MITI working on simplified NCM customised incentive mechanism to build real local industrial capabilities

The ministry of investment, trade and industry (MITI) – together with its agencies MIDA and MARii – is currently refining the New Customised Incentive Mechanism (NCM) to ensure that investments into the auto industry will build ‘real industrial capabilities’.

It will be a simplified version understood by all, from industry players to government agencies, said MITI minister Datuk Seri Johari Abdul Ghani. NCM has been in the works for some time now.

“First, we will simplify the NCM so that every player will understand it very well. When I talk to KSU (MITI’s secretary-general), deputy KSU, and the deputy CEO of MIDA, they all understand. Not only must the industry out there understand, but we must also ensure that the industry players themselves know exactly how to calculate it. We need to simplify things we have introduced, or introduce something new,” Johari said at the launch of the MCE Auto Hub in Serendah, Selangor this afternoon.

“The simplified NCM aims to encourage the localisation of critical technologies as opposed to essential manufacturing components. The greatest value in tomorrow’s automotive industry lies in critical components such as design and engineering, software, electronics, battery technologies, advanced driver assistance systems (ADAS) and intelligent mobility solutions. As such, these are the capabilities Malaysia intends to nurture,” he explained, adding that even if it takes time, ‘we don’t care’.

Does this mean that the more of these ‘critical technologies’ are done in Malaysia, the more incentives the car company will get? Anyway, it does sound like MITI, under Johari’s watch, will be more strict with what constitutes local content.

“It is equally important to ensure that local content genuinely means local value creation. Looking only at Tier 1 suppliers no longer provides an accurate picture. We must trace value creation throughout the supply chain, from Tier 1 to Tier 2 and Tier 3, to ensure that incentives reward genuine Malaysian capabilities rather than imported content disguised as localisation,” the Titiwangsa MP said.

“To complement this and track any leakages, MITI will additionally measure export performance on a net basis to reward investors accordingly,” he added, hinting at audits. I think we can all get behind a more transparent framework that’s also more stringent but it must apply fairly to all, without special exemptions.

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