PREMIER AUTOMOTIVE HUB

Pekan Automotive Park

The East Coast Economic Region: Poised For Transformation 3

The ECER At A Glance 4

The ECER Special Economic Zone (ECER SEZ) 6

The Manufacturing Cluster 7

Pekan Automotive Park 9

The Way Forward 12

The ECER Incentives Package - Pekan Automotive Park 14

Contact Us 17

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The East Coast Economic Region (ECER), covering the states of Kelantan, Terengganu, Pahang and the district of Mersing in Johor, is now poised to become a dynamic region in South East Asia by offering various opportunities to manufacturers and investors.

Strategically located in the east coast of Peninsular Malaysia, the ECER has the potential to become the main gateway for trade and industry within the Asia Pacific region, which commands a total population of about 2 billion people.

The vision and mission that will guide the transformation of the ECER into a developed Region by 2020 is defined by three main characteristics – distinctive, dynamic and competitive.

The distinctiveness of the ECER is portrayed through its natural beauty, abundant resources, unique culture and heritage known throughout the world. To maintain this characteristic, a balanced and sustainable development is emphasised.

The dynamism of the ECER reflects the potential for the Region to grow and develop at a faster pace through innovation and a shift in economic orientation, structure, technology and mindset. The competitiveness of the ECER lies in its ability to attract local and foreign direct investments.

To accelerate the growth and development of the ECER, a special vehicle has been established through the East Coast Economic Region Development Council (ECERDC).

The ECERDC plays a leading role in promoting and stimulating economic and social development as well as private sector investment in the Region. The Council acts as the one-stop centre to fast track investment applications and approvals.

It provides counselling, advisory services and processes tax incentives and non-tax incentives for projects. To meet the varying needs of investors, the ECERDC also customises incentives on merit basis to be recommended for approval by the National Committee on Investment (NCI).

East Coast Economic Region Development Council (ECERDC)

Scope of ECERLand Area : 66,736 sq km (51% of Peninsular Malaysia)Total Population : 3.9 million (2005), or 14.5% of Malaysia’s total populationTotal Initiatives : 189 projectsTotal Investment : RM 112 billion (2008 – 2020)

The ECER’s vision is defined by three main characteristics:

• Distinctive • Dynamic • Competitive

The vision is for ECER to be a developed Region by 2020.

Key Clusters

Key Enablers

Source: Strategic Framework for the ECER SEZ

ECER Projected Growth by 2020:-

2020

GDP Growth Rate 8.5%

GDP RM 65,930 million

GDP Per Capita RM 13,510

Population 4.88 million

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Key Enablers• Social & Human Capital Development

• Transportation

• Infrastructure

• Property

• Environment

Key Clusters• Tourism• Oil, Gas & Petrochemical• Manufacturing• Agriculture• Education

Mission• To move the economy up the value chain• To raise the capacity for knowledge and innovation• To address persistent socio-economic inequalities,

constructively and productively• To improve the standard and sustainability of the quality of life• To strengthen the institutional and implementation capacity

Major Urban NodesIndustry NodesTourism Nodes

PAKAKERTIH

CHERATING

SEZ

CENT

RAL

LINK

KUANTANPORT CITY

PANTAI SEPAT

KUALA PAHANGUMP

GAMBANGTo

KualaLumpur

PERAMU

TG. AGAS

To Dungun / K.Terengganu

KIJAL

CUKAI

KUANTAN

PEKAN

TELUK KALONG /KEMAMAN PORT

Cattle Integration inOil Palm Plantations

(Kemaman)

Kuantan-Maran

Agro Valley

K

To Johor / Singapore

TEMERLOH-MENTAKAB / KT R

AILEAST COAST E

XPRE

SSW

AY (L

PT 1

& 2

)EA

ST C

OAS

T EX

PRES

SWAY

(LPT

4)

Agropolitan Project

The Malaysian Government has moved resolutely to fast track the establishment of the ECER Special Economic Zone (ECER SEZ). The ECER SEZ will act as the development catalyst for concentrated decentralisation of economic activities in line with the New Economic Model, which aims for a dynamic and competitive region of growth in the ECER.

The ECER SEZ lays in a belt of development within the ECER that banks on the international, national and regional growth conurbations to fuel its growth. The location of the ECER SEZ also allows it to act as a springboard for manufacturers and exporters to market their products and services directly to the Far East and the Asia Pacific region, cutting down transportation and freight costs substantially.

Strategic Positioning

The ECER SEZ is a strategic location that supports investors with a steady supply of vast quantities of raw materials. The existing and new industrial developments in the ECER SEZ will see manufacturers strengthening and enhancing their value chain to add value to existing raw materials and innovatively tailoring products to meet global market demand.

The Automotive Industry

The manufacturing sector will be enhanced in the Focus Nodes of the ECER SEZ, which are the dedicated areas where the major manufacturing and industrial activities are located. Among these activities, the automotive industry has been identified as one of the main economic drivers of the ECER SEZ. It has its centre at the Pekan Automotive Park, a manufacturing and assembly hub for the industry.

The Manufacturing ClusterThe ECER Special Economic Zone (ECER SEZ)

Manufacturing is one of the five clusters through which development will be channelled in the ECER. The others are Tourism, Oil, Gas & Petrochemical, Agriculture and Education.

Manufacturing offers investors a wealth of opportunities as it takes advantage of the rich resources and raw materials already in place, extending the current value chain by adding value to existing feedstock from the Region.

This cluster is made up of the petrochemical, wood-based and food processing sectors, all of which are resource-based. Other non-resource based industries are also being enhanced, such as automotive assembly and distribution, located in Pekan-Peramu, Pahang.

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National Automotive Policy (NAP)

The National Automotive Policy (NAP) was introduced on 22 March 2006 to facilitate the required transformation and optimal integration of the local automotive industry into regional and global industry networks within the increasingly liberalised and competitive global environment.

The new policies and measure under the NAP Review announced on 28 October 2009 are expected to provide a significant contribution to the overall growth of the industry and the country. Emphasis will be given in attracting investments in high value-added manufacturing activities using latest and high technology. The opening up of Manufacturing License (ML) for manufacturing and assembling activities in the selected segments particularly for luxury cars and hybrid/electric vehicles will encourage new investments and expansion of existing investments in the country.

As far back as 1984, Pekan-Peramu, Pahang,

has been home to a pivotal motor vehicles

assembly hub. From being a production

plant for Isuzu vehicles and Proton cars,

the Pekan Automotive Park (PAP) is today a

complex of world-class production lines for

renowned names such as Mercedez-Benz,

Isuzu and Suzuki.

The Third Industrial Master Plan

The Industrial Master Plan (IMP)’s theme of ‘Towards Global Competitiveness’ is focused on raising Malaysia’s level of performance on the world stage, which is increasingly becoming liberalised and globalised. The IMP is a key national policy instrument, underlined by its major role in helping Malaysia achieve developed nation status by 2020.

Manufacturing is one of the areas highlighted in the nation’s IMP. Within manufacturing, vehicle assembly and manufacturing of automotive parts and components will continue to be promoted in order to enhance Malaysia’s position as a major trading nation.

Investors in the automotive field, whether in vehicle assembly or manufacturing of parts and components, will therefore find that the ECER SEZ is ideally set up to give their businesses every possible advantage.

Pekan Automotive Park

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Today, the PAP has positioned the Pekan-Peramu area as an automotive manufacturing and

assembly as well as R&D hub. Strategically located close to the expanded deepwater Kuantan

Port, the PAP provides a cost-competitive advantage to vehicle and component manufacturers/

assemblers looking for an automotive supply and distribution base for the ASEAN and the Asia

Pacific regions.

The PAP has grown in stature as more investors are attracted to the Park to carry out their

manufacturing activities and services for the automotive and related industries. The PAP was

also chosen to assemble the Mercedez-Benz S-500, the top line for that marque.

Up to December 2010, the PAP has produced almost half a million vehicles comprising at least

24 makes, generated revenue of more than RM 5.2 billion since 1984, and provides employment

for 2,500 workers.

The PAP is estimated to generate over RM 4.5 billion in investments throughout its four stages

of development, with a total of 10,580 jobs expected to be created.

Currently, the development of the PAP covers

approximately 237 acres. The self-contained

site is fully equipped to cater to automotive

manufacturing and assembly activities.

Designed with complete infrastructure, R&D

facilities as well as residential and recreational

amenities, it makes for the ultimate plug-and-play

concept. The PAP-Central Marketing Complex

(PAP-CMC) will act as a one-stop centre, providing

value-added services to potential and current

investors, as well as a Park Management Office.

Of special interest to investors is that the PAP’s

total industrial development will eventually cover

an area of more than 800 acres. Investors who set

up their businesses here will also enjoy innovative

and flexible financial incentives since the PAP is

one of the Focus Nodes in the ECER SEZ.

PAP Pekan-Peramu, aerial view

Key Characteristics

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Investment Opportunities

The PAP has drawn several major international automotive and component manufacturers to invest here. Investors too have responded positively to the government’s pragmatic policies, political and economic stability, sound economic fundamentals, well-developed infrastructural facilities and an educated and skilled labour force.

Opportunities abound for investors in the following segments:

• Manufacturers of automotive parts and components• Automotive assemblers*• Manufacturers of car accessories• Hybrid and electric vehicles• Pick-up trucks and commercial vehicles• Motorcycles with engine capacity of 200cc and above• R&D and technology providers• Logistics and other special service providers (eg. Health,

Safety and Environment [HSE], waste management etc)• Other manufacturers and suppliers supporting the

automotive industry (eg. speciality packaging, paint and anti-rust solutions)

• After-market segment service providers (eg. replacing of automotive parts/components)

Key Benefits to Investors in the ECER

• Well-connected with modern road, rail, air and sea transportation systems

• Supported by quality ICT services, easily accessible amenities and reliable public utilities

Synergies available to PAP

• Proximity to Kuantan Port which facilitates the distribution of automotives to the Asia Pacific region

• The Automotive Trading Hub/Regional Distribution Centre which is projected to turn Kuantan Port City into the second gateway for trade in vehicles

Synergies available to PAP

• The ECER’s commitment to meeting the human capital needs of investors at the PAP is achieved through the Centres of Excellence for the automotive industry at Universiti Malaysia Pahang (UMP) and Universiti Teknologi Mara (UiTM), two of the many CoEs in the Region

* For passenger vehicles with engine capacity of 1,800cc and above and on-the-road prices not less than RM 150,000

The Way Forward

Proposed Strategic Direction

Current Investor and Tenants at PAP

PRODUCTNAME

HICOM Automotive Manufacturers (Malaysia) Sdn. Bhd.

Defence Technologies Sdn. Bhd. Manufacture and assemble land-based military vehicles and buses

Expansion capacity of assembly of commercial/passenger vehicles. Eg: Mercedes-Benz

Manufacture and assemble commercial vehiclesIsuzu HICOM Malaysia Sdn. Bhd.

HICOM Teck See Manufacturing Malaysia Sdn. Bhd.

Suzuki Malaysia Automobile Sdn. Bhd.

Johnson Controls Automotive Holding (M) Sdn. Bhd.

PHN Industry Sdn. Bhd.

DRB-HICOM Auto Solutions Sdn. Bhd.

HICOM University College Sdn. Bhd.

Manufactures bumper modules, instrument panels and door trim assemblies

Undertakes the import and assembly of CKD

Instrument panel module (cockpit) for Mercedes-Benz

Produces stamped parts and sub-assembly of metal-based automotive body components

Service provider for CKD vehicles

Automotive Education

STRATEGIC DIRECTION 2011 - 2015

OBJECTIVE:

Developing PAP as the premier automotive hub by establishing Integrated Vendors Park (IVP) and National Automotive Testing Centre (NATC) as well as encouraging investment in new automotive technologies:

1) Co-location of vendors within the cluster

2) Establishment of NATC to support industry players

3) Special focus on innovation, high-technology and alternative energy vehicles

4) Establishment of comprehensive R&D facilities to support the industry

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The ECER Incentives Package - Pekan Automotive Park The ECER Incentives Package - Pekan Automotive Park

Activity/Cluster Activity/ClusterECER Incentives Package(To qualify for these incentives, companies must commence operations before 31 December 2015)

Major Incentives/Exemptions from Inland Revenue Board (IRB)These incentives are mutually exclusive/to be utilized upon expiry of ECER Special Incentives.

Companies developing infrastructure of industrial park:

• Income tax exemption of 100% for 10 years commencing from the year company derives statutory income, or

• Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years

• Stamp duty exemption on instruments of acquisition or leasing of property relating to industrial park

Companies undertaking promoted activities in the industrial park:

• Customised incentives based on merit of each case, or

• Income tax exemption of 100% for 10 years commencing from the year company derives statutory income, or

• Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years

Application to be submitted to ECERDC

• Import duty and sales tax exemption on raw materials, components, machinery, equipment, spare parts and consumables that are not produced locally and used directly in the activity

Companies developing infrastructure of industrial park:

• Customised incentives based on merit of each case, or

• Income tax exemption of 100% for 10 years commencing from the year company derives statutory income, or

• Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years

Application to be submitted to ECERDC

• Companies undertaking activities in SEZ will also enjoy a set of non-fiscal incentives such as competitive utility tariffs, land premium, flexibility in foreign exchange administration and accessibility to grants based on merit of each case

Manufacturing and Industrial Park Development projects in designated locations in the ECER Master Plan

• Automotive Trading Hub/Regional Distribution Centre - Kuantan Port City

• Pekan Automotive Park

Promoted projects and Industrial Park Development projects in the SEZ Free Zones:

• Kemaman Port Free Zone

• Kuantan Port City Free Zone

• Kuantan Airport Free Zone

• Tanjung Agas Free Zone

ECER Incentives

• Industrial Building Allowance: Initial allowance of 10%, and annual allowance of 3%

• Single deduction

• Withholding Tax exemption

• Double deduction of training expenses incurred

• Double deduction of training expenses incurred in the year of assessment in which the gross income first arises

• Single deduction of training expenses incurred

• Double deduction on cash contribution

• Double deduction of payments for services rendered

• 50% tax exemption on income (honorarium/royalty) received

• Reinvestment allowance (RA) of 60% of qualifying capital expenditure incurred to be offset against 100% of statutory income in promoted areas for 15 years from the year of assessment of first claim

• Double deductions for expenditure incurred

• Double deduction for expenses incurred on: - registration of patents, trademarks - product licensing overseas

• Double deduction on payment of premiums

• Double deduction on payment of premiums

• Double deduction on expenses incurred in advertising the brand

• Industrial building allowance of 10% on qualifying expenditure for each year of assessment

• Double deduction for expenditure incurred

The above claims to be submitted to the Inland Revenue Board

Training• Investment in buildings used for industrial, technical or

vocational training approved by the Minister

• Cash contribution to non-statutory income oriented vocational training institutions and those established and maintained by a statutory body

• Royalty payments to non-residents (franchisors) for franchised education programmes approved by the Ministry of Education

• Training of employees for the purpose of upgrading and developing the employees’ craft, supervisory and technical skills or increasing the productivity or quality of its products, in approved training institutions

• Pre-operational training by companies (which do not contribute to HRDF) for the acquisition of craft, supervisory or technical skills related to the production of their products

• Pre-operation training of potential employees within one year before commencement of business

Research and Development (R&D)

• Cash contribution to approved research institutes

• Payments made for the use of the services of approved research institutes and companies

• Research on commercialization of research findings

Reinvestment & Promotion

• Reinvestment in petrochemical and manufacturing activities

• Promotion of industrial park overseasExport promotion

• Expenditure incurred for the promotion of export by resident companies

• Export Credit Insurance Premiums paid to approved local insurance companies

• Premiums paid to local insurance companies for cargo exported or cargo imported

• Promotion of Malaysian Brand names by Malaysian companies (at least 70% Malaysian-owned) which are registered proprietor of the brand

• Investment in buildings used as bonded warehouses for storage of goods for exports and re-export

• Certification for recognized quality systems and standards, and halal certification

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Kelantan State Office

Ground Floor & MezzanineLot 137 & 138 Bangunan Sutera Inn PrimaJalan Dusun Muda off Jalan Bayam15200 Kota Bharu, Kelantan, MALAYSIATel : +609 746 0021Fax : +609 746 0020

Pahang State Office

B8002 Sri Kuantan SquareJalan Teluk Sisek25050 Kuantan, PahangMALAYSIATel : +609 565 0021Fax : +609 565 0020

East Coast Economic Region Development Council (ECERDC)Tel : +603 2035 0021/22Fax : +603 2035 0020E-mail : secretariat@ecerdc.com.myWebsite : www.ecerdc.com.my

Kuala Lumpur Office

Level 69, Tower 2PETRONAS Twin Towers50088 Kuala LumpurMALAYSIATel : +603 2035 0000Fax : +603 2035 0020

Terengganu State Office

Ground Floor & 1st Floor100B Jalan Sultan Zainal Abidin20000 Kuala TerengganuTerengganu, MALAYSIATel : +609 620 0021Fax : +609 620 0020

© East Coast Economic Region Development Council (ECERDC) 2010All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any means (electronic, mechanical, photocopying, recording or otherwise) without the permission of the copyright owner (ECERDC).

Disclaimer: While every reasonable care has been taken in preparing this document, ECERDC cannot be held responsible for any inaccuracies. All information and specifications are current at the time of preparation and are subject to change as may be required. Renderings and illustrations are artist’s impressions only and cannot be regarded as representations of fact.

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