Malaysian BIONEXUS incentives

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As we started our work in Japan in 2000 on nano-scaffolds for corneal limbal stem cells (jointly with a group of polymer scientists headed by Yuichi Mori), the very first strategic move was to start collaborating in India, for two reasons. One was we needed a solution for treatable corneal epithelial damage-related blindness, and the other was the availability of qualified and skilled corneal surgeons.

The next move was to have a technology transfer tie with Malaysia, simply because the local investors there were willing to invest their hard-earned money in a biotech venture focused on a personalized immune-cell-based cancer treatment protocol that has been a medical treatment procedure in Japan since the late ’90s.

I was wondering what makes these investors come forward to invest in such ventures, and a brief exploration lead me to the incentives the Malaysian Biotech Corporation uses to attract investors and technocrats from near and far.

Imagine a government body that offers:

• An exemption from tax on 100% statutory income for 10 years from the day your company starts earning statutory income.

• A concessionary tax rate of 20% for another five years.

• Exemption of import duty and sales tax on raw materials, machinery, equipment and their components.

• Double deduction on expenditure incurred for R&D and that for the promotion of exports.

• 100% ownership and freedom to bring in knowledge workers from overseas.

• Exemption of stamp duty and real property gain tax within a period of five years until 31 December 2011, when undertaking a merger or acquisition with a biotech company.

• Tax deduction equivalent to the total investment made in seed capital or early stage financing when a company or individual invests in your company.

• Industrial Building Allowance to be claimed over 10 years with effect from 2 September 2006, on buildings used solely for the purpose of biotech-qualifying activities

• Tax exemption on dividends distributed to your company.

All this is part of what is called “Bionexus” status, as described by the Malaysian Biotech Corp. What’s been the impact?

• As of 6th May 2011, 188 biotech companies have been awarded the Bionexus status.

• Total investment has been 1.96 Billion RM (about US$600 million).

• Among the 188, close to 50% companies have started making profits.

• Five companies are now listed on international and local stock exchanges with market capitalization totaling close to RM1 billion (US$300 million)

One of the major difficulties companies with bionexus status face is the initial seed money for start ups, which the government is trying to address by various means.

Those who have biotech products and services for the South and Southeast Asian market (for which Malaysia can be good hub) with a technical team ready to move to Malaysia in place, should consider applying for the “Bionexus” incentives.

(The author is one of the directors of VisionTec Sdn Bhd, Malaysia. References for this post can be found here and here.)

Samuel JK Abraham

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