Together empowering local industries and enhance economic power.
Procurement Proposal by the Agencies
IRD Development
Bidder proposal submission
Assess OEMs business and identity
Identify potential beneficiaries capabilities
Procurement Proposal by the Agencies
IRD Development
Bidder Proposal Submission
Finalization of activities, deliverables, outcomes and timeline
ICP activities monitoring to ensure deliverables performance
Post Implementation Audit
Relief of Obligation upon completion
Industrial Collaboration Program (ICP) is a program involving activities that provide value-add to any procurement made using fund provided by the Government of Malaysia. The purpose of these activities is to garner maximum benefits and impacts to the development of related local industries in a wholistic manner as returns on the investment by the Government via procurements made.
In support of the ICP aspiration, the ICP provider is required to consider the impacts of the proposed program for short, medium and long term gains. The Government of Malaysia has categorized ICP implementations into 3 main platforms that ICP provider could use as guidance that are:
The Economic Enhancement Programme (EEP) is applied on local companies that received a contract from the Government for any procurement equal or more RM100 million in the area of supplies, works and services. EEP is mandatory in cases where the source of fund for the procurement is from the Government. In the case where the source of fund for the procurement is acquired from the internal source for the company itself, then the respective company will be encouraged to implement the EEP exercise.
In the event that the Government’s procurement contract with the local company involves subcontracting to foreign OEMs, then the respective OEMs shall be subjected to the Counter Trade and Offset program whereby the management and implementation of these program shall be directly under the jurisdiction of the MOF and the TDA.
The Government intends to use the ICP and Vendor Development Program (VDP) approach to facilitate the capacity and capability development of the local industries, especially the Small and Medium Enterprises (SMEs) within a selective industrial cluster. In order to ascertain the inclusivity of the industry development, the EEP implementation shall be in parallel with the guidelines of the VDP issued by the Government.
The Government is desirous, via the implementation of the EEP to create more local companies, especially Bumiputera companies in the field of manufacturing and services that involves usage of medium and high technologies to add value in supporting the development of industrial cluster in selected sectors.
The EEP implementation based on the ICP platform is part of the Government’s effort to drive local companies to progressively grow and become competitive to participate in the domestic and global market.
In determining smooth implementation of the EEP, the EEP provider shall be responsible for its implementation and to be monitored and advised by MOF and TDA.
The EEP provider and its subsidiaries can become part of the recipients of any ICP program with condition that the credit value created collectively from all the ICP projects by the Syarikat Tempatan Utama (STU) under that ICP program cannot be more than 30% of the Mandatory ICP credit value.
The Counter Trade is applied to foreign companies who received Government’s contract with the value equal or more than RM50 million. In this category, the maximum ICP credit value generated shall be the same as that of the cost value of the Counter Trade that can be implemented via Counter Purchase or Buy Back program.
The management, monitoring and the program implementation under this Counter Trade category is directly under the management of MOF and TDA.
COUNTER PURCHASE
For Counter Purchase program implementation, the foreign ICP provider can implement it by purchasing selected Malaysia locally made products (usually stated as a percentage of the contract value) within a given period of time as an option to fulfil the ICP credit requirement.
The Counter Purchase program shall give preference to the products manufactured by local companies. If the products do not meet the ICP credit percentage as required, then the supplier/ICP provider can include the Government approved export commodities as the product for counter purchase.
The export commodity and/or manufactured products and/or services value-add must be from the Government approved list. OEMs/ICP Providers are required to submit a proposal to the MOF for approval on the products or services that are not included in the list.
Offset Program is a program that involves activities to strengthen local competitiveness by giving priorities to the technology development and knowledge-based economy.
It targets for the development of local technology-based industries by enhancing the capacity and capabilities of the local companies to a higher level to enable it to competitively participate in the global markets and supply chain. The implementation policy of the offset program shall be effectuated on foreign companies that received Government’s contract subject to the Minimum Threshold Value specified in this Policy.
The assessment on the Offset program and the ICP credit generated shall be based on the success of the program offered by the ICP Provider and its impact in strengthening local industries and national economy in the targeted sectors within the agreed period. Under a normal circumstance, the ICP implementation period shall be the same to the implementation period of the Main Procurement Contract.
DIRECT OFFSET
It comprises of activities and work packages related directly to the products and equipment which are procured via the Main Procurement Contract, and are mutually agreed by the ICP Provider and the Government. It includes:
FOREIGN DIRECT INVESTMENT
Program under this category are program that have indirect link or no link at all to the products or equipment acquired via the Main Procurement Contract; and are mutually agreed for their implementation by the Government and the ICP Providers. The main elements of the indirect offset program include the transfer of technology, knowledge and skill, industrial capability development and human capital competency development. It includes:
The Government of Malaysia is committed in developing national technology, industry and economy for the purpose of improving Malaysia’s competitiveness in the global market, supported by a holistic economic view and systematic development strategy. This effort is vital to sustain requirements in materializing the New Economic Model and high-income community development agenda.
In support of that, the Government of Malaysia is leveraging on the ICP platform as one of the strategies and has established a policy applied to all Government procurement related to activities, supply and service work. ICP shall be implemented through activities that add value to a procurement made by the Government of Malaysia, with an effective cost.
ICP shall be used as an economic tool to:
The ICP implementation in Malaysia is supervised by various committees which function as the overseer.
A committee formed at the procuring Agency to conduct evaluation on the proposed ICP, assisted by TDA as the secretariat.
The current ICP Policy and Guidelines has specified the reporting channel with a clear segregation of roles and functions for monitoring and information consolidation purposes. Ministry of Finance is the highest authority that manages the ICP implementation assisted by TDA for the ICP Policy operationalization.
Over the past decades, many countries have increased their demands for activities such as offset, industrial participation, industrial collaboration or other activities alike to achieve more substantial economic benefits.
These countries are using new approaches in the said activities above to increase economic benefits. These changes include targeting the activities and granting the credit only for new business rather than existing business.
Malaysia has carried out the activities which were referred as countertrade in 80’s and 90’s, offset in 2000’s and recently termed as Industrial Collaboration Program (ICP). Malaysia has expanded the scope of the program to cover defense and non-defense capital procurements.
Leveraging on the procurement, the ICP arrangements are designed as part of the contract agreements to help purchasers obtain more value -added contributing to the national economic growth on top of the said procurement scope.
ICP Implementation in Malaysia in guided by the National ICP established by the Ministry of Finance in 2014. It linked to macroeconomic frameworks such as Malaysia’s Vision 2020, The Five Year Development Plans, Industrial Master Plan, the National Policy Science, Technology and Innovation Transformation Program (NPSTI), Economic Transformation Program (ETP) and others.
The types of activities required by the countries depend on their goals and the country’s economic needs – whether it is developed, newly industrialised, or less industrialized. Companies will undertake a broad array of activities to meet these obligations.
Historically, this program was initiated by the Government of Malaysia in 1983. The term used before was ‘Countertrade’ and under the auspicious of the Ministry of International Trade and Industry (MITI).
Later in the mid 90’s, the activities were focused on the defence related procurement and the offset procurement was on the defence-related activities under auspicious of Ministry of Defence (MinDef).
In 2004, the Government has initiated a first-of-its-kind commercial countertrade program in Malaysia. TDA which was temporarily assigned to Malaysia Industry-Government Group for High Technology (MIGHT), was tasked to undertake the monitoring of the commercial countertrade program. Based on the local economic requirement and global evolution on ‘Countertrade’ , the program has evolved to become an initiative which was termed as ‘Offset Program’.
Treasury Circular Letters No.11, 1987 Guideline to Implement Countertrade in Government Procurement - the initial implementation of countertrade/ offset in Government procurements
From 2001 to 2002 a study on offset programs of the National Defence Procurement
Countertrade Policy in MinDef stipulation countertrade/ offset requirements in all Defence Procurement
Drafting of Economic Enhancement Programs (EEP) and revised Countertrade/ Offset Policy at the national level
Treasury Directive Letter Dated 18 March 2011 - Policy and Guidelines to requirements in all Government Procurements
Approval of Industrial Collaboration Programs (ICP) Policy