By InvestKL
T
he year 2015 is of great
significance for Malaysia
in terms of foreign direct
investment (FDI) and in the
context of the Association
of Southeast Asian Nations
(ASEAN). On April 6, 2015, the
Government unveiled the details
on the Principal Hub incentives
to attract more multinational
companies (MNCs) seeking
to increase their presence in
Asia via the establishment
of regional headquar ter s
operations. The incentives
further reinforce Greater Kuala
Lumpur’s (Greater KL) position
as a Principal Hub for MNCs’ key
regional command/nerve centre
in the region.
The new incentives,
effective from May 1, 2015,
are developed in recognition
of the changing trends in
regional headquarters, global
supply chain models, and the
implementation of the ASEAN
Economic Community (AEC).
These incentives aim to enhance
Malaysia’s competitiveness
as a regional base, allowing
for improved operations and
efficiency at reduced cost
for MNC’s headquar ter s related business services in
ASEAN. They also reaffirm the
Government’s commitment
to attract the world’s largest
companies as well as industry
leaders to Malaysia.
Combined with Malaysia
taking over the ASEAN chair
this year, the Principal Hub
incentives are game changers
for MNCs that take that step to
invest in Greater KL for the first
time or for expansion purposes.
PRINCIPAL HUB – THE
CONCEPT
Principal Hub is a command
centre from which MNCs can
conduct and manage their
regional and global businesses
and operations across several
countries more cost effectively
and efficiently. It encompasses
component s such as an
Operational Headquarters (OHQ),
International Procurement Centre
(IPC), Regional Distribution
C e n t re (RD C), B u s in e s s
Process Outsourcing (BPO) and
Knowledge Process Outsourcing
(KPO).
From their Principal Hubs
in Greater KL, MNCs can
manage, control, and support
their key functions including
management of risks, decision
making, strategic business
activities, trading, finance, and
operations and human resource
management.This business
model helps to streamline
operations and a more effective
sharing of resources and
services, enabling MNCs to
maximise operating efficiency,
as well as improve quality and
speed at lower cost.
INCENTIVES FOR PRINCIPAL
HUBS
Principal Hub companies are
placed in a three-tier tax scheme
under which they pay tax rates
of 0% up to 10% over five-year
periods that may be extended by
another five years, depending on
Figure 1: Three-tier Principal Hub incentives for MNCs
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INVESTMENT
TAKING GREATER KL TO
NEW HEIGHTS