Msc Malaysia Status - updated to January 2022
What is Msc Malaysia Status?
MSC Malaysia status (pioneer status) is a recognition by the Government of Malaysia through the Digital Malaysia Framework for ICT and ICT-facilitated businesses that develop or use ICT technologies to produce and enhance Industry 4.0 services for the benefits of Malaysian Enterprises.
Digital Malaysia is the new name for Mdec and Msc Status is the framework for which enterprises will offer its digital services to help companies embrace Industrial Revolution 4.0
Malaysia Digital will aim at featured improved governance and processes to meet the industries' diverse needs at speed to accelerate Malaysia's digital economy which at this stage encompass twenty five percent of Malaysia's GDP.
With greater agility, flexibility, and relevance, Digital Malaysia (formerly MDEC) believes Malaysia will be able to better deliver the needs of its global and regional investors. And according to Digital Malaysia CEO Mahadhir Aziz, "what started off as the driver of MSC Malaysia, creating Malaysia's own version of Silicon Valley, we have gone through a few iterations, reflecting on the dynamic nature and challenge of technology and digital. But the challenges in the past two years will, and have, altered the way we conduct business, the way we connect and the way we live our lives, who further stressed that "Malaysia must adapt, and adapt quickly, in order to stay ahead." Malaysia Digital represents the next chapter of Malaysia's endevour to catch up with the advance countries in terms of greater productivity and advancing on technologies like those of autonomous vehicle and robotics usage.
MSC Malaysia, which was started in 1996 was formerly known as Multimedia Super Corridor is a Special Economic Zone for information technology and was based in the new administrative capital of Putra Jaya. That idea at that time was for Malaysia to help develop the information and transformation into a digital economy. It was the first of its kind in Asia and it went to pioneer industrial growth of anything digital and it managed to make twenty over percentage of the country's GDP in 2021. With it was launched the Msc Status where companies engaged in digital offerings pioneer status with tax exemption for ten years – obviously it managed to attract a lot of MNCs to help to boost up the number of Msc Status companies. The Msc Status was instituted and managed by Mdec (later known as Digital Malaysia) and it did helped the country to transform itself into having a robust digital economy – it managed to grant over three thousand companies to be accorded pioneer status. That was that but Mdec has since become Mdec 2.0 and with it the country's digital economy is supposed to grow into the new fields brought about by Industry 4.0 – where Automation, Big Data Analytics and Artificial Intelligence is the order of the day. With Mdec 2.0, the Digital Malaysia Economy also forgoes those legacy technologies and replaced them with newer technologies like the connection of everything and the embodiment of our everyday life in a virtual setting – it is something that you would need to consider if you are in the quest of obtaining the new msc status for your business.
The Ministry of Communications and Multimedia (KKMM) through the instruments of Mdec, will drive the development of MSC 2.0 to boost the country's digital economy – it also envisages to attract digital investment, said its Minister. This has become more important as is shown by how the digital economy managed to help move the economy during the times of lockdown due to the pandemic. However, it must be reminded that before any foreign investor would want to come in there must be a boost to target the training of more digital savvy personals as there is an inherent shortage of these practitioners who tend to migrate after their training in the country. You can’t run on artificial intelligence when people don’t have the skill sets – so there should be more incentives for people to take up the skills. But it is not only a learning issue as there is a large industrial sector which would also need to be primed for Industry 4.0 take up so that they can help absorb newly trained personals. Unfortunately it is not easy to move the industry players as there is the issue of funds for taking up the route of Industrial Revolution 4.0 – you can’t force change as people tend to do what they know best and who are very much afraid of utilising new technologies. There is however a hope that foreign entities that are ahead of the game will come in to invest – however it would also depend on the political stability of the government.
It is in this context that companies with msc status will help the introduction of Industry 4.0 Elements in their production processes so as to achieve a higher degree of efficiency because only with a higher efficiency can a Malaysian Enterprise compete with the giants out there. The Malaysian Government had envisioned that Mdec 2.0 will bring about more awareness of essential processes that bring about technological advances which will help push the country out of the middle income trap into high income bracket - this will require the country to focus on bringing in direct foreign investments. But when you go out there to market for foreign investment, it would only be viable if there is a focus on training of graduates to take up additional courses that are centered at digitalisation - as the present higher institution courses are now heavily tilted towards irrelevant courses for the sake of jacking up the number of graduates. Hopefully, Mdec 2.0 with its granting of pioneer statuses and funding(through grants) will help attract more students to take up STEM activities and learnings.
For the unitiated, in order to obtain the Msc Status you will need to :-
• Provide or a substantial user of IT & multimedia products & services
• Employ a substantial number of knowledge workers in their third year of service
• Strong value proposition (Industry 4.0 offerings) specifying how operations will contribute to the development of MSC Malaysia
• Establish a separate legal entity for MSC-qualifying activities
• Locate in either a MSC Malaysia designated Cybercity/Cybercentre or outside the Cybercity/Cybercentre
• Comply with environmental guidelines
Pioneer Status privileges entails a five (5) + five (5) years with 100% exemption from taxable statutory income (on income derived from qualifying activities) starting from the date when the company starts triggering pioneer status, renewable up to 10 years
Also further benefits from 100% Investment Tax Allowance (ITA) on new investments made in MSC Malaysia Cybercities/Cybercentres, commencing from the date on which the first qualifying capital expenditure is incurred.
Also further eligible for R&D grants (for majority Malaysian owned MSC Malaysia status companies only) which comes yearly.
Further benefiting freedom to source capital globally for MSC Malaysia infrastructure and the right to borrow funds globally.
Further accorded unrestricted employment (to a certain level depending on your field of activities) of foreign knowledge workers - this is to assist further employing of knowledge workers as there is a shortage globally.
Also, duty-free importation of multimedia equipments, provided that the equipment is used by the company in the operation of its business, and not for direct sale and trading or use as components in manufactured items.
Approved field of activities (under services) - updated to 2022
• Artificial Intelligence - incorporating machine and deep learning. AI enable health application to quicken dianogstication. AI enabled robotics for Radiosurgery. AI enabled robotic explorer for harzardous expeditions. Marketing Analytics with AI. Facial/Image Recoqnition. Security Applications.
• Robotics - industrial automation and autonomous vehicles. Cooperative Robotics. Use of robotics in manufacturing, surgery, engineering, quality controls.
• IoT (also IIoT) - edge computing for autonomous vehicles. Use of IoT's in manufacturing, automation, transport, home automation, agriculture, energy and healthcare.
• Telecommunications - 5G and infrastructures. Mobile applications
• Block chain - framework and smart contracts including secured Covid vaccination certificates. Used in healthcare, real estate, energy, supply chain management, food, banking and finance. DeFi.
• Big Data - analytics and insights. Everything digital.
• Fintech - financial technology and block chains. Cryptocurrency, crowd funding, mobile payments, robo advices, stock trading apps and budgeting apps.
• Edutech - artificial intelligence assistance (proposed) by remote coaching. Improved Education Methods
• Proptech - real time 3D and 4D rendering of properties(proposed) and virtual renderings
• Agritech - precision agriculture, climate controls (proposed) for agriculture productions. Used for increasing yield, efficiency and decrease wastage of fertilizers, insecticides and water.
• Data centre and cloud (technology/software/design and support)
• Creative Media Content - virtual reality.
• 3D or Additive Manufacturing (technology/software/design and support)
• Sharing Economy - ehailing and real estate sharing
• User Interface and User Experience (UI/UX)
• Systems/network architecture design and support
• Cyber security (technology/software/design and support) for 5G (and 6G) environments
• Integrated Circuit (IC) design and Embedded software
• Autonomous (technology/software/design and support) - Automobile AI
• Simulation/Digital Twin/Prediction
• Global Business Services or Knowledge Process Outsourcing excluding non- technical and/or low value call centre; data entry; and recruitment process outsourcing.
As Mdec 2.0 moves into the realm of Industrial Revolution 4.0, there is a focus on new technologies that can bring about efficiencies in the way we do our production processes; chief among them is the use of automation. In this world of instantaneous gratification brought about by fast connectivity there is a need to embrace cutting cost in order to better compete on a global basis and thus we have to use newer technologies which some of our entrepreneurs are trying very hard to learn. But transform we must, especially on those legacy practices which would have hindered our journey to make change. It is in this respect that Mdec 2.0 is launched to help us move to a level playing field with the big boys and not only that, we seem to have lost a lot of initials due to our hesitancy in embracing newer technologies because there is a cost to doing so which we cannot afford. So the government is giving help in the form of tax breaks, but not any tax breaks as it would have to go in line with the practices of the OECD. In this respect you would not expect Mdec 2.0 to allow for the easy grant of pioneer status like that of yore – you will expect a tougher stance on the conditions and requirements from that of the previous practices. Higher employment and higher operating expenditures will be the order of the day going forward.
The other aspect of Mdec 2.0 is there will be a heavy embracement of Industry 4.0 elements in order to obtain pioneer status and thus tax relief. Now, although Industrial Revolution 4.0 have been talked about since 2010, there are still a lot of entrepreneurs that are not familiar with it, especially those who were lucky enough to enjoy a level of comfort arising from nobody cutting into their profit margins – these are firms that have been established for a long time and are doing very basic manufacturing that does not have to rely on newer technologies to sustain themselves. But change is a must now that we are a part of the global supply chains – and the first step is to learn how people are using Industry 4.0 methodologies to strife forward. We have to be connected to the global supply chain and Mdec 2.0 will help us to upgrade our manufacturing processes. Even so we will have to take small steps to embrace new methodologies as there is a cost to it which we can ill afford to fail.
What do we mean by embracing Industry 4.0 elements?
Let us take an example of Industry 4.0 element - with IoT sensors and transducers fitted along the supply chain or production line, you can have a program that integrates all data given out from the production line and have it processed to inform the controller as to know what is happening at particular points along the processing line. And in order to further expedite the processes, the IoT outputs can be diverted to edge computing instead of to the cloud. It becomes possible then to know beforehand whether the various processors will grind to a stop thus bringing down time to a minimum - when some processes fail it could take a long time before it could be started again. That is why Industry 4.0 elements can deliver a more efficient production process and in this time of unexpected break in the global supply chain, we should do our level best as to not disrupt the market.
Before implementing Industry 4.0 elements, you should have a deep understanding of the various aspects of utilising them to achieve a better efficiency. As there are different elements to know there is also a need to understand how different elements can be integrated to give a holistic account of bettering efficiency in the production processes. Before implementation, there is a need to know of the cost of doing so – there are different suppliers that can do the same thing. Indeed before we can talk about Industrial Revolution 4.0, we would have to learn new things as well as connected to the industry players who would be able to share their experiences in terms of the practicability of implementing new toys in their specific environments. So it goes well to learn from the industry as there are always a cheaper means towards implementing that is often not shared by the mainstream players. We at Patentagentip is rather well versed in Industry 4.0 paradigm as we are practitioners ourselves – so you will get good advice from us.
Your New Business Model (mdec2.0 complaint) will be Non-IP(intellectual property) based income as of this moment - in other words you don't own any intellectual property (IP). You may also obtain license to use the program that was created by a third party. You will not be accorded pioneer status via MDEC but you may obtain it through other authorities (like MIDA). Application is an onerous job as you will need to know what the authorities want - you will do yourself a great relief if you consult someone who is aware of what MDEC wants.
At the present moment, only Global Business Services or Knowledge Process Outsourcing (excluding non-technical and/or low value call/contact center; data entry; recruitment process outsourcing) will be accepted. Your application will be based on Services Model but if you want to apply using an IP based model (of revenue) then you will have to wait until MDEC has announced the criteria and requirements - the IP based models will have less of a restriction.
It is also expected that all (majority) previous holders of msc status will have to surender their pioneer status by 30 June 2021. And all previous application applied before 30 June 2018 will be treated as expired and they will need to reapply with a business model based on the above mentioned activities.
There is however a chance for previous msc status holders to apply for transitional pioneer status but that date line has come to pass. Anyway it was not easy to transition (with services) as there was a big gap to fill in terms of the number of employees required. However, there will be a chance for previous msc status holders to once again obtain pioneer status when they are allowed to apply under the IP based model - MDEC has still not announced the criteria and conditions for IP based models.
How to go about applying?
You will have to go to Mdec's website to obtain an account - it is online. Once you got an account you will have a month of grace to fill in all the answers - it is a particularly onerous task for the first timer as there are questions that will pick your mind. Seriously, it would be best if you can get a consultant to help out as they would be familiar with the requirements of obtaining msc status. Getting a rejection should be avoided at all cost as you will need a new company to apply again. However there is this great uncertainty of whether you would apply using an IP based model or a service model - it is most likely that you would no know what to do. So again get assistance from a knowledgeable person who have gone through the game many times. Or you could get assistance from Mdec officer but rest be assured that they would only assist you on the surface and not the whole game! The application will consist of two parts, Business Model and Financial model. As for the business model, it would have to rely on Industry 4.0 elements. For the financial model, there is not much to talk about as long as you adhere to their requirements - if you were to not answer in to what they specify, then you will automatically unable to submit your application. There is however a trick to a proper submission - one that will get you at least a seventy percent success. Talking about business models, there is also a trick to it which could mean success or failure. We at Patentagentip will assist you to a successful outcome if you choose us as the advisory and strategist (important) - your path does not end as a pioneer status holder but also the path to getting government grants for your expension. Let us help you then.
Why so many new applications fail to obtain msc status?
But truth be said, there is a high percentage of applicants for the Mdec 2.0 pioneer status to be rejected for one reason or another - you cannot blame the applicant as many of them tought that it was an easy exercise when they go solo without the guidance of people in the know. Furthermore, qualifying requirements have never been spelt out by the authorities - so nobody except those who have been helping applicants know exactly Mdec wants. And when they fail, they would then and only then seek professional advisory as to what to do next. But anyway all is not lost as they can reapply but with a new entity and a more appropriate business model that entails Industry 4.0 embracements. In order to save time (if you go alone and fail in your first try) and from not getting a big headache, you might want to go to a consultant (who understands the new conditions) to help you apply for msc status under Digital Malaysia's purview. More specific staus requirements can be found at Msc Status Qualifying Requirements