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Building a vibrant competitive economy
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MALAYSIA wants to
be to South East Asia what Dubai is to
West Asia — a vibrant, dynamic and
internationally competitive economy, a
leading trade and investment hub and an
international centre for Islamic banking
and finance. Both are also seeking to
become premier retail and tourist destinations
— and not just for regular sightseeing.
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Both
are big on promoting health tourism and targeting
the MICE (meeting, incentives, conventions and
exhibitions) market. Malaysia is promoting eco-tourism
as well.
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Like Dubai, Malaysia is promoting and
incentivising the private sector to make a greater contribution
to economic growth and to surpass public sector investment.
Both have a vision to become knowledge economies, and
are investing heavily in building human capital, with
a particular emphasis on training and education. Already,
Malaysia is making its mark. Its emphasis on building
world-class educational institutions, combined with
its relatively low cost of living, are making it an
attractive destination for students wishing to study
abroad.
Dubai and Malaysia are also striving to develop high
technology and higher value-added activities, and Malaysia
is working to modernise its homegrown village industries
such as handicraft, batik and songket as well. Both
are developing industrial clusters to help attract international
companies from around the world, to gain and share knowledge
among local talent, and to build an international reputation
in key industries.
Malaysia has spent $16 billion on building its Multimedia
Supercorridor (MSC), a 15km by 50km area served by a
high-speed digital fibre optic telecommunications network.
At the heart of this is Cyberjaya, an incubator centre
to hatch new IT and multimedia companies, although it
offers extensive call centre facilities as well.
Malaysia however, unlike Dubai, has a wider and more
diversified industrial base. It has a world reputation
in the automotive sector for the production of vehicles
and accessories; it is a world leader in the production
of chemicals and chemical products, electrical and electronic
goods (E&E), palm oil and rubber-based products,
plastics, timber products and textiles.
The government's future plans for these industries is
laid down in its “the Ninth Malaysia Plan”,
on which Malaysia embarked at the beginning of 2006.
The government strategy document describes the Plan
as “a new phase of development towards realising
its aspiration of becoming a developed nation by 2020.”
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In line with the Ninth Plan
the country wants to develop existing industrial
clusters as well as new ones, along with developing
industrial and small and medium sized enterprise
(SME) parks. It also wants to nurture its higher
added value manufacturing subsectors, such as
the petrochemical, maritime, aerospace, heavy
machinery and defence industries.
E&E products account for more than 50 per
cent of Malaysia's total exports and are shipped
primarily to the US, Singapore, Japan, the Netherlands
and Hong Kong. Chemicals and chemical products
are another significant export.
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Malaysia produces a diverse array
of products such as petroleum products, industrial gases,
oleochemicals, soaps, detergents and cosmetics, pharmaceuticals,
inorganic chemicals, paints, agricultural chemicals
and fertilisers. Malaysian oleochemicals, (derived from
palm oil and palm kernel oil and used to produce soaps,
shampoos and conditioners) hold over 20 per cent of
the global market.
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Malaysia is the world’s 14th largest furniture
exporter in the world and also exports a diverse variety
of wood products, wood-based panels, sawn timber and
joinery products. In addition, Malaysia is one of
the world’s largest producers of natural rubber
and is rated as the world's number one producer of
dipped goods in terms of both volume and quality.
It controls over 60 per cent of the global rubber
glove market, for example.
Focusing on the sectors mentioned above, the Ninth
Plan also advocates the upscaling of new services
such as aviation maintenance, repair and overhaul
(MRO), shared servicing and outsourcing; transport
and logistics and business and professional services.
Malaysia is strategically located in the region, making
it prime candidate for establishing itself as a logistics
hub. It has five international airports, six federal
ports and 11 state ports as well as an extensive and
well-integrated network of expressways and railroads.
MASkargo, a wholly owned subsidiary of Malaysia Airlines,
operates an Advanced Cargo Centre at Kuala Lumpur
International Airport (KLIA). It has a high tech cargo
warehouse, a six-star animal hotel, a perishable centre,
a priority business centre and an express handling
unit. Although the country competes with Singapore
on the logistics front, the cargo centre is thriving
as it finds new, more competitive routes for freighting
cargo from, say, Dubai to China.
The Ninth Plan also outlines goals for modernising
the agricultural sector, including introducing farm
accreditation and higher levels of professionalism.
Industries that are considered to have high potential
such as aquaculture, deep sea fishing, seaweed, herbs,
ornamental fish and floriculture will be developed
and commercialised on a large scale.
The modernising Malaysia’s agriculture base,
along with its credentials as an Islamic nation, makes
it well placed to become a global centre for the production,
certification and export of halal food. Its locally
developed halal certification has been commended by
the United Nations as a model system.
Finally, the Malaysian government is actively promoting
the country as a financial services hub, with a particular
emphasis on Islamic banking. It has thriving domestic
banking sector and a large off shore centre as well.
In October 1990, it established an international offshore
financial centre (IOFC) at Labuan, an island located
approximately 8km off the coast of the state of Sabah
at the mouth of the Brunei Bay. Today, offshore financial
services are provided by more than 60 offshore banks,
and nearly 80 offshore insurance companies.
And to demonstrate the closeness of Dubai and Malaysia
and their similar aspirations, last year the heads
of the Malaysian and Dubai financial services centres
signed a memorandum of understanding, bringing the
two centres closer together.
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MALAYSIA’S trade to West Asia, an area that
incorporates the Middle East and Africa, expanded
by 23.13 per cent to RM29.56 billion (Dh29 billion)
in 2005 with continued strong growth expected throughout
2006. According to the Malaysia External Trade Development
Corporation (Matrade), Malaysia has been recording
trade surpluses with the region for the past 15 years
and in 2005 recorded a surplus of RM39.49 billion
(Dh39 billion). Exports to West Asia amounted to RM11.53
billion for the period between January and August
this year and imports amounted to RM13.62 billion
during the period.
Figures show that Malaysia is importing an increasing
number of goods from the UAE. As a percentage of total
trade between the two countries, imports from the
UAE rose from 22.5 per cent in 2004 to 31 per cent
for the first eight months of the year to the end
of August, to reach a value of $606 million over that
period. This represents a 29.8 per cent growth in
Malaysia’s imports from the UAE for the eight-
month period compared with the same period in 2005.
In 2005, Malaysia’s imports from the UAE accounted
for 28.9 per cent of bilateral trade and were worth
$747 million.
Reflecting the changing trade balance between the
two countries, Malaysia’s exports to the UAE
fell as a percentage of total trade between the two
countries from 77.5 per cent in 2004 to 71.7 per cent
in 2005. However, this appears to be changing.
For the eight months ending August 2006, the value
of Malaysia’s exports to the UAE grew by 11.5
per cent for the first eight months of this year compared
to the same period in 2005. These exports were valued
at $1.3 billion.
As a percentage of Malaysia's total trade, trade between
the UAE and Malaysia is still small, albeit growing.
From January to August 2006, the UAE accounted for
only 1.3 per cent of Malaysia’s total exports,
($1.3 billion) behind the US at 19 per cent ($19.8
billion) and India at 3 per cent ($3.2 billion).
For the period January to August 2006, the UAE's share
of Malaysian imports is even less at only 0.7 per
cent, behind Saudi Arabia at 1.8 per cent and India
at 1 per cent. The US accounts for 13.2 per cent of
total Malaysian imports, a market worth $11.2 billion.
Jewellery accounts for 31 per cent of Malaysia’s
exports to the UAE, followed by electrical and electronic
products at 23 per cent, palm oil at 7 per cent and
wood products at 6 per cent.
Exports of palm oil have been volatile over recent
years. In 2003, the value of palm oil exports peaked,
with a total share of the export market of 10.9 per
cent. By 2005, this share had almost halved to 5.7
per cent, a percentage drop on the previous year of
32 per cent. More competitive pricing - Matrade says
the UAE is highly price sensitive — and increasing
awareness of the nutritional properties of palm oil
is resulting in an upsurge in demand. For the eight
months to the end of August its market share had increased
to 6.5 per cent, an upswing of 28 per cent on 2005.
Conversely, crude petroleum constitutes 50.7 per cent
of Malaysia’s imports from the UAE, followed
by refined petroleum products at 25 per cent and manufactured
metal products at 11.1 per cent.
Figures from the Malaysian Timber Industry Board show
that the UAE imports 3 per cent of Malaysia’s
furniture imports, the same as Canada but less than
the UK at 8 per cent. Figures also suggest that the
UAE’s booming construction sector is fuelling
demand for plywood. In 2005, the UAE imported 12 per
cent of Malaysia’s fibreboard, behind China’s
23 per cent and ahead of Japan at 11 per cent, Vietnam
at 9 per cent and Saudi Arabia at 5 per cent.
Malaysia’s trade performance with Saudi Arabia
is more chequered as the balance of trade increasingly
moves in Saudi’s favour. As a percentage share
of trade between the two countries, Malaysia's exports
to Saudi fell from 32.8 per cent in 2004 ($481.8 million)
to 23.4 per cent last year. However, there are signs
the decline may be easing. The market share of Malaysian
exports in the Saudi market for the eight months to
end of August was 17.9 per cent, 3.6 per cent up the
same period in 2005.
Imports from Saudi, mainly for refined petroleum products
(48.7 per cent), have increased dramatically. Imports
from Saudi make up 82.1 per cent of total trade between
the two countries, compared with 67.2 per cent in
2004. The other main import is crude petroleum at
43 per cent. Malaysia’s main exports to Saudi
are: electrical and electronic products (18 per cent);
manufactured metal products (13 per cent) and wood
products (12 per cent).
Aiming to boost trade with the UAE, Malaysia is encouraging
the Gulf States to invest in its manufacturing sector.
Figures from the Malaysian Industrial Development
Authority (MIDI) show that UAE investors have participated
in 35 projects since 2001, to the value of $245 million.
They invested in seven manufacturing projects in 2004
and eight in 2005, a total of $147 million in that
year alone. Although UAE investors have participated
in four projects in the period January to August,
only $2.1 million has been actually invested. This
is because “UAE investors are more interested
in portfolio investments than in the manufacturing
sector,” said a MIDI spokesperson. — Lucia
Dore
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A WORLD HUB FOR HALAL PRODUCTS
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MALAYSIA is positioning itself as the
world hub for halal products, a market forecast to be
worth $38.6 billion by 2010, said general manager CEO
office of Prima Agri-Products, Ahmad Nadzer Idris. The
Kuala Lumpur based company is set to capitalise on this
trend by building an $18 million Halal Food Park to
start operating by 2008.
The food park, which will house a number of producers
of halal poultry and meat products will “offer
a complete integrated factory to meet the regulatory
standards and certification of halal,” said Idris.
It will be ready for production in 2008 and, at full
capacity, will produce 200 metric tons a day. This compares
with 20 metric tonnes now. The company is aiming to
export 60 per cent of its product.
The domestic market in Malaysia was worth only $57 million
in 2002 and growth has been stagnant since then, said
Idris. This contrasts with rapidly growing demand for
halal products around the world.
Increasingly, halal food is appealing to a wider segment
of the community, non-Muslims as well as Muslims. Halal
food is becoming a favoured alternative to conventional
food, because the quality of raw material used is often
higher than for other products and the standards required
to meet certification requirements more stringent, explained
Idris. In Europe, for example, husbandry practices are
non-halal. At the time of visiting, Prima has awaiting
clearance by the EU inspectors for its next shipment
to Europe.
Halal products from Prima Agri-Products have been shipped
and distributed in the Gulf since 2004 and the company
is aiming to increase this. “We are receiving
lots of enquiries from the Middle East,” said
Idris. “Since 9/11 there has been more emphasis
on sourcing from other Muslim countries,” he said.
Pakistan, Bangladesh, Brunei and Indonesia are other
primary export markets for Prima’s halal products.
Such is the demand for halal food that Tesco, the UK’s
largest supermarket chain, is in discussions with Prima
to start selling its product there. Idris said: “We
are working with Tesco to promote halal products in
the UK which will be available from next March. —
Lucia Dore
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MoU with Dubai
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THE Dubai Financial Services Authority (DFSA) and
the Malaysian Securities Commission (MSC) signed a
Memorandum of Understanding (MoU) last August to commit
to a project designed to remove regulatory barriers
to Islamic finance transactions between Dubai and
Malaysia. Signed in the Malaysian capital, Kuala Lumpur,
the MoU also commits the two sides to broad based
cooperation and information sharing.
At the time of the signing chief executive of the
DFSA, David Knott spoke with Khaleej Times. He said:
“This is an important initiative in terms of
Islamic finance because Malaysia has established itself
as the leading Islamic finance centre in Asia and
the DIFC aspires to become a leading centre of Islamic
finance in the Middle East. As the most modern finance
centre in the region we have all the frameworks necessary
to enable funds management and capital markets transactions
to be developed in the Islamic finance area.”
The project with the MSC commits the two sides to
looking closely at the way Islamic finance transactions
and capital markets and funds management more broadly
are regulated, to try and harmonise the approaches.
“The objective is for capital markets transactions
that originate in Dubai to be sold into the corresponding
jurisdiction with the least possible additional regulatory
compliance costs”, said Knott. “The objective
is for capital markets transactions that originate
in Dubai to be sold into the corresponding jurisdiction
with the least possible additional regulatory compliance
costs”. This means that cross border transactions
will be able to be undertaken with optimum efficiency
and minimum replicated compliance cost
He also added: “It will clearly be very helpful
to the internationalisation of Islamic finance if
interpretations gather a reasonable degree of consistency.”
As it stands, “Malaysia has a somewhat less
conservative approach to some interpretations of Shari’ah
requirements” than the Middle East.” —
Lucia Dore
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By Lucia Dore
Senior correspondent
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