India | Malaysia

India - Malasiya : Investment Scenario

(i) Malaysian Investment in India

Malaysia is a now emerging as a major potential investor in India, with investments in the pipeline in power, oil refineries, telecommunication and electrical equipment industries, besides highway and other infrastructure development projects. Based on Government of India's statistics, Malaysia is ranked 21 among the foreign investors in India as per the cumulative FDI approved from January, 1991 to January 2007, with more than 210 FDI approvals, valued at US$ 1836.18 million. These figures, however, do not include the substantial flow of Malaysian investment to India through the Mauritian route. Notable investments include those of Maxis Communications in Aircel and TM International in Spice Communications.

Projects include software production, aqua-culture, ballast, radio paging systems, electrical apparatus for medical purposes, telephone equipment, food processing, heat resistant latex rubber thread, articles of apparel, industrial machinery, PVC pipes, oil palm plantations, car radio cassette players etc.

Recently, there has been a surge in Malaysian private sector initiatives in the flow of project-related investments into India. Notable among these are the investments, include;

	Ranhill Bhd.'s USD 900 million contract for construction and commission of a 2x350 MW thermal power plant in Chhatisgarh;
	Mudajaya Group Berhad's USD 150 million E&P power project related contract in Chhatisgarh;
	Asian Gateways Construction Sdn Bhd’s USD 1.4 billion mega thermal power project (1600 MW) in Andhra Pradesh, Power Purchase Agreement (PPA) for which was signed with PTC India Ltd. in July 2007;
	9.95% stake acquired by Khazanah Nasional Berhad, the investment arm of the Malaysian Government, in Infrastructure Development Finance Company (IDFC) valued at approximately Rs. 8.2 billion (USD 180 million) over a six-month period between September 2006 and March 2007 making them the second largest share holder in IDFC after the Government of India, which holds a 23% stake;
	Sunway Group’s joint venture in June 2007 with the Hyderabad based Opus Developers & Builders to develop a 35-acre township, SunCity in Andhra Pradesh, with around 3,400 units of high quality condominiums & their another JV with MAK Projects Private Ltd to develop an RM 380 million (USD 113.43) condominium project in Hyderabad;
	UMW Holdings Bhd’s acquiring 14.9% stake in BSE-listed Oil Country Tubular Ltd (OCTL) for RM 41.96 million (USD 12.16 million) through its Indian arm UMW India Ltd.;
	IJM Corp. Bhd and IDFC’s joint venture to develop a southern road project at a cost of Rs. 6.75 billion;
	Petronas has raised its stake in Cairn India to 12.7% from 9.93% with acquisition of more shares, thus increasing value to US $ 625 million (Rs. 2,534 crores) in March 2008;
	Rajiv Gandhi International Airport (RGIA) in Hyderabad that went into operation in March 2008 and the Indira Gandhi International Airport (IGIA) are co-owned by Malaysia Airports Holdings Bhd (MAHB) with 11% and 10% stake in them respectively.
	India’s largest mobile phone service provider Bharti Airtel Ltd. and Malaysia’s Global Transit Limited are part of a six member consortium to build a high bandwidth undersea fibre-optic cable linking Asia and the USA at a total estimated cost of US$ 300 million.
	UMW Corporation Sdn Bhd, a subsidiary of UMW Holdings Bhd has entered into two separate share sale agreements in 2008 for acquiring a 51% stake in MK Autocomponents Ltd for USD 22.52 million and 50% in MK Automotive Industries Ltd for USD 1 million approximately.
	Malaysian construction firm, UEM Builders Bhd, have set up an equally owned joint venture company in partnership with India’s Ansal Group, called UEM Builders-Ansal API Contracts Pvt. Ltd., with the objective of working jointly on several upcoming construction projects in India, particularly those related to real estates and township development.
	Sime Darby Plantation Sdn Bhd, a wholly owned subsidiary (WOS) of the Sime Darby Berhad, signed a Memorandum of Understanding (MoU) with the State Trading Corporation (STC) of India on 26 August 2008 to cooperate in the field of edible oils. Under the agreement, both sides would explore the possibility of setting up a joint venture to set up an edible oil refining facility and market the end products in India.
	IJM Steel Products Private Ltd, an Indian subsidiary of IJM Group has commissioned an RM 16 million (US $ 4.9 million) welded wire mesh(WWM) manufacturing facility at Isnapur, near Hyderabad.

Malaysian Projects in India
According to the Construction Industry Development Board (CIDB) of Malaysia, Malaysian companies have so far completed 51 construction projects worth US$ 2.33 billion in India, while 21 projects valued at US$ 2.28 billion are currently under various stages of implementation. Other notable projects in construction as well as other sectors underway include:

	Scomi Engineering Bhd is part of a consortium led by India's Larsen & Toubro Ltd that has been awarded the RM 2 billion monorail project in Mumbai.
	Ranhill Utilities Bhd (RUB) will partner with India's Jusco Group and Infrastructure Development Finance Co (IDFC) to lease and build water treatment plants in West Bengal.
	IJM Corp. Bhd, through its special purpose vehicle Vijayawada Tollway Pvt Ltd, has embarked on a major highway project worth nearly RM 500 million (USD 156.7 million) in Andhra Pradesh.
	Hyderabad-based Lanco Infratech Limited consortium, which has a tie-up with Malaysia's Pembinaan Redzai Sdn Bhd (PRSB) has won the bid for development of the US $ 2 billion Vizhinjam International Container Port Project in Kerala. A Special Purpose Vehicle (SPV) would be formed for the project in which the Kerala Government would hold a 24% stake.
	An MOU was concluded between the Government of Kerala and Construction Industries Development Board (CIDB) of Malaysia in September 2008 for development of an ‘Integrated Medical City’ at Kenalur, Kozhikode by a Malaysian consortium and is expected to cost US$ 120 million. It will consist of a medical university, hospital, nursing school, dental college and health services.

II) Indian Investment in Malaysia

At present, there are over 100 Indian companies including 61 Indian joint ventures operating in Malaysia. Cumulative Indian investment in Malaysia (from 1980 to 2007) is estimated to be over US$ 1.58 billion. During this period, India was the 7th largest investor in Malaysia. Indian investments in Malaysia in 2007 alone are in excess of US $ 1 billion. The acquisition by Reliance Industries Limited of the assets of Hualon Corporation in September 2007, take-over of Sabah Forest Industries by Ballarpur Industries Limited of the Thapar Group in March 2007 and the recent Larsen & Toubro buy-out of the switchgear business of Tamco Corporate Holdings Bhd are likely to set the tone for other Indian corporate entities looking for investment opportunities in Malaysia.

In September 2007, Satyam unveiled its new state-of-the-art 500-seat Global Solutions Centre (GSC) in Cyberjaya as part of the Company's ambitious plans to expand its Malaysian operations into developing its largest software development hub outside India.

Some of the other notable investments/JVs as well as Malaysian projects awarded to Indian companies during 2008 include:

	Hextar Chemicals Sdn Bhd, Kuala Lumpur and Unitop Chemicals Pvt. Ltd, Mumbai entered into a joint venture in January 2008 to make specialty chemicals for the agriculture, oil and gas, textile and personal care products industries. The Plant,  known as Hextar Unitop Chemicals Sdn Bhd,  will be built in two years’ time at a cost of RM 10 million (USD 2.99 million).
	Wipro has expanded its Malaysian operations by launching a Global Service Management Centre (GSMC) in Cyberjaya in February 2008.
	Hyderabad-based Vivo Bio Tech Ltd is to invest RM 450 million (USD 140.6 million) in the setting up of an integrated biotechnology facility in Malacca to commercialize bio-therapeutics in Malaysia.
	Malladi Group has announced in October 2008 its plans to invest US $300 million over the next 3 to 5 years to create a global one-stop shop encompassing entire value chain in contract manufacturing facility in bio-technology in Malaysia;
	Malaysia’s MNC Wireless Berhad and India’s Cellebrum.Com Ltd, a subsidiary of Spice Corp Ltd, established a strategic partnership that entails marketing Cellebrum.Com’s mobile platforms, distribution rights, marketing in collaborative areas and co-development in the areas of research & development.
	Hyderabad-based Goldstone Technologies Ltd. Launched its Internet Protocol Television (IPTV) service in Malaysia to take advantage of the growing audience market. Partnering with MOL Access Portal Bhd., Goldstone’s focus will be on South Indian content, particularly movies.
	Reliance Anil Dhirubhai Ambani Group’s Adlabs Films Ltd have expanded into Malaysia with the acquisition of a majority stake in the Lotus Five Star Cinemas.  With the Adlabs acquisition, Lotus has emerged as the third largest chain in Malaysia, operating 51 cinema halls spread all over Malaysia.
	India’s Punj Lloyd Ltd is part of a consortium awarded the job of building a 512 km natural gas pipeline from the proposed Sabah Oil and Gas Terminal in Kimanis to Petronas’ liquefied natural gas complex in Bintulu (East Malaysia).
	Aban Offshore Ltd, Mumbai has been awarded two contracts worth USD 55 million in all to drill nine oil wells in Malaysia.
	The Embassy Group of India in partnership with the Emkay Group of Companies of Malaysia have officially opened the Block A of their MKN Embassy TechZone project worth RM 350 million (USD 109.7 million) in Malaysia.
	Satyam Computers announced in November 2008 that it is buying Motorola’s Software Development Centre (SDC) in Cyberjaya, Malaysia. Under the deal, Satyam will take over the SDC’s 128 employees along with its assets in Malaysia. The value of the transaction, which is expected to be completed by 31 December 2008, has not been announced.
	Indian entertainment company Adlabs will be acquiring a controlling stake in Lotus Five Star by investing US $ 29 million (RM 100 million) over the next one year starting from November 2008.
	India’s Reliance Capital Asset received an Islamic fund management license from Malaysian Government in November 2008.
Indian public sector undertakings have an impressive track record in Malaysia, with HMT, EIL, BHEL, IRCON and IOC having been actively engaged with the Malaysian industrial sector since the 1970s. A few highlights are as follows:
	IRCON International Ltd. (a company under the Ministry of Railways, GOI) has been actively engaged in the development of railways in Malaysia since 1988. It has successfully undertaken track rehabilitation, track and bridge work, refurbishment of KTMB’s 22 class locomotives. It has successfully completed and commissioned 11 major railway projects valued about RM 694.7 millions. IRCON has successfully completed 31.5 km. rail link costing US$ 121 millions between Senai Station and the Port at Pelabuhan Tanjung Pelapas (PTP) in January, 2002.  IRCON is supplying locomotives on hire and maintenance basis to KTM Berhad (Malaysian Railway) since July 1993. IRCON was recently awarded the Seremban – Gemas Railway Double Tracking Project worth over US $ 1 billion.
	BEML Limited, Bangalore set up its International Warehouse-cum-Branch Office in Malaysia in October 2007.

Legal Framework

	The legal framework governing bilateral trade and economic cooperation includes a Trade Agreement, signed in October 2000, which, inter alia, envisages the establishment of a Joint Trade Committee to suggest means for facilitating, strengthening and diversifying trade;
	Double Taxation Avoidance Agreement was signed in May 2001 and discussions are underway to amend it to make in consonance with the current realities;
	The Air Services Agreement between India and Malaysia initially signed in May 1974. Regular meetings of civil aviation authorities between the two countries to review the respective traffic entitlements. The last round of bilateral talks was held in New Delhi in November 2008, which was preceded by talks in Putrajaya in July 2007.

Institutional Framework

Institutional arrangements between India and Malaysia for trade and economic cooperation include an India-Malaysia Joint Commission, chaired by the respective Foreign Ministers, which was established in 1992. The Joint Commission has so far held only four meetings (1992, 2000, 2002 and 2007).

Comprehensive Economic Cooperation Agreement (CECA)

India and Malaysia are currently discussing a Comprehensive Economic Cooperation Agreement (CECA) encompassing trade in goods, trade in services, investment and other areas of bilateral cooperation. The first meeting of the CECA Trade Negotiating Committee (TNC) was held on 4-5 February 2008 in Kuala Lumpur. The second meeting of the TNC was held in June/July, 2008 in New Delhi. The Third Meeting of the TNC is expected to be held shortly.

Trade Exhibitions

	India Trade Promotion Event ‘Incredible India 2003’ was held at Kuala Lumpur from 2-6 December, 2003 in association with India Trade Promotion Organization (ITPO), Clothing Manufacturing Association of India (CMAI), FICCI and CII.
	An exclusive Indian Engineering Exhibition (INDEE 2008) was held in Kuala Lumpur for the first time from 25 to 27 September 2008. About 170 Indian engineering companies participated in the event.  The inaugural of the Exhibition was held together with the Malaysia India Economic Conference.
	Thirty five Indian exhibitors took part in the Expo Cintai Malaysia (ECM) 2008, the 7th Malaysia International Trade & Consumer Fair, held at Malaysia International Exhibition and Convention Centre (MIECC) from 3 to 7 December 2008.  Indian products displayed at the Expo included garments, textiles, handicrafts, fashion jewellery, pearls, etc. The event was organised by the Chinese Chamber of Commerce & Industry of Kuala Lumpur and Selangor (KLSCCCI), Kuala Lumpur. The High Commission of India was an associate partner of the event, and also set up a separate booth during the Expo.