Access to the Malaysian upstream segment is starting to open, but the complexity of the tax system still remains an obstacle to further involvement by independents.
June 11, 2021
Asia - South East
South eastern Asia, peninsula bordering Thailand and northern one-third of the island of Borneo, bordering Indonesia, Brunei, and the South China Sea, south of Vietnam.
All licences in Malaysia are governed by production sharing contracts (PSCs), of which there are four main vintages: (i) 1976 PSC Model, (ii) Post-1985 PSC Model (conventional areas), (iii) Post-1993 PSC Model (deep-water areas), and (iv) Post-1996 PSC Model (Revenue/Cost Index). Malaysia’s PSC-based fiscal system is one of the most complex in the world.
Since an unexpected political transition in March, Malaysia’s new government under Prime Minister Muhyiddin Yassin has focused its attention on the unprecedented set of challenges facing Malaysia in 2020, including the COVID-19 pandemic and a sharp drop in global oil prices. In response to the economic damage wrought by COVID-19 restrictions, the Malaysian government has approved over $60bn in stimulus measures designed to protect Malaysian citizens and businesses, and has laid out plans to prioritize the country’s economic recovery following the lockdown period for the remainder of 2020 and into 2021. The Malaysian government has traditionally encouraged foreign direct investment (FDI), and the Prime Minister and many cabinet ministers have signalled their openness to foreign investment since taking office.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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