malaysia.ahk.de September/October 2015 Vol 21, No.5 KDN PP 8818/3/2013
The Business Magazine of the Malaysian-German Chamber of Commerce and Industry
TOWARDS A GREENER FUTURE RENEWABLE ENERGY, ENERGY TRANSITION, WASTE MANAGEMENT
20 Questions about the German Energiewende
The Waste Management System in Malaysia
Behn Meyer Group – Celebrating a World of Capabilities
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MGCC PERSPECTIVES is published six times p. a. by the Malaysian-German Chamber of Commerce and Industry. PUBLISHER Datuk Muhammad Feisol bin Haji Hassan. It is distributed free of charge to members and qualified non-members in Malaysia and abroad.
FOCUS WASTE-TO-ENERGY IN MALAYSIA
SPOTLIGHT ON SABAH AND SARAWAK NATIONAL BIOMASS STRATEGY 2020 (NBS2020): DEFINING MALAYSIA’S BIOMASS POTENTIAL ENERGY TRANSITION – 20 QUESTIONS ABOUT THE GERMAN ENERGIEWENDE
FEATURE THE WASTE MANAGEMENT SYSTEM IN MALAYSIA BEHN MEYER GROUP – CELEBRATING A WORLD OF CAPABILITIES
LEGAL & INVESTMENT
30 34 36 42 44 42 54
THE CIRCULAR ECONOMY
The Corporate Leviathan by Jayanthi Desan
MEETING TODAY’S SUPPLY CHAIN TRENDS AND CHALLENGES – PT. 3
ECONOMICS EDUCATION AND TRAINING EVENTS GERMAN INSTITUTIONS MEMBERS TRADE FAIRS
MALAYSIAN-GERMAN CHAMBER OF COMMERCE AND INDUSTRY (171131-U) Supported by the Federal Ministry of Economic Affairs and Energy based on a resolution of the German Bundestag. Suite 47.1, Level 47, Menara Ambank No. 8, Jalan YYap Kwan Seng 50450 Kuala Lumpur,r,r Malaysia TTel: 603-9235 1800 Fax: 603-2072 1198 homepage: malaysia.ahk.de email: [email protected]
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aysia.ahk.de *All opinions expressed rressed in articles do not necessarily reflect the views of MGCC.
EDITORIAL TEAM Sabine Franze Cheryl Sim DESIGNED BY ETC CREATIVE Sdn Bhd A-11-07, Tower A, Menara Prima Jalan PJU 1/39, Dataran Prima 47301 Petaling Jaya Selangor, Malaysia PRINTED BY Percetakan Zanders Sdn Bhd No. 16, Jalan BK 1/11, Bandar Kinrara 1 47180 Puchong, Selangor
Dear Members and Readers, The thick haze covering large parts of Malaysia since weeks ago has led to closure of schools and airports, to cancellation of sports events, negatively effecting the health and wellbeing of fauna and flora and also creating negative psychological effects by turning sunlight and sky both into a greyish mass. Besides this we are witnessing an economic “Haze” covering the global economy: a broad and continuing slow-down of the global economy. Major improvements are not expected for the near future. The integration of the ASEAN region as well as the formation of the ASEAN Economic Community are rather long-term processes and cannot provide immediate relief. The TPP is to be seen as an important step for this area of the world. But, expectations that this will clear up the current “Haze” will certainly lead to disappointment. The reasons for both the smoke in the air over Southeast-Asia as well as the general economic downturn are fundamental. Trying to only provide cure for the symptoms will not have the desired effects. Germany is currently not only confronted with a wave of refugees moving in from the Balkans as well as war-torn countries in the Near and Middle East. Recent scandalous findings at the world’s largest car maker, Volkswagen AG, have not only made a number of high-ranking managers lose their jobs, the company’s stock also fell drastically and instantly pulverized the annual sales goals of VW dealers around the world. This incident has also cast major doubts upon some of the core values of the German industry in general. It seems to be crucial for the company to discover and analyze the source of the problem before it can expect sustainable recovery. Malaysia on the other hand is forced not only to find solutions together with Indonesia to clear haze from the sky. It also has to tackle internal structural topics both in the field of politics as well as restoring the value of the Ringgit, improving infrastructure and reliability of energy supply. Another core item is the sustainable build-up of a skilled workforce. The close and trustful relationship between Malaysian and German institutions form the basis for the continuation of our fruitful cooperation on these fields. MGCC’s efforts in Dual Vocational Training and Education have found their way into the 11th Malaysia Plan for 2016-2020. During her visit to Malaysia early October, the Parliamentary State Secretary of the Federal Ministry of Economic Affairs and Energy in Berlin, Mrs Brigitte Zypries, has shown her strong support for the educational initiatives of MGCC. We are in close cooperation with the responsible institutions throughout Malaysia to offer appropriate support from German training providers and certifying institutions. By this we secure the undisputed high-quality services that are expected from us. The concept of Public-Private-Partnership has proven its success in Germany for more than a century and has already been successfully implemented in many other countries worldwide. In the field of education and many other service offers we at MGCC see it as our task to flex our muscles, rollup the sleeves and keep going. In close contact with you, our dear valued members, we hope to stay your partner of choice for Malaysian-German business issues, your preferred platform for networking and the provider of best-in-class services. As the new Executive Director of MGCC, I personally rely on close and open communication with you. In case you may have suggestions for the improvement of our services I kindly ask you to contact me directly at [email protected]
or (+603) 9235-1828 and I hope to meet you in person on one of our upcoming events (www.malaysia.ahk.de/events). Daniel Bernbeck Executive Director, Malaysian-German Chamber of Commerce and Industry
BOARD OF DIRECTORS
THOMAS ZIMMERLE President DATO’ ROBERT TEO KENG TUAN Vice President P. KANDIAH Treasurer DANIEL BERNBECK Executive Director DATUK MUHAMMAD FEISOL HJ. HASSAN FRANCIS LEE IR. LEE SWEE ENG LIM KHIANG HUA MARTIN METZGER PETER LENHARDT PHILIPP KERSTING WENDY LAU WOLFGANG LAABS YBHG TAN SRI DATO’ G.S. GILL
Waste-to-Energy in Malaysia Spotlight on Sabah and Sarawak From 30 November to 3 December 2015 MGCC will organize the business delegation “Waste-to-Energy in East Malaysia (Sabah and Sarawak)”. Up to 20% of Malaysia’s total area is covered by oil palm trees, whereby the East Malaysian states of Sabah and Sarawak by far form the largest proportion of this area and therefore have the highest share of biomass from the agricultural sector. Against this background, the delegation will have a special emphasis on East Malaysia. In line with the business delegation, MGCC has published a market analysis to provide an overview of Malaysia’s biomass and biogas sector and its renewable energy policy. It describes the main sources of biomass in the country and provides an overview of market entry opportunities and challenges. Additionally, special focus is given to energy production from biomass and biogas in East Malaysia. The statements and information in this study derive both from the knowledge and experience of MGCC and information from personal interviews with entrepreneurs, who in some case have requested anonymity, organizations and authorities, as well as secondary research. The following text is an excerpt from the study.
Pelletproduktion gab, wird heute eine schnell ansteigende Menge an Pellets in Malaysia hergestellt. Jährlich werden insgesamt rund 300.000 Tonnen Pellets in Malaysia produziert, von denen über 90% exportiert werden. Hierbei steigt insbesondere die Nachfrage aus Japan und Südkorea nach malaysischen Holz- und Ölpalmenpellets. In den vergangenen Jahren unternahm die malaysische Regierung auch zunehmend Anstrengungen, den Biomassesektor weiterzuentwickeln und die Biogasnutzung landesweit zu fördern, beispielsweise mit dem in 2011 eingeführten Einspeisetarif für die Stromerzeugung aus Biomasse und Biogas. Von großer Bedeutung sind hierbei die regionalen Unterschiede zwischen West- und Ostmalaysia. Während in Westmalaysia die genannten finanziellen Aspekte des Einspeisemechanismus eine wichtige Rolle für die Teilnehmer spielen, ist es in vergleichsweise dünn besiedelten Regionen Ostmalaysias vielmehr die Steigerung der Lebensqualität, die zum Wachstum der Biomasse- und Biogasindustrie beitragen. Deutsche Technologien sind in Malaysia angesehen und werden hier maßgeblich zur künftigen Energieversorgung und damit zur Wohlstands- und Wachstumsentwicklung im Land beitragen können, wobei sich bei der Verarbeitung von Ölpalmbiomasse besondere Anforderungen an die Maschinen ergeben und vorhandene Technologien für Holzverarbeitung angepasst werden sollten.
Um Malaysia von einem „Schwellenland“ zu einer autarken Industrienation zu entwickeln, wurde 1991 das Regierungsprogramm „Vision 2020“ (Wawasan 2020) ausgerufen. Eine der Strategien, um dieses Ziel bis zum Jahr 2020 zu erreichen, ist der Aufbau einer wettbewerbsfähigen, dynamischen, robusten und belastbaren Wirtschaft. Daher wurden neue Wachstumsfelder identifiziert, die starke Investitionen anziehen dürften. Diese beziehen sich auf die Solarindustrie, Luftfahrtbranche, Automobilindustrie und auf die Biotechnologie. Als weiterer zukunftsträchtiger Wirtschaftssektor wird die umweltfreundliche Energiegewinnung aus Biomasse gehandelt. Malaysia verfügt über eine besonders gute Ausgangsposition für die Entwicklung der Biomasse- und Biogasindustrie. Das Land ist nach Indonesien weltgrößter Produzent von Palmöl und einer der größten Holzproduzenten der Welt. Die verfügbaren Rohstoffe, die bei der Verarbeitung der Ölpalmen anfällt stellt somit, neben kommunalen Abfällen und Holz, eine der Hauptquellen von Malaysias Biomasse dar. Besonders signifikant ist die Entwicklung im Bereich Pelletproduktion. Während es vor rund zehn Jahren noch keine
Energiemarkt in Malaysia Malaysia ist reich an einer Vielzahl natürlichen Ressourcen, von einer ausgeprägten Fauna und großen Waldflächen bis hin zu einer großen Menge fossiler Brennstoffe wie Erdgas und Erdöl. Malaysias Energieverbrauch ist seit dem Jahr 2000 stetig gestiegen und betrug im Jahr 2012 Mrd. 116.354 kWh, was fast einer Verdoppelung entspricht. Die Hauptenergieträger am Primärenergieverbrauch sind hierbei überwiegend fossile Brennstoffe wie Erdöl (40%), Erdgas (36%) und Kohle (17%).
Da fossile Brennstoffe wie Erdöl, Erdgas oder Kohle allerdings nur limitiert zu Verfügung stehen und zum Klimawandel beitragen, ist die Entwicklung von Alternativen unvermeidlich. Dies gilt auch für Malaysia, denn obwohl das Land reich an fossilen und regenerativen Energiequellen ist, wurde es bereits im Jahr 2014 Ölnettoimporteur, allerdings freiwillig zum eigenen Nutzen, da es aus malaysischer Sicht Sinn macht, das eigene höherwertige Öl zu Weltmarktpreisen zu exportieren und bestimmte Mengen des geringer wertigen Öls zu günstigeren Preisen zu importieren1. Aufgrund des ganzjährigen tropischen Klimas in Malaysia spielt der Wärmemarkt nur eine sehr untergeordnete Rolle. Die Stromerzeugung hingegen bietet einen größeren Markt und eine Vielzahl an Markteinstiegsmöglichkeiten im Rahmen erneuerbarer Energien für in- und ausländische Unternehmen. Biogas – aktuelle Herausforderungen und Chancen Die Palmölindustrie in Malaysia eröffnet vielfältige Möglichkeiten im Bereich der Biogasindustrie. Zum Ende des Jahres 2014 betrug die Plantagenfläche laut Angaben des MPOB im gesamten Land 5,39 Mio. Hektar. Ungeachtet der Tatsache, dass die Rohmasse in großen Mengen vorhanden ist, ist die Biogasindustrie in Malaysia noch nicht optimal entwickelt. Nur ein geringer Anteil der verfügbaren Biomasse aus Ölpalmen wird derzeit eingesetzt, um Biogas zu produzieren. In den vergangenen Jahren unternahm die malaysische Regierung jedoch zunehmend Anstrengungen, diesen Sektor weiterzuentwickeln und die Biogasnutzung
landesweit zu fördern, beispielsweise mit dem bereits erwähnten Einspeisetarif für die Stromerzeugung aus Biogas. Hierbei hat die Regierung das FiT-System für Biogas zum 1. Januar 2015 weiter angepasst (siehe Kapitel 3.3), um die Stromerzeugung aus Biogas weiter anzukurbeln, Anreize für den Ausbau des Stromnetzes zu geben und letztlich sicherzustellen, dass eine wachsende Anzahl an Personen Zugang zu einem zuverlässigen Stromnetz erhält2. Zusätzlich zur Unterstützung durch die Regierung ist auch die Privatwirtschaft aktiv in die Förderung von Biogas involviert. Unternehmen wie Sime Darby und die Malaysian Biomass Industries Confederation (MBIC) bieten Investoren, die daran interessiert sind, in den Markt einzutreten, Kooperationsmöglichkeiten an. Nach Angaben von Sime Darby, einem der größten Palmölproduzenten im Land, erfüllten Anfang des Jahres 2015 mindestens 80 Palmölanlagen im Land die Kapazitäten und die Voraussetzungen, um als biogasbasierte komprimierte Erdgasanlagen (BioCNG) zu operieren. Das Unternehmen fügte hinzu, dass – unter Berücksichtigung der derzeitigen Ölpreise und der Nachfrage für Erdgas – das Potential für BioCNG die Marke von 25 Mio. Kubikfuß pro Tag erreichen und überschreiten kann. The Star (2015), http://www.thestar.com.my/Business/Business-News/2015/01/21/Clearing-the-airTreasury-sec-gen-Malaysia-net-importer-of-crude-oil-petroleum-products-since-2014/?style=biz (abgerufen am 21.01.2015).
Sustainable Energy Development Authority Malaysia, SEDA, http://www.seda.gov.my/, (abgerufen am 12.05.2015).
Derzeit produziert nur eine kleine Anzahl an Anlagen Biogas aus Abfallprodukten. So haben im Mai 2015 nach Aussage der SEDA nur 55 Palmölanlagen Biogasanlagen in ihre Produktionstechnologie implementiert, während weitere 16 Palmölanlagen in der Konstruktionsphase für die Biogasgewinnung sind3. Rund 80% der malaysischen Palmölanlagen haben jedoch noch keine konkreten Pläne für die Methangewinnung in der Biogasproduktion vorgelegt. Die malaysische Regierung hat jedoch als Teil des Entry Point Project No. 5 (EPP5) unter dem „National Key Economic Area“-Programm die verbindliche Vorgabe aufgestellt, dass alle Palmölanlagen bis 2020 mit einer Methangewinnungsanlage ausgestattet werden müssen4. Malaysia will bis 2020 insgesamt rund 500 Biogasanlagen errichtet haben, die ca. MYR 2,9 Mrd. (EUR 0,69 Mrd.) zum Bruttoinlandsprodukt beitragen und rund 2.000 Arbeitsplätze generieren sollen.** Das aus Palmöl Abwasser (POME) gewonnene Biogas bietet grundsätzlich ein großes Markteinstiegspotential und verschiedene Investitionsmöglichkeiten in Malaysia. In den vergangenen Jahren ist dennoch zu beobachten, dass sich die Branche nicht so schnell entwickelt hat, wie zuerst erhofft. Der Fortschritt in dem Ein- und Umbau von Biogasanlagen in den Palmölgewinnungsanlagen, der zur Erfüllung der Ziele des Entry Point Project Nr. 5 (EPP5) bis 2020 erforderlich ist, geht langsamer voran als geplant. Einer der Gründe hierfür ist die Tatsache, dass das Kyoto-Protokoll und das darunter laufende Clean Development Programm ausgelaufen sind, wodurch die Möglichkeit entfällt, zusätzliche finanzielle Mittel auf einem externen Markt zu generieren. Die daraus entstandenen Unsicherheiten der Marktteilnehmer hinsichtlich erneuerbarer Energien, insbesondere bezüglich des Potentials für Biogasanlagen, konnten auch durch die Einführung des FiT-Systems nicht vollständig beseitigt werden. Ein Grund hierfür ist, dass die malaysische Regierung Quoten eingeführt hat, welche die Anwendung der FiT-Tarife nur auf einen gewissen Prozentsatz von Anlagen begrenzt, um die limitierten, nicht ausreichenden Finanzmittel für die Förderung zu verteilen. Der jeweilige Prozentsatz variiert dabei, je nach Anzahl der Anträge und den zur Verfügung gestellten öffentlichen Mitteln.* Als Hauptgrund für die derzeitig etwas verlangsamte Entwicklung sind allerdings die relativ umfangreichen Investitionen für die Installation einer Biogasanlage in einer Palmölmühle aufzuführen sowie die bisher nicht konsequente Verfolgung der Umweltstandards und Aussprache von Strafen bei Nichteinhaltung. Anstatt das Abwasser aufzubereiten und daraus Methan zu gewinnen, bevorzugen viele Betreiber von Palmölanlagen aufgrund der geringeren Kosten derzeit noch das herkömmliche System zur Entsorgung des Abwassers POME in Sickergruben. Die Installation einer Biogasanlage und die Vorteile der Biogasverstromung werden von vielen Betreibern von Palmölanlagen nicht als lohnenswerte Investition erkannt, weil die Plantagenbetreiber eine lange Amortisierungszeit in Kauf nehmen müssten und sie die Investitionen daher nicht für rentabel halten. Eine Biogasanlage erfordert darüber hinaus einen größeren Platzbedarf im Gegensatz zu den bisherigen Entsorgungssystemen für POME. Die meisten Palmölanlagen haben jedoch nur eingeschränkt Platz zur Verfügung. Zudem fehlen landesweit erfolgreiche Biogasmodelle, die als Vorbild herangezogen werden könnten. Eine solche Anlage könnte dabei helfen, Plantagenbetreiber und potentielle Marktteilnehmer zu
technologischen Aspekten und insbesondere über die Einrichtungs- und Betriebskosten zu informieren, mögliche Zweifel oder Fehlinformationen zum Betrieb einer Biogasanlage zu beseitigen und Malaysias Biogasindustrie einen zusätzlichen Wachstumsschub zu verleihen.** Möglichkeiten des Markteinstiegs Der Aufbau und der Betrieb von Biogasanlagen in Malaysia bieten eine Reihe unterschiedlicher Markteinstiegsmöglichkeiten für ausländische Unternehmen. In der Praxis wird die Technologie von lokalen malaysischen Unternehmen aus Nachbarländern importiert und an die Plantagenbetreiber verkauft. Dabei bestehen zwischen den Anlagen und der genutzten Technologie teilweise erhebliche Unterschiede hinsichtlich des Umfangs und der Qualität.** Hieraus ergeben sich verschiedene Potentiale für ausländische Unternehmen: Aufgrund der vergleichsweise umfangreichen notwendigen Investitionen, die eine Biogasanlage benötigt, sind viele der Marktteilnehmer eher vorsichtig und versuchen mit günstiger Technologie das Risiko ihrer Investition zu verringern. Im Preiswettbewerb können die europäischen Unternehmen allerdings häufig nicht mithalten, wodurch das Marktpotential für Technologieanbieter aus Europa begrenzt ist. Die Technologien und Maschinen, die in der malaysischen Palmölindustrie zur Erzeugung von Biogas und Elektrizität eingesetzt werden, stammen größtenteils aus dem asiatischen Raum, insbesondere aus China, wohingegen Technologie aus Europa und den USA eher selten verwendet wird. Während die meisten Plantagenbetreiber die Kosten für größere Investitionen scheuen, gibt es auch einige wenige Betreiber, die aufgrund des finanziellen Anreizes des FiT motiviert sind, auch in umfassende, hochwertige Biogasanlagen zu investieren. Während ein breites Spektrum an Technologien zur Stromerzeugung verfügbar ist, fehlt häufig das Fachwissen der Plantagenbetreiber, die Kapazitäten richtig abzuschätzen. In Folge dessen kommt es häufig zu Investitionen, die nicht den tatsächlichen Kapazitäten entsprechen, sowohl in Form von zu umfangreichen als auch von zu geringen Investitionen, wodurch nicht das gesamte Potential der Palmölindustrieabwässer zur Stromerzeugung ausgeschöpft wird. Daher sind das Fachwissen von Experten und Erfahrungen ausländischer Unternehmen gefragt. Nach Aussagen lokaler Behörden und Unternehmen liegt ein großes Potential für ausländische Unternehmen darin, Beratungsangebote anzubieten, die den Plantagenbetreibern helfen, die richtige Technologie im angemessenen Umfang einzusetzen und diese zu refinanzieren.** Ein weiterer wichtiger Aspekt ist, dass die verwendete Technologie häufig von verschiedenen Unternehmen und Lieferanten stammt. An einer ganzheitlichen Implementierung und Integration der verschiedenen Teile und Produktionsstufen fehlt es aber häufig. Hier bedarf es Lösungen, welche an die örtlichen Gegebenheiten angepasst sind und somit sichergestellt ist, dass die Verluste an POME und Biogas während des gesamten Verarbeitungsprozesses möglichst gering bleiben.* Sustainable Energy Development Authority Malaysia, SEDA http://www.seda.gov.my/, (abgerufen am 12.05.2015)
National Biogas Implementation (EPP 5), http://www.mpob.gov.my/images/stories/pdf/2014/2014_ nkea.pdf, (abgerufen am 31.07.2015)
* nach Einschätzungen und Kenntnissen der AHK Malaysia ** Informationen aus Interviews mit Unternehmen und Institutionen
Biomasse und Biogas in Ostmalaysia Beide Bundesstaaten sind traditionell rückständiger und weniger industrialisiert im Vergleich zum wirtschaftlich besser entwickelten westlichen Teil Malaysias. Die Industriedurchdringung und der Anteil ausländischer Investitionen sind deutlich geringer und der landwirtschaftliche Fokus war bisher dominant. In den letzten fünf Jahren seit 2010 ist es allerdings in Sabah und Sarawak zu einer Neuorientierung in der Industriepolitik gekommen. In beiden Fällen hängt dies mit der Ressourcen- und Energiepolitik des Landes zusammen.*
Das Marktpotential ergibt sich aus den Rohstoffen für die mögliche Biogas- und Biomasseproduktion, aber gleichwohl aus den politischen Rahmenbedingungen, die für diesen Sektor geschaffen werden. Dass die Zentralregierung die Palmöl- und speziell die Biomasseindustrie als einen der 12 strategischen Sektoren – NKEA (National Key Economic Areas) – für die Zukunftsentwicklung des Landes ausgewählt hat, aber auch dass die Bundesstaaten Sabah mit POIC sowie Sarawak mit dem SCOREKorridor bedeutende Akzente setzen, bestätigt das im Land gesehene Entwicklungspotential.
In Sabah ist die Palmölindustrie der wichtigste Wirtschaftsfaktor. Entsprechend wurde das beschriebene POIC geschaffen, welches vom Bundesstaat Sabah und der Zentralregierung in Kuala Lumpur gefördert wird. Deutliche Erfolge dieses Industrieclusters werden durch die Ansiedlung zahlreicher ausländischer Investoren gekennzeichnet. Eine weitere Entwicklungsphase des Industrieclusters zielt heute darauf ab, besonders den oleochemischen Bereich zu fördern. An einer Zusammenarbeit mit deutschen Technologieanbietern besteht hohes Interesse.*
Insbesondere spielt auch die Nachfrageseite eine bedeutende Rolle: Speziell in den ostmalaysischen Staaten gibt es in vielen entlegenen Gebieten auch künftig keine Möglichkeit zu vernünftigen Kosten den Anschluss an das nationale Stromnetz zu erreichen. Entsprechend werden hier „Insellösungen“, also die autarke Energieselbstversorgung aus erneuerbarer Energie bereits heute stark von Interesse sein.
In Sarawak spielen die beschriebenen Entwicklungen auf dem Energiemarkt eine besondere Rolle, vor allem das Absenken der Energiepreise. Anders als in Sabah, wo es speziell um die Palmölindustrie geht, führen die niedrigen Energiepreise in Sarawak dazu, vermehrt ausländische Investoren mit energieintensiven Investitionen (z. B. Stahl- und Aluminiumwerke) anzusiedeln. Erstmals seit den letzten Jahrzehnten ist der Bundesstaat attraktiv für ausländische Investoren geworden. Ein entsprechender Industriekorridor, SCORE, wurde eigens hierfür gegründet und verbucht besondere Erfolge.* Fazit Malaysia verfügt im Vergleich zu Deutschland über ein besonders hohes Potential an Biomasse und Biogas. Das Land ist nach Indonesien weltgrößter Produzent von Palmöl und einer der größten Holzproduzenten der Welt. Entsprechend hoch ist das Biomassepotential als Rohstoff.
Deutsche Technologien sind in Malaysia angesehen und werden hier maßgeblich zur künftigen Energieversorgung und damit zur Wohlstands- und Wachstumsentwicklung im Land beitragen können. Erste bedeutende Anlagen z.B. in der Pelletproduktion werden Malaysia auf dem Weg zu einem der bedeutendsten Biomasseproduzenten der Welt begleiten. Deutsche Standards und Technologieverfahren werden auch in Zukunft maßgeblich zur Reduzierung von Umweltverschmutzungen in Malaysia beitragen und damit einen wesentlichen Beitrag zur Erfüllung der bereits bestehenden und sich bis 2020 noch weiter verschärfenden Umweltschutzauflagen beitragen. For more information about the study and delegation, please contact Mr. Thomas Brandt at [email protected]
or visit www.export-erneuerbare.de, under the “Publikationen” tab, you will be able to access the complete study. * nach Einschätzungen und Kenntnissen der AHK Malaysia . ** Informationen aus Interviews mit Unternehmen und Institutionen. Source: AHK Malaysia Zielmarktanalyse „WASTE-TO-ENERGY“ 2015.
National Biomass Strategy 2020 (NBS2020): Defining Malaysia’s Biomass Potential by Timothy Ong, Malaysia’s National Innovation Agency The National Biomass Strategy 2020 (NBS2020), launched during BioMalaysia and Bio Pacific Rim Summit in November 2011 by the Honourable Prime Minister of Malaysia, lays the foundation for Malaysia to capitalise on its biomass by channelling it into higher value downstream uses to help strengthen its proposition as the region’s Bioeconomy Hub. NBS2020 targets the creation of new high value industries and more than 60,000 jobs of which mostly highskilled from biomass based industries. By 2020, the strategy developed by Agensi Inovasi Malaysia (AIM) in close collaboration with key government agencies, universities and business leaders, is expected to generate RM30 billion in new income for Malaysia and 12 reduction in CO2 emission. Thus far, palm oil has been the most important agricultural crop of Malaysia. Overall, the palm oil industry is the fourth largest contributor to the country’s GNI, accounting for about 8 percent or over RM80 billion of the Gross National Income (GNI). Globally, Malaysia is the second largest producer and the largest exporter of crude palm oil. To date, government support for downstream activities has been targeted at palm oil based products such as oleochemicals and, more recently, at strengthening the role of the private sector in this industry as part of the Palm Oil National Key Economic Area (NKEA). As a consequence of these activities, the palm oil industry also generates significant amounts of biomass every year, estimated at 87 million dry tonnes in 2014. As of end 2014, Malaysia has a total planted area of 5.39 million hectares (source: Malaysia Palm Oil Board), and more than 50% of the area is in the Borneo States of Sabah and Sarawak, 1.51 and 1.26 million hectares respectively. The expansion of palm plantation is
expected to grow at a pace of 4% per annum with Sarawak leading the way. While the strategy initially focused on the palm oil industry since it was the largest producer of biomass in Malaysia, NBS2020 is extending the scope to eventually cover all types of biomass from sources such as rubber, wood and rice husk. Take woody biomass for instance: As much as 2.7 million tonnes of woody biomass is available in Sarawak alone, predominantly from existing plantations. The vast majority of the oil palm biomass being generated today is returned to the field to release its nutrients and replenish the soil. The biomass returned to the field as organic fertiliser plays an important role to ensure the sustainability of fresh fruit bunch (FFB) yields. However, there is also the potential to utilise this biomass for a variety of additional high value end-uses, including but not limited to the production of wood products, pellets, bioenergy, advanced biofuels and biobased chemicals. The different uses have very different riskreturn profiles, given different technological maturities, global demand potential and competitive dynamics. Not surprisingly, the highest-value opportunities – bioethanol and biobased chemicals – also carry the highest technological uncertainties and competitive risks. A portfolio approach is therefore critical for the nation to ensure there is a combination of short to medium-term investments into immediate opportunities and longer-term investment in higher value-added opportunities. A scenario where an additional 20 million tonnes of oil palm biomass is utilised by 2020 for higher-value uses could have the potential to contribute significantly to the nation’s economy. In addition to a significant incremental contribution to GNI of RM30 billion by 2020, this National Biomass Strategy 2020 offers Malaysia a way to meet its renewable energy target, reduce emissions and create jobs. This
strategy also offers an opportunity for Malaysia to build biogas facilities, power plants, liquid and solid advanced biofuels (pellets and ethanol) and biobased chemical downstream clusters to ensure the nation benefits from the downstream value creation potential. From a supply-side perspective, by 2020, Malaysia’s palm oil industry is expected to generate about 100 million dry tonnes of solid biomass mainly due to the improvement in yields. This includes not only the empty fruit bunches (EFB), mesocarp fibres (MF) and palm kernel shells (PKS), but also the oil palm fronds and trunks.
Excluded from this figure is oil palm mill effluent (POME). On the current course, most of this solid biomass will remain in the plantations as fertiliser, with a small but increasing amount being utilised for bioenergy given the introduction of a Renewable Energy Feed-in-Tariff system (excluding Sarawak). Biomass should not be removed from the field without consideration of its nutrient value and protection to the top soil. However, there is the potential to retain in the field the portion of the biomass that has the highest nutrient value but the lowest downstream value, as represented by its carbohydrate content, and replace the balance with inorganic substitutes. Moreover, converting the mostly unused POME into biogas for either powering the mills or selling power into the national grid would contribute towards the renewable energy target of Malaysia – 410 MW of installed biogas capacity by 2030. This initiative alone would reduce the nation’s carbon dioxide (CO2) emissions by 12 percent and free up significant biomass for higher value-added uses. Taken in combination, this has the potential to free up 20–30 percent of the available solid biomass for higher value-added uses without affecting oil palm yields. This of course is a decision each biomass owner will have to make based on its long-term commercial and sustainability merits. Assessing the various costs of mobilising oil palm biomass today – harvesting, collection, pre-processing, substitution and transportation to a downstream hub – in the order of 25 million tonnes of biomass can be mobilised at globally competitive costs, i.e., at a cost of less than USD 80 per
dry-weight tonne (fully loaded cost) based on the study conducted in 2011. However, a recent study conducted by AIM with the State Governments of Sabah and Sarawak based on actual mobilisation cost on ground indicate a significant reduction in the overall mobilisation cost with some locations within the states going as low as USD30 per dry-weight tonne (based on exchange rate of USD1=MYR4.2).
On the current course (i.e. business as usual), approximately 12 million tonnes of solid biomass will likely be utilised for nonfertiliser uses by 2020, primarily for wood products and bioenergy. An additional 20 million tonnes could be mobilised for additional uses such as production of pellets, advanced biofuels (bioethanol, biobutanol) and biobased chemical industries. In total, this is approximately 30 percent of the solid biomass the palm oil industry is expected to generate annually by 2020.
Currently, most biomass related projects revolve around power generation fuelled by the country’s Feed-in-Tariff systems creating a sprouting of biogas and biomass power plant facilities. Beyond standard bioenergy projects, pellets production is a natural entry point, as the technology is reasonably mature, the cost of developing infrastructure relatively low and the payback relatively quick. Hence, while pellets production enable profitable mobilisation today, they also act as a buffer. Should higher value biobased chemicals materialise earlier or should Malaysia capture a bigger share of the global biobased chemicals market, biomass can be diverted from pellets production to capture these higher value opportunities. These business-as-usual uses of wood products, bioenergy and pellets provide an opportunity to generate value from biomass today, with the potential to generate revenue of RM200–RM1,000 per dry tonne of solid biomass input. In parallel, resources should be expended to invest in longer-term projects around advanced biofuels and biobased chemicals. While these have only recently started to reach commercial scale in Malaysia, they
also have the potential for significantly higher value creation – in the order of RM1,000–RM3,000 of revenue per dry tonne of solid biomass input. The biggest long-term opportunity for Malaysia is in biobased chemicals, with a forecasted global market size of RM110–RM175 billion by 2020. A critical success factor will be the mobilisation of biomass, both with regard to logistics – how to move it efficiently from plantations to centres of production – and
to cost – to ensure globally competitive costs. It will also be critical to create best practice joint structures to enable smaller mills and small holders to participate. As the world’s second largest producer and largest exporter of palm oil, this is a natural opportunity for Malaysia to capture, with a significant prize. However, achieving full potential will require significant coordination and cooperation among multiple stakeholders. The development of partnerships is critical for mobilising the biomass, and the government has already put in place certain incentives and strategies to encourage development as a result of this National Biomass Strategy. The biomass sector in both Malaysia and internationally has seen significant progress over the last few years. Some of the indicators include the commercialisation of second generation ethanol, suggesting that the technology will be mature by 2015. There has also been an increase in activities and investments into bio-based chemicals, increasing confidence in the viability of the industry and maturity by 2020. To date, AIM has worked with over 100 Malaysian mill and plantation owners to create awareness about downstream opportunities. The NBS strategy has also been presented to industry players and government partners in Asia, EU and USA both during international creating major interest internationally. Malaysia’s reputation as a country ripe for investments in the biomass space has also grown. Increased awareness has resulted in
numerous technical/strategic level visits by international investors and technology partners to Malaysia for the exploration of investments into bioenergy, bio-pellets, 2nd generation bioethanol and other activities. These visits have resulted in workshops, direct negotiation and meetings between investors and biomass industry suppliers, facilitated by the government. Recognising higher value uses of their biomass, biomass owners, such as mills, have been working to develop partnerships to consolidate their biomass within multiple joint venture clusters. Due to the positive momentum and increasing interest by industry in the biomass sector, we have explored the opportunity for Malaysia to capitalise on other types of biomass, such as forestry residues and the potential to produce 2nd generation bio-butadiene for synthetic rubber. The production of 2nd generation bio-based chemicals provides additional opportunity to capture more value-add within Malaysia. In conclusion, we would just like to add that the outlook for the
Agensi Inovasi Malaysia (AIM), Malaysia’s National Innovation Agency, is a statutory body set up under the Prime Minister’s Department to jump start wealth creation through knowledge, technology and use innovation to stimulate and develop the innovation eco-system in Malaysia. AIM lays down the foundation of innovation that inspires and produces a new generation of innovative entrepreneurs. We facilitate collaborations between government, academia and industry in advancing the consolidation and execution of new ideas in innovation. For more information: www.innovation.my
industry continues to look positive. This is further strengthened by the government’s focus in the 11th Malaysian Plan (20162020) where green growth is one of the six strategic pillars for the country’s development plan anchored on GDP growth through Renewable Energy Projects in the country, where biomass is estimated to make up 38% of the overall total. Timothy Ong is currently the Senior Vice President of Agensi Inovasi Malaysia (AIM), an agency under the Prime Minister’s Department. He is also functioning as the Head of National Biomass Strategy Delivery Unit (1MBAS) to drive the execution of the National Biomass Strategy 2020 (NBS2020). As the lead for 1MBAS, Timothy works closely with Industry to look at commercial viability of proposed projects by assessing the entire biomass value chain ensuring project relevance and scalability in the long run.
The National Biomass Strategy Delivery Unit (1MBAS) led by AIM, set up in March 2012 by the The Honorable Prime Minister has the primary role to serve as the Central Government Agency for everything biomass in Malaysia as an initiative to help strengthen the execution of the National Biomass Strategy 2020 (NBS2020). One of 1MBAS’s function is to promote the utilisation of biomass and faciliate the industry to explore all commercial biomass opportunities in Malaysia in the entire biomass value chain and across all sectors, to promote and create a balanced portfolio of downstream industries ranging from Bioenergy, Advanced Fuels and Biochemical to its end products. Another key role of 1MBAS is to coordinate and liaise with the Government side of things relating to biomass as it cuts through multiple Ministries and Agencies based on different downstream activities. For more information: www.nbs2020.gov.my
– 20 Questions about the German Energiewende “Energiewende”, the energy transition, is Germany’s decision to fundamentally reform its energy system: away from nuclear power, towards renewable energy sources. By the year 2050, 80 percent of the country’s electricity is to come from renewable sources. At the same time, Germany wants to halve energy consumption by using energy more sparingly and more efficiently and to reduce greenhouse gas emissions by 80-95 percent. These are ambitious targets, and they pose a major challenge. But they also open up many opportunities. The project energietransition. de answers 20 prevalent questions about the energy transition in Germany.
Q: Is the energy transition affordable? Yes – in fact, we cannot afford not to do it. Investments made in renewables today will pay for themselves over the usual 20-year service life of the equipment as conventional energy becomes more expensive. Furthermore, renewables are only seen as more expensive because some of the costs of fossil and nuclear energy are passed on as taxes and other external costs and are not directly included on power bills. Q: How will Germany ensure that the poor can still afford energy? In general, Germany can protect the poor by providing jobs with livable wages, which is why one of the main goals of the Energiewende is to gear up German industry for future technologies. Furthermore, the cost of electricity has risen more slowly than the cost of motor fuel and heating oil over the past decade, for instance, partly thanks to renewables. Q: When will renewables pay for themselves? They increasingly do now. The differential cost of renewables is currently peaking, so renewables are expected to help stabilize power prices within the decade. Only
countries that undergo an energy transition – like Germany – will be able to stabilize their energy prices within the foreseeable future. Q: Is the energy payback from wind and solar ever positive? A common question not only among laypeople but, surprisingly, even among experts occasionally is whether solar arrays and wind turbines ever produce more energy than was consumed for their production and installation. The answer is easy: the payback has been overwhelmingly positive for decades. Q: Why are low-carbon goals not enough in themselves? Germany wants to fight climate change and reduce the risks of nuclear power at the same time. Nuclear power is rejected because of the risks, the costs and the unsolved waste issue. In addition, there is no economic case for it to play a major role in the world’s energy supply. Q: Will Germany import more power from abroad after the nuclear phase-out? Germany has been a net exporter of power for years and remained so in 2011, even
after shutting down eight nuclear power plants within a week. In 2012, the country even returned to a record level of power exports, including to France. In 2013 and 2014, new record levels were set with France being the second biggest buyer of German electricity. Going forward, Germany will continue to add sufficient power generation capacity – and is likely to remain a net power exporter. Q: Did Germany not overreact to Fukushima? A few pro-nuclear countries did not fundamentally change their stance on nuclear after Fukushima, but Germany was actually in the majority. And its nuclear phase-out dates back to 2000, so the decision in 2011 represents a sudden change in Chancellor Merkel’s position, not a fundamental change in the general German opinion. Germany’s nuclear phase-out has been a long time in the making, but the government’s decision to shut down eight nuclear plants in the week after the accident in Fukushima still came as a surprise. Overall, however, Germany has a strong political consensus in favor of phasing out nuclear.
Since the first nuclear phase-out of 2000, the political discussion in Germany has not been about whether, but about how quickly the phase-out should proceed. Q: Are renewables not a relatively expensive way to lower carbon emissions? If you want to compare apples and oranges, yes. It is often claimed, for instance, that insulation is a much cheaper way. But even if we insulate our homes better, we still have to decide how we are going to make electricity. Although renewables have been expensive in the past, they are increasingly becoming the cheapest option. All estimates going forward are that renewables will be the least expensive source of low-carbon electricity in Germany within this decade. These prices are for new plants, not decades-old central power stations that have already been completely written down. Q: Will the nuclear phase-out not increase Germany’s carbon emissions? It didn’t in 2011, when the nuclear phaseout was put into law and carbon emissions went down even further. And going forward, carbon emissions from the power sector can only go down, not up, because of the ceiling imposed by emissions trading. Q: Would nuclear power not be an inexpensive way to reduce carbon emissions? Nuclear is not bankable. No nuclear plant is currently being built in any free market without massive state support. Nuclear is currently considered an inexpensive source of power for two reasons: first, all of the currently operating plants in the West were built long ago and have been written down – the longer they stay in operation, the more profitable they become; and second, we do not pay to complete cost of nuclear power in our power bills. Some of the costs are passed on to taxpayers and future generations. Q: Will the lights go out? Germany has had the most reliable grid in Europe since standardized statistics started being tallied in 2006, and the German grid reached a new record reliability in 2011. That level – around 15 minutes of power outages per year – has remained stable since then. Furthermore, other countries that are going renewable, such as Spain and Italy, have also seen grid reliability improve as they ramp up renewables.
Q: Will the Energiewende kill jobs? Per megawatt-hour generated, renewables create more jobs than the fossil and nuclear sectors, and most of those jobs occur at home, not abroad. Germany already has twice as many people employed in the renewables sector than in all other energy sectors combined. Q: Do Germans support the Energiewende? Yes, and they have done so for much longer than the German government has. In October 2014, a survey found that 92 percent of the German public viewed the Energiewende up favorably. Q: How can Germany be both a green leader and remain an industrial powerhouse? Renewables are lowering the wholesale power rate, which firms pay, and energyintensive firms are largely exempt from the surcharge for renewable power. Energyintensive industries therefore benefit from the cheaper electricity that renewable energy provides. Heavy industry also benefits from renewables in a number of other ways. Technologies like wind, solar, biogas, and geothermal power provide economic opportunities for traditional industries. For instance, wind turbine manufacturers are now the second largest purchaser of steel behind the automotive sector. A number of struggling ports in Germany are also positioning themselves for the offshore wind sector. The solar sector will support industries ranging from glass to ceramics, and farming communities will benefit not only from biomass, but also from wind and solar. The copper and aluminium sector is also poised to benefit from the switch to renewables. Thus, switching
to renewable energy does not only result in developing new industries like solar manufacturing. These technologies also provide opportunities for traditional industries to become part of the transition to a renewable energy future. Q: How are energy-intensive companies exempted from the surcharge for renewable power? In 2000, when the original Renewable Energy Act became law, the Social Democrats and the Greens agreed that energy-intensive industry that faces international competition should be exempted from the surcharge to cover the cost of renewable power. The goal was to ensure that such firms do not “go offshore.” But over the past years, the German government has unnecessarily expanded those exemptions to cover firms that do not face international competition, thereby unfairly concentrating the cost burden on consumers and small and medium sized companies. Q: What role will shale gas play in the German Energiewende? International onlookers sometimes wonder when shale gas will get going in Germany. Americans in particular think, based on their own shale boom, that the Germans could reduce their carbon emissions and lower their energy prices with shale gas. The situation looks much different within Germany. Q: Why did carbon emissions increase in 2013 and fall again in 2014? In 2013, carbon emissions in Germany rose by around one percent, but estimates for 2014 reveal a much steeper decrease of around 5 percent.
Germany’s plan: switch from coal and nuclear to renewables Electricity generation in Germany 2005–2050, scenario
Source: DLR and Fraunhofer IWES.
Germany is gradually shutting down all nuclear power plants Declining nuclear energy installed capacity in Germany, 2000–2022
power production. Unfortunately, the market bonus is still included in the 2014 amendments to the Renewable Energy Sources Act (EEG). Second, the German electricity market needs to be redesigned so that lower wholesale prices brought about by renewable power are passed on to consumers. Furthermore, the German industry needs to pay its fair share in the switch to renewables; it already benefits from lower wholesale prices, so the exemption from the surcharge for renewables is a second benefit – and industries that do not face international competition do not need to be exempt.
Source: Institute of Applied Ecology, BMJ, own calculations.
The main reason why emissions from energy consumption increased is unrelated to the power sector, however. According to the AGEB, the working group consisting of utility and finance experts that collate energy data for the country, the cold first half of 2013 was the main factor. Here, demand for heating energy was up, 80 percent of which is fossil fuel. Q: Is Germany undergoing a coal renaissance? At present, a number of new coal plants are being built, and net generation capacity is expected to increase this decade. These plants were planned starting in the first phase of emissions trading, which failed to provide a shift from coal power to power from natural gas. But increasingly, renewables are offsetting demand, so this additional capacity is likely to be unprofitable. In 2014, electricity production from hard coal and lignite went down by more than 6 percent. The firms are now scrambling to shut down capacity. Since Fukushima, not a single coal plant has been added to utility plans. During the nuclear phase-out, renewable electricity is likely to fill the gap left binding by nuclear power. However, the growth of renewables will probably only slightly outstrip the nuclear decline so that coal power will remain relatively strong, especially lignite. In contrast, electricity from hard coal is expected to decline. In 2015, the German government announced plans to reduce emissions from lignite. If these plans become law, power from lignite could indeed drop during the nuclear phase-out. Q: How much electricity storage will Germany need? In 2014, Germany demonstrated that it could get more than 14 percent of its power from wind turbines (8.6 percent)
and photovoltaics (5.8 percent) without any additional power storage. The amount of storage needed is not, however, relative to renewable power alone, but rather to the share of intermittent wind and solar in combination with an inflexible baseload. In general, power storage is not expected to become a major issue until the end of this decade. Q: How could the cost of Germany’s Energiewende be decreased? A number of steps have to be taken to ensure that the cost of renewable electricity is equally spread across power consumers, and the benefits of distributed power have to be utilized. Overall, Germany needs to start focusing on the cost impact of individual actions on the overall power supply. To begin with, feed-in tariffs have become unnecessarily expensive with the “market bonus,” which is estimated to have cost an additional 530 million euros in January 2013 without having increased renewable
In the current EEG, offshore wind receives a favorable treatment although offshore plants are currently much more expensive than onshore wind and even more expensive than ground-mounted solar arrays. Within just a few years, even small solar roofs will be cheaper than offshore wind – and offshore wind requires the most grid expansion of all types of renewable power. Distributed power should require far less grid expansion than large, central projects, especially offshore wind, but some experts say a well-designed focus on sites with the best resources could indeed be the least expensive option. Furthermore, the wind sector has already implemented its own ideas about how the grid can be inexpensively expanded, but the government has yet to provide a proper policy framework. Source: http://energytransition.de/. A project aiming to explain what the Energiewende is, how it works, and what challenges lay ahead. It is intended to provide facts and explain the politics and policies to an international audience. The website highlights the effects of the Energiewende on the German economy, environment and society and addresses the most important related questions.
The benefits of renewable energy: future technologies for climate protection “Do you agree renewables . . .” (multiple answers possible)
Source: TNS Emnid survey conducted for the AEE, 1015 participants – October 2014.
The Waste Management System in Malaysia Waste management is an important issue related to the economic status of a country and the lifestyle of its people. As the growth of population and waste generation is exponential, waste management has become a serious issue for municipal governments throughout Malaysia. According to Department of Statistics Malaysia, during the last 50 years, population of Malaysia has increased 271% from 8.2 million (1960) to 30.4 million (2014). In the news report of an anti-litter campaign in January 2014, Deputy Urban Wellbeing, Housing and Local Government Minister Datuk Halimah Mohd Sidique said 30,000 to 33,000 tonnes of waste were being produced a day in 2013 which is way more compared to 22,000 tonnes in 2012. The Malaysian government has set a National Recycling Target that 22% of the total solid waste can be recycled by 2020. But, referring to a recent report by The Malaysian Reserve in September, being only 5 years away from 2020, the recycled rate currently is only about 5%. Sarawak Governed by Their Own Set of Environmental Laws and Regulations Sarawak (like their neighbouring state, Sabah) is governed by their own set of environmental laws and regulations, which includes the state’s own by-laws on waste management. There is currently no specific curb-side recycling programme or mandatory law in Sarawak that requires the public to separate their waste at home and therefore recycling can only be low key until society is fully capable of segregating at source i.e. the household. In depth studies must be carefully developed before a comprehensive recycling system can be implemented in the state. Factors to be considered are legal requirements, geographical accessibility and logistics, provisions of receptacles, collection and storage methods, types of vehicles, collection schedule, etc. as well as the establishment of a standard facility to cater for mass recycling activities. Close cooperation and participation from governing bodies is needed to ensure that sorting is exercised – policies and bylaws are only effective when successful enforcement is in place.
The Sarawak State government had the foresight to recognize that the trending socio-economic growth along with the state’s progressive development plans would soon necessitate the need for a much more complex waste management system than what was then in place. The government had then hired Trienekens, South East Asia’s leading company in the business of environment and waste management, to operate in Malaysia’s largest state, Sarawak since 1999. Consequently, a Joint Venture Agreement between the State Government and Trienekens GmbH, Germany led to the formation of Sarawak Wastes Management Sdn Bhd (SWM) – the concession holder to develop and implement an Integrated Solid Waste Management System for Sarawak, with Trienekens (Sarawak) Sdn Bhd as the System’s operator. The System integrates the collection, transportation, treatment and disposal of both municipal and hazardous waste and features a state-of-the-art treatment facility located in Sarawak’s capital, Kuching. The company currently covers the service scope of municipal waste services for a majority of Kuching’s population, besides providing comprehensive hazardous waste services for the whole of East Malaysia.
Jürgen Pickenhagen, Executive Chairman of Trienekens (Sarawak) Sdn Bhd
In an interview with Jürgen Pickenhagen, Executive Chairman of Trienekens (Sarawak) Sdn Bhd, regarding the measures to improve the waste management system to achieve the National Recycling Target which is 22% of the total solid waste will be recycled by 2020, he stated that East Malaysia is different from the other states in West Malaysia in terms of waste regulations. However, it is their opinion that any effort to improve waste management practices and to encourage recycling is a positive effort.
Trienekens Shares Their Experience and Challenges in the Waste Management Industry Developing and implementing a holistic waste management system requires comprehensive data on present and anticipated waste situations, supportive policy frameworks and knowledge. The ability to develop such systems with the proper use of environmentally sound technologies takes a number of technical, financial, institutional, economic and social factors into consideration. Meanwhile, recognition of the serious threats posed by environmental degradation has elevated the promotion of green growth to the top of policy agendas worldwide. Jürgen Pickenhagen continued to share his experience and challenges in the industry. “In the beginning, it took a lot of educational and awareness activities before the public came to understand and appreciate the benefits of having a proper waste management system in place. We started by transforming the management of household waste in Kuching by modernizing the logistical and disposal processes of municipal waste. From the development of municipal waste management, we then progressed quickly to the next phase of the System’s plan. We introduced Hazardous Waste Management concepts throughout East Malaysia; catering to the documentation, logistical and disposal needs of all types of hazardous waste generators; from oil and gas companies to chemical, clinical and pathological waste generators.” There is a mutually reinforcing relationship between social and industrial development. Industrialization has the potential to directly and indirectly promote a variety of social objectives such as employment creation, poverty eradication, labour standards, and greater access to education and health care. It is essential that governments address environmental management issues in order to ensure sustainable industrial development of optimum efficiency. The fact that waste is generated as part of society and will continue to be generated needs to be taken into perspective when progressing higher in the field of waste management.
“As the present take on green practices begin to take shape and awareness picks up, it is our duty as members of the Malaysian society to sustain such efforts so as to hopefully instil in our future generation, the value and importance of ensuring the preservation and sustainability of our environment.” In Sarawak, the main aim of implementing an Integrated Waste Management System was to provide safe and clean waste management services for the benefit of the public and environment. Although not yet a major and active component, recycling is expected to be part of the integrated system. As the leading waste management company in the region, Trienekens is a keen supporter of waste recovery and the 3Rs (Reduce, Reuse, Recycle). Through its corporate social responsibility (CSR) programmes, the company strives to improve public awareness on recycling and environmental preservation. Trienekens also regularly works with the local authorities, which themselves have several projects on composting and waste segregation at source in place. For the state’s second cutting edge Integrated Waste Management System, the Sarawak State Government has recently awarded Trienekens (Samalaju) Sdn Bhd, the sister company of Trienekens (Sarawak) Sdn Bhd, a 35 years Concession Agreement to implement a second Integrated Waste Management System for the Samalaju Industrial Park in Bintulu. In this project, it will include a Waste Transfer Station in Samalaju as well as a Waste Management Centre in Maskat, 44 kilometres from the Samalaju Industrial Park (SIP). This project operates on a DBOOT (Design, Build, Own, Operate and Transfer) basis with private funding. The total investment is projected at MYR900 million, starting with a first phase of MYR250 million. This major step forward is a strong example of the State Government’s resourcefulness in preparing for the state’s industrial growth – in particular, the development of the Sarawak Corridor of Renewable Energy (SCORE); wherein the Samalaju Industrial Park has been earmarked as a major growth node for heavy and energy-intensive industries. Custom designed to the types of waste that will be generated in SIP, the new System will ensure the holistic management of both municipal and hazardous waste.
Mandatory Separation of Waste Effective from 1 September 2015 in Peninsular Malaysia, excluding Penang, Perak, Selangor, Kelantan and Terengganu On 1 September 2015, the Malaysian government enforced a mandatory waste separation system in Peninsular Malaysia – excluding Penang, Perak, Selangor, Kelantan and Terengganu – in stages under the legal clause in the Solid Waste Management and Public Cleansing Management Act 2007 (Act 672) to urge Malaysian households and business premises to separate their waste into recyclables and non-recyclables. Yong Yoon Ming, Founder and Managing Director of Sulomas Sdn Bhd.
“Speaking impartially, I do feel that Malaysia is still developing in many aspects of waste management and environmental awareness. Proper infrastructure and systems must be established to help launch the waste segregation activity and to complement the implemented laws. Public cooperation is also critical and needs to improve in order for waste segregation to work successfully and efficiently. The effectiveness of a waste separation at home system depends very much on good and strong partnership between the government, local authorities, service operators and the public,” said Pickenhagen. On the enforcement of mandatory waste separation, he commented that it should be introduced in phases as the public must first understand the importance of the regulation. The public should also be provided with straightforward and specific, instructions on how they are required to separate their waste. The governing bodies should ideally provide the public with easy access to information, tutorials and provide an avenue for interactive Q&As. Finally, the process of managing the collected recyclables should also be regulated to ensure the safe management of any byproducts produced from the recycling process. “In developed countries, related acts, laws and regulations make it mandatory for the public to separate their waste at home. For example, in Germany, 60% of waste is recycled, with a whole different mindset and approach to environmental awareness firmly set and practiced by the population. The strong enforcement of existing legislations and public participation is further supported by an established system that facilitates the recycling process, making waste separation from home easy and convenient. For recycling to be a success, the public’s mindset, awareness, understanding and participation must be strongly geared towards environmental protection and preservation,” he added.
Waste Management in Peninsular Malaysia Speaking about the waste management system in Peninsular Malaysia, Sulomas Sdn Bhd is one of the players in this field. The Founder and Managing Director of Sulomas Sdn Bhd, Yong Yoon Ming shared the humble beginning of Sulomas with us. Before Sulomas was founded in 2014, Yong Yoon Ming was running a well established manufacturing company. Yong decided to venture into waste management business when SULO, the global leading manufacturer of waste management products and solutions approached his company to be an exclusive distributor for the Malaysian market. “Since our background was in the manufacturing industry, we started to manufacture stainless steel bins under our own trademark brand SUGO. We were lucky to have the right people that have extensive international experience to spearhead the business. In the past year, we have progressed significantly and we would like Sulomas to be the leader in waste management in Malaysia and Indonesia,” Yong said during an interview with MGCC. Rapid economic transition and a growing amount of urban population in Malaysia is escalating solid waste generation. The Malaysian government noticed that it is a massive problem to manage the waste produced, which therefore led to the formation of a consortium, comprising four major concessionaires, to overcome the problem. Alam Flora is the designated waste management entity of the Federal Territory and Pahang while in Negeri Sembilan, Malacca and Johor, the southern part of Peninsular Malaysia, Southern Waste Management Sdn Bhd (SWM) is the one taking care of the waste in this part of the country. For northern Malaysia, Kedah and Perlis are managed by E-idaman and Sarawak, as mentioned earlier, is partly managed by ‘Trienekens’
“However, the four major concessionaires cover only half the states in Malaysia and the rest have yet to sign up to the federal concessions. It’s an uphill task for the federal government to convince all member states to join the concession model. We still use landfills to dump our waste. The industry has plenty of room to grow and there are limited players, which puts Sulomas to be in the forefront providing systems and solutions with state of the art technologies, which is yesterday, today and future of waste management,” Yong commented while explaining about the current waste management situation in Malaysia.
Malaysia as a developing country and targeting to achieve a developed nation status in 2020, the initial steps taken towards an integrated waste management solution, segregation, has gained key importance as it has been done in other developed countries for years.
waste management company, Sulomas’s view is to encourage a sustainable waste management solution which includes waste collection that must follow international standards as it is in developed countries. Firstly, households should be given a mobile recycle garbage bin for segregation. Secondly, recycled waste should be collected by authorised waste collectors on a bi-weekly basis. Thirdly, solid waste or food waste should be collected once a week. Finally, for all of it to be successful, the authorities have to look at the entire system which includes providing the right tools to the households, for example, standardize mobile garbage bins to 240 liters one for ‘Food’ and the other for ‘Recycle’ waste, reduce the number of waste collection days to once a week for ‘Food Waste’ and alternate weeks for ‘Recycle’ thus reducing CO2 considerably and minimize trips to landfills. In a nutshell, Malaysia requires state of the art waste management solution which is integrated and sustainable,” he added.
“Waste generated in Malaysia is far greater than other developing countries, hence as an individual and as an entrepreneur of a
Awareness should be a continuous effort Waste management is the fundamental of the recycling process, and extensive
campaigns have been organized in 1996 and again in 2000. Yet according to a recent news report, only 10.5% of Malaysians practice the recycling of waste. Yong commented that the last campaign organized by the government on recycling was already 15 years ago, but there is still a good example which is Penang, where awareness on recycling is being created daily along with active NGO participation. Awareness is a continuous process which has to involve school children, university students, NGOs and households. Yong further continued that the developed world took over 60 years to see a great level of success in this area. Malaysia is considered a relatively new country and is still keeping up the pace in this area. “The revenue of the waste management industry in Malaysia and the world is set to explode. According to the latest research data available, the industry will be worth USD29 billion worldwide by 2025 and Malaysia will not be an exception as it will add to the USD29 billion in the next 10 years,” he concluded.
Behn Meyer Group – Celebrating a World of Capabilities The establishment of the Behn Meyer Group of Companies dates back 175 years, when two young Germans founded the company in Singapore during British colonial times. In conversation with the long term MGCC member company we sought to find out more about the interesting past and present of the Behn Meyer Group. Q: The Behn Meyer Group started its trading and shipping business with the name of Behn, Meyer & Co. in Singapore since 1840. Please tell us about its humble beginnings. On November 1st, 1840, Theodor August Behn and his schoolmate Valentin Lorenz Meyer, the son of a Hamburg Senator established the company Behn, Meyer & Co. and it became the first German enterprise in Singapore. The two young men started out with exceptionally good references from reputed trading firms in Antwerp, Bordeaux, Hamburg, London, Manchester, Manila, Marseilles, Bombay, Calcutta and Bremen. The business was based on natural products from South East Asia such as coconut oil, copra, pepper, camphor, rattan and rice, which were bought from countries all over Asia, and mostly from the many islands within the region. They traded not only as agents but also as independent entrepreneurs undertaking all the risks whenever suitable opportunities were available. They also sold all kinds of incoming goods from Europe and as their trading routes steadily expanded, both friends found themselves in a very fortunate position. Q: Standing strong through historically turbulent times, Behn Meyer is celebrating its 175th anniversary this year. What were the major milestones in the company’s corporate history? The survival of the two World Wars was a remarkable achievement since the company lost all its assets twice. But more importantly, the company managed a strong return to its traditional markets after the war and many colleagues went back to their previous positions.
Since German companies were not allowed to establish their own legal representations in the Straits Settlements and other British territories, new offices in Penang and Singapore were opened. The new establishments successfully acquired sole agencies for the well-known German chemical manufacturers I.G. Farben (later to become Bayer AG, BASF AG, Hoechst AG, Casella AG) and Beiersdorf A.G. as well as the machinery manufacturers Deutz and Henschel and many other highly reputable German brands. The exclusive relationships with these German partners turned out to be very successful and became the backbone of the business. The offices in Penang, Ipoh, Singapore grew strongly and the success was repeated later in Kuala Lumpur. In addition, the decision in the late nineties to focus on Agrochemicals and Chemicals was a major milestone as our today’s business is based on these 2 industries. In 1999, Behn Meyer Chemicals successfully branched out into manufacturing in Malaysia through the establishment of the company Performance Additives Sdn Bhd
which produces processing additives for the rubber and plastic industries. Further expansion into own production took place in Rayong, Thailand with the construction of a new plant. In 2011, Performance Additives built and acquired a factory in the United States of America as well as another one in Italy during the same year. The business decision to invest in R&D is another great milestone for the company. The intensive R&D support enables us to be more innovative, service our customers better and build lasting relationships. Q: From its early beginnings to a current presence in more than 14 countries, the company history of Behn Meyer Group is indeed a remarkable achievement. What were the turning points that helped your company sustain until today? What business principles do you strongly believe in? The people of the company made the longevity possible. Integrity, loyalty and hard work from so many dedicated people who sacrificed for the company and had the long-term survival of the company in mind.
As a privately owned company, Behn Meyer is managed with focus on sustainable business growth. Therefore long-term relationships with our suppliers, customers and business partners are vital to the company. Our principles are: • Practice an open and partner-like relationship with our customers and principals. • Ensure to be specialists in the businesses we are involved in. • Apply team management principles in all of our individual companies across the region. • Promote co-operation amongst all of our individual companies. • Motivate our staff through career development programs. • Invest in R&D. • Compliance & business ethics. • Reinvest substantial portions of profit. Q: Behn Meyer has evolved to be a specialty supplier for a wide variety of industries across Southeast Asia. What are your goals for the company for the next 10 years? The Behn Meyer Group is mainly involved in chemical distribution and manufacturing. The group’s portfolio includes AgriCare (fertilizers, crop protection), Ingredients (animal nutrition, food, home & personal care, pharma), Performance Chemicals (coatings, petroleum- and process chemicals, water treatment, leather and textile) and Polymers (rubber, plastics). We want to further strengthen our market position in the industries and countries we are active in and expand our network to other countries within Asia and in Europe. Behn Meyer’s growth strategy also includes M&A activity. However an acquisition makes only sense if there is a cultural fit and only if people will stay. The company’s operations reflect global mega-trends which particular impact Asia such as population growth, urbanization, increased water and food consumption as well as environmental protection. The AgriCare and Ingredients business units benefit directly from these trends with the latter being focused less on chemicals and more on biologicals such as probiotics and enzymes. The group is looking globally for a manufacturing unit to anchor this business. It will leverage products across its distribution business in Asia. In the past, a large number of suppliers re-evaluated if they wanted to have their
own presence in Asia and many established themselves directly. Today, a reversal of that trend can be seen, as multinational producers increasingly look for one partner to deal within the region. They want distribution partners with regional reach and strong compliance capabilities. Size does matter in distribution – and Behn Meyer has this regional footprint across SE Asia. Q: Speaking of the various businesses Behn Meyer is specialized in, we would like to know more about the AgriCare business unit. The demand of food and agricultural yield has been rising tremendously due to the rapid growth of population globally. According to a statistic published by The Worldwatch Institute – a research institute devoted to global environmental concerns – almost 40-60% of agricultural crops are grown with the use of different types of fertilizers. Behn Meyer imports and markets the widest range of fertilizers in Malaysia. What is the fertilizer consumption rate in Malaysia? Does the fertilizer that has the highest consumption rate brings impact to the environment? Fertilizers are essential in today’s agricultural systems to replace the elements removed from the soil by the crops, or by natural losses such as through leaching of nutrients, volatilisation, or soil erosion. As such, without the use of fertilizers, food and other agricultural production will not be efficient, and will result in more conversion of forest or natural grasslands into cropping land. In many developing countries, forest land that has been logged over and has become degraded land should be put to good agricultural use. A sustainable production can only be achieved with proper fertilization systems, reducing food imports, and improving the livelihood and living standards of the population. The fact that only 40-60% of agricultural crops globally are grown with the use of fertilizers testifies to the fact that a large percentage of agricultural systems in the world are still not properly educated in the use of fertilizer inputs to increase the efficiency of their cropping systems. In this respect, Behn Meyer AgriCare tries to fill this vacuum in a responsible way in all the countries that we are present. In Malaysia, fertilizer consumption averages between 4.5 to 5.0 million metric tons per year. Depending on the agricultural commodity prices this number fluctuates, meaning that usage is also constrained by economic returns, and indicating likewise that indiscriminate use of fertilizers, though possible, is also tempered by the need to
be cost effective. Fertilizers that can impact the environment are not necessarily those that are consumed in the largest quantity. Rather they are specific to the nature of the fertilizer. For example, Urea is prone to volatilization losses of up to 30%, nitrate fertilizers are prone to leaching losses, and the poorly soluble rock phosphate fertilizers are easily lost through surface run-off losses. BM AgriCare places large emphasis to inform the farming community of these problems, and to educate them on how to avoid such losses. We try to offer alternative solutions that minimizes these problems, or avoids them totally. Q: Overuse of fertilizers can cause damage to the environment and human health. What measures can be taken to control the usage of fertilizers? How is the level of awareness towards this issue among the agricultural community in Malaysia? Fertilizer is the single largest input cost of most agricultural production, and thus it is, if you may say, self-limiting when it comes to the issue of over-use. Overuse, but more so the wrong use of fertilizers or chemicals, can definitely cause damage to the environment and to human health. For this reason we have a technical team of agronomists who reach out to the farming community to give them the right advice. It is also the reason why we have a wide range of products that is suited to particular environments such as the cropping system, soil-type, terrain, rainfall pattern, crop type and age, etc. To discourage overuse of and minimise dependence on chemical fertilizers, we promote, for example, the good establishment of leguminous cover crops in young oil palm field to fix nitrogen from the air, reduce soil erosion, reduce weeds and therefore the need to spray herbicides. We encourage the use of empty fruit bunches (EFB) from the palm oil mills, after the oil has been extracted, to mulch the fields. This practice recycles nutrients still present in the EFB into the cropping system and reduces the need for fertilizer inputs, as well as help conserve moisture and reduce soil erosion. There are many more such ecologically and environmentally sound practices that are being developed to create a holistic approach towards sustainable food and agricultural production which cannot survive without the judicious use of fertilizers and agrochemicals. Behn Meyer AgriCare promotes such initiatives with great enthusiasm.
22 CSR COLUMN
The Circular Economy The Corporate Leviathan by Jayanthi Desan
Several years ago, in a hushed conference room in Geneva, I spent several days with a number of academics and corporates, embroiled in long discussions on how CR should not be reduced into linear categories. In our current economic system, we extract resources like water and energy and make products that are largely disposed of at the end of their life or after use. This broader thinking on production impacts understanding on CR which continues to be bounded by misunderstood institutional roots, political limitations and legal parameters. Such ideas have now become known as the Circular Economy. The circular economy is a notion that argues for a ‘restorative economic model’, one where production works within resource boundaries. A circular economy is also waste-free and resilient by design. So, production must account for social and ecological impact, or what is called ‘closed loop’. Simply put, businesses are judged on linear measurements – sales and profits as well as year on year growth projections. Supply chains are time-bound, with quick turnarounds to satisfy insatiable
consumption demands – all working in a linear process. The results are depletion of resources and a culture of perpetual waste. SO, HOW DO WE MOVE TOWARDS THIS NOTION OF CIRCULARITY? One of my favourite writers of fiction is Haruki Murakami. The world he builds is a dreamy one, full of talking cats, dead girlfriends and endless, rainy days. He says this: ‘It’s all a question of imagination. Our responsibility begins with the power to imagine. It’s just as Yeats said, in dreams begin responsibility. Turn this on its head and you could say that where there is no power to imagine, no responsibility can arise’. So, with some imagination, businesses can make the transition from the traditional linear model of production and consumption to a circular model, based on reusing resources and regeneration in production. Some examples of interesting companies in this area are Steelcase, the furniture maker and Desso, a Dutch carpet and artificial turf company. Steelcase’s
Thinkchair is 98 percent recyclable by weight, contains 38 percent recycled content and can be disassembled in five minutes. The chair can be recycled over and over again. Steelcase has re-imagined the office chair. Desso, the carpet company, shows new thinking in redesigned carpet tiles which can be disassembled with yarn that can be reprocessed to continue upcycling the materials. It has also developed a biodegradable base made out of corn byproducts and is experimenting with yarn from bamboo, which allow used carpets to be safely returned to the food-farming system. Some other examples are companies building laptops made of plastic from old laptops, making aluminium car body parts made from old cars and producing flushable or compostable diaper lining. These are interesting developments but it must also be remembered that the linear economy can be traced right back to the Industrial Revolution and largely continues to inform current business practices.
CSR COLUMN 23
During the Industrial Revolution, the factory employing hundreds of workers became representative of the corporation at large. In part, this was a reflection of the power of the new industrial processes that reshaped age-old relationships. The factory owner had the privilege of the ‘old lord of the manor but none of the responsibilities’. Labour was seen as a replaceable cash nexus. Major issues of responsibility and morality became acute. The famous Marxist, Friedrich Engels observed: One day I walked with one of those middleclass gentlemen into Manchester. I spoke to him about the disgraceful unhealthy slums and drew his attention to the disgusting condition of that part of the town in which the factory lived. I declared that I had never seen so badly built a town in my life. He listened patiently and at the corner of the street at which we parted company, he remarked: ‘and yet there is a great deal of money made here. Good morning, sir!’ Such ideas of profit at all costs has not changed much, except where legislation has intervened subsequently. We are confronted with a variety of similar situations, with nothing illustrating the
linear economy in a more dramatic way than the new round of haze-filled days that cloak us here in Malaysia and across South East Asia. At the end of the day, no business operates in a vacuum, every decision and action is influenced by a wide range of forces, both internal and external to the business. Successful business leaders enable their organizations to harness the forces that will enhance performance, while optimising their response to performance limiting forces. The circular economy energizes businesses with new possibilities and markets. The question is how do we re-design business to be circular? It is not so much a fundamental redesign of business and end-to-end overhaul of value chains as a rethinking of the over production and over consumption culture. It goes back to the core of a business and integrates the notion of profits with purpose. For companies that operate efficiently around a critical resource such as water or energy, market forces are happy to ply the necessary rewards. There are different ways to be circular: companies like Uber are
thriving on the sharing and collaborative culture, in which consumers choose access over ownership. As sharing is becoming acceptable in new ways, we are realising that young people want a car for mobility and not so much as a status symbol. Similarly, AirBnB is opening up the market for holiday accommodation without the need to build new hotels. Other examples of being circular are more straightforward like Coke which has managed to reduce the amount of water used per litre of product by 24% in 10 years. There are also exciting new start-ups working around the notion of circular like Waste Ventures in San Francisco, which is working on profiting from waste, to Evocative in New York which grows packaging materials from mushrooms.
Jayanthi is the Founder and Managing Director of Synergio, one of Malaysia’s leading sustainability strategy consultancies.
24 LEGAL & INVESTMENT
Meeting Today’s Supply Chain Trends and Challenges – Pt. 3 by Daniel H. Goh, InvestKL
PREFACE In the last two articles we covered how best-in-class companies are redesigning their supply chains to optimize total delivered costs in a global economy that is getting more connected. The strategies include taking advantage of growth driven by a global shift in trade flows especially in emerging markets and the proliferation of the digital economy.
This uncertainty has contributed to companies experiencing higher levels of volatility in supply and demand. According to a research from Capgemini, 90% of supply chain executives agree that while consumer demand is fluctuating more rapidly, their systems cannot adjust quickly enough to these fluctuations.
This is necessitated against a backdrop of a challenging geopoliticaleconomic climate which promises only greater levels of uncertainties in the near future. From McKinsey’s Economic Conditions Snapshot, June 2015, we see that within a span of a year, perception on the severity of risks to global economic growth has increased between 12% and up to 30%. Geopolitical issues remain the leading risk to growth. Risk from economic volatility, exchange-rate volatility, and debt defaults are on the rise.
Fluctuation in demand vs supply chain capability^. Source: Capgemini – The Supply Chain Impact Survey Research Results, November 2013.
In order to successfully manage cost efficiently and sustain growth in emerging markets which were covered in the last two articles, a key competency which best-in-class companies seek to develop is operational agility. Operational Agility, Competing in Turbulent Times Operational agility is an organization’s ability to identify and exploit revenue-enhancing and cost-cutting opportunities more quickly, effectively and consistently than their competitors. Risks on global economic growth has risen from 2014 to 2015*. *Source: Mckinsey Global Survey Results – Economic Conditions Snapshot, June 2015.
The traditional response to dealing with turbulence in supply chains is to institute more complex forecasting systems and processes to
LEGAL & INVESTMENT 25 detect potential shifts in advance and therefore plan for it. While this has been an effective approach, and even enhanced with big-data analytics, there are limitations as seen in the Capgemini’s survey findings.
operational agility. Decision making is kept at a regional level which would provide better efficiency and effectiveness, thus responding better to the market needs.
A complementary approach is to have operational agility being built-in via organizational design. Best-in-class companies do this by tailoring their supply chain capabilities and decision making structures to the needs of different customer segments. When a company has the right organizational capabilities, complemented by being in the right location, this empowers and enables the company to identify the regional market opportunities and threats, which allows the company to respond promptly and precisely. This process begins by gaining an in depth understanding of the required operational competencies to compete in a particular market or industry, which would lead to addressing capability gaps internally. As an example, a company whose skills needed to compete as a value player did not match with its existing strengths. By addressing this mismatch, the company would be able to realize the benefits of an improved and relevant supply chain. REQUIRED FOR WAY TO PLAY (IMPORTANCE) CURRENT COMPANY CAPABILITIES (STRENGTH LEVEL)
Process Effectiveness and Execution
Product Life Cycle and Launch Time
Required capabilities to compete vs current capabilities#
The typical journey in establishing a regional principal hubΩ Ω
Outsourcing non-core activities Thirdly, companies achieve greater levels of operational agility when they outsource non-core activities to leading service providers and begin to focus their resources only on core activities and competencies. According to a study by PwC - “Next-generation supply chains”, the article provides details on the supply chain functions that best-inclass companies would outsource and also on functions which would be managed at a regional vs global level. In the example below, leading pharmaceutical companies choose to outsource most of their non-core activities such as manufacturing, warehousing and logistics functions and focus on strategic planning. Decision making structure has moved to a regional level that comprises almost all their supply chain activities with the exception of product development and in some cases, strategic procurement which are kept at a global level. Organisational set-up: Automotive companies typically manage their planning, manufacturing, operational procurement and delivery functions regionally, and their new product development and strategic procurement functions globally. They outsource less than 10% of their planning, sourcing and enabling activities; a relatively low, 15% of their manufacturing and assembly activities; and 10%-35% of their delivery activities. Organisational set-up
Source: Strategy + Business – Designing the right supply chain, Kauffeld, Mueller & MIchaels, 2013.
Strategic procurement Operational procurement Manufacturing and assembly Service
Customer order desk Deliver
Inbound and outbound logistics Enabler
New product development SC centre of excellence % of supply chain activities outsourced
The journey often starts with establishing either a sourcing centre or regional sales and distribution centre. The journey continues as companies would gradually add in other key functions until a regional principal hub is established. Once a regional principal hub is established which houses key strategic functions, companies would be able to gain greater
Geographic organisation for supply chain functions
Regionalizing Key Functions Secondly, companies need to establish decision making structures closer to their markets of interest by regionalizing key functions. Companies gain operational agility as they evolve from a centralized headquarters controlled structure to a hybrid model. With this, dissemination of policies and strategic functions which leverage global economies of scale is kept at headquarters, but go-to-market decisions and supporting services are given regional autonomy.
18 Outsourcing level
36 Geographic organisation
The levels of outsourcing and organisational structure for supply chainπ Source: PwC – Next Generation Supply Chain – Efficient, Fast and Tailored, 2013.
26 LEGAL & INVESTMENT
Supply chain performance EBIT margin (%)
Inventory turns (#)
Delivery performance (%)
Leaders outpace laggards on supply chain performanceπ π
• By having the right organizational setup, and right levels of outsourcing, industry leaders gain an advantage in profitability, working capital utilization and delivery performance. InvestKL has assisted more than 40 global multinational companies in the past 4 years to establish regional structures to grow their businesses in the ASEAN region through Greater Kuala Lumpur. While most of factors driving operational agility reside within the control of a company, there are others which are impacted by the culture, processes and policies within the country which the company operates in.
Source: PwC – Next Generation Supply Chain – Efficient, Fast and Tailored, 2013.
It is therefore vital to adopt the right regional decision making structures and level of outsourcing to be a leader in the industry rather than laggards as leaders outpace laggards on profitability, working capital utilization and delivery performance. KEY TAKEAWAYS • In the past year, risks to global economic growth has increased between 12-30% due to turbulence in the geopolitical-economic climate • This contributed towards rapidly fluctuating customer demands where existing supply chain systems are unable to adjust quickly enough to these fluctuations • To address this challenge, best-in-class companies need to augment their approach by not just employing better forecasting systems with big-data analytics but also relook at organizational design to achieve better operational agility • Operational agility is enhanced by: – Aligning their competencies with what is required to serve a particular market or industry – Establish decision making structures closer to their markets of interest by regionalizing key functions – Outsource non-core activities to leading service providers
With one of the clients, a leading oil and gas service provider, InvestKL has helped streamline customs clearance procedures to allow for a more efficient turnaround time where an expensive exploration equipment can be imported, serviced, and reexported out to the field in less than 3 days. This is an example of how governments, in developing markets are playing an active role in enabling efficiencies and ease of doing business in their jurisdictions. Also, Malaysia has recently been named as the 8th most efficient government by World Economic Forum. For more information on the services which InvestKL provides, do get in touch with any of InvestKL’s Investor Relations directors or visit InvestKL’s website.
Daniel H. Goh, Senior Manager of Advisory in InvestKL has 15 years of business management experience in various multinational firms across various industries including Electronics, Medical Devices, Timber and Banking.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of any organisations. Examples of analysis performed within this article are only examples. The situation is different on case to case basis as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of any organisations in the region.
Developing Leaders of Tomorrow Infineon Technologies (Malaysia) Sdn Bhd Free Trade Zone, Batu Berendam, 75350 Melaka Tel: +60 (6) 232 5266 www.infineon.com
Open House, Kuala Lumpur 17th – 20th November 2015
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