MARKET OPPORTUNITIESMARKET OPPORTUNITIESIN MALAYSIA IN MALAYSIA

Date : 18th November 2004By : Peter Phang

Director, Malaysia

Malaysia: Vital StatisticsMalaysia: Vital Statistics

Population( 3nd Quarter,2004) : 25.72 million

Gross Domestic Product/ : Rm109,600 MillionGross National Income(2nd Quarter,2004)

GDP Growth Rate : 7.8%(Whole Year 2004, Estimate)

Per Capital : Rm16,000 or

Gross National Income Per year USD 4200.00

Total Export : Rm 310 Billion(First 8 Months Of 2004)

Total Import : Rm 257 Billion(First 8 Months of 2004)

Balance of Trade : Rm 53 Billion

MAJOR EXPORT (2003)MAJOR EXPORT (2003)

Product (Top 8)Product (Top 8)Product Value

1) Transistors, Valves,etc Rm 85 Billion

2) Automatic Data Processing Equipment Rm 40 Billion

3) Parts, Accessories For Office Machines Rm 23 Billion

4) Telecommunications Equipments Parts Rm 20 Billion

5) Fixed Vegetable, fats, oils, crude, refine, RM 19 Billion

not soft

6) Petroleum oils, Crude Rm 16 Billion

7) Natural Gas RM14 Billion

8) Electrical Switcher relays, circuits RM12 Billion

MAJOR IMPORTS (2003)MAJOR IMPORTS (2003)

Product (Top 8)Product (Top 8)Products Value

1. Transistors, valves etc RM 95 Billion

2. Parts & Accessories for Office Machines RM17 Billion

3. Electrical Switches Relays, Circuits etc RM12 Billion

4. Telecommunications Equipment

& Parts etc. RM11.8 Billion

5. Electronic Machine Apparatus RM10 Billion

6. Petroleum Products Rm 8.7 Billion

7. Automatic Data Processing Equipment Rm 7 Billion

8. Petroleum Oils,Crude Rm 6 Billion

Trade Statistics between Trade Statistics between Hong Kong & MalaysiaHong Kong & Malaysia

o Malaysia is the 9th trading partner of Hong Kong, both in 2003 and from Jan- August 2004

o Total trade in 2003 was HKD 60 Billion

Trade Summary in 2003 and Trade Summary in 2003 and From Jan- Aug 2004 From Jan- Aug 2004 Between Hong Kong And MalaysiaBetween Hong Kong And Malaysia

2003(HKD) Jan –Aug 2004 (HKD)

% Change 04/03

(Jan- Aug)

Total Export

- Domestic Export

- Re-Exports

15.5 Billion

1.2 Billion

14.2 Billion

11.7 Billion

0.9 Billion

10.8 Billion

+ 19.6%

+ 28.9%

+18.8%

Imports

(Of Which re-exported)

44.6 Billion 34.3 Billion +21%

Total Trade 60 Billion 46 Billion + 20%

Major Total Export To MalaysiaMajor Total Export To Malaysia(Jan – Aug 2004)(Jan – Aug 2004)

Product Value (HKD)

Telecommunications Equipments & Parts 2.7 Billion

Parts & Accessories for Office Machines 1.8 Billion

Semi Conductors, Electric Values & tubes, ETC 1.3 Billion

Electrical Apparatus for Electrical Circuits 0.8 Billion

Electric Power Machinery & Parts 0.4 Billion

Audio & Video Recorders & Players 0.3 Billion

Electrical Machinery & Apparatus 0.28 Billion

Watches & Clocks 0.2 Billion

Major Imports From Malaysia Major Imports From Malaysia

(Jan – August 2004) :- (Jan – August 2004) :-

Product Value (HKD)

Semi Conductors, Electric Values & tubes, ETC 10 Billion

Parts & Accessories for Office Machines 7.7 Billion

Telecommunications Equipments & Parts 2.5 Billion

Computers 1.5 Billion

Petroleum oils (other than Crude) 1.3 Billion

Polymers Of Styrene 0.9 Billion

Electrical Machinery & Apparatus 0.8 Billion

Fixed Vegetable Fats / Oils 0.5 Billion

Malaysia & The World Trade Malaysia & The World Trade OrganizationOrganization

Malaysia is a Founding Member of the work trade organization (WTO) by virtue of its membership in GATT since 1957.

o Active participation in international trade trough WTO has helped to Transform Malaysia from an agro-based to manufacturing based economy.

o For Malaysia, the WTO provides the forum to ensure a fairer and more equitable global trading environment

o The general council (GC) meeting which took place in 2004 concluded that countries with high tariffs on agriculture product to undertake reductions. This decisions would helped to address the high tariffs faced by Malaysia's agriculture products, particularly palm oil. Some of the developing countries which imposed very high bound

rates on palm oil are :

Country Bound Rate

India 300%

Nigeria 230%

Columbia 227%

Thailand 143%

Kenya 100%

Pakistan 100%

For the non-agricultural market access or NAMA, the frame work calls for a reduction or elimination of tariff rates. Which encountered in its export market particularly for the electrical and electronics products (E&E). Examples of markets with very high tariffs for E&E products are :-

County Bound Rate

India 50%

Morocco 40%

Brazil 35%

Columbia 5%

Uruguay 35%

Argentina 34%

Market Access For GoodsMarket Access For Goods

Malaysia was not required to undertake major commitment during the Uruguay Round Negotiations but even then already adopted the liberal and open-import policy reducing duties on many products beyond its WTO commitment.

Malaysia specific commitments in the WTO include :-o Binding of tariffs on 7197 products of which 5900 is non-agriculture and 1297 is agriculture based. Average bound tariffs rate for Malaysia is 14.5% which is lower than many other developing counties such as Thailand (25.7%), Philippines (25.6%), Egypt (37.2%), India (49.8%), Mexico (34.9%).

o Remaining 35% of Malaysia‘s tariffs lines comprising “sensitive” sector which include automotive and most steel products that are still unbound.

Service SectorService Sector

The service sector in Malaysia is of great importance. The service sector contributed to 56.4% to the GAP in 2003 and accounts for more than 50% of total employment in the country.

The Malaysian government is targeting the service sectors as a new source of growth that could contribute to the further diversification of the economy. Malaysia had submitted requests for the markets opening in 45 member countries while 16 countries have submitted request to Malaysia to date for service sectors’ market access The Level of market access offered however is subject to several conditions, which include: o 30% limit on foreign equity holding;o Foreign suppliers are allowed to establish commercial presence only through joint ventures with local firm; and o Limitation on number of foreign personal allowed to provide services.

The sector and sub-sector for which sector specific conditional market access have been offered to foreign service providers are :-o Business Service

- Legal Services

- Accounting, auditing and Bookkeeping Services

- Taxation Services

- Architecture Services

- Engineering Services

- Medical Specialty Services

- Computer and Related Services

- Research and Development Services

- Advertising Services

- Management Consulting Services

- Operational Headquarters (OHQ) Serviceso Communication Services

- Telecommunication Services

- Audio Visual Services

o Construction and Related Engineering Serviceso Financial Services

- Banking Services

- Securities Services

- Insurance Serviceso Health Related Social Services

- Hospital Serviceso Tourism and Travel Related Services

- Hotel, Tourist Resort and Restaurant Services

- Travel Agency and Tour Operator Serviceso Recreational, Cultural and Sporting Services

- Other Entertainment Services

- Sports Events Management Serviceso Transportation Services

- International Maritime Transportation Services

- Maritime Agency Services

- Vessel Salvage And Refloating Services Except On Inland Watero Skills Training Services

Malaysia and AFTAMalaysia and AFTA

AFTAAFTAThe ASEAN Free Trade Area (AFTA) is a collective effort by ASEAN member countries

to reduce/eliminate tariffs on intra-ASEAN trade in the goods sector. The target is to achieve tariffs between 0-5% in 2003 for the six original member countries, Vietnam by 2006, Lao PDR and Myanmar by 2008 and Cambodia by 2010, and eliminate quantitative restrictions and others non-tariffs barriers.

o ASEAN is a huge market with 530 million population.o Malaysian Companies with higher standard of international trade practice and sound government business policy within political stability, continue to be a choice for foreign investors interested in the ASEAN vast market potential.

MALAYSIA’S APPROACH TO FREE MALAYSIA’S APPROACH TO FREE TRADE AGREEMENTS (FTAs)TRADE AGREEMENTS (FTAs)

Malaysia’s Approach :-

Are not confined to liberalisation or market opening but include also non-trade areas such as :-

o Educationo Transporto Science and Technologyo Information and Communication Technology (ICT)o Agriculture

MALAYSIA’S INVOLVEMENT IN FTAS:-

Regional FTAs :-

ASEAN-China ASEAN-Japan ASEAN-India Trans Regional EU-ASEAN Trade Initiative (TREATI)

Bilateral FTAs :-

Malaysia-Japan Malaysia-US TIFA

TEXTILE QUOTA AND MALAYSIA

The Textile and apparel industry which ranked as Malaysia’s fourth largest export earner in 2001 has an export value of over RM10 billion. The industry has a workforce of 150,000 but is still perceived as a labor intensive industry.

Malaysia apparel and textiles companies need to gear up to better themselves when the quota system is removed in 2005.To ensure the industry to compete effectively globally. The Government measures include:

• Improve operational efficiency and productivity• Technology and skills be upgraded• Mergers of industries and corporations• To create more indigenous brands and upgrade its international branding status• To improve upon product design• To have a closer look into the different aspirations of the U.S and European buyers. The U.S buyers are very keen on human rights and ethical compliance issues whereas the European buyers are more environmentally concerned.

Opportunities available for Hong Opportunities available for Hong Kong SMEs :-Kong SMEs :-

1) Capital Equity Markets

- 5 Foreign stockbrokers to be allowed to operate in Malaysia to strengthen the distribution network as well as to increase on liquidity.

- 5 Leading global fund managers to be allowed to operate in Malaysia to enhance fund management expertise.

- 100% Foreign ownership in venture capital companies to increase funding in the ICT sector

2) Agriculture as 3rd Engine of Growth After the Manufacturing and Service Sector

- The move is to increase government income and reduce dependence an import particularly food.

- Government to provide a fund of RM300 Million as seed capital for the commercialization of the agriculture sector. IE = Food Processing

- A further sum of RM1.5 Billion for agricultural projects particularly for the small holder

3) Bio-technology

- The Bio-Valley Strategic plan was developed through a collaboration between the national Bio-technology Directorate and Massachusetts Institute of Technology to

spearhead the Bio-technology industry in Malaysia.

The following are the key research priorities:-

i) Genomic and phonemics

ii) Agriculture

iii) Nutrimental / pharmaceuticals technologies

- Keen in Bio-Technology because it provided enormous economy benefits.

- Many supporting companies and institutions to be formed as a spin-offs.

- Create new jobs in a new field

- Serve as a magnet for foreign investments

- In line with national goal in K-economy development

4) Car Assemblies and related industries

- Malaysia’s car industry is heating up with many new car models launched lately by non-national car companies I.e Hyundai, Kia, Ssanyong etc particularly from South Korea.

- This is the result of many foreign cars are very competitively priced and this has resulted in the National car’s market share been affected considerably.

- We foresee more dynamic influx of foreign cars selling well in Malaysia and this will also create additional demands for auto products such as car accessories, hi-fi systems, alarm systems, etc.

5) Muslims’ Halal Hub

- Malaysia is establing itself as the regional Halal Hub especially in Food.- Presently there are some 262 companies registered with the Malaysian - Islamic Board (JAKIM) as producers are of Halal products.- Malaysia’s strenghts :-

i) International Image among Muslim countriesii) Trusted “Halal” certificationiii) Recognition of JAKIM’s logoiv) Intensive government support

- Hong Kong companies can utilise Malaysia as its platform to manufacture and export Halal products to muslim countries and the Middle East.

CONCLUSION

• With good governance and leadership portrayed by the new Prime Minister, Malaysia is looked set to be progressive and stable as well as more attractive to Foreign Investors.

• The Malaysian economy is moving towards more agricultural based as its 3rd engine of growth.

• Services sector is fast gaining importance.

• Malaysia is striving to become a trading hub in Bio Technology and halal Food / services. ICT and Traditional Electrical & Electronic sectors are still important but showing signs of slowing down.