“Market Watch 2012” The Malaysian Plastic Industry General information about Malaysia Malaysia is centrally located within the Association of South-East Asian Nations (ASEAN). Consisting of two regions separated by the South China Sea — the Malaysian Peninsula and the states of Sabah and Sarawak on the island of Borneo — Malaysia is a federation of 13 states and three federal territories. The former British colony gained its independence in 1957. Since Independence, Malaysia has adopted the political system of a parliamentary democracy with a constitutional monarch whose position is rotated every five years between each of the nine hereditary state rulers. The political scene has been characterized by an extra-ordinary degree of political stability and continuity through an encompassing national coalition of political parties. Its territory comprises approx. 330,000 sq km, four fifths of which are covered by tropical rainforest. Due to its bio-diverse range of flora and fauna offering excellent beaches and brilliant scenery, the country is one of the region’s key touristic destinations. Malaysia is a multi-ethnic, multicultural and multilingual society with 28.66 million members. Ethnic Malays make up the majority of the population at 57.1% followed by Chinese at 24.6%, Indian at 7.3% and other local ethnicities at 11%. The Malaysian constitution guarantees freedom of religion, although Islam is the largest and official religion. Approx. 61.3% of the population practice Islam, 19.8% Buddhism, 9.2% Christianity, 6.3% Hinduism, and 2.6% practice Confucianism and other traditional Chinese religions. The official language of Malaysia is Bahasa Malaysia, but English as well as Chinese are the business languages.

Economical Overview Malaysia is a dynamic country which is constantly evolving. Being a middle-income country, Malaysia has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy spurred on by high technology, knowledge-based and capitalintensive industries. Malaysia’s Economic Performance ranking improved to 7th place out of 59 economies this year compared with 12th position in 2007.1 It is one of the 20 largest trading nations worldwide and was headed of Taiwan, Sweden, Canada, Australia, the United Kingdom

1

“Malaysia’s economy attains 7th position”, New Straits Times, 20th May 2011

“Market Watch 2012”, The Malaysian Plastic Industry

and Switzerland.2 The World Competitiveness Yearbook 2011 Report released by the Institute for Management Development (IMD) continued to rank Malaysia as among the top 5 most competitive nations in the Asia-Pacific region, taking 6th position in the 20 million population category and 2nd position after Taiwan in the GDP per capita less than US$20,000 category.3 Moreover, the country is the 21th largest exporter among all trading nations worldwide. Strategically located in the heart of South-East Asia, Malaysia offers a cost-competitive location for investors intending to set up offshore operations in order to manufacture advanced technological products for both regional and international markets. In addition, Malaysia has a market-oriented economy which is supported by pro-business government policies. Last year, the Malaysian Government launched the Economic Transformation Programme (ETP) which is managed by PEMANDU (Performance Management & Delivery Unit) under the patronage of the Prime Minister.4 The ETP identifies 12 National Key Economic Areas (NKEAs) which are drivers of economic activities that have the potential to materially contribute to the growth of Malaysia. Its objective — also known as ―Vision 2020‖ — is to transform Malaysia into a ―high income country‖ by year 2020. The programme will lift Malaysia’s Gross National Income (GNI) to US$523 billion by 2020, and raise per capita income from US$6,700 to at least US$15,000, meeting the World Bank's threshold for high income nation.5 To achieve the targets set, Malaysia needs an annual growth of GNI of 6%. There are plans to revitalize Malaysia's private sector, to grow the service sector from 58 to 65% and to create 3.3 million new jobs.6 The Government will also introduce other transformation plans in 2012.7 In Malaysia, the 2011 GDP growth edged lower to 4.0 percent year-on-year due to a weaker domestic demand. Further implementation of ETP projects and a RM232.8 billion 2012 Budget tabled by Prime Minister Datuk Seri Najib Razak will boost domestic demand, but unlikely to offset underperformance in net exports8.

2

Ibid. 3 Ibid. 4 See www.pemandu.gov.my . 5 Forbes.com, 21st September 2011. 6 Ibid. 7 “Malaysia Budget 2012 Main Highlights”, www.financesentral.com accessed on 21st November 2011. 8 Malaysian Economic outlook by Malaysian Institute of Economic Research (MIER), www.mier.org.my/outlook 21.11.” 2

“Market Watch 2012”, The Malaysian Plastic Industry

Economical Key facts Malaysia

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Currency:

1 Ringgit (RM) = 100 Sen

Exchange rates:

1 EURO = RM4.3; 1 US$ = RM3.2 (17.11.2011)

GDP (billion RM):

2009: 679.94; 2010: 765.97; 2011: 829.34

GDP - real growth rate:

2010: 7.2%; 2011: 4.0%, 2012: 5.0% (est.)10

Inflation rate:

3.3-3.5 % (est. 2012 IMF)

Exports:

RM513.59 billion (Jan- Sep 2011)

Exports - commodities:

Electronics 34.5%; petroleum & products 9.9%;

palm oil

9.3%; chemical products 6.9%; machinery 3,4%; manufactures of metal 3.0%; rubber products 2.6% Exports – partners:

Singapore 13.3%, China 12.5%, Japan 10.5%, USA 9.5%, Thailand 5.3%, Hong Kong 5.1%, Germany: 2.7%

Imports:

RM424.37billion (Jan – Sep 2011)

Imports - commodities:

Electronics 31.2%, petroleum & products 10.1%, chemical products 9.2%, machinery 8.0%, manufactures of metal 5.9%, transport equipment 5.1%, iron & steel products 4.3%, optical & scientific equipment 3.2%, processed food 2.2%, other products 20.8%

Imports - partners:

Japan 12.6%, China 12.6%, Singapore 11.4%, USA 10.6%, Thailand 6.2%, Germany 4.0%

Unemployment rate:

3.0% (2011)11

Average wage 2011:

Project manager IT: RM8,415, lecturer/speaker: RM3,459, mechanical engineer: RM3,070, account executive: RM2,572, plantation worker: RM85012

9 Malaysia External Trade Development Corporation (MATRADE), www.matrade.com.my . 10 Malaysian Institute of Economic Research (MIER), www.mier.org/outlook/ accessed on18th November 2011. 11 Bank Negara Malaysia, Economic and Financial Data for Malaysia, last updated on 14th November 2011. 12 www.payscale.com/research/MY/Conutry=Malaysia/Salary accessed on 21th November 2011. 3

“Market Watch 2012”, The Malaysian Plastic Industry

Population below poverty line:

3,6%13

Bilateral Trade: Malaysia & Germany Malaysia is EU’s second largest trading partner inside ASEAN, behind Singapore, with bilateral trade in goods reaching 31.9 billion Euros in 2010 and the EU’s 22nd largest trading partner. Germany enjoys intensive trade relations with Malaysia and is one of the main foreign investors in Malaysia, while among members of the European Union, Germany is Malaysia’s leading trade partner.14 Besides, Malaysia ranks 2nd as a consumer of German products among the ASEAN countries.

Plastic Sector Overview The plastics and plastic products industry is one of the most dynamic and vibrant growth sectors within the Malaysian manufacturing sector. The Malaysian plastics industry has developed into a highly diversified sector producing an array of products including automotive components, electrical and electronic parts as well as components for the telecommunications industry, construction materials, household goods, acrylic sheets, bags, bathroom accessories, battery casings, bottles, containers, toys, games and packaging materials. With a supply of 2million metric tonnes per annum of locally produced resins, the production of these value added finished products has further increased over the last years. In fact, Malaysia is one of the largest plastics producers in Asia, with over 1,550 manufacturers, employing some 99,100 people15. The country’s plastic products are exported worldwide including the EU, China, Hong Kong, Singapore, Japan and Thailand. Even though, the bulk of Malaysias exports in the plastic sector are plastics in non-primary forms, there are also exports for plastics in primary forms such as Polyethylene (PE), Polyvinyl chloride (PVC) or Polyethylene terephthalate (PET).

According to the Malaysian Investment Development Authority (MIDA)16, the growth of domestic downstream plastic processing activities can be attributed to the existence of a developed

13 14 15

Index Mundi, www.indexmundi.com/g?r.aspx?v=69 accessed on 18th November 2011. http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/malaysia/ accessed on 21st November 2011. http://www.aseansources.com/jsp/malaysia_plastic.jsp 4

“Market Watch 2012”, The Malaysian Plastic Industry

petrochemical sector in Malaysia. The sector provides a steady supply of materials for the plastic industry with world-scale resin production facilities. Other engineering plastics, such as polyamides (nylons) and polycarbonates (PC), continue to be imported. These engineering plastics are mainly used for the production of parts and components for the E&E, automotive, medical equipment and construction industries. In flexible packaging, more bio-, photo- or chemical- degradable plastics are being introduced with increasing awareness on environment protection.

Major market segments As mentioned before, Malaysia exports mainly plastics in non- primary forms. This plastic product industry can be divided into four sub-sectors, namely plastic packaging, E&E and automotive components, consumer and industrial products. With 40% of the total industry output, the largest sub-sector for the plastic industry remains plastic packaging involving both flexible and rigid (including bags, films, bottles and containers). In fact, Malaysia is one of the world’s leading suppliers of plastic bags17. Besides, Malaysia has also exports in the plastic industry with the following products: • plastic sacks and bags • boxes, cases and crates • carboys, bottles, flasks • spools, cops, bobbins, similar supports • stoppers, lids, caps, closures • articles for conveyance or for packing goods • tableware and kitchenware • household and toilet articles • office and school supplies

16

Malaysian Investment Development Authortiy (2011). Industries in Malaysia. Retrieved December 16, 2011 from http://www.mida.gov.my/env3/index.php?page=petrochemical 17 Malaysian Plastics Manufactueres Association (2011). http://www.mpma.org.my/p_ho.asp?ThemeID=211 5

“Market Watch 2012”, The Malaysian Plastic Industry

• builderwares • plastic furniture

Plastics in Primary Forms Malaysia produces more than 60% of the resins used for the manufacture of plastics. China, Hong Kong, Singapore, Japan and Indonesia are the major consumers of Malaysian plastics in primary forms which include: • Polyethylene (PE) • Polypropylene (PP) • Polyacrylonitrile-co-butadine-co-styrene (ABS) • Polysterene (PS) • Polyvinyl chloride (PVC) • Polyethylene terephthalate (PET) With the plastic in primary form, Malaysia then produces for example films or cables as described below.

Films and sheets Malaysia produces Linear Low Density Polyethylene (LLDPE) film grades that are ideal as general purpose and heavy duty films. It also exports High Density Polyethylene (HDPE) film grades for the production of carrier bags and thin film applications such as shrinkable polyethylene films and bags.

Wire and Cables Malaysia also manufactures Polyethylene and PVC wire and cable compounds for export. These are used in the telecommunications and power industries due to their excellent properties for cable insulation and jacketing.

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“Market Watch 2012”, The Malaysian Plastic Industry

Production As the below table shows, there was an increase in the production of plastics in primary forms and synthetic rubber. In comparison to the previous year, there was an increase of 26.1% and therefore RM255,866Mio. more than in 2010. In October 2011, Malaysia recorded RM1.235,192Mio. compared to RM979,326Mio. in 2010.

Table 1: Department of Statistics Malaysia (2011). Manufacture of plastics in primary forms

Exports The table below shows that the total exports of plastic products in 2011 increased by 15.48% compared to the previous year. While Malaysia spent RM4,095.659Mio. in 2010, there were RM 4,729.660Mio. spent already in 2011. Thereby, the market share of plastic exports was 3.14% compared to the total exports Malaysia had. Total plastic sector

2009

2010

2011

Change 2010/11 (%)

Exports in US Dollars (Mio.)

2,860.812

4,095.659

4,729.660

15.48

Market share (%)

2.96

3.16

3.14

Table 2 - Plastics exports between 2010 & 2011 in the Malaysian plastic industry

With regard to the plastics exports there were three main products sold to other countries naming plastics in non- primary form such as box, bags and closures and for plastics in primary 7

“Market Watch 2012”, The Malaysian Plastic Industry

form firstly Ethylene and secondly Polyether. All of them had increases in 2011. While the export of boxes, bags etc. recorded the smallest change of 8.85%, Ethylene and Polyether had 19.74% and 28.73% respectively compared to 2010.

Box, bags, closures etc.

Ethylene, primary form

Polyether, expoxide

2009

2010

2011

Change (%)

US$

507.402

687.503

748.340

8.85

Share (%)

17.74

16.79

15.82

US$

377.812

572.038

684.957

%

13.21

13.97

14.48

US$

344.362

514.913

662.824

%

12.04

12.57

14.01

19.74

28.73

Table 3 - Export of boxes, bags etc., ethylene & polyether in Malaysia from 2009 – 2011

Singapore continued to be the leading export destination for plastic products with a share of 20 per cent. Major export items includes, containers and bottles, plastic bags and sacks, plastic stoppers, lids and articles of Plastics such as plastic pipe sealing tape, plastic medical and surgical, welding protective mask, frames and handle. Exports to Japan, as the second largest destination, recorded a decrease of 28.2 percent. The main export items were, plates, sheets, film, foil and strips of plastic with a share of 61.2 per cent and containers and bottles, plastic bags and sacks, plastic stoppers, lids and cap, 26.4 per cent Other major export markets were: the UK the USA Thailand

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“Market Watch 2012”, The Malaysian Plastic Industry

The main export items to these countries were: plastic containers and bottles, plastic bags and sacks, plastics stoppers, lids and caps plastic plates, sheets, film, foil & strip18.

Imports The amount of money spent on the import of plastic has been steadily growing over the last three years. Whereas Malaysia spent $2,268.551Mio. on the import of plastic in 2009, they had costs of $3,432.452Mio. in the following year. Moreover, there has been an increase of 19.95% in 2011 which lead to costs of $4,117.241Mio. The shares of plastic for those years in relation to the total imports of Malaysia were between 2.99% and 3.31%. Total plastic sector

2009

2010

2011

Change 2010/11 (%)

Imports in US Dollars (Mio.)

2,268.551

3,432.452

4,117.241

19.95

Market share (%)

2.99

3.24

3.31

Table 4 - Total import of plastics to Malaysia in USD from 2009-2011

With regard to the import of plastic in primary form, Ethylene and Polyether were the two with the highest import rates. Once again, the money spent in Malaysia for plastic continued to growth over the last three years. While imports recorded RM584.205Mio. for Ethylene and RM536.026Mio. for Polyether in 2010, the data from 2011 showed Rm732,869Mio (Ethylene) and RM605,902Mio. Thus, the market shares were about 17.02% and 15.62% respectively in 2010 and 17.80% and 14.72% in 2011. 2009

2010

2011

Ethylene, Polyether, Ethylene, Polyether, Ethylene, Polyether, primary expoxide primary expoxide primary expoxide form form form Imports in US Dollars (Mio.)

391.605

319.605

584.205

18

536.026

732.869

605.902

http://www.ice.gov.it/paesi/asia/malaysia/upload/173/MALAYSIA%20PLASTIC%20PROCESSING%20MACHINERY%20MARKET%20REPORT %202010.pdf 9

“Market Watch 2012”, The Malaysian Plastic Industry

Market share (%)

17.26

14.09

17.02

15.62

17.80

14.72

Table 5 - Import of ethylene & polyether to Malaysia in USD from 2009-2011

Change in Imports 2010/11: Ethylene, primary form – 25.45% Polyether, expoxide – 13.04%

Malaysian Plastic Manufacturer Association (MPMA) The Malaysian Plastic Manufacturers Association was established in 1967 and is a trade association providing leadership and quality services to its members and the plastic industry. As the official voice of Malaysia’s plastic industry, it represents the members and industry in government interaction, provides platforms to assist members in order to be globally competitive. MPMA currently has about 900 members of whom 60% are plastic manufacturers within the country. These people in return are responsible for 80% of the total plastic production in Malaysia. Besides, they are actively involved in waste management and recycling activities and the Green Partnership Programme (GPP) which is a joint Malaysia - Japan Partnership programme focusing on transfer of technology and information for the environment19. Moreover, they work together with other associations such as the Malaysian Petrochemical Association (MPA) and the Plastics Resins Producers Group (PRPG)

Projects of MPMA Malaysian Plastics Design Centre (MPDC)20 The Malaysian Plastics Design Centre was initiated in 1995 with assistance and support from the Ministry of International Trade and Industry (MITI). MPDC is a company limited by guarantee formed in January 1998 to operate the Centre. The main objective of the Centre is to develop new designs for plastic products aimed at creating own brand names for Malaysian-made plastic products.

19 20

http://www.aseansources.com/jsp/malaysia_plastic.jsp http://www.mpma.org.my/p_ho.asp?ThemeID=212 10

“Market Watch 2012”, The Malaysian Plastic Industry

MPDC provides design services from concept design to engineering design. The other related services rendered by MPDC are graphic design and rapid prototyping. MPDC in collaboration with local and international institution also offers short courses in design in future. MPMA Plastics Technology Training Centre21 MPMA-PTTC was set up in 1993 with the objective of upgrading the skills of the workforce in line with the technological progress of the plastics industry. The role and objectives of MPMA-PTTC is to provide facilities for developing and upgrading manpower skills, to act as a "vehicle" for technology transfer from foreign to the local plastics industry and to assist in the establishment of links between the plastics industry and the government, research institutions, local or foreign training agencies. Currently, MPMA-PTTC has three branches, namely MPMA-PTTC Northern Branch/PSDC, MPMA-PTTC Johor and MPMA-PTTC Selangor.

Projects and investments in 2011 The total number of projects approved in Malaysia in the second quarter of 2011 was 266 projects. However, the plastic sector could record a number of thirteen projects with total investments of RM743,1Mio. Thereby, the domestic projects were financed with RM420,9Mio whereas the foreign projects got support with RM 322,2Mio. Thus, there were fewer investments in the plastic industry than for example in the petroleum or basic metal product sector even though the plastic sector had more projects for the second quarter of 2011. In the months January to June 2011, the government approved investments of RM884,5Mio. but had to support twenty two projects.

21

http://www.mpma.org.my/p_ho.asp?ThemeID=253 11

“Market Watch 2012”, The Malaysian Plastic Industry

Approved Investments by Major Industries

http://www.miti.gov.my/cms/documentstorage/com.tms.cms.document.Document_422f978c-c0a8156f-d9c0d9c082fe5b9b/MQB_Q22011.pdf

Developments and trends in the plastic industry The Malaysian Plastic Manufacturers Association (2011)22 states on their website that there are numerous developments when it comes to the use of plastics. Although, plastic will be used even more for higher value-added electronics and electronical products such as digital cameras, computers or televisions. Secondly, the packaging sector will use more metallocene PP and PE as well as multi-layer barrier films. Moreover, PET packaging is charting new growth milestones in the rigid plastic packaging segment. With regard to the automotive industry, the MPMA sees for example an increase of plastics in order to replace metal parts in car production. Another factor that could lead to an increased use of plastic is the fact that the automotive industry wants to achieve production efficiency, noise reduction as well as cost and weight reduction. In addition, plastic will also be used to create advanced composites for the aerospace, aviation and military industries. However, an overall trend that has arisen over the last few years also in the plastic industry is the environmental saving attitude of consumers. Since issues such as global warming and

22

http://www.mpma.org.my/p_ho.asp?ThemeID=192 12

“Market Watch 2012”, The Malaysian Plastic Industry

environmental impacts have came up, environmental friendly packaging in the plastic industry has became an often discussed topic. It is not only that consumers are buying products that are eco-friendly but manufacturers also realize the potential of cost savings from materials and packaging, making pro-environment designs and materials become the preferred choice of houseware producers and buyers. Besides, manufacturers use more recycled content in their production and make their products more readily recyclable. Above all, according to the MPMA the use of biodegradable plastics will reduce the proportion on non-biodegradable and ozone depleting plastic bags.

Conclusion Prospects for future developments are still bright as plastics will continue to be the materials for the future in many industrial and consumer applications. According to the Malaysian Plastic Manufacturers Association (2011), there are benefits for the industry in various ways. The three most important benefits are arising from the export sector and the local demand. First of all, an increase in the exports for plastic packaging is expected since for example the food sector will need more packaging material. Moreover, the local demand will increase as well since the automotive sector in Malaysia itself needs plastic due to improving consumer spending. Finally, the increase in in-direct export for electrical and electronics appliances will lead to bigger production in the plastic sector which can be lead back to a stronger purchasing power. The globalization nowadays will increase trade opportunities for the resins and plastic industry, however at the same time it will also expose Malaysian manufacturers to competition. Thereby, the major problems that come with globalization are higher production costs and environment concerns. Furthermore, regulations such as the Registration, Evaluation and Authorization of Chemical Substances (REACH) or Waste Electrical and Electronics Equipment (WEEE) initiated by the EU and other economies, make the use of plastics stricter for the global plastic industry.

Thus it is crucial for the Malaysian plastics industry to strengthen its competitiveness through the continued acquisition of the appropriate technologies as well as enhance skills training and marketing capabilities. If they do so, Malaysia can continue to penetrate new markets in developed and developing economies successfully.

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“Market Watch 2012”, The Malaysian Plastic Industry

Trade Fairs in Malaysia 2012

MASIA Plas 19.-22.7.2012 Putra World Trade Center (PWTC), Kuala Lumpur, Malaysia

Contact: Mr. Thomas Brandt at: [email protected] Ms. Schvonne Choo at: [email protected]

We hope the market report serves you with actual information on the Malaysian market. Our core business is to establish contacts, finding distribution partners, project acquisitions, etc. our “Office-in Office” will give you a permanent address to develop the market. Please contact us for further information.

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