The Malaysian government is keen to position its self as the rail equipment manufacturing hub in the ASEAN region based on a strong partnership with China, according to recent comments from the Transport Minister. The Transport Minister invited further investments from largest train maker in China, Railway Rolling Stock Corp (CRRC) to meet the requirement of new train sets for railway projects around the country.
Examples of ongoing/ upcoming projects include Gemas-Johor Baru double-tracking, and light rail transit 3 (LRT3). The completion of the Gemas-Johor Baru electrified double-track rail project will be part of the wider west coast electrified track system (ETS) in four years’ time. The MYR 8.9 billion Gemas-Johor Baru double-tracking project involves the construction of 197 km of double tracks, stations, electric trains, depots, land viaduct, bridges, and electrification and signalling systems.
CRRC’s rolling stock plant in Batu Gajah, Perak was established in 2015 with an estimated cost of USD 97 million,and it is the first and sole train manufacturing centre in the ASEAN region. Over 85% of employees at the plant are Malaysian. This plant currently has the capacity to assemble 200 train cars per year solely meant for the Malaysian market, supplying to Keretapi Tanah Melayu Bhd and Prasarana Malaysia Bhd.
But the potential expansion could double its capacity and the plant could start exporting. ASEAN countries most are looking to develop their transportation systems resulting in a strong demand for LRT, metro, suburban rail, locomotive and cargo trains.
(Source: The Edge Prop; Malaysian Reserve)
Malaysia launched the National Policy on Industry 4.0 (Industry4WRD) on 31 October to boost manufacturing sector through the use of technology, in its effort to attract high-tech investments into the country. Prime Minister Dr. Mahathir in his launching speech said that the policy “envisions Malaysia as a strategic partner for smart manufacturing, primary destination for high-tech industries and total solution provider for the manufacturing sector and related services in the region.” The policy is seen as a crucial step in reforming Malaysia to become a developed nation that is equitable, sustainable and inclusive by 2025 or earlier.
Industry4WRD would facilitate the adoption of Industry 4.0 by companies in a systematic and comprehensive manner, with four specific objectives to be achieved. The objectives are to increase the level of productivity in the manufacturing industry per person by 30% from MYR 106,647 (USD 25,435); to increase the absolute contribution of manufacturing sector to the economy from MYR 254 billion (USD 60.6 billion) to MYR 392 billion (USD 93.5 billion); to strengthen the country’s innovation capacity and capability as reflected in the Global Innovation Index ranking, by improving from 35th spot to 30th spot; and to increase the number of high-skilled workers in the manufacturing sector from 18% to 35%.
Primary focus areas of Industry4WRD include catalytic sectors and high growth potential sectors namely Electrical & Electronics, Machinery & Equipment, Chemicals, Aerospace and Medical Devices. Attention is also given to SMEs since they account for 42% of employment and 98.5% of manufacturing sector in the country. It is hoped that disruptive technologies and innovation brought by Industry 4.0 is hoped will be able to transform and improve SMEs so that they remain competitive in their sectors.
The launch of Industry4WRD is perceived as timely, as the country is attempting to break free from its decade-long problem of the middle-income trap. As a manufacturing economy, the country realizes that it must increase its labor productivity level to keep up with neighboring economies in attracting foreign direct investments. With its global productivity ranking becoming stagnant since 2009, Industry 4.0 might be the remedy to propel the country to become a developed nation by 2025.
In the 2019 budget, the government announced a number of measures in support of Industry4WRD. This included allocation of MYR 210 million (USD 50 million) from 2019 to 2021 to support the transition and migration to Industry 4.0 and assisting the first 500 SMEs to carry out the Readiness Assessment to migrate to Industry 4.0 platforms via Malaysia Productivity Corporation and MYR 2 billion (USD 480 million) under Business Loan Guarantee Scheme (SJPP) where the Government will provide guarantees of up to 70% to incentivize SMEs to invest in automation and modernization which forms part of the Industry4.0.
(Sources: The Star; The Straits Times; Ministry of International Trade and Industry, Malaysia)
The Malaysia Digital Economy Corporation (MDEC) together with The Federation of Malaysian Manufacturers (FMM) have announced a partnership to form a Digital Manufacturing Hub. The Digital Manufacturing Hub will be a center of excellence that aims to spearhead the digital transformation of manufacturers in future proofing themselves, and is expected to be a focal place for awareness, adoption and knowledge acquisition in preparation for Industry 4.0.
MDEC will oversee the Digital Manufacturing Hub, which will offer local manufacturers hands-on experience in embedding digital technologies and transformation, and serve as a platform for reskilling human capital in this field. Many Malaysian manufacturers, especially small and medium enterprises, are still not ready to operate in the IR4.0 environment and adopt automation process in their business. A key reason for their hesitation is the costs related to adopting Industry 4.0 initiatives, such as investment in automation and IT. Malaysia is regarded as stuck at the level of Industry 3.0 in terms of manufacturing technology, with many companies preferring to rely on foreign workers and labor-intensive processes.
FMM is also looking into working closely with the other partners such as Singapore Manufacturing Association (SMA) to increase the manufacturing competitiveness small and medium enterprises (SME) through IR 4.0 initiative adoption.
(Sources : Bernama; Daily Express; The Star)
According to The Star, GSR Capital and Envision Energy has outlined a USD 10 billion investment in the project, spread over a five-year period. The proposal was reportedly submitted to the government ahead of the Mahathir’s current visit to China. The framework of the plan, which was seen by the publication, includes the setting up of the new national car plant as well as a regional EV automobile hub in southern Perak, where a major auto city project was planned by the previous government.
Envision is a renewable energy company headquartered in Shanghai, while GSR Capital is a Hong Kong-based private equity firm. The proposal made by the two companies, which will work in partnership with Malaysian company Concept Fields, also outlines the participation of Nissan, through Envision. The latter holds a 75% stake in Nissan’s electric vehicle unit AESC, which will be brought in to work together with GSR Capital to set up the regional EV manufacturing facility.
The project will be spearheaded by GSR Capital, which will be facilitating FDI of about USD 10 billion into Malaysia, while AESC will provide the technology to produce an electric car. Supposedly, EV battery production is also an integral part of the plan. Aside from manufacturing, the proposal also outlines the establishment of an education hub – to train skilled employees locally – and the creation of R&D facilities. The JV project would also result in the creation of 15,000 new jobs.
The scope of the project, should it happen, would also fall in line with the government’s stand on how it is financed. Last week, finance minister Lim Guan Eng reiterated that the third national car project will be funded by the private sector and not with public funds.
(Source: The Star Online; The Coverage)
The Malaysian Goods and Services Tax (GST) that has been repealed on the 1st of June, is being replaced by Sales and Services Tax (SST), that will take effect on the 1st of September 2018, after Malaysians have enjoyed a 3 month ‘tax holiday’.
Only companies with annual sales of at least MYR 500,000 (USD 122,000) of annual sales will be covered under the new proposed regime compared to the previous annual turnover threshold of MYR 100,000 (USD 24,000). The higher annual turnover threshold will also apply to manufacturers that carry out sub-manufacturing activities, for whom the previous threshold stood at a low MYR 20,000 (USD 4,900)
During the second reading of the Sales Tax Bill 2018 in the Parliament the Finance Minister said that the higher threshold would mean that 27,456 manufacturers would have to be registered under the scope of the new SST, signficantly lower than the 32,725 manufacturers that had to register under the GST regime. This would reduce the cost of tax compliance and administration for small-sized manufacturers.
Tax-free input facilities will continue to be extended to manufacturers, on purchases of raw materials, components, packaging materials and manufacturing aids through imports or from registered manufacturers.
Replacing the GST with SST will also reduce the financial burden on consumers and is estimated by the World Bank to increase Malaysia’s GDP by 0.2%. The Finance Minister, The Honourable Lim Guan Eng claims that the SST will ensure that Malaysian exports are competitive, based on several benefits for registered manufacturers, including tax free input. He also claimed that the SST will assist in reaching the governments expectations of a 5.5% - 6% growth in GDP for 2018. Unlike the GST, that suffered from delayed tax refunds, the SST is not a refund-based regime. Items proposed for exemption from SST include household groceries, motorcycles below 250cc, sanitary pads, baby diapers, baby food, milk bottles, adult diapers, medical equipment for the elderly amongst others. The rates for SST are set at 10% for sales and 6% for services, the same rate charged prior to the introduction of GST on the 1st of April in 2015.
(Sources: The Edge Markets; The Malaysian Reserve; New Straits Times)
UMW Holdings, a MYR 9.9 billion (~USD 2.5 billion) Malaysian based multinational conglomerate has entered into an transaction agreement to establish a joint venture with Komatsu Limited, a USD 17.8 billion Japan-based multinational conglomerate, which is the second largest construction and mining equipment manufacturer globally.
The joint venture (JV) between UMW Holdings and Komatsu Limited began in 2017 when a Letter of Intent was inked between both parties that detailed their intentions to form a strategic partnership in the form of a JV in the heavy equipment industry, based on their long-standing business relationship.
This JV will result in a JV Company (JVC) aimed at expanding their footprint of the heavy machinery market into fast developing Southeast Asian markets namely Malaysia, Brunei, Singapore, Myanmar and Papua New Guinea.
Shares in the JVC will be held mainly by UMW Holdings with a 74% stake while Komatsu Limited will hold the remaining 26%. President & Group Chief Executive Officer of UMW Holdings Berhad, Badrul Feisal bin Abdul Rahim, said that the proposed partnership will allow UMW to move up the value chain from a pure distributor to a JV partner. He added, "We look forward to the enhanced opportunities that this JV will bring to both organisations especially via the expansion of new equipment variants and improvement of value-added services to maintain customers’ loyalty and strengthen the market share in the territories that we operate."
(Sources: The Edge Markets; New Straits Times Malaysia; UMW Holdings; The Sun Daily; Mining Magazine Bernama; Malaysian Investment Development Authority)
Motosikal Dan Enjin Nasional Sdn Bhd (Modenas), a member of DRB-Hicom Bhd, has entered into a strategic partnership with India-based Bajaj Auto Ltd (BAL), aiming to capture a bigger slice of the motorbike segment by entering into the street bike segment.
BAL is the fourth largest three-wheeler and two-wheeler manufacturer in the world, and the Bajaj brand has good recognition across several countries. DRB-Hicom group managing director Datuk Seri Syed Faisal Albar said that the move will strengthen the brand and help it capture a larger share of the motorbike market.
Modenas has been bringing in Bajaj's models into the Malaysian market. Till now, it has brought in three of Bajaj’s models, namely the V15, Pulsar NS 200 and Pulsar RS 200 for the street bike segment. It also recently introduced Bajaj’s Dominar 400 to the Malaysian market in early 2018.
The collaboration will be initiated in stages including distribution, and technology transfer through the development of a dedicated assembly hub in the Modenas plant in Gurun, Kedah. Modenas’s production capacity at its Gurun plant was at 50%. The tie-up with BAL is expected to ramp up Modenas’ production capacity and reduce costs.
In addition, Modenas and BAL also have plans to penetrate international markets in ASEAN and beyond., using the Modenas brand.
Previously, Modenas entered into a venture with Taiwanese scooter brand Kymco in 2017, which was well-received by the market.
(Sources: New Straits Times, The Star, Modenas)
The Ministry of International Trade and Industry (MITI) and the Automotive Institute of Malaysia (MAI), an agency under MITI, have begun to review the National Automotive Policy (NAP) to continue supporting the transformation of the automotive industry in Malaysia. The NAP 2018 encompasses four main areas, namely new generation vehicles, mobility, Industrial Revolution 4.0 and artificial intelligence.
The development of Malaysia’s automotive industry was previously guided by NAP 2014 and NAP 2017. Both policies have significantly contributed to the development of the automotive industry. NAP 2014 was holistically developed in tandem with the development of the transportation ecosystem in an effort to make Malaysia more competitive on the global scale. Since the launch of NAP2014, 27,125 new jobs were created by Decemeber 2017, a 4.93 percent increase from 25,850 recorded in 2016. In addition, 31 percent of the jobs created provided skilled and highly skilled employment – comprising technicians, executives, engineers and designers. 29,641 new jobs expected to be created in 2018.
According to statistics from MITI, more than half of the new cars sold in Malaysia in 2017 were Energy Efficient Vehicles (EEV). EEV penetration increased for its fourth straight year, reaching 52 percent of vehicles sold in Malaysia in 2017. This figure surpassed the 50 percent target of EEV penetration set by the government last year. EEV production also increased from 247,912 to 308,807 in 2016 and 2017 respectively.
EEV, together with Mass Rapid Transit, Light Rail Transit, High Speed Rail and East Coast Rail Link and improved highways, will be counted upon to create a sustainable transportation system in the country.
Malaysia, through MAI, has also launched Mobiliti Digital Optimisation Services (MDOTS), an initiative to collect, analyse and interpret information into smart data which can be used for better decision making in developing policies.
(Sources: The New Straits Times, Malaysian Digest, The Edge Markets, MITI Website)
JLL Malaysia Sdn Bhd, a subsidiary of Japan Lifeline Co. Ltd. and a lead manufacturer of medical devices, specialising in the cardiovascular field, has announced in March 2018 its plans to invest RM 70 million in Penang over the next two years. The investment will include the manufacturing equipment and acquisition of a 1.6-hectare plot at Penang Science Park, Bukit Minyak, for the construction of a medical device factory. The factory will produce medical devices for cardiac rhythm management, electrophysiology or ablation and cardiovascular surgery, such as balloon catheters, electro-physiological catheters, ablation catheters and open stent grafts, for the Japanese market.
The company has chosen Penang as the location for its factory because it offers a strategic location with developed infrastructure and ample skilled human resources. JLL Malaysia has already signed a sale and purchase agreement with Penang Development Corporation (PDC) for the land. The factory is expected to begin operations in early 2020 and will create 50 high-income jobs at the start.
Penang is home to a third of medical device companies in Malaysia and accounted for a third of the total value of medical devices exported from Malaysia at MYR 17.8 billion (USD 4.6 billion) in 2016. Japanese investors were the third largest foreign direct investment group in the manufacturing sector to Penang with investment value of MYR 5.33 billion (USD 1.37 billion) between 2008 and June 2017.
(Sources: The Star Online)
France's PSA Group and Malaysia's Naza Corporation Holdings have announced the signing of a share sale agreement and a joint venture agreement, officially establishing shared operation of the Naza Automotive Manufacturing (NAM) plant in Gurun, Kedah. This is PSA's first manufacturing hub in ASEAN, and are part of its plans to boost its presence in the region.
Groupe PSA, as a global automotive player and the second largest carmaker in Europe, is confident and committed to the Malaysian and other ASEAN markets, holding majority stake in the business operations of Naza Automotive Manufacturing (NAM). The Naza Group will have sole responsibility for the distribution of Peugeot, Citroën and DS Automobiles in the domestic market and, with Groupe PSA, will explore distribution prospects in other ASEAN markets to address the potential 680 million customers in the region, where the automotive equipment rate is growing.
The shared manufacturing plant in Kedah would have a capacity of 50,000 vehicles. The first vehicles are set to be produced in 2018 for Peugeot and in 2019 for the Citroën model. The JV aims to export 20,000 cars from the plant in the next three years
(Source: Naza Group)
Malaysia's national carmaker Proton Holdings Bhd is seeking to acquire a piece of land in Tanjung Malim, Perak, measuring 1,500 acres, to venture into the automotive parts market. If the land deal goes through and plans for it to be developed into an auto parts industrial zone materialize, Tanjung Malim will serve as a new technology park in Malaysia, strategically located between Kuala Lumpur and Penang.
Given that China’s Zhejiang Geely Holding Group Co Ltd now holds 49.9% stake in Proton, promoting the auto parts manufacturing industry additionally means local manufacturers could serve not just the Proton market, but also that of Geely and Volvo’s. The proposed deal would also bode well for the government’s initiative as outlined in Budget 2018, which is to develop Tanjung Malim into a Proton City, Educity and Youth City.
In November 2017, the government allocated some MYR 200 million (USD 51 million) for the relocation of Proton’s development plant from Shah Alam, Selangor, to Tanjung Malim in Perak.
(Sources: The Edge Markets; The Malaysian Reserve; The Star Online)
Japanese pulp and paper giant, Oji Holdings Corporation recently announced its plan to set up a new containerboard manufacturing machine at its Malaysian subsidiary GS Paperboard & Packaging Sdn Bhd (GSPP) in Selangor. GSPP is jointly owned by Oji Holdings and Japanese conglomerate Marubeni Corporation, with the latter holding 25% of the stake in the company. The new machine is expected to commence operation in April 2021.
The investment amount required for the machine is estimated at around JPY 35 billion (USD 315 million), together with the associated equipment for energy supply and water treatment. The machine will produce linear and corrugating medium with annual production volume of up to 450,000 metric ton. According to the company, the demand for both containerboard paper and corrugated carton is resilient in the region, with Malaysia being a net importer of containerboard paper amounting to 300,000 metric ton per year.
Much of GSPP’s activities revolve around containerboard paper, which contributes about 45% or MYR 800 million (USD 201.3 million) of the total revenue of Oji Holdings’ operations in Malaysia in FY2018. The total revenue generated for the said financial year is estimated at MYR 1.8 billion (USD 452.9 million). Another 55% or MYR 1 billion (USD 251.6 million) of the revenue was generated from corrugated carton packaging division. Oji Holdings operates in over 20 sites in South East Asia aside from Malaysia, including in Cambodia, Myanmar, Thailand and Vietnam.
(Sources: Oji Holdings Berhad; The Edge Markets; Pulpapernews.com)
A 50:50 joint venture (JV) between Malaysia’s plantation group United Plantation Berhad and Japan’s Fuji Oil is in the pipeline. The JV, slated to be operational as of June next year, will be known as Unifuji Sdn Bhd, and will be based in Perak. Its main business activities will be the production, sale and export of high value added palm oil fractions.
Under the JV, a high-tech palm oil processing plant which will be utilizing biomass and waste water to produce energy worth MYR 145 million (USD 48 million) will be set up in Ulu Bernam, Perak. The plant, managed by Unifuji, will ensure that Fuji Oil secure the procurement of high quality, traceable and sustainable palm oil from United Plantations, which owns a well-managed 18,000 ha plantation area in Malaysia. Aside from catering to the increasing demand from the European market, Fuji Oil will also be actively engaged in the supply of traceable and sustainable palm oil in the Japanese market.
(Sources: MIDA, The Star, Fuji Oil Holdings Inc.)
Fonterra, New Zealand’s largest company, and the world’s biggest dairy processer and exporter, has helped Malaysia develop into the world’s 10th largest exporter of dairy products, without even having a local dairy industry. According to Fonterra, half of the volume of milk that comes out of New Zealand, which is almost 10 billion litres every year, stops in Malaysian ports before reaching the final destinations in Europe, Japan, China or Africa.
Fonterra, which has a 40-year presence in Malaysia, has more than 700 staff across two manufacturing sites, a corporate office and a global shared services centre in Malaysia. It recently upgraded its milk powder manufacturing plant in the country, to boost its manufacturing efficiencies and ensure it continues to meet world class health and safety, and food safety and quality standards. This will allow the plant to blend and pack around 30,000 metric tonnes of milk powder products a year – that is one billion serves of dairy. The improved facility means Fonterra is better placed than ever to meet the growing demand for dairy – not just in Malaysia, but across 13 countries in South East Asia and the Middle East where the site exports its dairy products.
The company sees Malaysia as having strong infrastructure, logistics, and the overall fundamentals that allow it to use the country as a hub across many facets from a supply chain perspective.
Osram Licht AG is set to open its new LED Chip factory in Malaysia in Kulim Hi-Tech Park. The Kulim Hi-Tech Park is a comparably new industrial complex in the south-eastern part of the Malaysian state of Kedah. Osram Licht AG has chosen the Kulim Hi-Tech Park for its new LED chip factory. The site benefits from an expressway and airport connections, and it is located 40 km from the Osram’s sister factory in Penang.
While the company is set to open the new facility on Monday, October 23, 2017, Osram plans to continue construction of the facility in several stages with completion set for 2020. The company contends that once the final phase of building is finished in 2020 the factory in Kulim will be the biggest and most advanced six-inch LED chip manufacturing plant in the world. Once completed, Osram says that the new plant will create over 1,500 Malaysian jobs. The plant will eventually cover 48 acres. The high production volumes at the new facility will help bring costs per LED chip down for the company’s other divisions including Osram Opto Semiconductors.
According to Osram, the product will be superior to the competition both in terms of price and quality. Also, it will be the first ever to combine all of the manufacturing steps involved in LED chip production under one roof.
(Sources: Osram; LightTimes Online)
Fluor Corporation, a leading US-based engineering company, was awarded an engineering, procurement and construction management (EPCM) contract by Petronas Refinery and Petrochemical Corporation for an isononanol plant located in Pengerang, Johor, Malaysia. The project is part of Petronas’ Refinery and Petrochemical Integrated Development (Rapid) project and the mammoth USD 27 billion Pengerang Integrated Complex (PIC) development. The facility, which is expected to commence operations in 2019, will produce 250,000 tons per year of isononanol, which is a key chemical building block in plasticizers used in the automotive and building industries.
The PIC is a keystone project in the Malaysian Government's overall Economic Transformation Programme (ETP). It will position Malaysia to capitalize on the growing demand for energy and petrochemical products in Asia as well as further diversify the PETRONAS portfolio beyond upstream oil and gas and into refined fuels and high value petrochemical products.
(Sources: Fluor; Process-Worldwide.com)
According to the Ministry of Plantation Industries and Commodities Malaysia's export growth for rubber gloves is set to new level, with sales expected to hit MYR 16 billion (USD 3.74 billion) this year a 20% increase compared to the previous year.
The increase in export growth for the first six months in 2017 indicates that the rubber glove sector is on track to a new record in export sales by end of this year. Rubber gloves have been the largest contributor to the Malaysian rubber products industry. The export sales of rubber gloves accounted for over 70% of the total exports of rubber products, amounting to MYR 11.4 billion (USD 2.57 billion) from January to Jun 2017.
Malaysia is currently the world’s largest supplier of rubber gloves followed by Thailand and China. The Ministry of Plantation, together with the Malaysian Rubber Export Promotion Council, anticipates world demand for rubber gloves to increase to 287 billion pieces by 2020, compare to 211 billion pieces recorded in 2016.
(Source: Ministry of Plantation Industries & Commodities)
Malaysian Bioeconomy Development Corporation announced that Malaysia would soon be home to the world’s first bio-based chemical manufacturing plant as industrial biotechnology company Verdezyne prepares for the groundbreaking ceremony of the Verde Palm Plant on 30 July 2017. The 20,000 square feet plant in the state of Johor will use palm oil to produce 10,000 metric tonnes of Dodecanedioic Acid (Diacid) per year. Diacid, which is a renewable bio-based chemical used in almost everything, from automotive parts and toothbrush bristles to cosmetics and fragrances, is much more environmentally friendly and sustainable, and will be an alternative to typical petroleum-derived chemicals. As Malaysia aims to turn the biotechnology sector into one of the key economic drivers in the nation, contributing 5% of the nation’s GDP by 2020, innovations in green and bio-based technologies will be the highlight at the Malaysia Pavilion this week at EXPO 2017.
(Source: Market Realist, New Strait Times)
The Chinese owner of Sweden's Volvo Cars will inject MYR 173 million (USD 40 million) into Malaysia's Proton as part of its purchase of a key stake in the automaker. Geely Holding Group is also paying MYR 280 million (USD 65 million) for 51% of Proton-owned British sports car maker Lotus.
Geely will bring its Boyue SUV platform, estimated to cost MYR 290 million (USD 67.6 million) to Malaysia as part of its acquisition and Proton will also assemble Volvo cars for Geely. Proton Holdings Berhad was founded in 1983 by the Malaysian government to create a domestic auto brand and has a distribution network in key Southeast Asian markets. Its sales have suffered due to growing competition and a reputation for poor quality and bland models. Proton was privatized in 2012 but its new owner, conglomerate DRB-HICOM Berhad, was unable to revive the carmaker.
Geely is one of China's biggest independent auto brands. Founded in 1986 as a refrigerator manufacturer, it started producing motorcycles in the 1990s and launched its first car in 2002. It bought Volvo from Ford Motor Co. in 2010.
(Sources: Geely, Proton)
The Statistics Department shows that Malaysia’s manufacturing sector continues to grow, with sales jumping 13.6% to MYR 65.9 billion (USD 15.3 billion) compared to the same month a year ago. Electrical and electronic (E&E) products; petroleum, chemical, rubber and plastic products; as well as non-metalic mineral products, basic metal and fabricated metal sales contributed to the significant increase in sales value. Together, these products contributed to four-fifths of the manufacturing sector’s sales value. Data also showed a 2.1% increase in the number of employees in the sector for the month of March, while salaries and wages increased 7.8% to MYR 3.6 billion (USD 0.83 billion).
Meanwhile, the industrial production index (IPI), which measures factory output, expanded by 4.6% in March compared to the same month a year ago supported by growth in the manufacturing and mining indices. The electricity index saw a marginal decline.
(Sources: Bernama, Astro Awani News)
Malaysia's manufacturing activity continued to weaken in March, though at a slower pace when compared with a month earlier, as output rose for a second consecutive month. The Nikkei manufacturing purchasing managers' index, a gauge of the country's factory activity, was at 49.5 in March versus 49.4 in February. A PMI reading below 50 indicates a contraction in manufacturing activity, while a reading above signals an expansion.
The latest PMI reading showed manufacturing activity in contraction for the 24th straight month, though the level was the highest since May 2015, according to the survey by IHS Markit. Factory activity was mainly hurt by a contraction in new orders and the first decline in export orders in three months and on the other hand, manufacturing output rose modestly, with higher production used to build warehouse inventories.
(Sources: Nikkei Asian Review, The Star Online)
Malaysia’s industrial output rose 3.5% in January from a year ago, underpinned by gains especially in the manufacturing sector, which was below Bloomberg’s survey of a 5.3% increase. The Statistics Department announced yesterday the industrial production index (IPI) was supported a 4.6% increase in manufacturing, mining 1.2% and electricity 1.3%.
The department said the major sub-sectors which increased in January 2017 were: electrical and electronics products 7.0%, petroleum, chemical, rubber and plastic Products 2.5% and food, beverages and tobacco 7.0%. Meanwhile, the sales value of the manufacturing sector in January 2017 recorded MYR 61.2 billion (USD 14.3 billion), an increase of MYR 5.9 billion (USD 1.4 billion) or 10.7% as compared to MYR 55.3 billion (USD 12.9 billion) a year ago.
(Sources: Reuters, Bernama)
Malaysia has retained its pole position in the Established Index as the most attractive manufacturing market of choice for future relocation according to a Cushman and Wakefield report. The credit goes to Malaysia's infrastructure services, which are conducive to productivity with the quality of infrastructure relatively high, despite some concerns surrounding water availability and power outages.
While other middle-income countries may be catching up with Malaysia in terms of infrastructure standards, a recent report by the World Bank indicated that Malaysia still ranks higher than many of these peers in terms of overall logistics performance in relation to quality of trade and transport infrastructure according to the Manufacturing Risk Index report. Headquartered in Chicago, United States, Cushman & Wakefield provides commercial real estate services to help clients turn fixed assets into dynamic assets. The Manufacturing Risk Index is an annual survey of the manufacturing sector which measures how political, economic, technological and environmental risks are managed during portfolio assessment and site selection by occupiers.
It contains an Established Index which ranks the 30 largest countries by manufacturing output and a Pioneering Index which ranks the top 10 manufacturing locations, by growth, and are less established in terms of output but have the potential to mature as a location of choice. Malaysia, along with Taiwan, China, South Korea, Singapore, Thailand and Japan continued to dominate the top 15, occupying seven places within the top half of the Established Index.
(Sources: Business Insider, Nikkie Review)
Manufacturers have expressed shock over the sudden implementation of the Employer Mandatory Commitment (EMC), which requires that employers pay their foreign workers’ levy. All along, the Federation of Malaysian Manufacturers (FMM) has urged for a consultative approach on changes to government policy which would result in an immediate cost impact to manufacturers.
According to the Statistics Department, the manufacturing sector, as a key economic driver, contributed MYR 626 billion (USD 146 billion) in 2015. Manufacturing accounts for half of the country’s MYR 1.16 trillion (USD 0.2 trillion) economy and more than 80% of its MYR 780 billion (USD 182 billion) in total exports. As it stands, there are unresolved issues on foreign workers, with companies still facing delays in getting approvals to hire them.
Manufacturers reiterated their appeal to the government to adopt a more comprehensive and consistent approach in its foreign worker policy. This levy payment will cost Malaysia more than MYR 4 billion (USD 0.93 billion) per year and this amount will be transferred out from Malaysia,” Lim said in a telephone interview today. FMM is requesting an immediate dialogue between the Home Ministry and the manufacturing industry.
(Sources: The Edge, Bernama)
Malaysia experienced a 39% drop in approved investment in manufacturing sector for the period of January to September 2016, compared to the same period last year. Most of the approved investments came from petroleum products including petrochemicals contributing MYR 9.4 billion (USD 2.2 billion), electrical and electronics products with MYR 7.3 billion (USD 1.7 billion), natural gas with MYR 3.7 billion (USD 0.86 billion) and food manufacturing with MYR 3.3 billion (USD 0.77 billion). Other investments involved are transport equipment, basic metal products, chemical and chemical products, non-metallic minerals, and machinery and equipment. Altogether these investments contributed to 87% of the total approved investments for the sector.
The value of approved domestic investments recorded a 57.8% drop to settle at MYR 21.3 billion (USD 4.96 billion) from January to September 2016. However, the value accrued from foreign investment increased by 12.9% to record MYR 19.4 billion (USD 4.5 billion) during the period. The leading FDI source countries were the Netherlands, China, the UK, Singapore and Japan. The countries collectively contributed to 57% of total FDI approved in the reviewed period for the manufacturing sector.
(Source: The Star)
For the first eight months of 2016, a total investments of MYR 2.4 billion (USD 0.56 billion) is generated from 20 approved manufacturing projects in Malaysia by Chinese companies, making China the second largest investor in the manufacturing sector. Some of China’s large corporations actively investing in the country at the moment include Sinohydro Corporation Ltd., Comtech Solar International, Alliance Steel, China National Machinery Import and Export Corporation, and Longi. Both countries also recorded a 2% increase in total trade for the period between January and June 2016 compared to the same period in the preceding year. Apart from the companies engaged in manufacturing sector, Malaysia also hosts a number of China’s service companies including Huawei Centre of Excellence, Xiamen University, and ZTE Corporation. Malaysia and China are expected to continue forging closer trade and business relationship, riding on readily strong business ties and greater connectivity between the two countries.
(Source: The Borneo Post)
High-end manufacturing sub-sectors are expected to drive the growth in manufacturing sector in Malaysia, which is forecasted to record 5.1% growth annually. Contribution to GDP by the sector is projected at 22.5%, together with total employment rate of 18.2% by 2020. In 2015 manufacturing sector contributed 23% to GDP and 16.5% of total employment. Total gross exports generated from the sector was logged at 80.2%.
Potential high-end manufacturing sub-sectors which require moving up the value chain include aerospace, medical devices, green technology and electrical and electronics (E&E). For each sub-sector a number of initiatives have been put in place by the government to ensure that the sub-sectors’ development would perform up to the projection. Among the challenges beleaguering manufacturing sector in Malaysia are stiff competition from low-cost locations such as China and Vietnam as well as incompetency concerns involving cheap labor.
(Sources: The New Straits Time, Bernama)
AmorePacific Group is expanding internationally, and has been planning to establish an integrated manufacturing plant in Malaysia. The brand new plant is expected to cost around MYR 772 million (USD180 million) to be set up in Iskandar Puteri, Johor, which is one of the five flagship zones of Iskandar Malaysia. Citing the availability of central utility facilities within the industrial park including industrial steam, chilled water and industrial waste water management, the company has also chose the site for its close proximity to its regional headquarters in Singapore. The facility will add up to AmorePacific’s network of international manufacturing base currently located in France and China.
The plant is slated to be developed in three stages between October 2016 and January 2019 to be completed by 2020. Expected to employ 500 employees, the plant is also planned to be its research and development center for Singapore-Indonesia-Malaysia markets. With five brands – Sulwhasoo, Laneige, Mamonde, Innisfree and Etude House – targeted at different market segments, AmorePacific is seeing enormous growth potentials in Asia Pacific, with its sales in 2015 driven by strong sales in China and throughout the region together with the United States, which recorded a growth of 20.1% to reach about MYR 20.2 billion (USD 4.7 billion).
(Sources: The Star, Cosmetics Design Asia)
Malaysia’s global glove manufacturer Top Glove is planning to double its operation capacity in its manufacturing facilities in Thailand following the high risks of expansion in Malaysia, including shortage of workers and water supply. It has doubled its production capacity in the factory in Phuket, and planned to increase its output by 100% in the Songkhla factory. Among the motivations for the company to expand in Thailand is the favorable tax break and ease of hiring workers.
With 22 plants in Malaysia, two plants in Thailand and another plant in China the company possesses a combined annual production capacity of 46 billion pieces, commanding a quarter of the global glove market. Top Glove has to endure the rising operation costs in Malaysia following the foreign worker levies that have been doubled, on top of the employment policy flip-flop which disrupts its operation in the country. Its Q3 profit slumped 40% from the previous quarter, with its stock down 30% from last year. In 2015 its stock surged 200% due to the weakening ringgit giving in to dollar sales gain.
Driven by its confidence on the country’s economic outlook, global beverages manufacturer and distributor the Coca Cola Company is planning to expand its manufacturing facility in Nilai, Negri Sembilan in its effort to continue investing in Malaysia. The current facility located on a 30-acres site has been operational since 2011, with total built-up area of 123,024 m2. The site has been chosen as it offered lowest logistics costs of transferring raw materials and finished goods, being located close to Kuala Lumpur and Port Klang with good supply of water and electricity, as well as the availability of freehold land in the area. The company is currently eyeing to buy an adjacent plot of land with the size of 4.05 hectares to accommodate its expansion.
Since 2010 over MYR 750 million (USD 175 million) has been invested in Coca Cola’s operation in Malaysia, providing jobs to more than 800 people and serving over 60,000 customers. The company attributes its good performance in Malaysia to the attractive cost structure, availability of talent, strong economic fundamentals and excellent export infrastructure in the country. Its portfolio consists of more than 80 brands including Coca Cola, Coke Light, Coke Zero, Fanta, Sprite, Minute Maid Pulpy, Dasani and Aquarius.
(Sources: The Star, Coca Cola, Kable Intelligence Limited)