Industrial Technical Assistance Fund (ITAF)

TechnoFundScienceFund

5.2.6 Industrial Technical Assistance Fund (ITAF)

The Industrial Technical Assistance Fund (or ITAF) was established in 1990 to assist small and medium enterprises (SMEs) to become technologically proficient as well as cost competitive. Several sub-categories of this fund have been established to address specific requirements of SMEs such as studies in business planning, technology and market development (ITAF 1); assistance to improve and upgrade existing product, product design and processes (ITAF 2); assistance for productivity and quality improvement and to achieve international quality standards and certification (ITAF 3); and assistance for market development (ITAF 4). In 2003, the number of approvals for ITAF3 was 346.

However, the number of approvals for ITAF 3 dropped drastically to 142 in the year 2004.

Corresponding to this negative growth, the amount approved under ITAF3 declined from RM9.82 million in 2003 to RM3.56 million in 2004. A similar downward trend, albeit less pronounced, was observed for approvals under ITAF 2. Figure 5.8 provides a summary of the approvals for the period 2003-2005 for both these sub-categories of ITAF. Most of the projects approved under ITAF 2 and ITAF 3 were from the electrical and electronics, plastic products, chemical/chemical products, machinery and engineering, food manufacturing and transport equipment sectors as indicated in Figure 5.9.

Sharp drop in ITAF 3 approvals in 2004

32 37

43 142 195

346

2.54 2.10 2.99

4.84 3.56

9.82

0 50 100 150 200 250 300 350 400

2003 2004 2005* 2003 2004 2005*

ITAF 3 ITAF 2

Year

0 2 4 6 8 10 12

No. of projects approved Amount approved

* As at July 2005 Source: SMIDEC

NumberofProjects AmountApproved(RMMillion)

Figure 5.8: Approvals under ITAF 2 and ITAF 3, 2003-2005*

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157 5

10 9

16

42 19

68 9

24

79 62

112 35

23 10 3

7 2

4 0

1 15 2

17 4

6 23 14 12 1

2 1 1

0 20 40 60 80 100 120 140 160 180

Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services

3.46 0.14

0.20 0.22

0.46

1.05 0.50

1.68 0.22

0.65

3.12 1.60

3.23 0.91

0.52 0.23 0.04

0.37 0.20 0.10 0

0.05

0.86 0.10

1.04 0.52

0.59

1.42 1.36 0.68

0.07 0.06 0.10 0.10

0 0.5 1 1.5 2 2.5 3 3.5 4

Food manufacturing Palm oil based products Wood and wood products Leather and leather products

Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services

Figure 5.9: Cumulative approvals and amount approved under ITAF 2 and ITAF 3 by sector, 2003-2005*

Number of Projects Amount Approved (RM Million)

ITAF3ITAF2

ITAF3ITAF2

* As at July 2005 Source: SMIDEC

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157 5

10 9

16

42 19

68 9

24

79 62

112 35

23 10 3

7 2

4 0

1 15 2

17 4

6 23 14 12 1

2 1 1

0 20 40 60 80 100 120 140 160 180

Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services

3.46 0.14

0.20 0.22

0.46

1.05 0.50

1.68 0.22

0.65

3.12 1.60

3.23 0.91

0.52 0.23 0.04

0.37 0.20 0.10 0

0.05

0.86 0.10

1.04 0.52

0.59

1.42 1.36 0.68

0.07 0.06 0.10 0.10

0 0.5 1 1.5 2 2.5 3 3.5 4

Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services Food manufacturing Palm oil based products Wood and wood products Leather and leather products Textile and apparels Chemical/chemical products Rubber products Plastic products Non-metallic mineral products Mineral products Electrical and electronics Transport equipment Machinery and engineering Miscellaneous Paper and printing Manufacturing related services Services

Figure 5.9: Cumulative approvals and amount approved under ITAF 2 and ITAF 3 by sector, 2003-2005*

Number of Projects Amount Approved (RM Million)

ITAF3ITAF2

ITAF3ITAF2

* As at July 2005 Source: SMIDEC

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Figure 5.11: Leading Recipients of Double Deduction Relief for R&D by Industry Sector, 2002-2004

Source: Inland Revenue Board Petroleum

1% Tiles

2%

Electrical products 5%

Agrochemicals 5% Automotive & parts

72%

Others

9% Agricultural

6%

Year 2002: Total = RM122.9 million

Year 2003: Total = RM356.8 million

Electrical components IT/ 8%

Telecommunications Agricultural 8%

6% Agrochemicals

4% Electrical

products 4% Others

16%

Automobile 54%

Year 2004: Total = RM499.4 million

Agrochemicals

1% Semiconductors

2% Petroleum

1% Others

6%

Agricultural 7%

Electrical products 18% Automotive & parts

65%