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Opportunity Malaysia. US Mission to Malaysia.



 

CHAPTER V: LEADING SECTORS

A. Best Prospects for Non-Agricultural Sectors

Listed below are 10 industry sectors that the Foreign Commercial Service (FCS) at the U.S. Embassy in Malaysia considers to be the best prospects for 2004 for U.S. businesses.

Rank   Name of Sector
1   Healthcare
2   Franchising
3   Water and Wastewater Treatment
4   Oil and Gas Equipment
5   Information and Communication Technology (ICT) and Broadcasting
6   Municipal Solid Waste Management
7   Biotechnology
8   Higher Education: 4-Year Colleges and Universities
9   Plastic Materials and Resins
10   Tourism
     Other
    Temperate Hardwood Lumber
    Fresh Fruits and Nuts

Rank: 1
Name of Sector: Healthcare - New Economy Sector
ITA Industry Code: HCS


Narrative

The Malaysian healthcare sector is currently valued at nearly U.S. $900 million and is expected to grow to $1.2 billion by 2005. The healthcare sector, which includes pharmaceutical products and medical devices, has grown at an annual rate of 6%

The private healthcare industry has expanded from 50 private hospitals with a total of 2,000 beds in 1980, to over 200 private medical centers with about 10,000 beds that account for about 25 percent of the total number of hospital beds in the country. The billion-dollar industry is steadily progressing as a hub for health-tourism and center for medical excellence. The number of foreign tourists seeking treatment in these hospitals has almost tripled from 39,000 in 1998 to 100,000 in 2002. Revenue generated by health tourism has risen substantially from U.S. $2.5 million in 1998 to U.S. $39 million in 2002. By 2010, this sector is targeted to bring in revenue of over U.S. $526 million. Currently, there are 34 private hospitals involved in health tourism. Health tourism promotions are highly targeted to less-developed countries like Indonesia, Bangladesh, Vietnam, and from the Middle Eastern countries. Common treatments are in cardiology, cardiothoracic surgery, radiotherapy and radiology. The private sector is allowed to advertise their services to the public.

On the development of telemedicine, Hospital Kuala Lumpur (HKL) is the first hospital in the region to install a Telemedicine Command Control Center (TCCC) on its premises. Implemented in August 2002, it utilizes information technologies to enable monitoring of the individual operating theatres simultaneously and separately, and conferencing between doctors and theatres. The level of IT sophistication in private hospitals can generally be viewed to be at least on par with public hospitals and in many cases at a higher level. Other health care developments include:

  • Ministry of Health (MOH) will build a RM 100 million national specialist hospital for women and children. Expected to be ready in 2007 with 850 beds and 14 operating theaters.
  • Cancer Research Initiatives Foundation (CARIF) was established recently to focus on cancer research. In addition, MOH has proposed to build at least one chemotherapy center in each state to reduce the waiting period for cancer patients awaiting treatment.
  • A training center project worth RM 600 million for medicine and dentistry will be built in Penang to increase the number of specialists.
  • A center for disease control will be set up under the Institute of Medical Research (IMR) to curb and control contagious disease such as SARS and others.

All of these healthcare developments create expanded avenues of operation for U.S. companies with technological expertise as well as for U.S. exporters of medical equipment and products.

Malaysia imported more than 70% of its drugs and medical instruments (worth U.S. $947 million) in 2002. A total of U.S. $579 million worth of drugs and healthcare products, including U.S. $368 million worth of medical equipment, was used annually. About 90% of the medical equipment was imported. The main exporters to Malaysia are the U.S. followed by Japan, Germany and China. Local manufacturers are encouraged to produce medical equipment locally. This provides additional opportunities for U.S. companies to create joint ventures with local companies.

Data Table

Medical Equipment Market**
(U.S. Dollars Millions)

  2002 (Actual) 2003 (Actual) *2004 (Estimated)
Total Imports 249.76 322.80 342.17
Imports from the U.S. 75.07 65.86 62.57

Exchange Rate: U.S. $1 = RM 3.8 (Malaysian Ringgit)

*Unofficial estimates

**Note: Although Malaysia exports more than U.S. $280 million of its medical products, they are mainly products such as surgical gloves, condoms, tubes and others, which are not included in the definition of medical equipment for the purpose of this report.

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Healthcare Sector Overview. See “Chapter 12: Market Research” for instructions about accessing the report.]

 

Rank: 2
Name of Sector: Franchising - New Economy Sector
ITA Industry Code: FRA

 
Narrative

Around 40% of franchises operating in the country are foreign franchises, with U.S. franchises accounting for 70%. U.S. franchises are very popular in Malaysia, and their target market segment will continue to grow with rising disposable income and a growing appetite for Western fast food.

Due to the high capital investment required for a foreign franchise, owners of foreign franchises tend to be Malaysian conglomerates and wealthy investors.  As more and more manufacturing heads towards China and other neighboring low-cost labor markets, Malaysian manufacturers are beginning to look towards services and franchising as a way to diversify their operations, often in very different sectors.

In order to understand the nature of the franchising industry in Malaysia, it is important to note the government's agenda of promoting the industry as a way of increasing the number of "bumiputra" (ethnic Malays and other indigenous groups) entrepreneurs in the country. This has been quite effective since bumiputras now represents at least 40% of franchise owners in Malaysia, up from less than 10% ten years ago. Interestingly, more non-bumiputras are entering the industry for they are recognizing franchising as an effective strategy for regional expansion.

Although the government has been trying to encourage and promote the homegrown franchise industry, it is still at its infancy stage. The government has allocated $26 million for the franchise development program to establish around 50 new franchises in the country over 2001-2005 under the 8th Malaysian Plan.  Since it takes at least two years to create a successful homegrown franchise, the fastest way of establishing new franchises is to purchase foreign franchises. Therefore, U.S. franchises with proven business systems and track records are encouraged to operate in Malaysia.   In June 2004, Perbadanan Nasional Bhd (PNS), a government agency, has taken over the function as the franchise development implementation agency.

Fast food and restaurants dominate the local franchising industry, but it is currently going through a development phase where the industry is not only growing in terms of volume but also in terms of product variety. Industry players are now more adventurous and willing to explore non-food based franchises. Thus, there appears to be tremendous growth potential in the local industry, especially since franchising contributes only 5% of total retail sales in Malaysia, compared to more than 40% in the United States. Best prospects identified for the franchising sector in Malaysia include:

  • Casual fast-food outlets and restaurants
  • Education and training products/programs for English, life sciences, leadership, child development, and other adult training programs
  • Services, such as pharmacy, healthcare, nursing, senior care, printing, cleaning, plumbing, car servicing & maintenance
  • Gift and souvenir shops
  • Franchise consultancy.

Overall, strong government support assisted the growth of the industry, which has been registering a healthy 10% growth over the past few years. There are now 321 franchise systems and 8,300 franchising outlets in the country. The local industry, which currently employs 93,800 staff, is estimated to be worth more than $2.8 billion and should continue to grow with continuing government support.

Additional statistical data about the size of the market are not available because the franchising market is still in its infancy stage.

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Franchising Market. See “Chapter 12: Market Research” for instructions about accessing the report.] 
 
 

Rank: 3
Name of Sector: Water and Wastewater Treatment
ITA Industry Code: WRE

 
Narrative

There are three important segments under the waste and wastewater treatment industry sector: 1) Water supply, 2) Industrial wastewater treatment, and 3) Municipal sewerage treatment.

1) Water Supply

The demand for water is expected to double from 10.7 to 20 million liters per day by the year 2010. The development of water supply systems has been given high priority in Malaysian economic development plans. One of the focal points is to upgrade and rehabilitate the existing water supply system to improve its efficiency. In addition to upgrading existing treatment plants, opportunities exist to introduce new technologies that increase output without sacrificing the quality of treated water. Each of the 13 states in Malaysia is moving towards privatization of its water supply services. U.S. companies seeking opportunities in the water supply sector will therefore find it necessary to make contacts within the various state authorities.

2) Industrial Wastewater Treatment

In terms of technology, there is a demand for compact biological treatment systems and aeration equipment systems. Activated sludge systems and aerated lagoons are becoming increasingly popular. Some of the best opportunities exist in the provision of advanced wastewater treatment chemicals such as polyelectrolyte flocculent and aluminum chloride, which are mainly imported from Taiwan and the United Kingdom. Malaysia continues to import much of its water and wastewater treatment chemicals since local producers can provide only basic chemicals, such as pH adjusters and alkali-based chemicals. Most advanced chemicals are imported primarily from Germany, the United Kingdom, and the United States.

3) Municipal Sewerage Treatment

Under the 8th Malaysia Plan, over US $395 million has been allocated for improvement of the sewerage systems in the country. Indah Water Konsortium (a wholly-owned company of the Ministry of Finance Inc.) is responsible for providing technical expertise and project management support to ensure the projects are implemented according to the approved plans. The plans involve refurbishment of existing public sewerage treatment plants, public sewerage pipes networks, pumping stations, and central sludge facilities throughout the country. The normal method of marketing to the sewerage industry is through appointed agents or by direct tender. International tenders are normally open only to pre-qualified registered suppliers, with preference to foreign suppliers with local distributors or agents. Suppliers or manufacturers that wish to supply to Indah Water are required to register with a Product Supplier Evaluation Committee.

The level of imports of water and wastewater equipment to Malaysia in 2003 was around U.S. $774 million (source: Malaysia Statistics Dept.), a decrease of 9% compared with the level of imports in 2002. The U.S. has the second largest market share and this accounted for about 18% of the import volume in 2003. The primary foreign competitor in supplying the Malaysian market is Japan, with a market share of 23% in 2003. The projected overall growth rate for this sector is estimated to be 10% (unofficial).

Data Table

Water and Wastewater Equipment Market
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) *2004 (Estimated)
Total Market Size 679 592 651
Total Local Production 131 140 154
Total Exports 307 322 354
Total Imports 855 774 851
Imports from the U.S. 154 138 152

(Source: Malaysia Statistics Department)

*Unofficial estimates

Exchange Rate: U.S $1 = RM 3.8 (Malaysian Ringgit)

[For more information about this sector, please read the Industry Sector Analysis (ISA) reports entitled Water and Wastewater Treatment Equipment and Drinking Water Supply Market. See “Chapter 12: Market Research” for instructions about accessing the reports.]

 
Rank: 4
Name of Sector: Oil and Gas Equipment
ITA Industry Code: OGM

 
Narrative

Prospects for Malaysia's oil and gas industry are still bright and the sector should experience healthy growth rates. During the past five years, approximately US$6.6 billion has been spent on exploration and production. Sixty percent of Malaysia’s crude reserves remain undeveloped. A total of about US$16.2 billion will be invested by the petroleum industry during the Eighth Malaysia Plan period (2001-2005), as stated in the Government of Malaysia's five-year plan. Of this, US$10.9 billion (67.5%) will be spent for exploration, development and production activities by Petronas (National Petroleum Corporation) and its production-sharing contractors.

Malaysia is blessed with a broad, shallow continental shelf (330,000 sq. km) and some deepwater prospective areas. In total Malaysia has approximately 500,000 square kilometers available for oil and gas exploration, of which 205,000 square kilometers are currently covered by Production Sharing contracts (PSC). The country’s deeper offshore areas, with water depths of 200 meters or more, have only more recently been opened to oil and gas exploration. There are now 70 producing fields in Malaysia, 51 of these are oil fields.  As of January 1, 2004, oil and gas reserves were estimated to be 4.84 billion barrels of crude oil and 87.0 trillion standard cubic feet (tscf) of natural gas. At current rates of production, oil reserves in Malaysia are expected to last 18 years and gas reserves, 34 years.  Malaysia’s current production of crude oil and condensates is about 750,000 barrels per day; and of natural gas, is about 2.20 tscf per year.

Four new PSCs were concluded during the last 15 months, bringing the number of PSCs in operation in Malaysia to 49, the highest level so far.  Petronas has estimated that the PSC contractors invested US$2.88 billion during the April 2003 – March 2004 period, with most of the investments channeled into development projects.

Efforts to search for oil and gas have recently extended to some of the more unconventional areas, such as the deepwater acreage, where very limited exploration activities were carried out in the past due to technological constraints and high investment costs. Petronas recently introduced the Deepwater Production Sharing Contract (PSC) that provides added incentives to production sharing contractors to undertake exploration activities in the prospective deepwater areas. Since the 1993 signing of its first deepwater PSC with Mobil, Petronas has awarded 13 blocks under the Deepwater PSC terms to 11 multinational companies. The latest: two deepwater blocks were awarded to Murphy Oil in January 2003, and one deepwater block to Newfield Exploration Company (U.S.).

Petronas, which is interested in buying gas as well as developing the East Natuna gas field in the Indonesian part of the South China Sea, plans to sign a memorandum of agreement for that purpose by the end of 2002. The size of the gas reserve in East Natuna alone is almost the same as the combined size of all gas reserves in Malaysia, with about 80 tscf.

The multi-billion dollar Trans ASEAN Gas Pipeline (TAGP) project is taking shape, despite a delay in the Thai-Malaysia Gas pipeline project. Several cross-border gas pipelines in the region have been either completed or agreements firmed up. Besides Malaysia, ASEAN countries such as Thailand, Indonesia, Vietnam and the Philippines have begun building their own pipeline networks for domestic consumption. In the ASEAN region, there are currently around 5,000 km of offshore and 2,300 km of onshore pipelines which are either operational or under construction. These gas pipeline networks will evolve into an integrated regional pipeline system (i.e. TAGP). Since Malaysia is strategically located in South East Asia, it is quite possible that it will serve as the hub for the planned gas grid.

Malaysia's oil and gas equipment is supplied mostly through imports because local production is very small. It is expected that equipment needs will continue to be supplied through imports for the next several years. Malaysia uses primarily American made oil and gas equipment and tools, with at least 60% of the imports coming directly from the U.S.

Data Table

Oil & Gas Equipment
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) *2004 (Estimated)
Total Market Size 557 575 596
Total Local Production 45 60 65
Total Exports 5 7 12
Total Imports 517 522 543
Total Imports from U.S. 348 350 355

*Unofficial estimates generated by the Commercial Service in Kuala Lumpur

Exchange Rate: US$1 = RM3.8 (Malaysian Ringgit)

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Oil and Gas Equipment. See “Chapter 12: Market Research” for instructions about accessing the report.]


Rank: 5
Name of Sector: Information and Communication Technology (ICT) and Broadcasting
ITA Industry Codes: TEL, TES

Narrative

Third generation (3G) spectrum, Broadband Fixed Wireless Access, and Digital Terrestrial Television Broadcasting, are some of Malaysia’s best prospects for the ICT and Broadcasting Industries. In particular, 3G infrastructure, applications and content; Wi-Fi; IPv6; and migration of analogue networks to digital networks are key areas.

1) 3G

As an update to the third generation spectrum tender, the Government of Malaysia (GOM) selected the following two companies for the third generation (3G) spectrum for implementing International Mobile Telephone 2000 (IMT-2000) services: Telekom Malaysia Berhad and Maxis Communications’ subsidiary UMTS (M) Sdn. Bhd. Telekom and UMTS both plan to spend U.S. $1.05 billion and U.S. $921 million respectively on their 3G roll-out. The Pilot 3G launch for Telekom Malaysia is planned for early 2004, while UMTS will launch theirs in late 2004.

Maxis Communications/ UMTS plans to tap into the Internet Protocol version 6 (IPv6) for their 3G mobile service network. Telekom Malaysia will be using IPv6 for their 3G deployments as well. Digi Telecommunications Sdn. Bhd., although it did not bid for the 3G spectrums, plans to use Enhanced Data Rate for GSM Evolution (EDGE) technology for their GSM/GPRS mobile network upgrade. Due to the fact that Malaysia has determined IMT2000 as a 3G standard, it has ruled out most U.S. company participation in its network deployment. However, there is room for U.S. participation for 3G applications and content.

2) Wireless LAN

Wireless Local Area Network (known as Wireless LAN, Wi-Fi or hotspots), are based on IEEE802.11b technology, using the 2.4GHz frequency. Wi-Fi is touted to be one of the next best prospects for Malaysia. Malaysia’s regulatory agency for the ICT industry, the Malaysian Communications and Multimedia Commission (MCMC), has decreed that registrations or applications are not necessary for the set-up of localized hotspots. However, these hotspots or private networks need to be connected to the public communications network through a licensed Internet Access Service Provider to provide both bandwidth and access to the Internet. In general, the provision of Wireless LAN is allowed as long as it is not involved in Network Facilities Provider activities, Network Services Provider activities, or Applications Services Provider activities. Besides Wi-Fi, other low cost broadband Internet access options and low cost last-mile solutions are highly welcomed in the market, which provide additional opportunities for U.S. telecommunication firms.

3) Digital Terrestrial Television Broadcasting (DTTB)

MCMC plans to phase out the analogue systems by 2008. They are now looking at concepts for introducing digital terrestrial television broadcast in Malaysia. While looking at the concepts, they have decided to target 2005 to implement DTTB. In 2001, 97% of Malaysian households had access to free-to air TV and radio. MCMC’s target is to achieve 99% household penetration by the year 2007, including a 35% take up in DTTB. Ideally, the groundwork to develop and implement digital signaling and synchronization plans should commence within 2003.

Malaysia has been receiving digital TV via satellite by MEASAT Broadcast Network Systems Sdn. Bhd. (MBNS). MBNS transmits their programs with their own two MEASAT satellites using KU-band channels. In the future, viewers will have DTTB access either through a fully integrated Digital TV Receiver or via a set-top box decoder. This set-top box decoder will convert digital signals to analogue form to be displayed on existing analogue TV sets. Assuming the replication of analogue to digital is in existing coverage, the cost of installing in 80 analogue locations to digital would come up to U.S. $10.5million. Further, MCMC, with consultations from a working group, has determined that Malaysia will be adopting Digital Video Broadcast-Terrestrial (DVB-T) standards for DTTB.

Overall, the telecommunications business continues to be a key growth area for the next few years. Future export growth opportunities are primarily in mobile telecommunications (as opposed to traditional fixed-line services).

Data Table

Telecommunications Market

Telecommunications Equipment: HS 8517 (Electric Apparatus for Line Telephony)
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) *2004 (Estimated)
Total Market Size

1141.3

1125.0

1181.25

Total Local Production 1800.0 1900.0 1995
Total Exports 1063.2 1201.4 1261.5
Total Imports 404.5 426.4 447.7
Imports from the U.S. 41.0 26.1 27.3

*Unofficial estimates generated by the Commercial Service in Kuala Lumpur

Exchange rate: U.S. $1 = RM 3.8 (Malaysian Ringgit)

[For more information about this sector, please read the Industry Sector Analysis (ISA) reports entitled ICT and Growth of the Internet and Overview of Telecommunications Market. See “Chapter 12: Market Research” for instructions about accessing the reports.]
 

Rank: 6
Name of Sector: Municipal Solid Waste Management
ITA Industry Code: POL

 
Narrative

The Malaysian plastics industry has developed into a highly diversified sector producing an array of products including automotive components, electrical and electronics parts, components for the telecommunications industry, construction materials, housewares, packaging materials and toys. Exports of plastics products were valued at U.S. $1.83 billion in 2001 and the key markets are Singapore, Japan, Hong Kong, China, Thailand, the UK, the U.S., and Indonesia.

Prior to the development of the petrochemical industry in Malaysia, the majority of plastics resins were imported to meet the increasing market demand. However, in the 1990s the government of Malaysia began to develop the petrochemical industry in Malaysia using the large availability of natural gas resources found in the country. Through various attractive investment policies, incentives and infrastructure, Malaysia managed to draw investments from multinational corporations in Japan, the U.S., and Germany to build large resins production facilities in Malaysia.

Malaysia remains a net importer of plastic resins, despite the large production capacity of local producers. In 2002, the total market demand of plastic resins was estimated at 1.25 million metric tons (of which 60% consumed were polyethylene and polypropylene). Total local production was at around 1.4 million metric tons in 2002, of which more than 50% was exported. Thus, Malaysia imports approximately 513,000 metric tons, accounting for 43% of the total market demand. In 2003, the main import countries were Singapore, Japan, the U.S. and Thailand with market shares of 24%, 22%, 6% and 6% respectively. The main resins produced locally are commodity resins. Therefore, approximately 55% of plastic resins imports are engineering resins.

Malaysia imported plastic resins worth U.S. $127 million from the U.S. in 2003, showing a slight increase of 6% compared to 2002. Main resins imports from the U.S. were polyacetals (HS 3907) (U.S. $46.4 million); polyethylene (HS 3901) (U.S $18 million); amino resins, phenolic resins and polyurethanes (HS 3909) (U.S. $8.4 million); acrylic polymers (HS 3906) (U.S. $6.6 million); and silicones (HS 3910) (U.S. $5 million). However, U.S. resins continue to face more severe competition from Singapore, Japan and other Asian countries such as Thailand and Korea. In recent years, Malaysia’s import of plastic resins from Asian and ASEAN countries have increased dramatically due to highly competitive prices offered by these countries, in addition to the privilege of low tariff rates enjoyed when trading within the ASEAN region under the ASEAN Free Trade Area (AFTA) agreement.

Nevertheless, engineering resins remain the best prospect sector for U.S. suppliers since they have gained good reputation for product quality and advanced technology. Engineering resins are mainly used to produce high-end products such as automotive parts, electrical and electronics parts, and telecommunications components.

U.S. resins that enjoy a good reputation in Malaysia have a competitive edge. The best way for U.S. exporters of plastics resins to enter the Malaysian market is to engage established trading houses that will not only supply resins to the manufacturers but are also capable of providing technical support and consultancy to the end users.

Data Table

Total Imports, Exports and Local Production of Plastic Resins
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) 2004 *(Estimated)
Total Market Size 3,587 3,620 3,883
Total Local Production 3,266 3,500 3,850
Total Exports 990 1,245 1,469
Total Imports 1,311 1,365 1,502
Imports from the U.S. 119 127 131

(Source: Malaysia Department of Statistics, Malaysia Plastics Manufacturers Association)

Exchange Rate: U.S. $1 = RM 3.8 (Malaysian Ringgit)

*(Estimated: projected growth for total market size, total local production, total exports, total imports, imports from the U.S. are 10%, 18%, 10%, 3% respectively)

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Plastic Materials and Resins. See “Chapter 12: Market Research” for instructions about accessing the report.]

 

Rank: 7
Name of Sector: Biotechnology - New Economy Sector
ITA Industry Code: BTC

 
Narrative
 
With 12,500 species of flowering plants, 1,100 species of ferns, and one of the world's most diverse coral communities, Malaysia has a very diverse bio-source universe that is still untapped. Over the years, biotech research units have been set up in most Malaysian public universities. The private sector has engaged in some biotech R&D largely focused on plant tissue culture. Although, some 50 Malaysian companies use biotechnological processes, (primarily in food production, herbal products, and pharmaceuticals) they fall short of fulfilling the country's biotechnological potential. This shortage of technological expertise creates many new opportunities for U.S. biotechnology firms.
 
Malaysia's biotechnology agenda will be spearheaded by BioValley Malaysia, a project that involves the development of a centralized cluster of world-class facilities and infrastructure. The project will incorporate research, commercial, educational, recreational and residential facilities and include a zone for manufacturing. The proposed 484-hectare biotech research and development zone in the Multimedia Super Corridor (MSC) is expected to foster closer and greater interaction between the fields of biotechnology and ICT. 
 
Agricultural biotechnology is seen as a potentially powerful tool to ensure ample food supply for Malaysia. Industries targeted for improvement include palm oil, rice, cocoa, lumber and forest species, fruits, flowers, ornamentals, vegetables, spices and other minor crops and plants.
 
Malaysia is also keen on collaborating with established pharmaceutical companies in bio-pharmaceuticals. Research in medical biotechnology has generated several diagnostic tools for dengue and other infectious tropical diseases. Although R&D activities in bio-pharmacy are relatively new (only eight projects have been approved since 2000), a bio-enhanced formulation of the anti-malaria drug, artermisinin, has been produced. Other projects include screening of mediums for bioactive compounds, the experimental production of bio-molecules using biotechnological approaches, and the development of advanced drug delivery systems for bio-molecules. 
 
The Malaysia bio-IT market is estimated at U.S. $7.1 million for 2003, (up from U.S. $4.1 million in 2002). It is in the start-up phase, with just a few institutes spending real dollars on computational biology. The industry expects a compounded annual growth rate of about 70% over the next five years and is expected to reach U.S. $36 million by 2006.
 
The Government of Malaysia has shown its determination and interest and is serving as a catalyst for biotech development. The companies that have opted to invest in Malaysia indicated their choice was influenced by readily available bio-resources and the supporting infrastructure for further R&D. Malaysia has already attracted Singapore investors to set up a number of biotech companies, presumably due at least in part to less red tape in Malaysia.
 
Malaysia still lacks R&D and expertise in biotech but education, science training, and support will help resolve the shortage. One solution for biotech entrepreneurs is to partner with another biotech company and benefit from one another's knowledge and competitiveness. An example of a strategic alliance that facilitates effective and successful biotechnology industry development is the Malaysia-MIT Biotechnology Partnership Program (MMBPP). The partnership combined the scientific and research capabilities of MIT and its Malaysian counterparts, focusing on developing Malaysia's natural resources (such as oil palm and tongkat ali) and to develop intellectual property. U.S. companies should definitely consider biotech opportunities in Malaysia.
 
Statistics on biotechnology in Malaysia are difficult to obtain since it is a newly emerging industry and documented data is not currently available. Frost & Sullivan estimates the size of the Malaysian biotechnology market at over U.S. $10 million. 
 
[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Biotechnology. See "Chapter 12: Market Research" for instructions about accessing the report.]

 

Rank: 8
Name of Sector: Higher Education: 4-Year Colleges and Universities
ITA Industry Code: EDS

Narrative

U.S. higher education has always been popular among Malaysian students, which is reflected by the over 100,000 Malaysian alumni of American universities and colleges. With 6,595 students studying in U.S. colleges and universities in 2002-03, Malaysia ranked 19th as a source of foreign students. It has ranked among the top ten in previous years, but the economic downturn in late 1997 resulted in a significant decline, especially in Government sponsored students.  The country's strong economic recovery from the 1997 crisis led to some renewed interest in U.S. education.  However, the subsequent 9/11and the Iraq war events caused many Malaysian students planning to study overseas to divert to Australia, England, New Zealand and Canada.  This was due new visa regulations and the perceived higher risk of terrorism in U.S.

Recently, the improvement in U.S. visa application process, lesser fear of terrorism in U.S. and the strengthening Australian dollar and British sterling are factors that can help revive interest in U.S. education.  It is just a matter of marketing and promoting U.S. schools here.

The most popular fields of study among Malaysian students studying in the U.S. are Business Administration, Information Technology, and Engineering.

Malaysian Students Studying in the United States

Year ’97-‘98 ’98 -‘99 ’99 -‘00 ’00 -’01  

’01 -’02

’02 -’03

Total

14,597

11,557

9,074

7,795

 

7,395

6,595

(Source: Open Doors; fiscal year Oct. 1 to Sept. 30)

Although almost 70% of the students enrolled in undergraduate programs in 2002-03, interest in U.S. graduate programs is growing, especially interest in Master of Business Administration programs (MBAs).  MBAs from U.S. universities are highly sought after. It is also interesting to note that layoffs in the Malaysian financial, electronics, and information technology sectors (due to mergers, consolidations, down-sizing, etc.) have increased enrollment in U.S. graduate programs.

Less than five U.S. MBA programs are offered in Malaysia while there are more than 10 British and Australian MBA programs each offered here, mainly due to the need for low cost tuition.  Existing U.S. MBA programs which are offered through distance learning are from less well-known universities, such as Kansas’ Ottawa University and Colorado’s Revans University (University of Action Learning).   A British MBA program in Malaysia costs approximately U.S. $6,300 - $8,400 (compared with U.S. $8,400 - $9,000 for an American MBA program). There is definite interest in U.S. MBA programs, but the price has to be more competitive.

The GOM has recently called for a consolidation of private colleges to improve their efficiency, quality, and services. The 535 private colleges  are encouraged to consolidate.  The GOM’s goal of increasing the number of college-educated Malaysians from 17% in 2002 to 40% by 2020 bodes well for opportunities in private higher education.

Best prospects and opportunities for U.S. colleges & universities include:

  • Recruiting Malaysian students

  • Linking with Malaysian 2-year private colleges to attract junior & senior transfer students on a credit-transfer basis or on a “twinning” basis

  • Linking with local private colleges or corporations to offer distance learning programs and on-line degrees

  • Linking with local private colleges to offer 4+0 programs

  • Setting a branch campus in Malaysia

  • Offering expertise and technology to institutions and corporations for developing on-line programs

 
 

Rank: 9
Name of Sector: Plastic Materials and Resins
ITA Industry Code: PMR

 
Narrative

The Malaysian plastics industry has developed into a highly diversified sector producing an array of products including automotive components, electrical and electronics parts, components for the telecommunications industry, construction materials, housewares, packaging materials and toys. Exports of plastics products were valued at U.S. $1.83 billion in 2001 and the key markets are Singapore, Japan, Hong Kong, China, Thailand, the UK, the U.S., and Indonesia.

Prior to the development of the petrochemical industry in Malaysia, the majority of plastics resins were imported to meet the increasing market demand. However, in the 1990s the government of Malaysia began to develop the petrochemical industry in Malaysia using the large availability of natural gas resources found in the country. Through various attractive investment policies, incentives and infrastructure, Malaysia managed to draw investments from multinational corporations in Japan, the U.S., and Germany to build large resins production facilities in Malaysia.

Malaysia remains a net importer of plastic resins, despite the large production capacity of local producers. In 2002, the total market demand of plastic resins was estimated at 1.25 million metric tons (of which 60% consumed were polyethylene and polypropylene). Total local production was at around 1.4 million metric tons in 2002, of which more than 50% was exported. Thus, Malaysia imports approximately 513,000 metric tons, accounting for 43% of the total market demand. In 2003, the main import countries were Singapore, Japan, the U.S. and Thailand with market shares of 24%, 22%, 6% and 6% respectively. The main resins produced locally are commodity resins. Therefore, approximately 55% of plastic resins imports are engineering resins.

Malaysia imported plastic resins worth U.S. $127 million from the U.S. in 2003, showing a slight increase of 6% compared to 2002. Main resins imports from the U.S. were polyacetals (HS 3907) (U.S. $46.4 million); polyethylene (HS 3901) (U.S $18 million); amino resins, phenolic resins and polyurethanes (HS 3909) (U.S. $8.4 million); acrylic polymers (HS 3906) (U.S. $6.6 million); and silicones (HS 3910) (U.S. $5 million). However, U.S. resins continue to face more severe competition from Singapore, Japan and other Asian countries such as Thailand and Korea. In recent years, Malaysia’s import of plastic resins from Asian and ASEAN countries have increased dramatically due to highly competitive prices offered by these countries, in addition to the privilege of low tariff rates enjoyed when trading within the ASEAN region under the ASEAN Free Trade Area (AFTA) agreement.

Nevertheless, engineering resins remain the best prospect sector for U.S. suppliers since they have gained good reputation for product quality and advanced technology. Engineering resins are mainly used to produce high-end products such as automotive parts, electrical and electronics parts, and telecommunications components.

U.S. resins that enjoy a good reputation in Malaysia have a competitive edge. The best way for U.S. exporters of plastics resins to enter the Malaysian market is to engage established trading houses that will not only supply resins to the manufacturers but are also capable of providing technical support and consultancy to the end users.

Data Table

Total Imports, Exports and Local Production of Plastic Resins
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) 2004 *(Estimated)
Total Market Size 3,587 3,620 3,883
Total Local Production 3,266 3,500 3,850
Total Exports 990 1,245 1,469
Total Imports 1,311 1,365 1,502
Imports from the U.S. 119 127 131

(Source: Malaysia Department of Statistics, Malaysia Plastics Manufacturers Association)

Exchange Rate: U.S. $1 = RM 3.8 (Malaysian Ringgit)

*(Estimated: projected growth for total market size, total local production, total exports, total imports, imports from the U.S. are 10%, 18%, 10%, 3% respectively)

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Plastic Materials and Resins. See “Chapter 12: Market Research” for instructions about accessing the report.]

 
 

Rank: 10
Name of Sector: Tourism
ITA Industry Code: TRA

Narrative

There exist a growing market of affluent Malaysians that travel overseas at least once a year for their vacation.  The United States was one of the top tourist destinations for Malaysians before the Asian economic crisis in 1997.  The crisis led to an exchange rate peg of U.S. $1=RM 3.8 in 1998 (compared with U.S. $1=RM 2.5 previously) which significantly increased the cost of traveling to the U.S.   Therefore, Malaysians began to divert their travels to cheaper destinations such as China and Australia, which caused a substantial decline in Malaysian visitors to the U.S.

Although travel to the U.S. recovered by 2000 due to the country’s strong economic recovery, the subsequent 9/11, Bali bombing and Iraq war events resulted in a further decline due to new visa regulations and the perceived risk of traveling to the U.S.  As a result, Malaysians are now traveling more to Europe and Australia since there is no visa issues for these countries.

Malaysian Visitors to the United States

Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Total 54,640 67,395 80,066 79,836 48,974 59,785 74,507 52,396 40,750 34,274

(Source:  ITA Office & Travel Tourism Industries)

Leisure or holiday travelers previously represented 70% of Malaysians traveling to the U.S.  Presently, travelers to the U.S. are primarily business people and students.

The leisure market to the U.S. is starting to revive this year contributed by the recent improvement in visa application process and the strengthening Australian dollar and Euro dollar.   These factors together with the country’s improving economy create opportunities for renewing interest in U.S. travel and tourism.

There is no problem with getting flights to the U.S. from Malaysia with 10 airlines servicing this route. In terms of U.S. destinations, the most popular is California followed by New York and popular cities including Los Angeles, San Francisco, New York, Honolulu, Las Vegas, Orlando and Washington D.C. Malaysian vacationers travel to the U.S. mainly to visit theme parks, sightsee, shop at factory outlets, visit casinos, etc.

In addition, there is a growing trend among Malaysians, especially among professionals, to look for different lifestyle experiences in their travel e.g. an “American experience” in entertainment, music, sports, food, national parks, etc. Therefore, tour package itineraries to California and New York can be expanded to make them more interesting.  New destinations in the U.S. can also be promoted especially to free independent travelers (FIT), which are on the rise as Malaysians become better informed and independent about foreign travel.

U.S. travel and tourism promotions in Malaysia are encouraged to educate the public on the improved visa application process and to ease their fears in traveling to the U.S.

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Travel and Tourism, Malaysia to USA. See “Chapter 12: Market Research” for instructions about accessing the report.]

B. Best Prospects for U.S. Agricultural Sectors

The Foreign Agricultural Service (FAS) at the U.S. Embassy in Malaysia considers two sectors, 1) Temperate Hardwood Lumber and 2) Fresh Fruits and Nuts, to be the best prospects for 2004/05 for U.S. exporters of agricultural products.

Name of Sector: Temperate Hardwood Lumber

Narrative

The Malaysian furniture/interiors sector showed strong resilience in 2003, with a significant increase in overseas demand for Malaysian-made furniture.  Export earnings rose 10 percent to RM4.7 billion (US$1.23 billion) in 2003.  The industry is more optimistic for 2004 and expects overseas demand to further expand during the latter half of the year.  The tenth annual Malaysian International Furniture Fair (MIFF) 2004, held in Kuala Lumpur in early March 2004, showcased the best of Malaysian manufactured furniture.  With about 400 exhibitors occupying 60,000 sq. meters of exhibition space, MIFF 2004 attracted more than 16,194 visitors, of which 6,593 were international buyers.  RM2.05 billion (US$539 million) in sales, an increase of 4 per cent from the preceding year, was generated at the show.

Malaysian imports of temperate hardwood lumber declined by 31 percent in 2003 reflecting purchase draw downs following a big surge in purchase in 2002.  In tandem, imports from the U.S. showed a 25 percent drop compared to a 58 percent increase in 2002.  However, U.S. exports accounted for 62 percent of Malaysia’s total temperate hardwood import market in 2003.  In value terms, exports of U.S. lumber to Malaysia recorded a 3.6% increase to US1.3 billion in 2003.

Much of the opportunities for U.S. exporters in the Malaysian furniture industry arises from coupling cheaper native woods, such as rubberwood, with high-value veneers from the U.S.  Strong increases in market share of U.S. temperate hardwood lumber and veneer in past years confirm this trend.  As Malaysia moves into the top ten furniture exporters in the world, the U.S. wood industry, if properly positioned, would largely benefit from the development.

During Jan-Sept 2003, a total office area of 92,800 sq meters was completed in and around Kuala Lumpur, a sharp drop following a big increase in the previous year.  However, the retail sector recorded a 60 percent growth with the completion of several big shopping malls.  The condominium and apartment sector showed a similar increase with 19,060 units completed, a 66 percent growth from the past year.  In addition, 111 new hotels/resorts with an additional 7,838 rooms were completed throughout Malaysia in 2003.  The GOM is on track in building a new Administrative Center at Putrajaya.  Additional new facilities include a brand new boutique hotel and a grand convention center.  Next to Putrajaya is Cyberjaya, the new ‘intelligent’ city that is the base for international multimedia companies.  Recently completed projects in Cyberjaya include the Multimedia University, NTT R&D Center, Shell Company, DHL center and up-scale homes. In addition, in May 2003, the Government launched the BioValley of Malaysia, a brand-new city to support the development of the biotechnological industry.  Although the project has a slow start, the Government has expressed renewed interest in its development in recent months.  All these developments still provide opportunities for the expansion of the furniture/interiors sector and the increased use of US hardwood.

The American Hardwood Export Council (AHEC) has done a commendable job of increasing the awareness of U.S. hardwoods in Malaysia.  In 2003/04, its main activities were participating in trade shows, conducting a technical seminar, holding two regional conferences involving speaker/panelist from Malaysia and co-organizing a Malaysian interior/architect mission to the U.S. in July 2003 to meet with their peers in leading architectural and design firms and to see applications of U.S. hardwoods in large scale convention and hospitality settings.

Post recommends the following:

1. Conduct technical seminars in Malaysia on a yearly basis in order to increase the level of technical knowledge and application of U.S. hardwoods in making furniture and flooring.  A Pan Asian Architectural Seminar is scheduled for Kuala Lumpur in 2005.

2. That American Forest and Paper Association bring another team of present/potential U.S. wood users to the States for an exposure/buying mission.  This might address the constraint of the lack of a large, existing distribution network in Malaysia.

3. Support AHEC’s proposed ‘Quality Samples Program (K Lumpur Convention Center)’ as a follow-up activity to the architect mission to the US in 2003.  The new state‑of‑the-art convention center will be the premier and most prestigious convention center in the country. The project provides a tremendous opportunity for AHEC to influence the specifiers to use U.S. hardwood in its interior.  The interior designers are determined to use the very best materials.  If we succeed, the Center could very well become a showcase for American hardwoods not only to Malaysia but also to the region and beyond.

4. U.S. wood suppliers should team up with AHEC to participate at trade shows in order to increase their visibility in the local market and to make direct contact with local furniture manufacturers.

With concerted marketing efforts, U.S. market share as supply source to this Malaysian manufacturing sector can increase.

Data Table

Temperate Hardwood Lumber
(1000 Cubic Meters) (CUM)

  2002 (Actual) 2003 (Actual) *2004 (Estimate)
Total Market Size** 50 34 55
Total Imports 50 34 55
Imports from the U.S. 29 21 30

*Unofficial estimates

**Total Market Size for Temperate Hardwood is exactly the same as Total Imports because only Tropical Hardwood is available in Malaysia. Therefore all Temperate Hardwood in Malaysia is imported.

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Solid Wood Products. See “Chapter 12: Market Research” for instructions about accessing the report.]

Name of Sector: Fresh Fruits and Nuts

Narrative

The five major fresh fruits imported into Malaysia are apples, oranges, mandarin oranges including tangerines, pears and quinces, and grapes. Their combined sales accounted for 87% of all fresh fruits imported into Malaysia in 2002. Other fruits imported into Malaysia include mangos, grapefruits, plums, avocados, peaches, and to a lesser extent cherries, strawberries, kiwifruits, and apricot.

The market leaders for these imported fruits are China, Australia, New Zealand, and the United States. While Australia and the United States are the market leaders for oranges and grapes, China is the market leader for mandarin oranges, apples, and pears. Since the U.S. and China are in the northern hemispheres with similar seasonal periods, U.S. exporters have to compete aggressively with Chinese exporters who can sell their produce at lower prices. However competition is less intense with exporters in countries of the southern hemisphere, such as Australia and New Zealand, since they have opposite seasonal periods.

Produce such as apples, oranges, mandarin oranges, pears, grapes, cauliflower and carrots are popular and are consumed by consumers living in both the urban and rural areas and across various income levels. This is because of the affordability and wide availability of these produces. Higher priced imported produce such as broccoli, grapefruit, apricot, plums, cherries, baby carrots, strawberries, avocados, kiwifruits, mushroom, baby carrots, and celery are mostly consumed by consumers in the middle and above income bracket.

Most Malaysian consumers prefer the “see, feel and pick” experience in purchasing their produce and therefore most retail outlets sell fresh produce loose. However selling packed fresh produce is becoming acceptable (mainly practiced by hypermarkets and supermarkets) provided that the consumers can see through the packaging material.  Malaysian consumers prefer most fresh vegetables to be packed between 0.20kg (~0.5lb) and 0.50kg (~1lb.) The preferred packing size for fruits, such as apples, pears and oranges, is 6-10 fruits per pack. The preferred packing size for strawberries and cherries is usually around 0.25kg (0.5lb.) while for grapes it is 0.25-0.50kg. (0.5-1.0lb.) It is also becoming popular for apples and pears to be individually packed in Styrofoam nets (to prevent bruising) while still being sold loose.

Data Table

Temperate Fresh Fruit Market
(U.S. Dollars in Millions)

  2002 (Actual) 2003 (Actual) *2004 (Estimated)
Total Market Size** 82 82.6 83
Total Imports 80 80.6 81
Imports from the U.S. 20 19 20

Exchange Rate: U.S. $1 = RM 3.8 (Malaysian Ringgit)

*Unofficial estimates

**Since Malaysia has a tropical climate, almost all temperate fruits are imported, which is why the Total Market Size is not much greater than Total Imports.

[For more information about this sector, please read the Industry Sector Analysis (ISA) report entitled Retail Food Market. See “Chapter 12: Market Research” for instructions about accessing the report.]

Other Teams:

 

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