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Green Investment Climate Country Profile – Malaysia

Green Investment Climate Country Profile – Malaysia

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In July 2012, the Green Infrastructure Finance Framework Report was published to address the constraints in financing green infrastructure and to develop a new PPP-based approach to accelerate investments in low emission technologies. The approach calls for assessing the “Green Investment Climate” of a given country in order to develop country-specific recommendations for policy and incentive programs as well as other measures which can be introduced in order to further promote green growth in an economy.

This report includes one of the first Green Investment Country Profiles completed for the East Asia and Pacific Region as part of bringing the approach closer to operational status. The initial countries include China, Philippines, Vietnam, Malaysia, Indonesia, Singapore and South Korea. The assessment involves not only the green policy and incentives environment, but also the country’s overall natural resource endowment of fossil and renewable energy, its industrial development strategy in addition to general business indicators and other considerations, such as electricity prices, the capacity of the financial sector to mobilize long-term domestic financing, as well as their overall regulatory and legal capacity to implement PPPs. The country profiles provide a general understanding of the attractiveness, prevailing trends, strengths, and other aspects affecting the ability of the country to leverage its green growth potential.

In July 2012, the Green Infrastructure Finance Framework Report was published to address the constraints in financing green infrastructure and to develop a new PPP-based approach to accelerate investments in low emission technologies. The approach calls for assessing the “Green Investment Climate” of a given country in order to develop country-specific recommendations for policy and incentive programs as well as other measures which can be introduced in order to further promote green growth in an economy.

This report includes one of the first Green Investment Country Profiles completed for the East Asia and Pacific Region as part of bringing the approach closer to operational status. The initial countries include China, Philippines, Vietnam, Malaysia, Indonesia, Singapore and South Korea. The assessment involves not only the green policy and incentives environment, but also the country’s overall natural resource endowment of fossil and renewable energy, its industrial development strategy in addition to general business indicators and other considerations, such as electricity prices, the capacity of the financial sector to mobilize long-term domestic financing, as well as their overall regulatory and legal capacity to implement PPPs. The country profiles provide a general understanding of the attractiveness, prevailing trends, strengths, and other aspects affecting the ability of the country to leverage its green growth potential.

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Publish date: Apr 11, 2014
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12/19/2015

Green Infrastructure Finance

14 The World Bank – AusAID


Enhance awareness on the role and importance of RE.

In addition, the MOE should finalize the NEEMP by the end of 2013, with the aim of providing a
mechanism for successful implementation of EE measures. The NEEMP is expected to consist of six
main thrusts:


Thrust 1: Establish an overall long-term national plan for EE;


Thrust 2: Create legal and regulatory framework for EE;


Thrust 3: Create champion for EE;


Thrust 4: Create adequate and sustained funding mechanism for EE;


Thrust 5: Implement EE programs; and


Thrust 6: Enable commercial finance institutions to support EE.

With regards to the country’s PPP program, Malaysia adopts a centralized approach to implementa-
tion. A dedicated unit under the Prime Minister’s Department is entrusted with the responsibility of
spearheading the development and execution of PPP projects. While projects may originate from
line ministries, state and local authorities or the private sector, the Public-Private Partnership Unit
(3PU) is responsible for screening, evaluating, as well as negotiating and structuring the contractual
obligations of the projects. Line ministries are responsible for management of PPP contracts. This
involves the monitoring of asset development, construction, enforcement of contractual and pay-
ment obligations as well as public and community relations.

The evaluation of PPP projects is supervised by the PPP Committee, chaired by the Director General
of 3PU. Permanent members of the Committee are drawn from the Ministry of Finance (MOF),
Attorney General Chambers, Economic Planning Unit, Federal Land Commissioner, and the Valuation
and Property Services Department. Representatives of relevant line ministries also participate on
the Committee for projects that fall under their jurisdiction.

The PPP Guideline issued by the Government provides greater clarity on the types of projects suitable
for PPPs, procedures to follow when making proposals, qualifying criteria for bidders of the proj-
ects, operating models, payment mechanisms as well as process flow for project approvals. Private
participation in infrastructure is further encouraged through a pragmatic approach towards risk
allocation. Accordingly, there is no standard or common risk-allocation matrix-framework across all
PPP projects or one that is rigid through time. Instead, the prevailing risk and nature of projects are
taken into account. For new sectors developed using the PPP approach, the Government does not
assume asset construction risks. Instead, the Government assumes the entire or substantial portion
of the demand risk by being the off-taker.

Green Investment Climate Country Profile - Malaysia

The World Bank – AusAID 15

FDI has been an important source of eco-

nomic growth for Malaysia, bringing in
capital investment, technology, and man-
agement knowhow.vii

The Government has
been trying to encourage FDI by streamlining
its regulatory framework, and reducing restric-
tions on foreign investment. Emphasis has been
recently given to the services sector, which has
been identified as a leading engine of growth.

Malaysia’s laws governing FDI do not provide
general principles and rules for foreign partic-
ipation in local businesses.viii

FDI in Malaysia
is mainly regulated under the Promotion
of Investment Act 1986, and the Industrial
Coordination Act 1975.ix

The Malaysian
Industrial Development Authority (MIDA),
under Ministry of International Trade and
Industry (MITI), is in charge of promoting for-
eign and local investment, and for evaluating
applications for tax incentives. As a “one-stop
center”, MIDA coordinates with relevant authorities on investment facilitation measures.

The 2012-13 Global Competitiveness Report of the World Economic Forum (WEF) ranks Malaysia
at 25 among the 144 countries in the world.56

Malaysia retained a high ranking among the
Association of Southeast Asian Nations countries, second only to Singapore. Moreover, the coun-
try’s stage of development was also upgraded from “efficiency-driven” to “transition towards
innovation-driven”.57

Malaysia owes this success to its notable advantages in efficient and competitive markets for goods
and services (11th

globally), its remarkably supportive financial sector (6th

globally), and its busi-
ness-friendly institutional framework. WEF noted innovation and labor market efficiency as the
country’s strengths, where it tops the Global Competitiveness Index rankings. It is also well known
for a sophisticated business sector.

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