Malaysia's Ministry of International Trade and Industry has lifted a major import control on polypropylene and polyethylene by abolishing a 3-year-old regulation that required companies to obtain industry permission for such imports, according to the Malaysian Plastics Manufacturers Association.
The Approved Permit system for PP and PE was implemented in April 1994 to protect local feedstock producers in the fledgling industry. However, a burgeoning number of plastics manufacturers and an emerging need for more-sophisticated blends of raw materials prompted the Malaysian government to scrap the regulation July 3.
``The government started relaxing this law two years ago,'' said a Kuala Lumpur-based industry source who asked not to be named. ``Most applications have been granted automatically ever since, so it really doesn't make much difference now'' that the AP system is abolished, he said.
It typically took about nine days for AP applications to be approved, the source said.
``From the beginning, MPMA was of the view that the AP system would jeopardize the healthy growth of the plastics industry,'' Liew Sew Yee, the association's president, said in a news release.
``To remain competitive, it has become a necessity for manufacturers of plastics to import a special grade of raw materials. ... By removing the AP system, manufacturers could have a wider choice,'' Liew said.
Having won this battle, MPMA now is pressing for reduction of import duties for raw materials. The association is worried about the narrowing spread between duties for raw materials and finished products.
Under an agreement of Southeast Asian nations to create the ASEAN Free Trade Area in 2003, the Malaysian government has put finished plastics products on a ``fast track'' schedule, trimming the import duties of most plastics products from 14 percent to 7 percent, said industry sources. Duties for some products will be cut further to 5 percent in 1998.
However, the import duty for major raw materials remains at 15 percent, much to the displeasure of Malaysian plastics manufacturers. This means that feedstock costs remain constant as prices for finished products face downward pressure.
Low-end products such as PVC packaging material are likely to face pressure from the Philippines and Indonesia, while high-end products are expected to hold their ground, Liew has said.
Still, most industry members say that, based on their past experience, they don't expect speedy cuts to feedstock duties.
``The government took more than 20 years to cut the duties for polystyrene and PVC from 30 percent to 20 percent,'' the source said.