Manufacture&Service Performance Report 2009

INTRODUCTION 2

GLOBAL INVESTMENT SCENARIO 6

INVESTMENT PERFORMANCE OF THE MANUFACTURING SECTOR 12A. Projects Approved 12

• Overview 12• Approved Projects by Ownership 17– Domestic Investments 17– Foreign Investments 17

• Approved Projects by Location 21

B. Performance of the Manufacturing Sector by Industry 22• Electrical and Electronic Products 22• Transport Equipment 30• Machinery and Equipment 40• Engineering Supporting Industry 46• Basic Metal Products 49• Fabricated Metal Products 51• Textiles and Textile Products 53• Medical Devices Industry 54• Agriculture and Food Processing 56• Oil Palm Products 61• Chemicals and Chemical Products 64• Biotechnology Industry 69• Petroleum Products Including Petrochemicals 71• Plastic Products 73• Rubber Products 75• Wood &Wood Products and Furniture 78• Non-Metallic Mineral Products 81• Paper, Printing and Publishing Industry 84

C. Implementation of Approved Manufacturing Projects 85

CONTENTS

iMalaysia: Performance of the Manufacturing and Services Sectors 2009

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INVESTMENT PERFORMANCE OF THE SERVICES SECTOR 92A. Projects Approved 92

• Overview 92

B. Performance of the Services Sub-Sectors 93• Regional Establishments 93– Operational Headquarters (OHQs) 93– International Procurement Centres (IPCs) 96– Regional Distribution Centres (RDCs) 97– Regional/Representative Offices (ROs/REs) 98

• Support Services 100– Renewable Energy 101– Energy Efficiency/Conservation 103– Research and Development (R&D) 105– Integrated Logistics Services (ILS) 106– International Intergrated Logistic Services (IILS) 106– Integrated Market Support Services (IMS) 107

• MSC Status Companies 107• Transport 108• Energy 108• Financial Services 108• Telecommunications 109• Real Estate (Housing) 109• Distributive Trade 110• Hotels and Tourism 110• Health Services 110• Education Services 111

INVESTMENT OUTLOOK 114

ii Malaysia: Performance of the Manufacturing and Services Sectors 2009

APPENDICES

APPROVED MANUFACTURING PROJECTS, 2009 AND 2008

NEW MANUFACTURING PROJECTS APPROVED BY SIZE OFCAPITAL INVESTMENT, 2009 AND 2008

APPROVED MANUFACTURING PROJECTS BY INDUSTRY,2009 AND 2008

APPROVED MANUFACTURING PROJECTS WITH INVESTMENTSOF RM100 MILLION AND ABOVE, 2009

APPROVED NEW AND EXPANSION/ DIVERSIFICATIONMANUFACTURING PROJECTS BY INDUSTRY, 2009 AND 2008

APPROVED MANUFACTURING PROJECTS WITH MALAYSIANMAJORITY OWNERSHIP BY INDUSTRY, 2009 AND 2008

APPROVED PROJECTS IN THE ENGINEERING SUPPORTINGINDUSTRY BY SUB-SECTOR, 2009

APPROVED PROJECTS IN ELECTRICAL & ELECTRONICSINDUSTRY BY SUB-SECTOR, 2009

MANUFACTURING PROJECTS APPROVED WITH FOREIGNPARTICIPATION BY SOURCE, 2009 AND 2008

APPROVED MANUFACTURING PROJECTS BY STATE,2009 AND 2008

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iiiMalaysia: Performance of the Manufacturing and Services Sectors 2009

Malaysia: Performance of the Manufacturing and Services Sectors 2009

The slowdown in the world economyresulting from the financial crisis thatbegan in the USA in 2007 continuedto adversely affect the world economyin 2009, particularly export-orientedeconomies including Malaysia. Until theUS financial crisis, Malaysia had enjoyeda decade of growth with economicexpansion driven by the manufacturingand services sectors. However, given theeconomic pressures which accompaniedthe sharp deterioration in the globaleconomic and international financialenvironment, the Malaysian economycontracted by 3.8 per cent in the first threequarters of 20091.

During the January-September 2009period, the services sector sustained itsexpansion (1.6%) while the manufacturingsector contracted by 13.7 per cent duemainly to weakness in the export-orientedindustries. Given the less favourableexternal environment, growth in 2009was supported mainly by activities in theservices sector.

Manufacturing

Manufacturing remained an importantsector in the economy. During the first

nine months of 2009, value-added of themanufacturing sector declined by 13.7per cent given the less favourable externaleconomic environment. The sectoraccounted for 26.8 per cent of grossdomestic product (GDP) during thisperiod. Exports of manufactured productsdecreased by 14.1 per cent from RM432.6billion in 2008 (January-November) toRM371.5 billion in 2009 (January-November), accounting for 74.5 per centof Malaysia’s total exports for the periodJanuary-November 2009. Employment inthe manufacturing sector was estimated at3.3 million persons or 28.4 per cent oftotal employment in 20092.

The performance of the manufacturingsector was also reflected in the sector’sindustrial output (as measured by theindustrial production index), sales valueand productivity. The production indexof the sector shrank by 11.6 per cent in2009 (January-November) while sales ofmanufactured products declined by 21.2per cent to RM426.9 billion in 2009(January-November). Productivity in thesector, as measured by sales value peremployee contracted by 7.5 per cent3 forthe period January-October 2009 followingslowdown in the external demand.

1 Department of Statistics.2 Economic Report 2009/2010, Ministry of Finance, Malaysia.3 Malaysia Productivity Corporation.

INTRODUCTION1

2 Malaysia: Performance of the Manufacturing and Services Sectors 2009

Services

The services sector encompasses broadand diverse activities such as transport,telecommunications, financial services(banking, insurance, and capital markets),real estate, business and professionalservices, utilities, distributive trade, hotelsand tourism, education and healthservices.

The services sector accounted for thelargest share of Malaysia’s GDP. For thefirst nine months of 2009, it accounted for57.3 per cent of GDP. The services sectorrecorded a growth of 1.6 per cent invalue-added for the period January-September 2009. Employment in theservices sector was estimated at 6.1million persons or 52.6 per cent of totalemployment in 2009.

For the period January-September 2009,wholesale and retail trade maintained itsposition as the leading sub-sector,contributing to 13.0 per cent of GDP(RM49.7 billion). This was followed by thefinance and insurance sub-sector (11.7%or RM44.7 billion). Productivity in theservices sub-sectors recorded a positivegrowth ranging from 1.2 per cent to 3.5per cent in 20094.

3Malaysia: Performance of the Manufacturing and Services Sectors 2009

4 Malaysia Productivity Corporation.


FDI Inflows

Amid the global financial and economiccrisis, world foreign direct investment(FDI)5 inflows fell from a record high ofUS$1.97 trillion in 2007 to US$1.69trillion in 2008, according to the WorldInvestment Report by the United NationsConference of Trade and Development(UNCTAD).

The USA maintained its position as thelargest recipient of FDI inflows (US$316.1billion) in 2008, followed by France(US$117.5 billion), the People’s Republicof China (US$108.3 billion) and theUnited Kingdom (US$96.9 billion).

FDI inflows to developed countries in2008 decreased by 29.2 per cent toUS$962.3 billion from US$1.4 trillion in2007. This was mainly due to a decline incross-border M&As. FDI inflows intodeveloping countries were less affectedthan those into developed countries astheir financial systems were less closelyinterlinked with the banking systems inthe USA and Europe. Their FDI inflowscontinued to grow, but at a slower pace,posting an increase of 17.3 per centto US$620.7 billion in 2008 fromUS$529.3 billion in 2007.

Asia received the largest amount of FDIinflows among the developing countrieswith an increase of 17.0 per cent in 2008to US$387.8 billion. The People’sRepublic of China was the largestrecipient of FDI in Asia (US$108.3billion), followed by Hong Kong(US$63.0 billion), India (US$41.5 billion)and Singapore (US$22.7 billion).

5 FDI is defined by UNCTAD as an international investment made with the objective of a lasting interest by aresident entity in one economy in an entity resident in another economy. It comprises equity capital, reinvestedearnings and inter-company debt transactions and is largely based on national balance of payment statistics.

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GLOBAL INVESTMENT SCENARIO220

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Graph 1FDI Inflows by Region, 2000-2008


The total FDI inflows to the East Asiaregion rose by 24.4 per cent reachingUS$186.9 billion in 2008 from US$150.3billion in 2007. The largest recipients ofFDI in East Asia were the People’sRepublic of China (US$108.3 billion),Hong Kong (US$63.0 billion), Republic ofKorea (US$7.6 billion) and Taiwan(US$5.4 billion).

FDI inflows to ASEAN declined by 13.8per cent from US$69.5 billion in 2007 toUS$59.9 billion in 2008. In comparison,FDI inflows into ASEAN have beenincreasing over the period 2002-2007,with 2007 recording the highest level.

Developments in the global and regionaleconomy continued to influence FDI

inflows into open economies such asMalaysia, Thailand and Singapore, all ofwhich had been affected by the impact ofthe global financial crisis in 2008.

FDI inflows to Malaysia fell slightly by 4.8per cent from US$8.4 billion in 2007 toUS$8.0 billion in 2008. FDI inflows intoSingapore dropped by 28.2 per cent fromUS$31.6 billion in 2007 to US$22.7billion in 2008, while FDI inflows intoThailand declined by 10.7 per cent fromUS$11.2 billion to US$10 billion in 2008.The decline in FDI inflows to Malaysiawas largely due to loan repayments toparent companies which were in need offunds due to the global financial crisis.Malaysia was the third largest recipientamong ASEAN countries in 2008, afterSingapore and Thailand.

Although FDI inflows into Malaysiadecreased in 2008, Malaysia continues tobe a cost competitive location for FDIinflows into the manufacturing sector. FDIinflows into the manufacturing sector roseby 22.6 per cent from US$3.1 billion in2007 to US$3.8 billion in 2008. Thesignificant increase in FDI inflows waslargely due to expansion by the E&Eindustry, which upgraded their equipmentand technology as well as the introductionof new production lines. There were alsosizeable inflows of FDI into niche andhigher value-added activities, particularlyin solar cells, modules and panels as wellas testing and measuring instruments.

7

US$ billion

Total:US$186.9 billion


Hong Kong63.0 (33.7%)

Taiwan5.4 (2.9%)

Others2.6 (1.4%)

Republic of Korea7.6 (4.1%)China

108.3 (57.9%)

Graph 2FDI Inflows to East Asia, 2008


FDI Outflows

Reflecting the trend for FDI inflows, globalFDI outflows decreased by 9.5 per centfrom US$2.1 trillion in 2007 to US$1.9trillion in 2008.

FDI outflows from developed countriesdeclined by 16.7 per cent toUS$1.5 trillion in 2008 due to decreasein reinvested earnings. Nevertheless,developed countries remained the largestnet outward investor group.

FDI outflows from developing countriesrose by 2.5 per cent from US$285.5billion in 2007 to US$292.7 billion in2008. Transnational corporations (TNCs)

as well as sovereign wealth funds (SWFs)from West Asian countries continued toinvest abroad. Developing countries’TNCs accounted for 16.0 per cent of totalglobal FDI outflows in 2008 from 13.0 percent in 2007.

In 2008, FDI outflows from the South, Eastand South-East Asia region rose 6.8 percent to US$186.5 billion. The mainsources of FDI outflows were HongKong (US$59.9 billion), the People’sRepublic of China (US$52.2 billion),India (US$17.7 billion), Malaysia(US$14.1 billion) and Republic of Korea(US$12.8 billion).

US$ billion

Total FDI Inflows:US$60 billion


Others3.1 (5.2%)Indonesia

7.9 (13.2%)

Thailand10.1 (16.8%)

Singapore22.7 (37.8%)

Viet Nam8.1 (13.5%)

Malaysia8.1 (13.5%)

Graph 3FDI Inflows to Asian Countries, 2008

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Graph 4FDI Outflows by Region, 2000-2008


In South-East Asia, Malaysia was thelargest source of FDI outflows in 2008with US$14.1 billion followed bySingapore with US$8.9 billion.

Future Prospects

According to UNCTAD’s WorldInvestment Prospects Survey 2009-2011(WIPS), FDI inflows in 2009 will continueto be affected by the economic andfinancial crisis. Based on WIPS, amongthe global risks that could potentiallyaffect TNCs’ FDI plans for the next threeyears are deepening of the globaleconomic downturn, increase in financialinstability, and rise in protectionisminvolving a change in foreign investmentregimes. Major TNCs are expected toreduce their FDI expenditure in 2009 with58.0 per cent of respondents intending toreduce their FDI abroad and nearly one-third expecting a large decrease from2008 onwards.

Based on UNCTAD’s latest quarterlypublication, global FDI inflows declinedby about 40 per cent to US$1 trillion in2009 from US$1.7 trillion in 2008.Similarly, FDI inflows to developing andtransition economies decreased by 39.0per cent in 2009. Nevertheless, responsefrom WIPS suggests that a progressiverebound of FDI could be expected by2011.

TNCs are generally more optimistic aboutthe medium term outlook for the globaleconomy and expected to continueinvesting globally. As such, there shouldbe a moderate recovery in global FDIflows in 2010, before gaining momentumin 2011.



A. PROJECTS APPROVED

OVERVIEW

The investment trend in Malaysia isstrongly influenced by global economicdevelopments which turned negativetowards the end of 2008 and in 2009. Inline with the sharp decline in global FDIinflows in 2009, the total investments inapproved manufacturing projects inMalaysia amounted to RM32.6 billion in2009 compared with RM62.8 billion in2008. A total of 766 manufacturingprojects were approved in 2009.

The total investments approved in 2009exceeded the average annual investmenttarget of RM27.5 billion set under theThird Industrial Master Plan (IMP3). Thisindicates that Malaysia remains anattractive investment destination.

Foreign investments in 2009 amounted toRM22.1 billion and accounted for 67.8per cent of the total investments approvedfor the year. The balance of RM10.5billion or 32.2 per cent were investmentsfrom domestic sources.

INVESTMENT PERFORMANCE OF THEMANUFACTURING SECTOR3


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Graph 5Investments and Employment inProjects Approved, 2004-2009

RM billion2009 2008

ForeignInvestments

46.1 (73.4%)

DomesticInvestments

16.7 (26.6%)

ForeignInvestments

22.1 (67.8%)

DomesticInvestments

10.5 (32.2%)

Graph 6Sources of Investments in Projects Approved, 2009 and 2008

Despite the global slowdown, Malaysiacontinued to receive a significant amountof new investments. In 2009, investmentsin new projects amounted to RM22.1billion (471 projects), constituting 67.8per cent of the total investments approved.Of this, RM5.7 billion or 25.8 per centwas domestic investments while RM16.4billion or 74.2 per cent was from foreignsources.

Existing companies continue to expandand diversify their operations in thecountry. A total of 295 projects withinvestments amounting to RM10.5 billionwere approved in 2009, accounting for32.2 per cent of the total investmentsapproved.

It is significant to note that the investmentsapproved in 2009 helped to develop andstrengthen specific industry clusters in thecountry. Malaysia’s strength in the

electrical and electronics (E&E) industrycontinued to provide the platform fordeveloping other clusters especiallyclusters in the solar, medical devices andmachinery & equipment (M&E) industries.

Capital-Intensive Projects

Capital intensity of projects is measuredby the capital investment per employee(CIPE) ratio. The CIPE ratio for projectsapproved In 2009 was RM507,335compared with RM620,571 in 2008. In2009, the industry with the highest CIPEratio was the petroleum products industry(RM6,777,326), followed by the non-metallic mineral products (RM2,242,994)and the chemicals and chemical products(RM2,104,889) industries.

The higher CIPE ratio in the threepreceding years (2006-2008) was partlydue to the approval of several capital


RM million2009 2008

Chemical7,391 (33.5%)

Non-Metallic5,608 (25.1%)

E&E1,629 (7.4%)

Petroleum1,166 (5.3%)

FabricatedMetal

996 (5.0%)

Machinery902 (4.0%)

Food892 (4.0%)

Plastic624 (2.8%)

Others2,843 (12.9%)

Basic Metal21,001 (50.0%)

E&E10,445 (25.0%)

Transport1,554 (3.7%)

Food1,328 (3.2%)


Chemicals1,302 (3.1%)

Machinery919 (2.2%)

Fabricated Metal889 (2.1%) Others

3,228 (7.7%)

Graph7Investments in New Projects by Industry, 2009 and 2008

intensive projects. For instance, in 2008, atotal of 12 projects with investments of atleast RM1 billion each were approved,with total investments of RM38.3 billion.

In comparison, there were five projectswhich recorded investments of at leastRM1 billion each in 2009. The totalinvestments approved in these projectsamounted to RM14.5 billion.

In 2009, there were 50 projectsapproved which recorded investmentsof at least RM100 million each. Totalinvestments in these projects amountedto RM23.8 billion or 73.0 per cent oftotal investments approved in 2009.These 50 projects were mainly in thechemicals and chemical products(RM7.3 billion), non-metallic mineralproducts (RM6.1 billion), electrical andelectronic products (RM3.3 billion),basic metal products (RM2.0 billion),petroleum products (RM1.1 billion) andtransport equipment (RM923.4 million)industries.


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RM million2009 2008

E&E3,117 (29.5%)


Food1,080 (10.2%)

Chemicals988 (9.3%)

Transport854 (8.1%)

Non-Metallic807 (7.6%)

Fabricated Metal374 (3.5%)

Others1,036 (9.8%)Machinery

338 (3.2%)

E&E7,328 (35.3%)


Food1,454 (7.0%)


Chemicals1,354 (6.5%)

Transport1,335 (6.4%)

Non-Metallic1,079 (5.2%)

Others1,638 (7.9%)Rubber

414 (2.0%)

Graph 8Investments in Expansion/Diversification Projects by Industry, 2009 and 2008

The projects approved with investments ofat least RM1 billion each were:

• A new foreign-owned project withinvestments of RM5.5 billion for theproduction of polycrystalline silicon,fumed silica and trichlorosilane;

• A new wholly foreign-owned projectwith investments of RM5.2 billionto manufacture solar glass (coated,tempered, etc) and solar mirror;

• A majority Malaysian-owned expansionproject with investments of RM1.6billion to manufacture aluminiumingots, aluminium alloy ingots andaluminium billets;

• A new joint-venture project withinvestments of RM1.1 billion toproduce petrochemical feedstocks andfuels; and

• An expansion project by a whollyforeign-owned company withinvestments of RM1.0 billion toproduce advanced integrated circuits.

These projects are expected to createsubstantial impact to the economy andindustry through various multiplier effectssuch as development of supportingindustries, transfer of technology, researchand development, creation of highincome employment opportunities, skillsdevelopment and generation of foreignexchange earnings.

Projects Approved by Industry

The chemicals and chemical productsindustry recorded the highest investmentsapproved in 2009 with RM8.4 billion(77 projects). This was mainly attributed tothe approval of a large project withinvestments of RM5.5 billion to producepolycrystalline silicon, mixed acid,hydrogen, fume silica, trichlor-silane,silicon tetrachloride and hydrofluoricacid. The project is expected to strengthenthe solar industry cluster as polycrystallinesilicon is a significant component for thesolar industry.

The non-metallic mineral productsindustry registered the second highestamount of investments. A total of 27projects were approved with investmentsamounting to RM6.4 billion. This waslargely due to the approval of a newproject for the manufacture of solar glass(coated, tempered, etc) and solar mirrorwith investments of RM5.2 billion. Theelectrical and electronics (E&E) industryranked third with total investments ofRM4.7 billion (115 projects).

Other industries which attracted significantinvestments were basic metal productswith investments of RM2.6 billion (30projects) and food manufacturing withinvestments amounting to RM2.0 billion(69 projects). The total investments inthese five industries amounted to RM24.1billion or 73.9 per cent of the totalinvestments approved in 2009.


Export-Oriented Projects

In 2009, a total 251 projects approvedinvolving investments of RM8.6 billionproposed to export at least 80 per cent oftheir output. Of the total investmentsapproved, foreign investments amountedto RM6.8 billion or 79.1 per cent whilethe remaining RM1.8 billion or 20.9 percent was from domestic sources.

The main industries with export-orientedprojects were:

• E&E products (RM3.5 billion/57projects);

• Fabricated metal products (RM764.3million/28 projects);

• Food manufacturing (RM693.1million/16 projects);

• M&E (RM671.0 million/35 projects);and

• Chemicals and chemical products(RM662.0 million/12 projects).

The favourable investment environment inMalaysia, including the availability ofsupporting industries as well as a pool ofskilled and trainable workforce, has madeMalaysia an attractive investment locationto serve the global and regional markets.

Employment Opportunities

The projects approved in 2009 wereexpected to create employmentopportunities for 64,330 people. Of this,21.2 per cent was in the managerial,technical and supervisory (MTS) categorywhile another 43.7 per cent was in thecategory of skilled workers. There was anincrease in the MTS index of projectsapproved from 18.7 per cent in 2008 to21.2 per cent in 2009.

Most of the employment opportunitieswere in the E&E industry with 16,757jobs, followed by the fabricated metalproducts (5,873) and M&E (5,613)industries.


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Graph 10Investments in Projects Approved byMajor Industry, 2009 and 2008

Expatriate Posts

The Government continues to grantapprovals for expatriate posts, particularlymanagerial and technical posts toMalaysian as well as foreign-ownedcompanies. This is to facilitate technologytransfer and to supplement the local poolof managerial and technical skills. A totalof 1,852 expatriate posts were approvedin 2009, of which 356 were key postswhich could be permanently filled byforeigners. The remaining 1,496 were termposts generally granted for 3-5 yearswhere Malaysians are trained toeventually take over the posts.

APPROVED PROJECTS BYOWNERSHIP

DOMESTIC INVESTMENTS

Domestic investments approved in 2009amounted to RM10.5 billion, accountingfor 32.2 per cent of the total investmentsapproved during the year. Thoughdomestic investments declined fromRM16.7 billion in 2008 to RM10.5 billionin 2009, as a percentage of totalinvestments, it increased from 26.6 percent in 2008 to 32.2 per cent in 2009.

Domestic investments were mainly in thebasic metal products industry with RM2.2billion or 20.9 per cent of total domesticinvestments approved in 2009. Otherindustries which recorded significantdomestic investments were chemicals &

chemical products (RM1.3 billion), non-metallic mineral products (RM1.1 billion),food manufacturing (RM1.0 billion),transport equipment (RM864.9 million),E&E products (RM770.0 million)and petroleum products includingpetrochemicals (RM719.1 million).

FOREIGN INVESTMENTS

Malaysia remained a competitivedestination for FDI in the region andcontinued to attract encouraging levels offoreign investments in the manufacturingsector despite the global economicslowdown. Foreign investments inapproved manufacturing projects in 2009amounted to RM22.1 billion, returning to


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Graph 11Domestic Investments in ProjectsApproved by Major Industry, 2009

the levels prior to the record foreigninvestments registered in the last twoyears. Of the RM22.1 billion in foreigninvestments, RM16.4 billion or 74.2 percent was in new projects while theremaining RM5.7 billion or 25.8 per centwas in expansion/diversification projects.

The chemicals and chemical productsindustry accounted for the largest amountof foreign investments totalling RM7.0billion. The high foreign investments inthis industry was largely attributed to aproject with investments of RM5.5 billionfor the manufacture of polycrystalline

silicon, mixed acid, hydrogen, fumedsilica, trichlor-silane, silicon tetrachloride& hydrofluoric acid. Other industrieswith high levels of foreign investmentswere the non-metallic mineral products(RM5.3 billion), E&E (RM4.0 billion), foodmanufacturing (RM934.2 million),fabricated metal products (RM775.0million), M&E (RM637.2 million) andplastic products (RM549.8 million)industries.

Major Sources of ForeignInvestments

Five countries accounted for RM17.3billion or 77.0 per cent of the total foreigninvestments in 2009. The five countrieswere Japan (RM7.0 billion), Hong Kong(RM5.3 billion), the USA (RM2.3 billion),Singapore (RM2.0 billion) and Taiwan(RM716.1 million).


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Graph 12Foreign Investments in ProjectsApproved by Major Industry, 2009

Japan

The leading source of foreign investmentsin 2009 was Japan with investmentstotalling RM7.0 billion in 54 approvedprojects. A major new project approvedwith investments of RM5.5 billioninvolved the manufacture of polycrystallinesilicon, mixed acid, hydrogen, fumedsilica, trichlor-silane, silicon tetrachloride& hydrofluoric acid.

Of the projects approved, 12 were newprojects with investments of RM5.7 billionwhile 42 were expansion/diversificationprojects with investments of RM1.3billion.

Projects approved with Japaneseparticipation were mainly in thechemicals and chemical products (4projects with investments of RM5.6billion), E&E (13 projects/RM1.1 billion),and transport equipment (8 projects/RM220.8 million) industries.

Hong Kong

Hong Kong was the second largest sourceof foreign investments in 2009 withRM5.3 billion in seven approved projects.This was primarily due to a major newproject with investments amounting toRM5.2 billion for the manufacture solarglass (coated, tempered, etc) and solarmirror.

The investments approved were mainly inthe non-metallic mineral products(RM5.2 billion), E&E (RM103.4 million)and food manufacturing (RM6.1 million)industries. Of the projects approved, sixwere new projects with investments ofRM5.3 billion while one was anexpansion/diversification project with aninvestment of RM0.5 million.

USA

The USA continued to be a major sourceof foreign investments with investmentsamounting to RM2.3 billion in 19 projectsapproved during the year. Of this, 10 wereexpansion/diversification projects withinvestments of RM2.0 billion accountingfor 87.0 per cent of the investments


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Graph 14Japanese Investments in ApprovedProjects, 2004 – 2009

approved. The remaining nine projectswith investments of RM306.3 millionwere by new companies.

Investments from the USA were mainlyin the E&E industry with investmentstotalling RM1.5 billion (5 projects).Other industries with significant USinvestments were food manufacturing (1project/RM380.1 million), transportequipment (1 project/RM155.2 million)and plastic products (1 project/RM103.2million).

The high level of investments from theUSA in the E&E industry was mainly dueto an expansion/diversification projectwith investments of RM1.0 billion for themanufacture of integrated circuits.

Singapore

Singapore was the fourth largest source offoreign investments in 2009. Singaporecontinued to account for the highestnumber of projects approved with 92projects in 2009. Investments in theseprojects amounted to RM2.0 billion or 9.5per cent of the foreign investments approvedduring the year. Of the projects approved,42 were new projects with investments ofRM1.3 billion and 50 were expansion/diversification projects (RM690.0 million).

Investments from Singapore weremainly in the E&E (RM619.1 million),petroleum products (RM454.9 million)and fabricated metal products (RM256.9million) industries.


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Graph 15US Investments in Approved Projects,2004 – 2009

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Graph 16Singapore Investments in ApprovedProjects, 2004 – 2009

Taiwan

Taiwan was the fifth largest foreigninvestor with investments amounting toRM716.1 million in 32 projects approvedin 2009. Investments approved weremainly in the chemicals and chemicalproducts industry with investmentsamounting to RM419.6 million (3projects) followed by the scientific andmeasuring equipment (2 projects/RM103.0 million), E&E (7 projects/RM58.8 million), transport equipment(2 projects/RM44.3 million) and foodmanufacturing (1 project/RM42.5 million)industries.

Of the projects approved, 11 were newprojects with investments of RM521.7million while 21 were expansion anddiversification projects with investmentstotalling RM194.4 million.

APPROVED PROJECTS BYLOCATION

During the year, the states of Selangor,Johor, Penang, Perak and Kedah continuedto record the highest number of projectsapproved. The approvals in these fivestates totalled 619 projects or 80.8 percent of the total number of projectsapproved in 2009. The breakdown of theapprovals is as follows:

• Selangor - 278 projects

• Johor - 150 projects

• Penang - 104 projects

• Perak - 47 projects

• Kedah - 40 projects

In terms of investments approved, Sarawakreceived the largest amount, withinvestments amounting to RM8.5 billion.This is attributed to a RM5.5 billionproject for the manufacture ofpolycrystalline silicon, mixed acid,hydrogen, fumed silica, trichlor-silane,silicon tetrachloride & hydrofluoric acid.Selangor ranked second with investmentsof RM6.8 billion, followed by Sabah(RM5.7 billion), Johor (RM4.1 billion) andPenang (RM2.2 billion).


Kelantan

Kuala Lumpur

Terengganu

Pahang

Negeri Sembilan

Melaka

Perak

Kedah

Penang

Johor

Sabah

Selangor

Sarawak

1,00

0

3,00

0

2,00

0

5,00

0

4,00

0

7,00

0

6,00

0

9,00

0

8,00

0

10,0

00

RM million

Graph 17Investments in Approved Projects byLocation, 2009

B. PERFORMANCE OF THEMANUFACTURINGSECTOR BY INDUSTRY

ELECTRICAL ANDELECTRONIC PRODUCTS

The electrical and electronics (E&E)industry continued to be the leadingindustry in the manufacturing sectorcontributing 55.1 per cent of the country’stotal export of manufactured products forthe period January-November 2009.Output of the industry accounted for 33.9per cent of the total output of themanufacturing sector for the periodJanuary-November 2009. Over the sameperiod, employment accounted for 32.5per cent, making the E&E industry thelargest employer in the manufacturingsector.

For the period January-November 2009,exports of E&E products amounted toRM204.9 billion compared withRM238.3 billion for the correspondingperiod in 2008, a decline of 14.0per cent. This decline was attributedto the slowdown in the global economyespecially in the exports of electronicproducts such as automatic dataprocessing machines, semiconductordevices and telecommunication equipment.The top five export destinations for E&Eproducts were Singapore, the People’sRepublic of China, the USA, Japan andThailand.

The Nielsen Global Consumer ConfidenceSurvey conducted in June 2009 reportedthat consumer sentiments around theworld was improving. Growing consumeroptimism led to a turnaround of the E&Eindustry in the second half of 2009.Similarly, international research houseshad forecasted:

- An expected turnaround in the globalE&E industry by 2010 with demandpicking up in personal computers, discstorage systems and mobile phones;

- Worldwide consolidation of activitiesby MNCs;

- Inventory correction; and

- Anticipated increase in sales in the AsiaPacific region.

In Malaysia, the E&E industry is expectedto evolve and contribute significantly tothe country’s industrial progress andtransformation. It will leverage upon itsstrength in semiconductors, information &communication technology (ICT) andsupporting industries to develop newproducts, based on new and emergingtechnologies. The trend towards extensiveapplication of electronics in industriesand services, together with thedevelopment of multimedia ICT, willprovide growth opportunities which willpave the way to attract new investmentsinto the industry.


Outsourcing is expected to continue asMNCs strive to remain competitive in theircore businesses. The industry is expectedto strengthen its linkages with othersectors such as automotive, medical,defense and aerospace. The supportingindustries and services are also expectedto expand in tandem with thesedevelopments. Domestic companies areexpected to benefit from this trend asMNCs shift their outsourcing activities tothe Asia Pacific region.

The future development of the E&Eindustry in Malaysia will be driven bytechnology in order to stimulate thecluster development. Among the clustersidentified are semiconductor, solar, ICTand light emitting diodes (LEDs) lighting

clusters. In addition, new products such asadvanced integrated circuits, highbrightness light emitting diodes (HBLEDs);radio frequency (RF) and MEMS devicesare also given emphasis due to theirgrowth potential.

The E&E industry can be classifiedinto four sub-sectors, namely, electroniccomponents, consumer electronics,industrial electronics and electricalproducts.

Projects Approved in 2009

A total of 115 projects with investments ofRM4.7 billion were approved in 2009.Foreign investments continued todominate with investments of RM4.0


Table 1Structure of E&E Industry

Sectors Sub-sectors Examples of Products

Semiconductors, passive components, printed circuitboards, metal stamped parts and precision plastic parts

Audio visual products such as television receivers,Consumer portable multimedia players (PMP), speakers,

cameras and electronic games

Multimedia and information technology products suchIndustrial as computers and computer peripherals,

telecommunications equipment and office equipment

Distribution boards, control panels, switching apparatus andindustrial lightings, transformers, cables & wires, primary

Electrical Electrical cells & batteries, solar cells and modules, air conditioners,vacuum cleaners, microwave ovens, washing machinesand water heaters

Components

Electronics

billion (85.1%), signifying that Malaysia isstill an attractive offshore location forforeign investors. Domestic investmentsamounted to RM0.7 billion or 14.9 percent of total investments. Of the 115projects approved, 57 were new projectswith investments of RM1.6 billion while58 were expansion/diversification projectswith investments of RM3.1 billion.Approved investments were mainly in theelectronic components sub-sector, such asintegrated circuits, substrates and LEDs.The projects approved are expected togenerate employment opportunities for16,780 persons.

Electronic Components

Electronic components cover a widerange of products, from semiconductordevices which include fabricated wafersand integrated circuits (ICs) to passive

components such as capacitors, resistors,connectors, inductors, crystal quartz andoscillators as well as other componentssuch as storage media, disk drive parts,printed circuit boards (PCB) and metaland plastic parts/components for E&Eapplications.

Malaysia is currently among the world’sleading sites for semiconductor assembly,testing and packaging operations. Exportsfor the period January–November 2009amounted to RM84.1 billion or 44.6 percent of total electronics exports.

To date, more than 70 companies are inoperation undertaking silicon waferprocessing (e.g. MEMC, S.E.H.Hamadatec and Sapphire), waferfabrication (e.g. Infineon, X-Fab, SilTerra,and Fuji Electric), IC packaging andtesting (e.g. AMD, Intel, Texas Instrumentsand Freescale) and IC design (e.g. Altera,eASIC, SyMMiD and SiRES LABS).


In 2009, a total of 32 projects wereapproved in the electronic componentssub-sector with investments of RM3.0billion. Of these, 13 were newprojects with investments of RM717.1million (23.9%) and 19 were expansion/diversification projects with investmentsof RM2.3 billion (76.1%). Foreigninvestments amounted to RM2.8 billion(93%), while domestic investmentstotalled RM209.4 million (7.0%).


RM million

ConsumerElectronics

417.4 (8.8%)

IndustrialElectronics

412.2 (8.7%)

Electrical Products911.6 (19.2%)

ElectronicComponents

3,004.6 (63.3%)

Graph 18Investments in Projects Approved inthe E&E Industry by Sub-sector, 2009

Among the significant projects approvedwere:

• An expansion project by a whollyforeign-owned company with investmentsof RM1.0 billion to produce advancedintegrated circuits. The company plansto expand its R&D activities for MEMSapplications and to be a major playerin the MEMS sensor business. The R&Dactivities are expected to contributetowards technology development, productand manufacturing development;

• An expansion and technologyupgrading project by a wholly foreign-owned company with investments ofRM421.3 million to produce hard diskmedia and substrates;

• An expansion project to upgrade itsMalaysian operations as a globalmanufacturing hub as well as toundertake activities such as design anddevelopment of advanced ICs, supplychain management and R&D withinvestments of RM391.0 million.

• A diversification project by a whollyforeign-owned company to produceLED chips, LED lamps and wirelessdiodes with investments of RM110.7million.

Consumer Electronics

Consumer electronics is one of theimportant sub-sectors in the electronics

industry. Major products include camerasand audio visual products such as flatpanel television receivers, video compactdisc (VCD) players, digital versatile disc(DVD) players/recorders, walkman, blu-ray, mini discs, and electronic gamesconsoles. Among the major players arePanasonic, Samsung, Sharp, Sony, Hitachiand Clarion.

This sub-sector is mainly dominatedby Japanese and Korean companiesand continues to contribute significantlyto the rapid growth of the industry.Several companies have relocated theirlow-end activities to other countries whilemaintaining their high value-addedoperations such as design and developmentof audio-visual equipment in Malaysia.


Seven projects were approved in theconsumer electronics sub-sector withinvestments of RM417.4 million in 2009.Of these, three were new projects withinvestments of RM41.0 million (9.8%)and four were expansion/diversificationprojects with investments of RM376.5million (90.2%). Foreign investmentsamounted to RM370.6 million (88.8%)while domestic investments totalledRM46.8 million (11.2%).

Industrial Electronics

The industrial electronics sub-sectorincludes office equipment,


telecommunication equipment, wirelessdevices, navigational apparatus, computersand computing products, multimedia andinformation technology products andphotonics devices. Among the majorcompanies are Agilent, Xyratex, Motorola,Dell and Kyocera that manufacture a widerange of products including testingequipment, mobile phones, computers,laptops and wireless devices.

Electronics manufacturing services (EMS)companies such as Celestica, Plexus andJabil also play a pivotal role intransforming the electronics sector inMalaysia. Traditionally, EMS companiesundertook assembly operations such asprinted circuit board assemblies (PCBA).Today, EMS companies are increasinglyproviding total solutions from productdesigning to fully integrated systems (box-built) for aerospace, medical andtelecommunication applications.


In 2009, a total of 25 projects wereapproved in the industrial electronics sub-sector with investments of RM412.2million. Of these, 12 were new projectswith investments of RM326.3 million(79.2%) and 13 were expansion/diversification projects with investmentsof RM85.9 million (20.8%). Foreigninvestments amounted to RM222.9million (54.1%) while domesticinvestments totalled RM189.3 million(45.9%).


• Three new wholly foreign-ownedprojects with total investments ofRM153.5 million to produce RFIDtransponders, smart tags and components.The products are mainly for the exportmarket; and

• A new wholly foreign-owned projectwith investments of RM31.9 million tomanufacture LED lighting products,parts & accessories. The products aremainly for the export market.

Electrical Products

The electrical products sub-sectorencompasses electrical components,industrial electrical and consumerelectrical segments. Investments in thissub-sector amounted to RM911.6 millionor 19.2 per cent of the total approvedinvestments in the E&E industry.

Over the years, this sub-sector hassteadily evolved with the emergenceof new products and technologies.Among the products are intelligenthousehold appliances and energysaving and photovoltaic devices. Thepresence of renowned global players inthis sub-sector has significant impact onthe economy especially in enhancingtechnologies of domestic companies tomeet international standards.



A total of 51 projects with investmentsof RM911.6 million were approved in2009. Foreign investments totalledRM587.1 million (64.4%) while domesticinvestments amounted to RM324.5million (35.6%).

Of the projects approved:

• 22 were in the electrical componentssegment with investments of RM417.6million (45.8%);

• 20 were in the industrial electricalsegment with investments of RM466.9million (51.2%); and

• Nine projects were in the consumerelectrical segment with investments ofRM27.1 million (3.0%).

Of the 51 projects approved, 29 werenew projects with investments ofRM544.9 million (59.8%) and 22 wereexpansion/diversification projects withinvestments of RM366.8 million (40.2 %).

Industrial Electrical

This segment covers a number of keyelectrical products ranging fromconventional and intelligent electricalapparatus for switching/signalling/monitoring, power distribution, electricalconnection and circuit protection toillumination and lighting products as wellas domestic and industrial energy savingdevices/equipment/systems. This segmentis mainly dominated by Malaysian-ownedcompanies such as Ancom Components,AM SGB and EPE Power.


In 2009, a total of 20 projects wereapproved with investments of RM466.9million of which RM419.6 million(89.9%) were foreign investments andRM47.3 million (10.1%) were domesticinvestments. Of the projects approved, 12were new projects with investments ofRM190.5 million or 40.8 per cent andeight were expansion/diversificationprojects with investments of RM276.4million (59.2%). These projects areexpected to create job opportunities for1,112 persons.


RM million

ElectricalComponents

417.6 (45.8%)

ConsumerElectrical

27.1 (3.0%)

IndustrialElectrical

466.9 (51.2%)

Graph 19Investments in Projects Approved inthe Electrical Products Sub-sector,2009


• A wholly foreign-owned expansionproject with investments of RM207.5million to undertake the developmentand production of renewable energyharvesters. The establishment of thisproject is expected to further promotethe renewable energy industry in thecountry;

• A new wholly foreign-owned projectwith investments amounting to RM71.2million to manufacture miniaturecircuit breakers, distribution boardsand switches; and

• A wholly foreign-owned diversificationproject with investments of RM61.5million to manufacture mail facilitatingdevices and parts.

Electrical Components

The products under this segment includewires, cables and solar panels and cells.Electrical power cable and wire productionis dominated by local companies such asLeader Cable, Universal Cable and TenagaCable. These companies mainly supplythe domestic market while MNCs such asHitachi Cable and Fujikura cater mainlyfor the export market.


In 2009, a total of 22 projects wereapproved with investments of RM417.6million. Domestic investments in theseprojects amounted to RM275.0 million(65.9%) while foreign investments totalledRM142.6 million (34.1%). Fourteen of theprojects approved were new projects withinvestments of RM341.2 million whileeight were expansion/diversificationprojects with investments of RM76.4million.


• A new majority Malaysian-ownedproject with investments of RM192.0million to undertake design,development and manufacture oflithium-ion cells and battery packs;

• A new wholly Malaysian-ownedproject with investments of RM59.0million to manufacture solarphotovoltaic panels; and

• A majority Malaysian-ownedexpansion/ diversification project withinvestments amounting to RM31.5million to manufacture single core,multi cores and aluminium powercables.


Consumer Electrical

Products covered under this segment aremainly household appliances or ‘whitegoods’ such as washing machines,refrigerators, vacuum cleaners andmicrowave ovens. Among the majorexisting foreign companies involved inthis segment are Panasonic, OYL,Samsung and Dyson while domesticcompanies include Pensonic and Khind.


In 2009, nine projects were approved withtotal investments of RM27.1 million.Foreign investments amounted toRM24.9 million (91.9%) while domesticinvestments totalled RM2.2 million(8.1%). Of the projects approved, threewere new projects with investments ofRM13.2 million while six wereexpansion/diversification projects withinvestments of RM13.9 million.


• A wholly foreign-owned expansionproject with investments amounting toRM10.0 million to undertake design,development and manufacture ofcoander air-flow products. Theseproducts are meant for exportdestinations such as Europe, the USAand Japan; and

• A new majority foreign-owned projectwith investments amounting to RM5.0million to manufacture high precision& high efficiency particulate (HEPA)filters/sterilisers.

The high level of foreign investments inE&E projects approved in 2009 signifiesthat Malaysia is still a competitive offshorelocation for foreign investors.Multinational companies such as NationalSemiconductor, Hitachi, Rohm-Wako,Freescale and Panasonic continue toexpand and diversify their operations inMalaysia.

The emergence of major solar companiesin Malaysia such as First Solar, Q-Cellsand Sunpower, has spurred the growth ofthe solar value chain, opening up newopportunities for both local and foreigninvestors in developing the solar cluster.Cluster development increases co-operation between MNCs and Malaysiancompanies in sharing knowledge andtechnical expertise as MNCs outsourcecertain activities as well as parts andcomponents manufacture to Malaysiancompanies.

Malaysia is also home to five of theleading EMS companies in the world i.eFlextronics, Jabil Circuits, Plexus,Celestica and Sanmina-SCI. Thesecompanies have moved away fromtraditional operations to providing totalsolutions.


Malaysia also encourages R&D in E&E.Strong support by Government with theestablishment of MIMOS in waferfabrication facilities as well as collaborationbetween industry, the IC design associationand local universities in R&D through theestablishment of the Collaboration Micro-Electronic Design Excellence Centre(CEDEC) and the Malaysia IC DesignAssociation (MICDA) enable the industryto keep abreast with the latesttechnologies. Many MNCs have also setup R&D centres in Malaysia to undertakeR&D in areas such as design anddevelopment of chip semiconductordevices, wafer fabrication, LED and displayproducts, as well as IC packagingtechnology.

Green technology is also at the forefrontof Malaysia’s initiatives as Governmentencourages the manufacture ofenvironmental friendly products withenergy saving capabilities. This is evidentthrough the Government’s efforts such asthe introduction of funding and variousprograms related to the promotion of thisinitiative.

TRANSPORT EQUIPMENT

The transport equipment industrycomprises the automotive, aerospace andshipbuilding & ship repairing sub-sectors.The automotive sub-sector is the largestsub-sector in this industry.

For the period January-November 2009,exports of transport equipment totalledRM9.5 billion, compared withRM8.7 billion for the correspondingperiod in 2008. Exports of road vehicles(comprising passenger vehicles,commercial vehicles, motorcycles/scooters, trailers/semi-trailers, bicycles/other cycles and parts and components)amounted to RM3.5 billion. Exports ofaircraft and associated equipment andparts totalled RM3.3 billion while exportsof ships, boats and floating structuresamounted to RM2.7 billion.

Automotive

The automotive sub-sector comprises:

• manufacture/assembly of motor vehicles,including motorised two-wheelers;

• r e c o n d i t i o n i n g / r e a s s e m b l i n g /rebuilding/conversion of motorvehicles; and

• manufacture of parts and components,including coach and vehicle bodies.

There are currently four National Projectsand nine assemblers in the motor vehiclesector, with an annual installed capacityof 963,300 units. In addition, there are 11manufacturers/assemblers of motorcyclesand scooters with an installed capacity of1,069,700 units per year. There are alsothree composite body sports carmanufacturers.


According to the Malaysian AutomotiveAssociation (MAA), production ofmotor vehicles in 2009 totalled489,269 units (comprising 447,002units of passenger vehicles and 42,267units of commercial vehicles). Sales ofmotor vehicles amounted to 536,905 unitsin 2009, consisting of 486,342 units ofpassenger vehicles and 50,563 units ofcommercial vehicles.

Based on estimates by the Motorcycle andScooter Assemblers and DistributorsAssociation of Malaysia (MASSAM),production of motorcycles and scooters isexpected to reach 440,000 units in 2009,a decrease of 18.0 per cent comparedwith the actual production volume in 2008.Domestic sales of motorcycles and scootersare expected to decrease by 19.0 per centfrom 532,697 units (actual sales in 2008)to 430,000 units (estimated) in 2009.

Exports of motor vehicles and parts andcomponents in 2009 (January-November)amounted to RM3.3 billion, comparedwith RM3.7 billion for the correspondingperiod in 2008. The major share of theexports comprised motor vehicle parts.

Imports of motor vehicles and parts andcomponents in 2009 (January-November)totalled RM9.9 billion, compared withRM10.0 billion for the correspondingperiod in 2008. The major share of theimports comprised automotive components/parts and passenger vehicles (includingCKD parts).

As at November 2009, the automotivesub-sector employed 52,133 persons.PROTON and PERODUA togetheremployed 22,106 persons, constituting40.4 per cent of the total employment inthe sub-sector. The local content achievedby motor vehicle manufacturers is about60 per cent while for assemblers, it isabout 40 per cent.

As at December 2009, there weremore than 690 automotive componentmanufacturers and about 110 motorcycle/scooter component manufacturers. Theautomotive component industry producesover 5,000 components.

More than 75 per cent of the automotivecomponent manufacturers are Malaysian-owned. A number of these companieshave technical collaborations with globalautomotive component companies. Morethan 60 per cent of the componentmanufacturers have acquired internationalstandards such as ISO 9000, TS16949and ISO 14000. Global automotivecomponent manufacturers operating inMalaysia include Bosch, GKN, Denso,Delphi, Nippon Wiper Blade, ToyotaAuto Body and ZF Steering. They areproducing automotive air conditionersystems, security systems and otherautomotive body and part modules.

About 75 of the automotive componentmanufacturers are presently exportingtheir components, mainly for thereplacement market. Major components


exported include steering wheels, rims,bumpers, brakes, batteries, radiators,shock absorbers, clutches, exhausts andaccessories. Total sales value ofautomotive components and accessoriesin 2009 (January-November) amounted toRM5.2 billion. Total export value of motorvehicle components and parts for theperiod January-November 2009 wasRM1.8 billion.

The automotive component industry hastoday achieved the capabilities andcompetency to design and developcomponents both for the original equipmentand replacement markets. Most of thelocal component manufacturers are awareof the need to penetrate the global supplychain. They have therefore acquiredinternational procurement standards, thusenabling them to penetrate the regionaland global markets.

Review ofNational Automotive Policy

The Government reviewed the NationalAutomotive Policy (NAP) in October 2009with the objectives of:

• ensuring orderly development as wellas long term competitiveness andcapability of the domestic automotiveindustry as a result of market liberalisation;

• creating a conducive environment toattract new investments and expandexisting opportunities;

• enhancing the competitiveness of thenational car manufacturer throughstrategic partnership;

• fostering the development of the latest,more sophisticated technology in thedomestic automotive industry;

• developing high value-addedmanufacturing activities in niche areas;

• enhancing Bumiputera participation inthe domestic automotive industry;

• improving safety standards forconsumers and promoting environment-friendly opportunities; and

• enhancing the implementation ofcurrent NAP’s policy instruments.

New Measures in the NAP review(effective 1 January 2010):

• Companies manufacturing transmissionsystems, brake systems, airbag systemsand steering systems (critical and highvalue-added parts and components)will be eligible for better fiscalincentives.

• Investments in the assembly ormanufacture of hybrid and electricvehicles will be granted:

- 100 per cent ITA or PS for 10 years;

- Customised training and R&D grants;


- 50 per cent exemption on excise duty[for locally assembled/manufacturedvehicles or grants under the IndustrialAdjustment Fund (IAF)];

- PS with 100 per cent tax exemptionof statutory income for a period of 10years or ITA of 100 per cent on thequalifying capital expenditure incurredwithin a period of 5 years for themanufacture of selected criticalcomponents supporting hybrid andelectric vehicles; and

- Customised incentives based onproposed activities.

• The Ministry of Energy, GreenTechnology and Water will draw up aroadmap to develop the infrastructurefor electric vehicles.

• New manufacturing licences will beissued for selected segments namely:

- luxury passenger vehicles with enginecapacity of 1,800 c.c and above andon the road price not less thanRM150,000;

- hybrid and electric vehicles;

- pickup trucks;

- commercial vehicles; and

- motorcycles with engine capacity of200 c.c and above.

• Tax exemption on statutory income formanufacturers in the automotiveindustry is enhanced:

- from 10 per cent to 30 per cent of thevalue of increased exports providedthe vehicles and parts/componentsattain at least 30 per cent value-added; and

- from 15 per cent to 50 per cent of thevalue of increased exports providedthat the goods attain at least 50 percent value-added.

• For complete built-up (CBU) andcomplete knocked down (CKD), importand excise duty rates will be maintained;

• Gazetted prices of imported used CBUmotor vehicles will be established bythe Government in order to addressunder declaration;

• Import duty will be removed/reducedin compliance with trade agreements;

• Competitiveness of parts andcomponents manufacturers will beimproved through the continuation ofAutomotive Development Fund (ADF)and IAF;

• Under the NAP Review, the Ministryof Transport (MOT) will accord priorityin the 10th Malaysia Plan for fullestablishment of the VTA (FullImplementation of Vehicle Type


Approval) standards and testingfacilities;

• The Ministry of Science, Technologyand Innovation will coordinate andformulate a roadmap for theintroduction and enforcement ofmandatory standards for automotiveproducts;

• A mechanism to prohibit imports ofused parts and components will beintroduced by the Government, witheffect from June 2011;

• Imports of used commercial vehicleswill be prohibited, effective 1 January2016 in line with the gradual phase-outof imports of used parts/components;and the termination of ApprovedPermits (AP) system for used vehicles;

• The Government has set clear targets ofimplementing EURO 4M specificationsfor petrol and diesel by 2011 and theMinistry of Natural Resources andEnvironment will establish a roadmapfor fuel standards and quality;

• The Open AP system will be terminatedby 31 December 2015, while theFranchise AP will be phased out by 31December 2020;

• A charge of RM10,000 for each unit ofopen AP issued will be imposed andthe collection will be used to establisha Bumiputera Automotive Fund to assist

Bumiputera companies venturing intothe automotive and other businesses,effective 1 January 2010;

• A strategic partnership for Proton and aglobally established original equipmentmanufacturer (OEM) will beestablished to enhance Proton’scompetitiveness in the global marketand its long term viability; and

• The freeze on manufacturing licence(ML) for reconditioning andreassembling (rebuilt) activities will bemaintained.

The new policies and measures under theNAP Review are expected to contributesignificantly to the growth of the industryand the country. Emphasis will be givenon attracting investments in high value-added manufacturing activities usinglatest and high technology. The lifting ofthe freeze on ML for manufacturing andassembling activities in selected segments,particularly for luxury cars andhybrid/electric vehicles will encouragenew investments and expansion ofexisting investments in the country.Currently, the hybrid/electric segment isstill very new and has the potential to bepromoted and developed in this region.With the appropriate incentives offered bythe Government, Malaysia would be ableto attract OEMs to relocate theiroperations to the country.


Table 2Motor Vehicles Sales in the ASEAN Main Six Countries

The emphasis on safety and environmentaspects under the NAP Review will ensurethe continued development of thedomestic automotive industry. Thephasing-out of imported used automotiveproducts and introduction of mandatorystandards for parts and components andstandards for fuel and quality will spur thedevelopment of the automotive industry inthe long run.

The Automotive Industry inASEAN

Sales of passenger cars in the ASEAN mainsix countries (namely Indonesia, Thailand,Philippines, Singapore, Vietnam andMalaysia) totalled 1,257,897 units in 2009.

Malaysia remained the largest market forpassenger cars, accounting for 38.7 per

cent of the market. Thailand remained thelargest market for commercial vehicles,accounting for 49.6 per cent of thecommercial vehicle segment.


In 2009, a total of 44 projects wereapproved in the automotive industry withinvestments of RM702.6 million. Domesticinvestments amounted to RM405.6million (58.0%), while foreign investmentstotalled RM297.0 million (42.0%).

Of the total projects approved, 21were new projects while 23 wereexpansion/diversification projects. Thenew projects accounted for RM183.1million or 26.0 per cent of the investmentswhile expansion/diversification projectsaccounted for RM519.5 million (74.0%).


2009 2008

PC CV TIV PC CV TIVCountries

Source:Indonesian Automotive Industries (IAI); Malaysian Automotive Association (MAA); Chamber of Automotive Manufacturers of thePhilippines, Inc. (CAMPI); Thai Automotive Industry Association (TAIA); Motor Traders Association of Singapore (MTAS); VietnamAutomotive Manufacturers Association (VAMA)

Indonesia 359,384 124,164 483,548 425,267 178,507 603,774

Thailand 230,037 318,834 548,871 226,805 388,465 615,270

Philippines 46,228 86,216 132,444 44,428 80,021 124,449

Singapore 73,183 6,320 79,503 100,979 9,595 110,574

Vietnam 62,723 56,737 119,460 49,356 60,830 110,186

Malaysia 486,342 50,563 536,905 497,459 50,656 548,115

ASEAN 6 1,257,897 642,834 1,900,731 1,344,294 768,074 2,112,368

Note: PC - Passenger Car CV - Commercial Vehicle TIV - Total Industry Volume

Major projects approved included:

• An expansion project by a majorityMalaysian-owned company withinvestments of RM381.6 million tomanufacture multi-purpose vehicles(MPV);

• A new majority Malaysian-ownedproject with investments of RM38.5million to manufacture steering columns;

• A new foreign-owned project withinvestments of RM36.0 million tomanufacture battery plates andautomobile batteries;

• A new foreign-owned project withinvestments of RM34.0 million tomanufacture disc pads, bonded brakeshoes, brake linings, disc pad metals,base plates and brakes; and

• An expansion project by a majorityMalaysian-owned company withinvestments of RM19.3 million tomanufacture wire harnesses forpassenger and commercial vehicles.

While the year 2009 saw a slowdown inthe automotive industry as a result of theglobal economic crisis, the outlook for theindustry is expected to improve in 2010in line with a higher growth rate projectedfor the Malaysian economy, strongerconsumer confidence, improved access tofinancing and a more favourable pricingenvironment.

The revised National Automotive Policy isexpected to give a boost to the automotiveindustry as it would ensure the long-termviability and competitiveness of theindustry. Over the long term, the lifting ofthe freeze on issuance of ML for selectedsegments of the automotive industry,coupled with the availability of attractiveincentives would transform the localautomotive industry into a regional hub.

Currently, the principal driving markets forthe Asian automotive industry are People’sRepublic of China, India and ASEAN(Thailand, Philippines, Indonesia andMalaysia). The future of the automotiveindustry in these ASEAN countries isbright because of the ASEAN Free TradeArea (AFTA) where tariffs will be reducedgradually. Malaysia would continue toremain an attractive investment destinationfor automotive manufacturers due to itswell-developed automotive infrastructure,especially in the automotive engineeringsupport services, component manufacturingand electronic components.

Aerospace

The aerospace industry comprises theaviation and space sub-sectors. InMalaysia, the aviation sub-sectorencompasses manufacturing of parts andcomponents; maintenance, repair andoverhaul (MRO) activities; design anddevelopment; assembly and operation oflight aircraft and support services.


The aerospace industry in Malaysia whichbegan with the establishment of MROoperations back in the 1970s hasprogressed into the manufacture ofaerospace parts and components andassembly of light aircraft. Currently, thereare 12 companies involved in themanufacture of aircraft parts andcomponents including ground supportequipment, while more than 30companies are involved in MRO activities.

Parts and components manufacturing isone of the growth areas identified for theaerospace industry in Malaysia, accordingto the National Aerospace Blueprint. Thecurrent global economic crisis has causedmany airlines to delay or even cancel theiraircraft orders. This has affected Malaysianparts and components companies as theyare part of the global supply chain.However, the high volume of outstandingorders has managed to sustain theproduction of local companies throughoutthe year.

The parts and components sub-sector isexpected to experience an upswing from2010 arising from the recently announcedcontracts secured from global aircraftcomponent manufacturers. This willfurther strengthen Malaysia’s position inthe global supply chain for compositeaerostructures. The commencement ofoperations by Spirit AeroSystems Malaysiaand Honeywell Aerospace AvionicsMalaysia is expected to contributesignificantly to the growth of the

aerospace parts and components sub-sector in the country.

Malaysia has a full range of MROcapabilities which include modificationand remanufacturing of engines andengine components, repair and overhaulof aircraft parts, components andairframes, repair and testing of aircraftinstruments and components andprovision of line and heavy maintenanceto both military and civil aircrafts. MajorMRO companies in Malaysia includeMAS Engineering, GE Engine, AIROD,Hamilton Sundstrand, Honeywell, ParkerHaniffin and Eurocopter. The MRO sub-sector is projected to grow by 12-15 percent annually. The sub-sector is estimatedto achieve a turnover of RM4.5 billion in2009 compared with RM4.0 billion in2008.


In 2009, five projects were approvedwith total investments of RM551.9million. Foreign investments amounted toRM159.9 million or 29.0 per cent whiledomestic investments totalled RM392.0million (71.0%).

The major projects approved included:

• An expansion project by a whollyMalaysian-owned company tomanufacture composite panels foraircrafts with investments of RM320.1million. The main customers are Spirit


AeroSystems, Goodrich Aerostructures,Airbus UK, EADS, GKN and BAESystems;

• A new majority Malaysian-ownedproject to manufacture miniature jetengines with investments of RM7.6million. The product is for thepropulsion of remote controlledaeroplanes for the hobby industry andother applications such as targetdrones. The company will alsomanufacture related engine controlunits (ECU); and

• An expansion project by awholly foreign-owned company tomanufacture and reassemblehelicopter cockpit and helicoptermodifications with investments ofRM2.4 million. The company will workclosely with industry players and theGovernment in ensuring the localaviation industry’s rapid growthparticularly through the formation ofsmart partnership programmes withlocal vendors.

Comprehensive Tax Incentivesfor the Aerospace Industry

To further promote the growth of theaerospace industry, the Governmentannounced comprehensive tax incentivesin December 2009. These incentives areeffective for applications received byMIDA from 1 January 2010 until 31December 2014.

These incentives focus on four maingroups in the aerospace industry, namelyDesign, Manufacture & Assembly group,Operator group, Support group andRegulatory group.

1. The Design, Manufacture & Assemblygroup consisting of activities such asresearch, design and development,systems integration, manufacturing andassembly will qualify for income taxexemption from 5-15 years subject toevaluation in terms of investment level,value-added, technology and othercriteria.

2. The Operator group consisting ofgeneral aviation will qualify for ITA of100 per cent on qualifying capitalexpenditure incurred within 10 yearssubject to evaluation in terms ofinvestments in fixed assets of more thanRM150 million within 5 years.

3. The Support group consisting of MROand aerospace training will qualify forthe following incentives:

i. Income tax exemption of 100 percent of statutory income for up to10 years for companies that provideMRO and services related to MROof aerospace end products such asaircrafts, spacecrafts, missiles/rockets,communication and navigationsystems (CNS), simulators thereofand equipment, components,accessories or parts thereof; and


ii. Income tax exemption of 100 percent of statutory income for up to 15years for companies involved inconversion, upgrading andrefurbishment or re-manufacture ofaerospace end products.

The grant of these two incentives is subjectto evaluation by MIDA in terms ofinvestment level, value-added andsignificant economic impact to theeconomy.

i. ITA of 60 per cent on qualifyingcapital expenditure incurred within5 years for MRO companiescurrently operating in Malaysia andundertaking expansion, modernizationor automation of existing business ordiversifying existing business intoany related product within the sameindustry; and

ii. Double deduction on expensesincurred by the employers in trainingtheir employees in pilot conversionand instructor pilot training.

4. The Regulatory group consisting ofcompanies undertaking aerospacerelated certification, standarddevelopment, testing and evaluationand licensing activities, will qualify forPS with tax exemption of 100 per centof statutory income for a period of 5years or ITA of 60 per cent onqualifying capital expenditure incurredwithin 5 years.

The aerospace industry, being high-technology and knowledge-based innature, has potential to be one of themain sectors that will drive the nationtowards a high income economy based oninnovation, creativity and high-valuedactivities.

The continuous escalation in costs hasforced global aerospace players torelocate to more cost-competitivelocations. Malaysia should take thisopportunity to attract more aerospaceparts manufacturers especially tier onesuppliers to Boeing and Airbus. Thecomprehensive tax incentives announcedrecently by the Government are expectedto attract more investments into theindustry, thus making Malaysia a globalcentre for the industry in Asia Pacific.

Malaysia aims to be the preferred globalaerospace outsourcing centre throughparticipation in ‘design and build’activities in aircraft programmes. Malaysiaalso aims to secure a greater share of theMRO market as well as develop itscapability in avionics and systemsintegration.

Shipbuilding and ShipRepairing

The shipbuilding and ship repairingindustry in Malaysia includes themanufacture of a wide range of shipsincluding barges, passenger boats/ferries,patrol vessels, tug-boats, landing crafts,


tankers, leisure crafts, yachts, hydrofoils,hovercrafts and ship repairing activities.The industry has developed specialisedskills and technological capabilities inengineering design, naval architecture,metallurgy, corrosion control, machining,welding and fabrication. The industry hasalso extensive linkages with otherindustries such as steel, glass, logistics,storage, bulk-breaking of goods andservices (port services, financing,insurance and consultancy).

There are more than 70 shipyards inMalaysia. The major activities undertakenby these shipyards include constructing orbuilding ocean-going vessels, boats andoffshore structures for oil and gasindustries; repairing, maintaining,upgrading, overhauling and refurbishingvessels; conversion of ships; and heavyengineering and fabricating of offshorestructures, steel structures and cranes.

The largest shipyard in Malaysia canaccommodate dry-docking of vessels ofup to 450,000 DWT and has a ship liftsystem capability of up to 50,000 DWT.The demand for larger and moresophisticated naval vessels is still fulfilledby foreign shipyards which have thecapacity and capability in theconstruction of such vessels.


In 2009, three new wholly Malaysian-owned projects were approved with

investments of RM34.9 million toundertake shipbuilding and ship repairingactivities and metal fabrication works.These included a project with investmentsof RM18.6 million to undertakeshipbuilding and ship repairing activities.

The local shipbuilding and ship repairingindustry faced declining orders due to theworldwide economic crisis. However,local shipyards have been able to sustaintheir production by fulfilling the backlogof orders. Challenges faced by localshipyards include shortage of qualifiedpersonnel and skilled technicians; highoperational costs due to high costs ofimported materials and equipment; andstiff competition from new developingshipyards in other ASEAN countries suchas Vietnam and Thailand, which offerlower labour costs.

MACHINERY ANDEQUIPMENT

The machinery and equipment (M&E)industry in Malaysia covers the followingsub-sectors:

• Specialised M&E for specific industry;

• Power generating M&E;

• Metalworking machinery; and

• General industrial M&E, componentsand parts.


To date, there are about 800 companies inoperation in the M&E industry. Exports ofM&E totalled RM17.2 billion whileimports totalled RM34.6 billion for theperiod January-November 2009. Majorexport destinations included Australia,Indonesia, the People’s Republic of China,the USA, the Netherlands and Singapore.

The M&E industry is gradually moving upthe value chain and increasing its focus onhigh technology, high value-added andspecialised M&E. Generally, productsmanufactured have achieved more than60 per cent value-added. Companies inthis industry continued to enhance theirdesign, development, technology andinnovation capabilities to remaincompetitive and sustain the industry’sgrowth.


In 2009, a total of 95 projects withinvestments of RM1.2 billion wereapproved in the M&E industry. Of these,72 were new projects (RM901.9 millionor 72.7%) and 23 were expansion/diversification projects (RM337.9 millionor 27.3%). Foreign investments amountedto RM637.2 million (51.4%) whiledomestic investments totalled RM602.7million (48.6%). Projects approved in2009 are expected to generateemployment opportunities for 5,613persons.

Specialised M&E for SpecificIndustry

The specialised M&E for specificindustry sub-sector caters for the needsof specific industries and are designedaccording to users’ specific requirements.Industries targeted include the E&E,oil & gas, medical, solar/photovoltaic,agriculture, automotive, food andbeverage, woodworking and plasticprocessing industries.

Over the years, companies in thissub-sector have acquired capabilitiesand technologies to transform themselvesfrom supplying components andsub-assemblies to producing highvalue-added and sophisticated M&Efor the back-end and front-endsemiconductor processing industry.These companies have not only become


RM million

MetalworkingMachinery2.5 (0.2%)

General IndustrialM&E, Components

and Parts995.6 (80.3%)

Specialised M&E221.9 (17.9%)

Power GeneratingM&E

19.9 (1.6%)

Graph 20Investments in Projects Approved inMachinery and Equipment Industry bySub-sector, 2009

reliable suppliers to foreign companiesoperating in the country, but have alsocarved a niche for themselves globally.

Among the leading companies in thissub-sector are Genetec TechnologyBerhad, Vitrox Corporation Berhad,Kobay Technology Berhad, PentamasterCorporation Berhad and UpecaEngineering Sdn. Bhd. Through theircontinuous efforts and involvement inhigher value-added activities, Malaysiais now recognised as the leadingmanufacturer of automation equipmentfor the E&E industry in the South EastAsian region. The impact of the globaleconomic crisis on the semiconductorindustry has driven these local automationequipment manufacturers to explorenew markets and diversify intosupplying to other industries such assolar/photovoltaic, aerospace andmedical industries.

In recent years, the importance of oil &gas reserves from deep waters hasincreased significantly in the Asia Pacificregion. This has attracted substantialinflows of FDI into specialised M&E forthe oil and gas industry. Many of theworld’s leading oil and gas M&Ecompanies such as FMC, Aker Kvaerner,Halliburton, Cameron International andTechnip have established operations in thecountry to manufacture high-endspecialised M&E for subsea deepwaterdevelopment. Their presence has resultedin the enhancement of local fabricators’

capabilities in the oil & gas sector to moveup the value chain from producing low-end process equipment to design andfabricate offshore drilling platformequipment, as well as manufacture andprovide high end complex components,sub-assemblies and related services.Among leading Malaysian companies areKencana HL Engineering Sdn. Bhd., KNMProcess Systems Sdn. Bhd. and ScomiGroup of Companies.


In 2009, a total of 25 projects withinvestments of RM221.9 million wereapproved in the specialised M&E forspecific industry sub-sector. Thesecomprised 20 new projects withinvestments of RM203.4 million (91.7%)and five expansion/diversification projectswith investments of RM18.5 million (8.3%).Foreign investments amounted to RM83.7million (37.7%) while domestic investmentstotalled RM138.2 million (62.3%).

Significant projects approved included:

• A new wholly foreign-owned projectwith investments of RM39.2 million tomanufacture membrane systems andrelated equipment, process equipmentand components/modules for gasprocessing, petroleum refining andpetrochemical industries. The companywill also set up an engineering designcentre in the country for the Asianregion;


• A new wholly Malaysian-ownedproject with investments of RM25.0million to manufacture fully integratedfertilizer plants and parts. The companywill undertake R&D activities todevelop fully automated plantsincorporating Programmable LogicControl (PLC) software and 80 per centof its products will be exported;

• A new majority Malaysian-owned jointventure project with investments ofRM10.4 million to manufactureintelligent pipeline inspection gauges(PIG) for the oil & gas industry. Thecompany which specialises inproviding full range of inspectionservices for pipelines will be the firstin the country to manufacture PIG tocater to the needs of the oil & gas andpetrochemical sectors in the region;

• A majority Malaysian-owned jointventure expansion/diversification projectwith investments of RM10.4 million tomanufacture machinery and parts forthe solar industry such as loader/unloader machines, annealing ovens,backcoating and sorting machines. Thecompany which was established in2001 to supply M&E for thesemiconductor industry will diversify itsoperation to support the solar industry;

• A new majority foreign-owned jointventure project with investmentsof RM7.3 million to manufactureM&E and related modules and

sub-assemblies for the medical,semiconductor and electronics industries.The company is a mechatronic contractmanufacturer focusing on productionautomation and low volume serialproduction of high-tech modules andequipment. The products manufacturedwill be fully exported to European-based OEMs and engineering designcompanies; and

• A wholly Malaysian-owned expansion/diversification project with investmentsof RM4.7 million to manufacturecleaning and drying equipment andparts for PV solar wafers and siliconwafers; and ultrasonic cleaningequipment and parts for flat displaypanels. The company is developing itsown cleaning and drying technologyand will patent its equipment.

Power Generating M&E

The power generating M&E sub-sectorcomprises the manufacture of boilers,condensers, electric generating sets,turbines and engines.

Companies in this sub-sector manufacturea wide range of power generating M&Esuch as boilers, condensers, engines,turbines and industrial generator sets foruse in refineries, oil & gas explorationplatforms, petrochemical plants and othercommercial operations, in accordancewith internationally recognised standards.


As the demand for environmental-friendly,efficient and cost effective energy in thecountry increases, this sub-sector isexpected to move up the value chain intothe manufacture of advanced powergenerating M&E and environmental-friendly solutions such as water and windturbines; and photovoltaic powergenerating systems.

Leading companies in this sub-sectorinclude Tractors Malaysia Sdn. Bhd.,UMW Industrial Power Sdn. Bhd.,Mechmar Boilers Sdn. Bhd., VickersHoskins (M) Sdn. Bhd., Enco Systems Sdn.Bhd. and Transtherm Engineers Sdn. Bhd.


In 2009, two projects with investments ofRM19.9 million were approved in thepower generating M&E sub-sector tomanufacture generator sets; and biomassmicro power plant equipment and parts.The biomass micro power plantequipment is a green technology projectwhich utilizes organic materials such aspaddy husks, wood chips and otheragricultural waste to produce up to200kW of electricity per hour. Domesticinvestments amounted to RM19.8 million(99.5%) while foreign investments totalledRM0.1 million (0.5%).

Metalworking Machinery

The metalworking machinery sub-sectoris divided into two categories, namely

metal cutting machine tools and metalforming/shaping machine tools. M&E inthis category are laser cutting machines,machining centres, electro-dischargemachines (EDM), milling machines,drilling machines, lathes, shearingmachines, bending rolls, stampingmachines, press brakes, forging machines,and hydraulic and power presses.

Most of the metalworking machinesproduced locally are metal forming/shaping machine tools such as hydraulicand power presses, sheet metalworkingmachines and press brakes. Leadingcompanies include AIDA ManufacturingSdn. Bhd., Hydra-Link Engineering Sdn.Bhd., Li Chin (S.E.A.) Sdn. Bhd. andSunfluid Engineering Sdn. Bhd.


In 2009, two new projects withinvestments of RM2.5 million wereapproved to manufacture weldingmachines, CNC plasma cutting machinesand CNC router machines. Domesticinvestments amounted to RM1.9 million(76.0%) while foreign investments totalledRM0.6 million (24.0%).

General Industrial M&E,Components and Parts

The general industrial M&E, componentsand parts sub-sector covers a broadcategory of products such as industrial air-conditioning plants and equipment,


material handling equipment, pressurevessels, heat exchangers, valves, gasketsand fittings.

Companies in this sub-sector also providea wide variety of material handlingsolutions ranging from unit materialhandling systems such as cranes and liftsto bulk material handling solutions,logistics, sorting and warehousing systems.

Malaysia is the leading manufacturer inSouth East Asia of pressure vessels,process equipment and modules for thechemical, petrochemical and oil & gasindustries in South East Asia and hasattained international recognition for theseproducts.


In 2009, a total of 66 projects withinvestments of RM995.6 million wereapproved in this sub-sector. Of these,49 were new projects (RM695.2 millionor 69.8%) and 17 were expansion/diversification projects (RM300.4 millionor 30.2%). Domestic investments amountedto RM442.8 million (44.5%) while foreigninvestments totalled RM552.8 million(55.5%).


• A new wholly foreign-owned projectwith investments of RM165.8 million tomanufacture sea water reverse osmosissystems for the export market; and

• A new wholly Malaysian-ownedproject with investments of RM35.2million to manufacture quaysidecontainer cranes and rubber tyredgantry cranes for harbour cargohandling. The company will source itstechnology from Germany and Japan.

The relatively high level of foreigninvestments (51.4%) in the M&E industryindicates that Malaysia continues to bean attractive location for companiesseeking to produce cost competitiveproducts. The types of products proposedto be manufactured also indicate thatcompanies are moving towards producinghigh technology and high value-addedM&E, modules, components and parts.

The success of Malaysia in attractinginvestments in high value-added industriessuch as solar/photovoltaic, medical andaerospace will create opportunities andnew markets for local automation equipmentmanufacturers to diversify or venture toserve these industries. Specialised M&Ewill continue to be the major sub-sectorin the M&E industry. Some of the highvalue-added products proposed by localand foreign companies included cleaningand drying equipment for PV solar wafersand silicon wafers, ultrasonic cleaningequipment for flat display panels,machinery for the solar industry, modulesand sub-assemblies for the medical,semiconductor and electronics industries,and intelligent pipeline inspection gauges(PIG) for the oil & gas industry.


With dynamic engineering supportingindustry in Malaysia which is costcompetitive, competent and capableof supplying an extensive range of partsand components and related services,the future direction of the M&E industryis to focus on and strengthen coreactivities such as R&D, D&D, prototyping,software development, system integration,assembly, testing and calibration. This willenable the industry to face increasingcompetition from emerging countries, inits pursuit of new opportunities in theglobal market.

ENGINEERING SUPPORTINGINDUSTRY

Malaysia’s engineering supporting industrywhich mainly encompasses the mouldand die, machining, metal stamping,metal casting, surface engineering, heattreatment and forging activities, has in thelast four decades, progressed in tandemwith the country’s transformation from anagriculture dependant economy to aglobal manufacturing hub.

Currently, the industry is consolidatingand rationalising itself to meet thechallenges of supporting the Malaysianmanufacturing sector which is movingtowards high technology, capital intensiveand high value-added industries. Buildingon their vast experience and internationalrecognition for their capabilities, consistentquality production and fast and reliabledelivery in a diverse range of engineering

activities, particularly in machining andfabrication, players in the industry havebegun upgrading their facilities andacquiring technologies to meet thestringent requirements of OEMs for partsand components and precision engineeringservices.

By moving up the value chain andproviding total manufacturing solutions,as well as parts and components, for hightechnology industries in the E&E,automotive, machinery manufacturing,medical, oil & gas, aerospace, defenceand solar/photovoltaic industries, theindustry will be a major contributor toMalaysia’s efforts to become a preferredlocation for global outsourcing demands.

Among leading Malaysian companiescapable of providing total manufacturingsolutions to advanced global demandsare Alpha Master Sdn. Bhd., AtasmiPrecision Machinist Sdn Bhd., UWCHoldings Sdn. Bhd., Lypometal Sdn. Bhd.,Kobay Technology Sdn. Bhd. and KeinHing International Bhd. These companiesdevelop and produce high value-addedmodular components, machine structures,precision engineering parts, sheet metalfabrication & sub assemblies and undertakesurface finishing.


A total of 64 projects were approved inthe engineering supporting industry in2009 with investments of RM454.2


million. Of these, 41 were new projects(RM307.1 million or 67.6%) and 23 wereexpansion/diversification projects (RM147.1million or 32.4%). Domestic investmentsamounted to RM262.9 million (57.9%)and foreign investments totalled RM191.3million (42.1%). Projects approved in2009 are expected to generate employmentopportunities for 4,027 persons.

Of the 64 projects approved:

• 21 projects were in the the mould &die sub-sector with investments ofRM152.8 million;

• 26 projects were in the machining sub-sector with investments of RM228.1million;

• One project was in the metal stampingsub-sector with investments of RM0.4million;

• Four projects were in the metal castingsub-sector with investments of RM29.8million;

• Nine projects were in the surfaceengineering sub-sector with investmentsof RM33.4 million;

• Two projects were in the heat treatmentsub-sector with investments of RM5.6million; and

• One project was in the forging sub-sector with investments of RM4.0 million.


• A new wholly foreign-owned projectwith investments of RM67.3 millionto undertake machining activities forthe E&E industry. The company willundertake high precision machining upto 5 microns for hard disc drivecomponents such as actuators, dampers,anti-discs and separators for the exportmarket;

• A majority Malaysian-owned joint-venture expansion/diversification projectwith investments of RM60.8 million tomanufacture tools and dies. Thisexpansion/diversification project willbe an addition to the group’s existingcapabilities in metal stamping, forging


RM million

Surface Engineering33.4 (7.4%)

Machining228.1 (50.2%)

Casting29.8 (6.6%)

Heat Treatment5.6 (1.2%)

Forging4.0 (0.9%)

Metal Stamping0.4 (0.1%)

Mould & Die152.8 (33.6%)

Graph 21Investments in Projects Approved inthe Engineering SupportingIndustry by Sub-sector, 2009

and fabrication and transform thegroup to become a one-stop solutionprovider;

• A new wholly foreign-owned projectwith investments of RM25.3 million tomanufacture stud bolts, threaded rods,nuts, socket head cap screws, hexbolts, pins and customised machinedparts. The Malaysian plant will be themanufacturing and distribution centrefor its group in the Asia Pacific region;

• A new wholly Malaysian-ownedproject with investments of RM9.8million to undertake electroless platingand electroplating activities for the E&Eand telecommunication industries.Customers include MNCs such as Sony,Canon, Sharp-Roxy, Fuji, Panasonicand Dell;

• A new wholly foreign-owned projectwith investments of RM9.3 millionto manufacture moulds, tools anddies; metal stamped parts; sub-assembled parts and components forthe E&E and automotive industries. The company will adapt the latestadvanced manufacturing processtechnology from Japan to design andmanufacture customised parts andcomponents; and

• A wholly Malaysian-owned expansion/diversification project with investmentsof RM8.0 million to manufacture ironcastings. The company which was

involved in castings for theconstruction industry will expand itsproduction to cater for the automotiveindustry.

As manufacturing in the global scenariobecomes more and more competitive,the extent and efficient management ofoutsourcing determines the competitiveedge that OEMs and ODMs will enjoy.To reduce supply chain managementcosts, these major players are lookingfor total solution or manufacturingsolution providers and global supplierswho will manage the smallercomponents, parts and services suppliers.As the global outsourcing market isexpected to grow rapidly in the comingdecade, Malaysia needs to have in placemany more total solution ormanufacturing solution providers tosecure a larger share of this global marketdemand, especially for high technologyindustries.

While companies in the engineeringsupporting industry are realigningthemselves to provide multiple or totalengineering services, the Government isalso intensifying efforts to encouragemajor players to transform themselvesinto high-end solution providers capableof providing cost competitive packagedservices from product conception andR&D to serial production and if required,management of entire processes includinglogistics, packaging, testing andcertification.


The engineering supporting industry willcontinue to play an important role inachieving the country’s vision to be thepreferred location for manufacturingoutsourcing.

BASIC METAL PRODUCTS

The basic metal products industry inMalaysia assumes a major role in thedevelopment of the manufacturing andconstruction sectors. The industry coversprimary processing and downstreammanufacturing of ferrous (iron and steel)and non-ferrous (aluminium, tin, copper,zinc, lead, etc) metal products. Theindustry can be categorised into two mainsub-sectors, namely:

• Long products comprising billets,blooms, sections, bars and wire rodsand downstream wire products, such aswire mesh, hard drawn wire, bolts, nutsand nails; and

• Flat products comprising hot rolledcoils, plates and sheets, cold rolledcoils and sheets and downstreamproducts, such as pipes, galvanizedcoils, tin plates and fabricatedproducts.

There are currently 410 companies inoperation with sales of RM41.1 billionand employment of 48,400 workers. Awide range of ferrous and non-ferrousproducts are produced including:

• Primary steel products {direct reducediron (DRI) and hot briquetted iron(HBI), billets and blooms};

• Rolling/finished products (bars, wirerods, sections, hot rolled coils, platesand sheets, cold-rolled coils);

• Secondary long products (wire andwire products);

• Secondary flat products (pipes and pipefittings, and tinplate);

• Aluminium sheets/foils;

• Aluminium ingots (recycled);

• Aluminium rods and aluminiumextruded profiles;

• Copper rods/wires;

• Copper strips;

• Copper tubes/extrusions; and

• Tin.

Imports of iron and steel productsamounted to RM16.3 billion in 2009(January-November) while imports of non-ferrous metal products totalled RM12.3billion in 2009 (January-November).

Exports of iron and steel productsamounted to RM8.3 billion in 2009(January-November) while exports of non-


ferrous metal products totalled RM6.1billion for the same period in 2009.

Malaysia’s steel consumption in 2008totalled 8.3 million tonnes, a decrease of6.0 per cent from 2007. Flat productsaccounted for 53.9 per cent (4.5 milliontonnes) of the steel consumption, andlong products accounted for 46.1 per cent(3.8 million tonnes). In 2008, the overallperformance of the steel industry wasaffected by the current economicdownturn.

Malaysia produced 6.4 million tonnes ofcrude steel in 2008 and was the largestproducer of crude steel in ASEAN,accounting for about 33.0 per cent ofregional production.

Steel production in Malaysia is dominatedby long products, principally used in theconstruction sector, such as steel bars (2.3million tonnes) and wire rods (1.1 milliontonnes). Production of flat products suchas hot rolled coils (1.7 million tonnes) andcold rolled coils (0.7 million tonnes) isincreasing in tandem with increasingmanufacturing activities.

The main raw materials for steel makingare DRI/HBI and steel scrap. With theincreasing demand from electric arcfurnace operators, production of HBI andDRI increased from 1.9 million tonnes in2007 to 2.0 million tonnes in 2008.


In 2009, a total of 30 projects wereapproved with investments of RM2.6billion. Of these, 18 were new projectswith investments of RM0.6 billion(23.1%) while 12 were expansion/diversification projects with investmentsof RM2.0 billion (76.9%). Of theinvestments in the projects approved,RM2.2 billion or 84.6 per cent wasdomestic investments while RM0.4 billionor 15.4 per cent was foreign investments.

Overall, the RM2.6 billion investments inbasic metal products in 2009 hadexceeded the IMP3 investments target ofRM1.9 billion per year.


• 25 were for the manufacture of basiciron and steel products withinvestments of RM0.8 billion; and

• 5 were for the manufacture of non-ferrous metal products withinvestments of RM1.8 billion.


• A RM1.6 billion majority Malaysian-owned expansion project tomanufacture aluminium ingots,aluminium alloy ingots and aluminiumbillets;


• A new RM131.0 million whollyMalaysian-owned project tomanufacture cold rolled steel strip incoil;

• A new RM122.0 million majorityforeign-owned project to manufacturegold dore bars;

• A RM116.0 million majorityMalaysian-owned expansion project tomanufacture steel billets and steel bars;

• A new RM95.0 million majorityforeign-owned project to manufacturecarbon steel fasteners; and

• A new RM75.0 million majorityMalaysian-owned expansion project tomanufacture steel billets.

The Government introduced severalmeasures to further enhancecompetitiveness of the local steel industryin 2009. These measures which came intoeffect from 1 August 2009 include:

• Manufacturing licences will be grantedwithout restriction to meet the demandfor domestic and export markets forlong and flat products;

• Import licence requirements andimport duties on iron and steelproducts will be liberalised. Importduties on iron and steel products willbe reduced gradually to 0 - 10 per centin 2018; and

• Standards on selected iron and steelproducts will be enforced to ensure thatproducts of acceptable quality areproduced and imported into thecountry.

FABRICATED METALPRODUCTS

Metal fabrication activities can beclassified into four categories, namely:

• Fabrication for the offshore/onshore oiland gas industry;

• Building and civil constructionfabrication;

• Processing and manufacturing plantfabrication; and

• Industrial machinery and equipmentstructures and component fabrications.

The industry also covers other productssuch as the manufacture of tanks, drums,metal boxes, tin cans, metal furniture andfixtures, wire and wire products, non-ferrous metal products and householdwares.


In 2009, a total of 35 projects wereapproved for the manufacture of fabricatedmetal products with investments ofRM915.8 million. Domestic investmentsamounted to RM332.1 million (36.3%),


while foreign investments totalledRM583.7 million (63.7%). Of the 35projects approved, 25 were newprojects (RM688.6 million) and tenwere expansion/diversification projects(RM227.2 million). Projects approved in2009 are expected to generateadditional employment opportunities for1,846 persons.


• A new RM324.0 million whollyforeign-owned project to manufacturewire ropes for offshore and miningapplications, synthetic fiber ropes,parallel wire strand for bridge cable,anchor chains, sockets, thimbles andlocks;

• A new RM120.4 million whollyforeign-owned project to manufacturecopper rods and wires;

• A RM87.0 million wholly Malaysian-owned expansion project to undertakeindustrial fabrication;

• A new RM39.9 million majorityforeign-owned project to manufacturedrum covers and slitted/sheared steelsheets; and

• A new RM37.7 million majorityMalaysian-owned project tomanufacture onshore and offshore oil& gas processing modules andequipment.

The metal fabrication industry inMalaysia is an established industry.Domestic companies have developedworld-class capabilities in a diverse rangeof metal fabrication activities. KNMGroup Berhad is Malaysia’s leadingprocess equipment manufacturer for theoil and gas, petrochemicals, mineralsprocessing, desalination, renewableenergy, chemicals, steam generation,power and environment industries. TheGroup is now operating 19manufacturing facilities and engineeringcentres in 12 countries, offering acomprehensive and diversified range ofproducts and services to its clients inmore than 60 countries.

Petra Fabricators Sdn. Bhd. is one of themajor fabrication yards specialising in thedesign of process packages, andmanufacture of heat transfer equipment,pressure vessels, process packages,expansion joints, and other equipment forthe oil and gas, petrochemical andgeneral industries. Petra Fabricators hassecured projects in Thailand, Vietnam,Myanmar, Indonesia, Brunei, India,Nigeria, Qatar, United Arab Emirates andthe United Kingdom.

Other leading companies in the fabricatedmetal products industry include Nam FattCorporation Berhad, Ikatan EngineeringSdn. Bhd. and Kencana HL EngineeringSdn. Bhd.


TEXTILES ANDTEXTILEPRODUCTS

The textiles and textile products industryin Malaysia is categorised into thefollowing activities:

• Upstream activities which cover theproduction of fibre and yarn (naturaland synthetic), fabrics (woven, knittedand non-woven) as well as activities ofbleaching, dyeing, finishing andprinting; and

• Downstream activities which involvethe manufacture of made-up garments(shirts, pants, skirts), home textileproducts (bed linens, table linens,towels), industrial textile products(ropes, cords) and textile accessories(zip fasteners, sewing threads,drawstring).

Currently, there are more than 670licensed companies in operation withinvestments of RM8.6 billion. In addition,there are more than 1,000 small scaletextile companies in operation which areexempted from ML. The industry employsmore than 68,200 persons.

Due to global competition, Malaysiantextile manufacturers are moving up thevalue chain by diversifying into theproduction of higher value-added textiles,implementation of automation andcomputerized manufacturing, businesscollaboration with foreign companies to

acquire new technologies andundertaking research and developmentactivities to formulate new processes,develop new applications and value-added products.

Malaysia was a net exporter of textiles andtextile products in 2009 (January-November) with exports totalling RM8.1billion while imports amounted to RM4.0billion. The main products exported wereapparels and clothing accessories.Malaysian apparel manufacturerscontinue to maintain excellent reputationfor quality and capability in theproduction of up-market brands such asNike, Adidas, DKNY, Ann Taylor, Armani,Talbots and Tommy Hilfiger. The mainproducts imported were yarns and wovenfabrics.


In 2009, nine new projects were approvedwith total investments of RM333.6million. Foreign investments totalledRM225.2 million (67.5%) while domesticinvestments amounted to RM108.4million (32.5%).

Of the approved projects approved, fourwere for the production of made-upgarments and one each for fibre andyarn; fabrics; textile products; textileaccessories; and recycling of textiles. Theprojects approved are expected togenerate 1,345 employmentopportunities.


The continued inflow of investments intothe textiles and textile products industrywas attributed to a combination of factorssuch as conducive business environmentwell developed infrastructure, relativelylower costs of doing business and theavailability of relevant skill sets in thecountry.


• A new majority foreign-owned projectwith investments of RM287.8 millionfor the manufacture of specialtypolyester filament yarn. This is the firstproject of its kind to produce highcontent and micro filament yarn withtechnical and functional features suchas flame-retardant, breathable and anti-

bacteria. The project proposed toexport its entire production;

• A new majority foreign-owned projectto produce woven fabrics withinvestments of RM9.5 million andcatering mainly for exports to thePeople’s Republic of China, Republicof Korea and the USA; and

• A new majority foreign-owned projectwith investments of RM2.3 million forthe manufacture of made-up garments.The project proposed to utilisedomestic latex sheets and fabricbacked latex to produce sportswear,swimwear, skiwear or winterouterwear, mainly for the exportmarket.

Future prospects in Malaysia in the textileindustry lie in the promotion of highperformance textiles, made-up garmentsand textile products with functional andtechnical features both in the upstreamand downstream sub-sectors. Theapplication of functional and technicaltextiles are in sectors such as aerospace,automotive, industrial, construction, anti-ballistic protection (police, army), marine,high performance apparels (fire-fighters,racing), medical, sportswear and filtration.

MEDICAL DEVICESINDUSTRY

The medical devices industry is one of thefastest growing and innovative industries


RM million

Fibre and Yarn287.8 (86.3%)

Fabrics9.5 (2.8%)

Made-up garments20.7 (6.2%)

Textile accessories0.4 (0.1%)

Others7.6 (2.3%)

Textile products7.6 (2.3%)

Graph 22Investments in Projects Approved inthe Textiles and Textile ProductsIndustry by Sub-sector, 2009

globally. The industry encompassesequipment, instruments, appliances andconsumables used in healthcare fordiagnosis, prevention, monitoring andtreatment of illness and injury. Scientificadvances in medicine such as theintegration of drugs and biologics intodevices and longer life expectancy as wellas the increasing demand for betterhealthcare facilities and services aredriving rapid technological developmentsand growth in this industry. Globally, themedical equipment market was valuedat US$219.2 billion in 2009 and isexpected to increase to US$232.7 billionin 2010. In Malaysia, the consumption ofmedical devices is expected to grow toUS$877.0 million in 2010 from US$826.0million in 2009.

The medical devices industry in Malaysiais dominated by small and medium-sizedcompanies (SMIs) engaged in theproduction of medical gloves and othermedical disposable products. Currently,there are more than 180 medical devicesmanufacturers including the MNCs. TheMNCs in the industry are mainly involvedin the production of higher value productssuch as orthopaedic products, surgicalinstruments, medical electrodes, safetyintravenous cannulae, pacemakers,defibrillators, dialysers, and ophthalmiclenses. These MNCs include Ambu, B.Braun, C.R. Bard, Ciba Vision, MeditopCorporation, St. Jude Medical andSymmetry Medical.

The medical devices sector is one of thepriority sectors identified by theGovernment for further developmentgiven the growing demand forhealthcare and medical products,driven by increasing global population,longer life expectancy and growingaffluence. The industry continued toexpand as existing medical devicescompanies, both local and foreign,expanded their operations in Malaysia,and new manufacturing facilities wereestablished in the country. Existingcompanies include Ambu, B. Braun,Meditop, Symmetry Medical and TopGlove.

The presence of supporting industries forthe medical devices industry, ranging fromsterilisation services, sterile medicalpackaging, precision engineering, tooland die making to contract moulding andassembly, machinery fabrication and EMS,has enhanced the position of Malaysia asan outsourcing destination and globalsupplier of parts and components formajor medical devices and equipmentcompanies. Increasing interest is shownby local precision engineering, electronicand plastic manufacturers to diversify theiroperations into the medical devicessector. At the same time, MNCs are alsooutsourcing some of their manufacturingactivities/parts and components to localSMIs. Outsourcing activities undertakenby the local SMIs include machining forinstruments, sheet metal fabrication,moulding and packaging.


For the period January-November 2009,exports of medical devices were valued atRM8.0 billion. Malaysia continued to bea major exporter and producer of medicalgloves and catheters with exports valuedat RM6.2 billion, accounting for about77.5 per cent of total exports of medicaldevices. Other major exports includedinstruments and appliances used inmedical, surgical, dental or veterinarysciences (RM785.8 million), ophthalmiclenses, including contact lenses (RM378.6million) and orthopaedic appliances(RM109.8 million). The USA, Europe andJapan were the major export destinations.


In 2009, a total of 25 projects withinvestments amounting to RM656.4million were approved. Of these, 12 werenew projects (RM410.5 million) and 13were expansion/diversification projects(RM245.9 million). Foreign investmentsamounted to RM361.0 million (55%)while domestic investments totalledRM295.4 million (45%). Among theproducts approved were medical devicessuch as orthopaedic implants, surgicalsutures, medical electrodes, video scopes,medical solution bags, ceramic dentalcrowns and bridges, synthetic bone graftsubstitutes, scalp vein sets and surgicaland examination gloves.


• An expansion project by a whollyforeign-owned company to expandexisting electrode production capacityas well as to produce new products i.edisposable medical video scopes. Theproducts will be exported mainly to theUSA, Europe and Japan; and

• An expansion project by a whollyforeign-owned company withinvestments of RM55.0 million toproduce spinal needles, medicaldisposable needles, PVC tubes, scalpvein sets, extension tubes and parts,plastic injection moulded parts formedical disposable needles, urinarybags and parts, sterile disposableinfusion sets and plastic catheters andparts. The products will be exportedmainly to Japan.

With increased emphasis by theGovernment to promote better healthcaresystems and health services, greateropportunities will be created especially inhigher value-added products such aselectromedical equipment, cardiovasculardevices, orthopaedic devices, in vitrodiagnostic products, wound careproducts, home healthcare and self-careproducts.

AGRICULTURE AND FOODPROCESSING

The agriculture sector (including forestryand fishing) contributed 8.0 per cent of


the country’s GDP in the first threequarters of 2009, with livestock and otheragriculture sub-sectors recording positivegrowths of 7.4 per cent and 11.5 per centrespectively. The higher growth registeredby these sub-sectors was due to theincrease in the production of poultry,cattle, vegetables, fruits and paddy. TheGovernment will continue to promote thissector as it is an important source ofincome in rural areas and has significantlinkages with the food processing sector.

The global food shortage and food crisisin early 2008 prompted the Governmentto introduce the National Food SecurityPolicy to ensure adequate food supply inthe country. Various programmes wereoutlined to increase food production. Onesuch programme was the development ofnew corridors, which is expected to boostagricultural production as well asrevitalise the country’s agriculture sector.These corridors propose, among others,the expansion of large-scale commercialfarming, wider application of moderntechnology, development of value-addedactivities, improving supply chainmanagement, and participation of theprivate sector as anchor companies inthese corridors.

Malaysia remained a net importer of foodin 2009. For the period January-November 2009, imports amounted toRM24.4 billion. Major imports werecereals and cereal preparations(RM5.4 billion), cocoa (RM3.9 billion),

vegetables and fruits (RM3.1 billion),sugar and sugar confectionery (RM2.4billion) and animal feed (RM2.3 billion).Raw materials such as cereals and dairyproducts continued to be imported forfurther processing for humanconsumption as well as for the productionof animal feed.

For the period January-November 2009,exports amounted to RM14.3 billion. Themain products exported were cocoa(RM3.7 billion), fisheries products (RM2.0billion), margarine and shortening (RM1.4billion); and cereals and cerealpreparations (RM1.2 billion).

Agriculture

The agriculture sector comprisesaquaculture and marine fisheries,cultivation of crops/fruits/vegetables,floriculture, ornamental fish, livestockfarming and apiculture. Livestock,fisheries, fruits and vegetables are themajor sub-sectors with significant linkagesto the Malaysian food processing industry.

Chicken and beef are the main productsin the livestock sub-sector. While Malaysiais self-sufficient in chicken production,domestic demand for beef continued to besustained by imports. The poultry industryproduces about 764,000 tonnes ofchicken meat and 7 billion eggs per year.About 10-15 per cent of chicken meatproduced is exported, mainly toSingapore. Considerable improvements,


such as the wider adoption of closed-house systems, which are moreenvironmental-friendly, have contributedto higher productivity in poultry farmingand lower risk to diseases. In addition, theprovision of attractive incentives hasencouraged existing farms to convert toclosed-house systems. Total exports oflivestock products amounted to RM1.5billion in 2009 (January-November).

The fisheries sub-sector in Malaysia canbe categorised into marine capturefisheries and aquaculture. Aquacultureremained the fastest growing segmentin this sub-sector, with an estimatedannual production of 300,000 metrictonnes. Malaysia’s total exports of fish andother seafood for the period January-November 2009 amounted to RM2.0billion. Crustaceans and molluscs werethe major exports valued at RM1.2 billion.

For the period January-November 2009,exports of vegetables and fruits amountedto RM1.1 billion. Most of the fruitsproduced were for fresh consumption inthe domestic market. Besides local fruitssuch as mangoes, starfruits and papayas,cultivation of pittaya (dragon fruits) isincreasing. Imports were mostly oftemperate fruits such as apples, grapesand oranges. Total imports of vegetablesand fruits amounted to RM3.1 billion in2009 (January-November).


In 2009, a total of 75 agricultural projectswere approved incentives, Investments inthese projects amounted to RM701.0million. Of the projects approved, 73were new projects (RM674.0 million),while two were expansion/diversification(RM27.0 million) projects. Domesticinvestments amounted to RM670.7 million(95.7%) while foreign investments totalledRM30.3 million (4.3%).

The approved projects included livestockrearing, aquaculture and cultivation ofvegetables and fruits. Among the majorapproved projects were:

• A majority Malaysian-owned project toundertake aquaculture activity inSelangor with investments of RM97.4million. The company plans to use FishProtect Control Agriculture Systemfrom Australia to rear and breed bothfreshwater and marine fish in indoortanks; and

• A wholly Malaysian-owned projectwith investments of RM84.5 million torear Dorper sheep for the domesticmarket.

Food Processing

Food processing is one of the sectorswhich is less vulnerable to the globaleconomic crisis. This sector comprises allvalue adding activities which utilise


agricultural or horticultural produce. Thefood processing industry accounts for one-tenth of the domestic manufacturingoutput. The demand for processed food isexpected to continue to grow globally. It isestimated that the global retail sales offood products is worth US$3.5 trillion andis expected to grow at an annual rate of4.8 per cent to US$6.4 trillion in 2020.

The fisheries product sub-sector, whichincludes processed seafood products suchas frozen and canned fish, crustaceansand molluscs, surimi and surimi products,remained the main contributor to exportsof processed food. Although the HazardAnalysis and Critical Control Points(HACCP) certification is still voluntary inMalaysia, manufacturers who intend toexport their seafood products to Europeand the USA have to obtain HACCPcertification as well as fulfil otherrequirements of the importing countries.

Currently, Malaysia is the largest cocoaprocessing (cocoa grinder) country in Asiaand the fourth largest in the world.Malaysia is a net exporter of cocoa products,such as cocoa butter, cocoa powder andcocoa cake. These products are rawmaterials for chocolate manufacturers.

Malaysia is the world's sixth largestproducer of pepper and the fifth largestexporter of pepper and pepper products(specialty pepper, processed pepper andpepper sauces). Besides pepper, otherspices such as coriander, turmeric,

lemongrass, cinnamon, cloves and fennelare also produced.

In the fruit processing sub-sector, pinkguavas, passion fruits and pineapples areprocessed mostly for puree and juiceswhile dragon fruits are for freshconsumption or processed into cordial,jam and other products. Fruits such asjackfruits, bananas and papayas areutilised for the production of snack foodwhile noni and roselle are for theproduction of health-related products.

Chilled and frozen food, home mealreplacements, ready-to-cook and ready-to-drink meals are convenience foodswhich are increasing in demand. This isdue to changes in consumers’ lifestyle andpreferences especially among workinghousewives and executives who prefercooked food with minimal preparations.This has also led to increase in demand forconvenience foods which focus on healthsuch as breakfast cereals, muesli, fruit barsand fresh ready-to-eat salads or fruits.

Increasing consumer awareness in foodsafety and nutritional value has led tohigher demand for functional food,organic food and food ingredients fromnatural sources such as plants andseafood-based products. This sub-sectorhas the potential for further growth.

Transformation in the food industryfrom conventional processes intoprocesses utilising emerging technologies


is in line with the developments inthe industry globally. New emergingtechnologies, such as biotechnology andnanotechnology, offer platforms andprospects to enhance processes in foodproduction such as development ofspecialised packaging for improved foodsafety and security. There is a needfor more collaborative efforts betweenpublic R&D institutions and industryinvolved in agriculture and foodprocessing to ensure that new researchfindings are implemented.


A total of 60 projects (food processing andbeverages), with investments of RM1.3billion were approved in 2009. Domesticinvestments in these projects amounted toRM760.9 million (58.5%) while foreigninvestments totalled RM539.0 million

(41.5%). Of the projects approved, 44were new projects (RM970.2 million)while 16 were expansion/diversificationprojects (RM329.7 million).

The approved projects were in theprocessed seafood; processed meat; flour-based products; cocoa, chocolate &confectionery products; dairy products;processed vegetables & fruits; beveragesand aquaculture feed & animal feed sub-sectors.

Among the major projects approved were:

• A majority Malaysian-owned projectwith investments of RM92.8 million forthe production of frozen seafood. Thiscompany is involved in integratedfishery activity, which includes deep-sea fishing and production of frozenseafood. About 90 per cent of thefinished products will be exported toJapan, Hong Kong and Taiwan; and

• A wholly Malaysia-owned project, withinvestments of RM62.9 million tomanufacture sliced & minced meat andsliced butter for the domestic market.

Domestic investments continued todominate this sector, particularly in newprojects. With increasing demand for foodsafety and quality, it is pertinent that theseapproved projects are implemented incompliance with quality certificationssuch as Good Manufacturing Practice(GMP), HACCP and halal certification.


Others191.7 (14.7%)

Processedvegetables & fruits

12.6 (1.0%)

Beverages393.2 (30.2%)

Processed meat136.8 (10.5%)

Flour-basedproducts

126.6 (9.7%)

Dairy products94.1 (7.2%)

Cocoa, chocolate& confectionary

products89.5 (7.0%)

Aquaculture feed& animal feed71.7 (5.5%)

Processed seafood183.8 (14.2%)

RM million

Graph 23Approved Investments in the FoodProcessing Sector, 2009

The global halal food market is estimatedat US$635.0 billion and is expected toincrease to US$642.0 billion in 2010.Various initiatives are undertaken by theGovernment to assist the Malaysian halalfood industry to be a major player in thehalal market and gain better access intothe international market, especiallythrough Malaysia’s close links with theOIC countries. Currently, Malaysia hasfive designated halal parks in operationnamely Port Klang Free Zone and SelangorHalal Hub in Pulau Indah, Selangor;Serkam Halal Food Park in Melaka; PedasHalal Park in Negeri Sembilan; andTanjung Manis Halal Hub in Sarawak.

OIL PALM PRODUCTS

The oil palm products sector comprisespalm oil, palm kernel oil, oleochemicals(including biodiesel) and products frompalm biomass (including energy generation).

Palm oil is one of the 17 major oils andfats produced in the world. The othermajor oils produced include soyabean,rapeseed and sunflower oils. The world’smajor consumers of oils and fats are thePeople’s Republic of China, Europe, theUSA and India.

Indonesia remains the largest producer ofpalm oil while Malaysia is the largestexporter. The major consumers of palm oilare the People’s Republic of China, Indiaand Europe.

In 2009, production of crude palm oil(CPO) totalled 17.6 million tonnescompared with 17.7 million tonnes in2008. Production of crude palm kernel oiland palm kernel cake amounted to 2.1million tonnes and 2.3 million tonnesrespectively.

The states of Sabah, Johor and Pahangwere the main producers of crude palmoil. The utilisation rates of palm oil millsand palm kernel crushers were 90.5 percent and 71.5 per cent respectivelywhile the utilisation rates of palm oilrefineries registered 88.8 per cent andoleochemicals 87.1 per cent.

Exports of Malaysian oil palm products,constituting palm oil (crude palm oil andprocessed palm oil), palm kernel oil, palmkernel cake, oleochemicals and finishedproducts, increased to 22.4 million tonnesin 2009 from 21.8 million tonnes in 2008while the export value decreased toRM49.6 billion from RM65.2 billion. Thiswas due to the decrease in price of CPOwhich averaged RM2,773 per tonne (localdelivered) in 2008 compared with theaverage price of RM2,243.9 per tonne in2009. This decline in price is in tandemwith decrease in prices of other vegetableoils.

The People’s Republic of China remainedthe largest importer of Malaysian palm oilin 2009 with 4.0 million tonnes, followedby Europe, Pakistan, India and the USA.



In 2009, a total of 46 projects withinvestments of RM1.6 billion wereapproved for the production of oil palmproducts. These included projectsproducing palm oil and palm kernel oilproducts, oleochemicals, products frompalm biomass and energy generation frompalm biomass. Foreign investmentsamounted to RM852.9 million (52.3%)while domestic investments totalledRM779.1 million. The palm oil and palmkernel oil sub-sector had the highestinvestments with RM1.0 billion or 63.5per cent, followed by products from palmbiomass (RM330.0 million or 20.2%),oleochemicals (RM155 million or 9.5%)and energy generation projects from palmbiomass (RM110.2 million or 6.8%).

Palm Oil and Palm Kernel Oil

Refining and crushing are the mainactivities in this sub-sector. Currently,there are 51 refineries and 43 crushingplants in operation with a total capacity of19.3 million tonnes and 6.7 milliontonnes per year respectively. In 2009, therefineries processed a total of 15.7milliontonnes of crude palm oil and 1.4 milliontonnes of crude palm kernel oil whilecrushing plants processed 4.6 milliontonnes of palm kernel. The main productsproduced are refined, bleached anddeodorised (RBD) palm olein and stearin.Other products include margarine,vanaspati and specialty fat products.


In 2009, a total of nine projects withinvestments of RM1.0 billion wereapproved. Of these, three were newprojects with investments of RM282.7million and six were expansion/diversification projects (RM754.2 million).Foreign investments amounted toRM702.1 million (67.7%) while domesticinvestments totalled RM334.8 million.

The approved projects included fourprojects for the manufacture ofdownstream products such as palm-basedfats, cocoa butter equivalent, non-dairycreamer and hydrogenated products.Other projects included one integratedrefinery, two palm kernel crusher plantsand two projects for the production offractionated products. Among the projectsapproved was a proposal by a foreign-owned company with investments ofRM380.0 million for an integrated palmoil refinery and downstream products.

Oleochemicals

Oleochemicals are products deriveddirectly from naturally occurring fatsand oils from animal and vegetablesources. In Malaysia, oleochemicalsare mainly derived from palm-basedoils. The industry comprises basicoleochemicals (fatty acids, fatty alcohol,methyl esters, and glycerine) andoleochemical derivatives (fatty esters, fattyamines, soap noodles and metallic soaps)


and accounts for 10 per cent of the totalquantity of oil palm products exported.

There are more than 50 companiesinvolved in the production of basicoleochemicals and derivatives. Theindustry comprises local manufacturers aswell as several joint-venture companieswith multinationals. The major globalplayers operating in Malaysia are Croda,Procter & Gamble, Iffco and Kao, whilethe major local companies are IOI Group,KL Kepong Group and Kulim Group.

In 2009, Malaysia’s total productionof oleochemicals amounted to 2.3million tonnes. The main raw materialsused in the production of oleochemicalsare crude and processed palm kerneloil, processed palm oil and crude palmoil. Of the 2.3 million tonnes of palm-based oils consumed in the production ofoleochemicals, crude and processed palmkernel oil constituted 59.3 per cent (1.3million tonnes) while the balance wereprocessed palm oil (35.2%) and crudepalm oil (5.5%).

Exports of oleochemicals amounted to2.2 million tonnes in 2009. The USA,Europe, Japan and the People’s Republicof China remained the major markets foroleochemicals accounting for 60 per centof total exports.

Malaysian Palm Oil Board (MPOB) hasdeveloped and launched a total of 441technologies and oil palm related

products, of which about 22 per cent havebeen commercialised and licensed toindustries. Some of the technologieswhich have been commercialised arepalm-based printing ink, goat’s milk soap,personal care products and palm oil-based polyurethane for automotivecomponents.


Three projects were approved withinvestments of RM155.0 million in 2009.Domestic investments amounted to RM74.4million (48%) while foreign investmentstotalled RM80.6 million (52%). Allprojects were expansion/ diversificationprojects.

The projects approved included theproduction of fractionated fatty acids, fattyesters, distilled monoglycerides, esters andrefined glycerine.

The consumption of oleochemicals isexpected to grow due to increasedglobal demand from industries such aspharmaceuticals, personal care products,detergents, paints, cosmetics, food, plasticsand rubber. Malaysian manufacturersneed to invest in more specializedderivatives such as methyl estersulphonate from palm stearin which canreplace alkyl benzene sulphonate, themain raw material for the detergentindustry. This is to encouragemanufacturers to use natural materials andto move forward to new technologies in


materials and product applications withemphasis on environmental friendly andgreen products.

Palm Biomass

The oil palm industry produces about 30million tonnes of fibrous biomass (dryweight) yearly from plantations andprocessing activities. This biomass can beused to produce value-added productssuch as panel products, mouldedpackaging, composite products and is alsoa suitable substitute for wood-based andpulp and paper industries.

As at 2009, a total of 110 projects withinvestments of RM1.2 billion wereapproved for processing of palm biomassinto value-added products while 90projects with investments of RM2.8 billionwere approved with incentives forrenewable energy using biomass from oilpalm, wood, rice, sugarcane andmunicipal waste.

Of these, 23 companies are in operationproducing panel/composite products,moulded products, mulching mats,activated carbon, palm fibre, organicfertiliser and animal feed while 34projects are involved in energy generation.


In the palm biomass products sub-sector,28 projects with investments of RM330.0million were approved in 2009. Domestic

investments amounted to RM284.6 million(86.2%) while foreign investments totalledRM45.4 million. The approved projectswere for utilisation of palm oil mill effluent(POME) to produce organic fertilisers, oilpalm plywood, pallets and fibre.

In addition, six projects with investmentsof RM110.2 million were approved for thegeneration of energy from palm biomass.Foreign investments amounted to RM24.9million while domestic investmentstotalled RM85.3 million.

This sub-sector has shown encouragingprogress, particularly in the utilisation ofpalm waste such as POME to manufactureorganic fertilisers. With over 411 palm oilmills in the country, the need for importedfertiliser can be reduced if these mills usethe waste materials to produce organicfertilisers.

CHEMICALS AND CHEMICALPRODUCTS

Malaysia’s chemicals and chemicalproducts industry covers pharmaceuticalsand other chemicals such as agriculturalchemicals, inorganic chemicals, paint andpaint products, soaps, detergents,industrial gases and cosmetics & toiletpreparations.

Pharmaceuticals

The pharmaceutical industry in Malaysiacontinued to register strong growth in


2009 despite the global economicdownturn. This was due to the increasingawareness for better healthcare andincreased demand for medicationfollowing the outbreak of diseases such asthe Influenza A (H1N1). The Malaysianpharmaceutical market is expected togrow by 10 per cent to more than RM4.2billion in 2009 compared with RM3.8billion in 2008. The major consumer ofpharmaceuticals in 2009 was theGovernment, especially with increasedspending in the healthcare sector and theexpansion of medical services.

The pharmaceutical industry in Malaysiais divided into two sub-sectors namely themodern pharmaceuticals and thetraditional herbal medicines. The industryis dominated mainly by small andmedium-sized industries (SMIs) engagedin the production of prescriptionmedicines, over-the-counter (OTC) products,traditional medicines and health/foodsupplements. As at 31 December 2009,there were 249 pharmaceutical premiseslicensed by the Drug Control Authority,Ministry of Health, comprising 74 modernmedicine premises and 175 traditionalmedicine premises.

In the modern pharmaceuticals sub-sector,Malaysian pharmaceutical manufacturershave the capability to produce medicinesin all dosage forms e.g. tablets (coated &non-coated), capsules (hard and softgelatin), liquids, creams, ointments, sterileeye drops, small volume injectables

(ampoules and vials), large volumeinfusions, as well as dry powders forreconstitution and active pharmaceuticalingredients (APIs).

Major Malaysian pharmaceuticalcompanies, including herbal medicinemanufacturers in operation, includePharmaniaga, CCM, Kotra Pharma, Xepa-Soul, Hovid, and Nova Laboratories.Among the major foreign companiesproducing pharmaceutical products inMalaysia are Y.S.P. Industries (Taiwan),Sterling Drug (UK) and Ranbaxy (India).These companies focus mainly on theproduction of generic drugs, particularlyantibiotics, painkillers, injectables andherbal medicines/supplements. With theglobal trend towards the expiry ofpatented drugs and the rising expenditurefor healthcare, the market for genericproducts is expected to grow further.

Increasingly health-conscious Malaysianshave contributed to the growth of OTCfood supplements as well as herbal andtraditional medicines. The herbal industrycomprises a wide range of products suchas herbal remedies, flavours andfragrances, pharmaceuticals, nutraceuticalsand cosmaceuticals. The herbal industryhas been identified as a new andemerging industry under the ThirdAgriculture Policy. Malaysia aspires to bea major producer in the internationalherbal industry by 2010. Malaysia hasover 12,000 plant species, of which 2,000plants have the potential to be


commercially developed. Among thepopular local herbs are Tongkat Ali, KacipFatimah, pegaga, peria (bitter gourd) andMisai Kucing.

Exports of pharmaceuticals were valued atRM671.2 million during the periodJanuary-November 2009. Exports weremainly to ASEAN countries (Singapore,Vietnam, Brunei, and Thailand), Germany,Hong Kong and Taiwan. With theacceptance of Malaysia into thePharmaceutical Inspection Co-operation(PIC) Scheme, Malaysian companies arenow exporting pharmaceutical productsto PIC countries namely Europe, Canadaand Australia.

In 2009, Malaysian pharmaceuticalmanufacturers continued to expandproduction of generic drugs in anticipationof its increasing demand, especially fromthe Government. In addition, advances inbiotechnology are expected to drive thefuture direction of research anddevelopment in drugs. Among the notabledevelopments in 2009 were:

• Ranbaxy Malaysia announced thelaunch of its first generic Losartan Ktablets in Malaysia. The market size ofLosartan K tablets in Malaysia isestimated at RM22.0 million. Theproducts will also be exported toASEAN countries and the Middle East;

• A new strategic partnership betweenCCM Duopharma Biotech and Inno

Bio Ventures Sdn. Bhd. was establishedto develop and commercialise the firstlocally produced biosimilar product,i.e erythropoietin (EPO). Annual importof this product is currently valued atRM45.0 million. The product isexpected to be commercialised by theend of 2011. The Inno Bio Venturesfacility in Nilai, with a capacity of1,000 litres bio-reactor can cater forthe ASEAN market;

• Malladi Drugs & Pharmaceutical Ltd.from India announced plans to investup to US$300.0 million over the nextthree to five years to establish a globalhub in Malaysia, focusing on formulationand production of APIs; and

• A memorandum of Understanding(MOU) was signed between UniversitiSains Malaysia (USM) and BiotropicsMalaysia Berhad to set up a herbalstandardisation centre, to utilise asoftware developed by USM foridentifying molecules with potentialbioactivity and to commercialisespecific extracts and compounds.


In 2009, four projects were approved withinvestments of RM16.0 million. Domesticinvestments valued at RM14.8 millioncontinued to dominate this sector whileforeign investments totalled RM1.2million. Three of the projects approvedwere new projects for the production of


food supplements, multi-purpose solution/saline solution for contact lens andpharmaceutical products in the form oftablets and capsules.

There is a growing trend amonginternational pharmaceutical companiesto outsource their research andmanufacturing activities to emergingcountries to increase theircompetitiveness. Malaysia is expected tobenefit from this trend because of itsreliable quality, excellent infrastructureand facilities as well as its costcompetitiveness compared with otherdeveloping nations such as the People’sRepublic of China, Indonesia andVietnam.

Chemical Products

The chemical products industry providesintermediate products and inputs to enduser industries such as agriculture,electronics, automotive, construction-related industry, waste treatment,household products and personal careproducts.

This industry comprises a wide range ofproducts which include agriculturalchemicals (fertilisers and pesticides),inorganic chemicals, soap and cleaningpreparations, cosmetics and toiletpreparations, paints and paint productsand industrial gases. There are currentlymore than 180 companies in operation inthis sector.

Exports of chemicals and chemicalproducts for the period January-November2009 amounted to RM10.5 billion Themajor products exported were soap,cleansing and polishing preparations(RM1.8 billion); fertilisers (RM1.5 billion);basic chemical products for industrialapplications (RM1.5 billion) and paintsand colouring chemicals (RM1.3 billion).

Project Approved in 2009

In 2009, a total of 66 projects withinvestments of RM7.7 billion wereapproved. Of these, 35 were new projects(RM6.9 billion) while 31 projects wereexpansion/diversification projects (RM777.4million). Domestic investments totalledRM1.2 billion (15.2%) while foreigninvestments amounted to RM6.5 billion(84.8%).The projects approved are expectedto generate employment for 3,570 persons.


• 16 projects with investments of RM5.8billion were for the manufacture ofother chemical products such aspolysilicon, silane, methyl chloride,cleaning and treatment chemicals,zinc stearate, glyphosate, plantingchemicals and drilling fluid chemicals;

• Four projects (RM535.1 million)were for the manufacture ofbiodiesel (isoparaffin) and biodieselbased on jatropha;


• Three projects (RM349.5 million) werefor the manufacture of basic industrialchemical products such as calciumnitrate, chlorine, sodium hydroxide,sodium hypochlorite, hydrochloric acidand calcium carbonate;

• 18 projects (RM479.1 million) were forthe manufacture of agriculturechemicals and fertilisers;

• 16 projects (RM368.6 million) were forthe manufacture of paints, coatings,lacquers, solvents, thinners, toners,varnishes, sealants, adhesives, ink andcoating chemicals;

• Six projects (RM97.6 million) were forthe production of industrial gases suchas carbon dioxide, argon, nitrogen,hydrogen and acetylene; and

• Three projects (RM49.7 million)were for the manufacture of personalcare products and cleaning andtoilet preparations.


• A new project by a foreign-ownedworld leader in semiconductormaterials, with investments of RM5.5billion for the production ofpolycrystalline silicon, fumed silicaand trichlorosilane in Sarawak.Polycrystalline silicon is a fundamentalmaterial for the semiconductor industry

and is used in the production of mono-crystalline as well as polycrystallinesilicon wafers for the fabricationof semiconductor chips and solarcells. Construction of the new factoryis scheduled to commence in 2011with operations expected in thesecond quarter of 2013. This isthe second manufacturing base forthe company and the selection ofthe site in Sarawak is based on theavailability of electricity, industrialwater, quality workers and otherresources. The company will employabout 300 workers on commencementof operations, of which about 280will be Malaysians. The choice ofMalaysia as a location for its projectis based on potential supply anddemand for polycrystalline silicone.The company will actively strengthenrelated operations and focus on gettingnew customers in addition to retainingexisting ones; and

• Nine new projects by a Malaysiancompany, with investments ofRM46.6 million for the production oforganic fertilisers in Perak (3 projects),Negeri Sembilan (3 projects), Johor (2projects) and Selangor (1 project).

The products approved in 2009 are inline with Malaysia’s target to attractinvestments in high value-addedproducts such as polycrystalline silicon forsolar cell industry. The presence of threeworld leading solar cell companies,


namely First Solar in Kulim, Kedah,Q-Cells in Selangor and Sunpower inMelaka, has created opportunities anddemand for products such as newmaterials, chemicals and polymers forthe solar cell industry. This is in line withthe Government’s policy of creating acomplete value chain for greentechnology industries to include materialsuppliers, machinery and equipmentmanufacturers, product fabricators,installers and designers as well as serviceproviders.

BIOTECHNOLOGYINDUSTRY

Biotechnology has been identified as anew engine of growth for Malaysia.Biotechnology will be able to improve thequality of life, generate new wealth andincome for both rural and urbanpopulations and improve the socio-economic status of the population as awhole. Biotechnology also helps toenhance the level of knowledge andinnovation in the country, the two crucialelements in Malaysia’s quest towardsattaining the status of a high incomecountry.

The Malaysian Biotechnology Corporation(BiotechCorp) has since its inception in2005, nurtured about 151 biotechnologycompanies in the areas of agriculture,healthcare, industrial and bioinformatics.

Currently, the biotechnology industrycontributes about one per cent of theGDP. It is estimated that by 2020 theindustry will contribute approximately fiveper cent of the GDP with total investmentsof about RM8.0 billion and create280,000 new jobs.


In 2009, a total of 61 projects withinvestments of RM615.9 million wereapproved. Domestic investments in theseprojects amounted to RM168.3 million(27%) while foreign investments totalledRM447.6 million (73%). Foreigninvestments were mainly from Taiwan, theUSA, Europe, Japan, India and theRepublic of Korea.

Among the major types of products/activities approved were:

• Manufacture of tacrolimus andrapamycin (immunosuppressive drugs);

• Manufacture of probiotics foragriculture, healthcare and animals;

• Contract manufacturing organisationspecialising in biomanufacturing ofmammalian cell culture and microbialbased biopharmaceuticals;

• Research and development (R&D),extraction, production andcommercialisation of identifiedbiological active compounds from


herbs and plants for the formulationof herbal-based health supplementproducts;

• R&D, production and commercialisationof bio-degradable packaging productsderived from agricultural waste usingenzymatic processes;

• R&D, manufacturing andcommercialisation of products andservices for the application in the fieldof gene expression, genotyping, stemcell research, pharmaceutical drugdiscovery, biomarker discovery andmedical diagnostics; and

• R&D, production andcommercialisation of biomedicaldevices for orthopaedic care.

A significant project approved was amajority foreign–owned project tomanufacture active pharmaceuticalingredients (APIs), namely tacrolimusand rapamycin (immunosuppressivedrugs). This project will be the first of itskind to be established in Malaysia,using biotechnology process, i.e.fermentation process to produce APIs.The company plans to export 100 percent of its products globally.

In 2009, the biotechnology industry inMalaysia continued to grow with morecollaborations between the private andpublic sectors. Among the new initiativesundertaken were:

• The Malaysian Life Sciences CapitalFund (MLSCF) invested about RM40million in Sentinext Therapeutics Sdn.Bhd. to commercialise its vaccineswithin the next five years;

• Inno Biologics Sdn Bhd, a companyincorporated under Ministry ofFinance, signed a strategic licensingagreement with CEVECPharmaceuticals GmbH, to utilise anewly developed expression systembased on human amniocytes, todevelop cell line and manufacturebiopharmaceutical products;

• Sarawak Biodiversity Council (SBC),Novartis Pharma AG and BiotechCorpsigned an MOU to enhance Malaysia’sscientific capability in exploringbioactive compounds from naturalsources in Sarawak; and

• An international team of researchersled by the Centre for ChemicalBiology (CCB) under Universiti SainsMalaysia (USM) decoded thegenome of rubber tree, HeveaBrasiliensis. This effort will enableMalaysia to remain a leader in rubberresearch and be at the forefront of theglobal rubber industry.

The Malaysian Government willcontinue to undertake concerted effortsto address the challenges facing theindustry. The Government will worktogether with financial and funding


groups to assess and evaluatebiotechnology value propositionswithin the context of intellectualproperty, intellectual assetmanagement, patent revenue andpatent royalty, as well as continue toimplement far-reaching initiativesaimed at strengthening infrastructurefor the biotechnology industry.

PETROLEUM PRODUCTSINCLUDINGPETROCHEMICALS

The petroleum and petrochemicalindustry comprises natural gas, petroleumproducts and petrochemicals. The industryis characterised by high capitalinvestments and long gestation periods. Todate, the industry is one of the leadingmanufacturing sub-sectors with totalinvestments of RM58.0 billion.PETRONAS is the leading investor in thesector with investments of RM37.8 billionin 2009, with the takeover of DowChemical’s share in the Optimal Group ofcompanies in Kertih, Terengganu.

For the period January-November 2009,Malaysia’s exports of petroleum products,natural gas and petrochemical productsamounted to RM68.7 billion whileimports totalled RM29.7 billion.

The petroleum products sub-sectorincludes refinery products such asliquefied petroleum gas, naphtha,gasoline, kerosene, fuel oils, gas oils, jet

oils, diesel, bitumen and lubricating oils.There are currently six refineries anda gas-to-liquid plant in operation.PETRONAS, Shell, Esso and Conoco arethe major investors in this sub-sector.

Currently, there are more than 20companies in operation producing varioustypes of lubricating oils. The domesticdemand for lubricants is estimated at300,000 metric tonnes per annum (mtpa).PETRONAS, Shell and BP supply 70 percent of domestic demand. Othercompanies involved in this sub-sector aremainly SMIs. Total investments as at 2009in this sub-sector amounted to RM1.1billion, of which 63.0 per cent weredomestic investments.

Natural gas and naphtha are the twolocally available basic raw materials forthe petrochemical industry. Currently, awide range of petrochemicals areproduced in Malaysia, including olefins,polyolefins, aromatics, ethylene oxide,glycols, oxo-alcohols, ethoxylates, acrylicacids, phthalic anhydride, aceticacid, styrene monomer, polystyrene,ethylbenzene, vinyl chloride monomerand polyvinyl chloride by world-scaleproducers such as Polyethylene MalaysiaSdn. Bhd., Titan Petchem Sdn. Bhd., PetlinSdn. Bhd., Vinyl Chloride Malaysia Sdn.Bhd., Petrochemicals Malaysia Sdn. Bhd.,Idemitsu SM Sdn. Bhd., Industrial ResinsMalaysia Sdn. Bhd. and BASF PetronasChemicals Sdn. Bhd. The establishment ofthese plants in Malaysia has provided a


steady supply of resins for the plasticindustry.

There are 42 companies in operationproducing petrochemicals with acombined capacity of 12.9 million mtpa.Investments in these companies totalledRM32.3 billion as at 2009. The maindomestic investor in the petrochemicalindustry is PETRONAS. The USA is thelargest source of foreign investments,contributing 33.0 per cent of the totalforeign investments in the petrochemicalindustry, followed by Germany (22.8%)and Japan (14.0%).

Three major petrochemical zones havebeen established in Kertih, Terengganu;Gebeng, Pahang; and Pasir Gudang-Tanjung Langsat, Johor with 29petrochemical plants. Each zone is anintegrated complex with crackers, syngasand aromatics facilities to produce basicfeedstocks for downstream products.

Other petrochemical plants in Malaysiainclude the ammonia and urea plants inBintulu, Sarawak and Gurun, Kedah;acrylonitrile butadiene styrene (ABS) plantin Penang; methanol plant in Labuan; andnitrile-butadiene rubber (NBR) plants inKluang and Pasir Gudang, Johor.


In 2009, eight projects were approvedwith investments of RM1.2 billion. Of

these, four were new projects (RM1.16billion) while four projects wereexpansion/diversification projects(RM13.3 million). Domestic investmentsamounted to RM719.1 million or 61.0 percent while foreign investments totalledRM460.1 million or 39.0 per cent. Theapproved projects are expected togenerate employment opportunities for174 persons, including chemicalengineering, process engineering andskilled workers.

A major project approved was a newMalaysian majority joint-venture projectinvolving investments of RM1.1 billion toproduce petrochemical feedstocks andfuels. The products approved in 2009reflect Malaysia’s efforts in targetinginvestments in projects to provideadditional petrochemical feedstocks asoutlined in the IMP3.

Currently, the existing production of olefinfeedstocks are fully committed to existingpetrochemical projects. As such, tocontinue to develop the petrochemicalindustry in Malaysia, it is crucial that newsources of feedstock are made available.There is a need to establish new crackersin order to provide additional feedstocksto encourage the expansion of capacitiesof petrochemical plants. These additionalfeedstocks will provide a base forbroadening the range of petrochemicalproducts produced in the country.


PLASTIC PRODUCTS

The plastic products industry comprisesfour sub-sectors, namely plasticpackaging; E&E and automotivecomponents; consumer and industrialproducts; and others. Plastic packaging,both flexible and rigid (including bags,films, bottles and containers), remains thelargest sub-sector in the plastic productsindustry.

The main production processes in theplastic products industry are filmextrusion, injection moulding, pipes andprofiles extrusion, blow moulding andfoam moulding.

Presently, there are more than 1,450plastic product manufacturers in thecountry, employing about 85,000workers. Of these, about 1,160 (80%) areSMIs.

Exports of plastic products amounted toRM7.4 billion for the period January–November 2009. Major exportdestinations were Europe, Singapore,Japan, Australia, Thailand, Indonesia andthe People’s Republic of China. The mainproducts exported were plastic bags,bottles and containers (40%), plates, films,sheets, foils and strips (30%) and otherarticles of plastic (30%).

The growth of domestic downstreamplastic processing activities can beattributed to the existence of adeveloped petrochemical sector inMalaysia. The sector provides a steadysupply of materials for the plastic industrywith world-scale resin productionfacilities producing polyethylene (PE),polypropylene (PP), polyvinylchloride(PVC), polystyrene (PS), acrylonitrilebutadiene styrene (ABS), polyacetal (PA),polyester copolymers, styrene acrylonitrile


Packaging(40.0%)

Others(6.0%)

E&E and Automotive(32.0%)

Source: Malaysian Plastics Manufacturers Association

Consumer andIndustrial Products

(22.0%)

Graph 24Sub-sectors of Plastic Products, 2009

Injection Moulding(35.0%)

Pipes & ProfileExtrusion(7.0%)

Blow Moulding(6.0%)

Foam Moulding(5.0%)Others

(10.0%)

Film Extrusion(37.0%)

Source: Malaysian Plastics Manufacturers Association

Graph 25Profile of the Plastic Products Industryby Manufacturing Process, 2009

(SAN) and polybutylene terephthalate(PBT).

Other engineering plastics, such aspolyamides (nylons) and polycarbonates(PC), continue to be imported. Theseengineering plastics are mainly used forthe production of parts and componentsfor the E&E, automotive, medicalequipment and construction industries. Inflexible packaging, more bio-, photo- orchemical- degradable plastics are beingintroduced with increasing awareness onenvironment protection.


In 2009, a total of 42 projects withinvestments of RM770.8 million wereapproved. Of these, 22 were new projectswith investments of RM624.0 million and20 were expansion/diversification projectswith investments of RM146.8 million.

Foreign investments amounted toRM549.8 million (71%) while domesticinvestments totalled RM221.0 million(29%). The projects approved will providepotential employment for 2,190 persons.Of the 42 projects approved:

• The packaging sub-sector remained theleading sub-sector in 2009 with 15projects and investments of RM644.9million. Of these, seven were newprojects (RM541.6 million) and eightwere expansion/diversification projects(RM103.3 million). The majority ofthese projects were for the manufactureof flexible films, sheets and bags, andblow moulding bottles and containers;

• Twenty one (21) projects wereapproved in the consumer andindustrial sub-sector (RM99.1 million).Of these, nine were new projects(RM55.6 million) while 12 wereexpansion/diversification projects(RM43.5 million); and

• Six projects were approved in the E&Eand automotive component sub-sectorwith investments of RM26.8 million.The major projects approved involvedMalaysian-owned companies withinvestments of RM14.4 million.


• A new foreign-owned project withinvestments of RM290.0 million tomanufacture biaxially-oriented polyester


E&E and AutomotiveComponents26.8 (3.5%)

Consumer andIndustrial Products

99.1 (12.9%)Packaging

644.9 (83.6%)

RM million

Graph 26Investments in Projects Approved inthe Plastic Products Industry bySub-sector, 2009

film (metallised & non-metallised). Theproduct is used as packaging materialsin food, medical and E&E industries;

• A new majority foreign-owned projectwith investments of RM133.0 millionfor the manufacture of film and courierbags; and

• A new foreign-owned project withinvestments of RM53.0 million tomanufacture plastic bags.

The plastic products industry experienceda contraction in 2008 and early 2009, dueto the effects of the global economicdownturn. However, the industry returnedto positive growth in the third quarter of2009. A stronger recovery in the plasticproducts industry is expected in 2010.However, the strength of recovery is stilldependent on global economicperformance, as the demand for plasticproducts is dependent on other industries,especially the E&E and automotiveindustries.

Growth potential is expected primarily inthe production of plastic bags and otherpackaging materials which are mainlyexported to major world markets such asthe USA, Europe, Australia and Japan.Malaysia is able to produce high qualityand environmental friendly plastic packagingproducts at competitive prices. With newemerging markets, especially the People’sRepublic of China, the demand forregional suppliers is expected to grow.

Trade liberalisation under the FTAs andAFTA is expected to open up opportunitiesfor Malaysian plastic manufacturers.However, due to the competitive natureof the industry, the future growth ofthe Malaysian plastic products industrywill depend on the ability ofdomestic manufacturers to sustain theircompetitiveness through improvements intechnologies and skills to maintain currentmarkets and diversify into new markets. Inthis regard, it is important that theMalaysian plastic products industrycontinuously keep abreast with thedevelopments in internationalenvironmental regulations and directivessuch as Restriction on HazardousSubstances (RoHS), Waste Electrical andElectronics Equipment (WEEE), EnergyUsing Products (EuP), End of Life Vehicle(ELV) and Registration, Evaluation andAuthorisation of Chemical Substances(REACH).

RUBBER PRODUCTS

The rubber products industry can becategorised into latex products, tyres andtyre-related products and industrial andgeneral rubber products. The industry isdominated mainly by SMIs.

Domestic consumption of natural rubberin 2009 was estimated at 450,000 tonneswhile synthetic rubber consumption wasestimated to be around 112,000 tonnes.Consumption by the latex products sectorconstituted 79.0 per cent of the total


domestic natural rubber consumption inMalaysia.

Total revenue from exports of rubberproducts amounted to RM10.2 billion inthe first eleven months of 2009,contributing 1.7 per cent of Malaysia’stotal export earnings. During the sameperiod, imports of rubber productstotalled RM2.8 billion, comprisingindustrial and general rubber products(63.3%), tyre & tyre-related products(28.7%) and latex products (8.0%).

The latex products sub-sector is the largestsub-sector in the rubber products industryin terms of export earnings with 165companies in operation. For the periodJanuary-November 2009, export earningsof this sub-sector amounted to RM6.6billion or 64.7 per cent of export revenueof the industry. Malaysia is a majorproducer and exporter of latex products,consisting mainly of catheters, latexthread and medical gloves.

In the industrial and general rubberproducts sub-sector, there are currently184 companies in operation. Thissub-sector produces a wide range ofrubber products such as anti-vibrationmountings, beltings, hoses, tubings, sealsand sheeting for the automotive, E&E,machinery & equipment and constructionindustries. For the period January-November 2009, export earnings of thissub-sector amounted to RM3.2 billion.

There are currently 120 companiesin the tyres and tyre-related productssub-sector with ten tyre producers, whilethe remaining companies produceretreaded tyres, inner tubes, and otheraccessories. For the period January-November 2009, this sub-sectorcontributed RM431.0 million to theexport earnings of the country.


A total of 16 projects with investments ofRM131.1 million were approved in therubber products industry (excludingmedical devices). Of these, seven werenew projects with investments of RM35.4million, while nine were expansion/diversification projects with investmentsof RM95.7 million.

The approved projects involved domesticinvestments of RM33.8 million (25.8%)and foreign investments of RM97.3million (74.2%). Four of the projectsapproved were wholly Malaysian-owned(RM12.4 million), four were joint-ventureswith Malaysian majority ownership(RM19.5 million), six were whollyforeign-owned (RM86.1 million) and twowere joint-ventures with foreign majorityownership (RM13.1 million).


• Five projects with investments ofRM68.3 million were in the industrial


and general rubber products sub-sector. These projects were for themanufacture of products such as greenrubber compounds, seals, vibrationinsulators, weather strips, tubings &profiles and reinforced radiator hosesfor automotive industries. Domesticinvestments amounted to RM2.7million (4.0%), while foreigninvestments totalled RM65.6 million(96.0%). There were two new projectswith investments of RM15.9 million(23.3%) and three expansion/diversification projects withinvestments of RM52.4 million(76.7%);

• Three projects with investments ofRM32.4 million were in the latexproducts sub-sector. All of theseprojects were expansion/diversificationprojects. Domestic investments

amounted to RM5.6 million (17.3%),while foreign investments totalledRM26.8 million (82.7%);

• Six projects with total investments ofRM28.7 million were in the recyclingof used tyres into rubber crumbs,carbon black, steel wire and fuel oil. Ofthese, five were new projects while onewas for expansion/diversification.Domestic investments amounted toRM24.8 million (86.4%), while foreigninvestments totalled RM3.9 million(13.6%); and

• Two projects with investments ofRM1.7 million for tyre and tyre-relatedproducts, both of which wereexpansion/diversification projects.Domestic investments amounted toRM0.8 million (47.1%) while foreigninvestments totalled RM0.9 million(52.9%).


• An expansion/diversification project bya wholly foreign-owned company toproduce rubber compound withinvestments of RM44.8 million; and

• A new project by a wholly foreign-owned company to undertakeproduction of delinked and greenrubber compounds with investmentsamounting to RM13.2 million.


Industrial &General

Rubber Products68.3 (52.1%)

Recycling ofWaste Tyres28.7 (21.9%)

Tyres &Tyre-related

Products1.7 (1.3%)

Latex Products32.4 (24.7%)

RM million

Graph 27Investments in Projects Approved inthe Rubber Products Industry bySub-sector, 2009

The Malaysian rubber industry isfacing competition from regionalproducers such as Thailand, Vietnam, thePeople’s Republic of China and India.Besides lower costs of production, thesecountries also have access to readilyavailable raw materials.

As a measure to sustain competitiveness,the industry is moving towards high value-added and high technology rubberproducts for engineering, constructionand marine applications. Continuousefforts have been made in R&D both byGovernment agencies and the privatesector to improve efficiency, quality andproductivity.

Additional challenges are expected in thearea of international certification andcompliance. Implementation of theRegistration, Evaluation, andAuthorisation and Restriction of ChemicalSubstances (REACH) regulations by theEU will be a challenge to Malaysianrubber product manufacturers andexporters in their efforts to penetrate theglobal market, particularly the EU market.

However, there are vast opportunities forthese manufacturers to gain market accessand increase exports with theimplementation of ASEAN-China FreeTrade Agreement, Malaysia-Pakistan CloserEconomic Partnership Agreement, ASEAN-Korea Free Trade Agreement and Japan-Malaysia Economic Partnership Agreement.

WOODANDWOODPRODUCTSAND FURNITURE

The wood-based industry comprisesupstream and downstream activities.Upstream activities involve thesystematic and sustainable harvesting ofnatural forests and forest plantations.Downstream activities cover primary,secondary and tertiary operations whereprimary wood processing activities utiliselogs as their raw material to producesawntimber and veneer. Secondary andtertiary wood processing activities turnprimary products and other solid wastessuch as small branches, off-cuts, edgingsor slabs, chippings and sawdust intovalue-added products.

There are more than 3,900 mills inoperation, providing employment toabout 300,000 people or 3.5 per cent ofthe total labour force in Malaysia. Theindustry is predominantly owned byMalaysians and about 80 - 90 per cent ofthe companies are small and mediumscale manufacturers. Over the years, it hasdeveloped from a primary processingindustry to a more advanced andtechnology-driven industry producing asignificant number of downstream value-added products.

More than 60 per cent of Malaysiantimber mills are in the downstreamactivities such as mouldings, builders’carpentry and joinery (BCJ), fibreboard, aswell as furniture and furniture


components. They are mainly located inPeninsular Malaysia. The production ofsawntimber, veneer, plywood and otherveneered panel products are concentratedin Sabah and Sarawak.

According to the National Timber IndustryPolicy (NATIP), the re-structuring of theindustry into the manufacture of highvalue-added products and services is themain target of the Government. Theindustry is expected to achieve annualexport earnings of RM53.0 billion by2020, where 60 per cent of the exportswill be derived from activities related towooden and composite furniture products,panel products and engineered woodproducts. The remaining 40 per cent willbe from primary processed wood productssuch as logs, sawntimber and plywood.

Recognising that readily available rawmaterial supply is the key to the succesfultransformation of the industry, theGovernment has embarked on severalprojects to source raw materials andexplore alternative sources of rawmaterials. One of the programmesundertaken is the Forest PlantationDevelopment Programme. To date, theGovernment has approved more thanRM200 million in loans (of the RM1.45billion allocation) to 14 companies toestablish forest plantations.

Alternative raw materials such as fibresfrom palm biomass (oil palm trunks,empty fruit bunches, kernels), kenaf,

bamboo and other agricultural materials(cocoa, coconut, sago and sugar cane)offer vast potential for development. Inline with increasing global emphasis onprotection and conservation of theenvironment, the Government encouragesthe establishment of projects for thesealternative raw materials with various taxincentives.

Malaysia is one of the world’s largestexporters of timber and timber products.For the period January – November 2009,exports of wood-based products amountedto RM18.1 billion. Wooden furniture wasthe major contributor to the exports ofwood-based products accounting forRM5.7 billion (31.5%), followed bysawntimber and logs RM4.6 billion(25.4%), plywood RM4.5 billion (25%),mouldings; and builders’ carpentry andjoinery RM1.8 billion (10%).

Malaysia is the tenth largest exporter offurniture in the world and the third largestin Asia after the People's Republic ofChina and Vietnam. More than 80 percent of Malaysian furniture is made ofrubberwood while the rest are made froma mixture of other wood species andwood composites such as medium densityfibreboard (MDF) and particleboard. MostMalaysian-made furniture are still OEM.The Government continues to encouragefurniture manufacturers to move up thevalue chain from OEM to original designmanufacture (ODM) and original brandmanufacture (OBM) of furniture products.



In 2009, a total of 62 projectswere approved with investments ofRM493.4 million. Of these, 48 werenew projects with investments ofRM317.9 million (64.4%) while 14were expansion/diversification projects(RM175.5 million or 35.6%). Domesticinvestments amounted to RM354.4million or 72.0 per cent while foreigninvestments totalled RM139.0 million.

The highest investments were recordedin the furniture sub-sector withRM174.7 million (35.4%). A totalof 31 projects were approved in thissub-sector, of which 26 were newprojects (RM122.6 million or 70.2%) andfive were expansion/diversification

projects (RM52.1 million or 29.8%).Domestic investments amounted toRM132.5 million (75.8%) while foreigninvestments totalled RM42.1 million(24.2%).

In the panel products sub-sector, eightprojects were approved with investmentsof RM162.7 million (33.0%). Of these,four were new projects (RM51.9 million)and four were expansion/diversificationprojects (RM110.8 million). Domesticinvestments amounted to RM131.9million (81.1%) while foreign investmentstotalled RM30.8 million (18.9%). Amongthe projects approved were for theproduction of plain particleboard,plywood from palm biomass and fancyMDF.

A total of nine new projects wereapproved in the mouldings and builders’carpentry and joinery (BJC) sub-sectorwith investments of RM97.3 million or19.7 per cent of the investments in thewood-based industry. All the investmentswere by domestic investors. Most of theprojects approved were for themanufacture of architectural frames, doorsand windows.

In the non-wood fibre products sub-sector, six projects were approved withinvestments of RM24.0 million. Theseprojects were for the manufacture ofveneer, briquettes, fibre and pellets fromoil palm biomass.


Furniture &Fixtures

174.7 (35.4%)

Mouldings & BJC97.3 (19.7%)

Non-wood Fibre24 (4.9%)

Others34.7 (7.0%)

Panel Products162.7 (33.0%)

RM million

Graph 28Approved Investments In theWood-based Industry by Sub-sector, 2009


• A new wholly Malaysian-ownedproject with investments of RM21.0million, to produce plain particleboard.About 30 per cent of production will beexported to the Middle East and India;and

• An expansion/diversification project bya wholly foreign-owned company tomanufacture wooden and metalfurniture with investments of RM26.0million. The company will export morethan 80 per cent of its products to theMiddle East and other ASEAN countries.

Malaysia is the first tropical timberproducing country to offer certified timberproducts under its own Malaysian TimberCertification Scheme (MTCS). Inenhancing market access for wood-based products, Malaysia continuesto be actively involved in severalinternational initiatives and negotiationssuch as the High-Level Event onReducing Emissions from Deforestationand Forest Degradation (REDD),International Conference on GreenIndustry in Asia, World Forestry Congressand (EU) Action Plan for Forest LawEnforcement Governance and Trade(FLEGT). Malaysia has also commencednegotiations to conclude voluntarypartnership agreement (VPA) withEuropean Commission (EC) which aims tocombat illegal logging and reduceillegally harvested timber.

The implementation of NATIP in2009 complements IMP3 strategiesand targets where it is envisaged toprovide new directions for the Malaysianwood-based industry to remainsustainable and competitive in thechallenging global environment. NATIPoutlines programmes, plans and activitiesup to the year 2020 to encourageand continuously support the industryin areas of innovation and technology;marketing and promotion; humancapital; funding and incentives; as wellas develop bumiputera entrepreneursat all levels to improve their capabilityin management, production skillsand marketing strategy.

NON-METALLIC MINERALPRODUCTS

The non-metallic mineral productsindustry includes cement and concreteproducts, fibre cement and gypsumproducts, ceramic and clay products,glass, insulation materials, dimensionstones and other non-metallic minerals.

The types of cement produced in Malaysiainclude ordinary Portland cement,hydraulic cement, slag cement, fly ashcement, other blended cement and whitecement. Current approved capacity issufficient to meet the local demand.Expansion and diversification by existingmanufacturers as well as establishment ofnew integrated cement manufacturingprojects are allowed.


Fibre cement boards have evolved intomultifaceted applications that includeceiling, wall cladding, roof decking,roofing, interior partitioning, elevatedfloors and exterior windows. Localmanufacturers have expanded efforts todevelop new and technologicallyadvanced products to cater to the needsof the construction sector. Otherconstruction materials such as gypsumproducts have also undergone variousimprovements in product features andquality.

The ceramic industry sub-sector coversthe production of traditional ceramics andadvanced ceramics. The traditionalceramics industry involves the productionof wall and floor tiles, roofing tiles,sanitary ware, tableware, decorative ware,pottery, high refractory products, bricksand formers. The fine/advanced ceramicsindustry is a new industry in the countryand it has wide technologically advancedapplications in electronics, aerospace,medical and other industries.

The glass industry covers the productionof float glass, safety glass, glass containers,glassware, architectural glass, glass fibreand hi-tech precision glass products suchas glass funnels and panels for cathode raytubes, hard disc glass substrates, plasmadisplay and solar glass. Solar glass is acombination of solar and glasstechnologies and often used for topsurface of thermal collectors andphotovoltaic modules.

Insulation materials of non-metallicminerals include mineral wool made fromeither glass or volcanic rocks. This isconsidered a green construction materialdue to its energy saving function and isexpected to gain importance as aconstruction material.

Dimension stones are natural stones orrocks that have been fabricated to variouscolours, sizes and shapes. The principalrock types are granite, marble, limestone,travertine, quartz-based stone, slate andother products formed from natural stone.Major applications of dimension stonesare countertops, bathroom vanities, tiles,monuments, tombstones and buildingcomponents such as veneer (exterior),roofing slate, curbing and flagstone.

Other non-metallic minerals includequicklime and calcium carbonate.Quicklime is a chemical compoundwidely used in mortar and plaster as wellas production of glass, metal and paper.Calcium carbonate is a chemicalcompound used in the constructionindustry as a building material or as acomponent for cement. It is also used indrilling fluids for the oil industry, as fillermaterial for latex gloves and plastics andas glazing applications.

Exports of non-metallic mineral productsfor the period January-November 2009totalled RM4.8 billion while importsamounted to RM3.6 billion thus makingMalaysia a net exporter of non-metallic


mineral products. Major exports includedglass and glassware amounting to RM2.3billion; lime, cement and fabricatedconstruction materials totalling RM1.1billion; and mineral manufactures ofRM769.8 million. Major imports wereglass and glassware (RM1.8 billion),mineral manufactures (RM487.5 million)and lime, cement and fabricatedconstruction materials (RM471.5 million).

To date, a total of 318 companies are inproduction in the non-metallic mineralproducts industry. Investments in thissector amounted to RM28.4 billion withforeign investments of RM15.3 billion(53.9%) and domestic investments ofRM13.1 billion (46.1%).

Projects Approved In 2009

In 2009, a total of 27 projects wereapproved in the non-metallic mineral

products industry with investments ofRM6.4 billion. Of these, 19 were newprojects with investments of RM5.6 billion(87.5%) while eight were expansion/diversification projects with investments ofRM807.0 million (12.5%). Domesticinvestments totalled RM1.1 billion(17.1%), while foreign investments wereRM5.3 billion (82.9%).

The projects approved were for themanufacture of cement and concreteproducts (10 projects), glass (6 projects),non-metallic minerals (5 projects),ceramics and clay products (4 projects)and one project each for dimension stonesand others.


• A new wholly foreign-owned projectwith investments of RM5.2 billion tomanufacture solar glass (coated,tempered, etc) and solar mirror. Thishigh technology project is a first of itskind in Malaysia and will form asignificant part of the solar cluster inthe country;

• An expansion/diversification project bya wholly Malaysian- owned companywith investments of RM735.5 millionfor the expansion of productioncapacity of clinker and ordinaryPortland cement; and


RM million

Ceramic77.3 (1.2%) Dimension Stone

23.0 (0.4%)

Minerals69.4 (1.1%)

Others10.3 (0.2%)

Cement &Concrete

985.7 (15.3%)

Glass5,249.0 (81.8%)

Graph 29Investments in Projects Approved inthe Non-Metallic Mineral ProductsIndustry by Sub-sector, 2009

• A new majority Malaysian-ownedproject with investments of RM35.8million to manufacture ceramic roofingtiles. This is a new product in this sectorand is expected to modernise the localconstruction industry.

Promotional efforts within the non-metallic mineral products sector will betargeted towards three main areas namely,fine/advanced ceramics, green buildingproducts and specialty glass such as solarglass and coated float glass.

The fine/advanced ceramics industry has astrong potential for development inMalaysia. Currently, fine/advancedceramics which uses alumina andzirconia as the basic raw materials areconsumed primarily in the production ofsemiconductors and other electronic partsand components such as capacitors,resistors, indicators and filters. There isalso potential for growth in themechanical and engineering industriesand bio-ceramics products for biomedicalindustries.

Green building products are basicallyfocused on increasing the efficiency ofresource use such as energy, water andmaterials and hence reducing thebuildings’ impact on human andenvironment. There is great potential forthe development of these products in thecountry due to the availability of vastrenewable natural resources.

PAPER, PRINTING ANDPUBLISHING INDUSTRY

The paper, printing and publishingindustry encompasses the manufacture ofpulp, paper, paper products as well asprinting and publishing activities. Thepaper sub-sector covers the production ofmedium paper, test liner, newsprint,printing and writing paper, tissue paperand joss paper. The paper products sub-sector consists of packaging products suchas corrugated cartons, inner packagingand cushioning materials, labels, stickersand disposable diapers. The printing andpublishing sub-sector includes all printingof packaging materials, books, magazines,security documents, greeting cards,calendars and other miscellaneousprinting activities.

The paper, paper products and printingsub-sector is among the key supportingindustries to the manufacturing sector inMalaysia. Most of the manufacturingactivities are concentrated in PeninsularMalaysia. So far, Malaysia has recorded83 per cent self-sufficiency in the supplyof paper and paperboard with totalproduction of 1.5 million metric tonnesand local consumption of around 1.8million metric tonnes. In 2009 (January-November) imports of paper and paperproducts amounted to RM5.0 billionwhile exports totalled RM2.6 billion.

The domestic printing and publishingindustry consists mainly of small


and medium-scale domestic-orientedmanufacturers. However, local printershave been able to secure contract printingof books and magazines for internationalpublishers. Exports of this sub-sector in2009 (January-November) amounted toRM730.2 million while imports totalledRM771.6 million.

Project Approved In 2009

In 2009, a total of 20 projects withinvestments of RM502.3 million wereapproved in the paper, printing andpublishing industry. Of these, 12 werenew projects with investments ofRM201.0 million (40%), while eightwere expansion/diversification projectswith investments of RM301.3 million(60%). Domestic investments amountedto RM186.4 million (37%) while foreigninvestments totalled RM315.9 million (63%).


• A wholly foreign-owned expansion/diversification project with investmentsof RM268.0 million to producedisposable diapers and feminine carehygiene products. The company plansto export 40 per cent of production toSingapore, Thailand, Australia and NewZealand; and

• An expansion/diversification project bya wholly Malaysian-owned companywith investments of RM58.0 million toproduce printed materials with UVcoating, blister pac, lamination as wellas spot UV.

C. IMPLEMENTATION OFAPPROVEDMANUFACTURINGPROJECTS

A total of 5,839 manufacturing projectswere approved during the period 2004-2009 of which 4,201 projects (71.9%) hadcommenced production as at 31December 2009 while 218 (3.7%) were atthe stage of factory construction andmachinery installation. Of the 4,201projects in production, 520 projects hadcommenced production in 2009.

Total capital investment in the 4,419projects that were implemented(covering projects which havecommenced production and thosethat have undertaken factory


Paper Products379.0 (75.4%)

Printing &Publishing

109.3 (21.8%)

Pulp and Paper14.0 (2.8%)

RM million

Graph 30Investments in Projects Approved inthe Paper, Printing and PublishingIndustry by Sub-sector, 2009

construction and machinery installation)amounted to RM145.5 billion. Inaddition, 110 projects with investmentsof RM33.8 billion have acquired sitesfor factories, while 939 projects(RM63.4 billion) are in active planningstage. When these 1,049 projects arerealised, total investments will amount toRM97.2 billion.

Most of the implemented projects arelocated in Selangor (1,389 projects) withinvestments of RM37.0 billion, followedby Johor (966 projects/RM34.7 billion),Penang (629 projects/ RM19.6 billion),Perak (266 projects/RM6.0 billion), Kedah(243 projects/RM16.1 billion) and Melaka(226 projects /RM7.2 billion).

Significant projects implemented in 2009covered a broad range of industries,namely, electrical and electronics,fabricated metal products, chemicals andchemical products, food manufacturingand machinery and equipment.

Various measures and initiatives continueto be undertaken by the Government toimprove the delivery system, including tofacilitate investors to implement theirapproved projects. These measures andinitiatives include:

• Handholding activities which areactively carried out by Special ProjectsOfficers (SPOs) at the Federal and Statelevels in MIDA through meetings,briefings, dialogues and consultationsbetween Federal and State Agenciesand companies to facilitateimplementation of projects;

• State Investment Centres (SICs) set upas the States’ one-stop agency topromote and provide information andadvisory services to potential andexisting investors as well as to facilitateinvestors in setting up operations intheir respective States. The SICs are alsoinvolved in handholding activitiestogether with MIDA;

• The Advisory Services Centre (ASC) set-up in MIDA in 1988 to provideinformation and advisory supportservices effectively and efficiently in allareas of implementation. Representatives


Production4,201 (71.9%)

Factory Construction &Machinery Installation

218 (3.7%)

Site Acquired110 (1.9%)

Active Planning939 (16.1%)

Not Implemented371 (6.4%)

Investments in Projects Implemented: RM145.5 billion

Graph 31Status of Implementation ofManufacturing Projects Approvedduring 2004-2009

stationed in MIDA are from theDepartment of Environment, ImmigrationDepartment, Royal Customs and ExciseDepartment, Tenaga National Berhad,Telekom Malaysia Berhad and LabourDepartment. To further enhance theactivities of ASC, designated LiaisonOfficers have been appointed fromvarious Ministries/Agencies such asMultimedia Development Corporation(MDeC), Construction IndustryDevelopment Board (CIDB), Ministry ofHealth, Ministry of Tourism andMinistry of Higher Education;

• The District Industry ImplementationUnits (DIIUs) established in August2006 to monitor the implementation ofapproved manufacturing and servicesprojects at the district level and toprovide assistance to expediteapprovals from various Governmentagencies during the process of projectimplementation;

• The Customer Service Centre (CSC)launched in MIDA in 2006. The mainobjective is to serve investors andclients by providing informationparticularly through direct response tophone enquiries;

• The Immigration Unit set up in MIDAin December 2007 to facilitateapplications relating to immigrationmatters for expatriates and theirdependents. The main functions of theImmigration Unit are to assist and

advise companies as well as to approveapplications for visas, work permits,employment passes, dependantpasses for wives and children under21 years old, social visit passes forhusbands, parents and children above21 years old, students’ endorsementsfor the children of expatriates andidentification card for expatriates;

• On-line application in MIDAintroduced in January 2008 forsubmission of application forms to bedone electronically to MIDA forprocessing. Submissions cover allaspects relating to application formanufacturing licence, incentives,expatriate post and duty exemption onraw materials, components, machineryand equipments;

• Automatic issuance of ManufacturingLicence introduced in December2008. It covers all industries andactivities except for those related tosecurity, safety, health, environment,religion, projects located in Sabah andSarawak, activities subject toEnvironmental Impact assessment(EIA) approval from Department ofEnvironment (DOE) and projectsrequiring approval under PetroleumDevelopment Act (PDA)/Ministry ofHealth (MOH)/Atomic EnergyLicensing Board (AELB);

• Approving and monitoring of theInfrastructure Development Fund by


MIDA in January 2008 (previouslymanaged by Economic Planning Unit,Prime Ministers’s Department) with themain objective to ensure that existingindustrial estates are properlymaintained; and

• Improvements by the Special Task Forceto Facilitate Business (PEMUDAH) in2008 to enhance transparency andstrengthen processes and proceduresinclude:

- Reducing the time taken forclearance of exports to facilitatetrade;

- Reducing the time taken for propertyregistration through improvement ofprocesses and enabling on-lineapplications for property registration;

- Improvements in tax administration;

- Facilitating e–Payments;

- Establishing a one–stop centre toexpedite incorporation of companies;and

- Improving the processes foremploying expatriates and skilledworkers.

Based on Ministry of Human Resource(MOHR)’s records, in 2009, a total of 363companies had downsized theiroperations, which resulted in theretrenchment of 13,096 workers, In

addition, 64 companies had ceasedoperation, resulting in the loss of job for4,754 workers. The main reasons cited forclosures were the global economicdownturn which resulted in financialproblems, declining market demand andincreasing cost of production.

However, 520 projects had commencedproduction in 2009 resulting in thecreation of 64,157 job opportunities.These projects will provide alternativeemployment opportunities for the 17,850workers who were retrenchment duringthe same period




A. PROJECTS APPROVED

OVERVIEW

The services sector comprises a broadrange of services including regionalestablishments; support services; MSCstatus companies; real estate (housing);transport; energy; telecommunications;distributive trade; hotels and tourism;financial services; health services andeducational services.

A total of 2,016 projects with investmentsof RM29.5 billion were approved in theservices sector in 20096. Domesticinvestments accounted for the bulk of theinvestments (RM27.2 billion or 92.2%)while foreign investments totalled RM2.0billion (7.8%). The services projectsapproved in 2009 are expected to provide31,490 employment opportunities,especially in the managerial, professionaland technical levels.

92

INVESTMENT PERFORMANCE OF THESERVICES SECTOR


Services 2009 2008

Sub-Sector No. RM mil. No. RM mil.

4

Regional 161 325.9 161 219.1Establishments

Support 202 1,397.9 245 2,085.0Services7

MSC Status 284 2,160.4 242 1,778.4Companies

Sub-Total 647 3,884.2 648 4,082.5

Other Services Jan – Sept 2009 2008

Sub-Sector No. RM mil. No. RM mil.

Transport 26 7,731.7 19 1,422.9

Energy 1 5,010.4 106 4,407.2

Telecommuni- 11 3,783.0 22 4,954.0cations(including Post)

Financial 46 3,704.7 79 4,771.0Services

Real Estate 641 3,142.8 749 25,921.0(Housing)

Distributive 481 1,606.4 813 2,040.9Trade

Hotels & 23 589.0 44 1,929.6Tourism

Health Services 4 12.4 19 122.3

Education 136 12.2 160 184.9Services

Sub-Total 1,369 25,592.5 2,011 45,753.8

TOTAL 2,016 29,476.7 2,659 49,836.3

6 For this report, statistics on investments in regional establishments, support services and MSC status companies arebased on projects approved by MITI and MOSTI for the year 2009 while statistics on investments in the otherservices sub-sectors are based on projects approved by the respective Government Ministries/Agencies and areavailable only for the period of January to September 2009.

7 Approval statistics for 2009 for other R&D financial assistance schemes under Support Services cover the period January toSeptember only.

Table 3Approved Investments in the Services Sector,2009 and 2008

B. PERFORMANCE OF THESERVICES SUB-SECTORS

REGIONAL ESTABLISHMENTS

As at 31 December 2009, a total of 2,763regional establishments have beenapproved, comprising 177 OperationalHeadquarters (OHQs), 212 InternationalProcurement Centres (IPCs), 22 RegionalDistribution Centres (RDCs), 754 RegionalOffices (ROs) and 1,598 RepresentativeOffices (REs).

Malaysia’s world class infrastructure, goodconnectivity and strategic location withinASEAN are some of the main reasons whyMNCs continue to choose Malaysia tolocate their regional establishments.Attractive investment incentive packagesincluding tax incentives and liberalpolicies on foreign equity participationand employment of expatriates are otherfactors cited by these MNCs for theestablishment of these regionalestablishments in Malaysia.

In 2009, a total of 161 new regionalestablishments were approved to be set upin Malaysia with investments of RM325.9million. Estimated annual sales turnoverfor IPCs and RDCs amounted to RM758.3million. These operations will create atotal of 1,271 jobs for Malaysians,especially in the managerial, professionaland technical levels.

Operational Headquarters(OHQs)

As at 31 December 2009, a total of 177OHQs were approved with investments ofRM2.0 billion. Of these, 34 were from theUSA; 15 from Japan; 13 each fromAustralia, Germany and the UK; 12 fromthe Netherlands while 77 were from othercountries. These OHQs have created atotal of 11,434 job opportunities comprising9,283 Malaysians and 1,954 expatriates.The major OHQ activities undertaken bythese companies include the provision ofcommon corporate functions such asfinance/accounting, human resource,IT, technical support, R&D services,administration and management; as wellas business planning and coordination tosupport their operations in the Asia Pacificregion.

Of the 177 OHQs approved, a total of 132are in operation. These OHQs areinvolved mainly in E&E; oil and gas;pharmaceutical; chemicals andautomotive.

93

Regional Offices (RO)754 (27.3%)

OperationalHeadquarters (OHQ)

177 (6.4%)

InternationalProcurementCentres (IPC)212 (7.7%)

RegionalDistribution

Centres (RDC)22 (0.8%)

RepresentativeOffices (RE)

1,598 (57.8%)

Graph 32Number of Regional EstablishmentsApproved as at 31 December 2009


94

USA

Japan

Germany

Australia

UK

Switzerland

France

Netherlands

Sweden

People’s Republic of of China

Norway

Singapore

Hong Kong

• General Electric• Du Pont• Dow Chemicals• PepsiCo• Grey Communications• Hess Oil & Gas• Air Products• Henry Schein• Kellogg’s

• Sharp Electronics• Kajima Corporation• JapanTobacco International• Bridgestone

• BASF•Muehlbauer• Eppendorf• Arvato

• IBA Health• IEV Group• Leighton• Linfox•Wagners

• RMC Industries• British-American Tobacco• Diagonal Consulting Group

•Michelin• Norvatis Corporation• SBM Group

• Lafarge• Thales International

• Flexsys• Prometric• Friesland Foods

• Volvo

• China Shipping

• Aker Kvaerner•Wilhelmsen

• NOL Global• ACE Asia Pacific

• Aramis

• Schlumberger• Baker Hughes• Intel• Transocean• Agilent• IBM•Mars Foods• Hewlett-Packard

• NEC Infrontia• Sumitomo•Nippon Electric Glass• Nippon Menard

• Siemens• Nordenia• Bayer• Binder

• Paradigm• Ansell• Dome•Delta Asia

• Avocet Mining•OHM Surveys• Fitness First

• Omya Group• Tetra Pak

•Monier

• Organon•Mammoet

• UCB Group

• AGR

•Mattel• Global Footware

•OMG

Some of the world renowned MNCs which have established OHQs in Malaysia include:

CompanyCountry




In 2009, a total of 18 OHQs wereapproved with investments of RM139.3million. Of these, three each were fromthe British Virgin Islands, Singapore andHong Kong, two were from Switzerlandand one each from the UK, Australia,Cayman Islands, Sudan, the USA, Franceand Japan. A total of 90 expatriate postswere approved for these OHQs and 577employment opportunities will beprovided for Malaysians, of which, 40.6per cent of the posts were for seniormanagement and senior executivepositions.

Major OHQs approved in 2009 included:

• Pacific Inter-link Sdn. Bhd., a wholly-owned subsidiary of Capital HouseInvestment Ltd., from Cayman Islands,which is involved in projectmanagement,engineering, technical assistance andconsultancy services for the oil and gas,petrochemicals, energy and processindustries. The OHQ will be providingqualifying services for its relatedcompanies in Malaysia, Indonesia,Yemen, Saudi Arabia and Egypt;

• OMG Asia Pacific Sdn. Bhd, a wholly-owned subsidiary of OMNI MarketingGlobal Limited, which provides in-storeintegrated retail marketing service tomajor retailers such as Carrefour SA,Tesco, Guardian, Seven Eleven, Giantand Cold Storage. The OHQ will beservicing 11 related companies andprovide eight qualifying services such

asgeneralmanagementandadministration;business planning and coordination;and procurement of raw materials,components and finished products toits offices or related companies withinor outside Malaysia;

• Mass Trading Malaysia Sdn. Bhd., awholly-owned company of Mass Co.Ltd, Japan, which is a trading companyspecialising in production system linefor the electronics industry. The OHQwill be providing nine qualifyingservices to seven of its relatedcompanies within and outsideMalaysia;

• Monier Asia Pacific Sdn. Bhd., awholly-owned company of MonierGroup GmbH, which is the world’sleading supplier of roofing andchimney systems. The establishment ofthe OHQ will centralise the keymanagement functions of the Group’soperations in the Asia Pacific region;

• The Mattel Group which is involvedmainly in the manufacturing andmarketing of toys under the Mattelbrand and will be providing services toits related companies in the USA, thePeople’s Republic of China, HongKong, Singapore, Malaysia, Australia,New Zealand, India, Indonesia andThailand; and

• Gold Coin Group, a pioneer in themanufacture and distribution of animalfeeds and one of the biggestagribusiness enterprises in Asia. ItsOHQ will be servicing 15 related

companies in Singapore, Thailand,Vietnam, Indonesia, the People’sRepublic of China, Sri Lanka and India.

International ProcurementCentres (IPCs)

A total of 212 International ProcurementCentres (IPCs) have been approved as at 31December 2009 with total annual salesturnover estimated at RM68.7 billion whileinvestments in these IPCs amounted toRM5.4 billion. Of the IPCs approved, atotal of 89 or 42.0 per cent were bycorporations from Japan, 36 fromMalaysia,15 from the USA, 11 each fromTaiwan andSingapore, five from Germany while theremaining 45 were joint-ventures.

A total of 119 or 56.0 per cent of theseIPCs will be servicing the E&E industrywhile the remaining IPCs will beservicing the chemicals/petrochemicals(29); machinery and industrial parts (14);textiles (10), oil and gas (10); and furniture(7) industries. To date, 139 IPCs havestarted operation.

These MNCs establish their IPC operationsin Malaysia mainly to serve as theirprocurement and distribution centres andundertake supply chain management fortheir manufacturing operations in theregion.

Major MNCs which have located their IPCoperations in Malaysia include:

•Matsushita• Sharp• Sony• Kenwood• TDK Corporation• Canon Opto•Murata• Sumiden

• Dell• Knowles

• Robert Bosch• Henkel

• Acer• Inventec Electronics

•Mapa Spontex

• Lee Kum Kee

• Flextronics

• Ghim Li

• Hitachi• JVC Electronics• NEC Electronics• Brother Engineering• Sharp-Roxy• Nitto Denko•Mitsumi•Mitsubishi

• Smart Modular Technologies

• B.Braun

• Titan

• Safic-Alcan

• Benchmark

• Jackspeed Leather

Japan

USA

Germany

Taiwan

France

Hong Kong

Netherlands

Singapore

CompanyCountry



Three projects to establish IPCs wereapproved in 2009 with investments ofRM41.1 million and estimated annualsales turnover of RM671.2 million. Of thethree IPCs approved, one was by acompany from the Netherlands, one by ajoint-venture company with Japan andone by a local company. These IPCs willprovide employment opportunities for 108Malaysians, mainly in the managerial,technical and skilled categories. TheseIPCs proposed to procure a total ofRM29.8 billion worth of products fromlocal companies.

In addition, 15 approved IPCs haveembarked on expansion programs byadding new products in their procurementand distribution network.

Among the IPCs approved were:

• Benchmark Electronics (M) Sdn. Bhd.(formerly known as Quantum StorageSolutions (M) Sdn. Bhd.), an existingmanufacturing company, will set up itsIPC to procure and distribute electronicdevices and EMS to its customers insideand outside Malaysia; and

• Nakareg Sdn. Bhd., an existingmanufacturing company was approvedIPC to procure and distribute lineartransformers for audio industry, switching

transformers, noise filter coils andlinear transformers for adapters to itscustomers inside and outside Malaysia.

These IPCs will export about RM563.1million or 49.2 per cent of their productsthrough seaports, of which RM496.4million (88.2 per cent) will be exportedthrough Port of Sungai Udang, Melakaand the rest will be exported throughPenang Port, Pasir Gudang Port and PortKlang. Of the goods to be exportedthrough airports, RM580.6 million will beexported via the Penang InternationalAirport.

Regional Distribution Centres(RDCs)

As at 31 December 2009, a total of 22Regional Distribution Centres (RDCs) havebeen approved with total annual salesturnover of RM87.0 million andinvestments of RM80.1 million. Of these,four were from Germany, two from the UKand one each from the USA, Austria, theNetherlands, Switzerland, Malaysia,Belgium, Finland, France, Italy, Ireland,Spain, Denmark, Canada, and India whiletwo were joint-venture projects with Japanand Germany. A total of 555 employmentopportunities will be created by theseRDCs, of which 90 per cent will be filledby Malaysians.



Three projects were approved for RDC in2009 with investments of RM79.8 millionand total annual sales turnover of RM87.1million. These RDCs will provideemployment opportunities for 59Malaysians.

Among the RDCs approved were:

• Intersil International Operations Sdn.Bhd., a newly incorporated subsidiaryof Intersil U.S. Corporation, establishedas aRDC todistribute andmarket productsrelated to analogue semiconductors tocompanies within the Group. Parts andcomponents for its companies will besourced mainly from suppliers in theUSA; and

• Kohoku Electronics (M) Sdn. Bhd., anexisting manufacturing companyproducing lead tab terminals foraluminium electronic capacitors. TheRDCwill distribute parts and componentswhich are mainly sourced from itsrelated companies in Japan andSingapore.

Regional/RepresentativeOffices (ROs and REs)

To date, a total of 754 Regional Offices(ROs) and 1,598 Representative Offices(REs) have been approved. These ROs andREs were established mainly to assistforeign companies to plan or coordinatebusiness activities for the corporations’affiliates, subsidiaries and agents inMalaysia and in the region.

To date, 14 MNCs have started their RDC operations. These RDCs are:


Country Company

Germany Osram Opto Semiconductors, BMW, EPCOS AG, Siteco Group and BD Agriculture

Japan UMWToyota

UK Scapa Group

Belgium Agfa

Finland Amer Sport

France Sidel Group

Spain Acerinox

Ireland Kerry Group

Canada International Merchandising Inc.

India BEML


• Rolls Royce•Westland Helicopters

• Peugeot

• Parsons• Nexus Media• Lifecore Biomedical•WJ Communications

• Korea Petroleum•Hyundai

• Infrasys• D-Link• Kodak Polychrome•Heinz

• Tango Telecom

• Clarity

• T&A Mobile Phones• Laureate

• Aramco

•Maersk

• Sondex

• Pelikan

•Mitra Energy

• Al-Jazeera

• Total Waste Management

• Keihin

• Sanyo Hikari

• SS8 Networks

• Citroen

• Gregg Protection• XM Satelite Radio• Vitron• Croll-Reynolds

• Samsung• Xener System

• Soft Imaging System• Lawson Software• Benlux• LG Display

• Red Hat

• Petrosys

• QAD

•Georg Fischer

UK

France

USA

Republic of Korea

Singapore

Republic of Ireland

Australia

Hong Kong

Saudi Arabia

Denmark

UAE

Switzerland

Bermuda

Qatar

Scotland

Thailand

Japan

Major ROs and REs approved include:

Name of Regional/Representative OfficeCountry

Malaysia is a base for these ROs and REsto coordinate and support their operationsin theAsia Pacific region.The establishmentof these ROs and REs will provideopportunities for the companies to set upIPCs/RDCs in the long run.


In 2009, a total of 53 ROs and 84 REswere approved with total investments ofRM65.7 million. Of the total, investmentsfor ROs and REs were RM35.1 millionand RM30.6 million, respectively. TheseROs/REs were mainly from Singapore(31), the USA (12), the UK (10), andJapan (nine). These ROs and REs areexpected to create employmentopportunities for 289 Malaysians.

The major approved ROs and REsincluded:

Malaysia with its strategic location withinthe ASEAN region has vast potential to bethe logistics hub for MNCs. Malaysia hasalso been actively promoting the servicessector as it provides numerous opportunitiesfor growth especially in the establishmentof OHQs, IPCs and RDCs. The setting upof these establishments will benefit thecountry in terms of enhanced global trade,provision of skilled employmentopportunities and business opportunitiesfor local wholesalers and retailers.

SUPPORT SERVICES

Support services cover research anddevelopment (R&D), renewable energyand energy conservation/ efficiency,engineering design, integrated logisticsservices, integrated market supportservices, cold chain facilities, sterilisationand central utilities facilities. Theseservices activities are the targeted serviceactivities currently being promoted by theGovernment to further enhance the valuecreation of the manufacturing sector inMalaysia. Service providers undertakingthese activities are eligible to apply for taxincentives in the form of Pioneer Status(PS) and Investment Tax Allowance (ITA)for a period of 5 to 10 years.

In 2009, these incentives were extendedto testing facilities for medical devices toencourage the establishment of newtesting laboratories for medical devices aswell as existing testing laboratories toupgrade their facilities to meetinternational standards. Promotional


Country Company

Japan Sanyo Hikari

Singapore Benlux, LG Display andHeinz

USA Vitron, Croll-Reynolds,Barriersafe SolutionsInternational Inc. andBridgelux, Inc.

Switzerland Georg Fischer and GlobalSupply Chain Ltd.

Hong Kong Laureate and NikkoEntertainment Hong KongLtd.

Netherlands JS Bariatrics BV

UK Airo-Zone 5000 Ltd.

People’s Republic China Unionpay Co. Ltd.of China

efforts will be intensified to attractinvestments in this activity.

A total of 202 support services projectswere approved with incentives in 2009,involving total investments of RM1.4billion. Domestic investments continuedto dominate the support services sectorwith RM1,001.0 million (71.6%) whileforeign investments amounted toRM396.9 million (28.4%). A total of 5,149employment opportunities would becreated by these projects.

Of the projects approved, 18 were for thegeneration of energy using renewableresources or renewable energy, 175 forR&D, five for energy conservation/efficiency, three for integrated logisticsservices and one for integrated marketsupport services. The majority of theinvestments approved were for thegeneration of renewable energy (RM376.6million or 27.4%), energy conservation/efficiency (RM375.0 million or 27.2%)and integrated logistics services (RM120.7million or 8.8%). Investments in thesethree categories accounted for 63.4 percent of the total investments approved.

Renewable Energy

To supplement the conventional supply ofenergy, new sources such as renewableenergy are encouraged by theGovernment. In this regard, the fuel policy

which comprises oil, gas, hydro and coalhas been extended to include renewableenergy as the fifth fuel. The mainrenewable resources for generation ofenergy include biomass such as wastesfrom palm oil, rice, sugar cane, timber,sawmill and paper recycling mills;municipal wastes; biogas from landfills,palm oil mill effluent and animal wastes;mini-hydro; solar; and wind power. Ofthese, biomass resources and solar energyare widely used for generation ofelectricity.

As a major producer of agriculturalcommodities in the region, Malaysia iswell-positioned to promote the use ofbiomass as a renewable energy source.Oil palm waste is the main source ofbiomass for renewable energy as there areabundant oil palm plantations in the


Table 4Investments in Approved SupportServices, 2009

8 Approval statistics for R&D grant schemes cover the period January-September 2009 only.

Support Services 2009

No. RM mil.

Renewable Energy 18 376.6

Energy Conservation/Efficiency 5 375.0

Research &Development (R&D)

• R&D incentive 4 25.6

• R&D grant schemes8 171 457.9

Integrated Logistic Services (ILS) 3 142.3

Integrated Market Support 1 20.5Services (IMS)

Total 202 1,397.9

country. It is estimated that the oil palmindustry generates 65.5 million tonnes ofwaste annually in the form of empty fruitbunches (EFB), fibres, shells and palm oilmill effluents (POME). A total of 2,400megawatts (MW) of electricity could begenerated if all the wastes are fully utilisedand converted into renewable energy.

Malaysia also has vast potential for solarpower generation. The SURIA 1000programme launched by the Governmentin 2006 to intensify the usage of solarenergy as an alternative source of energy,provides financial rebates on the cost ofinstalling solar building integratedphotovoltaic (BIPV) systems for residentialand commercial building owners. To date,a total of 83 residential and commercialbuilding owners with a capacity togenerate a total of 600 kW of solar energywere approved financial rebates rangingfrom 42 per cent to 75 per cent under theprogramme.

Under the Ninth Malaysia Plan, theGovernment has targeted about 350 MWof electricity to be generated fromrenewable resources by 2010. Incentivesthat are being offered by the Governmentto encourage wider implementation ofrenewable energy projects include:

• Tax incentives in the form of PS and ITAfor companies generating electricityusing renewable resources either for

their own consumption or for salethrough the distribution grid system;

• Import duty and sales tax exemption onmachinery, equipment, parts andcomponents used to generate energywhich are not produced locally;

• Sales tax exemption on equipmentpurchased from local manufacturers;

• Import duty and sales tax exemption toimporters including photovoltaicservice providers approved by theEnergy Commission for imported solarphotovoltaic system equipment for useby third parties; and

• Sales tax exemption on the purchase ofsolar heating system equipment fromlocal manufacturers.

To date, a total of 90 projects have beenapproved PS or ITA incentives forrenewable energy, involving totalinvestments of RM2.8 billion. Theseprojects are capable of generating 498.9MW of electricity, 683,714.4 tonnes ofsteam, 399.9 giga joules (GJ) of heat and1,030 refrigerant tonnes (RT) of chilledwater, utilising 12.3 million tonnes ofbiomass per annum. Sources of biomassare oil palm, wood, rice, sugar cane andmunicipal wastes. Of the projectsapproved, 42 are in operation of which,27 are located in Peninsular Malaysia and15 in Sabah.



In 2009, a total of 18 renewable energyprojects were approved with taxincentives. Total investments in theseprojects amounted to RM376.6 millioncomprising domestic investments ofRM193.3 million (51.3%) and foreigninvestments of RM183.3 million (48.7%).A total of 3,449 employment opportunitieswould be created by these projects.

Seventeen of the projects approved werenew projects and one was a diversificationproject. These projects would generateenergy in the form of electricity, steam orheat using biomass, solar and hydropower. Of the projects approved:

• Nine projects would be utilising536,807 kWh of solar energy togenerate 169.2 kWp electricity and 30RT chilled water;

• Seven projects would be utilising700,656 tonnes of biomass to generate18 MW electricity and 134.5 tonnessteam;

• One project would be utilising43,234,560 m3 of hydro power togenerate 2.2 MW electricity; and

• One project would be utilising5,430,000 m3 of biogas to generate 0.2MW electricity and 5 tonnes steam.

All the energy generated from the solarpower projects are for own consumption

while more than 85 per cent of the energygenerated from biomass and hydro wouldbe sold.

Among the major approved projects were:

• A new project undertaken by a whollyforeign-owned mobile phone serviceprovider to generate electricity fromsolar energy for its own consumption.Investments in this project totalledRM143.1 million. The project wouldgenerate 20 kWp of electricity byutilising 7,200 kWh of solar energy;

• A majority Malaysian-owned projectundertaken by a real estate developerwith investments of RM71.7 million togenerate 64.8 kWp of electricity forown consumption, utilising 73,476kWh of solar energy; and

• A wholly Malaysian-owned projectwith investments of RM52.0 million, togenerate 11.5 MW of electricity and 30tonnes of steam utilising 432,000tonnes of oil palm wastes. Ten MW ofthe electricity generated would be soldto Tenaga National Berhad.

Energy Efficiency/Conservation

The increasing demand for energy as aresult of continuous economicdevelopment would pose challenges forenergy security in the long run.Conserving energy or using energy in amore efficient manner is crucial topreserve our environment and achieve


sustainable development. In this regard,the Government continues to encourageinvestments in energy conservation/efficiency activities through the provisionof incentives as follows:

• PS or ITA for energy consultants orservice providers as well as companiesinvesting in energy conservation/efficiency;

• Import duty and sales tax exemption onmachinery, equipment, parts andcomponents used in energyconservation/efficiency projects;

• Import duty and sales tax exemption toimporters of energy efficient equipmentsuch as high efficiency motors andinsulation materials supplied to thirdparty end users; and

• Sales tax exemption on the purchase oflocally manufactured energy efficiencyconsumer goods such as refrigerators,air conditioners, lightings, fans andtelevisions.

To date, 19 projects have been approvedPS or ITA incentives for energy conservation/efficiency activities, involving totalinvestments of RM4.7 billion. Of theprojects approved, nine projects (RM19.2million) involved service providers forenergy conservation / efficiency activities,while 10 projects (RM4.7 billion) wereapproved for energy conservation/efficiency activities by companies for their

own consumption. Of the 19 projectsapproved, 18 projects are located inPeninsular Malaysia and have startedoperations. These projects would be ableto conserve about 685 MW of electricityper annum.


In 2009, five energy conservation/efficiency projects were approved taxincentives involving investments ofRM375.0 million. Domestic investmentsamounted to RM198.4 million or 52.9 percent of total investments. Total value ofenergy savings from these projects wouldamount to RM766,414 while total energyconserved would amount to 153.7 MWper annum.


• A majority foreign-owned hypermarketoperator undertaking energy conservation/efficiency project for its ownconsumption, involving investments ofRM235.0 million. Energy conserved inthis project would amount to 94.0 MWwhich would result in energy savings ofRM585,572 per annum;

• A majority Malaysian-owned real estatedeveloper undertaking energyconservation/efficiency project for a26-storey building currently underconstruction, with investments ofRM126.5 million. This project woulduse energy efficient chillers to conserve


a total of 18.7 MW of energy whichwould result in energy savings ofRM74,023 per annum; and

• A new project undertaken by aMalaysian energy consultant toconserve energy for an educationalinstitution, with investments of RM9.3million. Energy conserved in thisproject would amount to 20.5 MW andenergy savings of RM13,875 would bethrough the replacement of the existingcooling system that uses energyefficient equipment.

Research and Development(R&D)

Research and development (R&D) servicesinclude industrial design (product andprocess development including designingand prototyping) and research servicesprovided by design houses, contract R&Dcompanies, R&D companies, and approvedR&D institutes/research companies.

To date, a total of 105 R&D projectsinvolving investments of RM1.4 billionhave been approved PS or ITA incentives.Foreign investments in these projectsamounted to RM934.9 million (67.4%)while domestic investments totalledRM451.2million (32.6%). R&D investmentswere mainly in the E&E (36 projects/RM697.7 million), chemicals andchemical products (16 projects/RM221.4million), machinery and equipment (10projects/RM141.1 million) and transportequipment (19 projects/RM78.9 million)

industries. A total of 3,107 employmentopportunities would be created by theseprojects.


In 2009, four R&D projects wereapproved PS or ITA incentives comprisingtwo contract R&D companies and two in-house R&D projects. Total investmentsamounted to RM25.6 million, of whichRM19.1 million (74.6%) were domesticinvestments and RM6.5 million (25.4%)were foreign investments.

Besides tax incentives, the Governmentalso provides other financial assistance inthe form of grants to further encourageindustries to undertake R&D activities andcommercialise R&D findings. For theperiod January-September 2009, a total of171 R&D projects with investments ofRM457.9 million were approved underthe following financial assistanceschemes:

• Demonstrator Applications/Techno/Science Grant Scheme-123 projectswith investments of RM224.2 million;

• Commercialisation of R&D Fund(CRDF)/Technology Acquisition Fund(TAF) Scheme-27 projects withinvestments of RM213.2 million; and

• MSC R&D Grant Scheme - 21 projectswith investments of RM20.5 million.


Integrated Logistics Services(ILS)

The main activities in the integratedlogistics services (ILS) industry coverfreight forwarding, warehousing,transportation and other related value-added services such as distribution,procurement and supply chainmanagement on an integrated basis.

Currently, companies undertaking ILS areeligible for PS or ITA. The objective ofgranting the ILS incentive is to create anefficient and competitive logistics industryto encourage the integration andconsolidation of the various transportintermediaries along the logistics supplychain in Malaysia. In this regard, Malaysiancompanies are encouraged to expand andventure into higher value-added servicesto enable them to compete globally.

A total of 24 companies with investmentsvalued at RM2.1 billion have been grantedthe ILS incentive. Of these, five were newprojects and 19 were expansion projects.

In 2009, three ILS companies wereapproved, as follows:

i. An expansion project by a Malaysian-owned company, with investmentsof RM48.4 million to undertakenon-vessel operating commoncarrier (NVOCC), container handling,warehousing and distribution activitiesin Port Klang, Selangor;

ii. An expansion project by a locallyincorporated company to build its ownwarehouse, acquire additionaltransportation equipment andincorporate more value-addedactivities such as packing, repacking,sorting, grading and sampling withadditional investments of RM54.0million in Nilai, Negeri Sembilan; and

iii. An expansion project by a Malaysiancompany in Bukit Kayu Hitam, Kedahto enlarge its existing warehousefacility and increase the number ofprime movers and ICT equipment withadditional investments of RM39.8million.

International IntegratedLogistics Services (IILS)

The IILS scheme was mooted in 2008. TheGovernment announced a majordevelopment in the logistics sectorwhereby access is given to InternationalIntegrated Logistics companies forCustoms Agent Licence. This licence,which was previously restricted todomestic logistics service providers, isnow open to International IntegratedLogistics Services (IILS) providers withoutany restrictions on equity. The CustomsAgents licence will be issued to qualifiedIILS providers that provide integrated andseamless logistics services (door-to-door)along the logistics value chain as a singleentity on a regional or global scale.


In 2009, an existing local company inSelangor with investments of RM208.0million was approved IILS status. Thecompany plans to undertakes freightforwarding, warehousing, transportationand value-added services, namely,VendorManaged Inventories (VMI), on-sitelogistics management, cross bordertransportation and management ofoutsource transportation. It has goodnetworking with logistic service providersabroad in Hong Kong, the People’sRepublic of China, Singapore, Philippines,the United Arab Emirates (UAE) andBritishVirgin Islands. Malaysia is expectedto be the logistics supply chain services inthe region.

Integrated Market SupportServices (IMS)

Integrated Market Support Services (IMS)comprise the activities of branding, marketresearch and customer relationshipmanagement. To date, seven companieshave been approved PS to undertakeintegrated market support activities,involving total investments of RM34.2million.

In 2009, a wholly foreign-owned marketresearch company with investments ofRM20.5 million was approved PS toundertake branding and research servicesfor the food industry. The company is asubsidiary of a public-listed companybased in UK with operations in 60countries. Branding services provided

include brand design and development,brand promotion and packaging designwhile research services cover feasibilitystudy, consumer research, market researchand research on product development.

MSC STATUS COMPANIES

As at 31 December 2009, a total of 2,520companies were granted MSC Status bythe Multimedia Development CorporationSdn Bhd (MDeC). Of these, 1,879 (74.5%)were majority Malaysian-owned, 566were majority foreign-owned (22.4%) and75 were with equal ownership. The 2,520companies are grouped into four maintechnologies namely creative multimedia;shared services and outsourcing (SSO);information technology (InfoTech); andinstitutions of higher learning andincubators. Of the 2,520 MSC statuscompanies approved, a total of 1,956 or78.0 per cent are in operation.

Creative Multimedia200 (10.2%)

SSO181 (9.3%)

IHLs & Incubators98 (5.0%)InfoTech

1,477 (75.5%)

Source: Multimedia Development Corporation (MDeC)


Graph 33Approved MSC Status Companies inOperation by Technology Cluster as at31 December, 2009

Based on the MSC Malaysia AnnualIndustry Report 2008, both local andexport sales of MSC Malaysia Statuscompanies have increased in 2008,pushing total revenue to rise by 27.5 percent to RM21.8 billion in 2008. Thebiggest contributor to overall revenue in2008 was the Information Technologycluster with 43.0 per cent contribution.

In 2009, a total of 284 companies weregranted the MSC Status with approvedinvestments amounting to RM2.2 billion.Domestic investments amounted to RM1.5billion (71.0%) while foreign investmentstotalled RM623.0 million (29.0%). A totalof 13,587 employment opportunities areexpected to be created by the MSCcompanies. Of the 284 companies awardedMSC Status in 2009, a total of 221 (78.0%)were wholly Malaysian-owned, 56 (20.0%)were wholly foreign-owned, while theremaining seven (2.0%) were joint-ventureprojects. In 2008, a total of 242 companieswere awarded MSC Status with approvedinvestments amounting to RM1.78 billion.

TRANSPORT

The transport sub-sector covers maritimetransport; aviation; and highwayconstruction and maintenance.

For the period January-September 2009, atotal of 26 projects were approved withinvestments of RM7.7 billion, the highestlevel of investments in the services sector.Domestic investments amounted toRM7.6 billion (98.7%) and foreign

investments totalled RM45.0 million(1.3%). Investments approved in thetransport sub-sector in 2009 exceeded theinvestments in 2008 which amounted toRM1.4 billion (19 projects).

The investments approved in 2009 weremainly in the aviation sub-sector with 16projects valued at RM7.6 billion. Nineprojects were approved in the maritimesub-sector with investments amounting toRM66.5 million while one project wasapproved for highway construction andmaintenance (RM2.1 million).

ENERGY

The energy sub-sector covers independentpower producers (IPPs); and generation,transmission and distribution of electricityby Tenaga Nasional Bhd. (TNB), SyarikatSESCO Bhd. (SESCO) and SabahElectricity Sdn. Bhd. (SESB).

For the period January - September 2009,one project with investments valued atRM5.0 billion was approved in this sub-sector, (100% domestic investments). Theamount of investments approved for thissub-sector in 2009 was higher thaninvestments recorded in 2008 whichamounted to RM4.4 billion. The sub-sectorremained as one of the major contributorsto investments in the services sector.

FINANCIAL SERVICES

Investments in financial services coverbanking, insurance and capital markets


(venture capital, fund management,investment advisory and brokerage).For the period January-September 2009, atotal of 46 projects were approved in thefinancial services sub-sector withinvestments of RM3.7 billion. Domesticinvestments amounted to RM3.6 billion(97.3%) while foreign investments totalledRM93.5 million (2.7%).

The number of projects and investmentsapproved in the financial services sub-sector for 2009 (January to September)and 2008 are as follows:

Banking contributed the largest amount ofinvestments in the financial services sub-sector with RM3.4 billion or 93.1 percent, followed by insurance (RM190.5million) and capital markets (RM65.4million).

Brokerage and fund management wereamong the major contributors toinvestments in the capital marketsamounting to RM32.0 million andRM31.0 million respectively.

TELECOMMUNICATIONS

The telecommunications sub-sectorcovers network facilities, networkservices, application services (includingcontent application services), post andbroadcasting.

For the period January-September 2009,estimated total investments amounted toRM3.8 billion, all of which were domesticinvestments. A number of new projectscommenced in 2009 to accelerate andupgrade communications infrastructureand services. Mobile cellular serviceproviders have invested to upgrade tohigher speeds such as 3G/HSPA+ whilewireless broadband service providers suchas Packet One Networks (Malaysia) Sdn.Bhd., Redtone Telecommunications Sdn.Bhd., Asiaspace Sdn. Bhd. and YTLCommunications Sdn. Bhd. have investedin WiMAX service.

REAL ESTATE (HOUSING)

Real estate covers the housing industry(excluding commercial buildings) inPeninsular Malaysia.

Real estate was among the largest servicessub-sector in terms of investmentsapproved in January - September 2009. Atotal of 641 projects were approved withtotal investments amounting to RM3.1billion. Domestic investments accountedfor 96.7 per cent (RM3.0 billion) of thetotal investments in this sub-sector.


Activity Jan – Sept 2009 2008

No. RM mil. No. RM mil.

Table 5Approved Investments in FinancialServices, 2009 (January-September)and 2008

Banking 11 3,448.8 23 4,107.4

Insurance 15 190.5 21 284.9

Capital Markets 20 65.4 35 378.7

Total 46 3,704.7 79 4,771.0

DISTRIBUTIVE TRADE

The distributive trade sub-sector coverswholesale and retail trade; hypermarkets/supermarkets, department stores anddirect selling; franchising; and projectsapproved under the PetroleumDevelopment Act, 1974.

A total of 481 projects were approvedwith investments of RM1.6 billion for theperiod January - September 2009. Foreigninvestments totalled RM900.8 million(56.1%), while domestic investmentsamounted to RM705.6 million (43.9%).

Investments in distributive trade weremainly in:

• Hypermarket and supermarkets (16projects) with investments of RM650.0million or 40.4 per cent of totalinvestments in this sub-sector;

• Wholesale and retail trade (175projects) with investments of RM577.6million;

• Projects approved under the PetroleumDevelopmentAct, 1974with investmentsof RM217.1 million;

• Departmental store (4 projects) withinvestments of RM80.0 million;

• Direct selling (26 projects) withinvestments of RM41.7 million; and

• Franchising (113 projects) withinvestments of RM40.0 million.

HOTELS ANDTOURISM

A total of 23 projects were approved inthe hotels and tourism sub-sector for theperiod January - September 2009, withinvestments of RM589.0 million, all ofwhich were domestic investments.

HEALTH SERVICES

Health services cover approvals for privatehealthcare institutions.

For the period January - September 2009,approvals were granted to four privatehealthcare institutions (comprisinghospitals, maternity homes, nursing carecentres, and medical specialist centres)involving investments of RM12.4 million,all of which were domestic investments.

To further promote and develop the healthtourism industry in the country andencourage private hospitals to be moreexport driven, special incentives for the


Table 6Approved Investments in Hotels andTourism, 2009 (January-September)and 2008

Activity Jan – Sept 2009 2008

No. RM mil. No. RM mil.

Hotel projects:

-With incentives 9 198.7 20 987.8

-Others 7 325.0 15 837.1

Tourism projects:

-With incentives - - 3 48.7

-Others 7 65.4 6 56.1

Total 23 589.0 44 1,929.6

healthcare travel industry wereannounced in 2009. These incentives are:

• 100 per cent exemption on the value ofincreased exports, subject to 70per cent ofthe statutory income for each year ofassessment for healthcare service providersoffering services to foreign clients inMalaysia. Foreign clients exclude:

– a non-Malaysian citizen whoparticipates in Malaysia My SecondHomeprogrammeandhis dependents;

– a non-Malaysian citizen holding aMalaysian student pass and hisdependents;

– a non-Malaysian citizen holding aMalaysian work permit and hisdependents; and

– a Malaysian citizen who is a non-resident living abroad and hisdependents.

• ITA of 100 per cent on qualifyingcapital expenditure incurred on theconstruction of new private hospitalsand the expansion/refurbishment ofexisting private hospitals.This allowancecan be offset against 100 per cent ofstatutory income for a period of 5years. The incentive is applicable forapplications received from 1 January2010 to 31 December 2014;

• Review of advertising regulations andguidelines to accommodate the

changing role of private hospitals inpromoting healthcare travel;

• Double deduction for expenses incurredby private hospitals to obtain domestic/internationally recognised accreditation;

• Automatic issuance of employment/professional pass for foreign spouses ofMalaysian or non-Malaysian medicalspecialists who qualify as professionalsunder the Malaysian Classification ofOccupation; and

• Issuance of permits for the transportationof patients from the airport to thehospital, the conversion of “visit-on-arrival” status to a social visit pass forforeigners seeking medical treatmentand expediting the approval to stay tomedical tourists at the state level.

EDUCATION SERVICES

Education services cover privatecolleges/universities, private educationinstitutions and skills centres.

A total of 136 projects were approved forthe establishment of educationalinstitutions, involving investments ofRM12.2 million for the period January-September 2009, all of which weredomestic investments.

Investments in education services were inskill centres which totalled RM7.3 million(46 projects) and private educationinstitutions (RM4.9 million/90 projects).



Global FDI flows in 2009 were affectedby the economic and financial crisisfacing the world. Based on UNCTAD’slatest quarterly publication, global FDIinflows declined by about 40 per cent toUS$1 trillion in 2009 from US$1.7 trillionin 2008. Similarly, FDI inflows todeveloping and transition economiesdecreased by 39.0 per cent in 2009.

In tandem with this trend, the totalinvestments approved in the manufacturingsector in Malaysia amounted to RM32.6billion in 2009 compared with RM62.8billion in 2008. This, however, stillexceeded the average annual investmenttarget of RM27.5 billion set under theThird Industrial Master Plan (IMP3).

Malaysia remained a competitivedestination for FDI in the region andcontinued to attract encouraging levels offoreign investments in the manufacturingsector. Foreign investments in approvedmanufacturing projects in 2009 amountedto RM22.1 billion, returning to the levelsprior to the record foreign investmentsregistered in the last two years. Domesticinvestments in projects approved werevalued at RM10.5 billion in 2009,indicating continued interest amongdomesticinvestors in the manufacturing sector.

Approved investments in the servicessector totalled RM29.5 billion9 in 2009.Recognising the growth and investmentpotential in the services sector, theGovernment has liberalised 27 servicessub-sectors, with no equity conditionimposed. These sub-sectors are in theareas of health and social services,tourism services, transport services,business services, and computer andrelated services. The Government will beprogressively undertaking liberalisation ofthe other services sub-sectors.

According to UNCTAD’sWorld InvestmentReport 2009, global FDI inflows areexpected to recover moderately in 2010,before gaining momentum in 2011. Giventhe improving global economic andinvestment environment and the forecastfor the Malaysian economy to grow 2.0 -3.0 per cent in 2010, foreign investmentsin Malaysia are expected to be sustainedin 2010.

In-line with the Government’s move to anew economic model based oninnovation, creativity and high value-added activities, the emphasis will be onattracting quality investments inknowledge and technology-intensiveprojects which may not necessarily

114

INVESTMENT OUTLOOK


5

9 Approved statistics for the services sectors are based on projects approved for the period January-September 2009,except for projects approved by MITI/MIDA and MSC status companies approved by MOSTI which are for thewhole of 2009.

require large investments. Greentechnology including renewable energyhas been identified as a growth area bythe Government. This technology will notonly assist in protecting the environment butwill also provide business opportunitiesand a competitive edge for the country.Efforts will also be intensified to target andattract industries in which Malaysia hasstrong foundations as well as new growthareas such as automotive, aerospace,renewable energy, electronics, petrochemical,biotechnology, machinery and equipmentand medical equipment.

To sustain the levels of investment inflowsinto the manufacturing as well as theservices sectors, the Government wouldcontinue to respond to local and globalchallenges to maintain the country’scompetitiveness. In this regard, theGovernment will ensure that the investmentenvironment remains conducive andcompetitive particularly in terms ofdelivery system, cost of doing business,provision of tax incentives, infrastructureas well as availability of skilled andknowledge workforce.



A-1 Malaysia: Performance of the Manufacturing and Services Sectors 2009

Appendix1

APPROVEDMANUFACTURINGPROJECTS,2009AND2008

2009

2008

2009

2008

2009

2008

Number

471

548

295

371

766

919

PotentialEmployment

39,706

58,518

24,624

42,655

64,330

101,173

TotalProposedCapitalInvestment(RM

million)

22,051.4

41,992.0

10,585.4

20,793.0

32,636.8

62,785.0

-Local(RMmillion)

5,654.9

7,769.4

4,837.2

8,916.8

10,492.1

16,686.2

-Foreign(RMmillion)

16,396.5

34,222.6

5,748.2

11,876.2

22,144.7

46,098.8

New

Expansion/

Total

Diversification

A-2Malaysia: Performance of the Manufacturing and Services Sectors 2009

Appendix2

NEWMANUFACTURINGPROJECTSAPPROVEDBYSIZEOFCAPITALINVESTMENT,2009AND2008

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital

Number

Investment

Investment

Investment

Number

Investment

Investment

Investment

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

SizeofCapital

Investment

2009

2008

LessthanRM

2.5million

103

111.0

21.6

132.6

119

157.2

11.0

168.2

RM2.5million-<RM

5.0million

66189.8

42.3

232.1

82247.2

39.2

286.4

RM5.0million-<RM

10.0million

113

603.9

190.5

794.5

104

558.2

170.9

729.1

RM10.0million-<RM

50.0million

143

1,887.3

1,038.9

2,926.2

187

2,398.7

1,324.7

3,723.4

RM50.0million-<RM

100.0million

15395.5

620.0

1,015.5

21786.2

637.9

1,424.1

RM100.0million-<RM

500.0million

281,787.7

3,350.5

5,138.2

242,465.2

2,527.0

4,992.2

RM500.0million-<RM

1.0billion

--

--

5671.8

2,248.1

2,919.8

RM1.0billion&Above

3679.8

11,132.5

11,812.3

6484.9

27,263.9

27,748.8

TOTAL

471

5,654.9

16,396.5

22,051.4

548

7,769.4

34,222.6

41,992.0


Appendix3

APPROVEDMANUFACTURINGPROJECTSBYINDUSTRY,2009AND2008

NumberEmployment

Domestic

Foreign

TotalCapital

Number

Employment

Domestic

Foreign

TotalCapital

InvestmentInvestment

Investment

Investment

Investment

Investment

(RMmillion)(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

2009

2008

Industry

Chemicals&ChemicalProducts

773,981

1,341.9

7,037.7

8,379.6

702,864

1,435.4

1,221.1

2,656.5

Non-MetallicMineralProducts

272,860

1,099.0

5,316.0

6,415.0

281,150

746.8

521.7

1,268.5

Electronics&ElectricalProducts

115

16,757

770.0

3,975.9

4,745.9

132

34,196

440.9

17,332.1

17,773.0

BasicMetalProducts

303,784

2,151.9

435.3

2,587.2

538,289

5,321.6

20,446.6

25,768.2

FoodManufacturing

695,512

1,037.6

934.2

1,971.8

876,029

1,711.2

1,070.2

2,781.5

TransportEquipment

544,563

864.9

541.0

1,405.9

737,732

2,036.9

853.1

2,890.0

FabricatedMetalProducts

995,873

595.0

775.0

1,370.0

105

5,397

518.8

554.6

1,073.4

Machinery&Equipment

955,613

602.7

637.2

1,239.9

935,377

738.2

519.3

1,257.6

PetroleumProducts

8174

719.1

460.2

1,179.3

16487

1,503.0

1,246.6

2,749.6

(Inc.Petrochemicals)

PlasticProducts

422,190

221.0

549.8

770.8

605,687

424.4

211.4

635.8

Scientific&MeasuringEquipment

191,541

202.1

312.9

515.0

182,056

141.1

378.9

520.1

Paper,Printing&Publishing

201,253

186.4

315.9

502.3

262,237

430.2

480.3

910.5

Beverages&Tobacco

3847

78.2

315.0

393.2

3164

27.6

60.2

87.8

Textiles&TextileProducts

91,345

108.3

225.3

333.6

183,090

105.4

303.0

408.4

Wood&WoodProducts

312,375

221.9

96.8

318.7

375,052

433.6

496.6

930.2

RubberProducts

222,064

92.5

127.9

220.4

375,790

407.4

314.5

721.9

Furniture&Fixtures

312,696

132.5

42.1

174.6

454,605

197.9

17.8

215.6

Leather&LeatherProducts

2130

13.3

-13.3

--

--

-

Miscellaneous

13772

54.0

46.6

100.6

18971

66.0

70.7

136.6

TOTAL

766

64,330

10,492.1

22,144.7

32,636.8

919

101,173

16,686.2

46,098.8

62,785.0


Appendix4

APPROVEDMANUFACTURINGPROJECTSWITHINVESTMENTSOFRM100MILLIONANDABOVE,2009

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital

NumberInvestmentInvestmentInvestmentNumberInvestmentInvestmentInvestmentNumberInvestmentInvestmentInvestment

(RMmillion)(RMmillion)(RMmillion)



Industry

New

Expansion/Diversification

Total

Chemicals&ChemicalProducts

9461.9

6,503.5

6,965.5

2160.8

165.1

325.9

11622.7

6,668.7

7,291.4


2147.7

5,199.3

5,347.0

1735.5

-735.5

3883.2

5,199.3

6,082.5

Electronics&ElectricalProducts

6340.5

440.0

780.4

7-

2,503.8

2,503.8

13340.5

2,943.7

3,284.2

BasicMetalProducts

2168.1

85.9

254.0

21,655.0

91.0

1,746.0

41,823.1

176.9

2,000.0

PetroleumProducts(Including

1679.8

453.2

1,133.0

--

--

1679.8

453.2

1,133.0

Petrochemicals)

TransportEquipment

1320.1

-320.1

2272.6

330.7

603.3

3592.7

330.7

923.4

FoodManufacturing

1-

229.0

229.0

2137.4

380.1

517.5

3137.4

609.1

746.5


2-

444.4

444.4

--

--

2-

444.4

444.4

PlasticProducts

230.0

393.5

423.5

--

--

230.0

393.5

423.5

Beverages&Tobacco

177.0

311.0

388.0

--

--

177.0

311.0

388.0

Scientific&

2156.0

56.0

212.0

1-

135.0

135.0

3156.0

191.0

347.0

MeasuringEquipment


186.4

201.5

287.9

--

--

186.4

201.5

287.9


--

--

2-

267.9

267.9

2-

267.9

267.9

Machinery&Equipment

1-

165.8

165.8

--

--

1-

165.8

165.8

TOTAL

312,467.5

14,483.1

16,950.6

192,961.2

3,873.7

6,834.9

505,428.7

18,356.8

23,785.5


Appendix5

APPROVEDNEWANDEXPANSION/DIVERSIFICATIONMANUFACTURINGPROJECTSBYINDUSTRY,2009AND2008

New

Expansion/

Total

New

Expansion/

Total

Diversification

Diversification

2009

2008

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

NumberInvestment

NumberInvestmentNumberInvestment

NumberInvestment


(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

Industry

Chemicals&

417,391.5

36988.1

778,379.6

351,302.4

351,354.1

702,656.5

ChemicalProducts


195,607.7

8807.2

276,415.0

13189.3

151,079.2

281,268.5

Electronics&

571,629.3

583,116.6

115

4,745.9

4710,445.4

857,327.5

132

17,773.0

ElectricalProducts

BasicMetalProducts

18595.8

121,991.3

302,587.2

3121,000.6

224,767.6

5325,768.2

FoodManufacturing

48891.9

211,079.9

691,971.8

451,327.6

421,453.8

872,781.5

TransportEquipment

25551.9

29854.0

541,405.9

481,554.5

251,335.5

732,890.0


66995.6

33374.3

991,370.0

82889.0

23184.4

105

1,073.4

Machinery&Equipment

72902.0

23338.0

951,239.9

68919.4

25338.1

931,257.6

PetroleumProducts

41,165.9

413.3

81,179.3

81,326.3

81,423.3

162,749.6

(Incl.Petrochemicals)

PlasticProducts

22624.0

20146.8

42770.8

37460.0

23175.8

60635.8

Scientific&

10304.0

9211.0

19515.0

11377.9

7142.2

18520.1

MeasuringEquipment


12201.1

8301.3

20502.3

20872.2

638.3

26910.5

Beverages&Tobacco

2389.2

14.0

3393.2

13.4

284.4

387.8


9333.6

--

9333.6

8171.0

10237.3

18408.4

Wood&WoodProducts

22158.1

9160.6

31318.7

21541.6

16388.6

37930.2

RubberProducts

9107.1

13113.2

22220.4

23307.4

14414.5

37721.9

Furniture&Fixtures

26122.5

552.0

31174.6

37199.0

816.7

45215.6


--

213.3

213.3

--

--

--

Miscellaneous

980.2

420.3

13100.6

13104.9

531.8

18136.6

TOTAL

471

22,051.4

295

10,585.4

766

32,636.8

548

41,992.0

371

20,793.0

919

62,785.0


Appendix6

APPROVEDMANUFACTURINGPROJECTSWITHMALAYSIANMAJORITY*OWNERSHIPBYINDUSTRY,2009AND2008

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

NumberInvestment


NumberInvestment


(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

Industry

New

Expansion/

Total

New

Expansion/

Total

Diversification

Diversification

2009

2008

BasicMetalProducts

15366.6

91,862.9

242,229.5

22762.0

194,043.6

414,805.6

Chemicals&

31673.4

20600.4

511,273.8

27997.8

20524.6

471,522.5

ChemicalProducts

PetroleumProducts

41,165.9

22.6

61,168.6

6718.2

41,256.8

101,975.0

(Incl.Petrochemicals)

Non-Metallic

15365.4

2750.5

171,115.9

9144.1

3711.4

12855.5

MineralProducts

FoodManufacturing

42609.2

14505.8

561,115.0

441,311.0

21583.9

651,894.8

TransportEquipment

22480.9

20487.8

42968.7

35506.8

191,245.5

541,752.3

Electronics&

33656.0

16177.5

49833.5

26184.0

32286.6

58470.6

ElectricalProducts

MachineryManufacturing

49440.6

12179.1

61619.6

43529.4

17193.7

60723.0


49371.7

16219.6

65591.2

64410.0

12105.9

76515.9

Wood&WoodProducts

18130.7

593.7

23224.5

16259.8

11126.3

27386.1


11176.6

412.9

15189.5

18366.2

415.4

22381.6

PlasticProducts

15119.5

1263.3

27182.8

28355.2

1149.2

39404.4

Scientific&

8145.0

12.0

9147.0

4103.1

210.2

6113.3

MeasuringEquipment

Furniture&Fixtures

25117.7

216.1

27133.8

35193.1

816.7

43209.8

RubberProducts

893.9

319.5

11113.3

18160.7

8240.0

26400.7


--

213.3

213.3

--

--

--


413.1

--

413.1

5109.5

54.8

10114.3

Beverages&Tobacco

11.2

--

11.2

13.4

--

13.4

Miscellaneous

863.6

27.6

1071.2

1263.0

29.3

1472.3

TOTAL

358

5,990.9

142

5,014.6

500

11,005.5

413

7,177.3

198

9,423.9

611

16,601.1

* Projectswith

Malaysian

equityow

nershipofmorethan

50percent.


Appendix7

APPROVEDPROJECTSINTHEENGINEERINGSUPPORTINGINDUSTRYBYSUB-SECTOR,2009

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital





Sub-sector

New


Total

Moulds,Tools&Dies

1127.9

23.5

51.4

1086.7

14.7

101.4

21114.7

38.2

152.8

Machining

1879.9

117.2

197.2

825.7

5.2

30.9

26105.6

122.4

228.1

Stamping

--

--

1-

0.4

0.4

1-

0.4

0.4

Casting

213.8

5.8

19.6

28.0

2.2

10.2

421.8

8.0

29.8

SurfaceEngineering

918.0

15.4

33.4

--

--

918.0

15.4

33.4

HeatTreatment

12.7

2.7

5.4

10.0

0.2

0.2

22.7

2.9

5.6

Forging

--

--

10.1

3.9

4.0

10.1

3.9

4.0

TOTAL

41142.4

164.7

307.0

23120.5

26.6

147.1

64262.9

191.3

454.2


Appendix8

APPROVEDPROJECTSINELECTRICAL&ELECTRONICSINDUSTRYBYSUB-SECTOR,2009

Sub-sector

New


Total

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital

Domestic

Foreign

TotalCapital





ConsumerElectronics

341.0

-41.0

45.8

370.6

376.5

746.8

370.6

417.4

ElectronicComponents

13120.0

597.2

717.1

1989.5

2,198.1

2,287.5

32209.4

2,795.2

3,004.6

IndustrialElectronics

12139.8

186.5

326.3

1349.6

36.3

85.9

25189.3

222.9

412.2

ElectricalProducts

29284.9

260.0

544.9

2239.6

327.2

366.8

51324.5

587.1

911.6

TOTAL

57585.6

1,043.7

1,629.3

58184.4

2,932.2

3,116.6

115

770.0

3,975.9

4,745.9


Appendix 9MANUFACTURING PROJECTS APPROVEDWITH FOREIGN PARTICIPATION BY SOURCE, 2009 AND 2008

Foreign ForeignNumber Investment Number Investment

(RM) (RM)

Country

*** The number of projects approved figures are not totalled to avoid double counting.

2009 2008

Japan 54 7,041,393,073 63 5,594,869,207

Hong Kong 7 5,315,671,056 7 83,557,592

USA 19 2,344,987,246 22 8,668,976,778

Singapore 92 1,992,453,506 112 2,004,260,964

Taiwan 32 716,094,564 32 911,617,377

Netherlands 21 479,696,932 19 1,795,674,697

Korea,Republic 11 455,522,339 9 197,619,840

Germany 14 424,977,489 19 4,438,254,903

Luxembourg 3 396,899,046 2 220,717,315

British Virgin Islands 11 375,336,380 6 1,230,417,087

Sweden 12 352,312,858 8 62,897,601

United Kingdom 24 325,774,938 23 850,464,793

Australia 13 323,146,625 20 13,105,834,743

Norway 2 170,798,974 2 941,940

China 17 162,221,544 17 35,655,186

Iran 3 151,458,933 1 2,863,284

Denmark 3 137,631,869 7 123,343,707

Finland 1 123,795,000 - -

Switzerland 8 85,912,790 8 873,227,170

Canada 2 85,862,000 1 330,000

India 8 82,834,936 8 170,975,614

United Arab Emirates 1 73,472,984 5 90,877,420

Others 72 526,421,830 130 5,635,397,312

TOTAL *** 22,144,676,912 *** 46,098,774,530


Appendix10

APPROVEDMANUFACTURINGPROJECTSBYSTATE,2009AND2008

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

TotalCapital

NumberInvestment


NumberInvestment


(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

(RMmillion)

State

New

Expansion/

Total

New

Expansion/

Total

Diversification

Diversification

2009

2008

Sarawak

155,894.3

102,556.4

258,450.8

2213,718.9

171,450.0

3915,168.9

SelangorD.E.

182

3,181.7

963,577.9

278

6,759.6

201

6,323.3

100

5,517.7

301

11,840.9

Sabah

165,463.7

9200.6

255,664.3

29609.8

11354.6

40964.4

JohorD.T.

822,992.2

681,071.3

150

4,063.4

9310,100.1

801,611.6

173

11,711.7

Penang

611,368.3

43796.9

104

2,165.2

843,425.7

676,730.6

151

10,156.3

KedahD.A.

26701.1

14794.9

401,496.1

26352.5

202,214.9

462,567.3

PerakD.R.

29321.5

18572.4

47893.9

262,135.3

24994.7

503,130.0

Melaka

14458.5

9434.2

23892.7

283,554.4

1380.1

413,634.5

NegeriSembilanD.K.

15685.1

15172.5

30857.6

13380.6

14765.1

271,145.8

PahangD.M.

12491.0

5113.9

17604.8

11867.3

12213.5

231,080.7

TerengganuD.I.

6338.5

3167.3

9505.8

4313.2

5679.1

9992.3

KualaLumpur

10139.2

416.5

14155.7

8104.0

413.8

12117.8

KelantanD.N.

316.2

1110.7

4126.9

117.6

266.0

383.6

PerlisI.K.

--

--

--

179.0

191.3

2170.3

Labuan

--

--

--

110.3

110.2

220.5

TOTAL

471

22,051.4

295

10,585.4

766

32,636.8

548

41,992.0

371

20,793.0

919

62,785.0

Malaysian Industrial Development AuthorityBlock 4, Plaza Sentral, Jalan Stesen Sentral 550470 Kuala Lumpur, MalaysiaTel: (603) 2267 3633Fax: (603) 2274 7970E-mail: [email protected]: www.mida.gov.my

Documents

Manufacture&Service Performance Report 2009