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August 15, 2005 02:00 AM

Heads up: Yong profiles plastics in Malaysia

Gurdip Singh
Correspondent
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    Malaysia's 11.5 billion ringgit (US$3.07 billion) plastics industry is focusing on niche markets with high-quality products, to shield Malaysian companies from their competitors in China.

    Plastics News interviewed Dato' Peter Yong, president of the Malaysian Plastics Manufacturers Association in Selangor Darul Ehsan. MPMA, established in 1967, has about 900 members - 60 percent of which are processors accounting for 80 percent of Malaysia's total plastics manufacturing output.

    Q: How has the Malaysian industry performed?

    Yong: Malaysian's per-capita resin consumption was about 123 pounds in 2004, which is not far from industrialized countries like Australia (183 pounds), Japan (192 pounds) and Singapore (198 pounds). It is among the highest of all developing countries, compared with Thailand (66 pounds), China (48 pounds) and Vietnam (22 pounds). So, based on per-capita consumption of resin, Malaysia's plastics industry is one of the leaders among developing economies.

    About half of the country's plastic products are exported to global markets like the United States, the European Union, Australia and Japan, and are priced competitively. Malaysia's main export items are housewares, bags, film and other packaging materials.

    Q: How is the Malaysian industry facing competition from China?

    Yong: China is the largest exporter of plastic products to the United States and European Union. However, Malaysian manufacturers still could focus on their niche markets to stay competitive. In terms of domestic market, only a small quantity of low-end products, like household and stationary items, are imported from China.

    Q: How has the industry grown over the last five years?

    Yong: The industry's sales grew to 11.5 billion ringgit in 2004 from 8.4 billion ringgit (US$2.24) in 2000, averaging a growth rate of about 8 percent. Export growth averaged 10 percent to 5.6 billion ringgit (US$1.5 billion) in 2004 from 3.8 billion ringgit (US$1.01 billion) in 2000.

    Q: What is the growth projection for the industry?

    Yong: The growth of the industry would be in tandem with the growth of gross domestic product in Malaysia, which is projected to grow at the rate of 5-6 percent. The manufacturing sector, which currently accounts for about one third of the Malaysian economy, is expected to keep leading the growth. Being a supporting industry to major sectors like electrical and electronics, food processing, automotive, toiletries and construction, plastics would benefit from the expansion of these sectors. The export markets will remain attractive, with the current exchange rate being conducive for exports.

    Q: How has the industry expanded and how much do you expect it to expand in the coming decade?

    Yong: The Malaysian plastics industry began in the 1950s when a few companies operated with low technology, focusing on the low-end household products and plastic bags. Growth accelerated in the 1970s, boosted by the rapid expansion of the country's economy. High growth rates of 20-25 percent in 1980s were a result of rapid expansion in manufacturing, particularly in the electrical and electronics sectors. Competition intensified both domestically and regionally in the 1990s, as a result of trade liberalization ... among member countries of ASEAN (the Association of Southeast Asian Nations). That's why manufacturers are more focused on quality and export orientation.

    Trade liberalization would intensify further within the next decade with the realization of the World Trade Organization and various free-trade agreements to be established between Malaysia and major trading partners like Japan, South Korea, Australia and Pakistan, as well as between ASEAN and the respective regional trading partners.

    Q: Please give an assessment on the industry's expertise.

    Yong: There is some good expertise in the industry but, generally, there is a lack of a highly skilled workforce. Most of the skilled workers acquired their skills through years of practical working experience. There is an inadequate training infrastructure to support the needs of the industry for well-skilled workers.

    Q: How much has the Malaysian government done for this industry?

    Yong: The Malaysian government has been very supportive of the plastics industry in providing training facilities for basic skills training; creating incentives for skills training, exports, the manufacture of high-value-added products, the use of advanced technology, and conducting R&D and product development; assisting in export-promotion activities; and engaging in an ongoing dialogue with the plastics industry on the issues that affect it.

    Q: How much more do you expect and anticipate from the government?

    Yong: The government should continue to support the plastics industry, particularly small and medium-sized enterprises by helping them transform into global players. Greater competition will result from the WTO and various free-trade areas to be created soon. To enhance their position, Malaysian plastics manufacturers need to focus on R&D and design activities to create innovative products, improve on product quality, adopt advanced technology and upgrade worker skills to stay ahead of competition.

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