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Renewable Energy Equipment

The Government of Malaysia is looking for ways to save billions of Ringgit in its annual spending on energy. A number of incentives for the energy sector were recently announced by the Government of Malaysia in the 2001 Budget,
A. Intensification of efforts to conserve the country's energy resources through the promotion of energy efficiency efforts; and
B. Promotion of the greater use of renewable energy (RE) to supplement the nation's depleting oil and gas reserves.

Currently, activities related to energy conservation and efficiency are not eligible for tax incentives. Efforts to promote energy efficiency and conservation, as well as biomass as a source of renewable energy have prompted the following tax incentives to be proposed:

For Energy service companies (ESCOs) providing energy conservation and efficiency services and companies, which undertake the utilization of biomass as a source of renewable energy:
Income tax exemption of 70% on statutory income for 5 years of investment allowance of 60% of capital expenditure incurred within a period of 5 years and to be utilized against 70% of the statutory income; and Import duty and sales tax exemption on machinery and equipment, which are not produced locally. Machinery and equipment that are produced locally will be exempted from sales tax.

For companies which incur capital expenditure for conserving their own energy consumption and/or for undertaking energy efficiency measures: Accelerated capital allowance on related equipment to be fully written off within a period of three years (effective from year of assessment 2001). Import duty and sales exemption on equipment, which is not produced locally. Sales exemption will be given for equipment that is produced locally.

These incentives are applicable for applications received from 28 October 2000 until 31 December 2002, on condition that the company implements the project within one year from the date of approval.

The Government of Malaysia itself has been actively pursuing the aims of energy efficiency via the implementation of an energy efficiency initiative in the industrial sector. The Malaysia Energy Centre is currently implementing a four-year RM80 million project supported by United Nations Development Program (UNDP) and Global Environment Facility to remove barriers to efficient energy use in the Malaysian manufacturing sector. The target is to reduce industrial energy consumption by 10 percent by the year 2004.

A recently completed study, conducted by DANCED (Danish Cooperation on Environment and Development) revealed that, with RM2.2 billion investment in energy efficiency programs over the next five years, Malaysia would save RM5.9 billion in terms of fuel saved and alternative investments avoided during the same period. Malaysia is expected to reap benefits totaling RM3.7 billion over the next five years. Environmental benefit in terms of the reduced emission of greenhouse gases would amount to 3.1 million tones of carbon dioxide in the same period.

For more information on Energy Efficiency and Renewable Energy program, please contact:

Dr. Mohd. Zamzam Jaafar
Chief Executive Officer
Malaysia Energy Centre
Block C, Kompleks Petronas Research and Scientific Services (PRSS)
Lot 3288 and 3289, Off Jalan Ayer Itam,
Kawasan Institusi Bangi,
43000 Kajang, Selangor, MALAYSIA.
Tel: 011-603-8925-2233, Fax: 011-603-8925-2806

For further information on the Malaysian environmental market, please contact:

United States-Asia Environmental Partnership (US-AEP)
American Embassy
376 Jalan Tun Razak
50400 Kuala Lumpur, Malaysia
Tel: 6-03-2168-5050 Fax: 6-03-248-4035
Contact: Vivian How or Looi Chee Choong

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