Ysia Mala: International Trade and Industry

MALAYSIA
INTERNATIONAL TRADE AND INDUSTRY

REPORT
2005
Ministry of International Trade and Industry

Malaysia
MALAYSIA
INTERNATIONAL TRADE AND INDUSTRY
REPORT
2005

Malaysia
ISSN 0128-7524
JUNE 2006
Copyrights Reserved
For sale of copies and further technical information refer to:
Senior Director,
Strategic Planning,
Ministry of International Trade and Industry, Malaysia
12th Floor, Block 10,
Government Offices Complex,
Jalan Duta, 50622 Kuala Lumpur.
Tel: 603-6203 4750 Fax: 603-6201 2573
MITI Homepage: www.miti.gov.my
e-mail: mitiweb@miti.gov.my
Design, layout and publication services by:
Information Broadcasting Network (M) Sdn Bhd

Tel: 603-2163 0176/8 Fax: 603-2163 0182
e-mail: ibnmsb@gmail.com
Printed by:
Ampang Press Sdn Bhd

Tel: 603-9284 9448 Fax: 603-9284 9105
Price: RM60.00
FOREWORD
n 2005, the world economy recorded a growth rate of 4.8 per cent
I (2004 : 5.3 per cent), amid rising oil prices, occurrence of natural
disasters and outbreak of avian influenza. The growth was attributed
to increases in global industrial production and trade, resilience of the
services sector and improvement in global market conditions.
In respect of Malaysia's external sector, total trade increased by 9.9 per

cent to RM967.8 billion in 2005. Exports recorded a double-digit growth
of 11 per cent to RM533.8 billion, while imports grew by 8.5 per cent to
RM434 billion, resulting in the trade surplus widening to RM99.8
billion, the highest recorded since November, 1997. The robust export
performance was driven by the sustained external demand from
Malaysia's major trading partners, increasing intra-ASEAN trade, as well
as double-digit growth of exports to its fast expanding non-traditional
markets.
Output of the manufacturing sector expanded by 5.1 per cent, with

export- and domestic-oriented industries recording growth of 5.7 per cent
and 3.2 per cent, respectively. The Government continued to facilitate the
development and growth of the sector. New incentives were introduced,
which included the reduction of import duties on required raw materials
and inputs, and group relief to all manufacturing companies undertaking
selected activities, such as food production and biotechnology.
In this Report, a new chapter on the performance of the services sector

has been included. The sector is a major contributor to the growth of the
Malaysian economy. MITI, through its agency, MIDA, has developed a
database on investments in the services sector for the period 2003-2005.
The database will provide information to the Government for the
formulation of policies and measures to enhance further the growth of the
sector.
In 2005, Malaysia continued to attract a significant level of investments,

both foreign and domestic, into the manufacturing sector. Investments
totalling RM31 billion were approved, the second highest level recorded
since 1996, involving 1,026 projects. Of the total investment, RM17.9
billion or 57.7 per cent were from foreign sources, while RM13.1 billion
iii
(42.3 per cent), domestic sources. Of significance, 454 projects were
expansion/diversification projects and 659 projects were approved
without incentives. This indicates that the decision by investors to remain
and continue to invest in Malaysia is not based solely on the availability
of incentives, but more on the conducive and business friendly
environment prevailing in the country.
At the multilateral level, Malaysia continues to participate in WTO

negotiations in the effort to ensure that the outcomes will be beneficial to
Malaysia's export interest and provide flexibility to Malaysia in
promoting its strategic industries. In addition, Malaysia is also engaged
in negotiations with developed and developing countries, both at regional
and bilateral levels, to secure better market access for the export of
products and services, as well as expand opportunities for Malaysia's
outward investments. In 2005, Malaysia concluded its first bilateral free
trade agreement with Japan. MITI has been and will continue to
undertake consultations domestically with all stakeholders, in particular,
the private sector, on issues of concern to Malaysia in the free trade area
negotiations.
DATO' SERI RAFIDAH AZIZ

Minister of International Trade and Industry
Malaysia
16 June 2006
iv
CONTENTS
CHAPTER 1
WORLD ECONOMIC, TRADE AND INVESTMENT DEVELOPMENTS . . . . . . . . . . 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Economic Developments by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trade Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
CHAPTER 2
MALAYSIA'S EXTERNAL TRADE ..................................................... 11
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Trade Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Direction of Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trade Practices Affecting Malaysia's Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CHAPTER 3
POLICY INITIATIVES AND MEASURES IN MANUFACTURING AND
MANUFACTURING-RELATED SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Initiatives for Enhancing Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Developing Malaysia as a Regional Hub for Halal Products and Services . . . . . . . . . . . . . . . 35
Development of Small and Medium Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Trade Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Development of Manufacturing-Related Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Development of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Human Resource and Skills Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CHAPTER 4
INVESTMENTS IN THE MANUFACTURING SECTOR ............................ 45
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Approved Projects by Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Approved Projects by Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
v
Approved Projects by Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Implementation of Approved Manufacturing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
CHAPTER 5
PERFORMANCE OF THE MANUFACTURING SECTOR .......................... 63
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Electrical and Electronics Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Transport Equipment Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Chemical Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Iron and Steel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Machinery and Equipment Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Non-Metallic Mineral Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Textiles and Apparel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Wood and Wood Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Rubber Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Palm Oil Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Processed Food and Beverages Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
CHAPTER 6
PERFORMANCE OF THE SERVICES SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Performance of Selected Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
CHAPTER 7
DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES . . . . . . . . . . . . . . . . . . . . . 137
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Issues and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Programmes for SME Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Performance of Financial Assistance Schemes for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Outreach Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
CHAPTER 8
PRODUCTIVITY - MANUFACTURING AND SERVICES SECTORS . . . . . . . . . . . . . 151
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
International Comparison of Productivity Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Productivity Performance of Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Total Factor Productivity of Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Productivity Performance of Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Total Factor Productivity of Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
vi
CHAPTER 9
WORLD TRADE ORGANISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Doha Development Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Other Doha Development Agenda Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Accession to the World Trade Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Trade Policy Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
CHAPTER 10
ASEAN ECONOMIC COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Sectoral Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Facilitation Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Regional Cooperation within ASEAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Regional Linkages with Dialogue Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
CHAPTER 11
DEVELOPMENT IN REGIONAL GROUPINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Asia Pacific Economic Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Organisation of Islamic Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
Other Regional Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
vii
Tables
CHAPTER 1
Table 1.1: World Real GDP Growth...................................................................................... 3

Table 1.2: Merchandise Trade Performance, 2005................................................................ 5
Table 1.3: Leading Exporters and Importers in World Merchandise Trade, 2005................ 6
Table 1.4: Leading Exporters and Importers in World Commercial Services Trade, 2005.. 7
Table 1.5: World FDI Inflows, 2004-2005 ............................................................................ 8
CHAPTER 2
Table 2.1: External Trade ...................................................................................................... 11

Table 2.2: Top 15 Trading Partners ....................................................................................... 11
Table 2.3: Exports by Sector ................................................................................................. 12
Table 2.4: Top 20 Export Destinations.................................................................................. 13
Table 2.5: Imports by End-Use ............................................................................................. 14
Table 2.6: Top 20 Import Sources ......................................................................................... 16
Table 2.7: Trading Partners with which Malaysia Recorded Trade Surpluses ..................... 16
Table 2.8: Trading Partners with which Malaysia Recorded Trade Deficits ........................ 16
Table 2.9: Malaysia's Trade with ASEAN............................................................................. 17
Table 2.10: Malaysia's Trade with the European Union ......................................................... 20
Table 2.11: Fast Growing Potential Markets, 2005 ................................................................ 21
CHAPTER 3
Table 3.1: Halal Certifications Awarded to Companies, 2005.............................................. 36

Table 3.2: Malaysian Standards, as at December 2005......................................................... 41
CHAPTER 4
Table 4.1: Approved Manufacturing Projects ....................................................................... 46

Table 4.2: Approved Manufacturing Projects by Industry, 2005.......................................... 48
Table 4.3: Approved Manufacturing Projects with Malaysian Majority Ownership by
Industry................................................................................................................. 50
Table 4.4: Approved Projects with Foreign Participation..................................................... 53
Table 4.5: Approved Manufacturing Projects by State, 2005 ............................................... 57
Table 4.6: Projects Approved with Incentives, 2005............................................................. 59
CHAPTER 5
Table 5.1: Manufacturing Sector Performance, 2005 ........................................................... 63

Table 5.2: Production Indices of Selected Manufacturing Industries ................................... 64
Table 5.3: Sales of Selected Manufacturing Industries......................................................... 64
Table 5.4: Employment in Selected Manufacturing Industries............................................. 65
Table 5.5: Export Performance of Manufactured Goods ...................................................... 66
viii
Table 5.6: Imports by End-Use ............................................................................................. 66
Table 5.7: Production Index for Selected E&E Products...................................................... 67
Table 5.8: Sales of Selected E&E Products .......................................................................... 68
Table 5.9: Employment in Selected E&E Segments............................................................. 68
Table 5.10: Productivity Indicators of Selected E&E Segments ............................................ 69
Table 5.11: Exports of Selected E&E Products ...................................................................... 70
Table 5.12: Imports of Selected E&E Products ...................................................................... 71
Table 5.13: Malaysian Standards for E&E Products Introduced in 2005 ............................... 71
Table 5.14: Production of Motor Vehicles by Segment .......................................................... 72
Table 5.15: Capacity Utilisation in Automotive Sub-Sector................................................... 72
Table 5.16: Sales in Automotive Sub-Sector........................................................................... 73
Table 5.17: Productivity Indicators of Automotive Sub-Sector .............................................. 77
Table 5.18: Exports and Imports of Automotive Sub-Sector .................................................. 77
Table 5.19: Total Production and Capacity Utilisation of Motorcycle Sub-Sector ................ 78
Table 5.20: Production Indices of Petroleum and Plastic Products Sub-Sector ..................... 81
Table 5.21: Sales of Selected Petroleum and Plastic Products ............................................... 81
Table 5.22: Employment in Petroleum and Plastic Products Sub-Sector ............................... 82
Table 5.23: Productivity Indicators for Chemical Industry..................................................... 82
Table 5.24: Exports of Petroleum and Plastic Products Sub-Sector ....................................... 83
Table 5.25: Imports of Petroleum and Plastic Products .......................................................... 83
Table 5.26: Production Indices of Basic Industrial Chemicals and Chemical Products
Sub-Sector ............................................................................................................ 84
Table 5.27: Sales of Basic Industrial Chemicals and Chemical Products Sub-Sector............ 84
Table 5.28: Employment in Basic Industrial Chemicals and Chemical Products Sub-Sector 85
Table 5.29: Exports of Basic Industrial Chemicals and Chemical Products Sub-Sector........ 85
Table 5.30: Imports of Basic Industrial Chemicals and Chemical Products Sub-Sector........ 86
Table 5.31: Exports and Imports of Pharmaceutical Products ................................................ 87
Table 5.32: Production of Selected Iron and Steel Products................................................... 88
Table 5.33: Productivity Indicators of Iron and Steel Industry............................................... 89
Table 5.34: Exports and Imports of Iron and Steel Products .................................................. 89
Table 5.35: Production Indices of Selected Machinery and Equipment Industry .................. 90
Table 5.36: Sales of Selected Machinery and Equipment Products........................................ 90
Table 5.37: Employment in Machinery and Equipment Industry........................................... 91
Table 5.38: Productivity Indicators of Machinery and Equipment Industry .......................... 91
Table 5.39: Industrial Production Index of Selected Non-Metallic Mineral Products ........... 94
Table 5.40: Installed Production and Capacity Utilisation of Clinker and Cement................ 94
Table 5.41: Sales of Selected Non-Metallic Mineral Products ............................................... 95
Table 5.42: Employment in Selected Non-Metallic Mineral Sub-Sectors.............................. 96
Table 5.43: Productivity Indicators of Non-Metallic Mineral Industry .................................. 96
Table 5.44: Exports of Non-Metallic Mineral Products.......................................................... 98
Table 5.45: Imports of Non-Metallic Mineral Products.......................................................... 98
Table 5.46: Malaysian Standards for Advanced Ceramics Published in 2005 ....................... 99
Table 5.47: Productivity Indicators of Textiles and Apparel Industry .................................... 100
Table 5.48: Production Indices of Wood and Wood Products Industry .................................. 102
Table 5.49: Sales of Wood-Based Products............................................................................. 102
Table 5.50: Employment in Wood and Wood Products Industry............................................ 103
Table 5.51: Productivity Indicators of Wood and Wood Products Industry ........................... 103
Table 5.52: Exports of Selected Wood and Wood Products ................................................... 104
Table 5.53: Imports of Selected Wood and Wood Products Industry ..................................... 105
Table 5.54: Production Indices of Rubber Products Industry ................................................. 106
Table 5.55: Sales of Rubber Products ..................................................................................... 106
ix
Table 5.56: Employment in Rubber Products Industry........................................................... 106
Table 5.57: Productivity Indicators of the Rubber Products Industry .................................... 107
Table 5.58: Exports of Rubber Products ................................................................................. 108
Table 5.59: Imports of Rubber Products ................................................................................. 108
Table 5.60: Production of Palm Oil Products ......................................................................... 109
Table 5.61: Exports of Palm Oil Products............................................................................... 110
Table 5.62: Imports of Palm Oil Products............................................................................... 111
Table 5.63: Production Indices of Selected Processed Food and Beverages Products........... 112
Table 5.64: Sales of Selected Processed Food and Beverages Products ................................ 112
Table 5.65: Employment in Processed Food and Beverages Industry.................................... 113
Table 5.66: Productivity Indicators of Processed Food and Beverages Industry ................... 113
Table 5.67: Major Exports of Processed Food and Beverage Products.................................. 114
Table 5.68: Imports of Selected Processed Food and Beverage Products .............................. 115
CHAPTER 6
Table 6.1: Accredited Professional Services ......................................................................... 123

Table 6.2: Contribution of Accredited Professional Services to Gross Domestic Product... 123
Table 6.3: Profile of Distributive Trade Services Sub-Sector, 2001 ..................................... 126
Table 6.4: Profile of Construction Services Sub-Sector, 2002.............................................. 129
Table 6.5: Performance of Construction Sector 1990, 1996 and 2002 ................................. 129
Table 6.6: Private Healthcare - Number of Establishments and Workers, 2001................... 132
Table 6.7: Healthcare Sector - Key Indicators, 2004 ............................................................ 132
Table 6.8: Economic Indicators by Type of Transportation Services, including
Storage and Communication ................................................................................ 134
Table 6.9: Freight Traffic by Port, Airport and Rail, 1990-2005 .......................................... 135
CHAPTER 7
Table 7.1: Distribution of Small and Medium Enterprises in Services Sector, 2005 ........... 137
Table 7.2: Distribution of SMEs in Manufacturing Sector, 2005 ......................................... 139
Table 7.3: Contribution by SMEs in Manufacturing Sector ................................................. 140
Table 7.4: Approval of Soft Loans by State, 2005................................................................ 145
Table 7.5: Approval of Grant Schemes by State, 2005......................................................... 147
CHAPTER 8
Table 8.1: Productivity Level and Growth for Selected Countries, 2005............................. 153
CHAPTER 10
Table 10.1: Intra-ASEAN Trade, 2005.................................................................................... 175
Table 10.2: Products in the Inclusion List of CEPT for ASEAN 6 ........................................ 175
Table 10.3: Malaysia's Exports under CEPT........................................................................... 176
Table 10.4: Malaysia's Main Exports Items under CEPT in 2005.......................................... 177
Table 10.5: Intra-ASEAN Investment Flows, 2004 ................................................................ 178
Table 10.6: Country Coordinators for Specific Areas Under the Strategic Plan of
Customs Development, 2005-2010 ...................................................................... 186
CHAPTER 11
Table 11.1: APEC Capacity Building Projects Organised in Malaysia, 2005 ........................202
x
Charts
CHAPTER 4
Chart 4.1: Investments in Projects Approved, 1996-2005 .................................................... 45

Chart 4.2: Approved New Projects by CIPE Ratio, 1990-2005 ........................................... 47
Chart 4.3: Approved Projects with Foreign Participation by Major Industry, 2005............. 51
Chart 4.4: Foreign Investments in Approved Projects Approved by Major Country ........... 54
Chart 4.5: Approved Manufacturing Projects by State, 2005 ............................................... 56
Chart 4.6: Status of Implementation of Approved Projects, 2000-2005............................... 61
CHAPTER 5
Chart 5.1: Investments Approved in Machinery and Equipment Industry, 2005 ................. 92
Chart 5.2: Exports of Machinery and Equipment, 2005 ....................................................... 92
Chart 5.3: Imports of Machinery and Equipment, 2005 ..................................................... 93
Chart 5.4: Approved Investments in Non-Metallic Mineral Industry................................... 97
CHAPTER 6
Chart 6.1: Contribution of Services Sub-Sectors to Real GDP, 2005................................... 119

Chart 6.2: Employment in Services Sub-Sectors, 2005 ........................................................ 120
Chart 6.3: Services Account (Net), 2000-2005 ..................................................................... 121
Chart 6.4: Approved Multimedia Supercorridor Companies by Sector as at 2005 .............. 122
CHAPTER 7
Chart 7.1: Profile of Small and Medium Enterprises by Sector ........................................... 137
Chart 7.2: Approval of Soft Loans and Grants, 2005 ........................................................... 145
Chart 7.3: Approval of Soft Loans, 2005.............................................................................. 146
Chart 7.4: Approval of Soft Loans by Sector, 2005.............................................................. 146
Chart 7.5: Approval of Grant Schemes, 2005 ....................................................................... 147
Chart 7.6: Approval of Grant Schemes by Sector, 2005....................................................... 148
CHAPTER 8
Chart 8.1: Productivity Growth by Major Economic Sector, 2005 ...................................... 151
Chart 8.2: Productivity Growth for Selected OECD Countries, 2005.................................. 152
Chart 8.3: Productivity Growth for Selected Asian Countries, 2005.................................... 152
Chart 8.4: Productivity Growth of Manufacturing Sector in Selected Asian
Countries, 2005 .................................................................................................... 154
Chart 8.5: Productivity Growth of Selected Services Sector in Selected Asian
Countries, 2005 .................................................................................................... 154
Chart 8.6: Sales Value per Employee of Manufacturing Industries, 2005............................ 155
Chart 8.7: Contribution of Sub-Sectors to Total Manufacturing Sales Value, 2005............. 156
Chart 8.8: Growth in Sales Value per Employee of Manufacturing Industries, 2005 .......... 156
xi
Chart 8.9: Growth in Labour Cost per Employee of Manufacturing Industries, 2005......... 157
Chart 8.10: Changes in Unit Labour Cost of Manufacturing Industries, 2005....................... 158
Chart 8.11: Contribution to TFP Growth, 1996-2005 ............................................................. 158
Chart 8.12: TFP Growth of Manufacturing Sub-Sectors, 1996-2005..................................... 159
Chart 8.13: Productivity Growth of Services Sector, 2005..................................................... 159
Chart 8.14: TFP Growth of Services Sub-Sectors, 1996-2005 ............................................... 160
Boxed Articles
CHAPTER 2
Box 2.1: Malaysia and Free Trade Area Agreements ......................................................... 29
CHAPTER 5
Box 5.1: National Automotive Policy ................................................................................. 74
CHAPTER 7
Box 7.1: Adoption of Standard Definition for Small and Medium Enterprises ................ 138
Box 7.2: Census on Establishments by Department of Statistics, Malaysia in 2005 ........ 138
CHAPTER 10
Box 10.1: ASEAN-China Free Trade Area .......................................................................... 189
CHAPTER 11
Box 11.1: Trade Facilitation Initiatives in APEC and ASEAN ............................................ 198
Box 11.2: Revised European Union Generalised System of Preferences ............................ 209
xii
Appendices
Appendix 1: Organisations and Groupings - Membership ....................................................... 217

Appendix 2: Statistical Tables - Trade ...................................................................................... 219
Appendix 3: Bilateral Agreements on Trade and Investment ................................................... 247
Appendix 4: Import Licensing .................................................................................................. 251
Appendix 5: Temporary Exclusion and Sensitive Lists for Investment under the
Asean Investment Area Agreement ...................................................................... 257
Appendix 6: MITI and its Agencies- Organisation Charts and Addresses ............................... 275
Appendix 7: Abbreviations And Acronyms .............................................................................. 297
xiii
World Economic, Trade And
Chapter 1
Investment Developments
OVERVIEW inflows. The United Kingdom (UK) was the

leading recipient of world FDIs for the first
In 2005, the world economy continued to time since 1977.
remain resilient, growing at 4.8 per cent,
despite high oil prices and adverse effects of ECONOMIC DEVELOPMENTS BY REGION
the avian flu pandemic and several natural
disasters. The growth momentum accelerated Asia
in the second half of 2005, following Asia, excluding Japan, continued to sustain
significant increases in global industrial high growth, expanding by 8.6 per cent in
production and trade, resilience of the services 2005 (2004: 8.8 per cent). Early in the year,
sector, strengthening of consumer and business Asia recorded a slowdown in growth, but
confidence, and improvement in market it recovered in the second half, as a result
conditions. of a rebound in corporate investments in
industrialised countries and recovery of the
Economic expansion was broad-based. The global semiconductor industry, as well as
economy of the United States of America increase in exports of information technology
(USA), which grew by 3.5 per cent, remained (IT) products. The high economic growth of
an important contributor to world economic the People's Republic of China, at 9.9 per cent,
growth. While the Japanese economy and India (8.3 per cent) continued to drive the
expanded by 2.7 per cent, the Euro-area had growth of other economies in the Asian region.
recorded a more sustained recovery, at 1.3
per cent. Robust growth was recorded in The overall economic growth of the Southeast
most emerging and developing countries, Asia region expanded by 5.5 per cent in 2005
particularly the People's Republic of China, (2004: 6.4 per cent). Amid rising fuel prices
at 9.9 per cent, India (8.3 per cent) and Russia and the increase in inflation and interest
(6.4 per cent). rates, Indonesia sustained a growth of 5.6 per
cent, attributed mainly to increases in private
World merchandise trade grew by 13 per cent consumption and fixed capital formation.
to US$20.6 trillion in 2005. In comparison, Singapore's economy expanded by 6.4 per
world trade in commercial services increased cent, with growth attributed to the rebound
by 11 per cent to US$4.8 trillion. The in the exports of electronics and the recovery of
expansion of merchandise trade was attributed domestic demand in the final quarter. Growth
mainly to higher oil and commodity prices. in the Philippines was supported by remittance
This development had contributed to high inflows, however, it softened to 5.1 per cent,
exports revenue for the African and West Asian due to the decline in agriculture output. The
regions. Trade in commercial services was Thai economy slowed to 4.4 per cent, as a
led by increases in both the travel and result of rising oil prices, weakening of the
transportation services sub-sectors. tourism industry and unrest in its southern
provinces.
In 2005, global foreign direct investment
(FDI) flows increased by 29 per cent, with The Malaysian economy grew at 5.3 per cent
flows mainly to developed countries, thus in 2005. The growth was driven by stronger
reversing their four-year decline in FDI electronics exports, following the recovery
1
in the global electronics industry during the The Canadian economy, in 2005, sustained
fourth quarter of 2005, and activities in the the same rate of growth, at 2.9 per cent, as
wholesale and retail trade, as well as business in 2004. Canada's growth was driven by
related sub-sectors. high energy and commodity prices, healthy
corporate profits and business investments
In Japan, economic activities accelerated in and increase in private consumption, supported
the fourth quarter and the Japanese economy by rising employment and asset prices.
expanded by 2.7 per cent in 2005. The growth
momentum was supported by strong export Europe
growth to the USA and the People's Republic The economy of the Euro-zone grew by 1.3
of China, more competitively priced exports per cent in 2005 (2004: 2.1 per cent). The
due to the depreciation of the yen, and recovery deceleration was a result of a slower growth
in domestic demand, underpinned by rising in the final quarter, due essentially to the
employment and buoyant corporate profits. volatility of oil prices, decline in global
demand and low consumption spending,
The Indian economy grew by 8.3 per cent in particularly in Germany, and softening of
2005. The high growth was led by the strong net exports. The Euro-area continued to
expansion in the manufacturing and services face difficulties in harmonising reforms in
sectors, as well as driven by broad-based sensitive areas, such as the labour market,
domestic demand and expanding business business takeovers and social system, which
activities. The rebound in the agriculture have a bearing on the growth.
sector from the weak performance in 2004
also contributed to the growth. In 2005, growth in Germany moderated to
0.9 per cent (2004: 1.6 per cent). The economic
Taiwan's economic expansion decelerated growth of France decelerated to 1.4 per cent
to 4.1 per cent in 2005 (2004: 6.1 per cent). (2004: 2.1 per cent), while the Netherlands
The decline was attributed mainly to weaker declined to 1.1 per cent (2004: 1.7 per cent).
exports of electronics in the first half of the Growth in the UK slowed to 1.8 per cent,
year. The rebound in the global electronics due primarily to the decline in the performance
industry in the fourth quarter had contributed of the property market and increases in
to the growth. interest rates and energy prices. Business
investments and export growth remained
West Asia's economy grew by 5.9 per cent in steady for the UK.
2005. The growth continued to be contributed
by oil exporting countries in the region, which Australia and New Zealand
benefited from high export earnings, for a third Both Australia and New Zealand sustained
consecutive year, arising from higher world oil a slower GDP growth in 2005. The Australian
prices and export volume. economy grew by 2.5 per cent (2004: 3.6 per
cent), while New Zealand expanded by 2.2
North America per cent (2004: 4.4. per cent). The slower
The growth of the US economy moderated growth in Australia was attributed to the poor
to 3.5 per cent in 2005 (2004: 4.2 per cent). performance of the property market and rising
The growth decelerated in the fourth quarter price of oil. The appreciation in the exchange
of 2005, reflecting weakening private rate of both countries had affected adversely
consumption expenditures, due to the exports revenue, as exports became less
contraction in the purchase of automobiles, competitive.
corporate fixed investments and net exports.
However, increases in industrial production Africa
and orders of capital goods towards the end of The African economy grew by 5.2 per cent
the quarter contributed to a rebound. in 2005 (2004: 5.5 per cent). Low prices of
2
agriculture raw materials, decline in food Table 1.1:
production and poor demand for cotton World Real GDP Growth
were among the factors contributing to the Countries 2005 2004
slower growth. Growth, however, continued
to be sustained by robust economic activities Change GDP Value1 Change
(%) (US$ billion) (%)
in sub-Saharan Africa, as a result of high global
oil and commodity prices. World 4.8 5.3
USA 3.5 12,485.7 4.2

With the exception of Chad and Equatorial
Guinea, growth continued to expand in most East Asia
oil exporting countries, such as Angola, at People's Republic
of China 9.9 2,224.8 10.1
15.7 per cent, and Sudan (8 per cent). Taiwan 4.1 346.1 6.1
Following the expansion in Nigeria's oil Republic of Korea 4.0 793.1 4.6
and non-oil sectors, the Nigerian economy Japan 2.7 4,571.3 2.3
grew by 6.9 per cent (2004: 6 per cent). EU
High world prices for metals also contributed UK 1.8 2,201.5 3.1
to the growth of exporting countries, including France 1.4 2,105.9 2.1
Germany 0.9 2,797.3 1.6
Mozambique, at 7.7 per cent, Zambia (5.1 per Netherlands 1.1 625.3 1.7
cent) and South Africa (4.9 per cent). A number Italy 0.1 1,766.2 0.9
of textiles exporting countries, namely Cote
ASEAN
d'Ivoire and Zimbabwe, were affected Singapore 6.4 117.9 8.7
adversely by the removal of textiles quotas, Indonesia 5.6 276.0 5.1
which caused a significant reduction in Malaysia 5.3 130.8 7.1
Philippines 5.1 97.7 6.0
output. Thailand 4.4 168.8 6.2
Latin America Canada 2.9 1,130.2 2.9

Australia 2.5 708.0 3.6
In 2005, the Latin American economy grew by New Zealand 2.2 108.5 4.4
4.3 per cent (2004: 5.6 per cent) and continued
to record two consecutive years of current South Asia
India 8.3 775.4 8.1
account surplus, supported by rising exports of Pakistan 7.0 118.5 7.1
fuels, metals and agriculture produce. The pace Bangladesh 5.8 61.2 5.9
of growth in the Andean region, at 6.3 per cent
West Asia
(2004: 7.8 per cent) was also faster, compared Saudi Arabia 6.5 307.8 5.2
with that of Latin American Southern Cone Iran 5.9 196.4 5.6
Common Market (MERCOSUR), at 4.2 per Egypt 5.0 93.0 4.1
cent (2004: 6 per cent). Latin America
Argentina 9.2 181.7 9.0
Venezuela's economy, which continued to be Chile 6.3 114.0 6.1
Brazil 2.3 792.7 4.9
influenced mainly by oil exports, grew at a Mexico 3.0 768.4 4.2
lower rate of 9.3 per cent in 2005 (2004: 17.9
per cent). Rising domestic demand accelerated Africa
Nigeria 6.9 99.1 6.0
the growth of Peru's economy to 6.7 per cent Ghana 5.8 10.7 5.8
in 2005 (2004: 4.8 per cent). The expansion South Africa 4.9 239.1 4.5
of the Argentine economy by 9.2 per cent, and Kenya 4.7 19.2 4.3
Uruguayan economy by 6 per cent, was Source: International Monetary Fund, World Economic Outlook, April
2006
supported by increasing domestic demand and Note: 1 GDP value at current price
robust export growth, mainly agriculture. The
Chilean economy, which benefited from rising cent), due to the decline in investments,
prices of metals, grew by 6.3 per cent. Growth tightening of monetary policy and softening in
in Brazil slowed to 2.3 per cent (2004: 4.9 per consumer sentiments.
3
TRADE DEVELOPMENTS In 2005, Malaysia's exports of textiles and
apparel expanded by 6.2 per cent to US$2.7
In 2005, world merchandise trade started billion. Exports to the USA remained at
with sluggish growth, but gained momentum US$772.5 million, as in 2004, while exports to
in the second quarter and ended the year the EU increased by 4.5 per cent to US$447.8
with global trade growing by 13 per cent million.
(2004: 21.5 per cent) to US$20.6 trillion.
In comparison, world trade in commercial Trade Developments by Region
services increased by 11 per cent to US$4.8
trillion in 2005. Asia
In 2005, Asia's merchandise trade decelerated,
The expansion of merchandise trade was with exports growing by 15 per cent to
attributed to the strengthening of the global US$2,773 billion (2004: growth of 25 per cent
manufacturing base and continuing rise in to US$2,411.3 billion), and imports expanding
prices of crude oil and refined products and by 16 per cent to US$2,599 billion (2004:
commodities. As a result, the share of fuels and growth of 27 per cent to US$2,240.5 billion).
other mining products in world merchandise Although the People's Republic of China
trade rose by 16 per cent, the highest level continued to be the world's third largest source
since 1985. The development in the oil market of exports and market for imports, there was a
benefited Africa and West Asia, as indicated by deceleration. In 2005, exports from the
their high share in world merchandise exports. People's Republic of China declined by 7
They accounted for 6.9 per cent of the world percentage points to 28 per cent to US$762
merchandise exports in 2005, the highest share billion, while imports decreased by half to 18
in two decades. Trade in commercial services per cent to US$660.1 billion. Japan retained its
was led by increases in the travel and ranking as the fourth largest exporter.
transportation services sub-sectors, which However, the growth of its exports moderated
grew by 10 per cent and 12 per cent, to 5 per cent (2004: 20 per cent) to US$595.8
respectively. billion. Japan was the fourth largest import
market in 2005.
The removal of quota restrictions on exports
of textiles and clothing, following the full In 2005, ASEAN, as a region, accounted for
implementation of the Agreement on Textiles US$653 billion or 6.5 per cent of the global
and Clothing in 2005, provided substantial merchandise exports, and US$593 billion or
market access for competitive global suppliers 5.7 per cent of world imports. ASEAN's
in Asia, particularly the People's Republic merchandise exports and imports in 2005
of China and India, into developed markets, declined by 6 percentage points and 9
such as the USA and the EU. In 2005, in value percentage points to 14 per cent and 16 per
terms, the market share of the imports of cent, respectively. Singapore was ranked 14th
textiles from the People's Republic of China largest exporter and 15th largest importer in
in the USA increased to 12.1 per cent 2005, accounting for 2.2 per cent of world
(2004: 7.9 per cent) and clothing, to 22 per exports and 1.9 per cent of the total import,
cent (2004: 13.8 per cent). The market share respectively. As the 19th largest exporter and
of the imports of textiles and clothing from 24th largest importer, Malaysia accounted for
the People's Republic of China in the EU rose 1.4 per cent of global exports and 1.1 per cent
to 30.7 per cent (2004: 23 per cent). Other of world imports.
textiles and clothing exporting countries, such
as Bangladesh, Cambodia, Indonesia, Pakistan, West Asia continued to benefit from rising
Sri Lanka and Viet Nam, also recorded global demand for oil and high prices oil in
increases in their market shares in the USA and 2005, resulting in the exports of the region
the EU. increasing by 6 percentage points to 36 per cent,
4
Table 1.2:
Merchandise Trade Performance, 2005
Exports Imports
2005 Change 2004 2005 Change 2004

(US$ billion) (%) (US$ billion) (US$ billion) (%) (US$ billion)
World 10,121.0 13.0 8,956.6 10,481.0 13.0 9,275.2
Asia 2,773.0 15.0 2,411.3 2,599.0 16.0 2,240.5

Peoples' Republic of China 762.0 28.0 595.3 660.1 18.0 559.4
Japan 595.8 5.0 567.4 516.1 14.0 452.7
ASEAN 10 653.0 14.0 572.8 593.0 16.0 511.2

Singapore 229.6 16.0 197.9 200.0 15.0 173.9
Malaysia 140.9 11.0 126.9 114.6 9.0 105.1
Thailand 110.1 14.0 96.6 118.2 25.0 94.6
Indonesia 86.3 20.0 71.9 68.7 25.0 55.0
Philippines 41.2 4.0 39.6 46.3 9.0 42.5
West Asia 529.0 36.0 389.0 318.0 19.0 267.2

USA 904.3 10.0 822.1 1,732.7 14.0 1,519.9
Mexico 213.7 14.0 187.5 231.7 12.0 206.9
Europe 4,353.0 8.0 4,030.6 4,521.0 9.0 4,147.7
EU-25 3,988.0 7.0 3,727.1 4,120.0 8.0 3,814.8
Latin America 351.0 25.0 280.8 294.0 22.0 241.0
MERCOSUR 163.0 20.0 135.8 113.0 18.0 95.8
Africa 296.0 29.0 229.5 248.0 16.0 213.8
Source: World Trade Organisation, 2006
valued at US$529 billion, which accounted for per cent). In 2005, Malaysia was ranked
5.2 per cent of world exports. Growth in imports 28th largest exporter and 27th largest importer
was slower, at 19 per cent (2004: 26 per cent). of commercial services.
In 2005, Asia accounted for US$543 billion or North America

22.5 per cent of global exports of commercial The USA continued to be the largest import
services and US$595 billion or 25.2 per cent of market for both trade and commercial services
world imports of commercial services. In Asia, globally in 2005, with imports of merchandise
Japan led in the world export of commercial trade growing at 14 per cent to US$1,732.7
services, with a share of 4.4 per cent, and was billion and commercial services, at 10 per cent
ranked the fifth largest exporter of commercial to US$288.7 billion. The USA was also the
services. This was followed by the People's largest exporter of commercial services,
Republic of China, with a share of 3.4 per cent, with exports growing at 10 per cent to
India (2.8 per cent), Hong Kong (2.5 per cent), US$353.3 billion, and second largest exporter
Singapore (1.9 per cent) and the Republic of in merchandise trade, with exports increasing
Korea (1.8 per cent). by 10 per cent to US$904.3 billion.
Asia's imports of commercial services were In 2005, Canada was the ninth largest
also led by Japan, with a share of 5.8 per cent exporter in merchandise trade and 15th largest
of world imports, followed by the People's exporter of commercial services. Exports of
Republic of China (3.6 per cent), India (2.9 per merchandise grew by 14 per cent to US$359.6
cent), the Republic of Korea (2.5 per cent), billion, while exports of commercial services
Singapore (1.9 per cent) and Hong Kong (1.3 expanded by 9 per cent to US$50.6 billion.
5
As the 10th largest import market for The EU-25 accounted for 39.4 per cent of
merchandise and 12th largest import market for world merchandise exports (2004: 41.6 per
commercial services in 2005, Canada's imports cent) and 39.3 per cent of global merchandise
of merchandise and commercial services rose imports (2004: 41.1 per cent) in 2005.
by 14 per cent to US$320.1 billion and 10 per Germany was the largest exporter of
cent to US$62.3 billion, respectively. merchandise and third largest exporter of
commercial services, with both exports
European Union growing at 7 per cent to US$970.7 billion
In 2005, Europe recorded the lowest growth and US$142.9 billion, respectively. Germany
in the export and import of merchandise continued to be the second largest
and commercial services among the regions. import market for both merchandise, valued
Europe's exports of merchandise and at US$774.1 billion, and commercial
commercial services grew by 8 per cent and services (US$198.6 billion), after the USA.
7 per cent, respectively, and imports expanded In the UK, negative growth of 1 per cent
by 9 per cent and 8 per cent, respectively. The was registered for exports of commercial
slower growth was attributed to the fiscal services, due mainly to the increase in
problem in Europe. insurance claims.
Table 1.3:
Leading Exporters and Importers in World Merchandise Trade, 2005
Rank Exporters US$ billion Share Annual Rank Importers US$ billion Share Annual
(%) Change (%) Change
(%) (%)
1 Germany 970.7 9.3 7.0 1 USA 1,732.7 16.1 14.0

2 USA 904.3 8.7 10.0 2 Germany 774.1 7.2 8.0
3 People's Republic 3 People's Republic
of China 762.0 7.3 28.0 of China 660.1 6.1 18.0
4 Japan 595.8 5.7 5.0 4 Japan 516.1 4.8 14.0
5 France 459.2 4.4 2.0 5 UK 501.2 4.7 6.0
6 Netherlands 401.3 3.9 12.0 6 France 495.8 4.6 5.0
7 UK 377.9 3.6 9.0 7 Italy 379.7 3.5 7.0
8 Italy 366.8 3.5 4.0 8 Netherlands 357.9 3.3 12.0
9 Canada 359.6 3.5 14.0 9 Belgium 320.4 3.0 12.0
10 Belgium 329.6 3.2 7.0 10 Canada 320.1 3.0 14.0
11 Hong Kong 292.3 2.8 10.0 11 Hong Kong 300.6 2.8 10.0
12 Republic of Korea 284.7 2.7 12.0 12 Spain 277.6 2.6 7.0
13 Russia 245.3 2.4 34.0 13 Republic of Korea 261.0 2.4 16.0
14 Singapore 229.6 2.2 16.0 14 Mexico 231.7 2.2 12.0
15 Mexico 213.7 2.1 14.0 15 Singapore 200.0 1.9 15.0
16 Taiwan 196.6 1.9 8.0 16 Taiwan 185.9 1.7 10.0
17 Spain 186.1 1.8 2.0 17 India 131.6 1.2 35.0
18 Saudi Arabia 178.8 1.7 42.0 18 Australia 125.3 1.2 15.0
19 Malaysia 140.9 1.4 11.0 19 Russia 125.1 1.2 28.0
20 Sweden 129.9 1.3 5.0 20 Austria 124.7 1.2 4.0
21 Switzerland 125.9 1.2 6.0 21 Switzerland 121.2 1.1 9.0
22 Austria 123.3 1.2 4.0 22 Thailand 118.2 1.1 25.0
23 Brazil 118.3 1.1 23.0 23 Turkey 116.4 1.1 19.0
24 United Arab 24 Malaysia 114.6 1.1 9.0
Emirates 112.5 1.1 36.0
25 Thailand 110.1 1.1 14.0 25 Sweden 110.6 1.0 10.0
26 Ireland 109.5 1.1 5.0 26 Poland 100.5 0.9 12.0
27 Australia 105.8 1.0 22.0 27 Brazil 77.6 0.7 17.0
28 Norway 103.3 1.0 25.0 28 United Arab
29 India 89.8 0.9 19.0 Emirates 77.0 0.7 25.0
30 Poland 88.9 0.9 19.0 29 Czech Republic 76.9 0.7 10.0
30 Denmark 76.5 0.7 12.0
6
Table 1.4:
Leading Exporters and Importers in World Commercial Services Trade, 2005
Rank Exporters US$ billion Share Annual Rank Importers US$ billion Share Annual
(%) Change (%) Change
(%) (%)
1 USA 353.3 14.6 10.0 1 USA 288.7 12.2 10.0

2 UK 183.4 7.6 -1.0 2 Germany 198.6 8.4 4.0
3 Germany 142.9 5.9 7.0 3 UK 150.1 6.4 4.0
4 France 113.7 4.7 4.0 4 Japan 135.9 5.8 1.0
5 Japan 106.6 4.4 12.0 5 France 102.9 4.4 7.0
6 Italy 93.4 3.9 13.0 6 Italy 92.3 3.9 15.0
7 Spain 91.2 3.8 8.0 7 People's Republic
8 People's Republic of China 85.3 3.6 19.0
of China 81.2 3.4 31.0 8 Netherlands 69.2 2.9 1.0
9 Netherlands 75.0 3.1 4.0 9 Ireland 67.5 2.9 5.0
10 India 67.6 2.8 76.0 10 India 67.4 2.9 73.0
11 Hong Kong 60.3 2.5 11.0 11 Spain 65.3 2.8 15.0
12 Ireland 54.7 2.3 5.0 12 Canada 62.3 2.6 10.0
13 Austria 53.8 2.2 11.0 13 Republic of Korea 58.0 2.5 17.0
14 Belgium 53.4 2.2 6.0 14 Austria 51.7 2.2 12.0
15 Canada 50.6 2.1 9.0 15 Belgium 51.2 2.2 6.0
16 Switzerland 45.2 1.9 9.0 16 Singapore 44.0 1.9 9.0
17 Singapore 45.1 1.9 10.0 17 Russia 37.6 1.6 15.0
18 Republic of Korea 43.5 1.8 9.0 18 Denmark 36.0 1.5 8.0
19 Sweden 42.8 1.8 12.0 19 Sweden 35.2 1.5 7.0
20 Luxembourg 39.6 1.6 20.0 20 Hong Kong 31.6 1.3 5.0
Africa while imports expanded by 22 per cent

Africa's growth of exports, which continued (2004: 28 per cent) to US$294 billion.
to be robust in 2005, eased slightly by Improved economic performance, favourable
1 percentage point to 29 per cent, while commodity prices and exchange rate
imports declined by 13 percentage points appreciation were among the factors
to 16 per cent. The growth of exports of contributing to the growth.
this region continued to be supported by
high exports of fuel by oil exporting countries, Growth in commercial services trade was
such as Angola, Sudan and Nigeria, and the highest among the regions, with exports
exports of metals by, among others, and imports growing at 20 per cent (2004: 16
Mozambique, Zambia and South Africa. per cent) and 22 per cent (2004: 14 per cent),
Consistent with the increasing global demand respectively. In 2005, Brazil's exports of
for fuel oil, exports of oil exporting countries commercial services grew by 28 per cent
grew by 45 per cent (2004: 41 per cent) to (2004: 21 per cent), while imports expanded
US$166 billion. The increase in exports by 38 per cent (2004: 12 per cent). In
revenue, however, did not stimulate the growth merchandise trade, Brazil was ranked as the
of imports, as the growth of imports of oil 23rd largest exporter and 27th largest importer,
exporting countries slowed to 17 per cent in accounting for 1.1 per cent of world exports
2005 (2004: 34 per cent). and 0.7 per cent of world imports, respectively.
Latin America INVESTMENT DEVELOPMENTS

The Latin American region continued to
record robust growth in the export and import World Foreign Direct Investment
of merchandise and commercial services in Inflows
2005. Exports of merchandise grew by 25 per According to United Nations Conference on
cent (2004: 29 per cent) to US$351 billion, Trade and Development (UNCTAD), in 2005,
7
FDI inflows increased significantly by 29 per developed countries rose by 38.2 per cent to
cent (2004: 9 per cent) to US$896.7 billion. US$573.2 billion (2004: declined by 6.1 per
Developed countries were the major recipients cent), while developing countries registered
of world FDIs, accounting for 63.9 per cent a lower increase of 12.5 per cent to US$273.5
share and reversing their four-year continuous billion (2004: 41.3 per cent). Increases in FDI
decline in FDI inflows. In 2005, FDI inflows to inflows were recorded among all regions.
Table 1.5:
World FDI Inflows, 2004-2005
Region/Economy 20052 20041
US$ billion Share (%) Change (%) US$ billion Change (%)
World 896.7 100.0 29.0 695.0 9.0

Developed Countries 573.2 63.9 38.2 414.7 -6.1
Europe 449.2 50.1 74.0 258.2 -28.1
EU-25 445.3 49.7 71.9 259.1 -23.8
EU-15 407.7 45.5 76.2 231.4 -29.4
UK 219.1 24.4 182.3 77.6 183.2
France 48.5 5.4 99.6 24.3 -42.8
Luxembourg 13.4 1.5 -80.1 67.2 -19.8
Italy 13.0 1.4 -22.6 16.8 2.4
Germany 4.9 0.5 112.7 -38.6 -241.4
New 10 EU Member States 37.7 4.2 35.6 27.8 122.4
Czech Republic 12.5 1.4 177.8 4.5 114.3
Poland 8.7 1.0 -31.0 12.6 173.9
Hungary 6.0 0.7 30.4 4.6 119.0
USA 106.0 11.8 10.5 95.9 68.8
Japan 9.4 1.0 20.5 7.8 23.8
Developing Countries 273.5 30.5 12.5 243.1 41.3
Africa 28.9 3.2 54.5 18.7 8.7
South Africa 7.2 0.8 800.0 0.8 14.3
Egypt 4.1 0.5 215.4 1.3 550.0
Sudan 2.1 0.2 40.0 1.5 15.4
Morocco 1.2 0.1 33.3 0.9 -60.9
Latin America and the Caribbean 72 8.0 4.5 68.9 43.5
Mexico 17.2 1.9 -3.9 17.9 39.8
Brazil 15.5 1.7 -14.8 18.2 80.2
Chile 7.0 0.8 -7.9 7.6 72.7
Colombia 4.5 0.5 45.2 3.1 72.2
Argentina 4.2 0.5 2.4 4.1 141.2
Asia and Pacific 172.7 19.3 11.1 155.5 45.5
West Asia 26.5 3.0 50.6 17.6 47.9
Turkey 4.8 0.5 77.8 2.7 50.0
South, East and South-East Asia 146.2 16.3 6.1 137.8 45.5
People's Republic of China 60.3 6.7 -0.5 60.6 13.3
Hong Kong 39.7 4.4 16.8 34.0 150.0
Singapore 15.9 1.8 -1.2 16.1 73.1
India 6.0 0.7 13.2 5.3 23.3
Republic of Korea 4.5 0.5 -41.6 7.7 102.6
Malaysia 4.2 0.5 -8.7 4.6 84.0
Thailand 3.7 0.4 164.3 1.4 -26.3
Indonesia 3.5 0.4 250.0 1.0 266.7
South-East Europe and the
Commonwealth of Indepandent States 49.9 5.6 34.0 37.2 55.0
Source : UNCTAD and UNCTAD's own estimates
Notes : 1 Revised data
2
Preliminary estimates
8
Foreign Direct Investments in billion, Hong Kong (US$39.7 billion),
Developed Countries Singapore (US$15.9 billion) and India (US$6
The bulk of FDI inflows to developed billion). Collectively, these countries attracted
countries in 2005 were concentrated in the US$121.9 billion or 70.6 per cent of the total
EU, valued at US$445.3 billion, or 77.7 per global FDI inflow to this region. FDI inflows
cent of the total world FDI inflow to developed to Malaysia amounted to US$4.2 billion,
countries. FDI inflows to the EU also expanded registering a decline of 8.7 per cent. For West
significantly by 71.9 per cent (2004: declined Asia, FDI inflows in 2005 expanded by 50.6
by 23.8 per cent). The UK emerged as the per cent to US$26.5 billion.
leading recipient for the first time since 1977,
with FDI inflows totalling US$219.1 billion, In 2005, FDI inflows to the Latin America and
an increase of almost three-fold from 2004. the Caribbean region expanded at a slower
Other countries in the EU, such as France, pace, by 4.5 per cent (2004: 43.5 per cent)
Czech Republic, Hungary and Germany, also to US$72 billion. Main recipients of FDI
recorded high FDI inflows. The increase in inflows were Mexico, at US$17.2 billion,
inflows in the new EU states was due mainly Brazil (US$15.5 billion), Chile (US$7
to high rates of reinvestment earnings. billion), Colombia (US$4.5 billion) and
Argentina (US$4.2 billion). The increase in
All other developed countries recorded inflows was due mainly to the economic
increases in FDI inflows. The USA registered recovery in the region, stronger growth in the
an increase of 10.5 per cent to US$106 billion, global economy, higher commodity prices,
while inflows into Japan expanded by 20.5 per and activities in cross-border mergers and
cent to US$9.4 billion. The increase in FDI acquisitions.
inflows to developed countries in 2005 were
attributed mainly to rising profits, due to the FDI inflows to Africa increased by 54.5 per
favourable business environment, increasing cent to US$28.9 billion in 2005. All major oil
activities in cross-border mergers and exporting countries, as well as Egypt and South
acquisitions, which grew by 40 per cent to Africa, recorded increase in FDI inflows.
US$2.9 trillion, and higher share prices in Investments were mostly in the oil and natural
major financial markets. resources industries.
Foreign Direct Investments in OUTLOOK

Developing Countries
In 2005, the Asia and the Pacific, and the Latin The global economy is expected to remain
America and the Caribbean regions were the resilient in 2006, despite high oil prices
top destinations for FDI inflows for developing and interest rates. Economic activities, which
countries, accounting for 63.1 per cent and accelerated in the second half of 2005 and
26.3 per cent, respectively, of the total FDI early 2006, are expected to be sustained,
inflows to the developing countries. with economic expansion continuing to be
broad-based. International Monetary Fund
FDI inflows to Asia and the Pacific region (IMF) projected that the world GDP in 2006
increased by 11.1 per cent (2004: 45.5 per cent) will grow by 4.9 per cent. The continued
to US$172.7 billion in 2005. The FDI inflows growth in the USA, rapid recovery in Japan
to Asia were associated mainly with and robust economic development in Asia,
investments in the oil sector and related particularly in the People's Republic of
activities, telecommunications and real China and India, and Russia, are among the
property. factors expected to contribute to global
growth. The anticipated recovery in the
Main destinations for FDIs were the Euro-area will be subdued, unless its fiscal
People's Republic of China, at US$60.3 problem resolved.
9
World trade is expected to grow by 7 per cent Following the rebound in 2005, global FDI
in 2006. It will be supported by stronger flows are expected to increase further in
economic growth, increased demand for 2006, given the stronger economic growth and
semiconductors, resulting from the recovery broad-based expansion, greater corporate
of the global electronics industry, and restructuring, sustained growth in profits and
high prices for fuel, commodities and raw continuing expansion of new markets. The
materials. Based on estimates by WTO, the competitive pressure on firms, continued off-
share of the People's Republic of China in shoring of services, on-going liberalisation
world trade had risen consistently to 6.9 per initiatives and growth of Multinational
cent in 2005 from 4.1 per cent in 2001. Corporations from developing countries, will
Continued steady growth is expected for the be among the major factors leading to increase
country in 2006. The global economic in FDIs. In view of the robust economic
developments, particularly in the USA and the developments in Asia and Latin America, the
EU, will continue to have a bearing on global prospects for FDI flows to these regions will
trade growth. remain positive.
10
Chapter 2 Malaysia's External Trade
OVERVIEW Table 2.1:

External Trade
Continued growth of exports and imports
Description 2005 2004
led to further expansion of Malaysia's total
trade, which increased by 9.9 per cent to RM billion Change RM billion
RM967.8 billion in 2005. Malaysia registered (%)
its eighth consecutive year of trade surplus Total Trade 967.8 9.9 880.8
since November 1997, with a record trade
balance of RM99.8 billion. Exports 533.8 11.0 480.7
Imports 434.0 8.5 400.1
Driven by economic expansion in both Trade Balance 99.8 23.7 80.7

industrialised and developing countries, as Compiled by Ministry of International Trade and Industry
well as strong external demand in 2005,
Malaysia's merchandise exports grew by 11 per Union (EU). In 2005, trade with these
cent to RM533.8 billion. Imports increased by four regions accounted for 87.2 per cent of
8.5 per cent to reach RM434 billion. Malaysia's global trade.
From the regional perspective, Malaysia's The most significant expansion in trade
major trading partners were the Association of was with ASEAN, which grew by 13.8 per
South East Asian Nations (ASEAN), North cent to RM246.2 billion in 2005. The
East Asia, North America and the European complementarities of industries and growing
Table 2.2:
Top 15 Trading Partners
Country 2005 2004
RM billion Share Change RM billion Share

(%) (%) (%)
Total Trade 967.8 100.0 9.9 880.8 100.0
USA 161.0 16.6 8.7 148.1 16.8

Singapore 134.2 13.9 15.0 116.7 13.2
Japan 112.9 11.7 0.5 112.3 12.7
People's Republic of China 85.1 8.8 19.1 71.4 8.1
Thailand 51.6 5.3 14.8 45.0 5.1
Hong Kong 42.0 4.3 6.2 39.5 4.5
Republic of Korea 39.6 4.1 7.7 36.7 4.2
Taiwan 38.8 4.0 3.7 37.4 4.2
Germany 30.5 3.2 7.6 28.4 3.2
Indonesia 29.1 3.0 5.5 27.6 3.1
Australia 26.2 2.7 16.1 22.6 2.6
Netherlands 20.8 2.1 8.4 19.2 2.2
Philippines 19.7 2.0 8.8 18.1 2.1
India 19.1 2.0 17.3 16.3 1.9
UK 16.0 1.7 7.0 17.2 2.0
Compiled by Ministry of International Trade and Industry
11
intra-regional linkages were the primary in 2004, to seventh position. Similarly, India
factors that had resulted in the expansion of moved to 14th position, one notch above last
trade with ASEAN. Significant growth in trade year's ranking.
was also recorded with other regions, such as
West Asia, which expanded by 23.1 per cent, EXPORTS
Latin America (23 per cent), Africa (20.7 per
cent) and South Asia (16.3 per cent). Robust growth in exports, which continued
from the previous year, had driven Malaysia's
In terms of trade with individual countries, total export to RM533.8 billion, up from
Malaysia's top four trading partners remained RM480.7 billion in 2004. The 11 per cent
unchanged in 2005. They were the United export growth registered for 2005 was higher
States of America (USA), accounting for 16.6 than the world merchandise export growth of
per cent of Malaysia's total trade, followed 6.5 per cent estimated for that year by the
by Singapore (13.9 per cent), Japan (11.7 per World Trade Organisation (WTO).
cent) and the People's Republic of China
(8.8 per cent). Collectively, trade with these In 2005, export growth was recorded in all
four markets accounted for 51 per cent of sectors. The composition of exports was
Malaysia's total trade. relatively unchanged during the year, with
manufactures being the major contributor to
In 2005, among the top 15 individual trading export, accounting for 77.4 per cent of total
partners, movements were observed in the export. Manufactured exports grew by 9.6 per
rankings of certain countries. For example, the cent to reach RM413.1 billion, from RM376.8
Republic of Korea moved from eighth position billion in 2004. Exports of mining goods
Table 2.3:
Exports by Sector

(%) (%) (%)
Total Exports 533.8 100.0 11.0 480.7 100.0
Manufactured Exports 413.1 77.4 9.6 376.8 78.4

Electrical and electronics products 264.7 49.6 9.6 241.5 50.2
Chemicals and chemical products 26.3 4.9 5.4 24.9 5.2
Machinery, appliances and parts 18.1 3.4 16.4 15.6 3.2
Wood products 14.6 2.7 4.0 14.1 2.9
Optical and scientific equipment 12.3 2.3 6.5 11.6 2.4
Manufactures of metals 10.8 2.0 12.7 9.6 2.0
Textiles and apparel 10.3 1.9 6.2 9.7 2.0
Iron and steel products 7.0 1.3 -3.2 7.2 1.5
Rubber products 7.0 1.3 13.0 6.2 1.3
Manufactures of plastics 6.7 1.3 19.8 5.6 1.2
Processed food 6.5 1.2 7.9 6.1 1.3
Agricultural Exports 41.2 7.7 0.2 41.1 8.6

Palm oil 22.9 4.3 -8.3 25.0 5.2
Saw logs and sawn timber 6.6 1.2 18.8 5.6 1.2
Crude rubber 5.8 1.1 11.3 5.2 1.1
Mining Exports 70.2 13.2 26.9 55.3 11.5

Crude petroleum 30.2 5.7 32.7 22.8 4.7
LNG 20.8 3.9 21.7 17.1 3.6
Refined petroleum 17.5 3.3 26.4 13.8 2.9
12
Table 2.4:
Top 20 Export Destinations
Country 2005 2004

(%) (%) (%)
Total Exports 533.8 100.0 11.0 480.7 100.0
USA 105.0 19.7 16.5 90.2 18.8

Singapore 83.3 15.6 15.5 72.2 15.0
Japan 49.9 9.4 2.8 48.6 10.1
Hong Kong 31.2 5.8 8.8 28.7 6.0
Thailand 28.7 5.4 25.1 23.0 4.8
Australia 18.0 3.4 14.3 15.8 3.3
Netherlands 17.5 3.3 10.7 15.8 3.3
India 15.0 2.8 31.2 11.4 2.4
Taiwan 14.8 2.8 -6.0 15.8 3.3
Indonesia 12.6 2.4 7.7 11.7 2.4
Germany 11.3 2.1 7.4 10.5 2.2
UK 9.5 1.8 -10.3 10.6 2.2
Philippines 7.5 1.4 1.5 7.4 1.5
United Arab Emirates 7.0 1.3 18.5 5.9 1.2
France 6.9 1.3 -2.4 7.1 1.5
Viet Nam 4.4 0.8 1.3 4.3 0.9
Canada 2.9 0.5 -5.5 3.0 0.6
Pakistan 2.8 0.5 5.2 2.7 0.6
expanded by 26.9 per cent to RM70.2 billion, the mainstay market, the USA previously
while agricultural exports increased marginally subjected to quotas, remained unchanged at
by 0.2 per cent to RM41.2 billion. RM2.9 billion in 2005, while export to the
EU increased by 4.5 per cent to RM1.8 billion.
Within the manufacturing sector, almost all
sub-sectors registered expansion in exports in Crude and refined petroleum, as well as
2005. The main increases were for electrical liquefied natural gas (LNG), were the principal
and electronics (E&E) products, which exports within the mining sector. Collectively,
expanded by 9.6 per cent to RM264.7 billion, these exports contributed to 12.9 per cent of
followed by chemicals and chemical products total export and 97.6 per cent of mining exports.
(increased by 5.4 per cent to RM26.3 billion),
machinery appliances and parts (increased by The top four agricultural exports were palm oil,
16.4 per cent to RM18.1 billion), manufactures saw logs and sawn timber, crude rubber and
of metals (increased by 12.7 per cent to seafood, accounting for 6.9 per cent of total
RM10.8 billion) and manufactures of export and 90 per cent of agricultural exports.
plastics (increased by 19.8 per cent to RM6.7 Despite registering 7.2 per cent increase in
billion). export volume, the value of palm oil exports
was lower. Exports of palm oil amounted to
Malaysia's textiles and apparel industry RM22.9 billion in 2005, compared with RM25
remained resilient despite the removal of billion in 2004. The lesser value in exports
quotas under the Agreement on Textiles and was primarily due to the lower average price
Clothing in January 2005. The export of of palm oil in 2005. However, double-digit
textiles and apparel expanded by 6.2 per cent growth was recorded for the other three major
last year to reach RM10.3 billion. Export to agricultural exports.
13
Table 2.5:
Imports by End-Use

(%) (%) (%)
Gross Imports 434.0 100.0 8.5 400.1 100.0
Intermediate Goods 308.3 71.0 7.2 287.7 72.0
Parts and accessories 163.7 37.7 2.7 159.3 40.0

Semiconductors, printed circuits and parts 102.5 23.6 1.9 100.5 25.0
Parts for office machines 24.3 5.6 4.6 23.2 5.8
Electrical apparatus and resistors 15.2 3.5 8.3 14.0 3.5
Parts for checking instruments 1.4 0.3 35.8 1.0 0.3
Processed industrial supplies 87.7 20.2 6.5 82.4 21.0

Iron and steel 14.2 3.3 17.6 12.1 3.0
Plastics in primary forms (excluding scrap) 8.5 2.0 10.0 7.8 1.9
Organic chemicals 8.5 2.0 10.3 7.7 1.9
Copper products 5.5 1.3 15.0 4.7 1.2
Paper and paperboard 4.0 0.9 1.9 3.9 1.0
Manufactures of base metals 3.4 0.8 9.2 3.1 0.8
Inorganic chemicals (excluding spent fuel 2.6 0.6 6.3 2.5 0.6
element of nuclear reactors)
Fertiliser, excluding crude fertilisers 2.4 0.6 1.6 2.4 0.6
Plastics in non-primary forms 2.2 0.5 1.6 2.1 0.5
Dying, tanning and colouring materials 1.5 0.3 1.9 1.5 0.4
(excluding artists' colours)
Residual petroleum products 1.1 0.3 -12.0 1.2 0.3
Primary fuels and lubricants 15.2 3.5 61.0 9.5 2.4

Parts and accessories for transport equipment 12.2 2.8 34.8 9.1 2.3
Other processed fuels and lubricants 12.3 2.8 24.3 9.9 2.5
Primary industrial supplies 8.9 2.0 1.6 8.8 2.2
Processed food and beverages, mainly for industry 4.6 1.1 -9.6 5.1 1.3
Primary food and beverages, mainly for industry 3.7 0.9 -0.1 3.7 0.9
Capital Goods 60.7 14.0 9.5 55.5 14.0

Capital goods (except transport equipment) 53.9 12.4 10.0 49.0 12.0
Automatic data processing machines 10.8 2.5 25.1 8.6 2.1
Electrical machinery and apparatus 7.7 1.8 22.5 6.3 1.6
Telecommunications equipment (excluding parts) 5.6 1.3 2.8 5.4 1.4
Other machinery specialised for particular industry 4.2 1.0 8.4 3.9 1.0
Transformer and other electric power machines 2.7 0.6 8.9 2.5 0.6
Rotating electric plants and parts 2.4 0.6 10.1 2.2 0.6
Measuring, checking and analysing equipment 1.2 0.3 -21 1.6 0.4
Medical, dental and surgical instruments 1.0 0.2 10.3 0.9 0.2
Continued ...
14

(%) (%) (%)
Transport equipment for industries 6.8 1.6 5.3 6.5 1.6

Consumption Goods 24.6 5.7 5.9 23.2 5.8
Non-durable consumer goods 6.8 1.6 10.2 6.2 1.5
Processed food and beverages for household 5.9 1.4 5.2 5.6 1.4
consumption
Semi-durable consumer goods 4.7 1.1 0.4 4.7 1.2
Durable consumer goods 3.5 0.8 12.3 3.1 0.8
Primary food and beverages for household 3.4 0.8 1.9 3.3 0.8
consumption
Transport equipment for non-industries 0.3 0.1 -4.9 0.3 0.1
Dual Purpose Goods 11.3 2.6 21.5 9.9 2.3

Processed motor spirit 6.4 1.5 35.4 4.7 1.2
Passenger motor cars 4.9 1.1 7.0 4.6 1.1
Major markets for Malaysia's exports remained components for down-stream production in
unchanged in 2005. The USA, Singapore and the E&E, machinery and appliances and
Japan were the top three export destinations, chemical industries. These included, among
accounting for 44.7 per cent of total export, others, semiconductors, printed circuits, parts
compared with 43.9 per cent in 2004. of machines, electrical apparatus, iron and
steel and plastics in primary and non-primary
Higher exports to India and Australia in 2005 forms. Imports of capital goods, with a value
had shifted their rankings in Malaysia's top of RM60.7 billion, comprised mainly E&E,
export destinations. India became Malaysia's machinery and apparatus, and transport
10th largest export destination from 12th equipment.
position previously, while Australia moved up
one notch to the seventh position. Major import sources in 2005 were
Japan, the USA, Singapore and the People's
IMPORTS Republic of China. The most significant
increase in imports was from the People's
Similar to exports, Malaysia's imports in 2005 Republic of China, registering an increase
also registered expansion. Growing by 8.5 per of 27 per cent to RM49.9 billion, compared
cent, imports increased to RM434 billion, with RM39.3 billion in 2004. Although
from RM400.1 billion in the previous year. lower imports were recorded from Japan,
Growth in imports was mainly attributed to it continued to be Malaysia's major source
higher demand for intermediate and capital of imports for 2005, accounting for 14.5 per
goods to sustain increased manufacturing and cent of total import. Lesser imports from
investment activities. Intermediate and capital Japan was a result of changes in sourcing
goods formed the bulk of imports, accounting patterns over recent years, with Malaysia
for 85 per cent of total import. importing more from other countries, such
as the People's Republic of China,
In terms of composition, intermediate imports, Singapore, Taiwan and the Republic of
valued at RM308.3 billion, comprised mainly Korea.
15
Table 2.6:
Top 20 Import Sources
Country 2005 2004

(%) (%) (%)
Total Imports 434.0 100.0 8.5 400.1 100.0
Japan 63.0 14.5 -1.2 63.7 15.9

USA 55.9 12.9 -3.4 57.9 14.5
Singapore 50.8 11.7 14.3 44.5 11.1
Taiwan 24.0 5.5 10.7 21.7 5.4
Thailand 22.9 5.3 4.1 22.0 5.5
Germany 19.3 4.4 7.8 17.9 4.5
Indonesia 16.6 3.8 4.0 15.9 4.0
Philippines 12.2 2.8 13.8 10.7 2.7
Hong Kong 10.8 2.5 -0.6 10.9 2.7
Australia 8.2 1.9 20.3 6.8 1.7
UK 6.5 1.5 -1.8 6.6 1.7
Saudi Arabia 5.9 1.4 56.5 3.7 0.9
France 5.7 1.3 2.1 5.5 1.4
Italy 4.7 1.1 29.8 3.6 0.9
Switzerland 4.7 1.1 21.8 3.9 1.0
India 4.2 1.0 -15.0 4.9 1.2
Viet Nam 3.9 0.9 75.3 2.2 0.6
Netherlands 3.4 0.8 -2.4 3.4 0.9
TRADE BALANCE per cent, from RM80.7 billion in the year

before.
Stronger export performance and reduction
of trade deficit with selected trading Large surpluses were registered with the USA,
partners, such as Japan, contributed Singapore, Hong Kong and the Netherlands,
to the widening of the trade surplus to while high deficits were recorded with the
a record level of RM99.8 billion in People's Republic of China, Japan, Taiwan and
2005. Trade surplus expanded by 23.7 Germany.
Table 2.7: Table 2.8:

Trading Partners with which Malaysia Trading Partners with which Malaysia
Recorded Trade Surpluses Recorded Trade Deficits
Country 2005 2004 Country 2005 2004
RM billion RM billion RM billion RM billion
USA 49.1 32.3 People's Republic of China 14.7 7.1

Singapore 32.5 27.7 Japan 13.1 15.2
Hong Kong 20.4 17.8 Taiwan 9.2 5.9
Netherlands 14.1 12.3 Germany 8.0 7.4
India 10.8 6.5 Philippines 4.7 3.3
Australia 9.9 9.0 Saudi Arabia 4.1 1.9
Thailand 5.8 1.0 Indonesia 4.0 4.3
United Arab Emirates 4.2 4.2 Switzerland 3.9 3.2
UK 2.9 3.9 Republic of Korea 3.7 3.0
Pakistan 2.6 2.5 Italy 2.0 0.7
Compiled by Ministry of International Trade and Industry Compiled by Ministry of International Trade and Industry
16
DIRECTION OF TRADE Malaysia's exports to all ASEAN countries
expanded in 2005, with the most significant
ASEAN, as a grouping, was Malaysia's largest growth of 63.7 per cent recorded to Myanmar,
and fastest growing trading partner in 2005. Cambodia (30.3 per cent), Thailand (25.1 per
Trade with other major trading partners, cent) and Singapore (15.5 per cent).
namely the USA, Japan, the People's Republic
of China and the EU, had also expanded. Within ASEAN, Singapore continued to be
Significant increase in exports was also Malaysia's major market, accounting for 59.9
recorded for certain fast growing potential per cent of its total export to ASEAN. This was
markets for Malaysia, such as Finland, Turkey followed by Thailand with 20.6 per cent share
and Myanmar. and Indonesia (9 per cent).
ASEAN For the fifth consecutive year, Malaysia was

In 2005, total trade with ASEAN countries the leading exporter to Singapore, accounting
grew by 13.8 per cent to RM246.2 billion, for 14.4 per cent of its total import. In 2005,
compared with RM216.4 billion in 2004. Malaysia continued to be the fourth largest
Exports to ASEAN expanded by 15.4 per cent source of imports for Thailand, accounting for
to RM139.2 billion, from RM120.6 billion in 6.9 per cent of its total import, compared with
2004, while imports increased by 11.6 per cent, 5.8 per cent in the previous year. For Indonesia
from RM95.8 billion to RM107 billion. With and the Philippines, Malaysia was their ninth
exports to ASEAN outpacing imports from largest exporter in 2005.
the region, trade surplus widened to RM32.2
billion in 2005, from RM24.8 billion in Export growth was recorded for all sectors in
2004. 2005. Major exports to ASEAN were E&E
products, which expanded by 7.2 per cent in
Singapore was Malaysia's largest trading 2005, to RM59.7 billion, or 42.9 per cent of
partner within ASEAN, accounting for 54.5 per total export to the region. This was followed by
cent share. This was followed by Thailand and refined petroleum products (56.5 per cent
Indonesia, with 21 per cent and 11.8 per cent growth to RM12.3 billion), crude petroleum
share, respectively. (63 per cent growth to RM12 billion),
Table 2.9:
Malaysia's Trade with ASEAN
Country 2005 2004
Total Total
Exports Imports Trade Exports Imports Trade
RM million Share Change RM million Share Change RM million RM million RM million RM million
(%) (%) (%) (%)
ASEAN 139,207.9 26.1 15.4 106,975.9 24.6 11.6 246,183.8 120,601.1 95,816.5 216,417.6
Singapore 83,333.4 59.9 15.5 50,827.0 47.5 14.3 134,161.4 72,176.4 44,477.0 116,653.4
Thailand 28,722.9 20.6 25.1 22,889.2 21.4 4.1 51,612.0 22,953.9 21,996.5 44,950.3
Indonesia 12,579.7 9.0 7.7 16,565.7 15.5 4.0 29,145.5 11,677.2 15,936.2 27,613.3
Philippines 7,475.9 5.4 1.5 12,192.0 11.4 13.8 19,667.9 7,362.4 10,710.4 18,072.7
Viet Nam 4,392.1 3.2 1.3 3,865.6 3.6 75.3 8,257.7 4,333.9 2,204.6 6,538.4
Brunei
Darussalam 1,337.1 1.0 11.2 49.1 0.1 -8.9 1,386.2 1,202.8 53.9 1,256.7
Myanmar 929.2 0.7 63.7 506.1 0.5 24.6 1,435.4 567.5 406.1 973.6
Cambodia 413.7 0.3 30.3 31.3 neg. -0.5 445.1 317.5 31.5 349.0
Lao PDR 23.8 neg. 149.5 48.9 0.1 8,659.0 72.7 9.5 0.6 10.1

Note: neg. - negligible
17
chemicals and chemical products (9.7 per For Malaysia, the USA continued to be its
cent growth to RM9.1 billion), machinery, largest individual country trading partner,
appliances and parts (18.8 per cent growth to accounting for 16.6 per cent of Malaysia's
RM7.7 billion), manufactures of metals (4.2 global trade, that is, 19.7 per cent of total
per cent growth to RM4.2 billion), iron and export and 12.9 per cent of total import. In
steel products (18.7 per cent growth to RM3.2 2005, exports to the USA surged by 16.5 per
billion), and transport equipment (5.7 per cent cent to RM105 billion. Imports, however, were
growth to RM2.9 billion). lower by 3.4 per cent to RM55.9 billion.
In 2005, Malaysia's exports under the Common The major contributors to Malaysia's export
Effective Preferential Tariff (CEPT) Scheme growth to the USA in 2005 were the expansion
grew by 28.4 per cent to RM11.1 billion. in its economy and higher demand for
Major exports under this Scheme were plastic consumer E&E products. Consequential to this
products (RM1.5 billion), E&E products increase, convergence of computing functions
(RM1.3 billion) and organic chemicals (RM1.1 with the digital media and greater utilisation of
billion). Thailand, Indonesia, the Philippines wireless applications, consumer demand for
and Viet Nam were the major export products such as cell phones, digital cameras
destinations under this Scheme. and other hand-held gadgets continued to grow.
As a result, exports of E&E products to the
ASEAN was Malaysia's second largest USA grew by 19.3 per cent to RM82 billion.
regional source of imports, accounting for Malaysia was the fourth largest source of E&E
24.6 per cent of Malaysia's global import. imports for the USA. Other major exports to
Imports from ASEAN grew by 11.6 per cent the USA included wood products (increased
in 2005 to RM107 billion. The main by 9.1 per cent to RM3.3 billion), textiles
sources of imports were Singapore, Thailand, and apparel (decreased by 0.3 per cent to
Indonesia and the Philippines. Collectively, RM2.9 billion), optical and scientific products
these countries accounted for 95.8 per cent (increased by 13.4 per cent to RM2.8 billion)
of Malaysia's imports from ASEAN. and rubber products (increased by 9.6 per cent
to RM2.1 billion).
Major imports from ASEAN were E&E
products, valued at RM41.9 billion or 39.2 per As in 2004, the USA was Malaysia's second
cent of Malaysia's imports from ASEAN. This largest source of import by country, with a
was followed by refined petroleum (RM14.7 share of 12.9 per cent of Malaysia's total
billion), chemicals and chemical products import for 2005. Imports from the USA
(RM9.5 billion), machinery, appliances and consisted mainly of E&E products (decreased
parts (RM5.6 billion), and manufactures of by 4.3 per cent to RM34.3 billion), machinery,
metals (RM3.8 billion). appliances and parts (increased by 8.1 per cent
to RM5.6 billion), chemicals and chemical
In 2005, Malaysia's total import under the products (increased by 2 per cent to RM3.1
CEPT Scheme increased by 54.7 per cent to billion) and optical and scientific equipment
RM3.8 billion. As in 2004, Thailand was the (decreased by 13.6 per cent to RM3
largest source under the CEPT Scheme, with billion).
imports totalling RM2.7 billion.
Japan
The United States of America In 2005, Malaysia's trade with Japan increased
For the USA, Malaysia was its 11th largest marginally by 0.5 per cent to RM112.9 billion.
trading partner and its 10th largest source of Exports increased by 2.8 per cent to RM49.9
imports in 2005. Among ASEAN countries, billion, while imports were lower by 1.2 per
Malaysia is the top supplier to the USA, cent, with a value of RM63 billion. In 2005,
accounting for 2 per cent of its total import. Japan sustained its position as Malaysia's
18
third largest trading partner and its third In 2005, Malaysia's exports to the People's
largest export destination. From Japan's Republic of China increased by 9.6 per cent
perspective, Malaysia was its 11th largest to RM35.2 billion. More than 43.4 per cent of
source of imports. the exports to the People's Republic of China
comprised E&E products, which expanded
E&E products remained the major export to by 20.4 per cent in 2005 to reach RM15.3
Japan, accounting for 33.5 per cent of total billion. This was mainly due to strong
export, valued at RM16.7 billion in 2005. demand in the information technology and
Compared with 2004, E&E exports to Japan in telecommunications sector.
2005 were lower by 6.5 per cent, due mainly to
Japan importing more from other sources, such The People's Republic of China continued to
as the People's Republic of China and Taiwan. be Malaysia's largest palm oil market in 2005.
Other major exports to Japan included LNG Total export of palm oil to the People's
(increased by 28.4 per cent to RM13.1 billion), Republic of China in 2005, in value terms
machinery, appliances and parts (increased recorded a decline of 16 per cent, compared
by 17.7 per cent to RM1.1 billion), wood with RM4.4 billion in 2004. However, the
(declined by 3.6 per cent to RM3.6 billion), export volume of palm oil to the People's
and chemicals and chemical products (declined Republic of China increased by 5.5 per cent in
by 2.8 per cent to RM2.4 billion) 2005 to three million tonnes. The lesser export
value for palm oil was attributed mainly by the
Growing imports from lower cost producing lower prices for the year. Other major exports
countries, in particular, the People’s Republic of to the People's Republic of China included
China, for products such as E&E parts and chemicals and chemical products (declined by
components contributed partly to the 1.2 per cent 0.5 per cent to RM3.9 billion), crude rubber
decline in imports from Japan for the year. The (increased by 46.7 per cent to RM2 billion) and
top five imports from Japan included E&E machinery, appliances and parts (increased by
products (decreased by 3.1 per cent to RM24.3 20 per cent to RM1.3 billion).
billion), machinery, appliances and parts
(increased by 8.4 per cent to RM9.1 billion), In 2005, the People's Republic of China
transport equipment products (decreased by 2 per remained the fourth largest source of imports
cent to RM6.5 billion), iron and steel products for Malaysia. Imports from the People's
(decreased by 0.4 per cent to RM5.3 billion) and Republic of China increased by 27 per cent
chemicals and chemical products (increased by to RM49.9 billion. Major imports from the
6.2 per cent to RM4.3 billion). People's Republic of China comprised E&E
products (increased by 30.1 per cent to
The People's Republic Of China RM30.7 billion), machinery, appliances and
In 2005, the People's Republic of China parts (increased by 39.9 per cent to RM3.5
remained Malaysia's fourth largest trading billion), chemicals and chemical products
partner. Malaysia's total trade with the People's (increased by 13.9 per cent to RM2.1 billion),
Republic of China expanded by 19.1 per cent iron and steel products (increased by 27.3 per
to RM85.1 billion, compared with RM71.4 cent to RM1.8 billion) and textiles and apparel
billion in 2004. (increased by 7.7 per cent to RM1.5 billion).
For Malaysia, the People's Republic of China The European Union

was the fourth largest export destination in Malaysia's total trade with the EU in 2005
2005, accounting for 6.6 per cent of Malaysia's amounted to RM113.1 billion, representing an
global exports or RM35.2 billion. For the increase of 4.4 per cent from RM108.4 billion
People's Republic of China, Malaysia was the in 2004. Exports grew by 3.7 per cent to
seventh largest global source of imports and RM62.6 billion, while imports increased by 5.2
the leading supplier among ASEAN countries. per cent to RM50.5 billion.
19
Table 2.10:
Malaysia's Trade with the European Union
Country 2005 2004
Exports Imports Total Exports Imports Total

Trade Trade
RM mil. Share Change RM mil. Share Change RM mil. RM mil. RM mil. RM mil.
(%) (%) (%) (%)
EU 25 62,629.3 100.0 3.7 50,512.3 100.0 5.2 113,140.9 60,387.6 48,030.6 108,418.2
Netherlands 17,451.6 27.9 10.7 3,350.8 6.6 -2.4 20,802.3 15,759.8 3,434.8 19,194.6
Germany 11,258.5 18.0 7.4 19,265.5 38.1 7.8 30,524.0 10,485.4 17,870.1 28,355.5
UK 9,470.1 15.1 -10.3 6,522.0 12.9 -1.8 15,992.1 10,556.3 6,639.4 17,195.7
France 6,912.6 11.0 -2.4 5,660.1 11.2 2.1 12,572.7 7,081.1 5,543.4 12,624.5
Italy 2,673.8 4.3 -8.3 4,694.2 9.3 29.8 7,368.0 2,914.5 3,615.7 6,530.2
Spain 2,209.6 3.5 -2.1 969.9 1.9 18.1 3,179.5 2,257.8 821.3 3,079.1
Belgium 2,039.4 3.3 -3.7 1,424.8 2.8 -7.3 3,464.1 2,118.5 1,537.3 3,655.8
Finland 1,891.8 3.0 78.0 825.3 1.6 19.4 2,717.1 1,063.1 691.4 1,754.5
Ireland 1,789.8 2.9 24.0 2,686.1 5.3 19.7 4,475.9 1,443.8 2,244.1 3,687.9
Hungary 1,425.5 2.3 -37.4 176.2 0.3 31.6 1,601.8 2,277.8 133.9 2,411.7
Austria 933.8 1.5 3.7 539.0 1.1 0.7 1,472.8 900.2 535.0 1,435.2
Sweden 815.9 1.3 9.7 2,456.2 4.9 -17.4 3,272.1 743.8 2,973.6 3,717.5
Czech Republic 730.5 1.2 26.7 227.1 0.4 8.5 957.6 576.7 209.4 786.2
Denmark 717.6 1.1 17.2 582.4 1.2 7.9 1,300.1 612.3 539.6 1,151.9
Portugal 682.8 1.1 121.4 435.8 0.9 -29.5 1,118.6 308.4 618.3 926.8
Poland 479.6 0.8 10.2 207.4 0.4 -27.8 687.0 435.3 287.3 722.6
Greece 342.8 0.6 -14.5 29.0 0.1 -4.2 371.9 401.0 30.3 431.3
Luxembourg 273.4 0.4 704.0 35.2 0.1 14.5 308.5 34.0 30.7 64.7
Slovakia 119.4 0.2 40.1 124.7 0.2 99.8 244.0 85.2 62.4 147.6
Estonia 113.3 0.2 61.9 13.6 neg. 63.5 126.8 69.9 8.3 78.2
Malta 92.5 0.2 9.9 185.9 0.4 46.0 278.5 84.2 127.3 211.5
Lithuania 60.6 0.1 38.8 37.8 0.1 23.6 98.3 43.6 30.5 74.2
Cyprus 56.4 0.1 3.7 14.0 neg. -19.0 70.5 54.4 17.3 71.7
Latvia 44.2 0.1 6.9 19.7 neg. 1,212.2 63.9 41.4 1.5 42.9
Slovenia 43.8 0.1 12.3 29.7 0.1 8.6 73.5 39.0 27.3 66.4

In 2005, Malaysia was the 19th largest decline in exports was offset by the increase of
exporter to the EU, accounting for 1.3 per cent 10.7 per cent and 7.4 per cent in exports to the
of its total import. Among ASEAN countries, Netherlands and Germany, respectively.
Malaysia was ranked second as a source of
imports. Major products exported to the EU included
E&E (increased by 5.8 per cent to RM37.3
The top five markets in the EU were the billion), palm oil (increased by 2.4 per cent
Netherlands, with exports valued at RM17.5 to RM4 billion), machinery, appliances and
billion or 27.9 per cent of Malaysia's total parts (increased by 16.7 per cent to RM2.2
export to the region. This was followed by billion), optical and scientific equipment
Germany (RM11.3 billion or 18 per cent), the (decreased by 0.1 per cent to RM1.9 billion),
UK (RM9.5 billion or 15.1 per cent), France and textiles and apparel (increased by 4.5 per
(RM6.9 billion or 11 per cent) and Italy cent to RM1.8 billion). Collectively, these
(RM2.7 billion or 4.3 per cent). five products accounted for 75.5 per cent of
Malaysia's total export to the region.
A sharp decline of 10.3 per cent in exports was
recorded for the UK, which can be attributed Exports of textiles and apparel to the
to the lower exports of E&E products. This EU increased by 4.4 per cent in 2005 to
20
RM1.8 billion, and expansion was registered in chemicals and chemical products (increased
all markets in the EU, except for the UK. by 1.3 per cent to RM5 billion), transport
equipment (increased by 79.4 per cent to
Exports under the Generalised Scheme of RM3.7 billion), as well as iron and steel
Preferences (GSP) accounted for 21.9 per cent products (increased by 50.5 per cent to
of Malaysia's total export to the EU. These RM3.3 billion).
exports were valued at RM13.7 billion, an
increase of 28 per cent from RM10.7 billion Fast Growing Potential Markets
in 2004. Major export destinations under this In 2005, the fast growing markets, including
Scheme were the Netherlands (24.8 per cent), developed country markets where Malaysia's
Germany (19 per cent), the UK (15.4 per cent), exports were previously low, were South
Spain (8.5 per cent) and Italy (7.2 per Africa, Turkey, Finland, the Russian
cent). Federation, Ireland, Egypt, Myanmar, Ukraine,
Sudan, and Luxembourg. In the majority of
Total import from the EU recorded an increase these markets, Malaysia's exports recorded
of 5.2 per cent to RM50.5 billion, compared double-digit growth or more. The major
with RM48 billion in 2004. Major sources of contributors to export growth to these countries
imports were Germany, with a share of 38.1 per were E&E products, textiles and apparel,
cent of Malaysia's total import from the EU, wood products, processed food, palm oil,
the UK (12.9 per cent), France (11.2 per cent), as well as manufactures of plastics and
Italy (9.3 per cent), the Netherlands (6.6 per metals.
cent) and Ireland (5.3 per cent).
TRADE PRACTICES AFFECTING MALAYSIA'S
Major imports from the EU included E&E EXPORTS
products (increased by 0.9 per cent to RM21.2
billion), machinery, appliances and parts In recent years, many countries continued to
(decreased by 2.9 per cent to RM6.8 billion), introduce new trade practices and regulations,
Table 2.11:
Fast Growing Potential Markets, 2005
Country 2005 2004
RM million Share Change RM million Share

(%) (%) (%)
South Africa 2,164.0 0.4 19.1 1,816.7 0.4

Turkey 2,024.2 0.4 33.9 1,511.8 0.3
Finland 1,891.8 0.4 78.0 1,063.1 0.2
Russian Federation 1,803.9 0.3 16.7 1,545.7 0.3
Ireland 1,789.8 0.3 24.0 1,443.8 0.3
Egypt 1,730.1 0.3 24.6 1,388.6 0.3
Bangladesh 1,550.2 0.3 12.0 1,384.1 0.3
Brazil 1,413.3 0.3 16.5 1,213.0 0.3
Myanmar 929.2 0.2 63.7 567.5 0.1
Czech Republic 730.5 0.1 26.7 576.7 0.1
Denmark 717.6 0.1 17.2 612.3 0.1
Ukraine 559.5 0.1 95.3 286.5 0.1
Sudan 485.2 0.1 225.9 148.9 neg.
Cambodia 413.7 0.1 30.3 317.5 0.1
Argentina 389.1 0.1 53.9 252.9 0.1
Qatar 363.2 0.1 90.0 191.1 neg.
Papua New Guinea 290.3 0.1 86.0 156.0 neg.
Luxembourg 273.4 0.1 704.0 34.0 neg.
Kazakhstan 183.1 neg. 379.6 38.2 neg.

21
while retaining existing ones, that impact on this licensing requirement will be monitored,
the global trade environment. With an open in particular, its impact on Malaysia's palm oil
economy having substantial trade interests, exports to the People's Republic of China. The
some of these trade practices and regulations introduction of this procedure has also elevated
may adversely affect Malaysia's export concern among the trading partners of the
performance. People's Republic of China and this has been
raised in the WTO.
The People's Republic of China
Apart from vegetable oils, there are also other
Automatic Import Licensing products that are subject to Automatic Import
Administration Licensing Administration. Products that are of
On 1 January 2006, the People's Republic of export interest to Malaysia and subject to
China abolished tariff rate quota imposed on Automatic Import Licensing Administration
imports of vegetable oils, including palm oil. include mechanical and electrical products,
In order to monitor the demand for vegetable polymers of ethylene, propylene, styrene and
oil, the People's Republic of China subjected vinyl chloride in primary form, scrap ingots of
vegetable oils to Automatic Import Licensing iron and steel, copper and copper products,
Administration. The deadline for the aluminum products, paperboard, synthetic
application of the 2006 Automatic Import filament yarn, insecticides, fungicides and
Licensing Administration for imports of herbicides, rubber tyres, crude petroleum and
vegetable oils was on 25 December 2005. petroleum oil, flat rolled products of iron or
iron alloy steel products (hot and cold rolled),
The Automatic Import Licensing Administration including bars and rods.
is made available to Chinese importers and
manufacturers who are required to: Compulsory Product Certification
System Mark Requirement
• register with the Administrative Department Compulsory Product Certification System
of Industry and Trade; (CCC mark) continues to draw the attention of
exporters, as issues pertaining to the costly and
• possess a business licence (granted for time consuming process of obtaining the
trading specified goods) or production quality certification, remain unresolved. The
licence; process requires the dispatch of Chinese
experts to the country of origin of the products
• pass the most recent annual inspection to certify the factory and products and
test by the Administrative Department subsequently annual follow-up inspections are
of Industry and Trade, and the most required. The high annual inspection costs and
recent annual inspection of foreign expenses are to be borne by the exporting
enterprises; companies in the country of origin. In practice,
the implementing agencies in the People's
• comply with food safety and hygiene Republic of China lack resources to dispatch
regulations; and staff to other countries. Goods that require
certification and the CCC mark include
• have no record of criminal acts relating to electrical products, motor vehicles, tyres and
imports with respect to Customs, foreign safety parts, safety glasses, information and
exchange, industry and commerce, taxation communication equipment and parts, condoms,
and quality inspection for the past three years. medical devices, fire fighting products and
detectors, as well as lighting apparatus.
The additional administrative procedures that
have been implemented are cumbersome In addition, the CCC mark requires registration
and create uncertainty. The implementation of of product labels in the Chinese language. The
22
process of registering the label in Chinese Sanitary and Phytosanitary
normally takes at least three months. This Standards, Health and Quarantine
affects the ability of exporters to respond Measures
quickly to orders. Further, even minor Imports of agriculture products continue to
variations to the label, such as 'nett weight' per be subjected to stringent sanitary and
packaging require separate applications. phytosanitary standards (SPS), and health
and quarantine measures. Some imports are
The application fee for the label is high, allowed only if the products have been given
averaging US$240 per label. Under the clearance under the Import Risk Analysis
procedure, verification of the labels of the carried out by the Australian Quarantine
imported products will be made when the Inspection Service. There have been delays in
goods are declared to the Customs authority of getting Import Risk Analysis clearance and
the People's Republic of China. this has limited market access for Malaysian
agriculture products.
Standards Development Process
Even though there are already existing These issues have been raised with the
and well-established international standards, Australian authorities for several years.
the People's Republic of China still pursues Malaysia and Australia reconvened the
the setting of its own standards which bilateral Agricultural Working Group in 2005
are stringent in nature. These unique standards to address SPS issues. Although Australia has
can pose as a technical barrier for products recognised Malaysian fumigation protocols on
entering the Chinese market, due to the chrysanthemum, orchids and foliage, and in
high compliance cost. Products where the principle agreed to allow exports of fresh
People's Republic of China is setting its josapine pineapples, mangosteens and durians,
own national standards, include IT products, subject to certain conditions, Malaysia's
telecommunications equipment and audio and exports of agricultural products to Australia
video products, of which Malaysia has export are still relatively low. Efforts will be
interest. intensified to enable more Malaysian
companies to export a wider range of fruits and
Australia flowers to Australia.
Restriction on the Use of Tropical Fumigation Treatment

Timber Commencing 1 December 2005, the Australian
The State Governments of New South Wales, Quarantine Inspection Service will only accept
Queensland and Victoria continue to maintain fumigation certificates from treatment
their policy requiring the use of timbers that providers that are listed under the Australian
comply with the 'Good Wood Guide', that is, Accreditation Scheme. Containers that fail
timber grown in plantations as a renewable Australian Quarantine Inspection Service
resource or recycled timber and not timber inspection on arrival in Australia will be
derived from tropical forest or native growth refumigated with cost. Prior to this, Australian
forest. Tender documents from these States Quarantine Inspection Service had accepted
discriminate against the use of tropical timber all valid Malaysian treatment certificates,
in building construction. provided that the facility is not listed on
Australian Quarantine Inspection Service's
The Malaysian Timber Certification Council Offshore Treatment Providers List as 'Under
Scheme, though recognised by the Investigation', 'Unacceptable' or 'Suspended'.
International Tropical Timber Organisation, is
not recognised by Australia. These practices To be recognised by Australian Quarantine
effectively limit the use of Malaysian timber in Inspection Service as registered offshore
Australian public projects. fumigation companies, in addition to the
23
necessary equipment to conduct fumigation preparations'. This reclassification has
treatments, Malaysian companies are required resulted in palm tocotrienol being subject to
to have at least one Australian Fumigation an import duty of 6.4 per cent, compared
Accreditation Scheme-trained fumigator with zero duty previously. The new
present at the premises. The need to comply import duty has resulted in higher prices for
with these requirements has resulted in an palm tocotrienol to consumers in the US
increase of up to 400 per cent in compliance market.
costs.
This request for reclassification as Vitamin E
Approval for Therapeutic Goods was filed by the exporter with the US Customs
All therapeutic goods, namely medicines and on several occasions. In addition, this issue
medical devices, unless exempted, must be was also raised at the Third Joint Council on
either 'registered' or 'listed' before they can be Trade and Investment Meeting in Kuala
imported into Australia. The process of Lumpur in October 2005. However, to date the
securing approval for therapeutic goods in issue has yet to be resolved.
Australia is time consuming and costly. To gain
approval, exporters of these products are Labelling Requirements for Natural
subject to inspection by experts from the Rubber Gloves
Australian Therapeutic Goods Administration. The USA continues to enforce labelling
The cost of bringing in these experts will have requirements for natural rubber gloves with
to be borne by the company in the country of the statement 'Caution: This product contains
origin. natural rubber latex, which may cause allergic
reaction'. However, synthetic rubber gloves
Products subjected to therapeutic approval are not required to abide by this labelling
prior to importation are: requirement, although scientific studies,
including by the USA, have shown that
• prescription medicines, which normally certain synthetic gloves can also cause
require a doctor's prescription, such as health problems to users. For example,
contraceptives, vaccines and antibiotics; Japan has banned vinyl gloves containing
'di (2-ethylhexyl) phthalate' (DEHP) for
• over-the-counter medicines, such as use in food handling. DEHP is a highly
analgesics, cough remedies and toxic plasticiser which has shown to
sunscreens; leach out from gloves when in contact with
food. The adverse effect of DEHP is well
• complementary medicines, also known as documented and includes damage to the liver,
'traditional' or 'alternative' medicines, such kidney and the reproductive system.
as herbal, vitamin, mineral, aromatherapy
and homeopathic products; and This labelling requirement has unduly alarmed
potential users in the US market and does not
• medical devices, such as medical gloves, reflect progress made in minimising incidences
bandages, syringes, condoms, pacemakers of allergies by the industry.
and dental products.
Buy America Act
The United States of America The USA continues to enforce the 'Buy
America Act' in public procurement. This
Reclassification of Palm measure confines procurement of the US
Tocotrienol government agencies to goods manufactured in
The US Customs has reclassified palm the USA. This reduces opportunities for
tocotrienol, which is a palm oil-based foreign products in the public procurement
Vitamin E, from 'vitamins' to 'food exercise.
24
The European Union on Waste Electrical and Electronic Equipment
and the Directive on Restriction of the Use of
Timber Certification Scheme Certain Hazardous Substances in Electrical and
A number of EU Member States, such as Electronic Equipment.
Denmark, the UK and France, have
implemented official public timber The Directive on Restriction of the Use of
procurement policies to ensure that all Certain Hazardous Substances restricts the use
timber used for government and public of lead, mercury, cadmium, hexavalent
projects are from legal and/or sustainable chromium, polybrominated biphenyls or
sources, with legality being the minimum polybrominated diphenyl ethers in E&E
requirement. Although the policies apply only equipment, effective 1 July 2006. The
to government procurement, the private sector Directive on Waste Electrical and Electronic
in Europe is also under pressure from non- Equipment requires European distributors of
governmental organisations and consumers new E&E products to provide services free of
to have similar requirement in the purchasing charge to collect and dispose used consumer
policies of the private sector. As a result, E&E products. This measure would increase
Malaysian timber exporters will increasingly the cost of distribution within the EU, which in
need to bear higher costs to produce proof turn may be transferred to the consumers, the
of legality or/and sustainability for the timber importers and the exporters from the source
products they are exporting to the EU countries countries.
concerned.
The implications of the adoption of the two
In Europe, the current two main certification Directives are far reaching as a large
schemes are the Forest Stewardship Council percentage of Malaysia's exports to the
Scheme and the Programme for Endorsement EU comprises E&E products. In 2005,
of Forest Certification. The Forest Stewardship E&E products represented 59.6 per cent of
Council Scheme is widely recognised by Malaysia's total export to the EU, valued
the EU general public, local councils and at RM37.3 billion. Electrical machinery,
large retailers as proof of legally and apparatus and appliances constitutes the
sustainably sourced timber. The Programme largest exports, valued at RM17.8 billion,
for Endorsement of Forest Certification is followed by office and automatic data
also widely supported and promoted by forest processing machines (RM11.5 billion) and
owners in Europe. The Malaysian Timber telecommunications and sound equipment
Certification Council (MTCC) Scheme is (RM8 billion).
presently the only timber certification scheme
from a tropical timber country recognised Registration, Evaluation and
by three EU countries (Denmark, the UK and Authorisation of Chemicals
France) in their official timber procurement The EU has reached initial political agreement
policies as proof of legality progressing on a legislative package for a new chemical
towards sustainability. Malaysia is currently policy called Registration, Evaluation and
working towards gaining full recognition for Authorisation of Chemicals (REACH). The
the MTCC Scheme by all the EU countries as law on REACH is expected to come into full
proof of legality and sustainability in the near effect from 2008.
future.
Once adopted, the complicated REACH
Electrical and Electronic Waste regulation will create a single registration
Disposal and Recycling system for more than 30,000 chemical
The EU Member States are presently substances. Under REACH, manufacturers,
adopting or transposing their national importers and down-stream users are required
legislation to comply with the Directive to ensure that they manufacture, place on the
25
market or use chemical substances that do imposed requires specialised and sophisticated
not adversely affect human health or the equipment for testing. The procurement of
environment. This requirement covers all such equipment is also expensive and testing
chemical substances produced or imported in organisations are often required to replace
volumes over one tonne per year. It involves newly obtained equipment to keep abreast with
three different processes, namely registration, the frequently changing EU rules on imports of
evaluation and authorisation. food.
All manufacturers and importers are obliged to Even though the EU is a Customs Union and a
register data on chemical substances used or single market, health authorities of member
imported with the new European Chemicals states have applied their own import rules. The
Agency to be established in Finland to EU Member States can choose to impose
demonstrate the safe use of their substances. stricter requirements according to their
Failure to register will mean the substance cannot national laws if the EU regulations are silent or
be manufactured or imported to the EU market. less stringent on certain issues. For example, in
the Netherlands, the Food and Drugs Act,
Certain substances may be subject to contains a more extensive list of food products
'evaluation' process on chemical safety or that are allowed to be irradiated for
authorisation process before gaining access to decontamination, compared with the list in the
the EU market. Notwithstanding the above EU Legislation (Directive 1999/2/EC).
processes, any chemical substance can be
subject to 'restriction,' depending on its impact Japan
on public safety.
Requirements for Import Approvals
This regulation would impact exporters of Import approval is required in Japan for
chemical substances and add administrative selected agricultural products, such as fruits,
burden and costs to them, as well as create vegetables, seeds, plants and cut flowers.
uncertainty, particularly for processed goods Obtaining an import approval is a difficult and
containing chemicals. lengthy process. They are also subject to the
Plant Quarantine as well as Food and
Sanitary and Phytosanitary Sanitation Laws, involving approval
Regulations procedures by the Ministry of Agriculture,
The concern on food safety in the EU has Forestry and Fisheries and the Ministry of
created barriers to trade. The EU regulation on Health, Labour and Welfare.
food monitors food safety from 'The Farm
to the Table'. The EU sanitary and Imports of pharmaceutical and cosmetic
phytosanitary regulations are very stringent. products also require import approvals.
The process of obtaining requirements, Approvals for pharmaceutical products can
particularly testing, can be expensive and will take 10 months to a year.
burden exporters.
Green Purchasing Law
Exports of poultry and poultry products, and Malaysian companies exporting to Japan
fish and fishery products are monitored consumer goods, such as stationery and
through annually submitted plans and residues consumer E&E appliances to Japan, are
and micro-organisms that need to be provided required to abide with the Green Purchasing
by 'Competent Authorities' recognised by the Law, which was enforced on 1 April 2001. The
EU. Tolerance level for residues and micro- law only allows products that meet a certain set
organisms established by the EU are often of eco-friendly 'evaluation criteria' and their
more stringent than the internationally agreed procurement also takes into consideration
Codex Rules. Some of the tolerance level factors that would facilitate recycling and
26
reuse, as well as minimal impact on the that are affected by adjustment tariffs, include
environment upon disposal. fishery products, fruit juices and plywood,
while products subject to quota tariffs are
Quality Marks anhydrous ammonia, ethylene glycol and
The existing quality marks in Japan are cotton yarn.
Japanese Industrial Standards, Japanese
Agricultural Standards, SG mark (a quality Approval for Ingredients and
guarantee market for the furniture, household Additives for Food and Cosmetics
and sporting goods), G mark (known as Importers of food and cosmetics are required
the 'good design' mark) and BL mark (affixed to submit supporting documents on ingredients
to high quality households goods). To gain and additives used to ensure the safety of
consumer acceptance in the Japanese market, the product or to justify the use of the
it is deemed necessary for a product to obtain ingredients and additives. Only products
the quality mark. Japanese consumers prefer that contain ingredients or additives listed
products carrying Japanese Agricultural under the Korean Food Additives Code or
Standards Mark, as the mark is considered Korean Cosmetics Ingredient Dictionary
to have met the set standards, and the products will be allowed to be sold in the Korean
are regarded as of high quality and safe. market. Products that contain ingredients
However, exporters find it difficult to obtain or additives other than that which is listed
the marks by themselves, as the application will not be allowed into the Korean market
forms are required to be submitted in the although they may have been allowed into
Japanese language and involve factory other foreign markets. This requirement
inspection by the Japanese authorities. Further, affects Malaysian exporters as certain
the relevant Japanese authorities take at least ingredients and additives used are not
three months to process an application. contained in the Korean lists.
The Republic of Korea Thailand
Adjustment Tariff and Tariff Quota Differences in Interpretation of the

System on Selected Goods ASEAN Harmonised Tariff
The Republic of Korea imposes an adjustment Nomenclature Tariff Code
tariff and tariff quota system on specific Differences in some product classifications
imported products that are deemed to be a continue to pose a problem for Malaysia's
threat to its local industry. In 2005, the exports to Thailand. There have been cases
Republic of Korea announced a list of 18 where Thailand does not agree with the
products that are subject to adjustment tariffs ASEAN Harmonised Tariff Nomenclature
and 89 products that are imposed with quota Tariff Code used by Malaysian exporters
tariffs. The products that are subject to and requires the exporters to follow Thai
adjustment tariff are mostly agro-marine Customs classification. Although in ASEAN,
products. Since the adjustment tariff system is there is an agreement that the Customs
an elastic system, tariffs imposed on Authority of the importing country is required
designated products may be subjected to to clear the goods by imposing the CEPT rate
variations annually. of the Code suggested by the importing
authority, the Thai Customs Authority,
Tariffs and quotas in both the adjustment tariff however, requires the importer to pay the
and tariff quota systems are imposed on an MFN rate, and also imposes additional penalty
annual basis. This means that for those charges. This has caused unnecessary delay
products listed in December 2005, the effective in clearance of goods, including the importer
date is from 1 January 2006 to 31 December having to incur extra costs for storage at
2006. Products of export interest to Malaysia the port.
27
Thailand continues to deny market access Manufactured exports is expected to continue
for palm oil, although the product is in the its lead in export expansion, with mining
CEPT Scheme of both countries. According exports in the second place, due to sustained
to the commitment under AFTA, Thai high prices of crude oil. Exports of E&E
imports of the products from Malaysia should products, the major contributor to Malaysia's
be subject to only 5 per cent import duty. total export, is expected to strengthen, due to
However, imports of palm oil are subject to heightened demand for wireless applications
import licence, which is not freely issued. and consumer electronics, particularly in
These measures are inconsistent with the rules major markets, such as the USA, the People's
of the CEPT Scheme and have prevented Republic of China, the Republic of Korea,
Malaysian companies from exporting to Taiwan and Japan. Other sub-sectors that
Thailand. are expected to register expansion in exports
include machinery, appliances and parts,
Saudi Arabia chemicals and chemical products,
manufactures of metals and manufactures
Protection of Local Businesses of plastics.
Foreigners in Saudi Arabia are not permitted
to engage in trading activities within the It is expected that ASEAN will continue to
Kingdom or become a commercial agent, be a predominant partner to drive Malaysia's
as they are only open to Saudi nationals trade. Malaysia will also remain a major
and wholly Saudi-owned companies. This contributor to the expansion of intra-ASEAN
requirement creates a problem for companies trade, as it already accounts for about 26 per
wishing to export and distribute their products cent of total intra-ASEAN trade. This will
in this market, as they have to seek out be complemented by further tariff reduction
business partners in the market prior to by ASEAN countries under the ASEAN
exporting. Free Trade Area arrangement. The upward
trend of exports to fast-growing markets in
OUTLOOK West Asia, South Asia and Africa will be
sustained.
The World Bank has forecast that global trade
for 2006 would grow at 7 per cent, compared Reinstatement of the preferential tariff for
with 6.2 per cent in 2005. A similar positive four Malaysian product groups under the EU-
outlook for international trade was made GSP Scheme, from January 2006, will help
by the International Monetary Fund, which to further boost Malaysia's exports to the EU.
forecasted that export growth for advanced With the inclusion of the additional product
countries, as well as for developing and groups, about 81 per cent of Malaysia's
emerging economies will reach 6.3 per cent exports to the EU will be eligible for
and 10.3 per cent, respectively, in 2006. The preferential treatment, compared with 16 per
import growth for advanced countries is cent previously. The product groups that
projected to reach 5.8 per cent, while that for will be reinstated for Malaysia are consumer
developing and emerging economies is 11.9 electronics, plastics, rubber and wood. Only
per cent. one product group, namely palm oil and fats,
remain graduated from the EU-GSP Scheme.
Based on the projected positive outlook for
the global economy and trade, as well as Bilaterally, Malaysia will be implementing
the expected expansion of domestic the FTA agreement with Japan in mid-2006,
manufacturing, Malaysia's exports in 2006 which provides for tariff elimination for goods
are set to remain robust. Continued growth is traded between the two countries within 10
expected for most product sectors in all major years. Other FTA arrangements expected to be
markets. completed in 2006, involves Pakistan,
28
Australia and New Zealand. At the regional bilateral, as well as regional arrangements, it is
level, the goods agreement under the ASEAN- expected that Malaysia's exports to the partner
China FTA has been implemented since July countries will expand. In addition, mutual
2005 and ASEAN-Korea FTA will be recognition arrangements on testing and
implemented in July 2006. conformity assessment procedures, being
pursued with major trading partners, will
With more emphasis being given towards further improve market access and reduce
addressing impediments to trade through costs.
Box 2.1: Malaysia And Free Trade Area Agreements
Malaysia has been engaged in discussions with developed and developing countries towards establishment of free trade
area (FTA) arrangements. These arrangements, pursued through bilateral and ASEAN-wide initiatives, build upon the
commitments under the World Trade Organisation (WTO). In addition, these arrangements also allow Malaysia to focus on
specific areas of interest to undertake further liberalisation and explore cooperation activities to promote and facilitate trade
and investment flows.
Malaysia's objectives in engaging in FTA negotiations are to:
- seek better market access for goods and services;

- facilitate and promote trade, investment and economic development;
- enhance the competitiveness of Malaysian exporters; and
- build capacity in specific areas, through technical cooperation and collaboration.
The FTA arrangements completed and being negotiated is comprehensive and encompass:
• tariff reduction/elimination in the goods sector;
• liberalisation of the services sector;
• investment liberalisation and protection;
• trade and investment promotion and facilitation activities; and
• economic and technical cooperation programmes to enhance domestic capacity building in specific areas.
Bilateral Free Trade Area Arrangements
Malaysia concluded the first bilateral FTA with the signing of the Japan-Malaysia Economic Partnership Agreement (JMEPA)
in Kuala Lumpur on 13 December 2005. The Agreement is scheduled to enter into force in mid-2006, after the completion
of domestic procedures by both countries.
JMEPA encompasses trade in goods, services and investment and a wide range of cooperation activities, covering
intellectual property capacity building and enhancement of business environment. Japan is Malaysia's third largest trading
partner and export destination. In 2005, total trade with Japan was valued at RM112.9 billion and exports accounted for
RM49.9 billion. Japan is one of the largest investors in the manufacturing sector in Malaysia, with total investment of RM38.2
billion in 3,159 projects between 1980 and 2005. In 2005, total investment from Japan was RM3.7 billion, involving a total of
84 projects. Implementation of the JMEPA will further enhance existing bilateral trade and investment relations and contribute
towards strengthening long-term relations between the two countries.
Under trade in goods, both countries will eliminate import duties on textiles and clothing, agriculture and wood products upon
entry into force of the agreement. Tariffs on the remaining products will be progressively reduced over a 10-year period.
Under the agreement, Malaysia will:
• eliminate import duties on rubber products, food products, plastics, paper and downstream iron products over six to eight
years; and
• reduce or eliminate import duties on chemicals and petrochemicals, iron and steel, paper products and automotive, and
automotive parts and components over 10 years.
Continued...
29
Japan will be required to:
• Maintain duty free treatment on 6,613 industrial products, tropical fruits and forestry products; and
• Reduce and eliminate duties on fishery products, rubber and leather footwear and cocoa products over eight years.
In the area of services, both countries will accord improved market access in selected sectors compared with commitments
made under the WTO in those sectors. The sub-sectors are business and professional services, computer and related
services, communication services, education services, tourism and related services, and health-related services. In addition,
the agreement provides for both countries to review their offers within five years, with a view to further improving market
access commitments.
Under investment, the agreement provides for national and most favoured nation treatment in relation to the establishment,
acquisition, expansion and management of investments. Investors and their investments from both Malaysia and Japan will
receive treatment in Malaysia and Japan similar to that granted to domestic investors and investors from other countries,
except in areas that have been specifically exempted in the schedules of both countries. These areas include subsidies,
grants and sensitive sectors, such as automotive and petroleum refining.
The investment agreement also provides certainties to investors with respect to:
• transfer or repatriation of initial capital and additional investments, including profits, earnings and other payments;
• compensation in the event of expropriation of investments; and
• investment disputes which can be referred to domestic courts or international arbitration.
JMEPA also includes cooperation programmes to further enhance Malaysia's capacity in selected sectors. For example, in
the automotive sector, Japan will assist Malaysia in developing the automotive sector, including the automotive parts
industry. Cooperation projects in the automotive sector will be in the areas of technical and expertise assistance, training,
development of mould and die centre, and promotion of investments and exports.
Cooperation projects in other areas include:
- development of mutual recognition arrangements (MRAs) on testing and conformity assessment procedures for products
of export interest. The MRAs will reduce costs and improve market access for Malaysia's products into Japan, particularly
those products that are subject to Japanese standards;
- cooperation, technical assistance and exchange of information on sanitary and phytosanitary measures imposed on
agricultural products;
- education and human resource development; and
- development of small and medium industries.
To facilitate and promote involvement of the business communities from both countries, a committee comprising
representatives from both the public and private sectors will be established in Kuala Lumpur and Tokyo, respectively. This
committee will provide the forum to discuss and elevate to the respective Governments on issues faced by the business
community.
In the case of FTA with Pakistan, while the negotiations are on-going, both countries have implemented the Early Harvest
Programme (EHP) beginning 1 January 2006. The EHP covers a total of 114 products from Pakistan (covering yarn, clothing
and textile products and jewellery) and 125 products from Malaysia (covering electrical appliances and machinery, plastics
products, chemical products, and rubber and timber products). Products offered under the EHP, with tariffs of 5 per cent
and below, have been eliminated, and those above 5 per cent and below 10 per cent are accorded a margin of preference
of 50 per cent.
Based on bilateral trade trends in 2005, Malaysia's offer is valued at RM23.1 million (11 per cent of total import from Pakistan)
and Pakistan's offer valued at RM104 million (3.7 per cent of total import from Malaysia).
The FTA negotiations with Pakistan is expected to be finalised in 2006 and implemented in early 2007.
Continued...
30
Other FTA initiatives by Malaysia are:
• commencement of negotiations with Australia and New Zealand on a bilateral FTA. Both negotiations are scheduled for
completion in 2006. In 2005, Malaysia's trade with Australia was valued at RM26.2 billion, accounting for 2.7 per cent of
Malaysia's global trade, while trade with New Zealand in 2005 was valued at RM3.3 billion (0.3 per cent of global trade);
• announcement by Malaysia and the United State of America (USA) on 8 March 2006, on both countries' preparedness
to commence negotiations on a Malaysia-USA FTA. This is subject to the USA obtaining the necessary domestic
approvals. The USA was Malaysia's largest trading partner in 2005, with total trade valued at RM161 billion, and
accounted for 16.6 per cent of Malaysia's global trade. The US market accounted for 19.7 per cent of Malaysia's global
exports and 12.9 per cent of global imports;
• establishment of a Joint Study Group on the feasibility of a Malaysia-India Comprehensive Economic Cooperation
Agreement. The Joint Study Group is currently finalising the recommendations for the consideration of both Governments
in 2006. Malaysia's trade with India in 2005 was RM19.1 billion, with exports valued at RM15 billion and imports at RM4.2
billion. Trade with India accounted for 2 per cent of Malaysia's global trade; and
• establishment of a Joint Study Group to undertake a feasibility study on a Malaysia-Chile FTA. The report is scheduled
to be finalised by end-2006. Malaysia's trade with Chile in 2005 was RM893.5 million, with exports valued at RM328.9
million and imports at RM564.6 million. Chile is Malaysia's fifth largest trading partner among the Latin American
countries, after Brazil, Mexico, Argentina and Costa Rica.
Regional FTAs
Malaysia participates in a number of regional negotiations by ASEAN with its dialogue partners to conclude Comprehensive
Economic Partnership Agreements. The countries are the People's Republic of China, the Republic of Korea, India, Japan,
Australia and New Zealand. The agreements with these countries are comprehensive and covers liberalisation of trade in
goods, services, investment and cooperation activities to promote and facilitate trade and investments.
The ASEAN-China Free Trade Area agreement on goods signed in November 2004 provides for tariff reduction/elimination
in four tranches, beginning 2005 and to be concluded by 2010 between the People's Republic of China and ASEAN 6
(Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand), and by 2015 for Cambodia, Myanmar,
Lao PDR and Viet Nam. The first tranche of tariff reduction/elimination for the ASEAN 6 and the People's Republic of China
took effect on 20 July 2005. The remaining three tranches are scheduled to take effect in 2007, 2009 and 2010. The
agreements on services and investment are being negotiated for finalisation in 2006.
The People's Republic of China is ASEAN's third largest trading partner, with total trade valued at US$47.6 billion for the
period January-June 2005. ASEAN's exports to the People's Republic of China for this period were valued at US$21.9 billion
and imports at US$25.7 billion.
In the case of the ASEAN-Korea FTA, the agreement concluded in December 2005, provides for the realisation of the
ASEAN-Korea FTA in goods by 2012 for the ASEAN 6, 2018 for Viet Nam and 2020 for Cambodia, Lao PDR and Myanmar.
Negotiations on services and investment are scheduled to be completed in 2006.
Trade with the Republic of Korea accounted for 3.8 per cent of ASEAN's global trade. For the period January-June 2005,
trade with the Republic of Korea was US$18.9 billion, with exports valued at US$9.1 billion and imports at US$9.8 billion.
Progress made in other ASEAN-wide FTA negotiations:
- ASEAN-India
Negotiations on FTA in goods resumed in 2005, and are scheduled for finalisation in 2006.
- ASEAN-Australia-New Zealand
Negotiations commenced in 2005 and are scheduled for completion by end-2006.
- ASEAN-Japan
ASEAN and Japan are continuing discussions on the elements in the Framework for Comprehensive Economic
Partnership (CEP), including the linkage with bilateral FTAs. The CEP provides for liberalisation of trade in goods,
services and investment by 2012.
Continued...
31
In addition, ASEAN and the EU are exploring broader economic cooperation through a potential ASEAN-EU FTA.
Other FTAs
Malaysia is also engaged in the negotiations towards establishment of a Trade Preferential System among the Member
States of the Organisation of the Islamic Conference (TPS-OIC) and the Preferential Trade Agreement among the
D-8 Member States (D8-PTA).
The Protocol on the Preferential Tariff Scheme for the TPS-OIC (Protocol), which involves 16 participating OIC countries,
namely Malaysia, Bangladesh, Cameroon, Egypt, Guinea, Jordan, Lebanon, Libya, Pakistan, Senegal, Syria, Tunisia,
Turkey, Uganda, United Arab Emirates and Iran, was adopted on 23 November 2005. It covers 7 per cent of total tariff lines
with tariffs of above 10 per cent. The modality agreed for tariff reduction for products:
• tariffs of above 25 per cent to be reduced to 25 per cent;
• tariffs between 15 to 25 per cent to be reduced to 15 per cent; and
• tariffs between 10 to 15 per cent to be reduced to 10 per cent.
Developing countries participating in the Protocol will reduce their tariffs in four annual installments, while the least developed
countries in six installments. The Protocol includes a Voluntary Fast Track Tariff Reduction schedule. The TPS-OIC will be
implemented once the Protocol is signed and ratified by at least 10 of the participating countries. As at 31 March 2006, five
participating countries, namely Malaysia, Egypt, Jordan, Tunisia and Turkey, have signed the Protocol.
At the D-8 Summit held in Tehran, Iran, from 14-15 February 2004, it was agreed that a Preferential Trading Arrangement
(PTA) be implemented among the D-8 countries. The D-8 comprises Malaysia, Bangladesh, Indonesia, Iran, Egypt, Nigeria,
Pakistan and Turkey. As at 31 March 2006, five High Level Officials Meetings have been held to negotiate the D8-PTA
Framework Agreement and implementation modality. The D-8 PTA was finalised at the Sixth High Level Trade Officials
Meeting on 3-4 April 2006 in Bali, Indonesia. The Agreement was signed during the Fifth D-8 Summit in Bali on 13 May 2006.
The D-8 PTA will be implemented once it is ratified by at least four member countries.
Domestic Consultations
MITI has been and will continue to undertake domestic consultations with various ministries, agencies and the private sector
on issues of concern to Malaysia in the FTA negotiations. While FTA negotiations are led by MITI, the various working groups
have been chaired by the respective ministries and agencies.
To facilitate these negotiations, MITI has been consulting the private sector through the various trade and industry
associations. Feedback, suggestions and views from the private sector are vital to ensure that their concerns and interests
can be advanced and addressed in these FTA negotiations.
Details of the respective FTAs and progress, including the officers responsible for the negotiations are contained in MITI's
website, www.miti.gov.my
32
Policy Initiatives And Measures In
Chapter 3 Manufacturing And Manufacturing-
Related Services
OVERVIEW initiatives for research and development
(R&D), especially in potential growth areas,
In 2005, additional policy initiatives and such as advanced manufacturing, advanced
measures were undertaken to facilitate the materials, nanotechnology and biotechnology.
development and growth of the manufacturing
sector and the related services. Apart from the Against a backdrop of high oil prices, the
incentives outlined in the Budget to promote Government is also encouraging the domestic
domestic and foreign investments, various industry to improve energy efficiency and
promotional programmes and certification develop more environment friendly sources of
initiatives were undertaken, aimed at fuel.
enhancing Malaysia's competitiveness in the
manufacturing and manufacturing-related The Government further intensified efforts to
services sectors. promote the recognition of Malaysian Halal
Standard abroad, as the contribution of the
As part of the strategy to promote development halal industry to Malaysia's economic
and attract investments in potential growth development and growth is expected to be
areas and promote industries in products high.
and services, especially in biotechnology,
various policy initiatives, institutional support Greater attention is being given to the
and funding mechanisms continued to be promotion and adoption of domestic and
developed. international standards, as they remain an
important means of enhancing the
There was greater focus on accelerating the competitiveness of domestic industries, as
development of small and medium enterprises well as ensuring global acceptance of
(SMEs) and enhancing their competitiveness, Malaysia's products and services.
in line with the National Blueprint for SMEs.
Malaysia is also engaged in negotiating for
Various trade facilitating programmes and free trade agreements (FTAs) at the ASEAN
initiatives were undertaken at the domestic and bilateral levels to secure better market
and regional levels, including the existing access for the export of manufactured products
electronic data interchange and new and services, as well as expand opportunities
mechanisms, for example, the ASEAN Single for outward investments.
Window initiative. Training and outreach
initiatives were specifically targeted towards INITIATIVES FOR ENHANCING INVESTMENTS
encouraging a greater use of information and
communication technology (ICT) applications In 2005, Malaysia continued its efforts to
in manufacturing processes. attract foreign direct investments (FDIs), as
well as expand domestic investments in the
Efforts to encourage greater compliance of the manufacturing and manufacturing-related
domestic manufacturing sector with Malaysian services sectors, through the liberalisation of
and international standards continued to be investment policies and improvements in the
given emphasis. To encourage innovation, the delivery system. Policies which were
Government also expanded its funding continued in 2005 included:
33
• full liberalisation of the equity policy in the Lumpur City Centre, Technology Park
manufacturing sector since 2003; Malaysia, Bayan Lepas and Kulim Hi-Tech
Park) will be considered for:
• liberalisation of the expatriate employment
policy in the manufacturing and (i) Pioneer Status with tax exemption of
manufacturing-related services sectors; 50 per cent of statutory income for a
period of five years; or
• fine-tuning of tax incentives;
(ii) Investment Tax Allowance of 50 per
• a fast track mechanism to expedite cent of qualifying capital expenditure
approval of applications for manufacturing incurred within a period of five
licences; years to be set-off against 50 per cent
of statutory income for each year of
• the establishment of a single, integrated assessment.
committee to further facilitate import
duty exemption on raw materials and • the scope of incentives made available to
components; and private higher education institutions were
expanded from technical and vocational
• hand-holding mechanism to assist investors training to include qualifying science
in obtaining all necessary approvals at courses, and to similar institutions which
the local, state and federal levels until undertake the upgrading of equipment or
the projects are in operation. expansion of capacity in the field of
science;
To further promote investments, reduce costs
of doing business and enhance the business • enhancement of incentives for companies
environment, several new measures were generating energy from renewable sources,
introduced: such as biomass, hydro-power (not
exceeding 10 megawatts) and solar
• group relief to all locally incorporated power:
resident companies under the Income
Tax Act 1967, including new companies (i) Pioneer Status with tax exemption of
undertaking activities in approved 70 per cent is increased to 100 per cent
food production, forest plantation, of statutory income and the incentive
biotechnology, nanotechnology, optics period is extended from five years to
and photonics; 10 years; or
• accumulated losses and unabsorbed (ii) Investment Tax Allowance of 60 per

capital allowances incurred by companies cent is increased to 100 per cent on the
during the pioneer period were allowed qualifying capital expenditure incurred
to be carried forward and deducted within a period of five years, with
from the post-pioneer income of a the allowance to be set-off against
business; 100 per cent (previously 70 per cent)
of statutory income for each year of
• application period for incentives for assessment; and
promoted areas was extended for another
five years, until 31 December 2010; (iii) The incentive package of Pioneer
Status, Investment Tax Allowance,
• eligible companies undertaking ICT, import duty and sales tax exemption
multimedia or shared services activities extended from 1 January 2006 until
outside the 'Cybercities' (Cyberjaya, Kuala 31 December 2010.
34
• the application period for Pioneer Status, • promoting compliance with the
Investment Tax Allowance, import duty international standard;
and sales tax exemption incentives for
companies providing energy conservation • enhancing investment and trade promotion
services was extended for another five years of halal products and services;
until 31 December 2010.
• building a comprehensive database of
• reduction in import duty from 25 per cent halal manufacturers, exporters and service
to 20 per cent on certain paper products, providers; and
refractory bricks, blocks, tiles and similar
refractory ceramic constructional goods, • developing competitive manufacturing,
glass fibres and articles thereof. testing and services facilities for the halal
industry.
Review of the Promotion of
Investments Act, 1986 Promotion of Malaysian Halal
In 2005, the Government continued with its Standard MS 1500:2004
review of the Promotion of Investments Act, To promote the Malaysian Halal Standard
1986. The review is to consider: MS 1500:2004 as a benchmark for
international level certification, efforts
• the feasibility of a sectoral approach to the were undertaken towards acceptance of the
provision of incentives; standard internationally. The Organisation
of Islamic Conference (OIC) Senior
• incentives for new investments and Officials' Meeting held in Jeddah in
reinvestments in all sectors; April 2005 had in principle accepted the
MS 1500:2004.
• continuation of Pioneer Status and
Investment Tax Allowance; and Promotion of the MS 1500:2004 was
also undertaken through international events
• abolition of redundant incentives. and exhibitions, such as Euro Halal, the
Malaysia International Halal Showcase
DEVELOPING MALAYSIA AS A REGIONAL HUB FOR (MIHAS) and during marketing missions
HALAL PRODUCTS AND SERVICES overseas.
In 2005, the Government further intensified Incentives

efforts to promote the development of halal Various incentives were also made available
products and services as one of the key areas to industries involved in the development of
for economic growth and development. halal products:
Strategies for Promoting the Halal • a special grant amounting to RM10 million
Industry for the development and promotion of
Strategies outlined for making Malaysia the halal products;
hub for halal products and services
include: • provision of Investment Tax Allowance
of 100 per cent on qualifying capital
• enhancing awareness of the Malaysian expenditure for five years for companies
Halal Standard; which produce halal food; and
• promoting international cooperation for the • double tax deduction on expenditure

promotion of the Malaysian Halal for obtaining halal certification and
Standard; accreditation.
35
Provisions under other incentives can also be Programmes and Activities
applied to companies engaged in halal-related Among the promotional programmes and
activities. The incentives include: activities undertaken by relevant ministries/
agencies in 2005 were:
• Grant for Business Planning and
Development; • Training Programme on Halal Standard,
which covers:
• Grant for Product and Process
Improvement; - standard and quality assurance
infrastructure;
• Grant for Productivity and Quality
Improvement and Certification; - Malaysian Halal Standard (MS
1500:2004);
• Market Development Grant; and
- Syariah perspective and requirements
• Brand Promotion Grant. of halal certification; and
Permodalan Usahawan Nasional Berhad, an - halal certification process and

agency under the Ministry of Entrepreneurial supporting programmes, especially for
and Cooperative Development, provides SMEs.
financial assistance for the development of
businesses in halal products and services. • Specialised Marketing Mission on
This includes: Halal Products to the People's Republic
of China from 29 June-10 July 2005
• Business Joint-Venture Package of up in collaboration with China Islamic
to RM1 million by equity financing (up Association;
to 30 per cent of the total project cost) or
debt financing (where another 60 per cent • Participation in Euro Halal Exhibition
of the project cost) is financed by a loan in Paris from 6-8 June 2005;
given by an appointed financial institution
and fully guaranteed by Credit Guarantee • Organising MIHAS 2005 from 28-31
Corporation Malaysia Berhad; and July 2005 which attracted the
participation of 332 companies from
• Loan and Services Package of up to 18 countries, of which sales generated
RM200,000. was valued at RM217.1 million;
and
Status of Halal Certification
In 2005, Jabatan Kemajuan Islam Malaysia • Incoming Buying Mission, organised
(JAKIM) issued 2,593 certificates based on the in conjunction with MIHAS 2005.
category of products, premises and abattoirs.
International Cooperation
Table 3.1:
The ongoing bilateral FTA negotiations
Halal Certifications Awarded to
with New Zealand and Australia served
Companies, 2005
as a platform for Malaysia to clarify
Category Number of Certificates and further discuss issues of common
interest to the FTA partners on halal
Total 2,593 matters, including information sharing
Products 2,276 and incorporation of a mechanism
Premises 279 to facilitate cooperation to better facilitate
Abattoirs 38 trade in halal products and services.
Source: Jabatan Kemajuan Islam Malaysia (JAKIM)
36
DEVELOPMENT OF SMALL AND MEDIUM • the adoption of a new policy formulation
ENTERPRISES and evaluation framework, involving the
identification of broad strategic priorities
In 2005, the National Small and Medium and targets for SME development
Enterprise Development Council, chaired by and establishment of comprehensive
the Prime Minister, endorsed: key performance indicators to evaluate
the effectiveness of all Government
• the National SME Development Blueprint programmes on SMEs.
2006, which includes 245 programmes for
implementation in 2006 to accelerate the Establishment of SME Bank
development of SMEs. The Government The SME Bank, which launched its operations
has allocated RM3.8 billion for SME on 3 October 2005, will:
programmes in various sectors, including
agriculture, agro-based and knowledge- • provide financial facilities and advisory
based industries. These programmes were services to SMEs;
aimed at:
• be a one-stop financial centre for
- strengthening the enabling providing funds for the business needs
infrastructure to support SME of Malaysian SMEs;
development;
• complement existing products and services
- building capacity and capability of offered by commercial banks;
SMEs; and
• set up a venture capital fund of
- further enhancing access to financing RM1 billion to finance SMEs that are
by SMEs. capable of undertaking business expansion;
and
• the introduction of the Multi Currency
Trade Finance Facility and Indirect Export • provide special financing for micro-
Financing Scheme to encourage the export businesses.
of goods and services of SMEs to non-
traditional markets, especially OIC member TECHNOLOGY
countries;
To further strengthen and diversify the
• the Human Resource Development Portal, sources of economic growth, the
which would enable employers and training Government continued to intensify its efforts
providers to interact online as one training to encourage investments in new areas
community; with high growth potential and competitive
edge. These include biotechnology and
• the launching of the SME Info Portal as nanotechnology, as well as manufacturing
a one-stop online information gateway for employing advanced technology.
comprehensive information on financing
and training, as well as Government support In the development of the biotechnology
and development programmes for SMEs; industry, the Government will be guided by
the National Biotechnology Policy, launched
• the publication of an annual report on in April 2005. The policy outlines strategies
SME development, which provides a and initiatives for development, particularly
comprehensive assessment of Government- in the areas of agricultural biotechnology,
assisted programmes and the performance health biotechnology and industrial
of SMEs in all sectors; and biotechnology.
37
Multimedia Super Corridor collaboration and improved communication
The Multimedia Super Corridor of Malaysia between trading partners, domestically and
(MSC Malaysia) continued to be the catalyst internationally. The RosettaNet grant, which
for the growth and development of a vibrant was earlier introduced for the electrical and
and sustainable domestic ICT industry. By the electronics (E&E) sector, has been expanded
end of 2005, a total of 1,421 companies were to other sectors with effect from 2005. As at
awarded MSC-status. 2005, a total of RM2.5 million had been
approved for 51 companies. A total of 333
Efforts are being pursued towards positioning companies have adopted the RosettaNet
Malaysia as a shared services hub and standard with 3,482 electronic business process
promoting it as a choice location. In 2005, connections transacted. This reflects an
Malaysia maintained its rank as the third increasing confidence among companies on the
most attractive destination for shared services Standard, while enjoying the benefits of lower
and outsourcing activities, after India and the inventory and transaction costs, as well as
People's Republic of China. reduced time to market.
International companies that have located their The Small and Medium Industries
shared services centres in Malaysia, include Development Corporation (SMIDEC) and
Group Data Centre, Communication and RosettaNet (M) Berhad conducted a series
Network Support Centre, Group Services of seminars and workshops nationwide to
Centre and IT Services Centre. As at end 2005, enhance the awareness of the RosettaNet
more than 40 shared services and outsourcing standard, as well as promote its benefits to
companies were established in the MSC business-to-business supply chain trading
Malaysia. partners.
Information and Communication The National Productivity Corporation (NPC)

Technology Services conducted two seminars on enhancing the
ICT has evolved from being an operational productivity of SMEs through the use of
tool for supporting businesses in areas, such ICT in Petaling Jaya and Johor Bahru.
as R&D, marketing and sales, to become a The purpose of the seminars was to introduce
strategic tool for improving the supply chain relevant ICT business solutions for improving
management. The use of ICT in various productivity, with emphasis on the application
industries will continue to be promoted to of ICT as a means of sustaining
enhance competitiveness and efficiency, as competitiveness.
Malaysia moves towards a knowledge-based
economy. The NPC also undertook a Study on the
Application of ICT in the Manufacturing
Initiatives to Promote Information Sector for 2005 to determine the extent and
and Communication Technology intensity of IT usage in the manufacturing
Programmes to raise awareness and enhance value chain and study the types of
training on ICT and other technologies IT-based tools used. The study covered
continued to be implemented in 2005 by Malaysian manufacturing companies
both the Government and the private sector. registered with the Federation of Malaysian
Agencies under the Ministry of International Manufacturers.
Trade and Industry (MITI) had conducted nine
seminars and workshops and two ICT-related The Malaysia External Trade Development
trade missions during the year. Corporation (MATRADE), together with the
Multimedia Development Corporation (MDC)
The RosettaNet is a series of e-business and the Association of the Computer and
standards which can be used to streamline a Multimedia Industry, Malaysia (PIKOM),
company's supply chain by enabling greater jointly organised a specialised ICT Marketing
38
Mission to Shanghai and Beijing. The Electronic Data Interchange
marketing mission was intended to enhance Services
cooperation and widen business networking DagangNet Technologies Sdn. Bhd.
with ICT providers in the People's Republic (DagangNet) continued to provide network
of China. and application services for the electronic
submission of import/export permits, Customs
MATRADE also organised the participation declarations and payment of duties.
of Malaysian companies in CeBIT, the
world's largest trade fair for the ICT industry, The performance of DagangNet is being
held in Hanover, Germany. The participation monitored through key performance indicators
was aimed at further promoting Malaysian targeted at the quality of service provided,
ICT products and services and to showcase response time and the availability of technical
Malaysia's capability in the ICT sector support.
abroad.
ASEAN Single Window and National
Malaysian Information, Single Window
Communication and Multimedia To further facilitate trade among ASEAN
Services 886 members, an Agreement to Establish and
The Malaysian Information, Communication Implement the ASEAN Single Window
and Multimedia Services 886 (MyICMS886) was signed by ASEAN Economic Ministers
was launched on 20 December 2005 to on 9 December 2005. The ASEAN
further develop the ICT industry in Single Window is premised on a set
Malaysia. The MyICMS886 strategy of standardised information parameters,
incorporates eight service areas targeted at procedures, formalities and international best
enhancing the delivery of advanced practices for the clearance and release of
information, communication and multimedia cargoes at entry points of ASEAN by
services which would contribute towards integrating processing and decision-making by
enhancing Malaysia's global competitiveness Customs authorities and relevant ministries. It
and help improve the quality of life of is aimed at accelerating the release of cargoes
Malaysians. being shipped to and from ASEAN in order to
reduce transaction costs and time required for
TRADE FACILITATION Customs clearance.
Financial Process Exchange As a follow-up, ASEAN member countries will

The Financial Process Exchange, a national establish their respective national single
multi-bank Internet payment system, was windows, which will gradually integrate
launched to facilitate online payments, electronically within the ASEAN network.
including trade transactions. Thus far, five Malaysia, Singapore, Brunei Darussalam, the
banks have participated in this initiative, Philippines, Thailand and Indonesia are
namely Bank Islam Malaysia Bhd., envisaged to establish their national single
Bumiputra-Commerce Bank Bhd., Public windows by 2008, while Cambodia, Myanmar,
Bank Bhd., Deutsche Bank Malaysia Lao PDR and Viet Nam are expected to
Bhd. and Citibank Bhd. Four more banks, operationalise their national single windows
HSBC Bank Malaysia Bhd., RHB not later than 2012.
Bank Bhd., OCBC Bank (Malaysia) Bhd.
and Maybank Bhd. are expected to join DEVELOPMENT OF MANUFACTURING-RELATED
the Financial Process Exchange by June SERVICES
2006 at the latest. Bank Negara Malaysia
will be incorporating Customs duty payment In 2005, efforts for the development and
in the Financial Process Exchange promotion of manufacturing-related services
project. were continued, particularly in the areas of
39
regional establishments, support services, • industry-related international conferences;
branding and marketing.
• international trade fairs and trade missions
Tax incentives, in the form of full income by women entrepreneurs;
tax exemption, are granted to Operational
Headquarters (OHQs), Regional Distribution • showcasing samples of products and
Centres (RDCs) and International Procurement services at Malaysia's Trade Centres in
Centres (IPCs). Tax incentives, in the form of Kuala Lumpur, Dubai and Johannesburg;
Pioneer Status or Investment Tax Allowance and
and exemption of import duty on sales tax for
equipment, are also given to service providers • local training seminars on export.
that undertake integrated logistics services,
market support services and central utility In June 2005, product packaging
facilities. improvements and labelling were
incorporated into the Grant for Enhancing
Branding and Marketing Product Packaging, Design and Labelling
To further foster brand creation and Capabilities for SMEs. A total of nine
intensify marketing promotion activities, seminars were conducted nationwide
support programmes made available to to create awareness among SMEs on
companies in 2005 were: the need to enhance capacity building,
as well as the need to comply with labelling
• Double deduction for the promotion of requirements.
Malaysian brands;
DEVELOPMENT OF STANDARDS
• Double deduction for the promotion of
exports; Out of 372 new standards adopted in 2005,
a total of 294 or 79 per cent were aligned
• Market Development Grant; and with international standards. As at December
2005, a total of 4,085 Malaysian Standards
• Brand Promotion Grant. were developed. Of this total, 2,111 (51.7
per cent) were aligned with international
As at 2005, under the Brand Promotion standards and 122 standards have been made
Grant, a total of RM49.1 million grants mandatory.
were approved to companies involved in
products and services such as food, E&E, MITI is a member of the National Standards
ICT services, pharmaceuticals, healthcare, and Accreditation Council. MITI is also
jewellery, giftware items, rubber gloves, represented in a number of other standards
automotive (leather seats), furniture, and accreditation committees:
engineered hardwood flooring, footwear
and franchise (food). - National Medical Testing and Accreditation
Committee;
The scope of the Market Development
Grant was expanded to assist SMEs in - Malaysian National Standards Committee;
defraying part of their costs for promotional
activities undertaken to develop export - Malaysian Electrotechnical National
markets. Committee;
As at 1 March 2005, additional export - National Accreditation Committee;

promotion activities were made eligible under and
the Market Development Grant. The activities
include participation in: - 21 Industry Standards Committees.
40
Table 3.2:
Malaysian Standards, as at December 2005
Sector Number of Number of Mandatory Number of
Standards Standards Standards
Aligned Internationally
Total 4,085 122 2,111
Electrotechnical 608 57 489

Information technology, communication and multimedia 544 nil 493
Chemicals 533 4 241
Food and agriculture 520 2 92
Plastics and plastic materials 309 nil 166
Civil engineering and construction 218 39 30
Textiles 202 nil nil
Mechanical engineering 199 4 87
Petroleum and gas 167 3 59
Rubber and rubber products 152 nil 90
Road vehicles 123 3 45
Quality management and quality assurance 100 nil 96
Occupational health and safety 90 nil 79
Packaging and distribution 79 nil 40
Iron and steel 76 2 39
Fire safety and fire protection 69 8 19
Consumer products and safety 64 nil 22
Environment management 19 nil 15
Medical devices 9 nil 9
Halal Standards 4 nil nil
Source: Department of Standards, Malaysia
The Industry Standards Committees are RESEARCH AND DEVELOPMENT

responsible for overseeing the effective
development of standards and international Industrial development, as envisioned in
standardisation in specific sectors, as well Malaysia's development plans, depends
as giving final approval for the technical heavily on R&D-driven productivity and
content of draft standards. Depending on innovation. With the emphasis on the potential
the need of each sector, each Industry growth areas, the Government has provided an
Standards Committee will establish its allocation of RM868 million in grants during
own set(s) of Technical Committees and the Eighth Malaysia Plan to ensure continued
Working Groups. Each Industry Standards support for R&D activities.
Committee has the responsibility to
coordinate all standards work undertaken by The R&D Grant Scheme focused on
the appointed Technical Committees and biotechnology, advanced manufacturing,
Working Groups. advanced materials, ICT, nanotechnology
and alternative sources of energy, including
MITI has also participated in preparatory solar, to encourage innovation among local
work in social responsibility issues at companies and the development of new
the domestic and international levels. products.
MITI is currently a member of the National
Mirror Committee on Social Responsibility ENVIRONMENT
(chaired by the Department of Standards,
Malaysia), which comprises representatives With oil prices escalating, the Government has
from the Government and industry, and embarked on a programme to encourage
coordinates Malaysia's approach and position energy efficiency and promote the use of
in social responsibility-related issues in alternative fuels that are environmental
international negotiations. friendly.
41
A policy to encourage the production and use in the formulation of policies and strategies
of biofuel is being formulated to ensure the towards a more comprehensive approach
orderly development of the biofuel industry. to environmental management.
The National Biofuel Policy will encompass HUMAN RESOURCE AND SKILLS DEVELOPMENT
the formulation of national industrial biofuel
legislation, as well as the provision of Academia-Industry Consultative
various incentives to encourage private sector Council
involvement. The Biofuel Act is expected to be In May 2005, an Academia-Industry
tabled in Parliament in 2006. Consultative Council was established, with
MITI as the coordinator for the forum.
MITI collaborated with other ministries The Council brings together industry and
and Government agencies in various academia in contributing towards the
initiatives and programmes on the formulation of strategies for capacity building
environment, including: in trade and industry.
- National Study on Waste Minimisation The objectives of the Council are to:
in Malaysia - Ministry of Housing and
Local Government and Japan International • narrow the gap and mismatch between skills
Cooperation Agency; supply and demand;
- Renewable Energy and Energy Efficiency • facilitate the collaboration of market-

Cooperation - Ministry of Water, Energy driven research and skills development
and Communication; and Economic programmes; and
Planning Unit and Danish International
Development Assistance; • maximise the utilisation of resources in
both academia and industry.
- National Steering Committee on Clean
Development Mechanism - Ministry of Skills Enhancement Programmes
Natural Resources and Environment and In 2005, a total of 18,462 school leavers
Malaysia Energy Centre; were awarded Malaysian Skills Certificates
(Sijil Kemahiran Malaysia) through 683
- National Steering Committee on Broga accredited skills training centres. As at
Project for the Solid Waste Thermal December 2005, the centres conducted 1,096
Treatment Plant - Ministry of Housing and skills enhancement programmes.
Local Government;
National Dual Training System
- National Committee on the Convention The latest initiative in enhancing Malaysia's
on International Trade in Endangered skills delivery system is the implementation
Species of Wild Fauna and Flora - Ministry of the National Dual Training System
of Natural Resources and Environment; (Skim Latihan Dual Nasional). Trainees
selected by participating employers will
- National Committee on the Review of undergo both theoretical study in training
the Environment Quality Act, 1974 - institutions, and practical training at the
Department of Environment; and workplace itself.
- The Environmental Quality Council, OUTLOOK

which functions as an advisory committee
to the Minister of Natural Resources and Against a backdrop of intense competition
Environment, and provides policy guidance for FDIs, the Government working in tandem
42
with the private sector, will endeavour Efforts will be intensified to accelerate the
to fine-tune the strategies, policies and development and growth of the SMEs.
initiatives to ensure Malaysia remains More targeted initiatives towards nurturing
competitive. The Government will continue potential areas of growth, such as
to improve the public sector services biotechnology and other high technology
delivery system and foster a conducive industries, are envisaged in the Ninth
environment for business, including further Malaysia Plan and the Third Industrial
reducing the costs of doing business and Master Plan. Improving trade facilitation
leveraging on outsourcing to enhance nationally and encouraging domestic
competitiveness. industries to adopt new technologies,
including ICT-based tools, are important
The launching of the Ninth Malaysia Plan priorities.
and the Third Industrial Master Plan in the
first half of 2006 are key milestones, The promotion of standards, including
aimed at reinforcing the contribution of Malaysian Halal Standard, as well as closer
manufacturing and services in enhancing international cooperation, through mutual
Malaysia's economic growth in the medium recognition agreements, are envisaged to be
and long term. given greater focus.
43
Investments In The
Chapter 4
Manufacturing Sector
OVERVIEW to RM269.7 billion, exceeded the IMP2 target

by RM19.7 billion.
In 2005, Malaysia continued to attract
significant levels of investments in the New Projects
manufacturing sector. A total of 1,026 projects Of the 1,026 projects approved in 2005, a total
were approved, involving investments of of 572 (56 per cent) were new projects with
RM31 billion, compared with 1,101 projects investments of RM13.8 billion, accounting
with investments amounting to RM28.7 billion for 44.5 per cent of total investment. In
in 2004. Of the total, foreign investments comparison, a total of 602 new projects with
amounted to RM17.9 billion or 57.7 per cent, investments of RM18.6 billion were approved
while domestic investments totalled RM13.1 in 2004. Investments in new projects in 2005
billion (42.3 per cent). were concentrated in five industries, namely
electrical and electronics (E&E) totalling
Investments approved in 2005 were the RM2.7 billion, basic metal products (RM2.2
highest recorded since 1996, except for the billion), scientific and measuring equipment
year 2000 when the amount registered was (RM1.3 billion), transport equipment (RM1.1
RM33.6 billion. Investments approved in 2005 billion) and chemicals and chemical products
exceeded the average annual investment target (RM954.5 million).
of RM25 billion set during the Second
Industrial Master Plan (IMP2), by 24 per cent. In 2005, a total of 365 new projects or 64 per
The total investment approved during the cent of all new projects approved involved
IMP2 period (1996-2005), which amounted investments of less than RM10 million each.
Chart 4.1:
Investments in Projects Approved, 1996-2005
40
33.6 IMP2
35 34.3 31.0 Average
29.1 28.7
30 26.4 Annual
50.1% 25.8 41.1% 25.8 42.3% Target
25
RM billion
26.7% 46.4% 54.4%

20 50.4% 17.9
55.4% 17.0
15 27.6% 32.2%
49.9%
10 58.9% 73.3% 57.7%
53.6%
49.6% 72.4% 64.8% 45.6%
5 44.6%
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total
Total
(RM billion) 34.3 25.8 26.4 17.0 33.6 25.8 17.9 29.1 28.7 31.0 269.7
DI 17.2 14.3 13.3 4.7 13.8 6.9 6.3 13.5 15.6 13.1 118.8
FDI 17.1 11.5 13.1 12.3 19.8 18.9 11.6 15.6 13.1 17.9 150.9
Source: Malaysian Industrial Development Authority
Note: DI – Domestic Investments
FDI – Foreign Direct Investments
45
Table 4.1:
Approved Manufacturing Projects
Total New Expansion/Diversification
2005 2004 2005 2004 2005 2004
Number of projects 1,026 1,101 572 602 454 499

Potential employment 114,956 88,634 49,773 51,895 65,183 36,739
RM million
Proposed called-up capital 3,693.0 4,449.6 2,712.4 3,342.9 980.6 1,106.7

Malaysian equity 1,624.8 2,706.2 1,438.3 1,976.6 186.5 729.6
- Bumiputera 542.2 1,168.3 522.0 931.9 20.2 236.4
- Public Corporation 5.6 nil 3.8 nil 1.8 nil
- Non-Bumiputera 1,077.0 1,537.9 912.6 1,044.7 164.4 493.2
Foreign equity 2,068.3 1,743.4 1,274.1 1,366.3 794.2 377.1

Loan 9,879.4 14,590.9 6,660.3 10,144.5 3,219.1 4,446.4
Other sources1 17,484.0 9,733.1 4,470.4 5,163.0 13,013.6 4,570.1
Total Proposed Capital

Investment 31,056.6 28,773.5 13,843.2 18,650.3 17,213.4 10,123.2
- Local 13,173.7 15,629.5 9,156.5 9,554.3 4,017.2 6,075.2
- Foreign 17,882.9 13,144.0 4,686.7 9,096.0 13,196.2 4,048.0

Note: 1 Includes retained earnings and other sources of financing not yet determined at the time of approval.
However, total investment in these accounting for 55.5 per cent of total
projects were relatively small amounting investment. In 2004, there were 499 expansion/
to RM1.5 billion or 10.8 per cent of the total diversification projects with investments of
investment approved for new projects. These RM10.1 billion. Investments in expansion/
projects were largely in fabricated metal diversification projects in 2005 were mainly
products (61 projects/RM192.2 million) E&E in E&E, valued at RM11.1 billion, basic
(49 projects/RM167.1 million), machinery metal products (RM1.1 billion), chemicals
manufacturing (47 projects/RM202.8 million), and chemical products (RM766.5 million),
plastic products (28 projects/RM163.3 non-metallic mineral products (RM755
million), food manufacturing (27 projects/ million), plastic products (RM660 million),
RM127.8 million), furniture and fixtures (27 food manufacturing (RM593.6 million) and
projects/RM101.6 million), chemicals and rubber products (RM438.6 million) industries.
chemical products (23 projects/RM101.6
million) and transport equipment (20 projects/ Capital-Intensive Projects
RM89 million) industries. Projects approved Capital-intensity (as measured by the capital
include high value-added, high technology investment per employee or CIPE ratio) of
products, as well as high-end parts and new projects approved in 2005 was
components and supporting services for RM278,127 compared with RM359,383 in
multinational corporations (MNCs). 2004. The higher CIPE ratio in 2004 was
attributable to a number of projects approved
Expansion/Diversification Projects with investments exceeding RM1 billion. If
The strong trend of expansion/diversification projects with investments of RM1 billion and
of projects by existing manufacturing above were discounted to remove the effects
companies continued in 2005. Of the of unusually large projects, the CIPE ratio in
projects approved, 454 projects (44 per cent) 2005 would be RM249,037, which was higher
were for expansion/diversification, involving than the 2004 figure of RM205,497. The CIPE
investments of RM17.2 billion and ratio of manufacturing projects registered an
46
Chart 4.2:
Approved New Projects by CIPE Ratio, 1990-2005
RM CIPE
CIPE excluding projects RM1 billion and above
500,000
479,166
450,000
388,102 367,015
400,000
373,039 359,383
350,000 351,617
278,127
300,000 361,963 327,988
255,026 231,282 292,597 249,037
250,000
191,312 244,458
181,280 193,849 197,494 198,780
200,000 226,506
181,197 205,497
150,000 167,639 137,118 183,757 176,643
153,183 158,728
99,894 137,306
100,000
96,982
50,000 86,579
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
increasing trend since 1990 (RM167,639). This (RM13.8 billion), as well as the number of
trend reflects the movement towards more projects approved (226). This was followed
capital-intensive, high value-added and high by basic metal products (RM3.2 billion),
technology projects. chemicals and chemical products (RM1.7
billion), food manufacturing (RM1.5 billion),
A total of 58 projects with investments scientific and measuring equipment (RM1.4
of RM100 million or more each were approved billion) and transport equipment (RM1.4
in 2005, of which four had investments billion) industries. These six industries
exceeding RM1 billion. Investments in accounted for RM23 billion or 74.2 per cent
these 58 projects amounted to RM19.7 billion of total investment approved. All these
or 63.5 per cent of the total investment industries, except chemicals and chemical
approved. Capital-intensive projects were products, registered significantly higher levels
mainly in E&E, with a total of 30 of investments in 2005, compared with 2004.
projects valued at RM11.1 billion, basic
metal products (5 projects/RM2.4 billion), Export-Oriented Projects
chemicals and chemical products (4 projects/ Of the 1,026 projects approved in 2005, a
RM745.3 million), scientific and measuring total of 363 (35.4 per cent) projects with
equipment (3 projects/RM1.3 billion), transport investments of RM17.9 billion would be
equipment (3 projects/RM605 million) and exporting at least 80 per cent of their output.
rubber products (3 projects/RM516.4 million) Domestic investments in these export-oriented
industries. These projects would have sub- projects amounted to RM4 billion, while
stantial multiplier effects on the manufacturing foreign investments totalled RM13.9 billion.
sector and the economy through their In comparison, 347 export-oriented projects
contribution towards forward and backward were approved in 2004, with investments
linkages, transfer of technology, local sourcing totalling RM7.4 billion. Export-oriented
and skills development. projects approved in 2005 were mainly in the
E&E (121 projects/RM12.1 billion), furniture
Projects Approved by Industry and fixtures (31 projects/RM321.3 million),
The E&E industry remained the leading machinery manufacturing (27 projects/
industry in 2005, in terms of investments RM241.7 million), fabricated metal products
47
Table 4.2:
Approved Manufacturing Projects by Industry, 2005
Industry 2005 2004
Total Foreign Domestic Number Employment Total Foreign Domestic Number Employment
Capital Investment Investment of (Persons) Capital Investment Investment of (Persons)
Investment (RM million) (RM million) Projects Investment (RM million (RM million) Projects
(RM million) (RM million)
Total 31,056.6 17,882.9 13,173.7 1,026 114,956 28,773.5 13,143.9 15,629.5 1,101 88,634
Electronics and electrical products 13,793.8 11,318.9 2,474.8 226 47,317 8,626.9 6,826.0 1,800.9 195 24,530
Basic metal products 3,205.0 430.5 2,774.5 47 3,034 1,924.7 264.7 1,660.0 32 2,632
Chemicals and chemical products 1,721.0 869.5 851.6 64 2,762 3,009.3 556.3 2,453.1 68 3,093
Food manufacturing 1,457.5 531.9 925.6 75 4,260 1,116.1 384.8 731.4 74 3,465
48
Scientific and measuring equipment 1,427.0 1,364.5 62.5 15 3,276 82.2 49.5 32.7 16 751
Transport equipment 1,416.1 503.8 912.3 62 5,623 1,324.0 254.6 1,069.4 108 6,669
Plastic products 1,180.0 594.8 585.3 81 6,242 683.0 274.6 408.5 87 5,096
Machinery manufacturing 1,027.4 570.0 457.4 85 4,742 406.6 116.1 290.5 80 2,852
Paper, printing and publishing 953.5 123.8 829.7 23 1,295 4,723.1 1,361.8 3,361.4 36 3,063
Non-metallic mineral products 921.5 596.1 325.4 30 1,480 774.9 380.7 394.2 42 3,187
Rubber products 773.0 215.2 557.8 27 2,049 385.2 109.8 275.4 29 3,306
Fabricated metal products 758.8 250.6 508.2 115 8,467 1,195.0 736.3 458.7 140 8,568
Petroleum products (incl. petrochemicals) 734.7 133.0 601.7 15 276 1,902.5 812.4 1,090.1 16 387
Furniture and fixtures 511.7 63.5 448.2 55 6,587 344.0 102.0 241.9 56 6,179
Textiles and textile products 373.9 146.2 227.8 35 12,800 823.9 368.5 455.4 36 5,865
Wood and wood products 360.5 77.2 283.3 36 3,288 897.5 236.1 661.4 44 6,439
Beverages and tobacco 94.4 77.6 16.8 9 393 377.4 282.5 94.9 9 803
Leather and leather products 9.0 3.6 5.4 1 150 18.5 5.4 13.1 5 156

(25 projects/RM160.2 million) and food Of the 1,026 projects approved, 656 projects
manufacturing (24 projects/RM722.7 million) or about 64 per cent were Malaysian-owned,
industries. involving investments of RM13.4 billion
(2004: 699 projects/RM16.5 billion). The
Employment Opportunities majority (443) of the Malaysian-owned
Projects approved in 2005 will generate a projects were new projects, with investments
total of 114,956 employment opportunities, of of RM9.5 billion or 70.8 per cent of total
which 77,235 or 67 per cent will be in the investment in Malaysian-owned projects.
managerial, technical, supervisory and skilled A total of 213 projects were expansion/
workforce categories. Industries that created diversification projects, involving investments
the most employment opportunities in these of RM3.9 billion.
categories were E&E (36,874), textiles and
textile products (8,273), fabricated metal Investments in new Malaysian-owned projects
products (5,534), furniture and fixtures were concentrated in the basic metal products
(3,533), machinery manufacturing (3,442), (RM2 billion), E&E (RM1.7 billion), paper,
transport equipment (3,235) and scientific and printing and publishing (RM861 million),
measuring equipment (3,138). transport equipment (RM853.3 million),
chemicals and chemical products (RM630.8
Expatriate Posts million), food manufacturing (RM494.5
To facilitate technology transfer and million), petroleum products, including
supplement the local pool of managerial petrochemicals (RM442.2 million) and plastic
and technical skills, the Government continued products (RM433.1 million) industries.
to grant approvals for expatriate posts,
particularly managerial and technical posts, About 65 per cent (287 projects) of the
to Malaysian as well as foreign-owned new Malaysian-owned projects involved
companies. Malaysian-owned companies were investments of less than RM10 million each.
generally given approval for technical Most of these projects were in the fabricated
expatriate posts, mainly in the engineering metal products (52 projects), E&E (35),
supporting industries, such as moulds, tools machinery manufacturing (30), furniture and
and dies, and machining. In 2005, a total of fixtures (26), food manufacturing (21) and
1,980 expatriate posts were approved, of which chemicals and chemical products (20)
323 were key posts that could be filled industries.
permanently by foreigners. The remaining
1,657 were term posts, generally granted for Malaysian-owned projects undertaking
three to five years, during which Malaysians expansion/diversification were mainly in the
are trained to eventually take over the posts. E&E (RM939.5 million), basic metal products
(RM813.2 million) and food manufacturing
APPROVED PROJECTS BY OWNERSHIP (RM442.1 million) industries. Reinvestments
were also concentrated in textiles and
Domestic Investments textile products (RM195 million), transport
Domestic investments in projects approved in equipment (RM191.8 million) and furniture
2005 amounted to RM13.1 billion or 42.3 per and fixtures (RM190.4 million) industries.
cent of total investment, indicating a sustained
level of interest among domestic investors A total of 16 Malaysian-owned projects
in the manufacturing sector. In comparison, with investments of RM100 million or more
domestic investments of RM15.6 billion were each were approved in 2005. Investments in
approved in 2004. The major portion of the these 16 projects amounted to RM5.9 billion.
investments approved in 2005, amounting to These capital-intensive projects were mainly
RM9.1 billion, was in new projects, while in the basic metal products (4 projects/
RM4 billion was in expansion/diversification RM2.2 billion), E&E (4 projects/RM1.4
projects. billion), paper, printing and publishing
49
Table 4.3:
Approved Manufacturing Projects with Malaysian Majority1 Ownership by Industry
Industry 2005 2004
Total New Expansion/Diversification Total New Expansion/Diversification
Capital Number Total Number Total Number Capital Number Total Capital Number Total Number
Investment of Capital of Capital of Investment of Investment of Capital of
(RM million) Projects Investment Projects Investment Projects (RM million) Projects (RM million) Projects Investment Projects
(RM million) (RM million) (RM million)
Total 13,402.1 656 9,459.5 443 3,942.5 213 16,501.2 699 10,670.5 449 5,830.7 250
Basic metal products 2,858.2 35 2,045.0 21 813.2 14 1,662.7 26 1,436.6 17 226.2 9

Electronics and electrical
products 2,619.4 99 1,680.0 64 939.5 35 1,795.4 73 465.7 45 1,329.7 28
Transport equipment 1,045.6 44 853.8 27 191.8 17 1,010.8 87 491.8 52 519.0 35
Food manufacturing 936.6 56 494.5 35 442.1 21 718.3 56 314.1 36 404.2 20
Paper, printing and
publishing 869.1 10 861.0 7 8.0 3 4,623.1 28 4,398.4 19 224.7 9
Chemicals and chemical
50
products 808.9 43 630.8 36 178.1 7 2,628.1 50 1,333.8 32 1,294.3 18
Plastic products 607.9 51 433.1 33 174.8 18 417.0 48 354.2 34 62.8 14
Fabricated metal products 534.4 81 385.1 63 149.3 18 418.6 82 342.8 58 75.8 24
Petroleum products (incl.
petrochemicals) 510.4 10 442.2 4 68.3 6 691.4 10 6.9 4 684.5 6
Machinery manufacturing 457.7 56 338.1 43 119.7 13 303.5 58 263.9 43 39.6 15
Furniture and fixtures 449.8 47 259.4 35 190.4 12 255.6 42 146.7 25 108.9 17
Rubber products 444.9 18 320.1 13 124.8 5 214.4 19 36.0 9 178.5 10
Non-metallic mineral
products 322.6 20 149.1 9 173.5 11 349.6 26 235.1 14 114.5 12
Wood and wood products 294.0 28 186.4 20 107.6 8 557.7 29 93.3 14 464.4 15
Textiles and textile
products 213.0 22 18.1 4 195.0 18 568.9 27 478.8 15 90.2 12
Scientific and measuring
equipment 71.9 8 24.3 5 47.5 3 33.9 8 31.9 7 2.0 1
Beverages and tobacco 17.1 6 17.1 5 0.02 1 100.9 4 100.9 4 nil nil
Leather and leather
products 9.0 1 9.0 1 nil nil 13.1 3 4.0 1 9.1 2

Note: 1 Projects with Malaysian equity ownership of more than 50 per cent
2
Expansion project with no additional capital
(2 projects/RM828.5 million), transport cent of the total investment approved,
equipment (2 projects/RM455 million) and compared with RM13.1 billion in 2004.
petroleum products, including petrochemicals
(1 project/RM420.6 million) industries. Foreign investments in the E&E industry
amounted to RM11.3 billion or 63 per cent
Of the 656 Malaysian-owned projects of the total foreign investment approved
approved in 2005, a total of 173 projects in 2005. Investments were also concentrated
(26.4 per cent) with investments amounting in scientific and measuring equipment (RM1.4
to RM4 billion would be exporting at least 80 billion), chemicals and chemical products
per cent of their output. Most of these projects (RM869.5 million), non-metallic mineral
were in E&E (35 projects/RM1.7 billion), products (RM596.1 million), plastic products
furniture and fixtures (24 projects/RM268.6 (RM594.8 million), machinery manufacturing
million), food manufacturing (16 projects/ (RM570 million), food manufacturing
RM411.1 million), wood and wood products (RM531.9 million) and transport equipment
(16 projects/RM227.7 million) and rubber (RM503.8 million) industries. Compared
products (14 projects/RM424.6 million) with 2004, foreign investments had
industries. increased substantially in the E&E, scientific
and measuring equipment, machinery
Malaysian-owned projects will generate a manufacturing, plastic products and chemicals
total of 53,795 employment opportunities or and chemical products industries.
46.8 per cent of total employment in approved
projects. In 2004, proposed employment in Foreign investments in new projects amounted
Malaysian-owned projects totalled 51,521 to RM4.7 billion in 2005, compared with
persons. RM9.1 billion in 2004. Investments were
mainly in the scientific and measuring
Foreign Investments equipment (RM1.2 billion), E&E (RM1.1
Malaysia continued to remain an attractive billion), machinery manufacturing (RM443.4
investment location in the region, as reflected million), food manufacturing (RM371.1
in the increase in foreign investments in 2005. million), chemicals and chemical products
A total of 562 projects, involving foreign (RM353.3 million), petroleum products,
investments were approved in 2005. Total including petrochemicals (RM126.9 million),
foreign investment in these projects increased plastic products (RM122.1 million) and basic
by 36.6 per cent to RM17.9 billion or 57.7 per metal products (RM121.1 million) industries.
Chart 4.3:
Approved Projects with Foreign Participation by Major Industry, 2005
10,000 New Project Expansion/Diversification Project

10,155
(141)
8,000
RM million
6,000
4,000
1,164 1,228
2,000 576 473
(85) (10) 136 353 516 20 122
(19) (37)
(5) (45) (19) (11) (44)
0
E&E Scientific Chemicals Non-metallic Plastic
equipment products

Note: Figures in parentheses refer to number of projects approved
51
Existing foreign investors continued to Foreign investments of less than RM10 million
reinvest, consolidate, expand and diversify each were also in 137 projects. Foreign
into higher value-added products and investments in these projects amounted to
activities to enhance the competitiveness RM418.7 million and were mainly in the
of their operations in the country. This machinery manufacturing, E&E, plastic
was reflected in the high levels of products, fabricated metal products, food
investments in expansion/diversification manufacturing and transport equipment
projects approved in 2005. Foreign companies industries. These projects involved the
also relocated critical manufacturing production of higher value-added products,
support activities, such as research and technology and skill-intensive operations, as
development (R&D), and engineering and well as support services for the E&E, transport
product design centres, from their home and machinery manufacturing industries.
countries to Malaysia.
Major Sources of Foreign
Foreign investments in expansion/ Investments
diversification projects totalled RM13.2 By region, Asia accounted for the highest
billion in 2005, compared with RM4 billion amount of investments in Malaysia with
in 2004. As in previous years, foreign RM8.6 billion, followed by North America
investments were mainly in the E&E industry (RM5.2 billion) and Europe (RM3.2 billion).
(RM10.1 billion), followed by the non-metallic The top five sources of foreign investments
mineral products (RM576 million), chemicals were the USA (RM5.2 billion), Japan (RM3.7
and chemical products (RM516.1 million), billion), Singapore (RM2.9 billion), the
plastic products (RM472.6 million), basic Netherlands (RM1.7 billion) and the Republic
metal products (RM309.4 million) and rubber of Korea (RM673.6 million). These five
products (RM203.7 million) industries. countries together accounted for 77.5 per cent
of total foreign investment in approved
A total of 52 projects with foreign projects.
investments of RM100 million or more each,
were approved in 2005 (2004: 29 projects). The United States of America
These capital-intensive projects involved In 2005, investments from the USA amounted
foreign investments of RM13.9 billion or to RM5.2 billion, representing the highest
77.6 per cent of total foreign investment investment level recorded over the last
approved. Of the 52 capital-intensive five years. The USA also emerged as
projects approved, three were projects with the largest source of foreign investments
investments exceeding RM1 billion each. in 2005, primarily due to major expansion/
Foreign investments in these three projects diversification projects undertaken by existing
amounted to RM3.4 billion or 19 per cent companies.
of the total foreign investment approved in
2005. In 2005, a total of 42 projects were
approved with investments of RM5.2 billion,
These capital-intensive projects were in a compared with 27 projects with investments
wide range of industries, including E&E of RM1.1 billion in 2004. Of the 42
(29 projects/RM10.3 billion), scientific and projects approved, 12 were new projects
measuring equipment (3 projects/RM1.3 with investments of RM247.7 million, while
billion), paper, printing and publishing 30 projects were for expansion/diversification
(2 projects/RM828.5 million), basic metal involving investments of RM4.9 billion.
products (4 projects/RM735.9 million),
chemicals and chemical products (3 projects/ Investments from the USA in new projects
RM614.3 million) and transport equipment were concentrated in the E&E (3 projects/
(3 projects/RM605 million). RM107.8 million) and transport equipment
52
Table 4.4:
Approved Projects with Foreign Participation
Country 2005 2004
Foreign Number of Foreign Number of

Investment Projects Investment Projects
USA 5,155.0 42 1,058.8 27

Japan 3,671.7 84 1,010.7 85
Singapore 2,919.9 130 1,515.5 161
Netherlands 1,674.0 26 99.2 9
Republic of Korea 673.6 24 324.6 25
Switzerland 563.2 6 121.1 3
India 558.9 8 291.7 7
Taiwan 430.7 71 414.5 78
Germany 387.7 11 4,723.7 14
Norway 303.2 5 nil nil
Panama 174.9 1 nil nil
Australia 155.9 12 116.5 12
Cayman Islands 154.1 2 57.3 3
Thailand 142.3 5 36.9 3
Hong Kong 105.4 17 49.9 9
United Kingdom 99.2 11 151.0 11
Canada 70.8 5 216.3 7
Indonesia 52.5 3 86.7 2
Italy 41.3 2 30.9 4
People's Republic of China 39.6 11 187.1 19
Sweden 35.9 2 28.7 4
France 35.3 5 137.4 10
Denmark 30.6 3 180.0 1
Brazil 24.5 1 nil nil
Luxembourg 24.1 1 nil nil
British Virgin Islands 13.4 3 114.6 6
Austria 12.4 2 nil nil
Spain 9.8 1 9.7 1
Bangladesh 9.2 3 nil nil
Russian Federation 7.3 2 nil nil
Peru 6.1 1 nil nil
Nigeria 4.9 1 nil nil
Bermuda 2.9 2 nil nil
Pakistan 2.2 1 0.9 3
Finland 1.5 1 30.0 1
New Zealand 0.3 1 53.5 3
Turkey 0.01 1 nil nil
Philippines nil nil 215.4 1
Armenia nil nil 21.0 1
Iran nil nil 4.4 2
Tunisia nil nil 1.2 1
Vanuatu nil nil 0.01 2

Note: 1 Expansion of capacities or manufacture of additional products not involving additional capital.
(3 projects/RM85.4 million) industries. Among landing gears and component parts with
the major new projects approved in the E&E investments of RM76 million.
industry were for the manufacture of flexible
copper-clad laminates (RM97 million) and the Existing US companies in Malaysia continued
development and production of lithium-ion to undertake major expansion/diversification
batteries (RM9.9 million). Investments in the projects, particularly in the E&E industry.
transport equipment industry were mainly in a Of the 30 projects approved for reinvestments,
project to undertake re-manufacture of aircraft 22 (RM4.8 billion) were in the E&E industry.
53
Chart 4.4:
Foreign Investments in Approved Projects by Major Country
6,000
5,155 2005
5,000 2004
4,000
RM million
3,672
3,000 2,920
2,000 1,674
1,059 1,011 1,515
1,000 674
99 325
0
USA Japan Singapore Netherlands Republic of
Korea
A major expansion project (RM870 million) Investments in new projects were mainly
by a US company involved the assembly in the scientific and measuring equipment
and test of chipsets, processors, networking (RM663 million), E&E (RM383.8 million),
and communication devices and R&D transport equipment (RM211.9 million),
services over the next five years. Another chemicals and chemical products (RM32.7
major expansion project (RM1.1 billion) million) and machinery manufacturing
was for the production of thin film (RM29.2 million) industries. A major new
magnetic disks, textured disks, plated project (RM380 million) approved was
polished substrates, plated substrates, for the manufacture of interconnection
aluminium substrates and metalised glass devices, including the establishment of an
disks. Other major projects were for R&D centre in Malaysia. Another project
the production of hard disk drives (RM778 (RM150 million) was for the production
million) and integrated circuits (RM392.8 of automotive body panels and assembly of
million). bumper and instrument modules as well as
door trims.
Japan
Investments from Japan totalled RM3.7 Investments from Japan in expansion/
billion in 2005, the highest level registered diversification projects were mainly in the
over the last five years. This was due to a E&E (RM1.3 billion), non-metallic mineral
sharp increase in investments in both new products (RM522 million) and plastic
and expansion/diversification projects. products (RM357.7 million) industries.
Together, these three industries constituted
Japan was the second largest source of about 94 per cent of total investment from
foreign investments in 2005, with investments Japan in expansion/diversification projects.
of RM3.7 billion in 84 projects, compared One large expansion/diversification project
with RM1 billion in 85 projects in 2004. Of in the E&E industry, involving an investment
the investments approved in 2005, a total of RM826.7 million, was for the manufacture
of RM1.4 billion or 36.2 per cent was in of code division multiple access mobile
20 new projects, while RM2.3 billion or 63.8 phones (3rd Generation and above) for the
per cent was in 64 expansion/diversification export market. Another major expansion
projects. project was for the production of multilayer
54
ceramic chip capacitors and elements, electromechanical systems technology.
involving investments of RM157.7 million. Two other large projects were for
Other major expansion/diversification projects printed circuit board assembly and the
were for the production of silicone elastomer manufacture of external storage devices
switches for E&E instruments/appliances, (RM25 million) and the production of
liquid crystal display television sets, electrical game controllers (RM18.6 million).
power tools, circuit breakers and adapters.
Investments in expansion/diversification
A major expansion/diversification project projects were concentrated in the E&E
(RM522 million) in the non-metallic mineral (RM1.7 billion), scientific and measuring
products industry was for the production of equipment (RM109.5 million), plastic
panels and funnels for cathode ray tubes. In the products (RM82.3 million), textiles and
plastic products industry, one major expansion textile products (RM28.8 million) and
project (RM345 million) was for the fabricated metal products (RM19.6 million)
manufacture of polyethylene terepthalate films. industries. A major diversification project
(RM1.5 billion) approved was for the
Singapore production of colour inkjet cartridges and
Investments from Singapore have recorded switches for automotive steering wheel
an increasing trend since 2002. In 2005, there panels. Investments in the plastic products
was a significant increase in investments, industry were mainly for the production of
mainly due to major expansion/diversification polyester resins, polyfoam products, and
projects in the E&E industry. Investments plastic packaging materials for medical
from Singapore amounted to RM2.9 billion, devices and other parts and components.
the highest level recorded over the last
five years. A total of 76 projects or 58.5 per cent of
the projects approved with investments from
Singapore was the third largest source Singapore were proposed to be located in
of foreign investments in 2005. A total of 130 Johor, mainly to support and complement
projects were approved, with investments their operations in Singapore. These projects
amounting to RM2.9 billion, compared involved investments of RM1.9 billion or
with 161 projects involving investments of 66 per cent of the total investment from
RM1.5 billion in 2004. Of the investments Singapore in 2005.
approved in 2005, a total of RM920.7 million
(30 per cent) was in 59 new projects, while The Netherlands
RM2 billion or about 70 per cent was in The Netherlands emerged as the fourth largest
71 expansion/diversification projects. source of foreign investments in 2005, with
26 projects approved, involving investments
Investments in new projects were of RM1.7 billion. In 2004, investments from
concentrated in the E&E (RM462.2 million), the Netherlands were in nine projects for a
followed by the food manufacturing (RM274 total of RM99.2 million. Of the investments
million) industries, textiles and textile approved in 2005, a total of RM56.7 million
products (RM45.2 million), paper, printing was for six new projects, while RM1.6 billion or
and publishing (RM33.3 million), chemicals 94 per cent was in 20 expansion/diversification
and chemical products (RM27.9 million), projects.
plastic products (RM27.2 million), basic metal
products (RM17.7 million) and machinery Investments from the Netherlands in new
manufacturing (RM17.2 million) industries. projects were mainly in the paper, printing
A major new project (RM380 million) in and publishing (RM34.6 million), machinery
the E&E industry was for the manufacture manufacturing (RM12.3 million) and transport
of semiconductor devices utilising micro equipment (RM6.4 million) industries.
55
Investments in expansion/diversification new projects amounted to RM220.6 million
projects were concentrated in the (14 projects), while investments in expansion/
E&E (RM1.6 billion) and machinery diversification projects amounted to RM453
manufacturing (RM26.9 million) industries. million (10 projects).
The high levels of investments were mainly
due to expansion projects by a leading Investments in new projects were mainly
electronic manufacturing services company. in the petroleum products, including
The expansion projects (RM1.5 billion) petrochemicals (RM90.9 million), transport
involved the establishment of a campus to equipment (RM48 million), machinery
undertake R&D, design, manufacturing, manufacturing (RM34.2 million), basic metal
distribution, logistics, procurement, services products (RM18.3 million) and plastic
and training, and to undertake printed circuit products (RM16.7 million) industries. Major
board assembly and system integration for projects approved included the manufacture of
industrial electronic applications. Other melamine powder, floating energy power
large expansion/diversification projects systems, and audio, video and reverse sensor
approved were for the production of systems for the automotive industry.
liquid crystal displays and remanufacture of
high-end hard disks (RM31.5 million) Investments in expansion/diversification
and automated singulation machines, die projects by Korean companies were largely
sorting machines and encapsulation machines in the E&E and plastic products industries. One
for the semiconductor industry (RM18.6 major diversification project approved was
million). for the manufacture of microwave ovens, with
an investment of RM392.1 million. Other
The Republic of Korea expansion/diversification projects were for the
The Republic of Korea continued to be a production of shrinkage fit tension bands and
major source of investments in 2005, with metal stamped components for cathode ray
RM673.6 million in 24 projects approved, tubes; and isolated phase high voltage busbars,
more than double the investments approved auto switches and encapsulated distribution
in 2004 (RM324.6 million). Investments in transformers.
Chart 4.5:
Approved Manufacturing Projects by State, 2005
Selangor 8,467 (335)

Johor 8,291 (234)
P. Pinang 4,808 (148)
Pahang 2,203 (18)
Kedah 1,763 (44)
Perak 1,397 (52)
Sabah 1,204 (41)
Melaka 1,039 (52)
Sarawak 860 (34)
N. Sembilan 352 (26)
Terengganu 328 (8)
K. Lumpur 150 (20)
Kelantan 125 (8)
Perlis 31 (2)
Labuan 20 (2)
RM million 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
Note: Figures in parentheses refer to number of projects approved
56
Table 4.5:
Approved Manufacturing Projects by State, 2005
State
Total New Expansion/Diversification Total New Expansion/Diversification
Capital Number Total Number Total Number Capital Number Total Capital Number Total Number
Investment of Capital of Capital of Investment of Investment of Capital of
(RM million) Projects Investment Projects Investment Projects (RM million) Projects (RM million) Projects Investment Projects
Total 31,056.6 1,026 13,843.2 572 17,213.5 454 28,773.5 1,101 18,650.3 602 10,123.1 499
Selangor 8,467.4 335 3,877.2 200 4,590.2 135 6,050.3 335 3,860.1 211 2,190.2 124
Johor 8,291.3 234 2,922.2 112 5,369.1 122 3,987.1 256 1,318.4 120 2,668.6 136
57
Pulau Pinang 4,808.2 148 1,180.0 73 3,628.2 75 2,030.3 144 879.8 70 1,150.5 74
Pahang 2,203.2 18 1,950.7 10 252.4 8 994.7 18 469.1 7 525.6 11
Kedah 1,763.4 44 175.3 22 1,588.1 22 5,245.4 65 4,895.9 31 349.5 34
Perak 1,397.4 52 1,100.0 34 297.4 18 1,316.0 54 736.6 31 579.4 23
Sabah 1,204.5 41 1,012.5 31 192.0 10 338.5 40 203.2 32 135.3 8
Melaka 1,039.0 52 243.4 21 795.7 31 1,194.1 56 360.5 33 833.6 23
Sarawak 859.6 34 552.0 20 307.7 14 5,901.2 45 5,061.5 19 839.7 26
Negeri Sembilan 351.6 26 223.3 18 128.3 8 1,054.3 44 466.7 21 587.6 23
Terengganu 327.7 8 300.9 6 26.8 2 138.4 5 25.2 2 113.2 3
W.P. - Kuala Lumpur 149.5 20 113.7 14 35.9 6 163.8 26 47.5 16 116.3 10
Kelantan 124.9 8 123.1 5 1.8 3 106.6 9 73.5 6 33.1 3
Perlis 31.4 2 31.4 2 nil nil 0.5 1 nil nil 0.5 1
W.P.- Labuan 20.3 2 20.3 2 nil nil nil nil nil nil nil nil

APPROVED PROJECTS BY LOCATION Perak attracted investments in a broad
range of industries, such as scientific and
A total of 717 projects or 70 per cent of measuring equipment (RM663 million),
the total number of projects approved in 2005 E&E (RM131.3 million), rubber products
were proposed to be located in three states, (RM124.4 million) and chemicals and
namely Selangor with 335 projects, Johor chemical products (RM105.2 million).
(234) and Pulau Pinang (148). In terms of Investments in Sabah were concentrated in
investment, the state of Selangor registered food manufacturing (RM531.4 million),
the highest investments at RM8.5 billion, petroleum products, including petrochemicals
followed by Johor (RM8.3 billion), Pulau (RM420.6 million) and chemicals and
Pinang (RM4.8 billion), Pahang (RM2.2 chemical products (RM102.6 million), while
billion), Kedah (RM1.8 billion), Perak investments in Melaka were mainly in the
(RM1.4 billion), Sabah (RM1.2 billion) and E&E (RM564.1 million), furniture and
Melaka (RM1 billion). fixtures (RM149.3 million), basic metal
products (RM94.3 million) and food
A large number of new projects were manufacturing (RM50.9 million) industries.
approved to be located in Selangor (200),
Johor (112), Pulau Pinang (73), Perak (34) The Government continued to promote
and Sabah (31). Together, these five states balanced industrial development in the
accounted for 450 new projects or 79 per cent country by encouraging the dispersal
of the total number of new projects approved of industries. In this regard, attractive
in 2005. Expansion/diversification projects incentives were offered to companies locating
were approved to be located mainly in their projects in the promoted areas of the
Selangor (135), Johor (122), Pulau Pinang Eastern Corridor of Peninsular Malaysia
(75), Melaka (31) and Kedah (22). Together, (Kelantan, Terengganu, Pahang and the
these states accounted for 85 per cent district of Mersing in Johor) and in Sabah
(385 projects) of the total number of projects and Sarawak.
approved for expansion/diversification.
Existing companies continued to undertake In 2005, a total of 109 projects (RM4.7 billion)
expansion/diversification projects, given the were approved for location in these promoted
strong industrial base that has developed areas. Of these projects, more than two-thirds
in these states. or 75 projects were proposed to be located
in Sabah (41 projects) and Sarawak (34
Investments in Selangor were in a projects). The concentration of the projects in
wide range of industries, such as E&E these states was due to the availability of
(RM2.4 billion), transport equipment natural resources, which encouraged the
(RM961.8 million), basic metal products establishment of resource-based industries. Of
(RM850.9 million), paper, printing and the total investment approved in the promoted
publishing (RM742.6 million), non-metallic areas, RM3.9 billion was in 72 new projects,
mineral products (RM685.1 million) and while RM780.6 million was in 37 expansion/
machinery manufacturing (RM664 million). diversification projects.
In Johor, investments were mainly in the E&E
(RM5.4 billion) and chemicals and chemical APPROVED PROJECTS BY INCENTIVE
products (RM604.2 million) industries.
Investments in Pulau Pinang and Kedah In 2005, the Government continued to
were mainly in the E&E industry, amounting grant incentives to projects involved in
to RM3.8 billion and RM1.3 billion, promoted products/activities that would
respectively, while investments in Pahang generate spin-offs and economic benefits to
were largely in the basic metal products the country, such as R&D, technology
industry (RM1.7 billion). transfer, industrial linkages, socio-economic
58
Table 4.6:
Projects Approved with Incentives, 2005
Types of Incentive Number of Total Foreign Domestic
Projects Investment Investment Investment
Total 367 18,816.0 12,507.8 6,308.2
General 191 6,033.8 1,457.8 4,576.0

Small-Scale Manufacturing 67 122.4 5.8 116.6
Customised 49 11,069.2 10,007.7 1,061.5
Special Incentives for Selected Activities 28 282.7 47.5 235.2
High Technology 27 296.1 89.1 207.0
Strategic 5 1,011.8 899.9 111.9
development and employment. A total Companies with shareholder funds not

of 367 projects, with investments exceeding RM500,000 and with at least
amounting to RM18.8 billion, were granted 60 per cent Malaysian equity that are
incentives. involved in promoted products/activities are
eligible for Pioneer Status or Investment
General Incentives Tax Allowance.
Companies engaged in promoted products/
activities that fulfil criteria such as value- In 2005, a total of 67 small-
added, technology and/or industrial linkages scale projects, with investments amounting
are eligible for Pioneer Status or Investment to RM122.4 million, were granted
Tax Allowance. In 2005, a total of 191 incentives. These projects were mainly in
projects were approved general incentives, the fabricated metal products (22 projects/
involving investments of RM6 billion, of RM38.1 million), E&E (13 projects/
which 159 projects (RM3.3 billion) were RM19.6 million), furniture and fixtures
granted Pioneer Status, while 32 projects (7 projects/RM12.8 million), chemicals
(RM2.7 billion) were granted Investment Tax and chemical products (4 projects/RM17.7
Allowance. million) and wood and wood products
(4 projects/RM10.1 million) industries.
Domestic investments in the 191 projects
amounted to RM4.6 billion, while foreign Customised Incentives
investments totalled RM1.4 billion. These Customised incentives (fiscal and non-
investments were in a broad range of fiscal) are granted for projects in selected
industries, including basic metal products industries. Projects granted these incentives
(RM1.8 billion), chemicals and chemical are those that are technology, capital
products (RM895.2 million), transport and R&D intensive, knowledge and skills-
equipment (RM745.4 million), food driven, and capable of generating significant
manufacturing (RM678.8 million) and linkages as well as contributing to the
petroleum products, including petrochemicals development of manufacturing support
(RM420.6 million). services, such as procurement, marketing
and distribution. In 2005, a total of 49
Incentives for Small-Scale projects, with investments of RM11.1 billion,
Manufacturing Projects were granted customised incentives.
The Government continued to grant Foreign investments amounted to RM10
incentives to small-scale manufacturing billion while domestic investments totalled
projects to further spur their development. RM1.1 billion.
59
A total of 43 projects were in the E&E industry linkages. In 2005, five strategic projects,
with investments of RM9.9 billion. Major involving investments of RM1 billion,
projects approved with customised incentives were granted these incentives. Foreign
in the E&E industry included the manufacture investments in these projects amounted
of colour inkjet cartridges, semiconductor to RM899.9 million (90 per cent), while
devices, telecommunication products and hard domestic investments totalled RM111.9
disk drives. The remaining six projects were million (10 per cent).
in the scientific and measuring equipment,
plastic products, basic metal products, In 2005, strategic projects approved were
transport equipment, fabricated metal and mainly in the scientific and measuring
machinery manufacturing industries. equipment (2 projects/RM684.9 million), E&E
(2 projects/RM242 million) and chemicals and
Special Incentives for Selected chemical products (1 project/RM85 million)
Activities industries.
The Government provides special incentives
for activities such as the utilisation of biomass IMPLEMENTATION OF APPROVED
to produce value-added products. In 2005, a MANUFACTURING PROJECTS
total of 28 projects were approved these
incentives, involving investments of RM282.7 A number of measures have been taken by
million. Domestic investments in these projects the Government to assist investors in the
amounted to RM235.2 million (83.2 per cent), implementation of approved projects. These
while foreign investments totalled RM47.5 include:
million (16.8 per cent).
• appointment of Special Project Officers
Incentives for High Technology by MIDA to facilitate the speedy
Projects implementation of projects in the
Companies engaged in promoted activities or manufacturing and related-services sectors.
for production of promoted products in areas Currently, 22 Special Project Officers
of new and emerging technologies are eligible are assigned to the various states for
for incentives for high technology projects. this purpose. These Special Project Officers
In 2005, a total of 27 projects, with total are represented in the One Stop Centre
investment of RM296.1 million, were granted committee meetings at both the local
these incentives. Domestic investments in authority and state levels. Companies can
these projects amounted to RM207 million contact the designated Special Project
(70 per cent), while foreign investments Officers for all assistance related to their
totalled RM89.1 million (30 per cent). projects; and
Incentives for high technology projects were • establishment of the Project Implementation
approved in a wide range of industries, and Coordination Unit in MIDA in 2001, to
including E&E (16 projects/RM169.6 million), expedite the implementation of projects
chemicals and chemical products (5 projects/ approved in the manufacturing and related-
RM80.6 million), machinery manufacturing services sectors. Various issues pertaining to
(2 projects/RM16.2 million) and plastic the implementation of approved projects,
products (1 project/RM15.1 million). including the approval of planning
permits, building plans, certificates of
Incentives for Strategic Projects fitness and business licences were resolved.
Strategic projects are those which are In addition, many issues were also
of national importance and generally resolved through regular interaction
involve heavy capital investments, high between industry associations and the
levels of technology and generate extensive Government departments concerned.
60
The appointment of Special Project Officers Total investment in the 4,257 projects
and work done through the Project approved and implemented for the period
Implementation and Coordination Unit have 2000-2005 amounted to RM95 billion. In
created greater awareness among Government addition, 91 projects, involving investments
agencies and contributed to the speedy of RM5.4 billion, have acquired sites, while
implementation of approved projects in both 861 projects, involving investments of RM44.2
the manufacturing and services sectors. billion, are in the planning stage. These 952
projects, when implemented, will involve
For the period 2000-2005, a total of 5,617 investments of RM49.6 billion. In total,
projects were approved, of which 4,107 the investments realised from the projects
projects (73.1 per cent) are in operation, approved during the period 2000-2005 are
while 150 projects (2.7 per cent) are at estimated at RM144.6 billion.
the stages of machinery installation and
factory construction. Of the 4,257 projects In terms of location, 1,283 projects
implemented, a total of 1,484 or 34.9 per cent implemented are located in Selangor, Johor
are export-oriented (exporting more than 80 (964), Pulau Pinang (655), Kedah (266),
per cent). They are mainly in the following Perak (244) and Melaka (197).
industries:
OUTLOOK
• E&E - 450 projects
• Furniture and fixtures - 143 projects Global FDI inflows reached a peak of US$1.4
• Food manufacturing - 102 projects trillion in 2000, before declining for three
• Wood and wood products - 102 projects consecutive years to US$633 billion in 2003.
• Fabricated metal products - 102 projects Global FDI inflows have since recovered
• Machinery manufacturing - 102 projects to US$648 billion in 2004. According to
• Plastic products - 83 projects United Nations Conference on Trade and
Development's (UNCTAD) preliminary
Of the 4,107 projects in operation, 895 projects estimates, inflows in 2005 increased to US$897
commenced operations in 2005. billion, with both developed and developing
countries performing better than in 2004.
Chart 4.6: Developed countries attracted the major portion

Status of Implementation of Approved of FDI inflows. However, in recent years,
Projects, 2000-2005 there has been a trend of increased FDI inflows
to developing countries, particularly into Asia.
The share of developing countries in global
91 (1.6%) FDI inflows rose to 36 per cent in 2004,
150 (2.7%) the highest level recorded since 1997. Asia,
480 (7.3%)
receiving invesments of US$147.5 billion,
4,107 (73.1%) was the leading destination for FDI flows
to developing countries, with the People's
861 (15.3%) Republic of China (US$61 billion) being the
main recipient.
While Malaysia was able to attract high levels

of investments in 2005, the Government
In Production Active Planning
recognises that global competition for FDIs
Not Implemented Machinery Installation is increasing in intensity as countries continue
& Factory to liberalise their investment environment
Site Acquired Construction
and offer attractive fiscal and non-fiscal
61
incentives. The Government will continue to Efforts will be intensified to target and
ensure that the investment environment in the attract industries in which Malaysia has a strong
country remains conducive and competitive, foundation, as well as investments in potential
particularly in terms of the delivery system, growth areas. Malaysian companies will be
costs of doing business, tax incentives, encouraged to further integrate into the regional
infrastructure, as well as availability of a skilled and global production and services networks of
and educated workforce. multinational corporations.
62
Performance Of
Chapter 5
The Manufacturing Sector
OVERVIEW by the Department of Statistics. This survey

covers 110 industries out of a total of 197
In 2005, the manufacturing sector contributed industries.
significantly to the development of the
economy, accounting for 31.4 per cent of Production
Gross Domestic Product (GDP). Growth in Based on the Monthly Manufacturing
the manufacturing sector was supported by Survey, the Industrial Production Index of the
both domestic and external demand. Sales of manufacturing sector increased by 5.1 per cent
manufactured goods increased by 18.4 per in 2005 to 129.3 from 123 in 2004. Output of
cent to RM459.3 billion, and exports of export-oriented industries expanded by 5.7 per
manufactured goods accounted for 77.4 per cent, while domestic-oriented industries grew
cent of Malaysia's total export. by 3.2 per cent.
Table 5.1: In 2005, the electrical and electronics (E&E)

Manufacturing Sector Performance, and chemical industries were the main
2005 contributors to the expansion of the export-
oriented industries. Transport equipment,
Indicator 2005 2004
processed food and beverages and non-metallic
Share of Real GDP (%) 31.4 31.6 mineral products were the main contributors
Production Index (2000=100) 129.3 123.0 to the growth of the domestic-oriented
Value-Added Growth (%) 4.9 9.8
Total Sales (RM billion) 459.3 388.0 industries.
Investments Approved (RM billion) 31.0 28.7
Productivity Growth (%) Sales
(Sales Value per Employee) 14.1 17.7
Share of Total Export (%) 77.4 78.4 Based on the same survey, the sales value
Share of Total Employment (%) 28.7 28.4 of the manufacturing sector increased by 18.4
Sources: Department of Statistics, Malaysia,
per cent to RM459.3 billion in 2005 from
Economic Planning Unit, Malaysia (EPU) RM388 billion in 2004. For the export-oriented
Malaysian Industrial Development Authority (MIDA)
National Productivity Corporation (NPC)
industries, sales value increased by 19.2 per
Malaysia External Trade Development Corporation cent to RM366.2 billion in 2005 (accounting
(MATRADE)
for 79.7 per cent of total sales) from
RM307.2 billion in 2004. Sales value of
The improved performance of the the domestic-oriented industries expanded by
manufacturing sector was also reflected in 15.2 per cent to RM93.1 billion (accounting
the expansion of the industrial output for 20.3 per cent of total sales) from RM80.8
(measured by the Industrial Production Index). billion in 2004.
The Industrial Production Index is computed
by the Department of Statistics. Effective Within the export-oriented industries, the
2005, the Industrial Production Index (Base E&E industry recorded the highest sales of
Year 2000 = 100) is based on a sample of 86 RM190.8 billion, followed by chemicals
industries out of a total of 197 industries. In with sales at RM127.4 billion. Together,
2005, the sales value and employment numbers they accounted for 69.3 per cent of total sales
in the manufacturing sector were derived from of the manufacturing sector. Domestic-oriented
the Monthly Manufacturing Survey conducted industries that recorded high sales were the
63
Table 5.2:
Production Indices of Selected Manufacturing Industries
Industry Group 2005 Change (%) 2004
Overall Manufacturing 129.3 5.1 123.0
Export-oriented industries 131.2 5.7 124.1

Electrical and electronics 129.3 4.8 123.4
Chemicals 145.9 10.9 131.5
Textiles and apparel 83.5 3.0 81.0
Wood products 109.6 1.5 107.9
Rubber products 133.8 -0.4 134.3
Palm oil 139.2 8.5 128.2
Machinery and equipment 121.2 -17.0 146.0
Professional and scientific equipment 107.4 -3.7 111.4
Rubber remilling and latex processing 98.7 12.3 87.9
Footwear 106.6 14.5 93.1
Domestic-oriented industries 122.7 3.2 118.9
Non-metallic mineral products 113.2 2.0 111.0
Non-ferrous metal 108.1 1.8 106.2
Iron and steel 103.0 -12.9 118.3
Processed food and beverages 125.9 7.6 117.0
Transport equipment 150.2 8.5 138.5
Fabricated metal products 123.5 -4.9 129.9
Paper products 119.0 7.5 110.7
Tobacco manufactures 87.8 -3.0 90.5
Animal feeds 104.6 -2.9 107.7
Source : Department of Statistics, Malaysia
Note: Base Year 2000 = 100
Table 5.3:
Sales of Selected Manufacturing Industries
Industry Group 2005 (RM billion) Change (%) 2004 (RM billion)
Total Sales 459.3 18.4 388.0
Export-oriented industries 366.2 19.2 307.2

Electrical and electronics 190.8 15.0 165.9
Chemicals 127.4 32.5 96.1
Wood and wood products 13.7 8.0 12.6
Rubber products 9.4 11.4 8.4
Textiles and apparel 8.8 4.7 8.4
Rubber milling and latex processing 5.4 9.4 4.9
Machinery and equipment 5.3 9.7 4.8
Professional and scientific equipment 5.0 -10.0 5.6
Animal feeds 2.6 -5.5 2.7
Tobacco manufactures 1.3 -14.3 1.5
Footwear 0.5 15.4 0.4
Domestic-oriented industries 93.1 15.2 80.8
Transport equipment 22.2 25.4 17.7
Iron and steel 18.2 33.4 13.6
Processed food and beverages 13.8 10.5 12.5
Non-metallic mineral products 9.5 -4.5 9.9
Fabricated metal products 8.8 8.3 8.1
Non-ferrous metal 4.4 21.5 3.6
transport equipment industry at RM22.2 Employment

billion, followed by iron and steel (RM18.2 Based on the Monthly Manufacturing Survey,
billion) and processed food and beverages employment in the manufacturing sector grew
(RM13.8 billion). by 3.7 per cent to 998,543 workers in 2005
64
Table 5.4:
Employment in Selected Manufacturing Industries
Product Group 2005 (Persons) Change (%) 2004 (Persons)
Overall Employment 998,543 3.7 962,813
Export-oriented industries 737,480 3.8 710,265
Electrical and electronics 335,132 5.8 316,705
Chemicals 124,780 7.2 116,376
Wood and wood products 105,202 2.0 103,093
Textiles and apparel 66,506 -3.7 69,074
Rubber products 59,409 3.1 57,620
Professional and scientific equipment 25,986 -8.6 28,423
Machinery and equipment 12,440 11.5 11,152
Rubber remilling and latex processing 4,908 -1.5 4,981
Footwear 3,117 9.7 2,841
Domestic-oriented industries 261,063 3.4 252,548
Transport equipment 58,327 10.8 52,647
Non-metallic mineral products 39,772 -0.1 39,798
Fabricated metal products 38,340 -2.2 39,197
Processed food and beverages 36,155 3.4 34,962
Paper products 21,719 6.8 20,332
Iron and steel 15,696 1.2 15,509
Non-ferrous metal 7,684 1.4 7,580
Animal feeds 2,534 -0.7 2,552
Tobacco manufactures 1,575 -8.7 1,726
from 962,813 workers in 2004. Export- Exports

oriented industries accounted for 73.9 per cent In 2005, exports of manufactured goods
of the total employment in the manufacturing accounted for 77.4 per cent of Malaysia's
sector, with the E&E industry recording total export. Total export of manufactured
the largest employment of 335,132 workers, goods increased by 9.6 per cent to RM413.1
followed by the chemicals (124,780) and billion in 2005, compared with RM376.8
wood and wood products (105,202) industries. billion in 2004.
Domestic-oriented industries accounted for
26.1 per cent of the total employment, with E&E products continued to be Malaysia's
the transport equipment industry employing leading export earner, accounting for receipts
58,327 workers, non-metallic mineral (39,772) of RM264.7 billion or 49.6 per cent of
and fabricated metal products (38,340). Malaysia's total export revenue. Other
products exported that exceeded the RM10
Investments billion level were chemicals and chemical
A total of 1,026 projects were approved products (RM26.3 billion), machinery and
in 2005, with investments amounting to equipment (RM18.1 billion), wood products
RM31 billion, compared with 1,101 projects (RM14.6 billion), optical and scientific
with investments totalling to RM28.7 billion equipment (RM12.3 billion), manufactures of
in 2004. Of the total number approved, 572 metals (RM10.8 billion) and textiles and
(56 per cent) were new projects with apparel (RM10.3 billion).
investments of RM13.8 billion, while 454 were
expansion/diversification projects (RM17.2 Imports
billion). Investments in projects approved Imports expanded by 8.5 per cent to RM434
in 2005 were concentrated in five industries, billion in 2005, the second highest growth
namely E&E (RM13.8 billion), basic metal rate in the last five years, mainly due to
products (RM3.2 billion), chemicals and higher imports of capital and intermediate
chemical products (RM1.7 billion), food goods. Collectively, these imports accounted
manufacturing (RM1.5 billion) and scientific for 85.1 per cent of Malaysia's total
and measuring equipment (RM1.4 billion). import.
65
Table 5.5:
Export Performance of Manufactured Goods
Product Group 2005 2004
RM billion Share (%) Change (%) RM billion Share (%)
Total Export 533.8 100.0 11.0 480.7 100.0

Exports of Manufactured Goods 413.1 77.4 9.6 376.8 78.4
Electrical and electronic products 264.7 49.6 9.6 241.5 50.2
Chemicals and chemical products 26.3 4.9 5.4 24.9 5.2
Machinery and equipment 18.1 3.4 16.4 15.6 3.2
Wood products 14.6 2.7 4.0 14.1 2.9
Optical and scientific equipment 12.3 2.3 6.5 11.6 2.4
Metal products 10.8 2.0 12.7 9.6 2.0
Textiles and apparel 10.3 1.9 6.2 9.7 2.0
Iron and steel products 7.0 1.3 -3.2 7.2 1.5
Transport equipment 7.0 1.3 31.3 5.3 1.1
Rubber products 7.0 1.3 13.0 6.2 1.3
Plastic products 6.7 1.3 19.8 5.6 1.2
Processed food 6.5 1.2 7.9 6.1 1.3
Jewellery 3.6 0.7 22.0 3.0 0.6
Non-metallic mineral products 2.9 0.5 -5.5 3.1 0.6
Petroleum products 2.2 0.4 29.1 1.7 0.4
Paper and pulp products 2.1 0.4 17.9 1.8 0.4
Beverages and tobacco 1.7 0.3 4.5 1.6 0.3
Table 5.6:
Imports by End-Use
Gross Import 434.0 100.0 8.5 400.1 100.0
Intermediate Goods 308.3 71.0 7.2 287.7 72.0

Parts and accessories 163.7 37.7 2.7 159.3 40.0
Semiconductors, printed circuits and parts 102.5 23.6 1.9 100.5 25.0
Parts for office machines 24.3 5.6 4.6 23.2 5.8
Electrical apparatus and resistors 15.2 3.5 8.3 14.0 3.5
Processed industrial supplies 87.8 20.2 6.5 82.3 21.0
Iron and steel 14.2 3.3 17.6 12.1 3.0
Plastics in primary forms (exclude scrap) 8.5 2.0 10.0 7.8 1.9
Organic chemicals 8.5 2.0 10.3 7.7 1.9
Copper products 5.5 1.3 15.0 4.7 1.2
Paper and paperboard 4.0 0.9 1.9 3.9 1.0
Manufactures of base metals 3.4 0.8 9.2 3.1 0.8
Inorganic chemicals
(exclude spent fuel element of nuclear reactors) 2.6 0.6 6.3 2.5 0.6
Primary fuels and lubricants 15.2 3.5 61.0 9.5 2.4
Parts and accessories for transport equipment 12.2 2.8 34.8 9.1 2.3
Other processed fuels and lubricants 12.3 2.8 24.3 9.9 2.5
Primary industrial supplies 8.9 2.0 1.6 8.8 2.2
Processed food and beverages,
mainly for industry 4.6 1.1 -9.6 5.1 1.3
Primary food and beverages,
mainly for industry 3.7 0.9 -0.1 3.7 0.9
Capital Goods 60.7 14.0 9.5 55.5 14.0

Capital goods (except transport equipment) 54.0 12.4 10.0 49.0 12.0
continued ...
66
Telecommunications equipment (exclude parts) 5.6 1.3 2.8 5.4 1.4

Other machinery specialised for particular industry 4.2 1.0 8.4 3.9 1.0
Transformer and other electric power machines 2.7 0.6 8.9 2.5 0.6
Rotating electric plants and parts 2.4 0.6 10.1 2.2 0.6
Transport equipment for industries 6.8 1.6 5.3 6.5 1.6
Complied by Ministry of International Trade and Industry
Imports of intermediate goods grew by 7.2 towards the technological advancement of

per cent to RM308.3 billion, while imports Malaysia's manufacturing sector.
of capital goods increased by 9.5 per cent
to RM60.7 billion. The growth is in tandem Production
with the higher levels of manufacturing The production index for semiconductors
activities, as reflected by the 5.1 per cent devices increased by 5.2 per cent to 165.7
growth in the Industrial Production Index for in 2005, compared with 157.5 in 2004, due
the manufacturing sector for the year. to the increase in demand for wireless
applications in communication, computers and
ELECTRICAL AND ELECTRONICS INDUSTRY consumer electronics, as well as convergence
of computing functions with the digital media,
The global E&E industry continued to grow such as cell phones, media players (MP3) and
in 2005, led by the semiconductor and the digital cameras.
ICT sub-sectors. The global semiconductor
market grew by 6.9 per cent to US$227.6 In 2005, the production of computers and
billion (RM864.9 billion) in 2005 from computer peripherals registered an increase
US$213 billion (RM809.4 billion) in 2004. of 7.4 per cent and that for wires and cables,
Presently, Malaysia is among the world's 18.8 per cent. However, the production of
leading locations for semiconductor assembly audio and audio visual products declined, due
and test operations, with export value of to the growing demand for these products from
RM90 billion in 2005. the People's Republic of China.
Within the manufacturing sector, the E&E Sales

industry continued to be the largest industry In 2005, total E&E sales increased by 15 per
in the country. The industry continues to be cent to RM190.8 billion. Sales of computers
the catalyst for the industrialisation process in and computer peripherals sub-sector grew by
the country, and is expected to remain the 45.6 per cent to RM52.5 billion, accounting
single largest contributor to exports, output for 27.5 per cent of total E&E sales in 2005,
and employment. The industry also contributes compared with RM36 billion in 2004. This has
Table 5.7:
Production Index for Selected E&E Products
Products 2005 Change (%) 2004
Semiconductor devices 165.7 5.2 157.5

Computers and computer peripherals 134.4 7.4 125.1
Electronic valves and tubes, printed circuit board and
other electronic components 118.4 3.6 114.2
Wires and cables 108.5 18.8 91.4
Audio and audio visual products 78.5 -0.8 79.1
Source: Department of Statistics, Malaysia

67
Table 5.8:
Sales of Selected E&E Products
Products 2005 (RM million) Change (%) 2004 (RM million)
Computers and computer peripherals 52,459.7 45.6 36,023.1

Semiconductor devices 43,051.1 2.2 42,114.5
other electronic components 41,055.4 20.3 34,132.0
Audio and audio visual products 27,593.5 -0.9 27,839.1
Wires and cables 5,482.5 15.1 4,761.9
Source: Monthly Manufacturing Survey, Department of Statistics, Malaysia
been attributed to growth in external and Employment

domestic demand. The increase in domestic In 2005, the E&E industry employed
demand, especially from key sectors, such as 335,132 workers, an increase of 5.8 per
the Government and education sectors, small cent, compared with 316,705 workers in
and medium-sized businesses and home-users, 2004. In tandem with the growth in output,
was due to the decline in the price of computers the electronic valves and tubes and other
and computer peripherals. electronic components segment was the
largest employer, employing 97,292 workers,
The sales of semiconductor devices increased representing 29 per cent of the total E&E
by 2.2 per cent to RM43.1 billion in 2005, industry workforce.
compared with RM42.1 billion in 2004,
due to rapid growth in demand for high The computers and computer peripherals
value-added products and the adoption of segment recorded the same trend, registering
new technology applications, such as digital an increase of 15.1 per cent to 46,851 workers,
television, third generation (3G) handsets, compared with 40,708 workers in 2004, due
streaming video and media player (MP3) to the increase in demand for advanced
by the consumers. Strong external demand, computing, digital processors and multi-
especially by the US electronics market, function devices.
had a positive impact on the electronics
industry in Malaysia. Employment in the semiconductor devices
sub-sector decreased by 0.8 per cent to 79,666
Sales in the wires and cables sub-sector workers, compared with 80,306 workers
increased by 15.1 per cent to RM5.5 billion in 2004, resulting from increased utilisation
in 2005, compared with RM4.8 billion in 2004, of modern technology in the production
due to higher demand for convergence of processes, such as computer-numerically
computing functions with digital media. controlled machines and robotics.
Table 5.9:
Employment in Selected E&E Segments
Segment 2005 (Persons) Change (%) 2004 (Persons)
E&E Industry 335,132 5.8 316,705

other electronic components 97,292 15.8 83,991
Semiconductor devices 79,666 -0.8 80,306
Audio and audio visual products 59,261 3.4 57,322
Computers and computer peripherals 46,851 15.1 40,708
Wires and cables 11,780 -7.3 12,704
Source: Monthly Manufacturing Survey, Department of Statistics, Malaysia
68
Table 5.10:
Productivity Indicators of Selected E&E Segments
Sub-sector/Segment Sales Value per Employee Labour Cost per Employee Unit Labour Cost
(RM'000) (RM'000) (Number)
2005 Change 2004 2005 Change 2004 2005 Change 2004

(%) (%) (%)
E&E Industry 569.3 8.7 523.8 22.7 0.8 22.5 0.0398 -7.3 0.0429
Computers and
computer peripherals 1,119.7 26.5 884.9 21.5 0.5 21.4 0.0192 -20.3 0.0241
Semiconductor devices 540.4 3.0 524.4 27.9 2.0 27.4 0.0517 -1.0 0.0522
Audio and audio visual
products 465.6 -4.1 485.7 24.3 6.1 22.9 0.0522 10.6 0.0472
Wires and cables 465.4 24.2 374.8 21.5 11.0 19.4 0.0462 -10.6 0.0517
Electronic valves and
tubes, printed circuit
boards and other
electronic components 422.0 3.8 406.4 20.0 -5.5 21.2 0.0475 -9.0 0.0522
Compiled by National Productivity Corporation based on Monthly Manufacturing Survey of Department of Statistics, Malaysia
Productivity Of the total projects approved, 85 projects

Sales Value per Employee of the E&E industry with investments of RM2.7 billion were
grew by 8.7 per cent to RM569,340 in 2005 new projects and 141 (RM11.1 billion) were
from RM523,820 in 2004. The computers and expansion/diversification projects.
computer peripherals segment recorded the
highest increase of 26.5 per cent in Sales Value Approved investments in 2005 recorded an
per Employee, which was attributed to higher increase of 60.5 per cent, compared with 2004.
value-added electronic parts and accessories, Foreign investors remained an important
such as flat and high definition displays for source of investment in the E&E industry.
computers and computer peripheral products. In 2005, foreign investments in approved
Other segments that recorded increases in projects amounted to RM11.3 billion,
Sales Value per Employee were wires and accounting for 81.9 per cent of the total
cables, at 24.2 per cent, semiconductor devices investment, while domestic investments
(3 per cent) and electronic valves and tubes totalled RM2.5 billion (18.1 per cent). In
and other electronic components (3.8 per cent). comparison, foreign investments amounted
The audio and audio visual products segment to RM6.8 billion, while domestic investments
registered a decline in Sales Value per were RM1.8 billion in 2004.
Employee of 4.1 per cent.
Investments in 2005 were mainly in
Labour Cost per Employee of the E&E the electronic components and industrial
industry increased marginally by 0.8 per cent electronics sub-sectors. The electronic
to RM22,650. Labour cost competitiveness of components sub-sector continued to account
the industry improved as Sales Value per for the largest share (58.7 per cent) of the total
Employee grew faster than Labour Cost per investment in E&E, followed by the industrial
Employee. This was further supported by a electronics sub-sector (34.8 per cent), electrical
significant reduction in Unit Labour Cost of products sub-sector (5.1 per cent) and
7.3 per cent. consumer electronics sub-sector (1.4 per cent).
Investments Exports
In 2005, a total of 226 E&E projects, with In 2005, E&E exports increased by 9.6 per
investments of RM13.8 billion, were approved. cent to RM264.7 billion, accounting for 64.1
69
Table 5.11:
Exports of Selected E&E Products
Total Export of E&E Products 264.7 100.0 9.6 241.5 100.0
Electrical machinery, apparatus and appliances

and parts 127.2 48.0 8.4 117.3 48.6
Semiconductor devices, integrated circuits,
micro-assemblies, transistors and valves 90.0 34.0 0.8 89.3 37.0
Electrical apparatus for electrical circuits and
printed circuits 22.7 8.6 61.2 14.1 5.8
Electrical and non-electrical household equipment 2.8 1.1 3.9 2.7 1.1
Equipment for distributing electricity 2.1 0.8 12.2 1.9 0.8
Electrical power machinery and parts 1.7 0.6 -9.7 1.9 0.8
Electro-diagnostic apparatus, medical and radiology 0.2 0.1 -28.1 0.3 0.1
Office machines and automatic data processing
machines and parts 86.8 32.8 13.1 76.7 31.8
Parts for office machines and automatic data
processing machines 32.3 12.2 6.7 30.3 12.6
Telecommunications and sound recording
equipment 50.8 19.2 7.0 47.4 19.6
Telecommunications equipment and parts 28.1 10.6 11.3 25.3 10.5
Television receivers 7.1 2.7 -9.1 7.8 3.2
Sound recorders 8.3 3.1 8.0 7.7 3.2
Radio broadcast receiver 7.2 2.7 9.0 6.7 2.8
per cent of total exports of manufactured The USA continued to be Malaysia's largest
goods, compared with RM241.5 billion single export market for E&E products, with
in 2004. All three major sub-sectors, exports increasing by 19.3 per cent to RM82
namely electrical machinery, apparatus billion. In 2005, Malaysia was ranked as the
and appliances and parts; office machines and fourth largest import source of E&E products
automatic data processing machines and for the USA, accounting for 9 per cent of
parts; and telecommunications and sound its total E&E import. The East Asian region,
recording equipment, registered increases including ASEAN, remained an important
in exports. export destination for Malaysia's E&E
products. In 2005, this region accounted
Semiconductor devices, integrated circuits, for 47.8 per cent of Malaysia's total export of
micro-assemblies, transistors and valves E&E products.
continued to be the main export products,
valued at RM90 billion, or accounting The USA, Japan, Singapore and Western
for 34 per cent of total E&E exports Europe remained major export destinations due
in 2005. Other major E&E exports that to their high purchasing power and consumer
recorded increases were automatic data usage and preference for the latest electrical
processing machines (RM54 billion), parts and electronic gadgets.
for office machines and automatic data
processing machines (RM32.3 billion), Imports
telecommunications equipment and parts Imports of E&E products increased by
(RM28.1 billion) and electrical apparatus 6.1 per cent to RM193.2 billion, compared
for electrical circuits and printed circuits with RM182.1 billion in 2004. The increase
(RM22.7 billion). was largely due to the growth in imports of
70
Table 5.12:
Imports of Selected E&E Products
Total Import of E&E Products 193.2 100.0 6.1 182.1 100.0
Electrical machinery, apparatus and appliances

and parts 140.3 72.6 5.1 133. 4 73.3
Semiconductor devices, ICs, micro-assemblies,
transistors and valves 105.7 54.7 2.7 102.9 56.5
Electrical apparatus for electrical circuits and
printed circuits 16.1 8.4 11.4 14.5 8.0
Electrical power machinery and parts 3.1 1.6 0.4 3.1 1.7
Equipment for distributing electricity 1.8 0.9 9.1 1.6 0.9
Electrical and non-electrical household equipment 1.1 0.6 16.9 0.9 0.5
Electro-diagnostic apparatus, medical, and
radiological equipment 0.4 0.2 42.1 0.3 0.2
Office machines and automatic data processing
machines and parts 36.6 19.0 12.0 32.7 17.9
Parts for office machines and automatic data
processing machines 25.3 13.1 7.6 23.5 12.9
Telecommunications and sound recording
equipment 16.3 8.4 1.8 16.0 8.8
Telecommunications equipment and parts 14.3 7.4 -1.1 14.4 7.9
Sound recorders 1.4 0.7 31.3 1.1 0.6
Television receivers 0.3 0.2 10.8 0.3 0.2
Radio broadcast receiver 0.3 0.1 20.0 0.2 0.1
Table 5.13:
Malaysian Standards for E&E Products Introduced in 2005
Title
MS IEC 60335-2-29: 2005 Household and similar electrical appliances - Safety - Part 2-29: Particular requirements for
battery chargers (ICS29.200;97.180).
MS IEC 60439-1:2005 Low-voltage switchgear and control gear assemblies - Part 1 : Type-tested and partially type-
tested assemblies (ICS 29.130.20)
MS IEC 60439-4:2005 Low-voltage switchgear and controlgear assemblies - Part 4 : Particular requirements for
assemblies for construction sites (ACS) (ICS : 29.130.20)
MS 60269-2:2005 Low-voltage fuses - Part 2 : Supplementary requirements for fuses for use by authorised
persons (fuses mainly for industrial application (ICS : 29.120.50)
MS IEC 60269-4-1:2005 Low-voltage fuses-Part 4-1 : Supplementary requirements for fuse-links for the protection of
semiconductor devices - Section I to III : examples of types of standardised fuse-link
(ICS : 29.120.50)
MS IEC 60529:2005 Degrees of protection provided by enclosures (IP code) (First revision) (ICS : 13.260, 29.020)
MS IEC 60947-4-2:2005 Low-voltage switchgear and control gear - Part 4-2 : Contactors and motor-starters - AC
semiconductor motor controllers and starters (ICS : 29.130.20)
Source: Department of Standards, Malaysia,
71
components used for finished products. The Table 5.14:
electrical machinery, apparatus and appliances Production of Motor Vehicles by Segment
product group remained the main import of
Segment 2005 Change 2004
E&E products, accounting for 72.6 per cent of
(Units) (%) (Units)
total E&E import.
Total 563,408 19.4 471,975
Developments
Passenger cars1 521,384 21.2 430,279
In 2005, a total of seven Malaysian Standards Manufacturers 334,763 6.1 315,545
(MS) for E&E products were introduced. Assemblers 186,621 62.7 114,734
Commercial vehicles 42,024 0.8 41,696
Manufacturers 7,231 - 2.3 7,401
The development of the E&E industry in Assemblers 34,793 1.5 34,295
Malaysia is focused on sustaining growth
Source: Reclassified, based on data from Malaysian Automotive
and expanding into new high technology Association (MAA)
and value-added products, such as micro- Note: 1 Include vans, multi-purpose vehicles, sport utility vehicles and
four-wheel drive vehicles
electro-mechanical systems, advanced
electronics display technology, photonics and
nanotechnology. For passenger cars, production grew by 21.2
per cent to 521,384 units in 2005, compared
In order to expand the E&E industry for with 430,279 units in 2004. For commercial
the global market, various measures are vehicles, production grew by 0.8 per cent to
being undertaken to enhance market access, 42,024 units in 2005, compared with 41,696
including to: units in 2004.
• establish strong domestic market for The share of passenger cars to total production
Malaysian products; increased to 92.5 per cent in 2005, compared
with 91.2 per cent in 2004. The increase
• encourage local companies to venture into was due to positive market response,
export market; especially with the introduction of new
models and the enhancement in design for
• promote Malaysian Brand Products;
existing models. In 2005, there were more than
• promote outsourcing and outward 60 new models and variants launched. The
investments; and increase in production was related to action
taken by local manufacturers and assemblers
• utilise free trade agreements (FTAs) to in utilising their existing capacity to reduce
expand market access. cost in order to be more competitive.
TRANSPORT EQUIPMENT INDUSTRY Within the passenger car segment, production

by the national car manufacturers grew by 6.1
The transport equipment industry comprises per cent to 334,763 units in 2005. Production by
four major sub-sectors: automotive (includes assemblers grew by 62.7 per cent to 186,621
the manufacture or assembly of motor vehicles
and motorcycles), automotive components and Table 5.15:
parts, marine and aerospace sub-sectors. Capacity Utilisation in Automotive
Sub-Sector
Automotive Sub-sector
Category 2005 Change 2004
(%)
Production
Total production of passenger and commercial Total installed capacity (units) 896,000 0.6 891,000
Actual production (units) 563,408 19.4 471,975
vehicles in 2005 grew by 19.4 per cent to Capacity utilisation (%) 62.9 9.9 53.0
563,408 units from 471,975 units in 2004.
Source: Malaysian Automotive Association
72
units. In terms of total production of passenger Table 5.16:
cars, the share of the national car manufacturers Sales in Automotive Sub-Sector
decreased to 64.2 per cent, compared with 73.3
Segment 2005 Change 2004
per cent in the previous year. (Units) (%) (Units)
Based on the new classification of passenger Total 551,042 13.0 487,605

cars and commercial vehicles, production of
Passenger cars1 531,034 13.6 467,572
commercial vehicles by manufacturers and Manufacturers 315,565 5.5 299,014
assemblers showed a mixed trend. In 2005, Assemblers 215,469 27.8 168,558
the production of commercial vehicles by Commercial vehicles 20,008 - 0.1 20,033
Manufacturers 5,275 - 49.9 10,531
manufacturers registered a negative growth Assemblers 14,733 55.1 9,502
of 2.3 per cent, while production by assemblers
Source: Reclassified, based on data from Malaysian Automotive
recorded a positive growth of 1.5 per cent. Association (MAA)
Note: 1Include vans, multi-purpose vehicles, sport utility vehicles and
four-wheel drive vehicles
The total installed capacity for the automotive
sub-sector increased by 0.6 per cent to 896,000 compared with a share of 36 per cent recorded
units in 2005. Capacity utilisation rate also in 2004.
increased to 62.9 per cent, compared with
53 per cent in 2004. For commercial vehicles, while the non-
national assemblers dominated the market
Sales in 2005, with a market share of 73.6 per cent,
The overall sales in the automotive sub-sector sales by national manufacturers decreased
increased by 32 per cent to RM14.8 billion by 49.9 per cent to 5,275 units in 2005 from
in 2005 from RM11.2 billion in 2004. The 10,531 units in 2004.
increase was mainly due to the introduction
of new models together with aggressive and Malaysia recorded the highest sales for
effective promotion packages, such as on-the- passenger cars among the five major ASEAN
road price discounts, attractive hire purchase markets in 2005, with total sales of 531,034
rates of as low as 2.6 per cent and supported units, accounting for 59 per cent of total sales
by the recent Government measure to lower in ASEAN 5. For 2005, sales of passenger cars
the road tax for passenger cars with engine in Thailand totalled 188,211 units, Singapore
capacity of 1,600cc and below. In terms of (108,741 units), Indonesia, (35,529 units), and
units, sales of passenger cars increased by 13.6 the Philippines (35,361 units). However, in
per cent, while commercial vehicles decreased the commercial vehicle segment, Malaysia
marginally by 0.1 per cent. ranked third after Indonesia, recording a share
of 11.9 per cent of total sales of commercial
Passenger cars recorded sales of 531,034 units vehicles in the region.
in 2005, or 96.4 per cent of total sales in the
automotive sub-sector. Sales of national cars Employment
continued to dominate the market with 315,565 Total employment in the automotive sub-sector
units sold in 2005, an increase of 5.5 per cent, increased by 12 per cent to 22,541 in 2005,
compared with 299,014 units sold in 2004. from 20,100 in 2004. The increase was to
Sales of non-national cars registered a positive meet the growing demand for motor vehicles.
growth of 27.8 per cent to 215,469 units in
2005 from 168,558 units in 2004. Productivity
The automotive sub-sector registered a 13.2
In terms of market share of passenger cars, per cent growth in Sales Value per Employee
sales by manufacturers accounted for 59.4 per from RM336,980 in 2004 to RM381,370 in
cent, while sales by non-national assemblers 2005. Within the sub-sector, motor vehicles
accounted for 40.6 per cent of total sales, recorded the highest growth in Sales Value per
73
Box 5.1: National Automotive Policy
INTRODUCTION
Since the establishment of Proton in 1985, Malaysia has succeeded in developing integrated capabilities in the automotive
industry, which include local design and styling capability, full scale manufacturing operations and extensive local
participation in the supply of components. Today, Malaysia is ASEAN's largest passenger vehicle market with more than
500,000 vehicles sold annually, of which 90 per cent are manufactured or assembled domestically.
Nevertheless, much of the country's success in developing the domestic automotive industry has been facilitated by policies
that have promoted local vehicle manufacturers. Moving forward, global and domestic challenges will put the sustainability
of this industry at risk.
The global industry is seeing slow growth, value destruction and massive rationalisation, driving vehicle manufacturers to
merge to achieve even higher levels in economies of scale. Recognising this global environment, the National Automotive
Policy (NAP) seeks to address the manifold issues and challenges and to transform the domestic automotive sector into a
more viable, competitive and significant contributor to the economy.
Moving forward, Government policy and support will be focused on automotive industry participants making a sustainable
economic contribution. The key drivers for such contribution will be economies of scale, industry linkages and competitive
value-added activities.
OBJECTIVES OF THE NATIONAL AUTOMOTIVE POLICY

The overall objective of the NAP is to generate sustainable economic value creation. This will maximise the long term
contribution of the automotive sector to the national economy and at the same time, ultimately benefit the Malaysian
consumer. The need to create economic value entails that the industry must continue to require supportive Government
policies in order to become fully competitive internationally.
The NAP therefore aims to facilitate the required transformation and optimal integration of the national industry into regional
and global industry networks. The urgency of the transformation is driven by an increasingly liberalised and competitive
global environment. Consequently, the Government has set out the following objectives for the national automotive sector:
• To promote a competitive and viable domestic automotive sector, in particular the national car manufacturers;
• To promote Malaysia as an automotive regional hub, focusing on niche areas;
• To promote a sustainable level of economic value added and enhance domestic capabilities;
• To promote a higher level of exports of vehicles, as well as components and parts that are competitive in the global
markets;
• To promote competitive and broad-based Bumiputera participation in the domestic automotive sector; and
• To safeguard the interests of consumers in terms of value for money, safety and quality of products and services.
THRUSTS OF THE NATIONAL AUTOMOTIVE POLICY

Provide Government Support and Incentives Based on Sustainable Economic Contribution
The Government will continue to nurture and support the development of the domestic automotive sector via a
comprehensive package of grants and incentives. Such Government support and incentives will be aimed at optimising
sustainable economic contribution, namely the scale of operations, extent of industry linkages, and the development of local
and Bumiputera capabilities.
A sustainable level of economic contribution must ultimately relate to the type and level of value added activities, which will
be competitive for the domestic market and for export in a fully liberalised environment. Thus, it would not be consistent with
this policy to seek to maintain a level of value added activities which will not be viable and sustainable in the long run.
The level of support will also be correlated to the level of economic contribution and value-add. In this context, a large-scale
manufacturing concern with exports and high industry linkages will be favoured over a pure assembly operation with little
value-added activities. Similarly, greater emphasis will be given to sales, distribution and after sales activities, compared with
pure importation of vehicles.
Support for manufacturing will come principally in the form of access to the Industrial Adjustment Fund and Research &
Development (R&D) Grants. These grants and incentives will be given based on pre-agreed conditions and timely
achievement of Key Performance Indicators.
continued ...
74
Increased Scale via Rationalisation to Enhance Competitiveness
For the industry at large, all participants across the value chain will be encouraged to focus on achieving a scale of
operations that ensures their enduring competitive viability.
The Government will encourage rationalisation initiatives in the domestic automotive sector in order to create a leaner and
more sustainable industry structure. A leaner industry structure throughout the value chain will enable industry participants
to achieve a sufficient level of scale to be competitive.
In this respect, the Government will promote, through grants and incentives, two national manufacturers in the high-volume
car segment to ensure sufficient scale and industry linkage. To enable achievement of the required scale and industry
linkage, these national manufacturers must be able to rationalise their models and platforms portfolio.
The rationalisation at the vehicle manufacturers' level will consequently enable rationalisation of the component sector that
will lead to greater scale, skills and improved quality. The end result will be a smaller number of vendors, all of whom will be
operating at a scale, cost and quality level that will allow them to remain competitive and be able to export.
Promote Strategic Linkages with International Partners
Scale and focus are necessary to achieve greater competitiveness but, they are not sufficient in themselves. In addition,
global best practices and industry linkage are other important key success factors for the automotive industry. Therefore, the
Government will continue to encourage industry participants to collaborate with external parties to establish strategic tie-ups.
Apart from sharing scale and resources, such strategic tie-ups open up opportunities and provide access for domestic
industry participants to enter the global automotive supply chain and vice versa. Moreover, such strategic tie-ups also compel
domestic industry participants to adopt best practice management, processes and procedures to deliver on higher quality
standards that are necessary in accessing international markets.
Become a Regional Hub Focusing on Niche Areas and Complementary Activities
The Government aims to position Malaysia as a regional manufacturing and assembly hub by encouraging existing
participants to deepen their commitment in Malaysia. The Government will encourage existing vehicle manufacturers to
rationalise the models assembled in Malaysia, scale up focused production and deepen industry linkages, in order to export
competitively. It is expected that they will not primarily compete with high-volume national manufacturers in terms of pricing
or target market.
The expansion of these participants and the deepening of industry linkages will also lead to greater scale and improved
quality of the industry's component economies of vendor sector, thereby improving overall viability of the industry.
SPECIFIC POLICY INSTRUMENTS
Excise Duty Structure
The excise duty structure has been streamlined, resulting in an overall reduction in the effective tax rate on most motor
vehicles and a reduction in the tax differential between the different categories of motor vehicles for example, cars, MPVs,
4WD and between the different engine capacities. It is intended that the streamlining of the tax structure will promote greater
transparency in pricing.
Gazetted Values of Imported Cars
To further promote greater transparency, the Government will gazette the values of imported cars for the purpose of duty
computation. With the cooperation of the industry and the general public, it is expected that the incidence of tax under
declaration will be significantly addressed. At the same time, the Government will step up enforcement measures against tax
under declaration.
ASEAN CEPT Import Duty
To promote greater integration with the ASEAN automotive industry, Malaysia will reduce the ASEAN CEPT import duty to 5
per cent for qualifying vehicles. While this will expose the domestic industry to greater competition, it is consistent with the
policy thrust for rationalisation of models and increasing scale through exports.
Industrial Adjustment Fund
Grants from the Industrial Adjustment Fund will be made available to all companies - be they local, foreign or joint ventures
- that create significant economic contribution. The award these grants will be based on two main criteria: Scale and industry
continued ...
75
linkage subject to a sustainable level of overall capacity. Grants will be given on a model-by-model basis, subject to minimum
threshold levels on both the scale and industry linkage criteria. Specific R&D grants will also be made available, based on
the viability and economic contribution of the R&D project. Further consideration will be given to companies that promote
sustainable and competitive Bumiputera participation.
Manufacturing Licences
New manufacturing licences will only be issued after over-capacity in the domestic automotive sector is resolved. In the
meantime, vehicle assemblers will not be allowed to use or make available their existing excess capacity to third parties to
assemble new makes or models that compete directly with those produced by national car manufacturers.
Where an increase in production capacity is required, companies in the high-volume and middle-volume segments will be
encouraged to use existing excess capacity. New assembly facilities will be strictly allowed on a case-by-case basis only.
Approved Permits
The current system of Approved Permits, primarily used as a monitoring and data collection measure, will be phased out by
31 December 2010.
In the interim, Approved Permits will be made available based on economic contribution. Priority will be given to vehicle
assemblers that have committed to a significant increase in production volume (with significant exports) in a particular model
and require Approved Permits to import models that complete their product range for the Malaysian market. Approved
Permits will be made available for a limited number of vehicles not assembled in Malaysia in order to ensure a sufficient
choice of products for Malaysian consumers.
The importation of second hand cars (other than individual personal imports) will be progressively phased out, culminating
in a total ban in 2010 in order to stimulate the demand for locally manufactured and assembled vehicles.
The Government will encourage and support companies currently awarded open Approved Permits (PEKEMA members) to
transition into other related business activities, e.g. in sales and distribution or as component manufacturers/vendors.
Vehicle Type Approval
Vehicle Type Approval processes and procedures will be implemented comprehensively in order to prevent the import and
sale of sub-standard vehicles. The Vehicle Type Approval process will ensure strict compliance with roadworthiness, safety
and emissions standards. The Vehicle Type Approval process will be implemented by the Road Transport Department and
other relevant agencies.
CONCLUSION
As a result of the implementation of these policy measures, the Government expects to see an industry with two strong
national vehicle manufacturers, complemented by a number of foreign vehicle manufacturers (potentially with local joint-
venture partners) that will upscale their assembly operations and at the same time, rationalise the models assembled to
achieve sustainable industry linkage.
Consequently, the components sector will also become more viable - there will be fewer companies (as incumbents merge),
but their volumes will be higher and more networked into the global automotive industry. Gradual liberalisation will lead to
reduced scope for importers, but genuine distributors will benefit from the increased sales volumes.
The NAP aims to provide a clear and transparent direction for all industry participants to enable them to make the optimal
plans and investment decisions for the future.
Going forward, future Government policies and measures introduced for the domestic automotive sector will be based on
this NAP. The NAP will be a long-term policy base for the domestic automotive sector, subject to reviews and refinement
dictated by the global automotive industry environment.
The Government believes that this NAP will be the key measure towards driving the transformation of the domestic
automotive sector to one that is viable, competitive and resilient for the benefit of industry participants, consumers and the
Malaysian economy.
Source: Prime Minister's Department, Malaysia
76
Table 5.17:
Productivity Indicators of Automotive Sub-Sector
(RM'000) (RM'000) (Number)
2005 Change (%) 2004 2005 Change (%) 2004 2005 Change (%) 2004
Automotive Sub-sector 381.4 13.2 337.0 21.9 1.2 21.7 0.0575 -10.6 0.0643
Motor vehicles 654.8 17.7 556.3 27.2 1.6 26.8 0.0415 -13.7 0.0481
Motor vehicles parts
and accessories 196.3 4.7 187.5 18.2 0.9 18.1 0.0928 -3.6 0.0963
Motor cycles and
scooters 274.0 5.3 260.3 20.5 1.0 20.3 0.0747 -4.1 0.0779
Employee at 17.7 per cent, followed by Exports

motorcycles (5.3 per cent) and parts and Exports of the automotive sub-sector increased
accessories (4.7 per cent). The expansion in by 21.7 per cent to RM468 million in 2005,
demand, due to strong consumer confidence, from RM384.7 million in 2004. Exports of
low interest rates, attractive car financing passenger cars increased by 12.4 per cent to
packages and the introduction of new RM411.1 million in 2005 from RM365.9
models by manufacturers and assemblers, million in 2004. Exports of commercial
have contributed to the high growth in the vehicles increased more by than three-fold to
Sales Value per Employee of the motor RM56.9 million in 2005 from RM18.8 million
vehicles sub-sector. in 2004. Main export destinations of passenger
vehicles in 2005 were the UK, amounting to
The automotive sub-sector was able to improve RM104.6 million, followed by Singapore
labour cost competitiveness, as Sales Value per (RM42.3 million), Iran (RM31.4 million),
Employee grew faster than Labour Cost per Australia (RM29.7 million) and Indonesia
Employee, while Unit Labour Cost declined. (RM29.3 million).
Investments
In 2005, a total of 52 projects were Table 5.18:
approved in the automotive sub-sector, with Exports and Imports of Automotive
total investment of RM1.1 billion, compared Sub-Sector
with 101 projects with investments of RM1.3 Segment 2005 Change 2004
billion in 2004. Of these projects, 35 were (RM mil.) (%) (RM mil.)
either wholly Malaysian-owned or majority
Total Export 468.0 21.7 384.7
Malaysian-owned projects, with investments Import 5,049.1 9.4 4,617.1
of RM782.1 million. Domestic investments
in 2005 amounted to RM728.8 million (66.3 Passenger Exports 411.1 12.4 365.9
cars Imports 4,905.9 7.0 4,584.3
per cent), while foreign investments totalled
RM360.7 million (33.7 per cent). Commercial Exports 56.9 202.7 18.8
vehicles Imports 143.2 336.6 32.8
Among the projects approved, four were Source: Department of Statistics, Malaysia
for reconditioning and reassembling of
used commercial vehicles with investments of Imports
RM20.7 million, one project was for contract Imports of the automotive sub-sector increased
assembly of commercial vehicles (RM7.9 by 9.4 per cent to RM5 billion in 2005, from
million), and another for remanufacturing of RM4.6 billion in 2004. Imports of passenger
diesel engines and transmission with an cars, mainly in completely knocked-down
investment of RM7.4 million. (CKD) form, were from Japan, valued at
77
RM2.8 billion, followed by the Republic of Capacity Utilisation
Korea (RM1.4 billion), Germany (RM401 Total installed capacity for the production
million), Thailand (RM95.8 million) and of motorcycles in 2005 was 1,063,000
France (RM60.7 million). Total import of units. Total capacity utilisation rate declined
passenger cars in 2005 amounted to RM4.9 to 42 per cent in 2005 from 51.1 per cent
billion. in 2004.
For commercial vehicles, total import Sales

increased by more than four-fold to RM143.2 Sales of motorcycles registered a marginal
million in 2004, from RM32.8 million in the decline of 0.5 per cent in 2005 to RM1.6
previous year. Main sources of imports were billion in 2005. However, in terms of units,
Japan, followed by the Republic of Korea, the the number of motorcycles sold increased
People's Republic of China, Thailand and to 452,224 units in 2005 from 420,470 units
Brazil. in 2004. In 2005, sales by the manufacturer
and assemblers were 99,714 units and 352,510
Motorcycle Sub-Sector units, respectively.
The motorcycle sub-sector is classified
into mopeds, scooters, street bikes and Employment
cruisers. The segment registered an increase Employment in the motorcycle sub-
in production of 5.8 per cent, and a marginal sector decreased by 5.5 per cent to 5,925
decrease in sales of 0.5 per cent. Capacity workers in 2005 from 6,271 workers in
utilisation decreased to 42 per cent in 2005, 2004. The decline was due to the reduction
compared with 57.2 per cent in 2004. in capacity utilisation, as a result of cost
cutting measures undertaken to enhance
Production competitiveness.
Production of motorcycles increased by 5.8 per
cent to 446,742 units in 2005 from 422,087 Investments
units in 2004. The increase was due to the In 2005, two projects were approved
continuous introduction of new and trendy for the manufacture/assembly of motorcycles
models, especially for engine capacity below and scooters, including motorised two
150cc. The national manufacturer produced a wheelers and specialised vehicles, with
total of 100,586 units, accounting for 22.5 per investments of RM25.5 million.
cent of total production of motorcycles and
scooters in 2005. Exports
Exports of motorcycles increased by more
Table 5.19: than four-fold to RM117.7 million in 2005
Total Production and Capacity from RM29.3 million in 2004. Major
Utilisation of Motorcycle Sub-Sector markets were Sri Lanka, valued at RM90
Production/Capacity 2005 Change 2004 million, Greece (RM21.8 million), Singapore
(%) (RM3 million), Turkey (RM2.9 million)
and Indonesia (RM2.6 million).
Production (units) 446,742 5.8 422,087
Manufacturer 100,586 -7.1 108,286
Assemblers 346,156 10.3 313,801 Imports
Imports of motorcycles decreased by 31.7 per
Installed capacity (units) 1,063,000 28.7 826,000
Manufacturer 250,000 25.0 200,000 cent to RM122.1 million in 2005, from
Assemblers 813,000 29.9 626,000 RM178.9 million in 2004. Main sources
of imports were Taiwan, valued at RM89.9
Capacity utilisation (%) 42.0 -9.1 51.1
Manufacturer 40.2 -13.9 54.1 million, Thailand (RM25.7 million) and
Assemblers 42.6 -7.5 50.1 the People's Republic of China (RM21.3
Source: Motorcycle and Scooter Assemblers Association of Malaysia
million).
(MASAAM)
78
Automotive Components and Parts components and parts proposed, include
Sub-Sector engines and components for passenger and
As at end 2005, there were more than 590 commercial vehicles, automotive body
automotive and about 170 motorcycle/scooter panels and bumpers, transmission systems,
component manufacturers. The automotive automotive wire harnesses, batteries, brake
component sub-sector produces over 4,000 systems and alloy rims.
components. Of the component manufacturers,
227 were PROTON vendors (32 tier one Exports
vendors) and 161 PERODUA vendors (some Export of automotive components and parts
vendors supply to both PROTON and expanded by 22.2 per cent to RM2.2 billion
PERODUA). in 2005 from RM1.8 billion in 2004. Major
export destinations in 2005 were the ASEAN
More than 70 per cent of the automotive countries, with exports valued at RM1.1
component companies are Malaysian-owned. billion, Taiwan (RM289 million), Germany
A number of these companies have technical (RM157 million), Japan (RM111.8 million)
collaborations with international automotive and the People's Republic of China (RM89.1
component manufacturers. There are also a million). Exports to major ASEAN countries
number of foreign global automotive were Thailand (RM279 million), Singapore
component manufacturers operating in (RM249 million) and Indonesia (RM192
Malaysia. million). Major components exported included
steering wheels and steering columns, rims,
The production index of automotive bumpers, brakes, radiators, shock absorbers
components and parts increased by 12.1 per and clutches.
cent to 152 in 2005, compared with 135.6
in 2004. The growth was due to the increase Imports
in the production of passenger cars and the Imports of automotive components and parts
replacement market. increased by 69.2 per cent to RM4.4 billion
in 2005 from RM2.6 billion in 2004. The
Sales increase was to meet the needs of new models
Sales of automotive components and parts and requirements of the existing market. Major
in 2005 increased by 20.4 per cent to RM5.9 import sources were ASEAN, valued at RM2.7
billion, compared with RM4.9 billion in 2004. billion, Japan (RM729.3 million), Germany
The increase was directly related to the (RM440.9 million), the People's Republic of
increase in the number of new cars and the China (RM136.5 million) and the Republic
higher demand in overseas market. of Korea (RM89.6 million). Within ASEAN,
sources of imports were Thailand (RM1.9
Employment billion), Indonesia (RM710.2 million) and
Total employment in the components and the Philippines (RM80.7 million).
parts sub-sector increased by 13.6 per cent
to 29,861 employees in 2005, compared with Developments
26,276 in the previous year. The increase was On 22 March 2006, the Government
due to expansion in the production of motor announced the National Automotive Policy
vehicles and motorcycles. (NAP) for the purpose to spur further growth
in the industry. The policy is aimed at
Investments promoting a competitive and viable automotive
In 2005, a total of 44 projects were approved sector, in particular that of national car
for the manufacture of automotive components manufacturers, as well as providing the
and parts, including fabrication of vehicle necessary support for existing assemblers.
bodies, with investments of RM1 billion,
compared with 64 projects approved in 2004, New measures for immediate implementation
with investments of RM725.7 million. Major have been taken, such as the establishment of
79
the Industrial Adjustment Fund to provide for the remanufacture of aircraft landing gears
interest-free loans and matching grants for and component parts. The company also plans
automation, technology enhancement and to develop a regional maintenance centre for
upgrading of machinery. aircraft landing gears at Subang Airport.
Beginning 1 January 2005, import duty for Exports and Imports

CKD vehicles has been reduced to zero Products exported were mainly components
for ASEAN, while imports from non-ASEAN and parts of aircrafts totalling RM1.4 billion,
countries were reduced to 10 per cent. This an increase of 40 per cent, compared with
is to encourage value-added activities in RM1 billion in 2004. Major export destinations
the country. For completely built-up (CBU) included the USA (RM355 million), Singapore
vehicles, import duty was reduced to 20 per (RM309 million), and the UK (RM305
cent for ASEAN countries to comply with million).
AFTA commitment, and to 50 per cent
for non-ASEAN countries. The import duty Imports of aircraft equipment and parts
for CBU vehicles from ASEAN was increased by 11 per cent to RM4 billion
further reduced to 5 per cent with effect in 2005, compared with RM3.6 billion in 2004.
from 22 March 2006. Major sources of imports were the USA,
valued at RM1.6 billion, Germany (RM1.2
Aerospace Sub-Sector billion) and Singapore (RM311 million).
Currently, there are two companies assembling
light aircrafts, seven manufacturers of aircraft, Marine Sub-Sector
parts and components and 28 companies The marine sub-sector comprises the building
involved in maintenance, repair and overhaul and repairing of ships and boats, fabrication
activities. Of these companies, 12 are involved and engineering works of leisure crafts.
in repair and overhaul of aircraft parts and Currently there are six major shipyards
components, including testing of aircraft involved in shipbuilding, shiprepairing and
instruments, 12 companies provide line metal fabrication activities with large scale
and heavy maintenance and four companies are operations and 70 small scale operations. The
involved in engine and engine parts largest shipyard in Malaysia has the capability
maintenance. to build vessels up to 30,000 dead weight
tonnes (DWT) whereas the small yards
The growth of the components and parts sub- produce wooden hulls for fisherman and
sector is dependent on the ability of companies traders, small ferries, tug boats, barges, standby
to secure contracts from multinational vessels and patrol boats for local usage.
corporations (MNCs). Malaysian companies
have won contracts from original equipment Investments
manufacturers by providing their capabilities In 2005, a total of five new projects were
to meet stringent customer requirements in approved, with investments of RM97.6
terms of quality, price and delivery. million. All of these projects are Malaysian-
owned and located in Sabah and Sarawak. Of
Investments the five projects approved, one major project,
In 2005, a total of four projects were approved, with investments of RM70.1 million is for
with investments amounting to RM226.9 shipbuilding and shiprepairing activities and
million. Domestic investments in these projects the manufacture of metal fabricated products,
amounted to RM84 million or 37 per cent of mainly for the oil and gas industry.
total investment, while foreign investments
totalled RM142.9 million (63 per cent). Major Exports and Imports
projects approved included a new joint-venture Main export and import products were light
project with investments of RM155 million vessels, fire floats, dredgers, floating cranes
80
and floating or submersible drilling or Table 5.20:
production platforms. In 2005, exports Production Indices of Petroleum and
increased by 37.5 per cent to RM2.2 billion Plastic Products Sub-Sector
from RM1.6 billion in 2004. Major export
Product Group 2005 Change 2004
destinations were Nigeria, valued at RM527 (%)
million, Singapore (RM509 million) and
Myanmar (RM235 million). Overall 145.0 13.3 128.0
Refined petroleum products 141.2 10.8 127.4

Imports recorded an increase of 10.3 per cent Plastic blow moulded products 234.2 23.3 189.9
to RM3.2 billion, compared with RM2.9 Plastic bags and films 230.6 52.8 150.9
Plastic extruded products 165.4 -10.2 184.3
billion in the previous year. Major sources of Plastic foam products 138.2 2.4 135.0
imports were Japan, valued at RM1.6 billion, Plastic injection moulded
the Republic of Korea (RM580 million) and components 118.7 4.8 113.3
Plastics in primary forms and
the Netherlands (RM328 million). synthetic rubber 14.4 2.4 111.7
CHEMICAL INDUSTRY Source: Department of Statistics, Malaysia

The chemical industry is one of the leading Overall production index for the petroleum
industries in Malaysia and remained the second and plastic products sub-sector recorded an
largest contributor to manufactured exports increase of 13.3 per cent to 145 in 2005
in 2005. The industry covers three major from 128 in 2004. The growth was in response
sub-sectors, namely petroleum and plastic to the continued expansion in the E&E and
products, basic industrial chemicals and automotive industries. Within the sub-sector,
chemical products, and pharmaceuticals. the high increases in production were recorded
for plastic bags, and films and plastic blow
Petroleum and Plastic Products moulded products, due to strong domestic
Sub-Sector demand.
Production Sales
The petroleum and plastic products sub-sector Sales value of petroleum and plastic products
comprises the manufacture of refined increased to RM98.4 billion from RM72
petroleum products, plastics in primary form billion in 2004. The higher crude oil prices
and synthetic rubber, plastic blow moulded contributed to the higher sale prices of
products, plastic bags and films, plastic intermediate materials and manufactured end
products rigid fibre reinforced, plastic products.
foam products, plastic injection moulded
The increase in sales of the petroleum and
components and other plastic products. This
plastic products sub-sector recorded was
sub-sector is one of the leading industries
attributed to strong domestic and external
which continued to contribute to the growth of
demand. The improvement in the sales of
the manufacturing sector.
Table 5.21:
Sales of Selected Petroleum and Plastic Products
Product Group 2005 (RM million) Change (%) 2004 (RM million)
Overall 98,425.9 36.7 72,016.5
Refined petroleum products 72,202.3 42.0 50,839.6

Plastics in primary forms and of synthetic rubber 12,367.9 22.1 10,132.0
Plastic injection moulded components 5,993.9 24.6 4,809.9
Plastic bags and films 4,695.4 40.3 3,346.5
81
Table 5.22:
Employment in Petroleum and Plastic Products Sub-Sector
Overall 92,600 8.8 85,083
Plastic injection moulded components 50,902 12.6 45,226

Plastic bags and films 13,927 8.3 12,858
Plastics in primary forms and of synthetic rubber 6,112 -0.5 6,140
Refined petroleum products 4,658 2.6 4,540
Plastic blow moulded products 3,372 11.4 3,027
Plastic foam products 2,711 0.9 2,686
Plastic extruded products 1,705 -5.1 1,796
plastic products was attributed to higher demand for plastic products, particularly
export of semiconductors, computers and from the automotive, E&E and food
parts and industrial electrical machinery, processing industries, had contributed to the
which resulted in increased demand for plastic growth. The sub-sector was able to maintain
parts and packaging materials, such as flexible its labour cost competitiveness as indicated
films, sheets and bags and containers. by a decline in Unit Labour Cost of 13.4 per
cent.
Employment
In 2005, employment in the petroleum Investments
and plastic products sub-sector expanded In 2005, a total of 15 projects were
by 8.8 per cent to 92,600 employees from approved in the petroleum products segment,
85,083 employees in 2004. The increase with investments of RM735 million,
was due to the expansion of existing facilities compared with RM1.9 billion in 2004. Of
for the production of products, such as these projects, eight were new projects,
plastic parts and components, sub-assemblies with investments amounting to RM660
and new approved projects. million, while seven were expansion/
diversification projects totalling RM75
Productivity million. Domestic investments amounted to
The petroleum and plastic products sub- RM602 million, accounting for 81.9 per cent
sector recorded Sales Value per Employee of the total investment, while foreign
growth of 25.6 per cent to RM1.1 million investments totalled RM133 million (18.1 per
in 2005 from RM846,400. The continuous cent).
Table 5.23:
Productivity Indicators for Chemical Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Chemical Industry 1,021.1 23.6 826.0 25.5 6.1 24.1 0.0250 -14.2 0.0291
Petroleum and
plastic products 1,062.9 25.6 846.4 22.2 8.8 20.4 0.0209 -13.4 0.0241
Basic industrial
chemicals and other
chemical products 1,074.9 18.1 910.2 38.5 3.3 37.3 0.0359 -12.5 0.0410
Pharmaceuticals 134.3 4.9 128.00 20.3 7.1 19.0 0.1514 2.1 0.1483
82
In the plastic products segment, a total of 81 Table 5.25:
projects were approved, with investments of Imports of Petroleum and Plastic
RM1.2 billion, compared with 87 projects Products
(RM679.4 million) in 2004. Of these, 44 were
new projects, with investments valued at (RM mil.) (%) (RM mil.)
RM520 million (44 per cent), while 37 were
expansion/diversification projects (RM660 Total 34,258.6 18.3 28,969.5
million). Domestic investments amounted to Petroleum products 20,260.0 26.1 16,072.7
RM585 million, or accounting for 49.6 per cent Synthetic resin 8,777.9 11.2 7,892.7
of total investment, while foreign investments Plastic products 5,220.7 4.3 5,004.1
totalled RM595 million (50.4 per cent). Source: Department of Statistics, Malaysia
Exports petroleum products and intermediate goods, in

Exports of petroleum and plastic products sub- tandem with the increase in exports of
sector recorded an increase of 22.8 per cent to manufactured products. Major import sources
RM55.2 billion in 2005 from RM44.9 billion were Singapore, amounting to RM15.2 billion,
in 2004. Exports in all product groups recorded Saudi Arabia (RM1.5 billion) and the USA
positive growth in 2005. (RM1.4 billion).
The petroleum product segment registered Developments

the highest export growth of 24.1 per cent, The oil market in 2005 witnessed increases
valued at RM40.5 billion in 2005, from in oil price as global supply could not meet
RM32.6 billion in 2004. The bulk of the growing demand. The oil price averaged
exports of petroleum products comprised US$56 a barrel in December 2005, after
liquefied natural gas, valued at RM20.8 billion, reaching the highest price of US$70 a
and refined petroleum products (RM17.5 barrel in August 2005. The increase in oil
billion). Exports of plastic products registered prices had impacted on the transportation
an increase of 19.8 per cent to RM6.7 billion and manufacturing costs and contributed to
from RM5.6 billion in 2004. Major export the increase in the cost of doing business.
destinations were Japan, amounting to RM16.3 Generally, there were increases in sales
billion, Singapore (RM12.3 billion) and the price of products which raw materials were
Republic of Korea (RM5 billion). derivatives of crude oil.
Table 5.24: The establishment of the plastics fabrication

Exports of Petroleum and Plastic industry in this sub-sector supports other
Products Sub-Sector industries, including E&E, automotive and
construction. Plastic compounders, converters
(RM mil.) (%) (RM mil.) and fabricators provide the downstream
linkages to the polymer industries. The
Total Export 55,117.5 22.8 44,891.0 extensive use of specialty and fine chemicals
Petroleum products 40,504.8 24.1 32,639.6 in food, pharmaceuticals, E&E and automotive
Synthetic resin 7,916.4 18.8 6,663.9 industries has led to the development of
Plastic products 6,696.3 19.8 5,587.5 synergies with petrochemical industries.
Basic Industrial Chemicals and
Chemical Products Sub-Sector
Imports The basic industrial chemicals and
Imports of petroleum and plastic products chemical products sub-sector covers the
registered an increase of 18.3 per cent to manufacture of industrial gases, basic
RM34.3 billion from RM29 billion in 2004. industrial chemicals, fertilisers and
This was due to higher imports of refined nitrogen compounds, pesticides and other
83
Table 5.26:
Production Indices of Basic Industrial Chemicals and Chemical Products Sub-Sector
Product Group 2005 Change (%) 2004
Overall 141.1 3.5 136.3
Fertilisers and nitrogen compounds 147.1 30.4 112.8

Basic industrial chemicals 146.9 3.6 141.8
Paints, varnishes and similar products 143.4 4.8 136.9
Industrial gases 139.4 3.9 134.2
Pesticides and other agrochemical products 90.2 -9.0 99.1
Soap, cleaning preparations and toiletries 89.4 6.0 84.3

agrochemical products, paints, varnishes billion from RM23.4 billion, attributed

and similar products, soaps and detergents, mainly to the increase in the manufacture of
cleaning and polishing preparations, perfumes industrial gases and basic industrial chemicals.
and toilet preparations and manufacture of However, the sales value of soaps, cleaning
other chemical products. preparations and toiletries declined by
4.5 per cent, due to increasing imports
Production from neighbouring countries, particularly
Overall production index for the basic Thailand, the Philippines and Indonesia, as
industrial chemicals and chemical products a result of the rationalisation of MNCs, which
sub-sector grew by 3.5 per cent to 141.1 in relocated their manufacturing facilities to
2005 from 136.3 in 2004, due to the increase these countries.
in demand from domestic-oriented industries,
such as agro-based industry, healthcare and The increase in oil palm planted areas by
construction-related industries. 4.5 per cent or 174,000 hectares to 4 million
hectares in 2005, contributed to the higher
The production of fertilisers and nitrogen demand and sales value for fertilisers,
compounds recorded the highest growth of pesticides and agrochemical products.
30.4 per cent to 147.1 from 112.8 in 2004.
The growth was attributed to increased demand Employment
for fertilisers in the plantation, agriculture and The overall employment in the basic industrial
agro-based industry sub-sectors. chemicals and chemical products sub-sector
increased by 2 per cent to 26,220 persons in
Sales 2005 from 25,696 persons in 2004. The
Sales value of the basic industrial chemicals increase was due to higher demand for basic
and chemical products sub-sector registered industrial chemicals, fertilisers, pesticides and
an increase of 20.5 per cent to RM28.2 agrochemical products.
Table 5.27:
Sales of Basic Industrial Chemicals and Chemical Products Sub-Sector
Overall 28,182.6 20.5 23.389.5
Basic industrial chemicals 16,552.8 20.8 13,697.6

Industrial gases 3,286.5 48.6 2,211.3
Fertilisers and nitrogen compounds 1,951.4 25.7 1,552.0
Paints, varnishes and similar products 1,713.9 9.8 1,561.2
Soap, cleaning preparations and toiletries 1,012.4 -4.5 1,059.6
Pesticides and other agrochemical products 477.3 2.9 463.7
84
Table 5.28:
Employment in Basic Industrial Chemicals and Chemical Products Sub-Sector
Overall 26,220 2.0 25,696
Basic industrial chemicals 8,629 1.1 8,539

Paints, varnishes and similar products 3,597 0.9 3,564
Soap, cleaning preparations and toiletries 3,224 0.3 3,215
Industrial gases 1,913 1.4 1,887
Fertilisers and nitrogen compounds 1,808 2.1 1,770
Pesticides and other agrochemical products 1,580 1.5 1,557
Productivity projects (RM141.3 million) and six expansion/

The basic industrial chemicals and chemical diversification projects (RM87.8 million).
products sub-sector recorded a Sales Value per
Employee growth of 18.1 per cent from Exports
RM910,200 in 2004 to RM1.1 million in 2005. Exports of the basic industrial chemicals and
The labour cost competitiveness of this sub- chemical products sub-sector grew marginally
sector improved as growth in Sales Value per by 0.5 per cent to RM17.9 billion in 2005
Employee was higher than Labour Cost per from RM17.8 billion in 2004. Exports of
Employee. This was further complemented by almost all product groups recorded positive
a decline of 12.5 per cent in Unit Labour Cost. growth in 2005. In terms of export growth,
dyeing, tanning and colouring products
Investments recorded the highest increase of 25.2 per cent
In 2005, a total of 29 projects, with investments to RM1.5 billion in 2005, compared with
of RM347.8 million, were approved in the RM1.2 billion in 2004. Product groups, namely
chemicals and chemical products sub-sector, organic chemicals and chemical materials
compared with 27 projects (RM471.9 million) and products, registered decline in export
in 2004. Of these, 15 were new projects with growth by 4.9 per cent and 4 per cent,
investments of RM208.9 million, while the respectively.
remaining 14 were expansion/diversification
projects (RM138.9 million). Domestic Major export destinations for basic industrial
investments amounted to RM222.6 million chemicals and chemical products in 2005 were
or 64 per cent of total investment, while the People's Republic of China, amounting to
foreign investments totalled RM125.2 RM3.9 billion, Thailand (RM2.5 billion),
million (36 per cent). Of the total, 18 projects Singapore (RM2.4 billion) and Japan (RM2.4
were Malaysian-owned, comprising 12 new billion).
Table 5.29:
Exports of Basic Industrial Chemicals and Chemical Products Sub-Sector
Total Export of Basic Industrial Chemicals and

Chemical Products 17,874.3 0.5 17,780.7
Organic chemicals 9,152.6 -4.9 9,619.4

Chemical materials and products 3,454.6 -4.0 3,600.2
Soaps and cleaning preparations 1,761.9 9.6 1,607.2
Dyeing, tanning and colouring materials 1,493.7 25.2 1,192.9
Inorganic chemicals 1,088.6 10.2 988.0
Fertilisers 922.9 19.4 772.9
85
Table 5.30:
Imports of Basic Industrial Chemicals and Chemical Products Sub-Sector
Total Import 20,802.2 5.4 19,730.9
Organic chemicals 8,662.5 10.5 7,842.2

Other chemical materials and products 3,243.6 -4.3 3,387.9
Inorganic chemicals 2,663.0 7.1 2,486.6
Fertilisers 2,435.6 0.8 2,416.8
Soap, cleaning preparations and toiletries 2,272.1 8.0 2,102.9
Dyeing, tanning and colouring materials 1,525.4 2.1 1,494.5
Imports environmental regulation proposed by the

Imports of basic industrial chemicals and EU on international trade. Malaysia has
chemical products sub-sector increased undertaken consultations bilaterally and at
by 5.4 per cent to RM20.8 billion from appropriate international forum, such as
RM19.7 billion in 2004. Imports comprised APEC to ensure that these initiatives to
mainly intermediate chemicals. The growth protect human health and environment
in imports reflected the robust activity in will not impose unnecessary restrictions
the basic industrial chemicals and chemical on the facilitation of trade. REACH is
products sub-sector in 2005. expected to be implemented by the EU in 2008.
The organic chemicals segment registered APEC advocacy on REACH will also
the highest import growth of 10.5 per cent focus on specific issues of concern by
to RM8.7 billion from RM7.8 billion in other affected industry groups, such as the
2004, largely due to the development of mineral industry. In this regard, member
specialty and fine chemicals for use in economies agreed to identify sector specific
the food and pharmaceutical industries. issues and the impact of REACH on the
Major import sources for basic industrial mineral trade.
chemicals and chemical products were
Singapore, amounting to RM5.1 billion, Pharmaceutical Sub-Sector
Japan (RM4.3 billion) and the USA (RM3.1 The pharmaceutical sub-sector comprises
billion). a wide range of products for the manufacture
of pharmaceuticals, medicinal chemicals
Developments and botanical products. The market for this
Malaysia is signatory to the Chemical industry is growing due to increased public
Weapons Convention. Malaysia had enacted awareness about health matters, resulting in
the Chemical Weapons Convention Act, greater spending on healthcare.
which came into force in May 2005. With
the implementation of this Act, Malaysia Production
has fulfilled its obligation to the Organisation The production index for the
for the Prohibition of Chemical Weapons in pharmaceutical sub-sector registered the
its continuous efforts to ensure that chemicals highest growth within the chemical industry,
monitored under the Convention would not an increase of 49.2 per cent to 266.2 in
be used to develop chemical weapons. 2005 from 178.4 in 2004. The growth
was attributed partly to the increase in the
Many countries, including Malaysia raised production of herbal medicinal products
concerns over the potential impact of the and nutraceuticals, arising from the
EU Registration, Evaluation and Authorisation Government's efforts in promoting healthcare
of Chemicals (REACH), a product-related and biotechnology.
86
Sales Table 5.31:
Sales of the pharmaceutical products registered Exports and Imports of Pharmaceutical
a growth of 11.7 per cent to RM800.3 million Products
in 2005 from RM716.4 million in 2004. The
2005 Change 2004
growth in sales was largely due to increasing
(RM million) (%) (RM million)
demand for healthcare products and services.
Exports 510.3 2.4 498.2
Employment Imports 2,391.6 4.4 2,291.4
In 2005, employment in the pharmaceutical Source: Department of Statistics, Malaysia
sub-sector increased by 6.5 per cent to 5,960
employees from 5,597 in 2004. The increase
in employment was due mainly to continued Imports
expansion in the production of a wider Imports of pharmaceutical products were
range of generic drugs by pharmaceutical mainly branded drugs, such as antibiotics
manufacturers as more patents of branded and vitamins from Australia, valued at
drugs expired. RM263.7 million, France (RM213.2 million)
and the UK (RM205.6 million).
Productivity
In 2005, the pharmaceutical sub-sector Developments
registered an increase in Sales Value per In 2005, a number of collaborations and joint-
Employee of 4.9 per cent to RM134,280. This ventures was undertaken among the local
was attributed to the production of higher pharmaceutical manufacturers and foreign
value-added products and increased demand companies. Collaboration between a local
for these products resulting from better health company and a foreign pharmaceutical
awareness. The sub-sector recorded a decline company was undertaken to set up a
in labour cost competitiveness as indicated pharmaceutical supply chain in South Africa.
by a 7.1 per cent growth in Labour Cost per
Employee, compared with 4.9 per cent growth More research facilities are also being
in sales value per employee. Unit Labour Cost established in line with the Government's
increased by 2.1 per cent. effort to provide quality medical services to all
Malaysians. For example, a Clinical Trial Unit
Investments is being set up by the National Pharmaceutical
A total of seven projects, with investments of Control Bureau to facilitate the carrying out of
RM204.3 million, were approved in the clinical trials in accordance with international
pharmaceutical sub-sector, compared with ethical and scientific standards. The clinical
eight projects (RM42.6 million) in 2004. All trial for testing of new vaccines for lung cancer
seven projects approved were new projects. developed in Cuba is being planned to be
Domestic investments amounted to RM202.3 carried out in Malaysia by Cuba's Centre
million, while foreign investments totalled for Molecular Immunology in cooperation with
RM2 million. a local company.
Exports IRON AND STEEL INDUSTRY

Exports of pharmaceutical products increased
by 2.4 per cent to RM510.3 million in 2005, The iron and steel industry consists of two
from RM498.2 million in 2004, due to higher product groups, namely long and flat products.
demand in new and non-traditional markets. Long products comprise billets, steel bars,
Major export destinations were ASEAN sections and wire products. Sections and wire
countries, namely Brunei Darussalam, valued products are mainly used in the construction
at RM101.6 million and Singapore (RM90.5 and civil engineering industry. Flat products
million), and Hong Kong (RM35.8 million). consist of hot-rolled coils (HRC), cold-rolled
87
Table 5.32:
Production of Selected Iron and Steel Products
Product Group 2005 Change 2004 Installed Capacity Capacity
(Million tonnes) (%) (Million tonnes) (Million tonnes) Utilisation (%)
Overall 9.2 -6.1 9.8 16.2 56.8
Billets, steel bars and rods 7.2 -5.3 7.6 11.6 62.0
HRC and CRC 2.0 -9.1 2.2 4.6 43.5
Source: Malaysian Iron and Steel Industry Federation (MISIF)
coils (CRC) and coated steel coils. They are The installed capacity for billets and steel
mainly used as intermediate raw materials for bars was 5.4 million tonnes and 6.2 million
industries, such as E&E, furniture and pipes. tonnes, respectively. The capacity utilisation
for billets was 77 per cent, while for steel
Scrap iron, direct-reduced iron and hot- bars, 47 per cent. The low capacity utilisation
briquetted iron are the essential raw materials for steel bars was due to the construction
for producing both long and flat products. industry downturn and corresponding excess
Malaysian iron and steel manufacturers use capacity in the domestic market.
the electric arc furnace technology in steel
making, with scrap iron as the main input. In 2005, production of billets, steel bars
Most major international manufacturers use and rods decreased by 5.3 per cent to
the blast furnace technology, with iron ore as 7.2 million tonnes, attributed to contraction
the main input. in the construction sector. Production of
HRC and CRC decreased by 9.1 per cent
Production to 2 million tonnes from 2.2 million tonnes
There are 42 plants involved in upstream in 2004, mainly due to reduced demand
activities, with total installed capacity of 24.3 from local manufacturers that required
million tonnes. In the downstream activities, HRC and CRC of higher and different
there are 677 establishments, including small grades and specifications which were not
and medium enterprises (SMEs), with an produced locally.
estimated total installed capacity of more than
11 million tonnes. Sales
Sales of basic iron and steel products
The overall production of iron and steel registered an increase of 33.4 per cent to
products declined by 6.1 per cent to 9.2 RM18.2 billion in 2005, compared with
million tonnes in 2005. Total installed capacity RM13.6 billion in 2004. The increase
was 16.2 million tonnes and the utilisation in sales value, despite the decline in
rate was 56.8 per cent. production volume, was due to, among
others, higher domestic steel prices and
In 2005, the installed capacity for HRC was increased demand for certain grades of steel
2.5 million tonnes and for CRC, 2.1 million from the local E&E industry.
tonnes per annum. Capacity utilisation was 62
per cent for HRC and 25 per cent for CRC. The Employment
current production of the sub-sector is Total employment in the industry
sufficient to meet most of the domestic increased by 1.2 per cent to 15,696
requirements, including CRC for downstream workers in 2005 from 15,509 in 2004.
manufacturing activities, except for certain The growth was due to the establishment
specifications and grades of long and flat and operation of two new facilities
products. and five expansion projects on existing plants.
88
Table 5.33:
Productivity Indicators of Iron and Steel Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Basic iron and steel 1,160.2 31.8 880.0 28.9 13.5 25.5 0.0249 -13.8 0.0289
Productivity Table 5.34:

The industry recorded Sales Value per Exports and Imports of Iron and Steel
Employee growth of 31.8 per cent from Products
RM879,990 to RM1.2 million in 2004. This
2005 Change 2004
was due to increase in domestic demand and (RM billion) (%) (RM billion)
higher prices of iron and steel products. The
industry was able to maintain its labour cost Total Export 7.0 -2.8 7.2
Total Import 18.3 13.7 16.1
competitiveness as Sales Value per Employee
grew faster than Labour Cost per Employee. Compiled by Ministry of International Trade and Industry
This was supported by a decline in Unit Labour
Cost of 13.8 per cent. at RM2.8 billion, followed by flat-rolled
products (RM1.9 billion) and semi-processed
Investments iron and steel products (RM819 million).
In 2005, a total of 47 projects were approved
with investments of RM3.2 billion, of which Imports
RM2.8 billion was domestic investments and Imports increased by 13.7 per cent to RM18.3
RM430.5 million was foreign investments. A billion in 2005. Main import items were
total of 28 were new projects, with investments flat-rolled products, valued at RM5.4 billion
of RM2.1 billion, while 19 were expansion/ followed by tubes, pipes and hollow profiles
diversification projects, with investments of (RM4.4 billion) and semi-processed iron and
RM1.1 billion. Major projects approved steel products (RM4.3 billion). Major sources
include a RM96.5 million project to produce of imports were Japan, valued at RM5.3
heavy gauge cold formed steel sections/ billion, the People's Republic of China
profiles, a new project to produce brass rods, (RM1.8 billion) and Taiwan (RM1.6 billion).
hexagonal bars, brass square bars and brass The increase was mainly attributed to higher
profiles and shapes, with investments of imports of selected grades and specifications
RM66.5 million, and three expansion projects of iron and steel products which were not
by major CRC and steel billets manufacturers produced locally, and the higher price of
involving investments of RM200 million each. imported products.
Exports Developments
Exports of iron and steel products decreased by In 2005, world crude steel production
2.8 per cent to RM7 billion in 2005, attributed increased by 5.9 per cent to reach 1.1 billion
to increased competition from the People's tonnes. The steel manufacturers in the USA
Republic of China. Exports were mainly to and the EU reduced output by about 16 million
Thailand, valued at RM1.3 billion, Singapore tonnes to balance market demand and stabilise
(RM831 million) and the People's Republic of prices. In contrast, the People's Republic of
China (RM596 million). Main export items China became a net exporter of crude steel,
were tubes, pipes and hollow profiles, valued with output increasing by 24.6 per cent to reach
89
349 million tonnes from 280 million tonnes MACHINERY AND EQUIPMENT INDUSTRY
in 2004.
The machinery and equipment (M&E) industry
Steel prices were stable in the first quarter of is important to the economic and industrial
2005, but started to decline in the second development as it has cross-cutting effects on
quarter, as a result of oversupply from the all sectors, such as manufacturing, agriculture,
People's Republic of China. For example, transportation, construction and mining. The
prices of HRC decreased from US$619 per industry comprises four sub-sectors, namely
tonne in May 2005 to US$518 per tonne in specialised machinery for specific industries;
September, while the price of CRC declined power generating machinery; metal working
from US$725 per tonne to US$621 per machinery; and general industrial machinery
tonne. Towards the end of 2005, prices started and equipment. The industry continued to be
to increase slightly in most regions, as a result the third largest contributor to manufactured
of growing demand and rise in the cost of raw exports, accounting for 3.4 per cent share in
materials, such as iron ore, scrap and energy. 2005, compared with 4.1 per cent in 2004.
The rapid changes in global trends, especially Production

in the price of raw materials, production, Based on the Monthly Manufacturing Survey
supply situation and consumption, as well of the Department of Statistics, overall
as mergers and acquisitions, continued to production index of the industry declined by
influence the domestic iron and steel industry's 17 per cent to 121.2 from 146 in 2004. The
production and export performance. With production index of industrial air-conditioning,
rapid developments in the People's Republic refrigerating and ventilating machinery
of China and more positive developments in sub-sector declined by 20.5 per cent to 97.3 in
other economies, such as India, Japan and 2005, due to slower growth in the construction
the Russian Federation, the supply of materials and housing sectors.
become tight and pushed the prices higher.
Such tight market situations have affected Sales
the domestic iron and steel industry, as Based on the same survey, sales of the M&E
demonstrated by the decline in production and industry grew by 9.7 per cent to RM5.3 billion,
exports. compared with RM4.8 billion in 2004. Sales
Table 5.35:
Production Indices of Selected Machinery and Equipment Industry
Selected Activities 2005 Change (%) 2004
M&E Industry 121.2 -17.0 146.0
Industrial air-conditioning, refrigerating, and ventilating machinery 97.3 -20.5 122.3

Pumps, compressors, taps and valves 183.3 -11.7 207.6

Table 5.36:
Sales of Selected Machinery and Equipment Products
Selected Products 2005 (RM million) Change (%) 2004 (RM million)
M&E Industry 5,255.2 9.7 4,788.9
Industrial air-conditioning, refrigerating, and ventilating machinery 3,212.0 -4.7 3,368.7

Pumps, compressors, taps and valves 2,043.2 43.9 1,420.2
90
Table 5.37:
Employment in Machinery and Equipment Industry
Selected Activities 2005 (Persons) Change (%) 2004 (Persons)
M&E Industry 12,440 11.5 11,152
Industrial air-conditioning, refrigerating, and ventilating machinery 7,320 6.1 6,899

Pumps, compressors, taps and valves 5,120 20.4 4,253
of pumps, compressors, taps and valves sub- Productivity

sector surged by 43.9 per cent to RM2 billion The M&E industry recorded a decline in
in 2005 from RM1.4 billion in 2004. The Sales Value per Employee of 1.6 per cent to
increase in sales value was due to the increase RM422,443 in 2005 from RM429,420 in
in demand for pumps, compressors, taps and 2004. The highest growth in Sales Value per
valves and clearance of available stock in the Employee within the industry was the
market. The sales value of industrial air- manufacture of pumps, compressors, taps and
conditioning, refrigerating, and ventilating valves, at a rate of 19.5 per cent, attributed
machinery declined by 4.7 per cent to RM3.2 to the increase in demand for value-added
billion in 2005 from RM3.4 billion in 2004. products used in the oil and gas, medical
equipment and aerospace industries. In terms
Employment of labour cost competitiveness, the sub-sector
According to the Monthly Manufacturing was able to sustain its competitiveness as
Survey of the Department of Statistics, Sales Value per Employee growth was
employment in the M&E industry increased higher than Labour Cost per Employee. This
by 11.5 per cent to 12,440 workers in 2005 was further complemented by a decline in
from 11,152 workers in 2004. Employment in Unit Labour Cost by 8.7 per cent.
the industrial air-conditioning, refrigerating
and ventilating machinery sub-sector increased Investments
by 20.4 per cent, while employment in the A total of 86 projects, with investments
pumps, compressors, taps and valves sub- of RM1 billion, were approved in 2005,
sector increased by 6.1 per cent. Increase in compared with 81 projects in 2004. Of
employment was due to hiring of more the total, 64 were new projects involving
personnel to increase sales and expedite investments of RM824.7 million and 22 were
clearance of existing stock in the market. expansion/diversification projects (RM209.9
Table 5.38:
Productivity Indicators of Machinery and Equipment Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Machinery and
Equipment Industry 422.4 -1.6 429.4 26.4 -10.2 29.4 0.0625 -8.7 0.0684
Pumps, compressors,
taps and valves 399.1 19.5 333.9 27.8 -13.3 32.1 0.0698 -27.4 0.0962
Air conditioning,
refrigerating and
ventilating machinery 438.8 -10.1 488.3 25.4 -8.4 27.7 0.0578 1.8 0.0568
91
Chart 5.1:
Investments Approved in Machinery and Equipment Industry, 2005
1,200 2005
1,034.0
1,000 2004
800
RM million
676.1
600
406.8
400
286.7
205.3
200 166.7
57.1 21.0 14.7 14.2
0
Total investment Specialised General industrial Power Metalworking
machinery machinery and generating machinery
for specific equipment and parts machinery
industries and equipment
Chart 5.2:
Exports of Machinery and Equipment, 2005
20
18.1 2005
18
16 15.6 2004
14
RM billion
12
9.5
10
7.8
8
6 4.4 4.2
4 2.8 3.2
2 1.0
0.8
0
Total export Power Specialised General Metalworking
of M&E generating machinery for industrial machinery machinery
machinery specific and equipment
and equipment industries and parts
million). Domestic investments amounted approved, with investments of RM57.1

to RM457.4 million (44.2 per cent of the million, compared with five projects
total investment), while foreign investments (RM21 million) in 2004. For the general
totalled RM577.2 million (55.8 per cent). industrial, components and parts sub-sector,
45 projects, with investments of RM286.7
Of the total number of projects million, were approved, compared with
approved, 37 projects were for the RM166.7 million in 2004. In the
specialised machinery segment, with metal working machinery sub-sector, two
investments of RM676.1 million in projects, with investments of RM14.7
2005, compared with 39 projects (RM205.3 million, were approved in 2005, compared
million) in 2004. For the power with five projects, with investments of
generating segment, two projects were RM14.2 million in 2004.
92
Exports areas of growth in the industry, particularly
Exports of machinery and equipment increased in the area of specialised machinery, as
by 16.4 per cent in 2005 to RM18.1 billion the demand for such machinery is increasing.
from RM15.6 billion in 2004. The increase in In 2005, a total of 37 projects were approved
exports was due to higher demand for for the manufacture of specialised machinery,
specialised machinery for specific industries. including 12 projects to manufacture machine
Among other major export items were heating and equipment for the E&E industry.
and cooling equipment, components and parts
of pumps and compressors, rotating electric The specialised machinery sub-sector has
plant and parts and non-electrical engines, the capability to manufacture specialised
motors and parts. Major export markets were machinery for the extraction of oil and gas,
Singapore, valued at RM4.3 billion, the USA including sub-sea systems, surface wellheads
(RM1.6 billion) and Thailand (RM1.5 billion). and drilling systems. In the field of crane
manufacturing, Malaysia is one of the leading
Imports countries in the world that has the technology
Imports of the industry increased by 10.5 per to manufacture high speed heavy lifting tower
cent to RM36.4 billion in 2005 from RM32.9 cranes and oil and gas pedestal cranes.
billion in 2004. Major sources of imports
were Japan, valued at RM9.1 billion, the NON-METALLIC MINERAL INDUSTRY
USA (RM5.6 billion), the People's Republic
of China (RM3.5 billion) and Germany The non-metallic mineral industry consists
(RM2.8 billion). Major import items were of cement and concrete products, ceramics
machinery, equipment and parts for specialised and clay-based products, glass and glass
machinery for specific industries, pumps and products and other non-metallic mineral sub-
compressors, fans and rotating electric plant, sectors.
internal combustion piston engines and heating
and cooling equipment. The cement sub-sector includes the production
of Portland cement (ordinary cement), clinker,
Developments ready-mix concrete, hydraulic cement and
Malaysia is still a net importer of machinery articles of concrete, cement and plaster.
and equipment. However, there are potential Hydraulic cement is a non-corrosive, non-
Chart 5.3:
Imports of Machinery and Equipment, 2005
40
36.4 2005
35
32.9 2004
30
RM billion
25
20
15 13.0 11.6
11.1 10.5
10 8.9
7.5
5 3.3 3.4
0
Total import Metalworking Specialised Power General

of M&E machinery machinery for generating industrial machinery
specific machinery and equipment
industries and equipment and parts
93
Table 5.39:
Industrial Production Index of Selected Non-Metallic Mineral Products
Selected Activities 2005 Change (%) 2004
Non-Metallic Mineral Industry 113.2 2.0 111.0
Cement sub-sector
Hydraulic cement 125.4 -6.3 133.9
Ready-mix-concrete 124.0 0.6 123.2
Articles of concrete, cement and plaster 115.5 -4.6 121.1
Ceramics sub-sector
Refractory ceramic products 124.2 -5.5 131.4
Structural non-refractory clay and ceramic products 106.7 -0.5 107.3
Glass sub-sector
Glass and glass products 101.6 14.5 88.8

rusting and non-shrink material. Hydraulic Production

cement is ideally suited for interior and In 2005, the production index for the non-
exterior applications to stop the seepage of metallic mineral industry increased by 2 per
water through cracks and faults in concrete cent to 113.2, compared with the previous year.
and masonry. The expansion in production by the industry
was contributed mainly from the 14.5 per cent
The ceramics sub-sector comprises two increase in the manufacture of glass and glass
segments, namely conventional ceramics products. The production index for both the
and advanced ceramics. The products under cement and ceramics sub-sectors declined in
conventional ceramics are heat insulation, 2005, largely due to the slowdown in the
refractory products, bricks, tiles, clay pipes, construction industry.
sanitaryware and tableware, while the
advanced ceramics segment includes advanced Within the cement sub-sector, the production
ceramic parts and components for the E&E index for the manufacture of hydraulic cement
industry, such as ceramic substrates, ceramic and articles of cement, concrete and plaster
rods and catalytic converters. declined by 4.6 per cent and 6.3 per cent,
respectively, in 2005. The decline was due
The glass and glass products sub- to the slowdown in the construction industry.
sector includes float glass, safety glass, The production index for ready mix-concrete
cast glass, glass mirrors, tinted glass, high recorded a marginal increase to 124 from 123.2
value-added products, such as glass panels in 2004, attributed to a marginal increase in
and funnels for cathode ray tubes, concrete projects.
tempered glass for E&E industry, as well
as windows and screens for the automotive Total installed capacity for cement is 28.3
industry. million metric tonnes per annum, while total
Table 5.40
Installed Production and Capacity Utilisation of Clinker and Cement
Products 2005 (Million metric tonnes) 2004 (Million metric tonnes)
Installed Production Capacity Installed Production Capacity

Capacity Utilisation (%) Capacity Utilisation (%)
Clinker 17.8 15.6 87.6 17.8 15.4 86.6

Cement 28.3 17.4 61.5 28.3 17.1 59.6
Source: Cement and Concrete Association
94
Table 5.41:
Sales of Selected Non-Metallic Mineral Products
Sub-Sector 2005 (RM million) Change (%) 2004 (RM million)
Non-Metallic Mineral Industry 9,499.0 -4.5 9,498.0
Cement sub-sector 4,760.1 -1.7 4,843.3

Hydraulic cement 2,584.2 -6.1 2,752.0
Ready-mix-concrete 1,323.6 3.9 1,274.2
Articles of concrete, cement and plaster 852.3 4.3 817.1
Ceramic sub-sector 859.0 19.6 718.0
Non-structural non-refractory ceramic ware 499.0 49.7 334.0
Refractory ceramic products 360.0 -6.3 384.0
Glass sub-sector
Glass and glass products 2,355.9 -17.1 2,843.3
production was 17.4 million metric tonnes in maintenance and repairs using hydraulic
2005, resulting in an excess capacity of 10.9 cement. However, sales of both ready mix-
million metric tones. Total installed capacity of concrete and articles of concrete, cement and
clinker was 17.8 million metric tonnes per plaster increased by 3.9 per cent and 4.3 per
annum, while total production in 2005 was cent, respectively, due to higher demand for
15.6 million metric tonnes. There is an excess fabricated construction materials and the use
capacity of 2.2 million metric tonnes of clinker of Industrialised Building System components
in the industry. for building and elevated highways projects.
Within the ceramic sub-sector, the production In 2005, sales of the ceramic sub-sector
index for refractory ceramic products and increased by 19.6 per cent to RM859 million
structural non-refractory clay and ceramic from RM718 million in 2004. The increase
products declined by 5.5 per cent and 0.5 per in sales was largely due to the higher demand
cent, respectively, in 2005. The decline was for non-structural non-refractory ceramic
due to the slowdown in housing and wares.
development of new building projects. For the
glass sub-sector, production increased by 14.5 Employment
per cent to 101.6 in 2005 from 88.8 per cent in Employment in the non-metallic mineral
2005. The increase was due to external demand industry declined marginally to 39,772
for glass products. workers from 39,798 in 2005. In the cement
sub-sector, employment declined by 2.1 per
Sales cent to 12,454 workers in 2005, compared
In 2005, sales of non-metallic mineral products with 12,730 workers in 2004. The decline
declined by 4.5 per cent to RM9.5 billion was due to lower demand for cement in the
from RM10 billion in 2004. The decline was construction sector.
largely attributed to a lower demand for glass
products from the construction sector. In the ceramic sub-sector, employment
increased by 2.9 per cent to 12,795 workers
Sales in the cement sub-sector declined in 2005 from 12,730 in 2004. The increase was
by 1.7 per cent to RM4,760 million in 2005, due to the expansion of existing operations for
compared with RM4,843 million in 2004. the manufacture of ceramic tiles, sanitaryware
Within the sub-sector, sales of hydraulic and clay bricks.
cement declined by 6.1 per cent to RM2.6
billion in 2005 from RM2.8 billion in the Employment in the glass and glass products
previous year due to a slowdown in sub-sector declined by 15.3 per cent to 6,691
95
Table 5.42:
Employment in Selected Non-Metallic Mineral Sub-Sectors
Sub-Sector 2005 (Persons) Change (%) 2004 (Persons)
Non-Metallic Mineral Industry 39,772 -0.1 39,798
Cement sub-sector 12,454 -2.1 12,730

Articles of concrete, cement and plaster 5,122 2.6 4,993
Ready-mix-concrete 3,720 -5.6 3,942
Hydraulic cement 3,612 -4.8 3,795
Ceramic sub-sector 12,795 2.9 12,428
Non-structural non-refractory ceramic ware 4,568 0.3 4,554
Refractory ceramic products 8,227 4.5 7,874
Glass sub-sector
Glass and glass products 6,691 -15.3 7,898
persons in 2005 from 7,898 in 2004. The manufacture of hydraulic cement declined
decline was due to the rationalisation process by 1.3 per cent. The high Sales Value per
in the industry, arising from the slowdown Employee of ready-mix concrete was due to
of demand for glass products from the the increase in sales by 3.9 per cent, following
construction sector. continuous demand for the product. Labour
cost competitiveness of the sub-sector declined
Productivity as Labour Cost per Employee grew more than
The non-metallic mineral industry registered the Sales Value per Employee, while Unit
a decline in Sales Value per Employee of Labour Cost increased by 2 per cent.
4.5 per cent to RM238,830 in 2005, compared
with RM249,960 in 2004. Both the manufacture of refractory ceramic
products and structural non-refractory clay
The manufacture of ready-mix concrete and ceramic products registered decline in
recorded the highest growth of 10.1 per cent Sales Value per Employee of 6.6 per cent and
in Sales Value per Employee, followed by 5.5 per cent, respectively. Slow demand and
the manufacture of other articles of concrete, excess capacity were among the factors that
cement and plaster at 1.7 per cent, while the contributed to the decline in productivity of the
Table 5.43:
Productivity Indicators of Non-Metallic Mineral Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Non-Metallic Mineral
Industry 238.8 -4.5 250.0 23.2 1.0 22.9 0.0970 5.7 0.0917
Hydraulic cement 715.4 -1.3 725.2 41.3 -0.9 41.6 0.0577 0.5 0.0574
Ready-mix concrete 355.8 10.1 323.3 22.7 3.1 22.0 0.0638 -6.4 0.0682
Other articles of concrete,
cement and plaster 166.4 1.7 163.7 19.6 -6.4 21.0 0.1180 -7.9 0.1282
Refractory ceramic products 78.7 -6.6 84.3 15.0 3.0 14.5 0.1899 10.3 0.1722
Structural non-refractory
clay and ceramic products 129.9 -5.5 122.8 21.4 3.3 20.7 0.1744 9.3 0.1596
Glass and glass products 352.1 -2.2 360.0 30.7 13.1 27.1 0.0871 15.7 0.0753
96
refractory ceramic sub-sector. The labour cost For the ceramic sub-sector, nine projects were
competitiveness of both sub-sectors declined approved with a total investment of RM128.2
as Labour Cost per Employee grew more than million for the manufacture of ceramic
the Sales Value per Employee. Unit Labour products, such as ceramic tiles, sanitaryware
Cost increased by 10.3 per cent and 9.3 per and clay bricks. Of these projects, three were
cent, respectively. new projects (RM52.5 million) and six were
expansion/diversification projects (RM75.7
The glass and glass products sub-sector million).
registered a decline in Sales Value per
Employee of 2.2 per cent, due to a 17.1 per For the glass sub-sector, three projects were
cent decline in sales value, as a result of approved for the manufacture of glass
slow activities in the construction sector. products, such as glass panels and funnels,
Labour cost competitiveness of the sub-sector pattern and float glass and bottles and jars.
declined as Labour Cost per Employee Two were expansion and diversification
grew more than the Sales Value per Employee, projects, with investments amounting to
while Unit Labour Cost increased by 15.7 per RM532 million, and one was for a new
cent. project with investment valued at RM30
million.
Investments
In 2005, a total of 30 projects were Exports
approved in the non-metallic mineral Total export of non-metallic mineral products
industry, compared with 43 projects in 2004. declined by 6.5 per cent to RM2.9 billion in
Approved investments in these projects 2005, compared with RM3.1 billion in 2004.
increased to RM921.5 million in 2005 from
RM774.9 million in 2004. Exports of cement and cement-based products
increased by 13.9 per cent to RM501.1 million
In the cement sub-sector, 11 projects were for in 2005 from RM440 million in 2004. The
the manufacture of concrete products, with increase was due to higher external demand
investments of RM149 million. Three of these for cement and fabricated construction
projects were new projects with investments, materials. Main export destinations were
valued at RM13.8 million, while eight were Bangladesh, valued at RM50.9 million, Sri
expansion/diversification projects (RM135.2 Lanka (RM26.8 million) and Australia
million). (RM20.4 million). Major exports items were
Chart 5.4:
Approved Investments in Non-Metallic Mineral Industry
1000
921.5 2005
900
800 774.9 2004
700
RM million
600 562.0
500
400 381.3
317.3
300
200 149.0 128.2
100 58.0 82.3
18.3
0
Non-metallic Glass Concrete and Ceramic Other non-metallic
mineral products cement product products products
97
Table 5.44:
Exports of Non-Metallic Mineral Products
Exports of Non-Metallic Mineral Products 2,934.3 -6.5 3,105.1

Ceramic products 1,001.0 10.9 902.6
Cement and concrete products 501.1 13.9 440.0
clinker, valued at RM82 million, followed by Imports of cement products declined by 3.9
white cement (RM31 million) and hydraulic per cent to RM294.8 million in 2005 from
cement (RM4 million). RM283.3 million in 2004. Major sources of
imports were Japan, valued at RM51.1 million,
Exports of ceramic products totalled RM1 followed by Taiwan (RM22.8 million) and the
billion in 2005, compared with RM902.6 People's Republic of China (RM19.6 million).
million in 2004. Major export destinations Major import items were cement clinker,
were the USA, valued at RM114 million, valued at RM92 million, white cement
followed by Australia (RM96 million) and (RM0.8 million) and hydraulic cement (RM0.6
the UK (RM85 million). Major export items million).
included glazed ceramics tiles, valued at
(RM742 million), followed by other ceramic Developments
articles (RM216 million) and unglazed ceramic For the cement sub-sector, there are 11
tiles (RM152 million). companies involved in the manufacture of
ordinary Portland cement. Of these, seven
Total export of glass and glass products companies are operating as integrated
declined by 13.4 per cent to RM1.2 billion in manufacturing plants producing clinker and
2005 from RM1.4 billion in 2004. The decline cement, while four companies are involved in
in exports was due to lower demand for glass cement grinding. MITI has not issued any new
products in the global market. Major exports manufacturing licence since 1998 because
destinations were Singapore, valued at RM1.9 there was excess capacity of cement and
billion, followed by the Republic of Korea clinker in the industry. In the area of standards,
(RM1.6 billion) and Thailand (RM138.8 two new Malaysian Standards (MS) were
million). published in 2005. One new standard was for
Portland cement (MS 522: Part 2: 2005) and
Imports another for pre-cast concrete piles (MS 1314:
In 2005, imports of non-metallic mineral Part 6: 2005).
products declined by 9.4 per cent to RM3.1
billion from RM3.4 billion in 2004. The decline For the ceramic sub-sector, 13 companies are
was due to lower imports of glass products. manufacturing ceramic floor and wall tiles,
Table 5.45:
Imports of Non-Metallic Mineral Products
Imports of Non-Metallic Mineral Products 3,051.2 -9.4 3,369.3

Ceramic products 918.9 30.0 706.7
Cement and concrete products 283.3 -3.9 294.8
98
Table 5.46:
Malaysian Standards for Advanced Ceramics Published in 2005
Title
MS ISO 14703 : 2005 Fine ceramics (Advanced ceramics, advanced technical ceramics)
- Sample preparation for the determination of particle size distribution of ceramic powders
- Test method for flexural strength of monolithic ceramic at room temperature.
MS ISO 14705 : 2005 Fine ceramics (advanced ceramics, advanced technical ceramics)
- Test method for hardness of monolithic ceramics at room temperature
- Classification system
- Test method for tensile strength of monolithic ceramics at room temperature
- Test method for tensile stress - Strain behaviour of continuous, fibre-reinforced composites at
room temperature
- Test method for linear thermal expansion of monolithic ceramics by push-rod technique
Source: Department of Standards, Malaysia
with a total capacity of 80 million square glass and polished plate glass used mainly
metres. About 30 per cent of the total ceramic for windows, doors, mirrors, vehicles and
tiles produced were exported, mainly to buildings. Dimensions, grades, quality, shapes
Japan, Singapore, Hong Kong and India. A and test methods are also specified. The MS
total of six companies are producing 1498 specifies the tempered glass for use as
advanced ceramic components and parts. Of glazing in building and furniture.
these, four companies are producing advanced
ceramic products, mainly for the E&E TEXTILES AND APPAREL INDUSTRY
Industry.
The textiles and apparel industry contributed
In the area of standards, 10 new Malaysian significantly to exports, sales and employment
Standards (MS) were published in 2005. One in the manufacturing sector. In 2005, the
standard was for ceramic tableware (MS textiles and apparel industry ranked the
1817:2005), two standards for ceramic seventh largest contributor to exports in the
cookware (MS ISO 8391-1:2005 and MS ISO manufacturing sector, accounting for 2.5 per
8391-2:2005) and seven standards were for cent of exports of manufactured goods.
advanced ceramics.
Production
For the glass and glass sub-sector, there are The production index of the textiles and
at present two manufacturers involved in the apparel industry increased by 3.1 per cent in
manufacture of glass components for the 2005 to 83.5, compared with 81 in 2004. The
E&E industry and supply about 10 per cent of expansion in production was largely due to
the world market for glass panels and funnels. a 17.9 per cent increase in the production of
One of these manufacturers supplies 60 per the apparel sub-sector.
cent of the world demand for heat resistant
glass products, such as glass plates for Sales
microwave ovens. Based on the Monthly Manufacturing Survey
of the Department of Statistics, sales value
Two Malaysian Standards were published for the textiles and apparel industry increased
in 2005 for glass and glass products, namely by 4.7 per cent to RM8.8 billion in 2005 from
MS 1135 and MS 1498. The MS 1135 RM8.4 billion in 2004, attributed to increased
specifies transparent, highly flat, glossy float sales of higher value-added products.
99
Table 5.47:
Productivity Indicators of the Textiles and Apparel Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Textiles and Apparel Industry 131.7 8.8 121.0 13.3 -4.4 13.9 0.1010 -12.1 0.1149
Textiles sub-sector 212.2 -4.8 222.8 16.0 -7.4 17.3 0.0754 -2.8 0.0776
Natural fibre spinning;
weaving of textiles 153.5 15.4 133.2 18.3 11.6 16.4 0.1191 -3.3 0.1232
Man-made fibre spinning;
weaving of textiles 323.4 10.0 294.2 15.8 -18.6 19.4 0.0488 -25.9 0.0659
Dyeing, bleaching,
printing and finishing of
yarns, and fabric
(except batik) 189.9 5.2 180.5 20.4 4.6 19.5 0.1074 -0.6 0.1080
Knitted and crocheted
fabrics and articles 107.0 -4.3 111.8 13.6 -4.0 14.2 0.1274 0.3 0.1270
Apparel sub-sector 83.0 10.6 75.0 11.7 -1.1 11.8 0.1405 -10.6 0.1572
Sales of apparel products increased by 7.7 per cent and 12.1 per cent in Labour Cost per
cent to RM3.4 billion in 2005 from RM3.2 Employee and Unit Labour Cost, respectively.
billion in 2004, due to higher demand for
shirts, blouses and dresses. The sales of In 2005, the textiles sub-sector recorded a
textile products increased by 2.9 per cent decline of 4.8 per cent in Sales Value per
to RM5.2 billion in 2005 from RM5.3 billion Employee to RM212,190. This was due to a
in 2004, due to higher demand for high-end decline in both sales and employment as
products. the sub-sector is competing with lower cost
producing countries and the relocation of
Employment lower end activities to other countries. The
Based on the same survey, employment in sub-sector was able to sustain its labour cost
the textiles and apparel industry declined competitiveness as indicated by a 7.4 per cent
by 3.7 per cent to 66,506 workers in 2005, decline in Labour Cost per Employee and 2.8
compared with 69,074 in 2004. This was per cent decrease in Unit Labour Cost.
attributed to increased automation in the
production processes and the move towards The Sales Value per Employee of the apparel
the manufacture of higher value-added sub-sector grew at 10.6 per cent, with an
products. increase in Sales Value per Employee level
to RM82,950 in 2005, from RM74,990 in
Productivity 2004. Development in fashion and design has
The textiles and apparel industry registered created niche markets and increased demand
a 8.8 per cent growth in Sales Value per for garment making, garment accessories,
Employee to RM131,646 in 2005 from merchandising, as well as wholesale and
RM121,043 in 2004. High demand, especially retail sales. The sub-sector was able to sustain
from the man-made fibre spinning and its labour cost competitiveness, with a decrease
apparel sub-sectors, contributed to the growth. of 1.1 per cent and 10.6 per cent in Labour
The industry was able to sustain its labour Cost per Employee and Unit Labour Cost,
cost competitiveness, with a decline of 4.4 per respectively.
100
Exports RM227.7 million (61 per cent) and foreign
Effective 1 January 2005, quotas for exporting investments was RM146.2 million (39 per cent).
textiles and apparel products was abolished
under the World Trade Organisation (WTO) Of the total projects approved, 12 projects
Agreement on Textiles and Clothings. The (RM192.1 million) were for the production
resilience of the industry is reflected by the of primary textiles, 15 projects (RM157.2
increase in the volume of exports under million) for made-up garments, six (RM22.1
the quota free market. Total export of textiles million) for made-up textile products and
and apparel increased by 6.2 per cent to two (RM2.5 million) for made-up textile
RM10.3 billion in 2005 from RM9.7 billion accessories.
in 2004. Export of textiles increased by 10.2
per cent to RM5.4 billion in 2005 from RM4.9 Developments
billion in 2004, while export of apparel Malaysia's export of textiles and apparel
increased by 2.1 per cent to RM4.9 billion, continued to increase from RM9.7 billion in
compared with RM4.8 billion in 2004. 2004 to RM10.3 billion in 2005. The growth
in exports by 6.2 per cent was partly due to
Major export markets for textiles and apparel the USA's decision to re-impose quantitative
were the USA, valued at RM2.9 billion, restrictions on textiles and apparel products
followed by the UK (RM456.2 million), originating from the People's Republic of
Turkey (RM638.1 million) and Singapore China.
(RM461.9 million). Main export items were
textile yarns (including special yarns), woven The Agreement on the Early Harvest
fabrics of man-made textile materials, and Programme for the Free Trade Area (FTA)
men's and women's clothings. between Malaysia and Pakistan was signed
on 1 October 2005. Both countries offered
Imports textiles and apparel products under the Early
In 2005, total import of textiles and apparel Harvest Programme to enjoy preferential tariff
increased by 4 per cent to RM5 billion in each other's market. The implementation
from RM4.8 billion in 2004. Import of of Early Harvest Programme under the
textiles increased by 2.6 per cent to RM4.1 Malaysia-Pakistan FTA, starting from
billion in 2005 from RM4 billion in 2004, 1 January 2006, will provide an opportunity
while imports of apparel increased by 10.5 per for Malaysian manufacturers to source raw
cent to RM981.6 million, compared with material of textiles and textile products at a
RM888.3 million in the previous year. Major competitive price from Pakistan. There is
sources of imports of textiles and apparel also an opportunity for the industry to have
in 2005 were the People's Republic of China, better market access and acquire market
valued at RM1.5 billion, followed by Taiwan share in Pakistan, provided the products are
(RM564.8 million), Indonesia (RM429.9 competitive in terms of price and quality.
million), Thailand (RM422.1 million) and
Japan (RM341.5 million). Main products WOOD AND WOOD PRODUCTS INDUSTRY
imported were textile yarn, woven fabrics
of man-made textile materials, knitted or The wood and wood products industry
crocheted fabrics, clothing accessories of comprises wood products, furniture and
textile fabrics and women's clothing. fixtures, as well as paper products. The wood
products range from sawn timber, veneer
Investments sheets and plywood, builders' carpentry and
In 2005, a total of 35 projects were approved joinery, laminboard, particleboard and other
with investments of RM373.9 million, panels and boards. Paper products include
compared with RM823.9 million in 2004 in pulp, paper and paperboard, corrugated paper
36 projects. Domestic investments amounted to and containers of paper and paperboard.
101
Table 5.48:
Production Indices of Wood and Wood Products Industry
Overall 112.8 3.6 108.9
Wood products 109.6 1.5 107.9

Laminboard and particleboard 137.0 20.8 113.4
Veneer sheets and plywood 111.3 -7.3 120.0
Sawmilling and planing of wood 94.1 9.2 86.2
Corrugated paper and paperboard 101.6 8.3 126.9
Pulp, paper and paperboard 97.5 6.3 91.7

Table 5.49:
Sales of Wood-Based Products
Total Sales 19,103.5 8.9 17,544.5
Wood products 13,654.2 8.0 12,637.0

Veneer sheets and plywood 6,082.2 3.2 5,891.8
Wooden and cane furniture 4,989.1 18.7 4,201.8
Laminboard and particleboard 1,483.8 3.5 1,434.2
Builders' carpentry and joinery 1,099.0 -0.9 1,109.3
Paper products 5,449.3 11.0 4,907.5
Corrugated paper and paperboard 2,353.0 11.7 2,106.0
Pulp, paper and paperboard 1,951.5 5.9 1,843.6
Production Employment
The overall production index of the wood Employment in the wood and wood products
and wood-based products industry increased industry grew by 2.8 per cent to 126,921
by 3.6 per cent to 112.8 in 2005 from 108.9 workers in 2005 from 123,425 in 2004. In the
in 2004, mainly due to strong external demand wood products sub-sector, employment in the
for laminboard, particleboard and other panels wooden and cane furniture segment registered
and boards. In the paper products sub-sector, an increase of 9.1 per cent to 41,121 persons
production index increased by 7.5 per cent in 2005 from 37,680 in 2004, benefiting from
to 119, compared with 110.7 in 2004 in the increase in production for export market.
response to improved demand in the domestic The paper products segment registered an
market. increase of 6.8 per cent to 21,719 persons from
20,332 in 2004.
Sales
In 2005, total sales of wood and wood products Productivity
increased by 8.9 per cent to RM19.1 billion Sales Value per Employee for the wood and
from RM17.5 billion in 2004. Sales of wooden wood products industry improved by 5.9 per
and cane furniture recorded an increase of cent in 2005 to RM150,510 from RM142,150
18.7 per cent to RM5 billion in 2005 from in 2004. The growth was driven by high
RM4.2 billion in 2004, following huge exports production of plywood, hardboard and particle
to traditional markets, such as Japan, the USA board resulting from expansion in the export
and the UK. Sales of paper products increased markets. Labour Cost per Employee also
by 11 per cent to RM5.4 billion from RM4.9 increased by 3.3 per cent to RM13,180. The
billion in 2004. industry recorded an increase in labour cost
102
Table 5.50:
Employment in Wood and Wood Products Industry
Products 2005 (Persons) Change (%) 2004 (Persons)
Total Employment 126,921 2.8 123,425
Wood products 105,202 2.0 103,093

Veneer, sheets and plywood 47,760 -2.2 48,816
Wooden and cane furniture 41,121 9.1 37,680
Builders' carpentry and joinery 9,504 neg. 9,506
Laminboard and particleboard 6,817 -3.9 7,091
Paper products 21,719 6.8 20,332
Corrugated paper and paperboard 12,587 4.9 12,003
Pulp, paper and paperboard 4,293 6.9 4,017

Table 5.51:
Productivity Indicators of Wood and Wood Products Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Wood and Wood Products

Industry 150.5 5.9 142.2 13.2 3.3 12.8 0.0875 -2.4 0.0897
Wood products 129.8 1.9 127.4 11.7 5.7 11.1 0.0904 3.8 0.0871
Builders' carpentry and
joinery 115.6 -0.9 116.7 12.9 0.2 12.9 0.1119 1.1 0.1107
Laminboard and
particleboard 217.7 7.6 202.3 20.2 -3.0 20.8 0.0927 -9.9 0.1029
Veneer sheets and plywood 127.4 5.5 120.7 9.2 9.7 8.4 0.0719 3.9 0.0692
Wooden and cane furniture 121.3 8.8 111.5 13.0 2.4 12.7 0.1075 -5.9 0.1142
Paper products 250.9 4.0 241.4 20.2 -1.4 20.5 0.0804 -5.2 0.0848
Corrugated paper and
paperboard 186.9 6.5 175.5 18.0 0.6 17.9 0.0965 -5.6 0.1022
Pulp, paper and paperboard 454.6 -1.0 459.0 26.5 -8.0 28.8 0.0582 -7.2 0.0627
Compiled by National Productivity Corporation based on Monthly Manufacturing Survey, Department of Statistics
competitiveness, as Sales Value per Employee cost competitiveness, as Sales Value per
grew higher than Labour Cost per Employee. Employee grew slower than Labour Cost per
In addition, the Unit Labour Cost decreased by Employee. Unit Labour Cost of the sub-sector
2.4 per cent. increased by 3.8 per cent.
Sales Value per Employee for the wood Sales Value per Employee for the paper
products sub-sector improved by 1.9 per cent products sub-sector improved by 4 per cent
in 2005 to RM129,790 from RM127,420 in in 2005 to RM250,900 from RM241,370 in
2004. The growth was attributed to the 2004. The growth was attributed to increasing
growing external demand from Japan, the USA demand and diversification of the industry
and the People's Republic of China. Malaysia's into higher value-added downstream products.
largest export markets for wood-based Labour Cost per Employee also decreased
products are Japan, the USA and the People's by 1.4 per cent to RM20,180. The sub-sector
Republic of China. Labour Cost per Employee recorded an increase in labour cost
also increased by 5.7 per cent to RM11,730. competitiveness, as Sales Value per Employee
The sub-sector recorded a decline in labour grew higher than Labour Cost per Employee.
103
In addition, the Unit Labour Cost decreased A total of 13 projects were approved in the
by 5.2 per cent. mouldings and builder's carpentry and joinery
segment, with investments of RM112.5
Investments million. Domestic investments amounted to
In 2005, a total of 86 projects in the RM89.2 million or 79.3 per cent of the total
wood-based sub-sector (including furniture) investment. Of these, eight were new projects,
was approved with investments of RM789.1 with investments of RM54.6 million and five
million, compared with RM1.2 billion in were expansion/diversification projects, with
2004. Of these, 58 were new projects with investments of RM57.9 million. Projects
investments of RM440.2 million, while 28 approved were mainly for the manufacture of
were expansion/diversification projects wooden doors and flooring boards, including
(RM341.7 million). Domestic investments the manufacture of activated carbon/charcoal
amounted to RM641.3 million or accounted briquettes, with an investment of RM21.5
for 82 per cent of the total investment. million.
The highest investments were recorded in Exports

the wooden furniture segment with 50 Total export of wood and wood products
projects approved, involving investments of increased by 5.6 per cent to RM16.7 billion
RM421.5 million, compared with RM302.6 in 2005 from RM15.8 billion in 2004. Exports
million in 2004. Domestic investments of wood products increased by 4 per cent
amounted to RM358 million, accounting for to RM14.6 billion in 2005, largely due to
84.9 per cent of total investment. Of these, increased demand from Japan, with exports
33 were new projects, with investments of totalling RM3.6 billion, followed by the
RM208.2 million and 17 were expansion/ USA (RM3.3 billion) and the UK (RM806.3
diversification projects, with investments of million). Exports of veneer, plywood, particle
RM213.3 million. board and other panel products accounted for
50.3 per cent of total export of wood products.
In the panel products segment, six projects Exports of wooden furniture increased by
were approved, with investments of RM117.8 7.1 per cent to RM5.8 billion, accounting for
million. Of this, domestic investments 39.8 per cent of total export earnings of wood
amounted to RM111.1 million, accounting for products, largely due to increased demand
94.4 per cent of the total investment. Five were from the USA, India and the Netherlands for
new projects, with investments of RM106.8 wooden bedroom furniture, office furniture and
million and an expansion/diversification seats of wooden frame.
project, with investments of RM11 million.
Projects approved included a joint-venture Exports of paper products increased by 17.9
with Canadian technology to manufacture fibre per cent to RM2.1 billion in 2005, compared
composite board utilising rice husk. with RM1.8 billion in 2004, due to strong
Table 5.52:
Exports of Selected Wood and Wood Products
Total Export of Wood and Wood Products 16,712.3 5.6 15,832.6
Wood products 14,638.9 4.0 14,074.3

Veneer, plywood, particleboard and other panel products 7,356.9 1.4 7,255.2
Wooden furniture 5.826.3 7.1 5,441.8
Builders' joinery and carpentry of wood 1,162.6 6.1 1,095.9
Paper products 2,073.4 17.9 1,758.3
Paper and paperboard, cut to size 1,266.8 18.0 1,073.4
Paper and paperboard 668.4 6.0 630.8
104
Table 5.53:
Imports of Selected Wood and Wood Products Industry
Total Import 6,246.0 4.4 5,981.4
Wood products 980.0 -0.5 985.1

Wooden furniture 443.1 -4.1 462.2
Veneer, plywood, particleboard and other panel products 384.5 2.5 375.0
Other wood products 149.6 3.6 144.4
Paper products 5,266.0 5.4 4,996.3
Paper and paperboard 4,000.7 1.9 3,926.4
Paper and paperboard, cut to size 772.8 10.5 699.1
demand from Singapore, valued at RM541.4 indigenous design and better finishing. These
million, followed by Japan (RM242.4 million) products have successfully penetrated into the
and Thailand (RM177.5 million). Exports of up market segments in the USA, the UK and
paper and paperboard (cut to size), valued at Japan.
RM1.3 billion, constituted 61.1 per cent of
total export of paper products in 2005. The wood and wood products industry requires
continuous and easy access to raw materials,
Imports such as forest logs and rubberwood. However,
Total import of wood and wood products the supply of these resources is declining. As a
industry increased by 4.4 per cent to RM6.2 measure to resolve this issue, the Government
billion from RM6 billion in 2004. Imports of banned the export of rubberwood sawn timber,
wood products declined marginally by 0.5 per effective 1 January 2006. This was to ensure
cent to RM980 million. The People's Republic adequate supply of rubberwood for the wood
of China was the largest source of import for products industry, especially furniture, and
wood products, valued at RM286.4 million, to increase the production of value-added
followed by Thailand (RM133.9 million), rubberwood products in the country.
Poland (RM87.4 million) and Germany
(RM44.3 million). Major products imported Emphasis has been given to increase the timber
were furniture parts, with a share of 45.2 per certification of Permanent Forest Reserves in
cent, and veneer, plywood, particleboard and Malaysia. As of 2005, a total of 4.7 million
other panel products (39.2 per cent). hectares (32.8 per cent out of 14.4 million
hectares) of Permanent Forest Reserves have
Imports of paper products increased by 5.4 per been certified by the Malaysian Timber
cent to RM5.3 billion in 2005 from RM5 billion Certification Council. The revised certification
in 2004. The largest import was paper and scheme, which is based on the principles
paperboard, valued at RM4 billion. Main and criteria of the Forest Stewardship Council
sources of import were Indonesia, valued at on sustainable forest management was
RM955.1 million, followed by Japan (RM534.7 implemented in 2005. Even though currently
million), Taiwan (RM450.3 million), Thailand the quantity of certified timber exported is less
(RM423.1 million) and the USA (RM1.4 than 1 per cent of total export, efforts are being
million). intensified to increase the trade in certified
timber to achieve 50 per cent target by 2010.
Developments
Malaysia is now moving towards original RUBBER PRODUCTS INDUSTRY
design manufacturing from original equipment
manufacturers by upgrading the production of The rubber products industry consists of
higher value-added furniture, incorporating manufacture of rubber gloves, rubber tyres and
105
Table 5.54:
Production Indices of Rubber Products Industry
Rubber Products Industry 133.8 -0.4 134.3
Rubber gloves 151.6 4.0 145.8

Tyres and tube 94.9 -10.3 105.8
Retreading and rebuilding of rubber tyres 88.6 -20.0 110.8
Other rubber products (latex-based and general rubber products ) 149.5 2.0 146.6

tubes, retreading and rebuilding of rubber tyres 149.5, compared with 146.6 in the previous
and manufacture of other rubber products. In year. However, the manufacture of rubber tyres
2005, the rubber products industry consumed and tubes, as well as retreading and rebuilding
483,000 tonnes of natural rubber, making of rubber tyres recorded decreases of 10.3 per
Malaysia the fifth largest consumer of natural cent and 20 per cent, respectively.
rubber after the People's Republic of China, the
USA, Japan and India. As at end 2005, about Sales
500 manufacturers were operating in the Sales of rubber products increased by 11.4 per
rubber products industry. cent to RM9.4 billion in 2005 from RM8.4
billion in 2004, due to increased demand for
Production rubber gloves and other rubber products for
Despite a marginal decrease in the overall industrial and general usage.
production index of rubber products in
2005, the production index of rubber gloves Employment
increased by 4 per cent to 151.6 from 145.8 Total employment in the rubber products
in 2004, while the manufacture of other rubber industry increased by 3.1 per cent to 59,409
products recorded an increase of 2 per cent to workers from 57,620 in 2004. The highest
Table 5.55:
Sales of Rubber Products
Products 2005 Change 2004
Total Sales 9,365.1 11.4 8,403.3
Rubber gloves 4,321.5 13.1 3,820.2

Other rubber products (latex-based and general rubber products ) 3,284.6 17.3 2,800.2
Tyres and tube 1,670.9 -1.1 1,690.2
Retreading and rebuilding of rubber tyres 88.2 -5.0 92.8
Table 5.56:
Employment in Rubber Products Industry
Rubber gloves 30,266 1.4 29,838

Other rubber products (latex-based and general rubber products ) 22,674 6.3 21,327
Tyres and tube 5,731 0.8 5,685
Retreading and rebuilding of rubber tyres 738 -4.2 770
106
Table 5.57:
Productivity Indicators of the Rubber Products Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Rubber Products Industry 157.6 8.1 145.8 16.8 5.0 16.0 0.1063 -2.8 0.1094
Manufacture of rubber gloves 142.8 11.5 128.0 14.7 6.4 13.8 0.1031 -4.6 0.1081
Retreading and rebuilding of
rubber tyres 119.5 -0.8 120.5 17.3 -0.9 17.4 0.1445 -0.1 0.1446
Rubber tyres and tubes 291.6 -1.9 297.3 27.7 -0.5 27.8 0.0951 1.5 0.0936
Other rubber products
(latex-based and general
rubber products ) 144.9 10.3 131.3 16.7 6.4 15.7 0.1153 -3.6 0.1196
Compiled by National Productivity Corporation based on Monthly Manufacturing Sales, Department of Statistics, Malaysia
number of employees was in the rubber Projects approved in 2005 involved domestic
gloves segment, which increased by 1.4 per investments of RM557.8 million, accounting
cent to 30,266 persons in 2005 from 29,838 for 72.2 per cent of the total investment,
in 2004. while foreign investments totalled RM215.2
million (27.8 per cent). In comparison,
Productivity domestic investments accounted for RM275.4
The industry recorded an increase of 8.1 per million (71.5 per cent), while foreign
cent in Sales Value per Employee to investments totalled RM109.8 million (28.5
RM157,640 in 2005 from RM145,840 in per cent) in 2004.
2004. Growth was due to the increase in
demand from the healthcare sub-sector, In 2005, a total of 13 projects approved
components and parts for the automotive, (RM323.1 million) were Malaysian-owned
machinery and equipment industries. This was companies. These projects were export-
further supported with continued efforts by oriented in nature, with 23 out of the 27
domestic manufacturers in enhancing quality, projects proposing to export at least 50 per cent
upgrading of manufacturing processes and of their products. This will maintain the
continuous R&D support. Labour Cost per export-oriented nature of the rubber products
Employee also increased by 5 per cent to sub-sector in the coming years.
RM16,760. With a reduction of 2.8 per cent
in Unit Labour Cost and higher Sales Value Investments in 2005 were mainly in latex
per Employee, compared with Labour Cost per products (RM134.2 million), industrial and
Employee, the industry was able to improve general rubber products (RM100.7 million),
its labour cost competitiveness. tyres and tyre-related products (RM280.7
million), and recycling of waste tyres into
Investments rubber crumb, steel wire, fuel oil and fibre
In 2005, a total of 27 projects were approved (RM257.4 million). A total of 12 projects
in the rubber products industry, valued at (RM134.2 million) were approved in the
RM773 million, compared with 29 projects, latex products sector, of which five were
with investments of RM385.2 million in new projects (RM30.8 million) and seven
2004. Of the 27 projects approved, 14 were were expansion/diversification projects
new projects, with investments of RM334.4 (RM103.4 million). Domestic investments
million and 13 were expansion/diversification amounted to RM125.6 million or 93.6 per
projects (RM438.6 million). cent of total investment, while foreign
107
investments totalled RM8.6 million (6.4 per 71.4 per cent of total investment, while foreign
cent). Of the 12 projects approved for the investments totalled RM28.8 million (28.6 per
latex products sector, eight projects, with cent). Six were new projects, valued at RM31.5
investments amounting to RM128.9 million million, while four (RM69.2 million) were
were for the production of rubber medical expansion/diversification projects.
devices, such as examination gloves, condoms
and rebreathing bags. These new projects will The recycling of waste tyres into rubber
further strengthen Malaysia's position as the crumb, steel wire, fuel oil and fibre attracted
world leader in the medical rubber products two new projects, with investments totalling
industry. RM257.4 million.
Two projects, with investments of RM280.7 Exports

million, were approved for the production of The total export of rubber products in 2005
tyres for passenger cars, trucks, earthmovers increased by 13 per cent to RM7 billion,
and graders. Domestic investments totalled compared with RM6.2 billion in 2004. Main
RM102.9 million, while foreign investments exports were rubber gloves, valued at RM4.5
amounted to RM177.8 million. billion, followed by general rubber goods and
industrial rubber products, such as vulcanised
A total of 10 projects, with investments of rubber thread, including rubber tubes, pipes
RM100.7 million, were approved in the and hoses (RM1.2 billion), and tyres and tubes
industrial and general rubber products (RM484.2 million).
sub-sector for the manufacture of products,
such as moulded rubber products for the Malaysia continued to be the world's leading
automotive industry, industrial hoses, anti- exporter of rubber gloves and maintained its
vibration dampers, tubes and seals. Domestic position as the largest supplier of rubber gloves
investments were valued at RM71.9 million or to the USA, accounting for RM1.8 billion or
Table 5.58:
Exports of Rubber Products
Total Export 6,985.5 13.0 6,183.6
Rubber gloves 4,502.8 11.0 4,058.3

Industrial rubber goods 1,199.9 1.7 1,025.1
Articles of rubber 590.1 13.2 521.3
Tyres and tyre-related products 484.2 12.1 431.8
Synthetic rubber 208.6 41.8 147.1
Table 5.59:
Imports of Rubber Products
Total Import 2,172.1 12.2 1,935.8
Synthetic rubber 824.4 20.4 684.8

Articles of rubber 574.5 2.9 558.1
Tyres and tyre-related products 516.0 16.0 444.8
Industrial rubber goods 169.1 -5.1 178.1
Rubber gloves 88.2 26.0 70.0
108
87.5 per cent of total exports. Other major PALM OIL INDUSTRY
export destinations for rubber gloves were
Japan, with exports valued at RM383 million, The palm oil industry comprises palm oil, palm
the UK (RM368 million), Germany (RM296.4 kernel oil, palm kernel cake, oleochemicals
million) and the People's Republic of China and finished products. Intensive R&D and
(RM290.3 million). increase in plantation area, especially in
Sabah and Sarawak, as well as aggressive
Imports efforts in promoting oil palm products for non-
The total import of rubber products increased traditional usage have enabled the sector to
by 12.2 per cent in 2005 to RM2.2 billion from maintain its competitiveness.
RM1.9 billion in 2004, attributed to imports of
synthetic rubber (38 per cent), as well as tyres The industry, as a whole, experienced a mixed
and tubes (23.8 per cent). Sources of imports performance in 2005. While recording a strong
were Japan, valued at RM494 million, growth in production, export earnings from
followed by Thailand (RM450.5 million), and palm oil declined resulting from lower prices
the USA (RM186.6 million). for crude palm oil and processed palm oil. The
decline in prices was attributed to high stocks
Developments at the beginning of the year, slow pace of
As a leading hub for rubber technology and the exports during the second-half of the year and
world leader in rubber research, Malaysia competition from lower soybean oil prices in
continues to undertake innovations in new and the world market.
high value-added products and applications.
The innovations include liquid natural rubber, Average crude palm oil price declined by 13.4
epoxidised natural rubber, deproteinised per cent to RM1,394 per tonne in 2005 from
natural rubber, and thermoplastic natural RM1,610 in 2004. The average price of refined
rubber. These rubbers are suitable for heavy- bleached deodorised (RBD) palm oil declined
duty engineering and the manufacturing of by 13.2 per cent to RM1,454, while RBD palm
earthquake isolators. olein declined by 14.6 per cent to RM1,497.
Likewise, the average price of RBD palm
Malaysian-owned companies have also stearin dropped by 15.8 per cent to RM1,298
developed into major global producers and per tonne.
established their own brands and
marketing channels. The introduction of the Production
Standard Malaysian Gloves scheme and Overall production of palm oil products,
technological developments, such as including oleochemical products, crude palm
polymer coated and powder-free gloves, have oil, crude palm kernel oil, palm kernel cake
supported the movement up the value chain, and palm kernel, increased by 8.4 per cent in
particularly in the production of specialty 2005. The production of oleochemical products
gloves. recorded the highest increase of 12.9 per cent
Table 5.60:
Production of Palm Oil Products
Products 2005 (Tonnes) Change (%) 2004 (Tonnes)
Total 24,883,458 8.4 22,964,964
Crude palm oil 14,961,658 7.1 13,976,182

Palm kernel 3,964,034 8.3 3,661,456
Palm kernel cake 2,095,877 10.7 1,894,017
Oleochemical products 2,019,258 12.9 1,788,864
Crude palm kernel oil 1,842,631 12.1 1,644,445
Source: Malaysian Palm Oil Board
109
to 2 million tonnes in 2005 from 1.8 million fatty alcohols, fatty acids, glycerine,
tonnes in 2004. This was followed by crude tocotrienol concentrates (used in health
palm kernel oil (12.1 per cent) and palm foods), diacylglycerols and emulsifier blends,
kernel cake (10.7 per cent). The increase stabiliser blends and flavours (used in the food
was mainly attributed to the expansion in industry).
matured areas, enhanced plantation and mill
management. With the increasing interest in the palm
biodiesel industry, six projects, with
Investments investments of RM423.5 million, were
In 2005, a total of 30 projects were approved approved for the production of fatty acid
in the palm oil products industry, with methyl esters (palm biodiesel). Three of the
investments of RM1.7 billion. In the palm biodiesel projects, with investments of
oil (edible) products sub-sector, 19 RM178.5 million, are Malaysian-owned,
projects were approved, with investments comprising two new projects and one
of RM758.3 million in 2005, compared expansion/diversification project. The other
with 17 projects with investments of three new projects, with investments of RM245
RM362.9 million in 2004. Of these, 12 million, are foreign-owned.
were expansion projects, while seven were new
projects. Domestic investments amounted to Exports
RM460.6 million or 61 per cent of the total Total export volume of palm oil products,
investment. comprising palm oil, oleochemical products,
palm kernel oil, finished products (include
In the oleochemical sub-sector, 11 projects margarine and shortening) and palm kernel
were approved, with investments of cake, increased by 7.3 per cent to 18.6 million
RM968.4 million in 2005, compared with 14 tonnes in 2005 from 17.4 million tonnes in
projects (RM2.2 billion) in 2004. Of these, six 2004. However, in terms of total earnings, the
were new projects (RM340.7 million) and export of palm oil products declined by 6.1 per
five were expansion/diversification projects cent to RM28.6 billion, compared with
(RM627.6 million). Foreign investments RM30.4 billion in 2004, due to lower average
amounted to RM724.3 million, accounting for palm oil prices during the year.
75 per cent of total investment, while domestic
investments totalled RM244.1 million (25 per In 2005, exports of palm kernel oil,
cent). oleochemical products and palm kernel cake
increased, with the exports of palm kernel oil
Five projects, with investments of RM544.8 recording an increase of 10.6 per cent to
million, were approved for the production of RM2.2 billion, compared with RM2 billion
Table 5.61:
Exports of Palm Oil Products
Exports 2005 Change (%) 2004
Quantity RM million Quantity Value Quantity RM million

(Tonnes) (Tonnes)
Total Export 18,621,679 28,599.7 7.3 -6.1 17,360,546 30,443.5
Palm oil 13,445,511 20,033.7 6.9 -9.7 12,581,792 22,175.6

Oleochemical products 1,834,178 5,137.8 3.6 1.9 1,770,220 5,040.0
Palm kernel oil 850,790 2,182.2 9.0 10.6 780,375 1,972.4
Finished products 391,389 829.1 4.5 -2.5 374,602 850.2
Palm kernel cake 2,031,995 353.6 13.1 0.7 1,795,918 351.3
110
in 2004. Exports of palm oil and finished Malaysia increased and the price of local crude
products declined by 9.7 per cent and 2.5 per palm oil was lower, compared with imported
cent, respectively. crude palm oil.
The People's Republic of China remained the Developments

largest market for Malaysian palm oil, with One of the strategies to increase the
exports increasing by 5.5 per cent to 3 million consumption of palm oil is to diversify its
tonnes in 2005. The increase was due to the usage into the non-traditional area, for
higher import quota allocated to palm oil and example, biofuel. In line with this strategy, the
the competitive price of palm oil over soybean Government announced the National Biofuel
oil. Exports to the EU increased by 15.6 per Policy in August 2005 to spur the development
cent to 2.3 million tonnes. The increase was of the biofuel industry in Malaysia. The
a result of higher demand for palm oil in biofuel B5 was introduced to the domestic
the production of biofuel formulation. The market on 21 March 2006, and was initially
Government's support for the industry, through used on selected Government vehicles. The
the introduction of various measures and tax introduction of B5 to the general public in the
exemptions, has made palm oil the most viable domestic market is still in the pipeline.
alternative fuel to the more expensive fossil
fuel. An increasing number of companies are keen
to build biodiesel plants, while joint ventures
Exports of palm oil to the USA increased between the private sector and the Malaysian
by 62.8 per cent to 0.6 million tonnes in 2005, Palm Oil Board (MPOB) has already been
as a result of American food manufacturers initiated to set up palm biodiesel plants in
switching to palm oil in anticipation of trans- Malaysia using MPOB patented technology for
fat labelling. Exports of palm oil to Egypt the export market.
increased by 81.6 per cent to 0.6 million
tonnes in 2005, mainly due to the expansion PROCESSED FOOD AND BEVERAGES INDUSTRY
of the oils and fats manufacturing sector in
that country. The processed food industry comprises the
manufacture of sugar and sugar confectionery,
Imports cocoa and chocolate products, dairy products,
Total import value of palm oil products snacks and biscuits, processed fish and fish
declined by 47.4 per cent in 2005 to RM994.7 products, as well as flour and rice milling. The
million from RM1.9 billion in 2004. Total beverages sub-sector covers the manufacture
volume of palm oil products imported of soft drinks, malt liquors and malt.
decreased by 23.2 per cent to 667,099 tonnes
in 2005, compared with 868,142 tonnes in Production
2004. Palm oil and palm kernel oil were the In 2005, the production index for the industry
main raw materials imported by Malaysia. The increased by 7.6 per cent to 125.9 from 117 in
decline in import was mainly due to lower 2004, due to strong domestic demand. Within
imports of crude palm oil as the production in the processed food sub-sector, products that
Table 5.62:
Imports of Palm Oil Products
Products 2005 (Tonnes) Change (%) 2004 (Tonnes)
Total Import 667,099 -23.2 868,142
Palm oil 556,519 -21.9 712,659

Palm kernel oil 110,580 -28.9 155,483
111
Table 5.63:
Production Indices of Selected Processed Food and Beverages Products
Overall 125.9 7.6 117.0
Processed food 127.2 7.9 117.9

Cocoa products 173.6 28.4 135.3
Snacks 140.8 15.9 121.5
Processing of fish and fish products 138.1 -1.9 140.8
Chocolate products and sugar confectionery 130.6 19.8 109.0
Biscuits and cookies 126.5 5.0 120.4
Flour milling 117.5 14.4 102.6
Sugar refineries 113.9 -2.6 117.0
Condensed, powdered and evaporated milk 95.9 13.8 84.3
Rice milling 88.0 -0.8 88.8
Other processed food 174.1 4.6 166.4
Beverages 119.3 6.1 112.4
Soft drinks 150.5 6.9 140.7
Malt liquors and malt 105.2 5.6 99.6

Table 5.64:
Sales of Selected Processed Food and Beverages Products
Total 13,792.2 10.5 12,485.3
Processed food 12,967.5 10.5 11,733.8

Condensed, powdered and evaporated milk 2,988.3 14.3 2,614.0
Cocoa products 1,959.5 31.4 1,490.7
Sugar 1,855.1 8.9 1,703.3
Flour 1,144.0 13.8 1,005.6
Processed fish and fish products 1,008.9 -0.2 1,010.7
Vegetables and animal oils and fats (exclude palm oil) 979.1 2.6 954.0
Biscuits and cookies 624.9 4.3 598.9
Chocolate products and sugar confectionery 620.9 3.0 602.7
Rice 484.5 3.9 466.5
Snacks 350.6 15.9 302.4
Beverages 824.6 9.7 751.2
recorded increases in production were cocoa Sales

products (28.4 per cent), and chocolate The sales value of processed food and
products and sugar confectionery (19.8 per beverage products expanded by 10.5 per cent
cent). Malaysia is the largest cocoa grinder to RM13.8 billion in 2005, supported by a
in Asia and a net exporter of cocoa products, continuous increase in domestic consumption
including chocolates, with exports to more and exports.
than 70 countries.
Employment
The beverages sub-sector also recorded an In 2005, total employment in the industry
increase of 6.1 per cent in production, increased by 3.4 per cent to 36,155 workers
attributed to the increase in external demand from 34,962 in 2004. Employment in the cocoa
for both alcoholic, as well as non-alcoholic products sub-sector registered an increase of
beverages in 2005. 23.7 per cent to 1,659 persons in 2005 from
112
Table 5.65:
Employment in Processed Food and Beverages Industry
Processed food sub-sector 34,215 3.6 33,033

Processed fish and fish products 7,374 -1.5 7,490
Biscuits and cookies 5,998 4.2 5,754
Chocolate products and sugar confectionery 4,143 11.3 3,723
Condensed, powdered and evaporated milk 3,551 -3.1 3,665
Snacks 2,667 12.6 2,368
Sugar 1,913 -0.7 1,926
Cocoa products 1,659 23.7 1,341
Flour 1,470 3.5 1,420
Vegetable and animal oils and fats (exclude palm oil) 1,087 0.9 1,077
Rice 1,078 2.8 1,049
Beverages sub-sector 1,940 0.6 1,929
1,341 in 2004. Other sub-sectors that registered compared with RM357,110 in 2004. However,
positive growth in employment were snacks, labour cost competitiveness of the industry
chocolate products and sugar confectionery, declined in 2005, due to the slower growth of
biscuits and cookies, flour, rice, as well as Sales Value per Employee, compared with a
vegetables and animal oils and fats (exclude double-digit growth of 11.2 per cent in Labour
palm oil). Cost per Employee. In addition, the Unit
Labour Cost of the industry increased by 4.1
Productivity per cent.
Sales Value per Employee of the processed
food and beverages industry recorded a growth The processed food sub-sector recorded
of 6.8 per cent to RM381,480 in 2005, an increase of 2.9 per cent in Sales Value
Table 5.66:
Productivity Indicators of Processed Food and Beverages Industry
(RM'000) (RM'000) (Number)

(%) (%) (%)
Processed Food and

Beverages Industry 381.5 6.8 357.1 21.8 11.2 19.6 0.0572 4.1 0.0550
Processed food 379.0 2.9 368.4 21.6 6.6 20.3 0.0571 3.6 0.0551
Cocoa products 1,181.2 6.3 1111.7 28.5 -2.7 29.3 0.0241 -8.7 0.0264
Manufacture of sugar 969.8 9.7 884.4 32.7 18.9 27.5 0.0338 8.7 0.0311
Vegetable and animal oils
and fats 900.7 1.7 885.8 29.4 7.0 27.5 0.0327 5.5 0.0310
Flour milling 778.2 9.9 708.3 75.4 87.9 40.1 0.0969 70.9 0.0567
Rice milling 449.4 1.1 444.7 18.1 -4.1 18.9 0.0403 -5.2 0.0425
Chocolate products and
sugar confectionery 149.9 -7.4 161.9 16.9 -7.2 18.2 0.1127 0.3 0.1124
Processed fish and fish
products 136.8 1.4 134.9 10.6 4.6 10.1 0.0776 3.2 0.0752
Biscuits and cookies 104.2 0.1 104.1 12.2 4.9 11.6 0.1172 4.8 0.1118
Beverages 425.1 9.1 389.6 25.1 2.9 24.4 0.0590 -5.7 0.0625
Soft drinks 559.5 4.9 533.4 31.5 1.7 30.9 0.0562 -3.1 0.0580
113
per Employee from RM368,350 in 2004 The flour-based products group received the
to RM379,000 in 2005. This was attributed highest investments of RM218.5 million,
to the nature of the sub-sector, which accounting for 29 per cent of the total
comprises mainly small businesses with investment in the sub-sector. A total of 12
low value-added content, high dependency projects were approved, including the
on imported raw materials and low R&D manufacture of flour-based products, such as
activities. Labour Cost per Employee bakery products, biscuits, snack food and
registered an increase of 6.6 per cent, valued noodles. Of these, eight were new projects and
at RM21,640 in 2005, from RM20,300 in four were expansion/diversification projects.
2004. The sub-sector registered a decline
in labour cost competitiveness as the growth In the seafood processing segment, a total of
of Sales Value per Employee was lower eight new projects, with investments of RM48.5
than growth of Labour Cost per Employee, million, were approved, while six new projects,
while Unit Labour Cost increased by 3.6 with investments of RM72.4 million were
per cent. approved for the processed meat and poultry
products segments. In the fruits and vegetables
The beverages sub-sector recorded an increase processing segment, four new projects, with
of 9.1 per cent in Sales Value per Employee investments of RM21.6 million were approved.
from RM389,610 in 2004 to RM425,060 in
2005. The sub-sector was able to maintain A total of 18 projects, with investments of
its labour cost competitiveness as indicated RM105.7 million, were approved for the
by a higher growth in Sales Value per production of other food products, including
Employee, compared with a growth of 2.9 per sauces, syrups, mixed condiments, wheatgrass
cent in Labour Cost per Employee and 5.7 per products and confectionery products. Domestic
cent decline in Unit Labour Cost. investments in these projects accounted for
78.3 per cent of the total investment.
Investments
In 2005, a total of 64 projects, with investments Exports
of RM752.6 million, were approved in the food All major products in the processed food
processing and beverages industry. Domestic sub-sector recorded increases in exports.
investments amounted to RM440.7 million, Export of processed foods products increased
accounting for 58.6 per cent of total by 7.9 per cent to RM6.5 billion in 2005 from
investment, while foreign investments totalled RM6.1 billion in 2004. Main export items were
RM311.8 million (41.4 per cent). cocoa and cocoa preparations, accounting for
Table 5.67:
Major Exports of Processed Food and Beverage Products
Exports of Processed Food Products 6,529.9 7.9 6,054.0

Cocoa and cocoa preparations 1,873.2 19.8 1,563.1
Cereals and flour preparation 902.8 20.8 747.1
Processed seafood 581.8 1.9 571.1
Sugar and sugar confectionery 470.0 6.6 441.1
Dairy products 418.2 3.8 402.9
Vegetables and fruits, prepared/preserved 262.6 -3.6 272.6
Processed meat 60.2 -16.5 72.1
Tea and mate 34.2 -18.6 42.0
Exports of Beverages 881.3 12.3 785.0
Alcoholic beverages 581.7 16.3 500.2
Non-alcoholic beverages 299.6 5.2 284.8
114
Table 5.68:
Imports of Selected Processed Food and Beverage Products
Imports of Processed Food Products 6,353.6 7.5 5,910.2

Dairy products 1,716.7 10.7 1,551.1
Sugar and sugar confectionery 1,339.6 13.3 1,182.8
Cereals and flour preparation 418.4 -30.7 604.2
Vegetables and fruits, prepared/preserved 396.7 10.7 358.2
Processed seafood 390.4 -6.2 416.3
Cocoa and cocoa preparations 179.3 11.8 160.3
Tea and mate 84.0 14.6 73.3
Processed meat 22.4 -5.1 23.7
Imports of Beverages 593.7 -3.6 615.9
Alcoholic beverages 560.4 -4.9 589.0
Non-alcoholic beverages 33.3 23.8 26.9
28.7 per cent of total exports of processed of RM10 million for the development and
food, followed by prepared cereals and flour promotion of halal products.
preparations (13.8 per cent) and processed
seafood (8.9 per cent). Malaysia is promoting the Malaysian Halal
Standard (MS 1500:2004) as a benchmark for
Improvements in product quality and International Standard for halal products. The
acceptance of Malaysian food products, halal food standard is in compliance with the
together with aggressive promotions, international standards of Good Manufacturing
contributed to the better export performance. Practices and Good Hygiene Practices.
Major export markets were Singapore,
Indonesia, the USA, Thailand and Australia. OUTLOOK
Imports Malaysia is forecast to achieve a GDP growth

Imports of processed food products increased of 6 per cent in 2006, compared with 5.3 per
by 7.5 per cent to RM6.4 billion in 2005 from cent in 2005, attributed to positive growth of
RM5.9 billion in 2004. Major import items the global economy and trade. The upturn in
were dairy products, accounting for 27 per the global electronics cycle and a more
cent of total imports of processed food, balanced growth across the major economies,
followed by sugar and sugar confectionery with the recovery in Europe and Japan, are
(21.1 per cent) and prepared cereals and flour expected to provide stimulus to the Malaysian
preparations (6.6 per cent). In 2005, main economy.
sources of imports were Australia, New
Zealand, Thailand and the USA. In 2006, the Third Industrial Master Plan
(IMP3), covering a 15-year period from 2006
Developments to 2020, will be launched and implemented.
The Government continues to develop and The IMP3, will focus on strengthening the
promote Malaysia as the regional halal hub. manufacturing sector and moving towards
In the 2005 Budget, the Government producing higher value-added products
introduced specific incentives for the through the application of the latest
production of halal food, such as Investment technologies. The development of the sector
Tax Allowance for halal food production will also be promoted through existing tax
and double deduction for expenses incurred in incentives and additional measures that will be
obtaining halal safety and quality standards. undertaken to facilitate the sector in expanding
The Government has also provided a grant and shifting into higher value-added activities.
115
In 2006, barring any unforeseen circumstances efforts by the industry to expand production
and with resilient domestic demand and of generic drugs and expand the export
sustained global demand, the manufacturing market will contribute to the growth of
sector is expected to register a higher growth of the pharmaceutical sub-sector. With the
7 per cent, compared with 4.9 per cent in 2005. anticipated positive growth of other sectors
In addition to the expected turnaround in the of the economy, the growth of the chemical
global electronics industry, the strong external products sub-sector that supplies intermediate
demand for resource-based products, such as products and inputs to other industries,
chemicals and petroleum products, will such as agro-based, E&E, automotive and
contribute substantially to the growth of the construction-related industries, is expected to
manufacturing sector. The downside risks that be sustained. The availability of hydrocarbon
could adversely affect the outlook include the feedstock from the domestic oil and gas
sharp and prolonged increase in oil prices and industry and the projected sustained growth of
the spread of avian influenza. major export markets, such as the People's
Republic of China, ASEAN and Japan, will
The E&E sub-sector is expected to register contribute to the growth of the petroleum
higher growth, as a result of further upturn products sub-sector.
in the electronics industry in late 2005. The
USA is expected to lead the demand for The demand for iron and steel products by the
IT-related products. The sub-sector will focus construction and building sector is expected to
on sustaining growth and expanding into new, grow with increased public sector expenditure,
high technology, value-added products, such including the development and improvement
as photonics, data storage systems, conductive of infrastructure with the implementation of
polymers and wireless technology. the Ninth Malaysia Plan in 2006. The
construction sector is expected to register
In the automotive sector, sales are expected to positive growth, mainly due to improvement
be higher due to price reduction following the in the civil engineering sub-sector, such as the
announcement of the NAP. The industry increase in construction activity in the oil and
will be more competitive with the anticipated gas industry and in public projects.
increase in exports, especially from ASEAN
countries. Domestic manufacturers need to The machinery and equipment industry is
improve productivity and increase production, projected to register growth, due to high
as well as explore new markets to be more demand for specialised machinery in the global
competitive. market. The machinery and equipment industry
has the technical and competitive advantage in
With the NAP, incentives given to producing certain types of specialised
manufacturers and assemblers will reduce machinery and equipment, such as E&E
their production cost and thus improve the equipment and plastic processing machinery.
quality. Through Japan-Malaysia Economic The industry will continue to focus on the
Association and other bilateral and multilateral manufacture of high value-added specialised
FTAs, trade in the automotive sub-sector will machinery or custom-made machinery and
be more active, and it is projected that more equipment for specific industries.
foreign companies will invest in this sub-
sector. The phasing-out of the global quota on the
textiles and apparel trade in 2005, under the
The output of chemicals and petrochemical Multi Fibre Agreement (MFA), impacted on
products is expected to increase due to the international market for these products. The
sustained demand for pharmaceuticals, resilience of the Malaysian industry was
chemicals and petroleum products, from both reflected by an increased volume of exports
the domestic and global markets. Continuous under the quota free market in 2005. The
116
demand for textiles and apparel is expected to natural rubber gloves, catheters and latex
grow further in 2006. thread. The demand for rubber products is
expected to increase further as a result of the
Exports of wood-based products is expected to projected growth in the E&E and automotive
improve with the growth of the global sub-sectors, and infrastructural developments
construction industry. Exports of furniture is in the region.
expected to grow by 5 per cent to 10 per cent
annually until 2010, in tandem with a projected Higher prices for primary commodities are
growth of 8 to 9 per cent per year in the world expected to contribute positively to Malaysian
furniture trade. exports. The demand for palm oil to produce
palm diesel is expected to increase with
Malaysia is expected to maintain its position as the commencement of methyl ester plants in
the world's leading producer and exporter of 2006.
117
Chapter 6 Performance Of The Services Sector
OVERVIEW contributing RM39.6 billion or 15.1 per cent

to GDP in 2005, followed by wholesale and
The services sector comprises a wide retail trade, hotels and restaurants sub-sector
range of activities, which include logistics (RM38.4 billion or 14.7 per cent), and
(transport, storage and communication), transport, storage and communication sub-
finance, insurance, real estate and business sector (RM23.1 billion or 8.8 per cent).
services, utilities (electricity, gas and water),
wholesale and retail trade, hotels and The services sector is also the largest employer
restaurants and construction. The services in the Malaysian economy. In 2005, the
sector is a major contributor to the growth sector contributed 5.2 million employment
of the Malaysian economy. opportunities or 48.3 per cent of total
employment. Within the services sector, the
In 2005, the services sector, which wholesale and retail trade, and hotels and
included construction services, but excluded restaurants sub-sector was the biggest
Government services, grew at 5.4 per cent and employer, with 1.9 million workers or 17.7 per
contributed RM139.5 billion (53.2 per cent) to cent of total employment in 2005. In the same
Gross Domestic Product (GDP), compared year, construction services and the finance,
with RM131.9 billion (53 per cent) in 2004. insurance, real estate and business services
The finance, insurance, and real estate and sub-sectors employed 759,600 persons or 7 per
business services sub-sector maintained its cent and 732,300 persons or 6.7 per cent of the
position as the leading services sub-sector, total workforce, respectively.
Chart 6.1:
Contribution of Services Sub-Sectors to Real GDP, 2005
50 2005 2004
39.6
40 37.5 38.4
35.6
RM billion
30 23.1 21.8
20.3
20 19.4
10.9
10.3
10 7.3
7.1
0
Finance, Wholesale & Transport Other services1 Electricity, Construction
insurance, retail trade, storage & gas & water
real estate hotels & communication
& business restaurants
services
Sources: Department of Statistics, Malaysia and Economic Planning Unit, Malaysia

1
Note: Include imputed rent from owner-occupied dwellings; community, social and personal services; products of private non-profit services to house
hold and domestic devices of households
119
Chart 6.2:
Employment in Services Sub-Sectors, 2005
2,000 2005 2004

1,927.2
1,800 1,771.7
1,600
1,400
Number (000)
1,200
1,118.2
1,039.1
1,000
800 770.6
759.6 732.3
642.4 631.2
600 557.9
400
200
93.0
89.7
0
Wholesale & Other services Construction Finance, Transport Electricity,

retail trade, insurance, storage & gas & water
hotels & real estate communication
restaurants & business
services services
Source: Economic Planning Unit, Malaysia
Based on the Balance of Payment (BOP) 2005, the largest component being sea
data, Malaysia continued to be a net and air freight services. Other services
importer of services. Despite strong inflows which contributed to export receipts were
in the travel component, the services account other business services (merchanting and
remained deficit in 2005. Total deficit in other trade, operational leasing and
the services account increased from miscellaneous business services), construction,
RM8.8 billion in 2004 to RM10.2 billion communication, computer and information
in 2005. Net inflow in the travel account services, and insurance.
amounted to RM18.1 billion (2004:
RM19.4 billion). Other components of the In terms of import of services, the
services account, namely transportation, transportation sub-sector was the largest
Government transactions and other services, component which increased from RM29.8
continued to register a net outflow, billion in 2004 to RM31.9 billion in 2005.
contributing to the overall deficit in the Within the transportation segment, payment
services account. of sea and air freight constituted the largest
import component. Total import of the
In terms of export of services, the travel travel component increased from RM11.7
component was the largest export earner, billion in 2004 to RM14.2 billion in 2005,
increasing from RM31.1 billion in 2004 reflecting the increasing trend of Malaysians
to RM32.3 billion in 2005. Tourists to travelling abroad. Other important services
Malaysia were the largest contributors to components imported included business
travel exports accounting for more than services, namely operational leasing and
95 per cent of travel receipts. Exports of miscellaneous business services, royalties and
transportation services also increased from license fees, construction, communication and
RM12 billion in 2004 to RM16.2 billion in insurance.
120
Chart 6.3:
Services Account (Net), 2000-2005
25,000
20.000
15,000
10,000
5,000
RM billion 0
-5,000
-10,000
-15,000
-20,000
2000 2001 2002 2003 2004 2005
Transportation -11,736 -11,352 -11,572 -13,486 -17,783 -15,707

Travel 11,158 16,148 17,102 11,523 19,398 18,117
Government transactions -62 25 -284 -327 -721 -350
Other services -10,030 -13,187 -11,242 -13,011 -9,675 -12,311
Total -10,670 -8,366 -5,996 -15,300 -8,780 -10,249
PERFORMANCE OF SELECTED SERVICES estimated from statistics under finance,

insurance, real estate and business services.
Business and Professional Services Their contribution to GDP increased from
There are two sub-sectors under the business RM37.5 billion (15.1 per cent) in 2004 to
and professional services, namely Business RM39.6 billion (15.1 per cent) in 2005. During
Services and Professional Services. Business the same period, employment grew by 7 per
Services include shared services or captive cent to 732,300 persons in 2005.
outsourcing and offshoring of business
activities, which include back office operations, The business and professional services sub-
call or contact centres and information and sector is one of the fastest growing sub-sectors
communication technology support or data and its contribution towards industrial
centres and operational headquarters (OHQs), development gained in importance during the
representative and regional offices. Second Industrial Master Plan (IMP2) period.
The types of services provided and the delivery
Professional Services comprises accredited methods have undergone changes, largely
professional services, which include driven by advancements in technology, in
accounting; book-keeping and auditing; tax particular the information and communication
consultancy; legal; architectural; engineering technology (ICT).
and other technical services; and non-
accredited professional services, which include Business Services
research and development (R&D), advertising,
market research, management consultancy, and Regional Establishments
environmental and energy services. Regional establishments provide intermediate
service inputs to the operations of
The contribution of the business and multinational corporations (MNCs) and their
professional services to GDP has been affiliates globally. As at 2005, a total of 552
121
regional offices and 1,252 representative Chart 6.4:
offices had been approved. These offices Approved MSC Companies by Sector as
provide feedback to their parent companies on at 2005
the opportunities for business in Malaysia and
165 (12%)
the region in the medium to long term. These
regional establishments are engaged in data 45 (3%)
57 (4%)
collection and fact finding.
59 (4%)
592 (42%)
Business Process Outsourcing 86 (6%)
The growth of business process outsourcing
in recent years has been driven by major 114 (8%)
factors, such as the orientation of companies 189 (13%)
to focus on their core competencies, growing 114 (8%)
availability of competitive outsourcing service

providers, automation and the liberalisation of Software development Wireless/mobile
the investment regime relating to foreign direct Internet-based Systems integration

investments (FDIs).
Content development Telecommunications/
networking
According to the World Investment Report Hardware/electronics
design Others
2004, the offshore outsourcing of business
processes is expected to grow from US$1.3 Education & training
billion in 2002 to US$24 billion in 2007.
Source: Multimedia Development Corporation
Common areas outsourced include information
technology (IT), accounting and legal
services, maintenance, market research, human MSC Malaysia is concentrating on capturing
resource, consultancy services and marketing- offshore shared services projects, where
related activities. customers are primarily located outside
Malaysia. By the end of 2010, the Multimedia
For two consecutive years (2004 and 2005), Development Corporation aims to have
the AT Kearney's Global Services Location 100,000 high value shared service outsourcing
Index (previously known as the Offshore jobs in the MSC Malaysia. By 2020, the
Location Attractiveness Index) ranked number of jobs created is projected to grow
Malaysia as the third most attractive to 600,000.
business location for business process
outsourcing, behind India and the People's Total investment in the telecommunications
Republic of China. Malaysia's favourable and IT sub-sector, which covers
performance was attributed, among others, communication and multimedia projects,
to its continued investments in modern MSC-status companies, and software
infrastructure in the Multimedia Super development companies, amounted to RM6.1
Corridor of Malaysia (MSC Malaysia), billion (294 projects) in 2005, compared
enhancement in incentives to make them more with RM6.6 billion (202 projects) in 2004.
attractive for companies to locate in Malaysia, In 2005, domestic investments approved
and measures on liberalisation of employment amounted to RM5.6 billion (92.4 per cent),
and intensify the usage of English language while foreign investments was RM462.7
and upgrade the technical skills among the million (7.6 per cent).
workforce. As at 2005, a total of 1,421
companies were granted MSC-status. Of these, As at 2005, a total of 106 OHQs have
1,033 were majority Malaysian-owned, 349 been approved by the Malaysian Industrial
majority foreign-owned and 39 with equal Development Authority (MIDA) for
ownership. establishment in Malaysia. Of these, 82 have
122
Table 6.1:
Accredited Professional Services
No. of Establishments Gross Output (RM million) Employment (Persons)
2003 1996 2003 1996 2003 1996
Total 6,961 4,808 6,088 4,543 88,285 78,465
Legal services 3,108 2,078 1,588 1,144 32,288 25,979

Accounting services 1,383 985 1,000 634 19,225 15,816
Architectural consultancy services 914 578 753 683 9,367 8,063
Engineering consultancy services 718 505 1,963 1,441 15,903 16,568
Surveying services 690 498 767 627 11,007 11,563
Drafting consultancy services 148 164 16 13 495 476
Source: Census of Professional Services Private Sector, 2004, Department of Statistics, Malaysia
started operations. These companies are 78,465 persons to 88,285. Legal and
engaged in providing business services, engineering consultancy services formed
including outsourcing, R&D, back room the major segments, accounting for 58 per
operations and other qualifying business cent of gross output in 2003. These two
services to their group of related companies services were also the major sources of
within and outside Malaysia. employment, absorbing 55 per cent of the total
employment of business and professional
Professional Services services in 2003.
Accredited Professional Services The value-added contribution of the accredited

During the period 1996-2003, the number professional services decreased from RM4.2
of establishments in legal, accounting, billion in 1996 to RM4 billion in 2003. This
architectural, drafting, engineering and was due largely to the weak performance of
surveying consultancy services increased the construction industry, which affected
from 4,808 in 1996 to 6,961 in 2003. The its related services (architectural and drafting
gross output of these services increased consultancy, engineering and surveying
from RM4.5 billion in 1996 to RM6.1 billion services). During the same period, legal and
in 2003. During the same period, employment accounting services registered a marginal
in these establishments increased from increase in value-added.
Table 6.2:
Contribution of Accredited Professional Services to Gross Domestic Product
Value-Added (RM million) Value-Added as Percentage of GDP (%)
2003 1996 2003 1996
Total 4,038 4,237 1.7 1.7
Legal 1,189 1,062 0.5 0.4

Engineering consultancy 1,146 1,349 0.5 0.5
Accounting 792 597 0.3 0.2
Architectural consultancy 460 638 0.2 0.3
Surveying consultancy 441 579 0.2 0.2
Drafting consultancy 10 12 neg. neg.
Sources : Census of Professional Services Private Sector, 2003,

National Product and Expenditure Accounts, 1987-2003, Department of Statistics, Malaysia
123
Non-Accredited Professional The application period for the tax incentive
Services has been extended for another five years
until 31 December 2010.
Energy Services
Energy sources, including petroleum, natural To date, 32 projects, all of which are
gas, coal, renewable energy, and primary and undertaken by Malaysian-owned companies,
secondary electricity sectors, each provides a have been granted Pioneer Status/Investment
specific market for energy services. These Tax Allowance incentives, involving total
energy services are required at each step of investment of RM630.9 million to generate
the energy chain, from the location of the energy from biomass. The approved projects
potential energy source to its distribution and are capable of generating 153.1 megawatt of
finally to the consumer. electricity, 926.4 tonnes of steam, 150.7 giga
joules of heat and 1,000 refrigerant tonnes
In Malaysia, presently, there are 12 firms of chilled water and will utilise 5.7 million
involved in the upstream exploration and tonnes of biomass per annum. Of the projects
development activities for oil and gas, approved, 14 have commenced operations, of
including Petronas Carigali, the only which nine are located in Peninsular Malaysia
Malaysian-owned company. The upstream and five are in Sabah.
stage of exploration, which is highly
specialised, is closely related to the Environmental Services
construction and fabrication industry. The The environmental services industry includes
exploration and development activities for oil the supply of equipment (such as for water
and gas have created backward linkages, with supply and delivery, treatment of waste
the setting up of companies to service the water, waste handling, air pollution control
construction of oil rigs, offshore platforms and and laboratory testing), services (such as
pipelines for use in the oil and gas industry. engineering design, construction and
management of utilities, waste collection and
Renewable energy is important in achieving processing, and legal and consultancy services)
the goal of sustainable energy supply in the and resources (such as sale of water, recovered
long term. Renewable energy from biomass materials and renewable energy) relating to
and solar energy accounts for 90 per cent of the environment.
renewable energy potential. The value of the
equivalent energy that can be generated from Presently, the environmental services sub-
the available biomass in Malaysia is estimated sector provides supporting services to the
at RM10 billion per annum. The bulk of the Federal Government, local authorities and
available biomass is from oil palm and timber manufacturing companies which need to
wastes, which are normally disposed of by comply with environmental requirements. The
open burning. Converting biomass into a emerging trend in this sub-sector is the growth
usable form of energy is an environment- potential associated not only with compliance
friendly approach to waste disposal. with rules and regulations, both at the national
and international levels, but also its expanding
The Government grants a wide range of capacity as a source of technological
incentives to promote the utilisation of biomass innovation, competitive advantage and
derived from oil palm waste, timber waste and benchmarking with international service
padi husk as a source of renewable energy. To standards. Privatisation of these services has
further encourage the generation of energy expanded the role of the private sector in the
using biomass, the Government has granted tax delivery of environmental services.
incentives in the form of Pioneer Status, with
full tax exemption for 10 years or Investment Presently, the following environmental
Tax Allowance of 100 per cent for five years. services are granted incentives under
124
Promotion of Investments Act, 1986: processes. The demand for other types of
consultancy services, such as energy and
• storage, treatment and disposal of toxic and environmental consultancy services and
hazardous wastes; technical testing, is also expected to increase.
The provision of energy consultancy services
• energy conservation; is a relatively new business in Malaysia.
Therefore, there is potential for the growth
• waste recycling activities; and and development of these services among
local service providers.
• use of renewable energy resources.
Advertising Services
As at 2005, a total of 97 companies were During the period 1996-2003, the share of
granted incentives, involving a combined value-added for advertising services to GDP
investment of RM2 billion. Of the total, 52 was at 0.1 per cent. The lower employment
companies have started operations. for the sub-sector, from 4,079 persons in 1996
to 3,855 in 2003, contributed to improvement
Market Research Services in labour productivity, as reflected by an
The market research services sub-sector is increase in value-added per employee, from
expected to grow further as more businesses RM65,900 in 1996 to RM86,700 in 2003.
become aware of the importance of marketing
intelligence. Industry sources have indicated The total number of establishment increased
that: from 143 in 1996 to 212 in 2003. During
the same period, gross output per employee
• in 2004, the industry has an estimated increased from RM436,306 to RM560,018.
annual gross revenue of RM200 million, of Competition in this industry was more intense
which 50 per cent was contributed by towards sectoral concentration and between
foreign companies operating in Malaysia; local and large international agencies.
• an increasing number of companies Research and Development Services

have outsourced their market research R&D includes industrial design (product and
requirement to independent companies to process development covering designing and
gather information on market intelligence, prototyping) and research services provided
consumer preferences and brand loyalty; and by, among others, design houses, contract
R&D companies, R&D companies and
• foreign-owned firms dominate the market, approved R&D institutes/research companies.
while smaller local companies compete in
niche markets. The involvement of private companies in
R&D activities is crucial to the nation's
Management Consultancy Services industrialisation drive. New innovations and
Management consultancy services comprise technologies developed through R&D will
services related to IT, financial management, enhance the country's competitiveness in the
market and feasibility studies, strategic international arena. Various tax incentives and
planning, business process re-engineering, financial assistance schemes have been put
change and risk management and other in place to encourage the private sector's
advisory services. involvement in carrying out R&D activities.
These incentives include the Pioneer Status,
Management consultancy services are Investment Tax Allowance for in-house,
expected to grow, in view of the increasing contract and independent R&D companies,
pace and complexity of new ventures and the as well as double deduction on approved
sophistication in business models and work R&D expenditure.
125
To date, a total of 83 R&D projects, involving assistance, six projects, involving investments
investments of RM1.3 billion, have been of RM19 million, were approved under
granted Pioneer Status/Investment Tax Commercialisation of R&D Fund, while
Allowance incentives. Foreign investments two projects, with investments of RM2.6
in these R&D projects amounted to RM909.8 million, were approved under Demonstrator
million and domestic investments totalled Applications Grant Scheme and one project,
RM390.7 million. R&D investments were with investments of RM935,156, was approved
concentrated in the E&E industry (RM681.6 under the Multimedia Super Corridor R&D
million), chemicals and chemical products Grant Scheme.
industry (RM211.6 million), machinery
manufacturing industry (RM111.3 million) Distributive Trade Services
and transport equipment industry (RM76.1 This sub-sector comprises wholesaling,
million). A total of 2,789 employment retailing, franchising, direct selling, catering
opportunities were created by these projects. and restaurants. It also includes commission
agents or representatives, including those of
Financial assistance schemes, such as the international trading companies. Distribution
Research and Development Grant Scheme, of motor vehicles and other consumer durable
Multimedia Super Corridor R&D Grant goods is also included in the sub-sector. Some
Scheme, Intensification of Research in Priority of these distributors also perform important
Areas, Demonstrator Applications Grant tasks, including repair and maintenance
Scheme and Commercialisation of R&D Fund, services of goods.
are primarily aimed at Malaysian-owned
companies. The distributive trade services sub-sector has
undergone structural changes during the IMP2
In 2005, a total of nine R&D projects, with period, which are evident in the format and
total investment of RM22.5 million, were modes of delivery of services, as well as new
approved financial assistance, compared with types of distribution outlets. The notable
296 R&D projects with total investment of changes are those related to the greater number
RM189.1 million in 2004. The number of R&D of mega malls and shopping complexes,
projects granted financial assistance declined hypermarkets, and specialty stores. The
substantially in 2005 due to the freeze of three entrants of foreign retailers, for example,
R&D grant schemes, namely Research and operators of hypermarkets, changed further the
Development Grant Scheme, Multimedia profile of the distributive trade services sub-
Super Corridor R&D Grant Scheme and sector in which integrated wholesale and retail
Intensification of Research in Priority Areas, functions emerged. The dynamics within this
which are currently under review. Of sub-sector has spinned off new activities and
the R&D projects approved for financial services, which contributed to the development
Table 6.3:
Profile of Distributive Trade Services Sub-Sector, 2001
Activity Establishments Number of Workers Fixed Assets Revenue
Number Share (%) '000 Share (%) RM billion Share (%) RM billion Share (%)
Total 284,171 100.0 1,172 100.0 26.0 100.0 248.7 100.0
Wholesale 16,386 5.8 180 15.3 13.3 50.9 115.0 46.2

Retail 153,660 54.1 512 43.7 7.7 29.6 71.7 28.8
Motor vehicles 31,800 11.2 148 12.6 3.2 12.2 48.9 19.6
Restaurants 82,325 29.0 332 28.3 1.9 7.4 13.2 5.3
Source: Census of Distributive Trade 2002, Department of Statistics, Malaysia
126
of more comprehensive and innovative modern methods of operations and
supply chain activities, resulting in greater management strategies and are driven by
international network and outsourcing. innovations and application of ICT. In addition,
they also enjoy economies of scale and
The development of distributive trade services scope while receiving support from their
sub-sector and its current status include the foreign networks, which is seen as a source
following: of competitive advantage.
• the sub-sector experienced an average To promote Malaysia as a regional and global

annual growth rate of 2.7 per cent, with trading centre, the Government promoted the
contribution to GDP increasing from international procurement centre (IPC) and the
RM25.3 billion in 1995 to RM26.8 billion regional distribution centre (RDC) activities in
in 2000 and to RM33.1 billion in 2005; 1996 and 2003, respectively. To date, a total of
177 IPCs and 10 RDCs have been approved.
• total sales increased from RM159.6 billion The total annual sales turnover of these
in 2000 to RM205.6 billion in 2005; centres was estimated at RM59 billion and
their business spending was estimated at
• the largest revenue generators were RM4.7 billion per annum. These centres serve
wholesale services, which contributed 46.2 as procurement and distribution centres and
per cent and 70.2 per cent of the total undertake supply chain management for their
revenue in 2001 and 2005, respectively; manufacturing operations, both in Malaysia
and abroad.
• generated employment of 1.3 million
workers in 2005, compared with 1.1 million Wholesale Trade
in 2000; and The sub-sector has undergone structural
transformation, characterised by rising
• retail trade services contributed the highest productivity and its concentration into larger
share of total employment in the sub-sector. businesses by foreign-owned firms. Although
the total number of establishments declined
During the period 2003-2005, the Ministry of from 22,940 in 1993 to 16,386 in 2001,
Domestic Trade and Consumer Affairs their contribution to revenue increased
approved 758 distributive trade establishments, from RM101.6 billion to RM115 billion. In
with a total investment of RM2.5 billion. 2005, wholesale establishments contributed
They include 334 projects in the wholesale RM144.3 billion of sales turnover in the
and retail trade, 322 projects approved distributive trade services sub-sector.
under the Petroleum Development Act,
which are mainly for the setting up of petrol In terms of management capabilities
stations, 67 projects for direct selling, and performance, although 98.4 per cent of
28 hypermarkets/supermarkets and three the total establishment were Malaysian-owned,
departmental stores. Of the total investment, the foreign-owned firms were larger in size
56.5 per cent was foreign-owned. Investment and were relatively more advanced in terms
in hypermarkets was substantial, with 47 of the of management approaches, operational
81 approved hypermarkets being in operation systems, technology and productivity. In
as at 2005. terms of revenue generation, the largest
segment of the wholesale trade was in
Since the late 1990s, the policy liberalisation non-agricultural intermediate products,
had been introduced to attract foreign followed by agricultural produce, covering
participation in hypermarkets, superstores, fruits and vegetables, livestock and poultry,
departmental stores and specialty stores. food, beverages and tobacco, and household
The foreign operators are larger, adopting goods.
127
Retail Trade attributed to the rise in e-commerce
Based on the Census of Distributive Trade transactions in the business-to-business (B2B)
2002, for reference year 2001, out of the total segment from RM7.7 billion to RM29.3
of 153,660 retail establishments (other than billion, while the business-to-consumer (B2C)
motor vehicles and restaurants), 41.9 per cent increased from RM3.4 billion to RM7.4 billion
were involved in specialised stores, followed over the same period. In terms of business
by 33.1 per cent in non-specialised stores, such sector, more banks, bookshops, ticketing
as provision stores, supermarkets, superstores, agents and cinemas offered their services
hypermarkets, convenience stores and mini through on-line transactions.
markets. It is estimated that 99.7 per cent of
retail establishments were Malaysian-owned. During the IMP2 period, an important feature
of the distributive trade services sub-sector
The retail trade business is dominated by was the development of its linkages with the
the specialised retail outlets. In 2001, they transport and communication, agriculture,
constituted 66.8 per cent of the total number manufacturing and tourism sectors. The
of establishments of 153,660 and generated distributive trade sub-sector also witnessed
71.4 per cent of the total revenue of RM71.6 increased linkages with the financial sector
billion in retail trade. Nevertheless, the non- as a result of the rising trend in cashless
specialised retailers are becoming increasingly transactions.
visible, as reflected in the number of outlets
and sales revenue of provision stores. Although Construction Services
the number of departmental stores increased There are two categories of construction
only marginally from 29 in 2000 to 33 in 2005, services:
the total sales volume increased from RM638
million in 2000 to RM883 million in 2005. • general construction works, comprising
building and civil engineering construction;
The number of franchisors increased from and
90 in 2000 to 204 in 2005. In terms of
franchisees, the number increased from 2,159 • specialist trade or works, consisting of,
in 2000 to 2,584 in 2005. By business sector, among others, mechanical works, electrical
the franchisees were mainly involved in the and air-conditioning works, and other
distribution of household, food and automotive specialist trade or works, such as plumbing,
products. sewerage and sanitary works; painting
works; carpentry, tiling and flooring works;
The number of direct selling licences and glass works.
registered a sharp decline from 772 in 1996 to
385 in 2001. From 2002 onwards, the industry Prior to the financial crisis of 1997, the sector
witnessed an expansion, with the number of was growing faster than the overall GDP
licences issued in 2005 totalling 569. Sales growth, driven by strong demand for properties
turnover from direct selling activities increased and substantial investments in public
from RM4.5 billion in 2000 to RM5.3 billion infrastructure. At its peak performance in
in 2005. Direct selling activities were 1997, the sector registered value-added of
mainly involved in the distribution of locally RM9.5 billion, representing 4.8 per cent of
manufactured products, such as herbal GDP. In 1998, following the financial crisis,
and other health supplements, handicraft, the sector contracted by 24 per cent.
cosmetics, food products and footwear. Subsequently, the sector recorded a gradual
recovery. Nevertheless, its contribution to the
E-commerce grew at an average annual rate overall GDP decreased from 4.7 per cent in
of 81.8 per cent from RM11.1 billion in 2003 1996 to 2.7 per cent in 2005. In 2005, the
to RM36.7 billion in 2005. This was largely sector employed a total of 759,600 workers,
128
absorbing 7 per cent of the total workforce of Table 6.4:
10.9 million. Profile of Construction Services Sub-
Sector, 2002
An increasing number of Malaysian
Output Size Establishments Gross Output
construction firms have provided construction
services to overseas markets, such as India, Number Share RM billion Share
West Asia and South Africa. As at 2005, the (%) (%)
Construction Industry Development Board Total 4,328 100.0 41.7 100.0

(CIDB) had facilitated 76 Malaysian
construction companies in undertaking a total Less than
RM10 million 3,447 79.6 10.4 24.9
of 316 projects, worth RM17.6 billion, in these RM10 million -
overseas markets. RM100 million 837 19.3 21.3 51.1
More than
RM100 million 44 1.1 10.0 24.0
Gross output of construction services was
contributed substantially by a few large Source: Survey of Construction Industry, Department of Statistics,
Malaysia
construction firms (output capacity of above Note: The survey covered only companies with value of work
RM100 million). In 2002, these firms exceeding RM500,000
numbered 44 and contributed 24 per cent of the

total value of gross output. In contrast, 3,447 special trades (15.6 per cent). Value-added
construction companies recorded output generated by the construction services sub-
capacity of less than RM10 million, and 837 sector grew steadily from RM4.4 billion in
companies, between RM10 million and 1990 to RM14.8 billion in 2002.
RM100 million.
Education and Training Services
Construction services are characterised by Education and training services cover private
distinct market segments between the private higher education (college and university
and public sectors. Medium to high-cost education, and commercial and other
residential housing and non-residential technical education) and adult and other
buildings are undertaken largely by the private vocational education (post-secondary non-
sector, while low-cost housing, and public tertiary education, tertiary education and skills
amenities and infrastructure works are training).
implemented by the Government.
Education and training services are
In 2002, of the total value of RM40.8 billion in an important supplier of qualified and
construction works undertaken, 65.9 per cent trained workforce for industries and
was by the private sector. Civil engineering services. The provision of education services
works recorded the highest contribution to has been undertaken traditionally by the
gross output, at 38.4 per cent, followed by Government. With liberalisation in the
residential construction (23.7 per cent), non- mid-1990s, there was an increasing number
residential construction (22.3 per cent) and of private higher learning and training
Table 6.5:
Performance of Construction Sector 1990, 1996 and 2002
Year Gross Output Costs of Inputs Value-Added of Employment
(RM billion) (RM billion) Surveyed Companies (RM billion) (Persons)
2002 41.8 27.0 14.8 455,663

1996 44.6 27.5 17.2 627,369
1990 11.9 7.6 4.4 305,547
Source: Survey of Construction Industry, Department of Statistics, Malaysia
129
institutions. Public-funded institutions for The presence of branch campuses of foreign
education and training services include universities from Australia and the United
universities, teacher training colleges, Kingdom (UK) provides additional choices in
polytechnics and colleges, and vocational education and training for Malaysians. These
institutions, while the private sector is involved establishments also help to enhance private
in universities and colleges, and commercial education services by attracting foreign
and other technical institutions. students, who wish to pursue qualifications
from prestigious universities of developed
During the period 2003-2005, a total of countries, to study in Malaysia.
287 private educational establishments were
approved by Ministry of Higher Education, The main features of private non-university
involving a total investment of RM273 million. status colleges and institutions are:
These establishments were largely Malaysian-
owned (89.4 per cent), with an employment • their number grew from 354 in 1996
potential of 2,395 persons. to a peak of 632 in 2000 and consolidated to
532 in 2005. These institutions vary, in
The liberalisation on the supply of education terms of size, facilities and programmes
has facilitated private sector participation offered;
in education and training services. During
the 1990s, local private universities and • some of them offer diploma and certificate
offshore campuses of foreign universities courses for professional qualifications,
and private colleges were established, with and franchised degree programmes of
the latter conducting all segments of foreign foreign universities. They also conduct
degree programmes locally. examinations on behalf of professional
bodies in Malaysia, such as the Malaysian
A number of the providers of education and Institute of Accountancy, Institution of
training services have gained international Engineers Malaysia, Institute of Bankers
recognition. As at 2005, three colleges have Malaysia and National Vocational Training
become public listed companies and have been Council; and
recognised as international education providers.
Some of the internal courses of the private • presently, there are 26 private colleges
higher educational institutions have also that have been accredited by universities
been accredited by internationally renowned from the UK, Australia and France to
universities. conduct full degree programmes in
Malaysia.
Private Education Institutions
Presently, there are 16 private universities, of Enrolment in private higher education
which 11 are Malaysian-owned and the institutions increased from 50,840 in 1995 to
remaining five are branch campuses 341,310 in 2005. Of these, 38.5 per cent were
of foreign universities. In addition, there are 11 in diploma courses, 32.4 per cent in degree
university colleges operating in the country. courses and 27.8 per cent in certificate courses.
In 2005, a total of 41,312 foreign students were
These institutions award bachelor degrees and enrolled in higher education institutions. The
other higher qualifications, mainly in business, majority of the foreign students were from the
applied sciences, IT, engineering and medical People's Republic of China, Indonesia,
disciplines. With internationally recognised Thailand, Bangladesh, Republic of Korea,
qualifications, as well as relatively lower fees, Pakistan, India, as well as West Asia and
education in these institutions is attractive and Africa. The main fields of studies were
accessible to both Malaysian and international business and administration, arts, design and
students. music.
130
Technical Education and cent of the value-added and private healthcare,
Vocational Training 40 per cent.
There are numerous private technical
education and vocational training providers. During the period 1990-2000, private
These providers assume an important role, healthcare services grew at an average annual
offering affordable courses to meet the demand rate of 8 per cent, higher than the 5.4 per cent
in niche areas. The number of private technical growth of the public healthcare service. This
education and vocational training providers, was due to the liberalisation of Government
accredited by National Vocational Training policy and a greater demand for such services
Council, increased from 316 in 2000 to 1,330 by the higher income group.
in 2005. The output of these training
institutions increased from 18,725 students in In 1999, gross output in current prices of
2000 to 33,111 in 2005. the private healthcare services (excluding
allied health and nursing care, and social work
Commercial and Professional services) was estimated at RM2.9 billion.
Education This was contributed largely by private
Specialised industrial, commercial and hospitals, including maternity homes, at 52.7
professional training and continuous per cent, followed by medical services (41.7
professional education are provided by various per cent), dental services (5.2 per cent) and
professional bodies, trade associations and veterinary services (0.5 per cent).
training organisations. These organisations
focus on education and training activities in The main features of the private healthcare
specialised skills and competencies, required services are:
by the profession or trade. They include
the Federation of Malaysian Manufacturers, • medical services constituted the bulk
Institute of Manufacturing, Malaysian Institute (2,688 or 71.4 per cent) of the total
of Certified Public Accountants, Institution number of establishments of 3,763,
of Engineers Malaysia, Institute of Architects followed by dental services (20.5 per cent),
Malaysia and the Malaysian Institute of hospitals (6 per cent) and veterinary
Management. services (2.1 per cent);
Health Services • there are two large private healthcare

Health services cover the provision of service providers. Together, they account
healthcare services, such as hospital services, for 24 per cent of the total number of beds
medical and dental services, social work in private hospitals. There are also six
services (for example, nursing homes), human medium-sized private hospitals, with an
health activities and veterinary services. average number of 286 beds per hospital,
and 15 other smaller private hospitals, with
The value chain of the health services sub- less than 200 beds each;
sector includes the manufacture, provision
and distribution of pharmaceutical products, • the private hospitals are concentrated
medical equipment and devices, health in urban areas, in particular, Selangor
insurance, R&D, and education and training and the Federal Territory. In 2004, of
of medical personnel. the total private hospital beds in Malaysia,
44.9 per cent were in Selangor and
According to a study conducted in 2003 by the Federal Territory, followed by Pulau
National Economic Action Council, value- Pinang (18.5 per cent), Johor (7.6 per cent),
added of health services amounted to RM2.5 Perak (7.4 per cent) and Melaka (7.2 per
billion in 2000, constituting 1.2 per cent of the cent). This indicates that private hospitals
GDP. Public healthcare accounted for 60 per cater to the needs of the higher income
131
Table 6.6:
Private Healthcare - Number of Establishments and Workers, 2001
Number of Establishments Share (%) Number of Workers Share (%)
Total 3,763 100.0 43,437 100.0
Medical services 2,688 71.4 21,223 48.8

Dental services 773 20.5 3,281 7.6
Hospitals 224 6.0 18,709 43.1
Veterinary services 78 2.1 224 0.5
Source: National Economic Action Council Report, 2003
group of the urban population, including services, and transport companies. The
expatriates; and scope of tourism services has progressed
from supplying services on current mass
• medical services accounted for 48.8 per products and markets to more innovative
cent of the total employment, followed by tourism packages. These include eco-tourism,
hospitals (43.1 per cent). agro-tourism, edu-tourism, health tourism,
sports tourism and event organisation
While private hospitals comprised 62 per cent (meetings, incentives, conferences and
of the total number of hospitals, they accounted exhibitions-MICE). Further growth is expected
for only 22 per cent of the number of beds, in these new niche markets, which include long
reflecting their smaller size, compared with and medium haul markets.
Government hospitals. However, private
hospitals have a higher ratio of doctors to For the period 1996-2005, total tourist receipts
beds (10:19), compared with Government had increased from RM10.3 billion to RM31
hospitals (10:40). billion, reflecting an average annual growth
rate of 12.9 per cent. For the same period,
During the period 2003-2005, a total of tourist arrivals increased from 7.1 million to
25 private hospitals were approved by Ministry 16.4 million, with an average annual growth
of Health, involving a total investment of rate of 8.1 per cent.
RM89 million. All the establishments are
wholly Malaysian-owned, with potential ASEAN countries continued to account for
employment of 745 workers. more than 70 per cent of total tourist arrival.
Within ASEAN countries, Singapore and
Tourism Services Thailand accounted for more than 60 per cent
Tourism services comprise hotels, resorts, of tourist arrivals. Tourist arrivals from West
lodging owners and operators, tour operators, Asia increased from 31,371 in 1996 to 164,000
travel agencies, restaurant and catering in 2005.
Table 6.7: The tourism services sub-sector is a significant

Healthcare Sector - Key Indicators, contributor to foreign exchange earnings,
2004 which increased from RM10.3 billion in 1996
Public Private Total to RM29.6 billion in 2004. The sub-sector is
Malaysia's second largest source of foreign
No. of hospitals 131 218 349
exchange earnings, after the manufacturing
No. of beds 37,280 10,542 47,822
Doctors 9,410 8,836 18,246 sector. In 2005, foreign exchange earnings
Doctors - beds ratio 10:40 10:19 10:26 grew by 4.7 per cent to RM31 billion.
Beds - population ratio 1:686 1:2,427 1:535
Dentists 1,111 1,439 2,550
Nurses 30,002 10,218 40,220 Per capita tourist expenditure expanded at the
rate of 4.4 per cent from RM1,444 in 1996 to
Source: Health Facts 2004, Ministry of Health, Malaysia
132
RM1,890 in 2005. Main components of tourist (hotels rated 3-star and below) were granted
expenditure were accommodation, shopping tax incentives. Of the total investment of
and food and beverages. The average length of RM20.9 billion, 80 per cent or RM18.4 billion
stay of tourists in Malaysia had also increased was for the establishment of new hotels.
from 5.4 nights in 1996 to 7.2 nights in 2005.
Specialised Tourism Products and
The tourism services sub-sector is also a major Services
contributor to employment, providing 451,000 Specialised tourism projects cover indoor and
employment opportunities in 2005. The major outdoor theme parks, safaris, agricultural parks
source of employment was in hotels and other and recreational camps. As at 2004, there were
lodging services, which increased steadily by 19 specialised tourism projects in strategic
more than two-fold from 39,000 workers in locations, such as Genting Highlands, Fraser's
1995 to 91,156 in 2005. It is projected that by Hill, Cameron Highlands and national parks. In
2010, a total of 520,700 direct employment addition, there are also service providers in the
opportunities will be created in the sub-sector. tourism related services, for example,
convention and exhibition centres which are an
Hotels and Lodgings important source of growth for the tourism
In 2005, there were 2,256 hotels and other sub-sector, due to their capacity to attract high
lodging places. Within the hotel segment, the spending business travellers. In 2005, a total of
4-star and 5-star hotels account for 19 per cent, 3,230 international conventions were organised
while the 2-star and 3-star hotels formed the in Malaysia, with foreign delegate arrivals of
bulk of the number of hotels (36 per cent). 775,286, an increase of 63.7 per cent from
Total number of hotel rooms grew from 94,744 473,486 arrivals in 2001. These international
in 1995 to reach 170,873 in 2005 and is events generated about RM3 billion in tourist
projected to further increase to 247,008 by receipts from foreign business travellers in
2010. Of the hotels rated by the Ministry of 2005.
Tourism, Kuala Lumpur has the highest
proportion of luxury hotels, followed by Pulau To enhance the appeal of Malaysia as a
Pinang and Selangor. Sarawak has the highest tourist destination, continual efforts were
number of budget hotels, followed by Sabah made to promote the country's traditional
and Kuala Lumpur. advantages, that is, its cultural and natural
heritage. Continuous effort has been expanded
For the period 2003-2005, a total of 85 hotels by the Government to further enhance the
and tourism projects have been approved by attractiveness of the country's historical and
the Ministry of Tourism, involving a total cultural advantages. Among specialised
investment of RM4.9 billion, of which 36.7 per tourism products and services promoted
cent were from foreign sources. These projects include MICE tourism, sports and recreational
are expected to provide potential direct tourism, thematic events, eco-tourism, health
employment for 7,296 workers. tourism, education tourism, Malaysia
My Second Home Programme, and Agro-
A total of 360 hotel projects were granted tax Tourism.
incentives during the IMP2 period, of which
309 projects were the establishment of new Travel Agencies and Tour
hotels and 51 projects were expansion, Operators
refurbishment or modernisation of existing In tandem with the growth in hotels and other
hotels. During the same period, a total of 30 lodging places, the number of travel and tour
tourist projects, including both in-door and out- establishments also increased from 744 in 1990
door theme parks and safaris, were granted tax to 2,383 in 2005. In 2005, a total of 20,610
incentives. As a measure to encourage more licences were issued to tour coach and car
domestic tourism, a total of 180 budget hotels rental operators.
133
Logistics communication, grew at an average annual rate
The logistics services which comprise transport of 6.5 per cent. The growth of this sub-sector
as its core element and related integrated was in line with the rapid expansion of the
services such as warehousing, distribution and country's manufacturing base and external
forwarding, serves as an important link for trade.
Malaysia's industrialisation and international
trade. The transport sector covers ports, In 2005, the transport, storage and
airports, roads, railways and inland haulage communication services sub-sector contributed
services. Although transport comprises several RM23.2 billion or 8.8 per cent of GDP.
modes, more than 90 per cent of international According to the Census on Transport and
trade is seaborne, with ports providing the Communication 2004 undertaken by
important interface between shipping and land Department of Statistics, there were 3,816
transport. Ports are linked to the hinterland and establishments in the sub-sector, contributing
marketplace largely by roads, railway, haulage RM77.9 billion in fixed assets and employing
services and, to some extent, through major 217,671 workers. Within the transport
airports. The transport sector is also supported component (excluding services allied
by a number of integrated logistics services and to transport and post, courier and
together they provide the logistics support to telecommunications), land transport services
domestic- and export-oriented primary constituted the major sub-component, in terms
producers and manufacturers. of number of establishments (1,082),
employment (60,289) and fixed assets (RM15
During the IMP2 period, the transportation billion), and followed by maritime transport.
sub-sector, including storage and The road haulage sub-component was the
Table 6.8:
Economic Indicators by Type of Transportation Services, including Storage and
Communication
Transport Service 2003
Establishments Employment Value-Added Size (Asset)

(Number) (Persons) (RM million) (RM million)
Total 3,816 217,671 25,723 77,902
Maritime 403 19,663 3,972 12,769

Sea transport 348 18,318 3,903 12,702
Inland water transport 55 1,345 69 67
Land transport 1,082 60,289 2,136 15,032

Rail 4 6,916 198 12,412
Public bus transport 259 18,146 381 711
Road haulage 819 35,227 1,557 1,909
Air 15 24,620 1,421 2,053
Services allied to transport 2,171 54,056 4,935 17,452

Cargo handling/stevedoring 138 5,917 220 227
Storage and warehousing services 35 2,672 156 366
Highway operations services 16 5,049 1,882 9,811
Port operations services 9 9,976 1,582 5,733
Shipping and forwarding agencies services 750 14,754 787 445
Others1 1,223 15,688 308 870
Post and courier 84 21,342 721 453
Telecommunications 61 37,701 12,538 30,143
Source: Census on Transport and Communications, Department of Statistics, Malaysia

Note: 1 Car parking services and travel agencies and tour operator services
134
most labour intensive, with employment of and imports, including container and non-
35,227 workers, followed by air (24,620) and container cargo, was 252.6 million tonnes,
maritime transport (18,318). comprising 135.1 million tonnes (53.5 per
cent) for exports and 117.5 million tonnes
In 2005, the transportation component of (46.5 per cent) for imports. In 2005,
the balance of payments registered a containerised cargo contributed 139.2 million
deficit, amounting to RM15.7 billion, tonnes (55.1 per cent) of the total throughput.
compared with RM6.5 billion in 1996. This Non-container trade, which includes all
widening deficit reflected Malaysia's continued commodities that are carried as bulk as well as
reliance on foreign transportation and logistics general cargo, contributed 113.4 million tonnes
services. of total throughput in 2005.
Overall Freight Transport Air freight cargo comprises mainly high value
The overall volume of freight transport in and time sensitive cargo, such as electronics
Malaysia by sea, air and rail had increased and ICT products, biotechnology, medical
during the period 1990-2005. The port products and perishable items, such as fresh
component handled the largest portion of fruits and flowers. Electronics and ICT
freight traffic in 2005. products are mainly exported by air through
Penang Airport (60 per cent) and Kuala
Table 6.9: Lumpur International Airport (40 per cent).
Freight Traffic by Port, Airport and The volume of air cargo trade totalled 1 million
Rail, 1990-2005 tonne in 2005.
Port1 Airport Rail It is estimated that only about 7 per cent of the
('000 tonnes) ('000 tonnes) ('000 tonnes) seaborne traffic is transported via rail. In terms
of inland movements, railway carries less than
2005 252,620 1,006.8 4,031 1 per cent of the cargo generated by the
2000 190,417 775.1 5,481
1995 147,378 482.0 5,249 economy. Railway freight contributed 4
1990 99,897 241.6 4,631 million tonnes to the total cargo volume in
2005.
Sources: Ninth Malaysia Plan and Ministry of Transport
Note: 1Includes Port Klang, Penang, Pasir Gudang, Kuantan,
Bintulu, Tanjung Bruas, Kuching, Miri, Rajang, Kota In 2005, a total of 71 projects were approved
Kinabalu, Lahad Datu, Sandakan, Tawau, Port Dickson,
Kemaman, Teluk Ewa and Tanjung Pelepas. Data refer to for the transport sub-sector. These projects are
only 17 main ports, which differ from data contained in Ninth involved in maritime transport, aviation, and
Malaysia Plan, which cover all 24 ports.
highway construction and maintenance. Total
approved investment was higher in 2005, at
Malaysian ports handle a variety of cargo, RM11 billion, compared with RM9.3 billion in
including palm oil, wood products, 2004 (51 projects). The bulk of investments
machinery, appliances and parts, textiles and approved in 2005 were domestic investments
clothing, rubber products, chemicals and (RM10.9 billion or 99.6 per cent), while
chemical products. Port Klang handled the foreign investments amounted to RM41.5
largest volume of cargo, mainly containerised, million.
followed by Bintulu Port, which largely
handled only one major commodity that is, OUTLOOK
liquefied natural gas. Other large ports in
Malaysia include the Port of Tanjung Pelepas The increase in services activities and
(PTP), Johor Port and Penang Port. investments in Malaysia is expected to be
translated into benefits for the economy as a
In 2005, total cargo throughput or the volume whole. These include increase in employment
handled by Malaysian ports, for both exports opportunities, enhancement and upgrading of
135
knowledge and skills in the various services sector. Statistics on investment in the
sub-sectors and levels, access to foreign various services sub-sectors in Malaysia are
markets, and spin-offs into other sectors of being collated to develop a comprehensive
the economy, including procurement of goods database on services investments. The database
and value-added services. The increase in the could assist in the formulation of specific
number of regional establishments which cater policies and incentives to promote identified
to the needs of MNCs in both manufacturing- services.
related services and services activities will
strengthen Malaysia's position as a major With the increasing pace of trade and
trading nation in the region. investment liberalisation at the multilateral
and regional levels and the prospects for
The promotion of the services sector is increased economic benefits through bilateral
being intensified. MITI and its agencies cooperation, including free trade arrangements
are collaborating with the various ministries in services between Malaysia and its trading
and regulatory agencies to identify specific partners, it is essential for Malaysia's service
sectors for promotion, formulate promotional suppliers to strategise in order to enhance
programmes and activities, and develop their competitiveness to meet the challenges
specific investment incentives. An initial of services liberalisation, as well as to
contact point for investors has been established take advantage of trade and investment
at MIDA to assist investors in services in opportunities created in the services sector in
a similar way as investors in the manufacturing other countries.
136
Development Of Small And Medium
Chapter 7
Enterprises
Table 7.1:
OVERVIEW Distribution of SMEs in Services
Sector, 2005
As at December 2005, there were 518,996
No. of SME Share
small and medium enterprises (SMEs) or Establishments (%)
99.2 per cent of total establishments. Of this,
449,004 (86.5 per cent) SME establishments Total 449,004 100.0
were in the services sector, 37,866 (7.3 per Wholesale and retail 248,221 55.3
cent) in the manufacturing sector and 32,126 Restaurants 63,013 14.0
(6.2 per cent) in the agriculture sector. Selected services1 43,626 9.7
Transport and
communication 27,980 6.2
Chart 7.1: Financial intermediaries 19,108 4.3
Profile of SMEs by Sector Professional services 11,120 2.5
Real estate activities 8,779 2.0
Business/management
consultancy services 8,352 1.9
7.3% Health2 7,759 1.7
Education 7,618 1.7
Hotel 2,275 0.5
6.2%
Computer services 1,095 0.2
86.5%
Telecommunications 58 neg.

Note: 1 Include rental services, advertising, research and
development, business activities (labour recruitment, building
cleaning, packaging services, and duplication services),
recreation, cultural and sporting activities (motion picture
projection, recreation clubs).
Services Manufacturing 2
Include hospital, medical, dental and veterinary services,
herbalists, homeopathy, and foot reflexology.
Agriculture neg. - negligible
Source: Small and Medium Industries Development Corporation In the manufacturing sector, the majority
of SMEs were in textiles and apparel
(23.2 per cent), followed by food and
The significant increase in the number of SME beverages (15 per cent) and metal and metal
establishments in the manufacturing sector in products (12.4 per cent).
2005 to 37,866, compared with 18,271 in 2004
was due partly to the new definition of SMEs Contribution of SMEs to the
adopted by the National SME Development Manufacturing Sector
Council. In 2005, SMEs contributed 29.6 per cent or
RM81.7 billion to the total manufacturing
In the services sector, the majority of SMEs output of RM276 billion, 25.9 per cent to
were in wholesale and retail, accounting for value-added and 31.1 per cent to total
55.3 per cent of total establishments, followed employment. Compared with the performance
by restaurants (14 per cent), transport and in 2004, the contribution of SMEs in terms
communication (6.2 per cent), financial of output has increased by 8.6 per cent,
intermediaries (4.3 per cent) and professional value-added (9.2 per cent) and employment
services (2.5 per cent). (2.5 per cent).
137
The higher contribution by SMEs in the chemicals and chemical products, food and
manufacturing sector was attributed to the beverages, metal and metal products, and
strong growth in both output and added rubber and plastics products. Chemicals and
value of four major sub-sectors, namely chemical products recorded the highest growth
Box 7.1: Adoption of Standard Definition for Small and Medium Enterprises
The National SME Development Council at its second meeting on 2 December 2004, had approved the adoption of a
standard definition for Small and Medium Enterprises (SMEs). The standard definition is intended to facilitate the
identification of SMEs for the purpose of providing assistance through support programmes from the various ministries and
agencies responsible for the development of SMEs.
Generally, the definition of SMEs is divided into:
i) Manufacturing, manufacturing-related services and agro-based companies with full-time employees not exceeding
150 or with annual sales turnover not exceeding RM25 million; and
ii) Services, primary agriculture and ICT enterprises with full-time employees not exceeding 50 or with annual sales
turnover not exceeding RM5 million.
SMEs are further categorised into micro, small and medium enterprises as each of these categories requires different
treatment and support assistance, depending on their levels of growth.
Manufacturing, manufacturing-related Services, primary agriculture and information

services and agro-based companies and communication technology enterprises
Micro Annual sales turnover not exceeding RM250,000 Annual sales turnover not exceeding RM200,000
or or
full time employees not more than five. full time employees not more than five.
Small Annual sales turnover between RM250,000 and Annual sales turnover between RM200,000 and
RM10 million RM1 million
or or
full time employees between five and 50. full time employees between five and 20.
Medium Annual sales turnover between RM10 million and Annual sales turnover between RM1 million and
RM25 million RM5 million
or or
full time employees between 50 and 150. full time employees between 20 and 50.
Box 7.2: Census on Establishments by Department of Statistics, Malaysia in 2005
In 2005, the Department of Statistics, Malaysia, undertook a Census on Establishments to form the basis for a
comprehensive database on SMEs in the country. The Census was sent to approximately 1.7 million establishments and
data collection was implemented through postal survey and face-to-face interviews.
Preliminary result of the Census (December 2005) indicated that a total of 523,132 establishments could be segregated into
services, manufacturing and agriculture sectors. The services sector is the largest with 451,516 establishments (86.3 per
cent), followed by the manufacturing sector with 39,219 establishments (7.5 per cent) and agriculture sector with 32,397
establishments (6.2 per cent). In the services sector, 99.4 per cent or 449,004 establishments, are SMEs, while for the
manufacturing sector, out of 39,219 companies, a total of 37,866 or 96.5 per cent are SMEs.
Continued...
138
Profile of Establishments based on the Census on Establishments by Department of Statistics, Malaysia, 2005
Size Manufacturing Services Agriculture Total
Micro 20,952 360,912 29,985 411,849

Small 14,955 78,917 1,618 95,490
Medium 1,959 9,175 523 11,657
Total SMEs 37,866 449,004 32,126 518,996
Large 1,353 2,512 271 4,136
Total Establishments 39,219 451,516 32,397 523,132

% of Total Establishments 7.5 86.3 6.2 100.0
Table 7.2:
Distribution of SMEs in Manufacturing Sector, 2005
Sub-Sector No. of SME Establishments Share (%)
Total 37,866 100
Textiles and apparels 8,779 23.2

Food and beverages 5,664 15.0
Metal and metal products 4,686 12.4
Publishing, printing and reproducing of recorded media 2,806 7.4
Furniture 2,286 6.0
Rubber and plastics products 2,166 5.7
Wood and wood products 2,052 5.4
Non-metallic mineral products 1,650 4.4
Machinery and equipment 1,390 3.7
Electrical and electronics 1,077 2.8
Chemicals and chemical products 1,047 2.8
Transport equipment 699 1.9
Paper and paper products 677 1.8
Leather products 497 1.3
Tobacco products 193 0.5
Medical, precision and optical instrument 167 0.4
Recycling 167 0.4
Petroleum products 75 0.2
Manufacturing not elsewhere classified 1,788 4.7
of 18 per cent and 19.9 per cent, respectively • Grant for Enhancing Product Packaging,
for output and added value. Design and Labelling Capabilities of
SMEs, with a total allocation of RM100
New Initiatives million;
In 2005, the Government introduced three
new grant schemes for SMEs to enhance • Grant for Enhancing Marketing Skills of
their product packaging, design and labelling SMEs (RM50 million); and
capabilities, develop and promote halal
products and enhance marketing skills of • Grant for Development and Promotion of
employees in SMEs: Halal Products (RM10 million).
139
Table 7.3: SMEs in all sectors towards increasing
Contribution by SMEs in their contributions to the economy. The
Manufacturing Sector Blueprint includes a total of 245 programmes,
covering both capacity building programmes
Indicator 2005 2004 Growth
(%) and greater access to financing, for
implementation by various ministries and
Output agencies.
(RM billion) 81.7 75.2 8.6
Share (%) 29.6 29.3
Value-Added Out of the 245 programmes, a total of 27
(RM billion) 16.6 15.2 9.2 programmes will be implemented by the
Share (%) 25.9 25.5
Employment Ministry of International Trade and Industry
(Persons) 394,670 384,935 2.5 (MITI) and its agencies, with a budget
Share (%) 31.1 31.0 allocation of RM233.1 million. The objective
Computed from Annual Survey of Manufacturing Industries, of these programmes is to enhance the viability
Department of Statistics, Malaysia
and competitiveness of SMEs in the
manufacturing and services sectors. Focused
ISSUES AND CHALLENGES development areas include provision of
enabling infrastructure, marketing and
The SMEs are still dependent on the domestic promotion, technology development, and
market. Based on a survey undertaken by awareness and outreach, as well as access to
Small and Medium Industries Development financing.
Corporation (SMIDEC), SMEs exported only
20.7 per cent of their total output in 2005, PROGRAMMES FOR SME DEVELOPMENT
compared with 26 per cent in 2004.
In line with Government initiatives in
In general, SMEs are still faced with issues of: addressing issues faced by SMEs, SMIDEC
has implemented various developmental
• market access; programmes to assist SMEs in market
• advancement of technology; accessibility, capacity building and technology
• innovation and creativity; improvement, as well as enhancing their
• access to financing; competitiveness.
• access to information; and
• human resource development. Market Access
The Industrial Linkage Programme (ILP),
The Government has given greater focus to which was incepted in 1997, is being
various planning and policy initiatives for the implemented by SMIDEC to facilitate
development and promotion of SMEs. In view SMEs in achieving the required competencies
of the significant presence of SMEs, as well as to become reliable and competitive suppliers
their role as major a contributor to economic of parts and components as well as services.
development, the National SME Development
Council was established to facilitate the The ILP was also extended to incorporate
process of inter-ministry and inter-agency the resource-based sector, specifically the
coordination in the implementation of food processing and consumer products
comprehensive policies and programmes for sub-sector. SMIDEC has collaborated with
the development of SMEs. foreign-based hypermarket chains in
identifying and linking Malaysian SMEs
In 2005, the National SME Development which have the capability and capacity to
Council endorsed the National SME become their suppliers. In 2005, a total of 108
Development Blueprint 2006 to promote the SMEs in the food and non-food sub-sectors
development of competitive and resilient were recommended by SMIDEC as suppliers
140
to hypermarket chains. Of these, 31 SMEs Human Resource Development
have been appointed as suppliers to these Malaysian SMEs continued to face a challenging
hypermarkets, with total sales valued at business environment, which required
RM2.1 million. Six of them have progressed employees of SMEs to constantly improve their
to become suppliers to the hypermarket chains skills at both the technical and managerial
in the global network. levels. In 2005, a total of 1,361 employees of
SMEs participated in skills upgrading
As at December 2005, a total of 1,088 programmes held at 21 Skills Development
SMEs from various sectors were registered Centres. Of this, a total of 1,017 or 74.7 per cent
under the ILP, out of which 415 SMEs or were from the manufacturing sector and 344
38.1 per cent were linked to multinational (25.3 per cent) from the services sector.
corporations (MNCs) and large companies.
To date, this linkage programme has realised The five well-received training courses
actual total sales of RM335 million. among companies in the manufacturing sector
were footwear technology, ICT, industrial
SMEs were also given assistance in engineering, radiographic interpretation, and
exploring market opportunities and expanding safety and health. In the services sector,
market network through participation in SMEs participated in training courses on
international trade fairs and exhibitions. enhancement of marketing skills, which
Through business matching sessions, held included modules on effective selling,
in conjunction with SMIDEC's Annual management, customer account management,
Showcase - SMIDEX 2005 and the ASIAN customer care, customer relationship
SME Convention, a total of RM88.4 million management and excellent customer service.
in potential sales was generated. Potential
sales of RM8.4 million were also recorded In the area of capacity building, SMIDEC
through a mini product display, jointly collaborated with the Automotive Federation
organised with an MNC. of Malaysia and Japan External Trade
Organisation to implement the technical
SMEs were also encouraged to undertake experts programme for the automotive
productivity and quality improvement industry. The technical experts provided
activities, apart from acquiring related assistance in the form of technical consultancy
certifications to facilitate market access. services and human resource development,
Technical briefings in various certifications particularly related to utilising continuous
were conducted, namely the Hazard Analysis improvement approach to enhance productivity
Critical Control Point (HACCP), British and quality. As at 2005, a total of 118 SMEs
Retailers' Consortium Standard and Good have benefited from this programme.
Manufacturing Practice (GMP). In 2005, a
total of 100 SMEs successfully achieved The SME Expert Advisory Services offers
certifications under these schemes. SMEs technical assistance and advisory
services. As at December 2005, a total of 29
Assistance was given to SMEs to conform industry experts have been registered under the
to automotive standard and certification, SME Expert Advisory Panel programme.
namely the ISO/TS 16949, which is a Under this programme, the experts provide
prerequisite for SMEs in the automotive on-site advisory services, which include
sub-sector intending to become global technology improvement, conformance with
suppliers. SMIDEC, in collaboration with international standards, such as HACCP and
the national car manufacturers and the GMP, productivity improvement, automation,
respective automotive associations, had maintenance of machinery and equipment,
undertaken a project for 60 SMEs to acquire materials technology, process improvement
this certification. and ICT.
141
Advancement of Technology measurement parameters, a total of four
In 2005, a series of workshops on enhancing separate Communities of Practice were
the capabilities of SMEs, through technology established for the benchmarking programmes.
matching, was initiated to assist them in These included Enterprise 50 winners,
adopting the latest technologies to enhance SMIDEC grant recipients, retailers and
their products and processes, as well as to women entrepreneurs. A total of RM1 million
inform them on research findings that are was allocated to undertake the benchmarking
available for commercialisation. Through and best practices activities.
participation at these workshops, SMEs are
able to upgrade their product and process Regional Cooperation Programmes
capabilities.
SME Programmes under ASEAN
The application of ICT and adoption of latest In January 2005, Malaysia participated in
technologies have created SMEs that are the ASEAN-Japan Workshop on SME
competitive, in terms of costs and quality, and Development through Regional Trading
at the same time be able to respond in real time House in Medan, Indonesia. The objective of
to market demands and changes. The the workshop was to provide opportunities
RosettaNet Standard Grant Scheme provides and sharing of ideas in enhancing the role of
an interface for companies to communicate and SMEs in strengthening export market access
conduct business electronically in sourcing for by establishing a trading house.
parts and components, as well as services, with
their trading partners. Under the ASEAN-China Cooperation Fund,
Malaysia participated in a workshop on
In addition, the Soft Loan Scheme for ICT has 'Empowerment of Small Medium Enterprises
enabled SMEs to upgrade their engineering through Technological Capacity Building' in
design and manufacturing capabilities, as July 2005 in Bandung, Indonesia. The
well as acquire relevant software in the workshop was held with the objective of
services sector. This Soft Loan Scheme sharing best practices in policies and incentives
assists SMEs to enhance their business available to facilitate technology transfers
processes through the utilisation of enterprise to SMEs.
resource planning, computer-aided design and
manufacturing, point of sales system, tracking Following the directive by Leaders at the Eight
system, automated store management system ASEAN+3 Summit, the People's Republic of
and inventory management system. China organised the 'First High Level Seminar
on Promoting SME Development and
Benchmarking and Best Practices Investment in East Asia', in Beijing, from
The implementation of benchmarking 27-28 October, 2005. Malaysia presented
activities was intended to measure SMEs' two papers at the seminar, namely 'The Role
key performance indicators in a more efficient of SMEs in Malaysia's Economy' and 'SME
and systematic manner. The information Financing in Malaysia'.
gathered through this exercise was used by
SMEs to assess their level of achievement and The Beijing Initiative, an outcome of the
competitiveness in relation to their peers in the seminar, was adopted as a framework to
same sectors. SMIDEC collaborated with the improve cooperation in SME development
National Productivity Corporation (NPC) to among the participating countries. Work
provide benchmarking and sharing of best programmes outlined under the Initiative
practices for SMEs. included improving the investment and
financing environment for SMEs in the East
As different Communities of Practice of Asia region, exploring and establishing
SMEs would require different sets of investment financing schemes, as well as
142
strengthening the promotion of economic, • networking and clustering for innovative
trade and cooperation among SMEs in East SMEs;
Asia.
• establishing appropriate legal and
The Initiative agreed that the 'High Level regulatory structures;
Seminar on Promoting SME Development and
Investment in East Asia' be held on an annual • establishing a market consistent economic
basis. Highlights of the Initiative included environment; and
proposals to:
• developing methodologies to effectively
• establish a mechanism for regular measure processes in the implementation of
communication and negotiations; innovation programmes for SMEs.
• explore new fields of cooperation, enrich In 2005, Malaysia participated in various

cooperation content and enhance higher programmes implemented under the APEC
levels and modes of cooperation, as well as SME Working Group. Among the capacity
share knowledge and experiences to building programmes were:
promote the growth of SMEs;
• APEC Symposium on 'Industrial Clustering
• set up and improve multi-level investment for SMEs', held in Taiwan, in March 2005.
and financing system for SMEs; and Participants were able to share best
practices in the development of clustering
• further explore the development of regional for SMEs in their economy. Inputs from
infrastructural initiatives to promote the resource persons had been compiled into
ASEAN+3 SMEs, such as the establishment the Best Practices Guidelines for Industrial
of SME Regional Development Fund and Clustering;
SME Consultancy Service Centre.
• Workshop for SME Programme Managers
SME Programmes under APEC on Reducing SMEs' Compliance Cost, held
The 21st Meeting of the SME Working Group in Brunei Darussalam, in July 2005. The
and the SME Ministerial Meeting held in workshop focused on APEC's overall
August 2005, endorsed the Daegu Initiative on efforts in addressing standards-related
SME Innovation Action Plan. The Initiative is issues which tend to hinder intra-APEC
aimed at assisting APEC economies to identify trade;
factors that can be improved upon to accelerate
innovation and cooperation, and institute • Seminar on 'Enhancing the Business
efficient measures to facilitate SME innovation, Environment for Micro-Enterprises in
through voluntary reviews, information sharing the Asia-Pacific Region', held in Hanoi,
and recommendations among peers. Seven in August 2005. Participants were able
areas were given emphasis: to share experiences on supporting
policies for micro-enterprises, as well as
• developing human resources and propose policies and mechanisms to
technology through industry, educational enhance the business environment for such
and research institutions; enterprises;
• facilitating access to expert assistance and • Workshop on 'Best Practices on Mentoring

consulting services; Systems: Key to Reducing APEC SME
Loan Default', held in Bangkok, in July
• enhancing availability of capital to 2005. Workshop participants exchanged
innovative SMEs; best practices on APEC economies'
143
mentoring systems, with particular attention participants' knowledge in business processes
on reducing loan defaults among SMEs in practised by Korean SMEs, as well as upgrade
APEC economies; management skills of senior managers in
production technology. As at 2005, a total of
• Workshop on 'Micro and Small Enterprise 133 Malaysian SMEs have benefited from this
Financing: A Tool for Mainstreaming the programme, including 10 in that year.
Informal Sector', held in Peru, in July 2005.
Workshop participants analysed various The Technical Expert Programme with Japan
aspects of formalisation, including the External Trade Organisation was implemented
regulatory framework and how it can affect to assist automotive component manufacturers
the financing of micro, small and medium to improve efficiency, reduce wastage and
enterprises in APEC economies; and enhance preventive maintenance of machinery.
As at end 2005, a total of 70 automotive
• Seminar on 'Need and Availability of companies have benefited from this
Micro-Finance Service for Micro- programme.
Enterprise: Bringing Multi-Level Good
Practices into Local Context', held in Bali, In addition, SMIDEC has also collaborated
in August 2005. The seminar explored with the Department of International
micro-finance services, both on the demand Cooperation, Ministry of Economic Affairs,
and supply sides, based on a study Taiwan, to conduct a training course in Taiwan
conducted in 2004-2005 in the five APEC on 'Plastic Mould Design and Making for
economies, namely Malaysia, Thailand, the SMEs'. The objective of the programme was to
Philippines, Mexico and Indonesia. improve capacity, as well as upgrade
technology and equipment of local SMEs,
SME Programmes under United particularly in the mould and die industry. This
Nations Conference on Trade and programme benefited 18 participants from
Development Malaysia.
In 2005, Malaysia participated in the
'Expert Meeting on Enhancing Productive Resulting from the First Malaysia-Thailand
Capacity of Developing Country Firms Joint Trade Council Meeting held in May
through Internationalisation', organised by the 2005, Ministers of both countries agreed
United Nations Conference on Trade and to embark on close collaborative efforts
Development (UNCTAD). The objective of the in SME development. SMIDEC has been
meeting was to examine the emerging trends of given the task to cooperate with the Office
internationalisation through outward foreign of SMEs Promotion, Thailand, and both
direct investments, particularly with regard to parties have agreed to sign a Memorandum
SMEs, and identify policy measures for of Understanding on this collaboration.
investors from developing countries to retain
their competitiveness through investing The proposed areas of cooperation include:
abroad. Participants were also able to share
information and best practices in facilitating • exchanging of information on policies and
and supporting SMEs to internationalise their support programmes in relation to SME
operations. development;
Bilateral Cooperation Programmes • facilitating the establishment of business

Since 1998, SMIDEC, in collaboration with contacts, linkages and networking;
the Small Business Corporation of the
Republic of Korea, has been administering • co-organising meetings, seminars and
technical and managerial training programmes trade exhibitions to promote investments
for SMEs. The programme helped to enhance and joint ventures;
144
• exchanging study visits for capacity Table 7.4:
building purpose; and Approval of Soft Loans by State, 2005
State Approvals RM million
• cooperating in the area of research and
development. Total 149 84.8
Selangor 54 33.2
Collaboration in SME development, Perak 15 6.1
particularly in the area of capacity building, Pulau Pinang 13 10.5
was discussed at the First Malaysia - Uzbekistan Pahang 12 5.8
Joint Trade Council Meeting, held in October Sarawak 11 4.8
Kuala Lumpur 10 5.1
2005. Recognising the strength of Uzbekistan in Johor 9 5.8
the production of cotton, efforts are being made Sabah 8 5.1
to encourage Malaysian textile manufacturers to Terengganu 8 4.5
consider forming strategic alliances to source Melaka 3 0.7
Negeri Sembilan 3 1.6
for raw materials from Uzbekistan. Kelantan 2 1.5
Kedah 1 0.1
PERFORMANCE OF FINANCIAL ASSISTANCE Perlis nil nil
SCHEMES FOR SMEs Source: Malaysian Industrial Development Finance Berhad
Financial Assistance Schemes for loans and grants approved was the result
SMEs of promotional programmes undertaken by
The Government continues to provide financial SMIDEC in creating awareness among SMEs
assistance, in the form of grants and soft on the development and financial assistance
loans, to enhance the competitiveness of SMEs. offered.
In 2005, the number of approvals for grants
and soft loans increased by 48.4 per cent to Soft Loan Schemes
1,465, valued at RM104.6 million, compared Three soft loan schemes offered to SMEs
with 987 approvals, valued at RM42.9 million are Soft Loan for SMEs, Soft Loan for Factory
in 2004. Of the 1,465 approvals, 1,316 were Relocation and Soft Loan for ICT. These
for grants, amounting to RM19.8 million, while schemes are managed by the Malaysian
149 were for soft loans, valued at RM84.8 Industrial Development Finance Berhad
million. The increase in the number of (MIDF).
Chart 7.2: In 2005, a total of 149 loans, valued at

Approval of Soft Loans and Grants, RM84.8 million, were approved. In terms of
2005 approvals by state, Selangor obtained the
highest, with a total of 54 loan approvals,
amounting to RM33.2 million, followed by
19% Perak (15 approvals, valued at RM6.1 million)
and Pulau Pinang (13 approvals, valued at
RM10.6 million).
The Soft Loan for SMEs was introduced to

81%
assist existing as well as new start-up
companies to finance projects, fixed assets and
for use as working capital. In 2005, a total of
128 approvals were given, with loans
Soft Loans RM84.8 mil. Grant RM19.8 mil.
amounting to RM77.5 million. Among the
Sources: Small and Medium Industries Development Corporation and
Malaysian Industrial Development Finance Berhad
major recipients financed under the soft loan
scheme in 2005 were the wood and wood
145
Chart 7.3: Chart 7.4:
Approval of Soft Loans, 2005 Approval of Soft Loans by Sector, 2005
140 128
13.9%
120 10.7%
100 20.5%
Approvals
80
9.0% 0.6%
60
1.0%
40
16 1.2%
20 5 6.8% 1.3%
0 2.0%
-20 6.2% 5.0% 2.0%
5.6% 2.1%
6.2% 5.9%
SLSME SLICT SLFR
Soft Loan Schemes Wood & wood Paper & printing
products
Source : Malaysian Industrial Development Finance Berhad Machinery
Note : SLSME: Soft Loan for Small and Medium Enterprises Plastic products
SLICT : Soft Loan for ICT Adoption
Tourism
SLFR : Soft Loan for Factory Relocation
Non-metallic mineral
products Chemical products
products sub-sector (RM15.8 million), and the
services sector (RM9.8 million). In the services Services Electrical &
sector, the hotel sub-sector was approved the electronics
Transport equipment
highest amount of loan, valued at RM2.9 Mining & quarrying
million, followed by engineering services Basic iron & steel
(RM1.5 million) and warehousing (RM1.5 Food, beverages &
Fabricated metal tobacco
million).
Rubber products Miscellaneous
To encourage SMEs to relocate their operations manufacturing
Textiles & apparel
from non-designated industrial areas to
approved industrial sites, SMEs are provided Source: Malaysian Industrial Development Finance Berhad
with Soft Loan for Factory Relocation. In
2005, a total of RM4.5 million in loans was Collaboration with Financial
disbursed for factories to relocate their Institutions
operations. In addressing the financial needs of SMEs,
SMIDEC has signed a Memoranda of
The Soft Loan for ICT Adoption was Understanding with Bank Islam, Bank
introduced to assist SMEs in acquiring Muamalat and SME Bank to provide new
software and designing software, for financial packages to SMEs. In addition, joint
example, computer-aided design and advisory services in financial support facilities,
manufacturing. A total of 16 approvals technical advisory, training and management
were given, with loans amounting to counselling are available to SMEs.
RM2.8 million.
Grant Schemes
In 2005, the top three recipients of soft In 2005, a total of 1,316 projects for
loans under these three loan schemes financial grants, valued at RM19.8 million,
were wood and wood products, with a value were approved. Out of these, 66.9 per cent
of RM16.8 million, followed by services or 881 projects amounting to RM6 million
sector, including professional services, were approved under the Market
distributive trade and logistics, totalling Development Grant. This was followed by
RM11.8 million, and fabricated metals, RM9.3 324 projects under the Productivity and
million. Quality Improvement and Certification
146
Chart 7.5:
Approval of Grant Schemes, 2005
900 881
800
700
600
Approvals
500
400 324
300
200
100 61 22 16 10
0 2
Market Productivity Product & RosettaNet Packaging Development Business

Development & Quality Process & Labelling & Promotion Planning &
Improvement Improvement of Halal Development
& Certification Products
Grant Schemes
Source: Small and Medium Industries Development Corporation
Table 7.5: with 474 projects (36 per cent), followed

Approval of Grant Schemes by State, by Selangor, 237 projects (18 per cent),
2005 and Negeri Sembilan, 131 projects (9.9 per
cent).
State Approvals RM million
Total 1,316 9.7 The food and beverages sub-sector

recorded the highest approval of grants,
Johor 474 4.1
Selangor 237 7.2 valued at RM4.6 million, followed by
Negeri Sembilan 131 1.3 E&E (RM3.3 million), and machinery
Kedah 107 1.2 and engineering (RM2.1 million). For the
Kelantan 91 0.8
services sector, a total of 31 SMEs under
Melaka 57 0.6
Pulau Pinang 49 1.6 the wholesale and retail sub-sector were
Perak 43 0.7 given grants, amounting to RM200,000
Kuala Lumpur 43 1.5 in 2005, particularly for the purchase
Pahang 30 0.3
of equipment and consultancy services.
Perlis 24 0.2
Sarawak 18 0.2
Terengganu 8 0.1 Special Assistance Scheme for
Sabah 4 0.1 Women Entrepreneurs
Source: Small and Medium Industries Development Corporation The Special Assistance Scheme for Women
Entrepreneurs was introduced in 1999
to enable women entrepreneurs to have
Grant, valued at RM7.7 million, and greater access to financing. In 2005, total
61 projects, amounting to RM4.8 million, loans and grants amounting to RM8.5 million
under the Product and Process Improvement were approved to women entrepreneurs
Grant. under this scheme. Of this amount, a total of
RM1.5 million was approved for various
In terms of approvals by state, Johor grant schemes, and RM7 million were
recorded the highest uptake in 2005, approved as soft loans.
147
Chart 7.6: conjunction with the convention, pre-
Approval of Grant Schemes by Sector, arranged business matching sessions were
2005 organised and potential sales of RM42.5
million were recorded.
9.4% 7.6%
5.9%
In 2005, three Domestic Investment Seminars
5.4%
10.8% 3.9% were held in Kota Kinabalu, Kuching and
3.6% Melaka. The seminars, which were organised
3.0% in collaboration with the Malaysian Industrial
2.3% Development Authority (MIDA), attracted a
2.0% total of 1,800 participants.
17.0% 1.9%
1.2%
0.9% During the year, SMIDEC conducted
0.6% 85 workshops and technical briefings
24.2%
0.4% throughout the country. These initiatives,
Food & beverages Manufacturing-related
which attracted a total of 9,986 participants,
services provided information to SMEs on related
Transport equipment topics, such as financial assistance and
Textiles, apparel &
Wood & wood leather management, as well as promotion of the
products three new financial schemes, namely the
Leather & leather
Paper & printing products Grant for Development and Promotion of
Halal Products, Grant for Enhancing Product
Rubber products Machinery &
engineering
Packaging Design and Labelling Capabilities
Palm oil-based of SMEs and Grant for Enhancing Marketing
products Miscellaneous1 Skills of SMEs.
Electrical & Mineral products
electronics SMIDEC also participated as resource
Services
Plastic products speaker in 77 seminars and workshops
Non-metallic products organised by other organisations to disseminate
Chemicals &
petrochemical information on development and financial
programmes for SMEs. A total of 20,585
Source: Malaysian Industrial Development Finance Berhad participants benefited from these sessions.
Note: 1 Miscellaneous includes pharmaceuticals, medical products,
accessories for textiles apparel, jewellery, and sport goods and
equipment SME Information and Advisory
Centre
OUTREACH PROGRAMMES Since its establishment in July 2003, a total of
415,028 visitors accessed the Virtual Centre
Promotion Programmes (www.smidec.gov.my), of which, 251,079
SMIDEC has undertaken a series of promotion visitors were recorded in 2005. The Centre
programmes to create awareness of the provides information on SME programmes,
development and financial assistance available news and events, as well as company
to SMEs. In 2005, a total of 33,474 participants registration.
had benefited from 166 conventions,
workshops, seminars and briefing sessions The Business Advisory Services, conducted
organised and participated by SMIDEC. throughout the year, attracted a total of
2,222 companies, compared with 834 in
The ASIAN SME Convention 2005, held 2004. The Business Advisory Services
in August 2005 attracted 1,103 participants provides an alternative avenue for SMEs to
from ASEAN countries, the Republic of Korea, get information on policies, incentives,
the People's Republic of China and India. In programmes and financial assistance available
148
for them. Most of the enquiries received were Nominations from SMEs accounted for 74
on financial assistance, programmes in per cent of total nominations, compared
enhancing productivity and quality of SMEs, with 64 per cent in 2004. A total of 19 SMEs,
as well as programmes to upgrade the usage of or 38 per cent emerged as winners of the
ICT. Enterprise 50 Award. Of these, 10 companies
were from the services sector, and nine from
SMIDEC Annual Showcase (SMIDEX the manufacturing sector.
2005)
During the year, SMIDEX 2005 was held in OUTLOOK
collaboration with the Malaysian International
Chamber of Commerce and Industry (MICCI). The continued growth and sustainability of
The event comprised trade exhibitions, product SMEs in the economy will be the focus of the
presentations and business matching sessions. Government in 2006. Endorsement and
A total of 226 companies participated in the implementation of programmes, as outlined in
event, which attracted 4,928 trade visitors. The the National SME Development Blueprint
business matching sessions, organised during 2006, emphasises the further commitment of
the showcase, generated potential sales of the Government.
RM45.9 million.
In addition to the strengthening of existing
Enterprise 50 Award Programme support programmes, new approaches will also
The Enterprise 50 Award continued to be introduced to ensure more effective outreach
attract interest among companies from programmes to benefit all sectors of the
various sectors. This Award recognises economy. These approaches include extending
the achievements of homegrown companies, the coverage of the support programmes to
which are well positioned for the future. micro enterprises and start-ups, with an
increase in the quantum of the financial
In 2005, the number of nominations assistance. Programmes for specific sub-sectors
received increased from 112 to 182. or focus groups will also be formulated.
149
Productivity - Manufacturing And
Chapter 8
Services Sectors
OVERVIEW utilisation of resources. The main sources of

TFP growth were education and training,
In 2005, Malaysia registered a productivity which contributed 30.6 per cent to TFP growth,
growth of 3 per cent to RM26,255 from followed by demand intensity (29.6 per cent),
RM25,495 in 2004. Malaysia's productivity capital structure (17.4 per cent), economic
growth was higher than a number of re-structuring (12.2 per cent) and technical
Organisation of Economic Cooperation progress (10.2 per cent).
Development (OECD) and Asian countries,
such as the United States of America (USA), The manufacturing sector remained an
Denmark, Canada, Norway, Germany, Japan, important sector in the economy in 2005,
the Republic of Korea, Taiwan and Singapore. accounting for 31.4 per cent of the country's
Gross Domestic Product (GDP). The sector
In terms of Total Factor Productivity (TFP), recorded a productivity growth of 3.8 per cent,
which measures the synergy and efficiency of attributed to strong domestic and external
the utilisation of both capital and labour, the demand.
economy achieved a TFP growth of 1.6 per
cent for the period 1996-2005. A growth in The services sector (excluding Government
TFP indicates more efficient management and services) registered a productivity growth of
Chart 8.1:
Productivity Growth by Major Economic Sector, 2005
6
4.9
5
4.0 3.9
4 3.8
3.4
Per cent
3 2.7 2.6
2 1.7
1.2
1
-1 -0.7
Utilities
Transport
Finance
Manufacturing
Construction
Government
Trade
Agriculture
Mining
Other services
1
Computed from Economic Report, Ministry of Finance, Malaysia and Economic Planning Unit, Malaysia
Note: 1Other services include community, social and personal services, product of private non-profit services to household as well as domestic services of
household. Among the activities included in this sub-sector are sewage and refuse disposal; activities of organisation whose members interest centre
on the development and prosperity of a particular line of business or trade; and provision of personal services.
151
Chart 8.2:
Productivity Growth for Selected OECD Countries, 2005
3.5
3.0
3.0
2.6
2.5
2.0 1.9 1.8
1.6
1.4
Per cent
1.5
1.0 0.9 0.9 0.9
1.0
0.5
0.1
0
-0.5
-1.0
-1.0
-1.5
of Korea
Malaysia
Republic
Japan
USA
Canada
France
Ireland
UK
Germany
New Zealand
Finland
Australia
Computed from Economic Report, Ministry of Finance, Malaysia, various issues
OECD Economic Outlook, December 2005, Vol. 78,
National Accounts of OECD Countries, Detailed Tables 1992-2003
Country Data, The Economist Intelligence Unit
Market Indicators and Forecast, The Economist Intelligence Unit
Chart 8.3:
Productivity Growth for Selected Asian Countries, 2005
8
7.1
7 6.6
6
5
Per cent
4.4
4
3.0 3.0
3 2.7 2.6
2 1.9 1.9
1
0
People’s India Indonesia Malaysia Thailand Taiwan Republic Japan Singapore

Republic of Korea
of China

Key Indicators 2005, Asian Development Bank
Country Data, The Economist Intelligence Unit
Market Indicators & Forecast, The Economist Intelligence Unit
Directorate-General of Budget, Accounting & Statistics, Executive Yuan, Republic of China
World Economic Outlook, September 2005
152
3.3 per cent. The utilities sub-sector achieved Table 8.1:
the highest productivity growth of 4.9 per cent, Productivity Level and Growth for
attributed to the ability of the sub-sector to Selected Countries, 2005
meet increased demand from industrial,
Country Productivity Productivity
commercial and domestic customers. Measures Growth Level
undertaken by the service providers to improve (%) (at 2000
operational efficiency also contributed to the constant
prices) US$
performance.
People's Republic of China 7.1 2,272
INTERNATIONAL COMPARISON OF PRODUCTIVITY India 6.6 1,242
Hong Kong 5.0 60,299
PERFORMANCE Indonesia 4.4 1,952
Malaysia 3.0 11,300
Thailand 3.0 4,305
Malaysia's productivity growth of 3 per cent
Taiwan 2.7 35,856
was higher than selected OECD countries, such Republic of Korea 2.6 27,909
as Australia, Finland, New Zealand, Germany, Japan 1.9 77,061
Singapore 1.9 52,426
the United Kingdom (UK), France, Canada,
USA 1.8 77,346
the USA, Japan and the Republic of Korea. Canada 1.6 49,308
These countries recorded a productivity growth France 1.4 57,677
Ireland 1.0 62,936
ranging from -1 per cent to 2.6 per cent.
UK 0.9 51,882
Among selected Asian countries, Malaysia's Germany 0.9 50,789
productivity growth was higher than Singapore Finland 0.1 55,698
Australia -1.0 45,545
(1.9 per cent), Japan (1.9 per cent), the
Republic of Korea (2.6 per cent) and Taiwan Computed from Economic Report, Ministry of Finance, Malaysia,
(2.7 per cent). Malaysia needs to continuously various issues
OECD Economic Outlook, December 2005, Vol. 78
improve productivity growth to achieve higher National Accounts of OECD Countries, Detailed Tables 1992-2003
productivity levels. Country Data, The Economist Intelligence Unit
Market Indicators & Forecast, The Economist Intelligence Unit
In terms of productivity level, Malaysia's

productivity level is relatively lower, compared lower productivity growth, compared with
with selected OECD and Asian countries. the previous year. The soft demand for E&E
These industrialised countries, which normally products had led to a slower productivity
have higher capital intensity, greater growth of Malaysia's manufacturing sector.
innovation, more intense research and
development (R&D) activities and better Malaysia's selected services sectors, finance,
quality management systems, recorded higher trade and transport together recorded a
productivity levels. Nevertheless, Malaysia's productivity growth of 3.7 per cent. This was
productivity level at US$11,300 was higher higher than the services sector's growth of
than Thailand's productivity level at US$4,305, Taiwan at 1.3 per cent, but lower than the
the People's Republic of China (US$2,272), Republic of Korea's growth at 11.6 per cent.
Indonesia (US$1,952) and India (US$1,242). The high productivity growth in the Republic
of Korea was due to better performance in its
Among selected Asian countries, the knowledge-intensive industries, particularly in
manufacturing sector of the Republic of the business service and finance sectors.
Korea registered a productivity growth of
17.4 per cent in 2005. The Republic of Korea's PRODUCTIVITY PERFORMANCE OF
performance was due to its manufacturing MANUFACTURING SECTOR
effectiveness and efficiency, such as increased
utilisation of ICT, greater emphasis on Productivity level in the manufacturing
innovation and enhanced R&D activities. sector, as measured by Sales Value per
Malaysia, Taiwan and Singapore registered Employee, increased to RM459,960 in 2005
153
Chart 8.4:
Productivity Growth of Manufacturing Sector in Selected Asian Countries, 2005
20
17.4 2005 2004
18
16
14 13.7
Per cent
12
10 9.7
8 6.1 6.1
6 2.6
4 3.8 2.9
2
Republic of Malaysia Taiwan Singapore

Korea
Ministry of Trade and Industry, Singapore
The Bank of Korea; Korea National Statistical Office
Chart 8.5:
Productivity Growth of Selected Services Sector in Selected Asian Countries, 2005
14
2005 2004
12 11.6
10
Per cent
8 6.5
6
4.4
4 2.9 3.7
2.7 3.5
2
1.3
0
Republic of Malaysia Singapore Taiwan
Korea

Ministry of Trade and Industry, Singapore
The Bank of Korea; Korea National Statistical Office
from RM402,980 in 2004. Capital- The sales value of the manufacturing sector
intensive industries, such as iron and steel, in 2005 increased by 18.4 per cent to RM459.3
and chemicals, registered the highest billion, compared with RM388 billion in 2004.
productivity levels at RM1,160,200 and The high capacity utilisation rate of more
RM1,021,070 respectively, which were than 80 per cent and sustained domestic and
significantly higher than the manufacturing external demand, contributed to the increase
average of RM460,000. The sub-sectors in sales value. In terms of contribution to total
registered high capacity utilisation attributed output, the E&E industry was the leading
to increase in demand from both domestic sector, registering a contribution of 41.5 per
and external markets. cent to the manufacturing sector. This was
154
Chart 8.6:
Sales Value per Employee of Manufacturing Industries, 2005
Iron and steel 1,160.2
Chemicals 1,021.1
E&E products 569.3
Manufacturing average 460.0
Machinery & equipment 422.4
Processed food & beverages 381.5
Transport equipment 381.4
Non-metallic mineral products 238.8
Fabricated metal products 229.1
Rubber products 157.6
Wood & wood products 150.5
Textiles & apparel 131.7
RM thousand 0 200 400 600 800 1000 1200 1400
Complied by National Productivity Corporation, based on the Monthly Manufacturing Survey, Department of Statistics, Malaysia
attributed to the uptrend in the global Competitiveness in terms of labour

demand for semiconductors. The chemicals cost indicates the industries' efficiency in
industry contributed 27.7 per cent. Increased producing products at the lowest labour
output was driven mainly by favourable cost. High labour cost competitiveness is
demand for industrial gases, basic chemicals, observed when the productivity of the
refined petroleum products and plastic sector grows faster than the increase in its
products. Both the E&E and chemical Labour Cost per Employee, resulting in a
industries together contributed 69.2 per cent decrease in its Unit Labour Cost. Labour
to total manufacturing output in 2005. cost competitiveness as reflected in the
decline of 9.6 per cent in Unit Labour
Malaysia's manufacturing sector recorded Cost, indicates that the manufacturing sector
an average increase of 14.1 per cent in has become more efficient in generating
Sales Value per Employee in 2005. Among output. Growth of Sales Value per Employee
the industries that recorded high Sales by 14.1 per cent compared with 3.2 per cent
Value per Employee were iron and steel growth in Labour Cost per Employee
(31.8 per cent), chemicals (23.6 per cent), contributed to Malaysia's improved
transport equipment (13.2 per cent) competitiveness.
and fabricated metal (10.7 per cent). High
capacity utilisation in these industries was With the exception of non-metallic mineral
a result of enhanced domestic and external products, and processed food and beverages,
demand. other industries in the manufacturing sector
recorded declines in Unit Labour Cost, and
The manufacturing sector continued to thus these industries were able to sustain their
maintain its labour cost competitiveness. labour cost competitiveness.
155
Chart 8.7:
Contribution of Sub-Sectors to Total Manufacturing Sales Value, 2005
E&E products 41.5
Chemicals 27.7
Iron & steel 3.9
Rubber products 1.9
Per cent 0 5 10 15 20 25 30 35 40 45
Chart 8.8:
Growth in Sales Value per Employee of Manufacturing Industries, 2005
Iron & steel 31.8
Chemicals 23.6
E&E products 8.7
Rubber products 8.1
Machinery & equipment -1.6
Non-metallic mineral products -4.5
Per cent -10 -5 0 5 10 15 20 25 30 35
156
Chart 8.9:
Growth in Labour Cost per Employee of Manufacturing Industries, 2005
Iron & steel 13.5
Chemicals 6.1
Rubber products 5.0
E&E products 0.8
Textiles & apparel -1.6
Per cent -15 -10 -5 0 5 10 15
TOTAL FACTOR PRODUCTIVITY OF Quality of labour contributed 36 per

MANUFACTURING SECTOR cent to TFP growth in the manufacturing
sector. This reflects that continuous
For the period 1996-2005, TFP grew by an education and training of the workforce
average annual rate of 2.4 per cent, has shifted skills and knowledge to a higher
contributing 35.6 per cent to manufacturing level.
sector's output growth of 6.6 per cent. Capital
and labour contributed 35.3 per cent and 29 per Demand intensity contributed 18 per cent to
cent, respectively. TFP growth. The manufacturing industries
have been utilising better marketing
During the period 1996-2005, capital and branding strategies and developing
structure was the major contributor to new products and services to improve
TFP growth, accounting for 44 per cent. domestic and external demand. More of
This shows that the industry has shifted to such activities to generate demand are
high technology capital investments, such required.
as the adoption of computer-aided design
and manufacturing, precision machining Technical progress contributed 2 per cent to
and other computer-integrated manufacturing TFP growth. To further enhance TFP growth,
technologies. With continuous R&D productivity and quality improvement
and innovation activities, as well as the programmes, such as quality assurance,
potential development of new emerging standardisation, total quality management,
technologies, the capital structure component good manufacturing practices, benchmarking
will continue to be a significant source of TFP and best practices, need to be
growth. emphasised.
157
Chart 8.10:
Changes in Unit Labour Cost of Manufacturing Industries, 2005
Wood & wood products -2.4
Rubber products -2.8
Fabricated metal products -3.1
E&E products -7.3
Manufacturing average -9.6
Transport equipment -10.6
Textiles & apparel -12.1
Iron & steel -13.9
Chemicals -14.2
Per cent -20 -15 -10 -5 0 5 10
Among the manufacturing sub-sectors, implementing productivity and quality

chemicals and chemical products recorded the initiatives.
highest TFP growth at 4.3 per cent, followed
by machinery and equipment (4.1 per cent), PRODUCTIVITY PERFORMANCE OF THE SERVICES
non-metallic mineral products (4.1 per cent) SECTOR
and E&E (4 per cent). These industries have
been implementing TFP improvement The services sector comprises:
programmes, such as investing in high
technology, developing human capital, • transport (transport, storage and
adopting innovative marketing strategies and communication);
Chart 8.11: • finance (finance, insurance, real estate and
Contribution to TFP Growth, business services);
1996-2005
• commerce and trade (wholesale, retail,
Quality of Labour 36%
hotels and restaurants);
• utilities (electricity, gas and water services);

and
Demand Intensity 18%
• other services (community, social and
personal services).
Capital Structure Technical Progress 2%
44%
Productivity in the transport sub-sector
Source: National Productivity Corporation grew by 4 per cent, attributed to an increase
158
Chart 8.12:
TFP Growth of Manufacturing Sub-Sectors, 1996-2005
Chemicals & chemical products 4.3
Non-metallic mineral 4.1
E&E 4.0
Apparel 3.3
Wood products 2.6
Rubber 2.5
Manufactures of metal 2.3
Textiles 1.9
Food (excluding feedmill) 1.6
Beverages & tobacco 0.3
Per cent 0 1 2 3 4 5
in transport services, especially with The productivity of the finance sub-sector

the introduction of value-added services, grew by 3.9 per cent. The productivity growth
intensified support facilities, increased flight in the sub-sector was attributed to the low
frequencies and destinations, as well as interest rate regime, which contributed to the
improved transport infrastructure. In the expansion in the loans market.
telecommunications industry, the increase in
subscribers of cellular phones, broadband and Productivity in the commerce and trade
internet services contributed to productivity sub-sector grew by 2.7 per cent, attributed
growth. to increase in demand for retail and tourism
Chart 8.13:
Productivity Growth of Services Sector, 2005
Utilities 4.9
Transport 4.0
Finance 3.9
Commerce and trade 2.7
Services sector 3.3
Other services 1.2
Per cent 0 1 2 3 4 5 6
Computed from Economic Report, Ministry of Finance, Malaysia, Economic Planning Unit, Malaysia and Department of Statistics, Malaysia
159
services. In the retail industry, major retail transport services and supported by higher
chains have registered significant growth in external trade and domestic economic
sales, increase in the number of foreign activities, particularly in the tourism and
retailers, convenience stores, especially in communication industries.
major urban centers. Further, internet shopping
has also gained wider popularity among users. During the same period, TFP of the utilities
In the tourism industry, although a number of sub-sector also grew by an average annual
foreign countries issued travel advisories and rate of 1.7 per cent. This performance was
warnings during the post-tsunami period, attributed to improved operational efficiency
tourist arrivals and receipts of foreign earnings and stronger demand for electricity from
remained stable. the commercial, industrial and household
consumers.
TOTAL FACTOR PRODUCTIVITY OF THE SERVICES
SECTOR For the commerce and trade sub-sector, TFP
During the period 1996-2005, the services grew by an average annual rate of 1 per cent.
sector registered an average annual TFP The relatively low growth of TFP in this
growth of 1.6 per cent. This TFP growth sub-sector was attributed to dependence on
contributed 26.1 per cent to the output growth labour for the industries' main operations.
of 6 per cent, while capital and labour
contributed 34.8 per cent and 39.1 per cent, OUTLOOK
respectively.
The economy is expected to achieve a
Among the services sub-sectors, finance productivity growth of more than 3.3 per cent
recorded the highest TFP growth of 1.9 per in 2006. Growth will be led by the private
cent, attributed to the Government's efforts sector, while the public sector will continue
in strengthening the capacity and capability to assume a supporting role in productivity
of domestic financial institutions. The efforts improvement. Productivity growth requires
include enhancing structural and operational continued strengthening of human resource
efficiencies, introduction of financial capabilities, nurturing creativity and
innovations and attracting international innovation, as well as bridging the gap between
financial institutions. industry needs and availability of skills.
In the transport sub-sector, TFP grew by an Sustained improvements in productivity at

average annual rate of 1.7 per cent. This industry levels are crucial to enhance
growth was attributed to an increase in competitiveness of the economy. This will
Chart 8.14:
TFP Growth of Services Sub-Sectors, 1996-2005
Finance 1.9
Transport 1.7
Utilities 1.7
Other service 1.6
Services 1.6
Commerce and trade 1.0
Per cent 0 0.4 0.8 1.2 1.6 2.0

Computed from Economic Report, Ministry of Finance, Malaysia, Economic Planning Unit, Malaysia and Department of Statistics, Malaysia
160
require industries to improve, among others, approach to sustain labour cost
on the ability to rationalise cost and integrate competitiveness. Among the initiatives is
work processes, as well as utilise higher for industries to intensify the adoption of
technology and improve management systems. the performance-based remuneration system,
Training and retraining of employees need for example, the Productivity-Linked Wage
to be continuously undertaken to upgrade System, which will ensure that wage increases
knowledge and skills for better performance. commensurate with improved performance
Industries should adopt a comprehensive and productivity.
161
Chapter 9 World Trade Organisation
OVERVIEW and substantial improvement in market

access;
The focus of the World Trade Organisation
(WTO) in 2005 was to have a successful • Framework for Establishing Modalities in
outcome of the Sixth Ministerial Conference to Non-Agriculture Market Access (NAMA)
put negotiations of the Doha Development on elements related to unbound tariffs,
Agenda back on track. This was all the more sectoral liberalisation and flexibilities for
important due to the failure of the Fifth developing countries;
Ministerial Conference in Cancun in 2003 to
reach any decision on the Doha Development • modalities for Negotiations on Trade
Agenda. Another setback at the Sixth Facilitation to improve and strengthen
Ministerial Conference would have derailed Article V (freedom of transit of goods),
negotiations at the multilateral level. Article VIII (fees and formalities connected
to importation and exportation) and Article
Malaysia participated actively in the X (publication and administration of trade
Sixth Ministerial Conference, that was regulations);
held from 13-18 December 2005 in Hong
Kong, to ensure that the outcomes would • completion of work in the Doha
accommodate Malaysia's export interests Development Agenda mandate to
and provide for flexibility to promote its operationalise the special and differential
strategic industries. The need to incorporate treatment (S&D) provisions in WTO
developmental aspects into the negotiations Agreements; and
was also stressed by Malaysia and other
developing countries. • continuation of work in Services on market
access and rules, including the submission
Besides the focus on the Sixth Ministerial of initial offers as soon as possible, and
Conference, the WTO carried out its regular revised offers by May 2005.
work on accession negotiations, trade policy
reviews, dispute settlement proceedings The Sixth Ministerial Conference adopted the
and monitoring implementation of WTO Ministerial Declaration that provided further
obligations. direction towards the conclusion of
negotiations on the Doha Development Agenda
DOHA DEVELOPMENT AGENDA in 2006. Besides the Sixth Ministerial
Conference, five informal mini-ministerial
July Package meetings were held in Davos, Kenya, Paris,
In order to facilitate progress in the Doha Dalian and Zurich to provide further impetus to
Development Agenda negotiations, the WTO the negotiations and ensure a successful
General Council adopted a July Package on outcome for the Doha Development Agenda.
1 August 2004 that included:
Ministerial Declaration
• Framework for Establishing Modalities in The Sixth Ministerial Conference was faced
Agriculture on reduction of domestic with the task of reaching agreement on a range
subsidies, elimination of export subsidies of issues that would shape the final agreement
163
of the Doha Development Agenda. The WTO's (USA) and Japan would be in the middle band.
149 Members adopted the Ministerial Developing countries and other developed
Declaration on 18 December 2005. Consensus countries would be in the third band.
on key areas under the Doha Development
Agenda was achieved in all areas, including The major achievement on Agriculture by
Agriculture, NAMA, Services and Trade the Sixth Ministerial Conference, was the
Facilitation. agreement by all Members on the parallel
elimination of all forms of export subsidies
Agriculture by the end of 2013 for developed countries,
Agriculture negotiations in 2005 focused on and the introduction of disciplines on all
the formula for tariff reductions, reductions in export measures. The disciplines would be in
domestic support and deadline for the the form of certain criteria for the use of
elimination of export subsidies. export subsidies that could otherwise result
in unfair competition. Developing countries
The Sixth Ministerial Conference managed will be given an additional five years after
to set a deadline for Members to establish the end date to eliminate their export
modalities or procedures for tariff reductions subsidies. This significant development will
for Agriculture by 30 April 2006, and for enable exporters in Malaysia to take full
members to submit comprehensive draft advantage of the opportunity to compete for
schedules for tariff reductions based on these markets in third countries.
modalities by 31 July 2006.
The agriculture sector in Malaysia, however,
On market access, Members reaffirmed the must continue to be cost-effective, upgrade
objective of achieving substantial reductions in production processes and ensure that products
tariffs, with specific protection for developing are competitive to fully capitalise on market
countries. It was agreed that there would be opportunities that would no longer be distorted
four bands for structuring tariff reductions. when export subsidies are eliminated.
However, Members would still have to
negotiate details, including relevant thresholds It was agreed that S&D treatment for
for each band, range of tariff reductions from developing and least-developed countries
lowest to highest tiers and flexibilities in the (LDCs) would be an integral element in all the
formula. Developing countries were given the three pillars of domestic support, market access
flexibility to self-designate an appropriate and export competition. This would include
number of lines as Special Products based on lesser cuts and longer implementation period
agreed criteria and the right to have recourse to for developing countries and LDCs.
a Special Safeguard Mechanism based on
import quantity and price triggers. However, Non-Agriculture Market Access
there are concerns that the provision of too Negotiations in 2005, focused on extensive
much flexibility accorded in Agriculture may technical details, with Member countries
negate efforts to improve market access submitting various proposals, mainly on the
through tariff reductions. three core elements of NAMA modalities:
formula for tariff reduction, flexibilities for
The Sixth Ministerial Conference agreed on developing countries and the treatment of
three bands for the reduction of trade-distorting unbound tariffs. While developed countries
domestic support. All developed countries and certain developing countries continued to
would make substantial reductions in domestic push for ambitious tariff cuts and sectoral
support, with countries having higher levels of initiatives, many developing country Members
support undertaking deeper reductions. The persistently articulated concerns over attempts
European Union (EU), which has the highest by developed countries to link flexibilities
level of permitted support, would be in the top given to developing countries with the level of
band, while the United States of America liberalisation to be undertaken.
164
Since the adoption of the July 2004 framework, pursued more intensively in light of its
Members have focused on negotiations on potential as a source of growth and foreign
non-tariff barriers that involve identifying, investment.
categorising and examining notified non-
tariff barriers. It was also noted that Members The Sixth Ministerial Conference agreed
are developing bilateral, vertical and to strengthen the current bilateral request-offer
horizontal approaches to the non-tariff approach. Under this approach, an interested
barriers negotiation. While major countries Member can make a request to another
are keen to address the non-tariff barriers on Member to liberalise its services sector. The
a sector-specific approach, developing outcomes of these negotiations would be
Member countries have concerns that this extended to all other Members. The current
may lead to elimination of measures approach would be strengthened through:
established for developing strategic industries.
Some developing countries reiterated that • adoption of specific liberalisation objectives
measures outside the mandate of the NAMA in the four modes of supply in order to
negotiations, should not be discussed. guide Members when undertaking new and
improved commitments;
The Sixth Ministerial Conference set a
deadline of 30 April 2006 for the establishment • revision of most favoured nation (MFN)
of modalities for non-agricultural products. exemptions granted under market access
It was agreed that the Swiss formula would and national treatment provisions and the
be adopted to reduce tariffs, whereby higher use of economic needs tests to determine
tariffs would be reduced more steeply foreign participation; and
compared with lower tariffs. The Swiss
formula was first introduced during the • adoption of a plurilateral approach to
agriculture negotiations of the Uruguay Round improve offers by bringing together a group
from 1986-1994. To address unbound tariffs, of Members with mutual interests in a
the Ministers agreed to adopt a mark-up sector to agree on common goals for
approach to establish base rates, where certain liberalisation in that sector.
percentages would be added to the applied
rates of unbound tariffs before any reduction The approach adopted would provide direction
are made. This approach would address to the services negotiations, in that Members
Malaysia's concerns over low applied tariffs, have clearer objectives to guide them when
including zero rate tariffs. Currently, negotiating services commitments. While
Malaysia's unbound tariff lines account for the current bilateral request-offer approach
37 per cent of total tariff lines, comprising remains the main approach to services
mainly products in the sub-sectors of iron and liberalisation, it would be strengthened by
steel, automotive and chemicals. In reducing the plurilateral approach. Members interested
tariffs, Malaysia wants some degree of in the liberalisation of a certain services sub-
flexibility to allow for the promotion of its sector could agree on certain commonalities in
strategic industries and preservation of national the services commitments.
developmental objectives.
In providing finality to the negotiations,
Services several deadlines were adopted:
The Services negotiations gained renewed
momentum following agreement at the Sixth • submission of plurilateral requests for
Ministerial Conference to strengthen the sectoral negotiations by the end of February
mandate of its negotiations. While negotiations 2006;
on Agriculture and NAMA have often been
given more attention, negotiations on the • submission of a second round of revised
liberalisation of Trade in Services are being offers by July 2006; and
165
• submission of final draft schedules of (WCO) and World Bank also contributed
commitments by 31 October 2006. monetary and technical assistance for capacity
building programmes to assist developing
The Sixth Ministerial Conference agreed to country members.
further clarify and intensify negotiations on rules
pertaining to emergency safeguard measures, S&D treatment for developing countries and
government procurement and subsidies. LDCs remained a crucial issue in the
Malaysia is keen for an agreement on emergency negotiations. The S&D treatment would not
safeguard measures to safeguard the domestic only be limited to longer transition periods, but
industry in the event of a surge in imports. would also take into account the capacities of
developing countries and LDCs to implement
Malaysia made a revised offer in December commitments in the new Agreement.
2005. Under the revised offer, technical
adjustments were made to the financial The Sixth Ministerial Conference agreed that
services and new commitments in a number of to allow for a timely conclusion of text-based
sectors, including professional services. negotiations on all aspects of the mandate,
there was a need to move into a focused
Trade Facilitation drafting mode. Malaysia supports the need to
Negotiations on Trade Facilitation continued establish new rules for trade facilitation that
to further strengthen and improve: will lead to faster and more efficient clearance
of goods at borders. However, the rules should
• Article V of GATT 1994 on freedom of not be too onerous on developing countries in
transit of goods; undertaking binding obligations.
• Article VIII of GATT 1994 on fees and OTHER DOHA DEVELOPMENT AGENDA ISSUES
formalities connected with importation and
exportation; and The Sixth Ministerial Conference adopted a
development package which includes
• Article X of GATT 1994 on publication and strengthening the S&D treatment provisions
administration of trade regulations. for LDCs and amendments to Trade-Related
Aspects of Intellectual Property Rights
A total of 60 submissions by Members have (TRIPs) and Public Health.
facilitated the understanding of existing
measures and policies with regard to the three Special and Differential Treatment
Articles. Discussions have also focused on the The African Group, LDCs and like-minded
identification of needs and priorities on developing countries have forwarded 88
technical assistance and capacity building for proposals on:
developing countries to implement trade
facilitation measures. • improving preferential access to
industrialised countries' markets;
Malaysia shared its experience on Article VIII
of GATT 1994 as a contribution towards • making mandatory the flexibility for
better understanding of Customs practices exemptions in the implementation of WTO-
and procedures in simplifying import and specific rules; and
export formalities and documentation. The
International Monetary Fund (IMF), • improving and making mandatory the
Organisation for Economic Cooperation and existing provisions on technical and
Development (OECD), United Nations financial assistance to assist developing
Conference on Trade and Development countries implement multilateral rules and
(UNCTAD), World Customs Organisation benefit from negotiated rights.
166
The Sixth Ministerial Conference agreed to quality, reputation or characteristic of the
strengthen S&D treatment provisions so that goods are essential to its geographical origin.
developed and developing countries declaring However, there is a divergence of views on
themselves in the position to do so would the procedures, the legal effects and costs
provide duty-free and quota-free market access of establishing such a system. Malaysia will
to all products originating from LDCs. support a simple system that does not impose
Flexibilities would be given to developing legal obligations on non-participants and is not
countries to phase-in their commitments and burdensome to implement.
coverage of goods. The Committee on Trade
and Development in Special Session and Trade and Environment
relevant WTO bodies will continue work to Negotiations on trade and environment in 2005
strengthen S&D treatment provisions in WTO focused on:
agreements to make them more precise,
effective and operational. • relationship between existing WTO rules
and specific trade obligations set out in
Trade-Related Aspects of Multilateral Environmental Agreements
Intellectual Property Rights (MEAs);
There was no significant progress with regard
to TRIPs in 2005. The Sixth Ministerial • procedures for regular information
Conference reaffirmed the amendment to the exchange between MEA Secretariats and
TRIPs Agreement that allows WTO Members the relevant WTO committees, and
with insufficient or no manufacturing capacity the criteria for granting of observer status;
to make effective use of compulsory licensing and
to manufacture pharmaceutical products in
another Member country that has the capacity • reduction or elimination of tariffs and
to do so. The issuance of compulsory licensing non-tariff barriers on environmental goods
would be subject to strict conditions set by and services.
the WTO.
There was no substantial progress in the
The issue of compulsory licensing was given negotiations due to disagreements between
prominence due to worldwide recognition of Members on all these issues.
the need to address the problem of access to
affordable medicines when faced with public World Trade Organisation Rules
health problems, such as the AIDS/HIV The negotiations on Rules cover anti-dumping,
epidemic. The amendment to the TRIPs subsidies and countervailing measures as well
Agreement would provide security for a as regional trade agreements.
permanent solution to the needs of the affected
countries. Anti-Dumping
Malaysia supports the strengthening of
Members continued negotiations on a anti-dumping rules such as increasing the
multilateral system of notification and de minimis level, formulation of guidelines and
registration of geographical indications for termination of sunset review provisions and the
wines and spirits. This is to enhance current lesser duty rule, which takes into account the
provision for the protection of geographical needs of the developing countries.
indications to allow Members to restrict the
use of names of geographical location for Negotiations on Rules continued with
products originating from a specific location. proposals and discussions on issues relating to
Geographical location refers to indications evidence of dumping, determination of injury,
which identify goods as originating from access to non-confidential information and
the territory of a Member or region where sunset reviews.
167
In 2005, Malaysia initiated an anti- • different tariff levels of structure of the
dumping case on polyethylene terephthalate parties;
against Taiwan, Indonesia, the Republic
of Korea and Thailand. The date of • different trade and industrial structure of
imposition of anti-dumping duties was the parties; and
23 October 2005.
• sensitive sectors of the parties that the
Subsidies and Countervailing RTA may affect.
Measures
Malaysia is supportive of clarifying the The Sixth Ministerial Conference agreed
provisions on the Subsidies and Countervailing that Rules negotiations are to be finalised
Measures Agreement. The Sixth Ministerial by the end of 2006.
Conference took note of issues that had
been discussed by Members, such as definition Dispute Settlement Understanding
of a subsidy, meaning of specificity under The Dispute Settlement Understanding
the Subsidies and Countervailing Measures Special Session continued with negotiations
Agreement, prohibited subsidies, serious on the procedural aspects of the dispute
prejudice, export credits and guarantees and settlement mechanism. Proposals were
allocation of benefits over time. circulated on issues pertaining to:
Fisheries Subsidies (i) Time Saving

Negotiations on fisheries subsidies intensified Improvement of timeframes in the
on proposals relating to clarification of dispute settlement process from
disciplines, definitions and coverage, non- current nine to 12 months for panel
actionable and prohibited subsidies, approach establishment, and another six to
to be taken that is 'top-down approach' nine months for appellate proceedings.
or positive listing of prohibited fisheries Shorter panel proceedings would
subsidies and S&D treatment. allow the complaining party to receive
redress in a shorter time.
Regional Trade Agreements
Members considered two substantive areas (ii) Panel Composition
regarding systemic issues and development Proposal includes the establishment
aspects of Regional Trade Arrangements of a roster and the composition of
(RTAs). The systemic issues touched on panel which should not be less than
the transparency element of 'substantially 20 persons.
all trade', 'transition periods', 'other regulations
of commerce' and 'development aspects'. (iii) Transparency
The main proponents of these issues were the To make WTO dispute more
EU and Australia. transparent deriving from the amicus
curea (friends of the court), which will
The proliferation of RTAs poses challenges allow the public to observe all
to the multilateral trading system and increases substantive panel, Appellate Body and
the need to address these systemic issues. arbitrator meetings, except those
Discussions were intensified on the definition dealing with confidential information.
of ‘substantially all trade’, where a paper by
the People's Republic of China was submitted (iv) Sequencing Issue
to address the issues of: This issue is related to Article 21.5
of 'Understanding on Rules' and
• different levels of economic development 'Procedures Governing the Settlement
of the parties; of Disputes' on surveillance of
168
implementation of recommendations the EU for the establishment of a panel for
and rulings which involves the measures affecting large civil aircraft (the
sequencing of retaliation and Boeing-Airbus dispute). The USA claims that
compliance procedures. This issue has France, Germany, the United Kingdom (UK),
continued to be discussed by Members Spain and the EU provide subsidies which
with different views between the benefit Airbus. A total of 49 countries,
Group of Six (including Malaysia) and including Malaysia, were requested to reply to
the USA, the EU, Japan and the questionnaires on the subsidy effects of Boeing
People's Republic of China, on which and Airbus sales. This request is allowed under
parties can initiate Article 21.5 of the Annex V of the Subsidies and Countervailing
Dispute Settlement Understanding. Measures Agreement of the WTO.
Malaysia is of the view that both
parties, the complainant or the Hormones Dispute Case: Continued
defending party, can initiate this Suspension of Obligations in the
Article. European Union
The EU still maintains its ban on imports of
The Permanent Representative of Malaysia hormone-treated beef from the USA and
to the WTO, H.E. Ambassador Muhamad Canada, despite a Dispute Settlement Body
Noor Yacob, has been elected as Chairperson decision in 1998 that the EU's decision to ban
to the Dispute Settlement Body following a the imports is unjustified as there is no
consensus decision taken at the General scientific evidence to show that the beef can
Council on 8 February 2006. pose a public health risk. In 1999, with the
authorisation of the WTO, the USA and
Dispute Settlement Understanding Canada imposed penalties in the form of
Cases additional duties on European exports and
these amounted to more than US$100 million a
Byrd Amendment year. On 17 February 2005, the EU attempted
In the case concerning the Continued to convince the WTO panel that it should not
Dumping and Subsidy Offset Act of 2000 be punished for maintaining the ban as it had
(the Byrd Amendment), the EU planned to constituted enough evidence that the hormones
impose €28 million worth of annual sanctions were unsafe. This was the first time that a
on the USA for its failure to comply with the dispute involving a complaint was brought by
WTO ruling pertaining to illegal anti-dumping the defending party and made public at the
rules applied under the Byrd Amendment WTO in September 2005.
in the USA. The Byrd Amendment allows
the US producers to receive anti-dumping Internet Gambling Case
and countervailing duties from foreign This is the fourth WTO dispute case involving
competitors. However, in 2003, the WTO the General Agreement on Trade in Services
found that this was inconsistent with the (GATS), but is the first where the basic
USA's trade obligations. In November 2004, structure of the GATS and several of its
the WTO gave the European Commission, important provisions have come up for
Canada and their co-complainants the authority interpretation. Antigua and Barbuda raised the
to retaliate. The USA has informed the dispute in March 2003 and had held
WTO that it is taking steps to repeal the unsuccessful consultations with the USA. On
Byrd Amendment. Antigua's request, the Dispute Settlement Body
set up a panel on 12 June 2003. The Panel
Measures Affecting Trade in Large concluded that the USA's Schedule under
Civil Aircraft GATS includes specific commitments on
In June 2005, the Dispute Settlement Body gambling and betting services and the term
heard the first request by both the USA and 'sporting' was interpreted as to not include
169
gambling and betting services. By maintaining As a result of negotiations, Saudi Arabia
such a measure, the USA had failed to accord agreed to undertake a series of important
services and service suppliers of Antigua commitments to further liberalise its trade
treatment no less favourable than that provided regime and accelerate its integration in
for under the terms agreed and specified in its international trade. Among the commitments
Schedule. In August 2005, the Appellate Body undertaken by Saudi Arabia are:
upheld the Panel's finding that the USA's
Schedule of Commitments included gambling • WTO agreements will be applied uniformly
and betting services, and gave the USA until throughout Saudi Arabia's Customs
3 April 2006 to implement its recommendation territory;
over the USA's restrictions on internet
gambling and betting services. The arbitrator • review of fees charged for the
decided that this was a reasonable period as authentication of trade documents and to
Antigua and Barbuda, the complainants, are bring it into conformity with WTO rules
developing countries. The USA had earlier within two years of accession;
sought for a 15-month period to change its law.
• elimination of any non-tariff measures that
Anti-Dumping Duties on Imports of cannot be justified under WTO rules while
Certain Paper from Indonesia maintaining the right to restrict the
On 4 June 2004, Indonesia requested importation and exportation of certain
consultations with the Republic of Korea goods and services;
concerning the imposition of definitive anti-
dumping duties by Republic of Korea on the • elimination of export subsidies on
imports of business information paper and agriculture products;
uncoated wood-free printing paper from
Indonesia and certain aspects of the • to ensure that its producers and distributors
investigation leading to the imposition of such of natural gas liquids operate on the basis of
duties. In response to Indonesia's request on normal commercial considerations; and
16 August 2004, a panel was established on
27 September 2004. The Dispute Settlement • full implementation of TRIPs, Technical
Body adopted the Panel's Report on the case on Barriers to Trade (TBT) and Sanitary and
28 November 2005. The Panel agreed with Phytosanitary (SPS) Agreements.
Indonesia that the Republic of Korea had acted
inconsistently with some of the provisions of Countries that are currently negotiating
the Anti-Dumping Agreement and on the issue accession to the WTO are Algeria, Andorra,
of disclosure of confidential information Azerbaijan, Bahamas, Belarus, Bhutan,
during the investigation. Bosnia Herzegovina, Cape Verde, Ethiopia,
Kazakhstan, Lao PDR, Lebanon, Libya,
ACCESSION TO THE WORLD TRADE ORGANISATION Montenegro, the Russian Federation, Samoa,
Serbia, Seychelles, Sudan, Tajikistan,
As at 31 December 2005, there were 149 Ukraine, Uzbekistan, Vanuatu, Viet Nam and
Members of the WTO. Saudi Arabia acceded to Yemen.
the WTO on 11 December 2005, while three
Working Parties have been established to In 2005, Malaysia participated actively in the
consider the applications for accession by Iran, accession process to negotiate for improved
Montenegro and Serbia. The first meeting of market access for its exports, especially with
the Working Party on Montenegro and Serbia Algeria and the Russian Federation. Accession
was held in October 2005, while the Working negotiations in the WTO provide an
Party for Iran has yet to commence its opportunity to seek concessions without
proceedings. having to undertake any reciprocal offers. As
170
most of these countries are either new or assistance programmes were conducted in
potential markets for Malaysia, inputs from the Malaysia:
private sector are essential to help identify
areas or issues of interest to be pursued in the • Regional Training Workshop on
negotiations. Multilateral Negotiations on Agriculture,
held from 26-27 January 2005; and
TRADE POLICY REVIEWS
• WTO National Seminar on Non-Agriculture
The Trade Policy Review mechanism is a Market Access, from 18-20 April 2005.
periodic review of individual WTO Members'
trade policy regimes and practices. In 2005, the OUTLOOK
trade regimes of 15 members were examined
under the Trade Policy Review mechanism. The Sixth Ministerial Conference provided the
They were Bolivia, Ecuador, Egypt, Guinea, framework and direction for the key
Liechtenstein, Mongolia, Nigeria, Paraguay, negotiating areas. In order to achieve a
the Philippines, Qatar, Romania, Sierra Leone, successful completion of the Doha
Switzerland, Tunisia, and Tobago and Development Agenda in 2006, all Members
Trinidad. must adopt a pragmatic approach, and which
could involve political compromises on issues
TECHNICAL ASSISTANCE that are sensitive to both developed and
developing countries. Given the intensive pace
In 2005, Malaysia participated in 12 technical of negotiations during the Sixth Ministerial
assistance programmes organised by the WTO. Conference, where all members were keen to
The programmes primarily involved areas of bring the negotiations back on track, there are
negotiations on agriculture, non-agriculture expectations that the Doha Development
market access and services. Two technical Agenda can be concluded in 2006.
171
Chapter 10 Asean Economic Cooperation
OVERVIEW Federation and Australia-New Zealand. The

Eleventh Summit saw the signing of key
The Eleventh ASEAN Summit (Eleventh Agreements with these countries, including:
Summit), held in Kuala Lumpur from 12-14
December 2005, achieved significant progress • The Kuala Lumpur Declaration on East
towards deepening commitments to enhance Asia to formalise the establishment of a
economic integration within the region and forum for dialogue on broad strategic
with Dialogue Partners. The decisions made political and economic issues of common
and agreed at the Eleventh Summit include interest and concern between ASEAN and
the advancement of the liberalisation of the its six dialogue partners (People's Republic
services sector by five years to 2015 and to of China, Japan, Republic of Korea, India,
further fast track the integration of the tourism Australia and New Zealand);
and air travel services sectors under the
implementation of Phase II of the Priority • The Kuala Lumpur Declaration on ASEAN
Integration Sectors. +3 Cooperation to provide the political
momentum towards building an East Asian
To facilitate and promote intra-ASEAN community;
trade and services, ASEAN members at
the Eleventh Summit signed the Agreement • The Joint Declaration of the Heads of
on the ASEAN Harmonised Electrical and State/Government of ASEAN and the
Electronics Equipment Regulatory Regime and Russian Federation on Progressive and
the ASEAN Mutual Recognition Arrangement Comprehensive Partnership to enhance
(MRA) on Engineering Services in 2005. ASEAN-Russian Federation in a
multidimensional manner; and
As part of the trade facilitation measures,
ASEAN reaffirmed its commitment by signing • The ASEAN-Korea Framework Agreement
the Agreement to Establish and Implement on Comprehensive Economic Cooperation.
the ASEAN Single Window, which allows
for single channel clearance of goods for The holding of the First East Asia Summit in
ASEAN countries. ASEAN 6 (Brunei December 2005 is seen as a key step towards
Darussalam, Indonesia, Malaysia, the strengthening cooperation on a much broader
Philippines, Singapore and Thailand) have level, with ASEAN taking the lead. This paves
committed to establish the ASEAN Single the way, in the long term, for more integrated
Window by 2008, while Cambodia, Lao PDR, economic cooperation linkages with the +3
Myanmar and Viet Nam (CLMV) by 2012. An countries, India, Australia-New Zealand and
ASEAN Task Force on ASEAN Single the Russian Federation.
Window was established in 2005 to expedite
work to realise the ASEAN Single Window. The sub-regional initiatives within ASEAN also
received greater attention with the convening of
On extra-ASEAN relations, measures were the First Indonesia-Malaysia-Thailand Growth
taken to strengthen linkages with the +3 Triangle (IMT-GT) Summit, Second Brunei-
countries (People's Republic of China, Japan Indonesia-Malaysia-Philippines - East ASEAN
and Republic of Korea), India, the Russian Growth Area (BIMP-EAGA) Summit and
173
the CLMV Summit on 11 December 2005 In narrowing the development gap between
in Kuala Lumpur, in conjunction with the ASEAN 6 and the newer member countries,
Eleventh Summit. ASEAN 6 continued to assist CLMV through
the programmes of Initiative for ASEAN
These Summits recognised that enhancing Integration (IAI). To date, ASEAN 6
economic development in these sub-regions contributed US$4.5 million to implement
would complement the economic integration various capacity building programmes,
process of ASEAN. It will also contribute especially in the area of human resource
towards sustaining economic activities within development. Funding assistance amounting
the less developed sub-regions in ASEAN. to US$16.3 million was also provided by
ASEAN's Dialogue Partners and donor
In relation to the 11 Priority Integration countries for the IAI programmes.
Sectors, a Consultative Meeting, involving
both the public and private sectors of ASEAN TRADE
countries, convened in Jakarta on 8-9 July
2005, to speed up the implementation of the Intra-ASEAN Trade
various measures identified in the Roadmaps In 2005, intra-ASEAN trade involving five
for the 11 Priority Integration Sectors. The member countries, namely Indonesia,
meeting: Malaysia, the Philippines, Singapore and
Thailand, increased by 16.2 per cent to
• reviewed some of the timelines and US$250.7 billion from US$215.7 billion in
measures in the areas of standards, customs, 2004.
trade in services and investment;
Intra-ASEAN exports of these countries
• established several product working groups increased by 14.9 per cent to US$133.5 billion
on standards to implement standard-related in 2005 from US$116.2 billion in 2004.
measures in the Roadmaps; Indonesia registered the highest intra-ASEAN
exports growth of 21.1 per cent, followed by
• posted on the ASEAN website Malaysia (15.4 per cent), Singapore (14.7 per
(www.aseansec.org) a compilation of non- cent), Thailand (14 per cent) and the
tariff barriers within the region; and Philippines (4.5 per cent).
• established alternative Rules of Origin to a Intra-ASEAN imports in 2005 by these five

number of products such as textiles and member countries were valued at US$117.2
apparel, wheat flour, wood and wood-based billion, an increase of 17.7 per cent from
products, aluminum products and iron and US$99.5 billion in 2004. Indonesia recorded a
steel products. significant increase of 45.8 per cent, followed
by Thailand (36.6 per cent), Singapore (11.4
To achieve greater integration in the per cent), Malaysia (7.5 per cent) and the
implementation of various measures under Philippines (3.4 per cent).
the priority sectors, ASEAN is also expected
to adopt a work plan for the implementation ASEAN Free Trade Area
of Phase II of the 11 Priority Integration
Sectors in early 2006. In this regard, member Common Effective Preferential
countries are required to revise the respective Tariff
Roadmaps, taking into account improvements As at 1 January 2005, Malaysia had transferred
to the existing measures and the addition all completely built-up (CBU) and completely
of new measures, widening the scope of knocked-down (CKD) motor vehicles, which
product coverage as well as reviewing of were previously not offered for preferential tariff
timelines. concession, into the Common Effective
174
Table 10.1:
Intra-ASEAN Trade, 2005
Country Exports Imports
2005 2004 Change 2005 2004 Change

(US$ mil.) (US$ mil.) (US$ mil.) (US$ mil.)
US$ million % US$ million %
Total 137,827.8 118,934.7 18,893.1 15.9 123,290.1 104,467.4 18,822.7 18.0
Singapore 49,862.0 43,459.0 6,403.0 14.7 41,698.0 37,436.9 4,261.1 11.4

Malaysia 36,633.3 31,742.1 4,891.2 15.4 28,152.3 26,195.4 1,956.9 7.5
Thailand 24,136.7 21,170.0 2,966.7 14.0 21,634.5 15,834.6 5,799.6 36.6
Indonesia 15,738.8 12,994.3 2,744.5 21.1 17,039.4 11,685.9 5,353.5 45.8
Philippines 7,146.3 6,837.9 308.4 4.5 8,637.3 8,355.9 281.4 3.4
Viet Nam 2,364.81 1,688.91 675.9 40.0 4,306.11 3,549.81 756.3 21.3
Brunei
Darussalam 1,357.01 427.71 929.3 217.3 630.81 314.11 316.7 100.8
1 1 1
Myanmar 486.2 544.6 -58.4 -10.7 395.7 526.21 -130.5 -24.8
Lao PDR 59.91 39.61 20.3 51.3 147.31 225.01 -77.7 -34.5
Cambodia 42.81 30.61 12.2 39.9 648.71 343.61 304.4 88.6
Source: ASEAN Secretariat

Note: 1The figures are for the period of January-June in 2005 and 2004
Preferential Tariff (CEPT) Scheme. The CBU The CLMV countries also fulfilled their
motor vehicles were included in the CEPT at obligations by transferring products into the
20 per cent, while the CKD motor vehicles were CEPT Scheme for tariff concessions.
phased-in at zero duty. On 19 October 2005, Beginning 2005, these countries have included
Malaysia reduced the duties on some of the 87.8 per cent of their products into the CEPT,
CBUs to 15 per cent, and the CEPT rates for of which 71.1 per cent products have duties
two CBU public transportation vehicles (motor ranging from 0 to 5 per cent.
buses) were reduced to 5 per cent effective
16 January 2006. With the announcement of Under the e-ASEAN initiatives, ASEAN 6 and
the National Automotive Policy, Malaysia the CLMV are required to eliminate tariffs on
further reduced the CBU CEPT rates to 5 per ICT products in three tranches, beginning 2003
cent effective 22 March 2006.
Table 10.2:
Malaysia has also transferred eight rice Products in the Inclusion List of CEPT
products into the CEPT. With this transfer, for ASEAN 6
Malaysia has phased-in 99.3 per cent of its
Country Total Products in the Inclusion List
products into the CEPT. The remaining 0.7 per Products
cent of Malaysia's products, comprising No. of Products %
alcoholic beverages, and arms and ammunition,
Average 98.5
are permanently excluded from the Scheme.
Singapore 10,705 10,705 100.0
ASEAN 6 has included 98.5 per cent of its Thailand 11,030 11,030 100.0
Philippines 11,059 11,013 99.6
products into the CEPT, of which 98.9 per cent Malaysia 12,130 12,043 99.3
of them have duties ranging from 0 to 5 per Indonesia 11,153 11,028 98.9
cent. This includes the transfer of products Brunei
Darussalam 10,702 9,924 92.7
previously placed in the Highly Sensitive List
and Temporary Exclusion List in January 2005. Source: ASEAN Secretariat
Based on ASEAN Harmonised Tariff Nomenclature
175
to 2010. In 2005, ASEAN 6 has eliminated duties Cumulative Rules of Origin was adopted.
on 487 ICT products under the third tranche, For the purpose of calculating the 40 per cent
while the CLMV is finalising its schedule for value-added content, member countries can
ICT products offered for tariff elimination. now cumulate inputs within the region (not
Malaysia has eliminated tariffs on 219 ICT for the purpose of enjoying tariff concession)
products, including 45 products in 2005. with a minimum threshold of 20 per cent
local/regional value content compared with the
Given the satisfactory performance of tariff existing '40 per cent local/regional value
liberalisation under the CEPT, ASEAN's work content all-or-nothing approach'.
programme in 2006 will mainly focus on
addressing the non-tariff measures to facilitate Product Specific Rules for textiles and
and enhance intra-ASEAN trade. apparel, wheat flour, wood and wood-based
products, aluminum products and iron and
Products of member countries, which are listed steel were also developed and adopted for
under the General Exclusion List of the CEPT implementation in 2005. ASEAN exporters and
and permanently excluded from preferential manufacturers can now chose to comply, either
tariff concession, are currently being reviewed, with the 40 per cent local/regional value
and the review is expected to be completed by content or respective Product Specific Rules, to
end 2006. This is to ensure that products benefit from the preferential tariff concessions
excluded are justified for reasons of protection of the CEPT Scheme. Using Product Specific
of human, animal, health and security, and Rules, exporters/manufacturers will have to
protection of artistic and historic value in prove that their manufactured goods have
accordance with provisions under the CEPT undergone substantial transformation to
Agreement. qualify for tariff concessions.
Similarly, the classification criteria for non- To further reduce the impediments to intra-
tariff measures have been developed and ASEAN trade, ASEAN is exploring the
ASEAN is currently developing a work possibility of establishing an ASEAN Trade
programme to eliminate non-tariff measures. Facilitation Committee to pursue trade
facilitation agenda in a concerted manner.
To further promote intra-ASEAN trade,
continuous improvements were made to the Exports under CEPT Scheme
Rules of Origin and procedures of trading Malaysia's exports under the CEPT in 2005
under the CEPT. A guideline to implement increased by 28.4 per cent to RM11.1 billion,
Table 10.3:
Malaysia's Exports under CEPT
Export Destination 2005 2004
RM million Share (%) Change (%) RM million Share (%)
Total 11,060.2 100.0 28.4 8,616.1 100.0
Thailand 4,645.4 42.0 27.1 3,654.8 42.4

Indonesia 2,465.1 22.3 75.7 1,403.2 16.3
Philippines 1,812.1 16.4 27.8 1,417.9 16.5
Viet Nam 1,393.2 12.6 -1.2 1,409.9 16.4
Singapore 716.3 6.5 0.5 712.7 8.3
Myanmar 15.6 0.1 22.8 12.7 0.1
Brunei Darussalam 10.6 0.1 165.0 4.0 neg.
Cambodia 1.9 neg. 111.1 0.9 neg.
Lao PDR neg. neg. neg. neg. neg.
Source: Ministry of International Trade and Industry

176
compared with RM8.6 billion in 2004. Exports ASEAN Integration System of
to almost all ASEAN countries recorded Preferences
increases, with exports to Indonesia recording The ASEAN Integration System of Preferences
an increase of 75.6 per cent. Exports to (AISP) is a scheme where ASEAN 6 gives
Viet Nam, however, recorded a slight decrease unilateral import duty exemption to products
of 1.2 per cent. of export interests to CLMV. As at December
2005, ASEAN 6 have offered duty exemption
In 2005, Thailand remained Malaysia's largest on 2,857 products to CLMV. Myanmar is
export destination, with a market share of the biggest preference-receiving country with
42 per cent of Malaysia's total export under 1,637 products, followed by Cambodia (477
CEPT. Total export to Thailand was RM4.6 products), Lao PDR (359 products) and
billion, compared with RM3.6 billion in 2004, Viet Nam (320 products).
followed by Indonesia (RM2.5 billion), the
Philippines (RM1.8 billion), Viet Nam (RM1.4 In 2005, Malaysia had eliminated duties on 231
billion) and Singapore (RM700 million). additional products as requested by CLMV,
with Cambodia as the biggest preference-
receiving country with 91 products, followed
Table 10.4:
by Lao PDR (71 products), Viet Nam (67
Malaysia's Main Exports Items
products) and Myanmar (2 products).
under CEPT in 2005
Product Category RM Share of To date, Malaysia has offered duty exemptions
million Total Exports on 783 products covering fruits and
Under CEPT
(%)
vegetables, chemicals and chemical products,
rubber products, wood and wood-based
Total 11,060.2 100.0 products, paper and paper products, E&E,
plastic products, footwear, furniture, and
Plastics 1,530.5 13.8
E&E products 1,279.3 11.6 textiles and apparel.
Organic chemicals 1,103.6 10.0
Articles of iron and steel 943.6 8.5 Various initiatives are currently being
Machinery equipment 819.1 7.4
Rubber and rubber products 698.9 6.3 undertaken by ASEAN to further promote
Vegetable fats and oils 547.7 5.3 the utilisation of AISP among CLMV. This
Iron and steel 364.7 3.3 includes standardising the issuance of the
Automotive products 337.6 3.1
Footwear 284.9 2.6 Legal Enactment (to effect the duty exemption)
by ASEAN 6 based on open-ended basis,
instead of yearly expiration dates and
harmonisation of the Rules of Origin in
Malaysia's major export products under the accordance with the 40 per cent local/regional
CEPT include plastic products (13.8 per cent), value content implemented under the CEPT.
electrical and electronics (E&E) products
(11.6 per cent), organic chemicals (10 per INVESTMENT
cent), articles of iron and steel (8.5 per cent)
and machinery equipment (7.4 per cent). Investment Flows
In line with the increase in global FDI inflows
Malaysian exporters and manufacturers in 2004, FDI inflows into ASEAN increased
continued to take advantage of the tariff by 38.9 per cent to US$25.7 billion, from
concessions under the CEPT. In 2005, a total US$18.5 billion received in 2003. The increase
of 94,626 Form D (Certificate of Origin in FDI into ASEAN has outpaced the increase
under the CEPT) were issued, compared in global FDI, indicating that ASEAN remains
with 83,319 Form D in 2004, an increase of a preferred destination for investors despite
13.6 per cent. international challenges, such as the emergence
177
of the People's Republic of China and India which accounted for 78.3 per cent of ASEAN's
as attractive investment destinations, and total outward investment.
international terrorism. FDI inflows were
mainly to Singapore (62.6 per cent), Malaysia Malaysia's gross investment overseas in
(18 per cent), Viet Nam (6.3 per cent), 2004 increased by almost three times to
Thailand (5.5 per cent) and Indonesia (3.9 per RM28.3 billion from RM10.6 billion in 2003.
cent). Major investment destinations were Singapore
(RM2.5 billion), Hong Kong (RM1.1 billion),
In 2004, the leading investor in ASEAN was Chad, Central Africa (RM1 billion), the
the United States of America (USA) with USA (RM800 million) and Thailand (RM700
investments valued at US$5.1 billion, million).
followed by Japan (US$2.5 billion), the
Netherlands (US$2.2 billion), the United Intra-ASEAN Investment
Kingdom (US$1.7 billion) and Singapore In 2004, intra-ASEAN investment amounted to
(US$1.2 billion). US$2.4 billion, an increase of 5.7 per cent from
US$2.3 billion in 2003. Singapore remained
ASEAN Outward Investments the leading source of outward intra-ASEAN
In 2004, total ASEAN outward investments investment, accounting for 50 per cent share
increased by more than two-fold to US$13.6 (US$1.2 billion), followed by Malaysia
billion from US$5.7 billion in 2003. Outward (US$600.8 million), Indonesia (US$269.1
investments were mainly from Singapore, million) and the Philippines (US$190.7 million).
Table 10.5:
Intra-ASEAN Investment Flows, 2004
Source Host Country (US$ million)
Country
Darussalam
Philippines
Cambodia
Singapore
Myanmar
Indonesia
Viet Nam
Lao PDR
Thailand
Malaysia
Brunei
Total
Total 24.6 31.9 31.7 7.8 980.1 12.3 116.2 649.3 336.0 242.9 2,432.6
Singapore 3.7 2.8 (78.8) 0.2 965.5 5.9 115.5 nil 82.0 121.3 1,218.0
Malaysia 19.6 25.8 111.3 2.3 nil neg. 0.2 331.6 64.0 46.0 600.8
Indonesia 0.6 nil nil nil 4.4 2.1 nil 260.9 nil 1.0 269.0
Philippines 0.7 nil nil nil 0.3 nil nil 6.7 183.0 nil 190.7
Thailand neg. 3.3 (0.8) 4.2 9.8 4.2 0.2 36.2 nil 74.6 131.7
Brunei
Darussalam nil nil nil nil 0.1 nil 0.3 3.9 2.0 nil 6.3
Myanmar nil nil nil nil nil nil nil 5.8 nil nil 5.8
Viet Nam nil nil nil 1.1 nil nil neg. 2.6 2.0 nil 5.7
Cambodia nil nil nil nil nil nil nil 0.5 3.0 nil 3.5
Lao PDR nil nil nil nil nil nil neg. 1.1 nil nil 1.1
Source: FDI Database, ASEAN Secretariat

Notes: (1) Data compiled from respective ASEAN Central Banks and Central Statistics Offices. Unless otherwise indicated, the figures include equity
and inter-company loans.
(2) Cambodia figures are estimated figures.
(3) Figures for Brunei Darussalam, Cambodia, Malaysia, Myanmar, Singapore and Viet Nam include reinvested earnings.
(4) Figures for the Philippines and Singapore for 2004 are preliminary.
(5) ( ) Indicates net outflows which include disinvestments of equity and repayment of inter-company loan.
(6) neg. - negligible
178
Malaysia emerged as the major recipient of also embarked on capacity building
intra-ASEAN investment with US$980.1 programmes for ASEAN officials involved in
million in 2004, an increase of almost four-fold investment negotiations with ASEAN
from US$251.1 million in 2003. About 98.5 Dialogue Partners. In addition, under the
per cent of the investments into Malaysia were AIA Framework, the publication of the
from Singapore (US$965.5 million), followed 'Statistics on Foreign Direct Investment in
by Thailand (US$9.8 million) and Indonesia ASEAN, Seventh Edition 2005' in CD-ROM
(US$4.4 million). Other major host countries was undertaken. This publication provides
for inward intra-ASEAN investment flows investors and policy makers with a better
were Singapore (US$649.3 million), Thailand understanding of FDI development in
(US$336 million) and Viet Nam (US$242.9 ASEAN.
million).
Among activities that ASEAN is currently
Malaysia's intra-ASEAN investment outflows undertaking is the study on 'AIA Plus Strategy:
in 2004 were mainly to Singapore (US$331.6 Building on FTA Agreements,' which focuses
million), Indonesia (US$111.3 million) and on Australia and New Zealand. This study,
Thailand (US$64 million). The investments which is expected to be completed in 2006,
were mainly in real estate, financial services, will facilitate ASEAN in the negotiations
manufacturing and plantation sectors. with Australia and New Zealand. Other
programmes that are in progress include
ASEAN Investment Area capacity building workshops for Investment
ASEAN continues to enhance its effort to Promotion Agencies, and ASEAN
attract FDI inflows into the region. To further publications, which include 'Facts and Figures:
enhance the investment environment in Cost of Investing and Doing Business in
ASEAN, various measures were undertaken ASEAN' and 'ASEAN Investment Map’,
in 2005 under the ASEAN Investment Area which will enhance transparency and facilitate
(AIA) initiative. Among the measures included investments into ASEAN.
are improvements to the Temporary Exclusion
List and Sensitive List. In 2005, Cambodia ASEAN Industrial Cooperation
and Myanmar indicated improvements to Scheme
their Temporary Exclusion List/Sensitive List. ASEAN Industrial Cooperation (AICO)
Malaysia has already made improvements to Scheme is aimed at promoting resource sharing
its Sensitive List by phasing-out some by ASEAN based companies through industrial
restricted sectors in line with its liberalisation cooperation scheme. Since its implementation
of the equity policy in the manufacturing and in 1996, many companies, particularly those in
manufacturing-related services sectors in 2004. the automotive sector, have benefited from
Among the sectors that were phased-out from preferential market access given under this
the Sensitive List included paper packaging, scheme.
plastic packaging (bottles, films and sheets,
bags), plastic injection moulded components, The attractiveness of the AICO Scheme
metal stamped products and electroplated was further enhanced with the formalisation of
products. a Protocol in April 2004, which requires Brunei
Darussalam, Cambodia, Indonesia, Lao PDR,
Apart from the liberalisation initiatives, Malaysia, Myanmar, the Philippines,
ASEAN continued to undertake facilitation Singapore and Thailand to accord zero tariff
and cooperation programmes to promote for approved arrangements by January 2005,
investments. In 2005, ASEAN convened and Viet Nam by January 2006. In addition,
consultations with Japan and the EU to the annual waiver of 30 per cent national equity
exchange information on investment regimes requirement has been extended until
and other investment-related issues. ASEAN 31 December 2006.
179
As at 11 October 2005, a total of 133 projects foreign equity participation targets shall
were approved by ASEAN countries, involving be with flexibility as follows: 49 per cent
arrangements in the areas of automotive by 2006, 51 per cent by 2008 and 70 per
products (89.5 per cent), E&E products cent by 2010; and
(5.3 per cent) and food processing (3.8 per
cent). As at December 2005, Malaysia has - for the non-priority sectors, the targets
approved a total of 65 projects, mainly in the with flexibility shall be as follows: 30
automotive, agriculture, food processing and per cent in 2006, 49 per cent in 2008, 51
E&E sectors, valued at US$387 million. per cent in 2010 and 70 per cent in 2015.
SERVICES In addition to these targets, the Mode 3

liberalisation will also address elimination of
The current fourth round of services other limitations in the form of conditionalities
negotiations under the ASEAN Framework on market access and national treatment.
Agreement on Services (AFAS) commenced in Commitments for Mode 4 (movement of
January 2005 and is scheduled to be completed natural persons) under the fourth round will
by the end of 2006. The fifth package of be further improved, compared with current
liberalisation commitments to be made under levels of commitments. Roadmaps are being
this round is targeted to be completed by 2006. developed for the liberalisation of the services
Noting the liberalisation of services sector sector until 2015.
holds tremendous potential and a source of
new growth, the ASEAN Leaders endorsed The MRA Agreement on Engineering Services,
the decision of the ASEAN Economic signed by the ASEAN Economic Ministers on
Ministers to fast track the liberalisation of the 9 December 2005, allows for free
sector to 2015 instead of 2020. Due to the movement of engineering services
complexity involved in services liberalisation, professionals within the region and promotes
the Leaders also agreed that some flexibility information exchange to encourage best
be allowed to member countries in meeting practices on standards and professional
the commitments. qualifications in ASEAN. This arrangement
is expected to benefit ASEAN companies,
To enable liberalisation of the services sector particularly those involved in cross-border
within ASEAN to be carried out in a more construction projects. Other MRAs being
expeditious manner, the ASEAN Economic negotiated include:
Ministers endorsed new parameters and targets
for services liberalisation under this fourth • MRAs on Architectural Services,
round as follows: Accountancy Services and Land Surveying;
• no restrictions for commitments under • MRAs on Nursing Services and Medical

Mode 1 (cross-border supply) and Mode 2 Practitioners;
(consumption abroad), unless for specific
reasons where a member country cannot do • MRA for IT Professionals; and
so. In such cases the member country is
required to provide due reasons; and • MRA for Tourism Professionals.
• for Mode 3 (commercial presence), the SECTORAL COOPERATION

modality for equity liberalisation has been
divided into two groups: Agriculture
Various measures have been undertaken by
- for the three priority sectors, namely ASEAN to strengthen cooperation in the
tourism, healthcare and e-ASEAN, agriculture sector. Among others, was the
180
adoption of the Strategic Plan of Action for the rice reserve will be considered after the
ASEAN Cooperation in Food, Agriculture and completion of the Pilot Project and will be
Forestry (2005-2010) in 2004. The documents implemented on a voluntary basis.
endorsed in 2005 were:
On fisheries, ASEAN endorsed the Regional
• Strategic Plan of Action for the Commodity Guidelines on the Code of Conduct for
Sectors of Palm Oil, Rubber, Cocoa and Responsible Fisheries and adopted a five-year
Pepper; programme on Sustainable Fisheries for Food
Security.
• Revised Manual of ASEAN Rules and
Procedures for the Registration of Animal A total of 12 new agriculture training projects,
Vaccines; and seminars and workshops have been endorsed
for implementation in 2006. The projects,
• Criteria for Accreditation of Livestock among others, will focus on capacity building,
Establishments for Sheep and Goats for research and development on agriculture
Breeding and Slaughter, Ducks for database, sustainable forest management
Slaughter and Cattle Slaughterhouses for and early warning system for agricultural
the Production of Frozen or Chilled Beef. hazards.
ASEAN has also endorsed 104 new ASEAN Transport

harmonised maximum residue limits on 12 In 2005, ASEAN continued to focus on
pesticides for various fruits, vegetables and improving cross-border transport infrastructure
cash crops. To date, a total of 599 maximum and connectivity, promoting safe and secure
residue limits for 42 pesticides has been transportation and increased air accessibility.
adopted. ASEAN has also agreed to establish
an ASEAN Animal Health Trust Fund, with ASEAN adopted the Framework Agreement on
pledged contribution in cash by all member Multimodal Transport, which will further
countries. The ASEAN Animal Health Trust facilitate the door-to-door delivery of goods
Fund would facilitate the collection and using various modes of transport under a single
management of contributions and assist in transport document. The Agreement was
addressing animal diseases of economic and signed by ASEAN Transport Ministers on
public health importance, including the avian 17 November 2005. The Agreement also
influenza, foot and mouth disease and classical provides a common policy framework for
swine fever. further specialisation of freight forwarders and
multimodal transport operators, which will
To prevent, control and eradicate the spread reduce the cost of doing business.
of avian influenza disease in the region,
ASEAN has adopted a Regional Framework ASEAN has also finalised Protocol 1 on
for Control and Eradication of Highly Designation of Transit Transport Routes
Pathogenic Avian Influenza. The Framework and Facilities of the Framework Agreement
covers eight strategic areas to be addressed on Facilitation of Goods in Transit, which
and implemented over a period of three years was signed on 16 December 1998. Member
(2006-2008). countries are finalising their Transit Transport
Routes for the Protocol and it is expected to
ASEAN and +3 countries (People's Republic be signed by September 2006. The Protocol
of China, Japan and Republic of Korea) are will be implemented based on 'ASEAN-X
in the process of developing an Agreement on Formula' (participation of a minimum of six
Rice Reserve to support the implementation of countries) as agreed at the Ninth ASEAN
the Pilot Project on East Asia Emergency Rice Transport Ministers Meeting on 24 October
Reserve Programme. A full-fledged system on 2003.
181
Besides Protocol 1, five out of the nine • identification of two pilot ports for
implementation Protocols to the Framework developing an integrated Port Safety, Health
Agreement have been concluded. These and Environmental Protection Management
Protocols cover the types and quantity of road System;
vehicles, technical requirements of vehicles,
ASEAN Scheme of compulsory motor vehicle • funding by the Asian Development Bank
third-party liability insurance, sanitary and of US$3.5 million to implement Phase II of
phytosanitary measures and dangerous ASEAN Road Safety Programme and
goods. US$40 million to rehabilitate the
Cambodian Railway Network;
The remaining three Protocols are on
designation of frontier posts, railway borders • mobilising US$2.3 million to implement
and interchange stations, and Customs transit eight transport projects under the Initiative
system. for ASEAN Integration Work Plan. Six
projects have been completed and the
To accelerate the integration of air travel as remaining two projects are on-going;
one of the 11 Priority Integration Sectors,
ASEAN has agreed to increase cargo tonnage • implementation of the feasibility study on
to 250 tonnes weekly and provide additional the Saigon-Loc Ninh Missing Link in
designated points for air freight services Viet Nam and completion of the feasibility
beginning 2006. This is realised through the study on the spur line connecting Nam
adoption of a Protocol to Amend the ASEAN Tok-Three Pagoda Pass-Thanphyuzayat
Memorandum of Understanding on Air (Myanmar-Thailand Border) by 2006; and
Freight Services, which was signed in 2002.
ASEAN is also expected to finalise the • harmonisation of road signage design and
ASEAN Multilateral Agreement on the Full placement for the ASEAN Highway
Liberalisation of Air Freight Services by the Network.
end of 2006.
Finance
ASEAN is currently developing an ASEAN Cooperation in finance made significant
Multilateral Agreement on Air Services and progress, particularly in advancing the
a conceptual framework to establish a single integration efforts under the Roadmap for
aviation market. Member countries are also Financial and Monetary Integration of
currently considering to further improve the ASEAN. Comprehensive measures have been
measures for passenger air services developed in four areas, namely financial
liberalisation as stipulated under the Roadmap services liberalisation, capital market
for Integration of the Air Travel. This includes development, capital account liberalisation and
accelerating the timeline for liberalisation and currency cooperation.
expanding the coverage of destinations to all
ASEAN countries. ASEAN is also expected The Third Round of Negotiations on financial
to conclude and sign the Fifth Package of liberalisation was concluded in December
Commitments on Air Transport Services in 2004, and the Protocol to implement the Third
2006. Package of Commitments was signed by the
ASEAN Finance Ministers on 6 April 2005.
Key developments in 2005 related to the
ASEAN Transport Action Plan (2005-2010), The Fourth Round of Negotiations was also
include: launched under the new positive list approach,
at the beginning of 2005 and will be concluded
• finalisation of the Roadmap on Integrated by 2007. The guideline to implement the
and Competitive Maritime Transport in positive list approach under the Fourth Round
ASEAN; has also been finalised.
182
To create an inter-linked ASEAN securities Information and Communication
market by 2010, ASEAN has set up a Technology
Task Force to explore various models of In an effort to progressively integrate the
alliance and linkage including cross-listing, e-ASEAN sector by 2010, ASEAN member
cross-trading access or cross-exchange countries adopted the Hanoi Agenda on
products. In addition, priority areas have promoting online services and applications
been identified to narrow the gaps in to realise e-ASEAN.
technology, platforms and market practices
and strengthening standards of investor The Hanoi Agenda aims to accelerate
protection and surveillance. the development of online services and
applications and boost electronic transactions
To strengthen cooperation in the capital among citizens, businesses, industries and
market, the ASEAN Capital Market governments in the ASEAN region. It is also
Forum, comprising representatives of intended to provide a platform for regional
ASEAN securities' regulators, has been integration efforts to ensure synchronised
held on a regular basis to discuss, institutional and legal framework to support
among others, the harmonisation of relevant a more rapid, substantive and effective
standards. This includes disclosure development of the ICT sector in ASEAN.
standards, distribution rules, accounting ASEAN countries also adopted the ASEAN
and auditing standards and cross-recognition ICT Focus Plan 2005-2010 to serve as an
of qualifications of capital market overall guiding document for concerted and
professionals. collective cooperation in building the
information society and enhancing the region's
In order to further facilitate trade connectivity and competitiveness.
integration and promote greater financial
stability, ASEAN is exploring the possibility An ASEAN ICT Fund was also established
of adopting a regional exchange rate to effectively bridge the digital divide in
arrangement. In addition, ASEAN central ASEAN and provide counterpart funding for
banks and monetary authorities have joint projects or activities with the private
increased the value of the existing ASEAN sector, ASEAN dialogue partners and other
Swap Arrangement from US$1 billion to international organisations. An ASEAN ICT
US$2 billion to provide short-term liquidity Centre has also been established at the
support. ICT Unit at the ASEAN Secretariat.
To enhance the effectiveness of the Chiang 'ASEAN Connect' (www.ASEANconnect.gov.my),

Mai Initiative, which was initiated to further a comprehensive web portal that collates all
enhance ASEAN+3 finance cooperation, essential information and data about all
ASEAN has agreed, among others, to ASEAN initiatives and activities in ICT, was
transfer one-way swap to two-way swaps on launched in 2005. It contains a list of key
a voluntary basis, expand the network to indicators on convergence, telecommunication
include Brunei Darussalam and CLMV and equipment trade, conformity assessment
minimise the timeframe for swap activation procedures, digital divide and infrastructure.
process.
Tourism
As at June 2005, a total of 17 bilateral Noting the importance of the tourism sector in
swap arrangements totalling US$47.5 generating economic growth of the region, the
billion have been concluded. ASEAN is liberalisation of the air travel sector will be
also exploring possible routes towards fast-tracked in Phase II of the implementation
multilateralising the Chiang Mai Initiative of the priority integration sectors. New
and to promote active usage of the East Asian measures to be incorporated in the roadmap for
local currencies. the integration of the tourism sector include:
183
• development of criteria for places to be by 2010. ASEAN will also develop
classified as ASEAN Tourism Heritage definitions, performance indicators and
sites; implementation mechanism, as well as the
establishment of a certification body for
• development of an ASEAN tourism portal hotel standards and local food and beverages
and comprehensive marketing plan for the services.
Visit ASEAN Campaign;
Malaysia organised the ASEAN Tourism
• organisation of an ASEAN Tourism Investment Forum on 9 December 2005 in
Investment Forum on a regular basis to Kuala Lumpur, as part of a series of activities
explore tourism investment opportunities; for the Eleventh Summit. The Philippines
hosted the ASEAN Tourism Forum on
• organisation of capacity building 13-21 January 2006 to further promote the
programmes for local tourist guides; sector in the region.
• development of plans to encourage FACILITATION MEASURES

maritime travel; and
Standards
• development of an ASEAN Crisis In 2005, ASEAN completed the harmonisation
Communication Framework and Action of standards for 20 product groups, comprising
Plan. 58 international standards of the International
Organisation for Standardisation (ISO) and
To further promote intra-ASEAN travel, the International Electro-Technical Commission,
implementation of the fourth phase of the Visit 72 standards for safety and 10 standards for
ASEAN Campaign in 2006 will include the Electromagnetic Compatibility. A total of 27
production of ASEAN posters, exchange of International Electro-Technical Commission
audio video promotional materials, production standards have been identified for
of audio video promotional of ASEAN leaders harmonisation by the end of 2007.
and improvement to the existing ASEAN
tourism website. ASEAN will also conduct To facilitate the implementation of AFTA,
studies on the Impact Assessment of Visit priority integration sectors and the realisation
ASEAN Campaign. of an ASEAN Economic Community, ASEAN
has adopted a Policy Guideline on Standards
ASEAN is currently developing an MRA and Conformance. The guideline contains
for Tourism Professionals which is expected principles for the implementation of measures
to be finalised by August 2006. ASEAN in the area of standards and conformance
will also implement a project on Developing for both regulated and non-regulated sectors
Common Tourism Course Curriculum for in ASEAN. It also focuses on harmonisation
ASEAN Countries, starting January 2006. of standards, implementation of relevant
It will address the identification of a conformity assessment schemes and adoption
common ASEAN Tourism Curriculum and of technical regulations.
establishment of a regional Qualification
Framework and Recognition System. ASEAN is expected to adopt technical
regulations, conformity assessment and
In the area of tourism standard, criteria harmonise each respective national standards
and requirements have been developed for in accordance with the existing international
eco-tourism, home-stay programme, local standards. ASEAN is also expected to
and food beverages services and public ensure the implementation of Post Market
restrooms. Standards for hotel ratings, tour Surveillance System upon the implementation
operators and tour guides will be developed of respective sectoral MRAs.
184
In relation to the implementation of the prepared foodstuffs. This includes food
ASEAN MRA for Electrical and Electronics labelling, Import-Export Certification and
Equipment, all member countries have Registration Procedure, Food Fortification
notified their participation in recognition of and Genetically Modified Organisms, as well
test reports and seven countries, including as GMP Inspection and Certification. An
Malaysia, have notified their acceptance of ASEAN Common Food Control Requirement
certification. In addition, seven testing is also currently being developed.
laboratories and one certification body have
been designated to provide services under Initial harmonisation of technical requirements
the ASEAN MRA for Electrical and have also being identified for traditional
Electronics Equipment. medicines and health supplements. This
includes definitions and terminologies,
On 9 December 2005, ASEAN has also labelling requirements and advertisement
adopted the Agreement on ASEAN claims, product requirements and licensing,
Harmonised Electrical and Electronics safety and quality requirements, testing
Equipment Regulatory Regime to enhance methods and Post Market Surveillance
cooperation in the protection of human health, System.
safety, property and environment in relation
to trade in E&E equipment in ASEAN. Customs
The Agreement will also facilitate the MRA ASEAN continues to undertake concrete
negotiations on conformity assessment measures in realising Customs integration to
between ASEAN and non-ASEAN countries. promote economic growth.
Under this Agreement, ASEAN is expected On 9 December 2005, the ASEAN Economic
to eliminate restrictions on trade in E&E Ministers signed the Agreement on ASEAN
equipment within the region. Member Single Window. The ASEAN Single Window
countries with existing national legislation is aimed at expediting Customs procedures
regime on E&E equipment are required to relating to trade activities within the region by
develop a common regulatory regime and allowing for the establishment of a single
implement all the provisions in the Agreement channel clearance of goods for ASEAN 6
by 2010 and transpose the agreed ASEAN by 2008 and new members by 2012.
common requirements into their national
legislation. ASEAN countries are also required Some ASEAN countries are in the process of
to identify and agree on standards for developing their national single window, which
compliance. This is to ensure that only those will be subsequently integrated into the
E&E equipment complying with the agreed ASEAN Single Window. ASEAN is currently
standards will have market access. in the process of finalising a separate Protocol,
a technical framework to operationalise the
For cosmetics and pharmaceutical implementation of the ASEAN Single Window,
products, ASEAN is currently enhancing which is expected to be signed in 2006. A
efforts to implement the ASEAN Harmonised Steering Committee to monitor the
Cosmetics Regulatory Regime and ASEAN implementation of the ASEAN Single Window
Common Technical Dossiers by 2008. The will also be established.
harmonisation of labelling requirements and
MRA for Good Manufacturing Practice (GMP) To further harmonise and simplify Customs
inspection for pharmaceuticals is being procedures within the region, ASEAN has
pursued. adopted an ASEAN Customs Declaration
Documents, containing 48 information
ASEAN is also in the process of harmonising parameters which will be implemented
the technical requirements in the areas of beginning 2006. These documents will
185
also be implemented for trade with REGIONAL COOPERATION WITHIN ASEAN
non-ASEAN countries. To operationalise
the implementation of the ASEAN Customs Indonesia-Malaysia-Thailand
Declaration Documents, a standard format, Growth Triangle
definitions and explanatory notes to the The Indonesia-Malaysia-Thailand Growth
information parameters has been adopted. A Triangle (IMT-GT), established in 1993, received
review of the information parameters will be a significant boost with the holding of the First
conducted in 2006 to allow for further IMT-GT Summit Meeting in Kuala Lumpur on 11
improvements and adjustments. In addition, December 2005. The Summit reviewed progress
ASEAN has also developed and adopted an made and agreed that the IMT-GT has
ASEAN Cargo Clearance Model beginning tremendous potential, which could lend to the
June 2005. deepening of integration within ASEAN. There
are already progresses made in enhancing land,
To further simplify the ASEAN Harmonised sea and air connectivity. To further enhance
Tariff Nomenclature (AHTN) for better cooperation, the Summit agreed to:
compliance and Customs control, as well
as to address the technical transposition • establish a socio-economic outlook of all
issue, the AHTN Review Committee member states and provinces in the IMT-
has completed review on 83 of 97 Chapters GT, as well as database on all transactions
of the AHTN. The Nomenclature has in trade, investment and tourism activities
been implemented in ASEAN beginning in the sub-region;
1 January 2004, and it will be extended to
extra-ASEAN trade beginning 1 January 2007. • formulate IMT-GT roadmap for development
AHTN is a harmonised Customs product to serve as basis for cooperation of each
classification implemented by all ASEAN priority sector for the next five years, with
member countries at eight-digit level. assistance from the Asian Development Bank
and ASEAN Secretariat;
In 2005, ASEAN finalised 15 specific
programmes under the Strategic Plan of • institutionalise meetings among
Customs Development, 2005-2010. Governors, Chief Ministers and the
Table 10.6:
Country Coordinators for Specific Areas Under the Strategic Plan of Customs
Development, 2005-2010
Programme Country Coordinator
Customs Enforcement and Mutual Assistance Brunei Darussalam

Customs Reform and Modernisation Brunei Darussalam
Narrowing the Development Gap Cambodia
Customs Valuation Indonesia
Customs Post Clearance Audit Indonesia
Customs Human Resource Development and Administration Malaysia
International Partnership and ASEAN Customs Malaysia
Public Security and Protection of the Society Malaysia
Customs Clearance Philippines
Tariff Classification Singapore
Customs Transit Singapore
Temporary Admission Singapore
ASEAN e-Customs Thailand
Origin Determination Viet Nam
Partnership with Customs Stakeholders and the Trading Community ASEAN Secretariat
Source: ASEAN Secretariat
186
private sector, led by the joint Business ASEAN-Mekong Basin Development
Councils, to address issues of common Cooperation
concern with their respective stakeholders; The Seventh ASEAN Mekong Basin
and Development Cooperation (AMBDC)
Meeting, held on 28 November 2005 in
• streamline and coordinate the institutional Kuala Lumpur, reviewed the progress
arrangements between the public and made on the implementation of the
private sectors. AMBDC projects since its establishment
in 1996.
The IMT-GT Leaders also welcomed the
participation of ASEAN Dialogue Partners To date, a total of 55 projects at a cost
and international institutions as development of US$183 million have been identified
partners. for implementation. Of these, only 31
projects, valued at US$11 million, have
Brunei-Indonesia-Malaysia- been implemented or are at various
Philippines - East ASEAN Growth stages of implementation. The bulk of the
Area projects relating to infrastructure
The Second Brunei-Indonesia-Malaysia- projects have not been implemented
Philippines East ASEAN Growth due to funding constraints. To address
Area (BIMP-EAGA) Summit, held on this issue, member countries agreed that
11 December 2005, endorsed the BIMP- each country prioritise its list of projects
EAGA Roadmap to Development (2006-2010) and endeavour to provide in-country
to enhance economic growth of the sub-region. contribution.
The roadmap covers broad based strategies in The AMBDC countries also agreed to a
four priority areas: set of criteria to facilitate project evaluation
and funding support. The criteria include:
• promote intra- and extra-ASEAN trade,
investments and tourism; • projects must strengthen interconnections
and economic linkages between the ASEAN
• coordinate the management of natural member countries and the Mekong Riparian
resources for sustainable development of countries;
the sub-region;
• projects must have regional content
• coordinate the planning and implementation that would lead to synergies and
of infrastructure projects; and complementarities;
• strengthen the institutional structure and • projects initiated should involve at least two
mechanism. countries in the Mekong Basin;
Since the First BIMP-EAGA Summit, • projects should promote development

efforts have been taken to improve airport within the Mekong Basin countries with the
and seaport infrastructure facilities within view to deepen integration;
the sub-region, and other trade and
investment initiatives. To attract investment • accord priority to the short-term needs of
to the sub-region, the ASEAN- Mekong Basin countries; and
Japan Centre sponsored the BIMP-
EAGA Investment Promotion Seminar on • projects which require donor country
22 November 2005. assistance should meet the regional content
criteria.
187
Progress has been achieved in the Singapore- Area (EAFTA) were held on 12-13 April 2005
Kunming Rail Link, which is a flagship project in Beijing, the People's Republic of China, and
under the AMBDC. To enhance private sector 18-19 November 2005 in Jakarta, Indonesia,
participation in the Singapore-Kunming Rail respectively. The Expert Group comprising
Link project, member countries have agreed academia are tasked to assess the feasibility of
that various outreach programmes need to be establishing an EAFTA as well as to conduct
undertaken to create greater awareness among in-depth study on the economic and industrial
the private sector, potential investors and structure of the East Asia region.
funding agencies.
Cooperation was also enhanced in the areas of
Malaysia, as the current chair of AMBDC, has ICT, food security and energy. The Second
agreed to produce a video on the Singapore- ASEAN+3 Energy Ministers met on 13 July
Kunming Rail Link, especially on the missing 2005 to identify ways to enhance cooperation
links of the project and organise a high-level in the wake of rising fuel prices. ASEAN and
event on the Singapore-Kunming Rail Link to the +3 countries are also in the process of
disseminate information and opportunities on implementing the East Asia Investment
this ASEAN project to relevant stakeholders in Information Network, a portal to disseminate
2006. information on investment policies in the
ASEAN and +3 countries.
REGIONAL LINKAGES WITH DIALOGUE PARTNERS
ASEAN-China
East Asia Summit In 2005, significant progress has been made
The First East Asia Summit held on 14 towards strengthening economic cooperation
December 2005, marked the beginning of a between ASEAN and the People's Republic of
process of enhancing collaboration among the China. The first tranche of tariff reduction
ASEAN and the six major dialogue partners of under the ASEAN-China Free Trade Area was
the People's Republic of China, Japan, the implemented on 20 July 2005.
Republic of Korea, India, Australia and New
Zealand. The Grouping will be an open, Under the first tranche of tariff reduction/
inclusive, transparent and outward looking elimination, tariffs on 40 per cent of the
forum, and other countries which meet the products were reduced to 0 to 5 per cent
membership criteria can join as members. It will by ASEAN 6 and the People's Republic of
serve as a forum for dialogue on broad strategic China. Subsequent tariff reduction/elimination
political and economic issues of common will be undertaken under the second, third and
interest and concern, as well as to promote the fourth tranches in 2007, 2009 and 2010,
overall economic development of the region. respectively. Flexibility has also been accorded
to 150 tariff lines, for which the duties will be
ASEAN+3 eliminated by 2012.
To strengthen various mechanisms for the
development of ASEAN+3 cooperation as Products under the sensitive track are
well as economic linkages, the ASEAN+3 further classified into Sensitive List and
Leaders signed the Kuala Lumpur Declaration Highly Sensitive List. For products under the
on the ASEAN+3 Summit on 12 December Sensitive List, the ASEAN 6 and the People's
2005. The Declaration reaffirmed the Republic of China are obliged to reduce duties
collective resolve of the Leaders to implement to 20 per cent by 2012 and to 0 to 5 per cent by
the short, medium and long-term measures 2018. For products under the Highly Sensitive
contained in the East Asia Study Group Report. List, duties will be reduced to 50 per cent by
2015. ASEAN and the People's Republic of
In addition, the First and Second Meetings China will further review the Sensitive Track
of the Expert Group on East Asia Free Trade in 2008.
188
Box 10.1: ASEAN-China Free Trade Area
The ASEAN-China Free Trade Area in Goods commenced Since the implementation of the Trade in Goods Agreement,
on 20 July 2005. Prior to the implementation of the ASEAN- a total of 1,387 Form E was issued to Malaysian exporters
China FTA, ASEAN and the People's Republic of China and manufacturers for export purposes to the People's
implemented the Early Harvest Programme. The Early Republic of China in 2005. The value of these exports
Harvest Programme is an early tariff liberalisation amounted to RM756.5 million.
programme on a selected range of products, comprising
mainly unprocessed agricultural products and selected Malaysia's exports under the ASEAN-China FTA are
manufactured products. encouraging, given the fact that it has only been
implemented for less than a year. More outreach
The tariff reduction/elimination for the Early Harvest programmes will be continue to be undertaken to
Programme began on 1 January 2004 for ASEAN 6, the promote ASEAN-China FTA to the Malaysian business
People's Republic of China and Viet Nam, and 1 January community.
2006 for Cambodia, Lao PDR and Myanmar. In respect of
ASEAN 6 and the People's Republic of China, tariffs for Major export products to the People's Republic of China
Early Harvest Programme products were eliminated on 1 under the Early Harvest Programme and Trade in Goods
January 2006. Cambodia, Lao PDR, Myanmar and Viet Nam Agreement included chemical products (47.3 per cent), palm
(CLMV) will eliminate duties on Early Harvest Programme oil (15.2 per cent), stearic acid (10.4 per cent), rubber
products by 1 January 2010. products (8.1 per cent) and detergents and soaps (7.4 per
cent).
For Malaysia, the Early Harvest Programme comprises 590
products, of which 503 are unprocessed agriculture A total of 516 Form E (both under Trade in Goods Agreement
products, and 87 processed and manufactured products. and Early Harvest Programme) were received from the
People's Republic of China, with imports valued at US$3.7
Malaysian exporters and manufacturers continued to benefit million in 2005. No import was recorded in 2004 from the
by exporting to the People's Republic of China under the People's Republic of China under the Early Harvest
Early Harvest Programme. A total of 3,780 Form E Programme.
(Preferential Certificate of Origin under ASEAN-China FTA)
were issued by Malaysia for exports to the People's Republic Various measures are currently being undertaken to further
of China in 2005. The value of exports under this Preferential promote trade between ASEAN and the People's Republic of
Certificate of Origin totalled RM540.3 million in 2005. China under the ASEAN-China FTA arrangement. This
includes the usage of Product Specific Rules as an
Tariff reduction/elimination under the ASEAN-China FTA is alternative rule to the 40 per cent local/ASEAN-China FTA
based on Normal Track and Sensitive Track (Sensitive List value content in order to enjoy tariff concessions. Product
and Highly Sensitive List). Specific Rules have been adopted for 466 products covering
food products, leather and fur products, and textiles and
Duties on products listed in the Normal Track will be apparel. However, for wool and woven products (six tariff
reduced/eliminated in four tranches, in 2005, 2007, 2009 lines), Product Specific Rules have been adopted as an
and 2010 for ASEAN 6 and the People's Republic of China. exclusive rule, and the 40 per cent local/ASEAN-China FTA
Flexibility is accorded to a maximum of 150 products in the value content is not applicable.
Normal Track for which the duties will be eliminated in 2012.
In compliance with the additional thresholds set for Normal
Track products, ASEAN 6 and the People's Republic of Table 10.7:
China have reduced the duties to 0 to 5 per cent range on
40 per cent of the products upon implementation on 20 July Malaysia's Exports under the
2005. The coverage will be extended to 60 per cent of the Early Harvest Products and Trade in
products by 1 January 2007. Malaysia has placed 87.3 per Goods Agreement
cent of the products in the Normal Track, of which currently
71 per cent are already with duties ranging between 0 to 5 Category No. of RM
per cent. Form E million
Issued
The duties for products listed in the Sensitive List for ASEAN
6 and the People's Republic of China will be reduced to 20 Total 7,213 1,810.9
per cent by 2012, and subsequently to 0 to 5 per cent by
2018. The duties for products in the Highly Sensitive List will Early Harvest Programme (2005) 3,780 540.3
be reduced to 50 per cent by 2015, with no further tariff cut Trade in Goods Agreement
commitments. (20 July-December 2005) 1,387 756.5
Early Harvest Programme (2004) 2,046 514.1
A review will be undertaken in 2008 for products in the
Sensitive Track with the aim of further reducing the number Source: Ministry of International Trade and Industry
of products placed in the Sensitive Track.
Continued...
189
Table 10.8:
Malaysia's Main Exports1 under ASEAN-China Free Trade Area, 2005
Product Category RM million Share to Malaysia's Total Export under
ASEAN-China Free Trade Area (%)
Total 1,296.8 100.0
Chemical products 613.1 47.3

Palm oil 196.7 15.2
Stearic acid 134.5 10.4
Rubber products 105.3 8.1
Detergents and soaps 95.9 7.4
Cocoa products 74.9 5.8
Fish and crustaceans 19.1 1.5
Mangosteen, watermelon and papaya 18.9 1.5
Cathode-ray tubes for television 13.2 1.0

Note: 1Malaysia's main exports under ASEAN-China FTA in 2005 included products under the Early Harvest Programme and Trade in Goods
Agreement
Malaysia has placed 87.3 per cent of 10,591 conducted for agriculture technicians from
products in the normal track and 6.5 per cent ASEAN and the People's Republic of China
(418 products) in the sensitive track. in 2005. These projects are Technical Barriers
Malaysia's sensitive products include swine, to Trade (TBT) and Sanitary and Phytosanitary
milk and cream, wood products, cement, (SPS) Methods, Workshop on Sustainable
chemical products, eggs, soap, rice, tobacco, Development of Bamboo Industry and the
footwear, ceramic products, automotive, and Workshop on Development of Edible
iron and steel. For Malaysia, a total of 0.6 per Mushroom Industry.
cent of products, comprising alcoholic
beverages, arms and weapons, tobacco refuse In the area of ICT, the First ASEAN-
and used tyres, are excluded from tariff China ICT Week was held from 11-18 May
liberalisation under ASEAN-China Free Trade 2005 in the People's Republic of China,
Area. The remaining 5.6 per cent of Malaysia's followed by the ASEAN-China Ministerial
products have been offered for earlier tariff Forum and the launching of the ASEAN-China
reduction/elimination under the Early Harvest IT Cooperation website.
Programme. The tariffs for products under
the Early Harvest Programme have been The Fourth ASEAN-China Business
eliminated on 1 January 2006. Council Meeting was convened back-to-back
with the Second ASEAN-China Business
To further strengthen existing cooperation Summit and the Second ASEAN-China
between ASEAN and the People's Republic of Expo from 19-22 October 2005, in Nanning,
China, several projects and activities have been the People's Republic of China.
implemented in 2005, including ASEAN-
China Training Course on Risk Management ASEAN-Japan
and Post Clearance Audit and ASEAN-China Negotiations on the ASEAN-Japan
Workshop on Intellectual Property Rights, held Comprehensive Partnership Agreement, which
in the People's Republic of China in May and commenced in April 2005, are expected to be
September 2005, respectively. concluded within two years. Other economic
cooperation measures and projects as
With the view to strengthening cooperation envisaged in the ASEAN-Japan Plan of Action
in agriculture, three training projects were were also implemented.
190
Japan provided support in terms of the first tranche of tariff reduction/elimination
dispatching automotive experts to a number of will commence in 2006, where the Republic
ASEAN countries, including Malaysia, under of Korea will eliminate tariffs on 70 per cent of
the ASEAN Economic Ministers - Minister its products under the Normal Track, while
of Economy and Industry Economic and ASEAN 6 will eliminate tariffs on 50 per cent
Industrial Cooperation Committee. Japan is of their products. The Republic of Korea
also providing technical support to the will eliminate tariffs on all products
development of a roadmap for the integration by 1 January 2008, ASEAN 6 by 1 January
of the automotive and electronics sector. 2010, Viet Nam by 2016 and Cambodia,
Lao PDR and Myanmar by 2018, subject
The ASEAN-Japan Centre conducted a to certain flexibilities. For products
design development project in 2005. A total listed under the Sensitive Track, a longer
of 112 ASEAN companies received technical time frame for duty reduction/elimination
support from Japanese experts. The Centre will be accorded to ASEAN and the Republic
also dispatched 114 members on six of Korea.
investment missions to ASEAN countries.
The Centre also organised an ASEAN Both ASEAN and the Republic of Korea
Tourism Fair, which attracted 64,000 visitors. signed the Agreement on Dispute Settlement
In addition, a total of 125 and 170 ASEAN Mechanism on 9 December 2005. The
trainees also attended training courses in the Agreement provides a mechanism to resolve
areas of Intellectual Property, and Standard disputes arising from the implementation of
and Conformity, respectively, organised by various commitments under the ASEAN Korea
Japan. Framework Agreement.
The Third ASEAN-Japan Transport Ministers Negotiations on trade in services and

Meeting on 16 November 2005, adopted investment between ASEAN and the Republic
the ASEAN-Japan Transport Logistics of Korea will begin in early 2006, and are
Improvement Plan to improve and facilitate expected to be concluded by the end of 2006.
logistics services and infrastructure between
ASEAN and Japan. The Meeting also adopted ASEAN and the Republic of Korea have
the Common Action Plan for the ASEAN- also agreed to pursue cooperation in 19 areas,
Japan New Air Navigation System. such as Customs procedures, trade and
investment promotion, small and medium
Japan also extended assistance to the enterprises, human resource management and
CLMV, amounting to US$4.7 million, in development, tourism, financial services,
the areas of human resource development, information and communication technology,
transportation, energy, industrial relations energy, natural resources and agriculture,
and management programmes. fisheries, livestock, plantation commodities
and forestry.
ASEAN-Korea
ASEAN-Korea relations were further ASEAN-India
enhanced with the signing of the Framework Negotiations on the ASEAN-India FTA
Agreement on Comprehensive Economic Agreement are still on-going. To date, ASEAN
Cooperation between ASEAN and the and India have reached agreement in the area
Republic of Korea at the Ninth ASEAN- of the general Rules of Origin to confer
Korea Summit on 13 December 2005, in originating status for products under the
Kuala Lumpur. ASEAN-India FTA. At the Fourth ASEAN-
India Summit on 13 December 2005, the
Under the Trade in Goods Agreement Leaders have tasked the Economic Ministers
between ASEAN and the Republic of Korea, and officials to expeditiously conclude
191
negotiations, and the implementation date • First ASEAN-EU Investment Experts
for the FTA in Goods has now been Meeting, 26 May 2005, Vientiane, Lao
deferred to 1 January 2007. Negotiations PDR;
to liberalise the services and investment
sectors will commence in 2006. • Trans-Regional ASEAN-EU Trade
Initiative High-Level Policy Dialogue
ASEAN-Australia and New Zealand on EU Economic Integration, 15 June
ASEAN and the Closer Economic Relations 2005, Brunei Darussalam;
Countries (Australia and New Zealand) are
currently negotiating a FTA covering trade • ASEAN-EU Workshop on Trade
in goods, services and investment. Facilitation and ASEAN-EU and
Customs Experts Meeting, 19-21 July
The negotiations are still on-going with a 2005, the Philippines;
major part of 2005 being spent on clarifying
the issues to be addressed in the establishment • ASEAN-EU Electronics/Electrical Experts
of the FTA. To facilitate the negotiations, Meeting, July 2005, Brussels;
capacity building initiatives such as Seminars
on Rules of Origin and Trade in Services • ASEAN-EU Workshop on Investment,
were held on 28-29 July 2005 and 2-3 May 14-15 November 2005, Thailand; and
2005, respectively.
• EU Consultations with ASEAN Working
ASEAN-European Union Group on Wood-based Products,
The Vision Group on ASEAN-EU Partnership 15-16 December 2005, Thailand.
was established in 2005 and has had two
meetings. The Vision Group has been tasked by ASEAN-Russian Federation
the ASEAN Economic Ministers and the EU At the First ASEAN-Russia Summit
Trade Commissioner to examine ways to held on 14 December 2005 in Kuala Lumpur,
enhance ASEAN-EU relations to a higher ASEAN and Russian Leaders signed
level, including the feasibility to have a region the Joint Declaration of the Heads of
wide FTA. The Report of the ASEAN-EU State/Government of ASEAN and the
Vision Group on Enhanced Partnership was Russian Federation on Progressive and
tabled at the ASEAN Economic Ministers’ Comprehensive Partnership. The Declaration
Meeting on 16 May 2006 in the Philippines. provides the necessary foundation to expand
The Report recommends the establishment of the scope and quality of economic relations,
an ASEAN-EU FTA to foster and diversify which include developing mutual trade,
trans-regional trade and investment flows and investment and industrial linkages.
to deepen economic integration between the
two regions in a sustainable manner. The ASEAN-Russian Federation Economic
and Development Cooperation Agreement,
ASEAN and EU will undertake domestic signed by the Foreign Ministers, will
consultations before any decision can be made pave the way for strengthening economic
to launch an FTA. An announcement on this linkages. Both sides also reaffirmed
would be made during the 12th ASEAN to establish effective and mutually
Summit in the Philippines in December 2006. beneficial cooperation at the private sector
level within the ambit of the ASEAN-
The ASEAN-EU cooperation also continued Russian Federation Business Council
to be strengthened through various projects established in 1998.
implemented under the Trans-Regional
ASEAN-EU Trade Initiative. The projects To strengthen economic linkages, the
implemented were: ASEAN-Russian Federation Business Forum
192
was held on 13 December 2005 wide Trade and Investment Framework
in Kuala Lumpur in conjunction with Agreement, promote greater private sector
the First ASEAN-Russia Summit. interaction, collaborate in all modes of
transport and implement the Enterprise for
To enhance trade, a joint feasibility study on ASEAN Initiatives to enhance trade and
the possibility of a Free Trade Area will be investment flows.
undertaken in 2006.
OUTLOOK
ASEAN-Canada
ASEAN and Canada are now taking ASEAN is expected to register a growth
concrete steps to enhance cooperation. of 5 to 5.5 per cent in 2006, compared with 5.2
The ASEAN-Canada Senior Economic per cent in 2005 and 6.1 per cent in 2004,
Officials Meeting was held in Toronto, Canada, notwithstanding the uncertainties surrounding
from 3-4 May 2005 in conjunction with the oil prices and the impact of other trans-
ASEAN-Canada Business Seminar. This is a boundary diseases.
positive step towards revitalising economic
cooperation between both parties. Prior to this, The various measures implemented to deepen
ASEAN-Canada economic relations were the economic integration of the region are
facilitated only under the existing Joint critical to sustain its economic growth. The
Cooperation Committee. The move also promotion and liberalisation of the services
comes at an opportune time when ASEAN is sector is also expected to provide the
now engaged in comprehensive economic necessary impetus to sustain and boost
partnership arrangements with a number of economic growth. Developments in the
trading partners. ASEAN and Canada are now sub-regional growth areas within the region
working on a comprehensive action plan for will also be important for ASEAN to maintain
all fields. On economic cooperation, ASEAN is its growth track.
strengthening senior official level dialogue and
collaboration on trade and investment, and The implementation of the ASEAN-China
increasing business community involvement in FTA in Goods in July 2005 and the FTA in
promoting two-way trade and investment Goods with the Republic of Korea in 2006 will
relations. be a major boost to ASEAN's external trade
relations. ASEAN will also be concluding
ASEAN-United States of America services and investment agreements with these
ASEAN and the USA signed a Joint two countries. These agreements and those that
Vision Statement on ASEAN-USA are under negotiations, such as that with India,
Enhanced Partnership on 17 November Australia and New Zealand, will continue to
2005. The Vision Statement calls on both make ASEAN a more dynamic region for
parties, among others, to conclude the region- business.
193
Chapter 11 Development In Regional Groupings
OVERVIEW development and shared prosperity within

the Asia-Pacific region. Key elements of the
Malaysia's participation in regional groupings, work programme are advancing freer trade,
such as the Asia Pacific Economic Cooperation fighting corruption, protecting innovation,
(APEC), Organisation of Islamic Conference enhancing human security, advancing the
(OIC), Group of Developing Eight (D-8) and development of small and medium enterprises
Group of Fifteen (G-15), is to further efforts (SMEs) and undertaking APEC reform.
towards enhancing economic cooperation and Economic and technical cooperation continued
promotion of trade and investment in the to remain the overarching focus in all of
respective regions. These groupings also APEC's activities.
provide the fora to discuss issues of common
interest and address emerging global issues The 17th APEC Ministerial Meeting and
affecting trade, investment and economic the 13th APEC Economic Leaders' Meeting
development. held in November 2005 in Busan, the Republic
of Korea, reaffirmed APEC's commitment to
Malaysia is the Chairman of the OIC from achieving trade and investment liberalisation
2003-2006. Malaysia's main effort in 2005 and facilitation in the APEC region by
as Chairman was to provide an economic 2010 for developed members and 2020
dimension to the OIC to complement its for developing members. APEC Leaders and
political and social agenda. Ministers reiterated their commitment in
supporting the multilateral trading system
In the other regional groupings, such as as the key vehicle for achieving global
the European Union (EU), North America trade liberalisation and improving economic
Free Trade Area (NAFTA) and Latin development. In this regard, APEC called upon
American Southern Cone Common Market all World Trade Organisation (WTO) members
(MERCOSUR), the main developments to ensure the success and completion of the
continue to focus on their engagement in Doha Development Agenda by 2006.
Free Trade Agreements. These regional
groupings have concluded a number of Key APEC 2005 Initiatives
agreements and entered into new negotiations
to diversify their trade and investment linkages Mid-term Stock Take
with other countries. Malaysia also monitors APEC undertook a Mid-term Stock Take, a
and evaluates the impact of these free trade review to assess the progress made towards
agreements on its trade and economic interests. achieving the Bogor goals of free and open
trade and investment no later than 2010
ASIA PACIFIC ECONOMIC COOPERATION for developed members and 2020 for
developing members. The Mid-term Stock
The work programme in APEC in 2005 Take also identified the actions needed to
was guided by the broad theme of 'Towards achieve these goals. In undertaking the
One Community: Meet the Challenge, Make Mid-term Stock Take, inputs were obtained
the Change'. The theme reflected APEC's from individual economies, APEC Business
diverse membership and their willingness and Advisory Council and independent experts
commitment to cooperate for mutual economic and academicians.
195
In the Mid-term Stock Take, Malaysia stressed • continued adoption of the Pathfinder
that besides liberalisation, emphasis should Approach that allows for implementation
also be given to trade facilitation, including of initiatives on a differentiated time
reducing the cost of doing business and schedule.
enabling all economies to benefit from
opportunities created by market opening Regional Trading
measures. APEC should continue to focus on Arrangements/Free Trade
the wider goals of strengthening regional Agreements
economic development and enhancing shared The work programme on RTAs/FTAs
prosperity. continued to focus on enhancing the
effectiveness of FTAs as a vehicle for trade
One of the key recommendations adopted and investment liberalisation and facilitation.
at the 17th APEC Ministerial Meeting and In this regard, APEC has developed model
13th APEC Economic Leaders' Meeting was measures on trade facilitation in RTAs/FTAs.
the implementation of the Busan Business
Agenda, which focused on trade facilitation Elements of the model measures on trade
and addressing behind-the-border issues that facilitation in RTAs/FTAs cover mainly
impede trade and investment. The main features Customs measures, which include
of the Busan Business Agenda include: transparency, impartial administration,
consistency and predictability, quick release of
• reducing transaction costs by another 5 per goods, modernisation and paperless trading,
cent from 2006-2010 (APEC has been fees and charges, confidentiality, express
undertaking measures to reduce transaction shipments, review and appeal, penalties and
costs by 5 per cent from 2001-2006); advance rulings.
• reducing on-line piracy and trade in The model measures are not mandatory but are
counterfeit and pirated goods, and indicative examples to provide members with a
strengthening intellectual property rights useful reference in negotiating RTAs/FTAs.
protection and enforcement; and
Malaysia contributed to the formulation of
• addressing issues related to business the model measures and stressed that the
regulation and related administrative model measures should not be burdensome
procedures such as Customs procedures on member economies. Malaysia emphasised
and alignment of standards. the need for FTAs to incorporate capacity
building, technical assistance and cooperation
Other recommendations endorsed include: to facilitate implementation. Malaysia also
highlighted the importance of securing input
• support for multilateral trading system; and feedback from the private sector, to ensure
that trade facilitation measures meet business
• strengthening APEC Collective and needs.
Individual Actions;
Anti-Counterfeiting and Piracy
• promotion of High Quality Regional Initiative
Trading Arrangements/Free Trade An important outcome of APEC's work
Agreements (RTAs/FTAs), including programme in 2005 was the development of
developing comprehensive model a set of model guidelines on anti-counterfeiting
measures; and piracy to:
• adopting a more strategic approach to • reduce trade in counterfeit and pirated

capacity building; and goods;
196
• protect against unauthorised copies; and In 2005, APEC organised a workshop in
Kuala Lumpur to enhance skills of trade
• prevent sale of counterfeit goods over the officials in trade facilitation negotiations. The
internet. workshop aimed to improve awareness on
trade regulations and fees and formalities
Malaysia supports these guidelines as applied on the movement of goods in line with
improved protection and enforcement of the launching of multilateral negotiations on
intellectual property rights (IPRs) would trade facilitation in the WTO.
promote innovation and enhance business
competitiveness. Recognising the potential benefits from trade
facilitation, in 2001 in Shanghai, APEC
Small and Medium Enterprises Leaders set the goal of reducing business
The APEC work programme on SMEs in transaction costs by an average of 5 per cent
2005 focused on advancing innovation. APEC by 2006. The projected benefits from this
adopted the Daegu Initiative on SME reduction in the costs of doing business are
Innovation Plan which aims to assist APEC estimated to be worth US$154 billion in Gross
member economies identify factors that can Domestic Product (GDP) for APEC member
be improved to facilitate and accelerate economies. Trade facilitation work in APEC
innovation of SMEs in the Asia Pacific region. comprises Customs procedures, standards,
business mobility and e-commerce.
Malaysia agreed to the establishment of
the APEC SME Innovation Centre in the Within ASEAN, priority is also accorded
Republic of Korea that would link SMEs towards implementing trade facilitation
with supporting organisations of member initiatives. Several ASEAN Mutual
economies to further enhance innovation of Recognition Arrangements (MRAs) were
SMEs. The Small and Medium Industries concluded in 2005. ASEAN is also working to
Development Corporation (SMIDEC) acts as establish and implement the ASEAN Single
the focal point for Malaysia. The Innovation Window, which allows for a single channel
Center in the Republic of Korea would serve as clearance of goods for ASEAN 6 countries by
a foundation for sharing policy experiences to 2008 and for the newer members of ASEAN
effectively enhance the innovation capacity of by 2012. To further reduce impediments to
APEC SMEs. Malaysian SMEs can utilise intra-ASEAN trade, ASEAN is currently
the centre by exchanging information and best exploring the possibility of establishing an
practices, as well as establishing networking ASEAN Trade Facilitation Committee to
with the SMEs in the APEC region. pursue trade facilitation agenda in a concerted
manner.
Trade Facilitation
APEC's ongoing work on trade facilitation Anti-Corruption and Transparency
provides direct benefits to business through In 2005, APEC focused on developing a
efficiency gains, increased transparency and work programme to combat corruption and
greater consistency in regulations throughout transparency, as mandated by APEC Leaders
the region. in 2004. APEC developed a matrix to
catalogue, coordinate and facilitate capacity
APEC also developed a roadmap to further building efforts and assistance within APEC
progress trade facilitation work in 2006. The and international organisations on anti-
roadmap includes key provisions to identify corruption programmes.
specific trade facilitation elements, common
approaches, capacity building and efforts to APEC organised the First Anti-Corruption
collaborate with the business community to and Transparency Symposium in Seoul, the
reduce transaction costs. Republic of Korea, on 1 September 2005.
197
Box 11.1: Trade Facilitation Initiatives in APEC and ASEAN
Trade Facilitation Initiatives Objectives How it Facilitates Trade
STANDARDS
ASEAN Mutual Recognition • Signed on 9 December 2005. • Recognition of qualifications and
Arrangement for Engineering Services eligibility of professionals in the
• To further strengthen the services engineering services; and
initiatives in ASEAN.
• Facilitates participation of Malaysian
• To allow free movement of companies, in particular those
professionals in engineering involved in construction projects, in
services within the region. ASEAN countries, such as
Cambodia, Lao PDR, Myanmar and
• To promote information exchange, Indonesia.
encourage best practices and
mutual recognition of professional
qualifications in ASEAN.
APEC Mutual Recognition • Endorsed on 4 June 2003. • Promotes information sharing and
Arrangement on Food transparency on food regimes
• To exchange information on among APEC economies.
regulatory and procedural issues,
standards and conformity
assessments and inspection and
certification requirements pertaining
to trade in food.
• Participating economies include

Singapore, Thailand and Viet Nam.
ASEAN Mutual Recognition • Signed on 5 April 2002. • Development of a common

Arrangement for Electrical and regulatory regime and conformity
Electronics Equipment • To enhance cooperation in the trade assessment between ASEAN
of electrical and electronics countries; and
equipment in ASEAN, taking into
account the health, safety and • Elimination of restrictions to trade
environmental aspects of electrical caused by technical regulations.
and electronics equipment.
APEC Mutual Recognition • Implemented in 1999. • Development of conformity

Arrangement on Electrical and assessment and elimination of
Electronics Equipment • To exchange information and restrictions to trade in electrical and
recognise test reports and electronics equipment.
certificates of conformity issued by
designated test facilities and
conformity assessment bodies in
other participating member
economies with the objective of
facilitating trade in regulated
electrical and electronics
equipment.

Australia, Brunei Darussalam, Chile,
the People's Republic of China,
Hong Kong, Indonesia, Japan, the
Republic of Korea, Malaysia, New
Zealand, the Philippines, Russia,
Singapore, Taiwan, Thailand and
Viet Nam.
continued ...
198
APEC Mutual Recognition • Implemented in 1998. • Provides information sharing and

Arrangement on Safety of Toys transparency on requirement for
• To exchange information pertaining safety standards of toys among
to safety standards and test results APEC economies.
of toys.

Australia, Brunei Darussalam,
Canada, Chile, the People's
Republic of China, Hong Kong,
Indonesia, Japan, the Republic of
Korea, Malaysia, Mexico, New
Zealand, the Philippines, Russia,
Singapore, Taiwan, Thailand and
the USA.
APEC Mutual Recognition • Endorsed in 1998. • By aligning telecommunications

Arrangement on Telecommunications Standards, products can be brought
• To streamline the procedures for a into the market by up to six months
wide range of telecommunications earlier than before the MRA was
and telecommunications-related implemented; and
equipment.
• Provides savings of at least 15 per
• Participating economies include cent of the cost to test and certify
Australia, Brunei Darussalam, equipment.
Canada, the People's Republic of
China, Hong Kong, Indonesia,
Japan, the Republic of Korea,
Malaysia, New Zealand, Papua New
Guinea, Peru, Singapore, Taiwan
and the USA.
CUSTOMS
ASEAN Single Window • Signed on 9 December 2005. • Saves cost and time as it allows
traders to lodge information to this
• To ensure the expeditious clearance single body to fulfil all import/export
of imports through a single related regulatory requirements.
submission of data, single data
processing and single customs
release and clearance, in relation to
trade activities within the region.
ASEAN Harmonised Tariff • Implemented on 1 January 2004. • Simplification of Customs

Nomenclature procedures for traders.
• To harmonise Customs
classification of products to facilitate
export and import activities by
member countries.
APEC Customs and Trade Facilitation • To enhance information sharing and • Provides information on Customs
Handbook transparency on Customs laws, regulations, administrative
procedures among APEC guidelines, rulings and contact
economies. information; and
• Cooperative engagements each

APEC Customs administration has
with respective business sectors.
continued ...
199
BUSINESS MOBILITY
APEC Business Travel Card • Implemented since 1996. • Provides real savings in time, cost
and convenience as there is no
• To provide pre-clearance for need to apply for individual visas or
frequent-travellers and entry permits; and
businessmen.
• Fast-tracked entry and exit through
• Participating economies include special APEC lanes at major
Australia, Brunei Darussalam, Chile, international airports of participating
the People's Republic of China, economies.
Hong Kong, Indonesia, Japan, the
Republic of Korea, Malaysia, New
Zealand, Papua New Guinea, Peru,
the Philippines, Russia, Singapore,
Taiwan, Thailand and Viet Nam.
PAPERLESS TRADING
APEC PaperlessTrading Individual • Endorsed in 2002. • Provides information to business on
Action Plan paperless trading systems in APEC
• To provide a mechanism to track economies that enable trade-related
individual member economy's documents on goods and services
progress towards implementation of to be submitted online to a
electronic data transfer to promote Government authority.
trade liberalisation.
INVESTMENT
APEC Investment Regime Guidebook • To provide information on: • Provides clarity in regulations and
- regulatory framework and procedures across different
investment facilities; economies;
- investment promotions and
incentives; • Assists Government officials to
- summary of international exchange information on each
investment agreements or other's investment regimes; and
codes to which an APEC
member is a party; and • Provides business people and
- an assessment of recent trends investors with information to better
in foreign investment. understand the regulations and
procedures for doing business and
investment in member economies.
Representatives from the government and programme in APEC. The APEC anti-
private sectors participated in the symposium. corruption plan focuses on information
Key highlights of the symposium included exchange (transparency), capacity building
sharing of ideas and experiences on global and best practices in the implementation of
anti-corruption strategies, initiatives for denial domestic and international commitments.
of safe haven, asset recovery and Malaysia offered the Malaysian Anti-
extradition and capacity building measures Corruption Academy as a regional training
to implement anti-corruption policies. The hub for APEC and other developing nations
Anti-Corruption Agency of Malaysia to undertake capacity building programmes.
participated and shared Malaysia's anti- Malaysia signed the United Nations
corruption strategies and experiences during Convention on Anti-Corruption on
the symposium. 9 December 2003 in Mexico and is currently
undertaking measures to ensure that
Malaysia participated actively in the necessary legislation is in place before
development of the anti-corruption work ratifying it.
200
Securing Trade and Facilitating Among the recommendations endorsed by
Cross-Border Business and APEC members were:
Movement of Goods
While APEC is not a security forum, issues • increasing investments in the energy sector;
relating to security that have an impact on trade
and investment need to be addressed. Within • adoption of energy saving measures; and
this context, Malaysia continued to support the
initiatives or measures on counter terrorism, • diversification of sources, including
energy security, infectious diseases and identification of new energy and renewable
emergency preparedness that would facilitate sources.
trade.
Health Security
Counter Terrorism APEC endorsed the initiative on Preparing
Under the counter terrorism agenda, APEC for and Mitigating an Influenza Pandemic to
endorsed: counter the spread of infectious diseases,
including avian influenza that emerged as a
• assessment of a major international airport serious economic threat in the region.
of each economy to identify vulnerability to This initiative is to promote cooperation
the Man-Portable Air Defence Systems and among APEC economies to respond to the
ways to overcome these risks; influenza pandemic through enhanced risk
communication and public awareness,
• adoption of the International Atomic Energy socio-economic assessment of the avian
Agency Code of Conduct on the Safety and influenza mitigation and control strategies in
Security of Radioactive Sources and the birds, and enhanced capacity building in
Guidelines on Import and Export of monitoring, surveillance and emergency
Radioactive Sources by 2006; and response to transboundary animal diseases for
prevention and control of an avian-origin
• implementation of total supply chain pandemic at the source and beyond. Malaysia
security in 2006. proposed for APEC members to develop
cooperation programmes on stock piling of
Malaysia, in endorsing these initiatives, the vaccine and produce the vaccine at a
highlighted the need to intensify capacity reasonable cost.
building initiatives and sharing of best
practices to assist developing economies in Disaster Preparedness
implementing the security measures. For As a response to natural disasters that had hit
example, Malaysia can benefit from the the Asia Pacific region, including the tsunami,
sharing of best practices in total supply APEC endorsed the APEC Strategy on
chain security to improve trade facilitation, Response to and Preparedness for Emergency
efficiency, reducing cost of doing business and Natural Disasters. This initiative aims to
and identifying gaps that currently exist in identify gaps in the preparedness of APEC
the domestic supply chain. Malaysia also economies, as well as to identify ways for
suggested that APEC share and exchange APEC economies to cooperate at the regional
information on the modus operandi of terrorist level. The implementation of this initiative,
organisations and identifies the root causes which includes early warning systems and
of terrorism. best practices in emergency management,
will enable economies to be better prepared
Energy Security for future natural disasters. Malaysia supported
The focus on energy security was on these activities and encouraged greater and
addressing the increase in price of petroleum timely sharing of information and best
as a result of instability in supply and demand. practices in disaster mitigation.
201
Capacity Building and Economic practices and regulations within APEC
and Technical Cooperation economies.
In 2005, Malaysia organised seven APEC
capacity building seminars and workshops. Malaysia will also collaborate with other
Representatives from local industry APEC economies in organising 10 capacity
associations, government officials and building projects for implementation in 2006.
academicians participated in these activities. These include social safety nets, education,
climate information services, legal metrology,
In 2006, Malaysia will be hosting five APEC dispute resolution and standards.
capacity building projects in the areas of
human resource development, agriculture, food Individual Action Plans
and professional services. On human resource The Individual Action Plans serve as a
development, emphasis will be on improving roadmap for APEC economies to achieve the
policy setting and promotion of research and Bogor goals of free and open trade and
development for SMEs to improve their export investment in the APEC region. The Individual
performance. The professional services project Action Plans contain liberalisation and
will examine the current differences in trade facilitation measures undertaken by APEC
Table 11.1:
APEC Capacity Building Projects Organised in Malaysia, 2005
Project Objective
Biosecurity Planning and Surveillance • To create awareness and enhance capacity to design surveillance
Capacity Building Workshop, programmes for building information on health status of agricultural
15-20 August 2005 industries, native flora and for early detection of serious exotic pests;
• To build understanding to engage in biosecurity planning as a means

of containing transboundary movement of exotic pests; and
• To strengthen capacity in implementing Sanitary Phytosanitary (SPS)

measures in compliance with the requirements of the WTO SPS
Agreement.
East Meets West: An International Colloquium • To discuss issues pertaining to concepts, theories and best practices in
for Educational Assessment, educational assessment.
13-15 September 2005
• To narrow gap between developed and developing countries through
education.
• To improve teaching and learning methods through educational

assessment.
Seminar on Maximising the Potential of Older • To share best practices and knowledge in areas of policies,
Workforce, 22-23 September 2005 programmes and legislations among economies.
• To formulate policy measures to provide opportunities for older

workforce to be continuously active and productive in contributing to
the economy.
• To maximise older workforce potential in APEC economies.

APEC/WTO Rules of Origin, • To understand the concept and significance of Rules of Origin under
11-15 April 2005 the multilateral trading system.
• To understand the present status of harmonisation of Rules of Origin in

the WTO.
• To understand product Specific Rules of Origin for products in the

Customs Harmonised System (HS) Chapters.
continued ...
202
Project Objective
Seminar on Market Risk Analysis, • To provide participants with a basic set of market risk analysis skills
18-22 July 2005 that are needed to understand and provide supervisory oversight of
market risk.
Investigation and Enforcement Courses in the • To strengthen national training programmes and improve coordination
Area of Securities Regulations, of regional and international training programmes in the area of
16-19 May 2005 investigation and enforcement, including market surveillance and
internet fraud with a focus on preventative measures.
Seminar on Fundamentals of Interest Rate • To provide greater understanding of fundamentals of interest rate risk
Risk Management, 3-7 October 2005 management.
members and provides useful information new export industries and also stated that
that could be used by businesses to plan and Malaysia deserves high credit for initiatives
make business decisions. undertaken in meeting APEC's free trade and
investment goals.
In 2005, Malaysia's Individual Action Plans
highlighted new liberalisation and facilitation Strengthening APEC
measures. These include: APEC has been undertaking measures to
streamline and improve the APEC work
• allowing the exchange rate of the Ringgit process. These include continuously reviewing
to operate in a managed float, effective its structure and work programme to achieve
21 July 2005; higher efficiency in the face of widening
agenda and a need to maintain financial
• allowing up to 49 per cent foreign equity sustainability.
in investment banks and also in Islamic
banking subsidiaries established by the APEC's expanded agenda on non-trade issues
conventional domestic banking groups; could be duplicative with work of other
international organisations. Therefore, the
• reduction of the simple average applied APEC work programme should be reviewed
tariffs to 8.1 per cent from 8.6 in 2004; and to ensure that the focus is on trade and
economic matters, particularly in facilitation
• increasing the percentage of Malaysian and capacity building. Key recommendations
Standards aligned to international standards adopted in 2005 include an increase of
to 52 per cent (1,982 out of 3,825) as at members' annual contribution to ensure
September 2005, compared with 50 per cent financial sustainability.
for the same period in 2004 (1,770 out of
3,514). To evaluate and achieve greater effectiveness
of the programmes of numerous working
APEC members are examined under the groups, APEC established the Steering
Individual Action Plan Peer Review process. Committee on Economic and Technical
The Peer Review process is an important Cooperation (ECOTECH) to plan and
mechanism, which allows APEC members to implement the ECOTECH activities.
be fully apprised of the trade and investment
liberalisation and facilitation measures within Business Sector Participation
APEC. A review of Malaysia's Individual The international business community assumes
Action Plans was undertaken in 2005. The an important role in the APEC process by
review described Malaysian policy makers as providing industry views and feedback. Such
demonstrating considerable flair for policy information has been useful in evolving APEC
innovation in promoting the development of initiatives that enhance and facilitate business
203
transactions in the APEC region. APEC cooperation among OIC member countries. In
currently interacts on broader policy issues line with this objective, Malaysia hosted
with the business community, mainly through the OIC Trade Forum, from 20-21 June 2005
the APEC Business Advisory Council. and the OIC Trade Exhibition, from 20-24 June
Government-Business dialogues such as the 2005, in conjunction with the Islamic
Automotive Dialogue, Chemical Dialogue and Development Bank (IDB) Board of Governors
the Non-Ferrous Metals Dialogue also provide 30th Annual Meeting at the Putrajaya
additional channels for in-depth discussions International Convention Centre in Putrajaya.
on specific technical issues affecting the
relevant industries. The Forum with the theme, 'Maximising
Intra-OIC Trade and Investment Linkages',
The work programme of the Automotive was aimed at enhancing economic, trade
Dialogue in 2005 included the development of and investment cooperation among OIC
targets and schedule of automotive emission member countries. The Forum discussed
regulations and fuel properties improvement, issues relating to:
and simplification of Customs procedures. In
2005, Malaysia participated for the first time in • enhancing intra-OIC trade - the way
the Automotive Dialogue peer review session. forward;
Presentations included background on the
development of the domestic automotive • harnessing market potential in the goods
industry, liberalisation measures introduced, and services sectors in OIC countries;
issues and challenges faced by the industry and
strategies to make the industry competitive in • opportunities among OIC countries in
the long run. Malaysia will host the next APEC the areas of halal products and services,
Automotive Dialogue Steering Committee tourism, construction and education
Meeting in 2006. services;
As part of the work programme of the Chemical • promoting successful intra-OIC business
Dialogue, Malaysia has agreed to adopt and ventures and alliances; and
adapt the Globally Harmonised System of
classification and labelling into Malaysia's • investment cooperation among OIC
chemical standards. This standard will be used countries.
as the future reference or guideline for industries
or relevant Government ministries/agencies A total of 26 panelists and 1,374 participants
pertaining to hazard classification and labelling from the public and private sectors in Malaysia
of chemicals and safety data sheets in Malaysia. and other OIC member countries participated
The work programme of the Chemical Dialogue in the Forum. Participants of other OIC
also included providing business sectors' member countries were from Indonesia,
views on the EU Registration, Evaluation Bangladesh, Pakistan, Bahrain, Kuwait, Qatar,
and Authorisation of Chemicals (REACH) United Arab Emirates, Saudi Arabia, Yemen,
regulations. Egypt, Kazakhstan, Kyrgystan, Uzbekistan,
Tajikistan, Senegal and Nigeria.
ORGANISATION OF ISLAMIC CONFERENCE
Key recommendations made by the Forum
Malaysia is the Chairman of the Organisation to further enhance trade and economic
of the Islamic Conference (OIC) from 2003- cooperation among OIC members include:
2006. In assuming the chairmanship of OIC,
one of its priorities is to complement OIC's • to adopt the Malaysian Halal Standard MS
political and social agenda by strengthening 1500:2004 as the standard for halal food
and raising the profile of trade and economic certification by all OIC member countries;
204
• to focus on capacity building, particularly importers, and 225 foreign exporters and
in the area of trade financing by the Islamic importers from 34 other OIC countries.
Development Bank (IDB);
In 2005, Malaysia initiated and implemented
• to develop an insurance scheme to promote several capacity building and poverty
security for foreign direct investments; alleviation programmes aimed at
strengthening and intensifying trade and
• to develop data linkages on investment economic cooperation, as well as forging
between OIC member countries and explore closer bilateral trade and economic relations
the possibility of hosting a common between Malaysia and some OIC member
OIC website for investment promotion by countries. The programmes implemented
the Malaysian Industrial Development include:
Authority (MIDA);
• capacity building in the palm oil industry
• to provide funding for agricultural projects in Sierra Leone;
by IDB and industrial projects by Islamic
Cooperation for the Development of Private • exploration of oil and mineral resources
Sector; and capacity building in administration,
planning and management functions in
• to adopt and promote the use of information Mauritania;
and communication technology (ICT) to
facilitate exports and sourcing of products • development of the fisheries sector in
and services; Bangladesh; and
• to disseminate information on the role of • small enterprise and micro financing under
Islamic Cooperation for the Development Syariah Banking Scheme for the tsunami
of Private Sector to facilitate wider usage of survivors in Aceh, Indonesia.
its services; and
Between 2006-2008, a total of eight
• to share success experiences in the capacity building projects financed under the
economic area. Malaysian Technical Cooperation Programme
(MTCP) will be implemented. The projects
The recommendations were adopted at the and training programmes will focus on
21st Session of the Standing Committee on good practices on Customs procedures and
Economic and Trade Cooperation (COMCEC) trade facilitation, halal standards and
held from the 22-25 November 2005 in conformance infrastructure for OIC
Istanbul, Turkey. The IDB and the Islamic countries, capacity building for human
Centre for Development of Trade (ICDT) resource and development of SMEs and
were mandated to study the feasibility of women entrepreneurs.
implementing the recommendations.
Malaysia tabled a resolution on the use of
The OIC Trade Exhibition attracted a total of the Malaysian Halal Standard MS 1500:2004
122 exhibitors that showcased products and as an international benchmark for Halal Food
services, namely ICT, Islamic banking, finance Certification at the 32nd Islamic Conference
and insurance, construction, education, tourism of Foreign Ministers held from the 28-30 June
and professional services. Business matching 2005 in Sana'a, Yemen. Malaysia is also
sessions were also arranged between buyers, working closely with the OIC Islamic Fiqh
sellers and potential investors. A total of 1,753 Academy to adopt the MS 1500:2004 Standard
individual business meetings were held, as an international benchmark for halal food
involving 638 Malaysian exporters and certification.
205
The Framework Agreement on Trade The Special Session of the TNC also agreed
Preferential System among OIC member to include in the Protocol of Malaysia's
countries (TPS-OIC) came into force in 2003. proposal for the Voluntary Fast Track Tariff
Malaysia signed the TPS-OIC on 30 June 2004 Reduction modality for countries which are
and ratified it on 23 August 2004. At the end ready to offer wider product coverage with
of 2005, a total of 16 countries have signed deeper tariff concessions at the end of the fifth
and ratified the Framework Agreement, namely year or earlier, after the coming into force of
Bangladesh, Cameroon, Egypt, Guinea, Iran, the Protocol.
Jordan, Lebanon, Libya, Malaysia, Pakistan,
Senegal, Syria, Tunisia, Turkey, Uganda and Ratification by 10 member countries is
United Arab Emirates. required for the Protocol to come into force. As
at 31 March 2005, five member countries,
Two meetings were held to discuss the namely Malaysia, Egypt, Jordan, Tunisia and
draft Protocol on the Preferential Tariff Turkey, have signed the Protocol. Malaysia
Scheme (Protocol) of TPS-OIC covering tariff signed the Protocol on 27 March 2006 and
reduction modalities and implementation will complete the ratification process in June
schedule of concessions. A Special Session of 2006.
the Trade Negotiation Committee (TNC) held
on 23 November 2005 finalised the Protocol OTHER REGIONAL ARRANGEMENTS
and adopted by the 21st Ministerial Session of
COMCEC held from 22-25 November 2005. The Group of Developing Eight
Key areas agreed include: The Group of Developing Eight (D-8),
which comprises Bangladesh, Egypt,
• tariff reduction on 7 per cent of the Indonesia, Iran, Malaysia, Nigeria, Pakistan
total tariff lines having tariffs above and Turkey, has made substantive progress
10 per cent; in economic cooperation. The most significant
decision taken was to initiate the D8
• tariff reduction to be implemented in Preferential Trade Agreement (D8-PTA),
four annual installments for developing aimed at according preferential tariff
countries and in six annual installments for concession for goods among the participating
least developed countries (LDCs); countries.
• immediate elimination of para-tariffs The Fourth High Level Trade Officials

(border charges and fees, other than tariffs, Meeting was held from 19-20 April 2005 in
on foreign trade transactions of a tariff-like Ankara, Turkey. D-8 member countries
effect that are levied solely on imports) continued discussions on key issues relating to
and non-tariff barriers upon entry into tariff reduction modality, payments and
force of the Protocol and longer transition transfers, as well as restrictions to safeguard
period of three years for LDCs to the balance of payments.
eliminate their para-tariffs and non-tariff
barriers; At the Fifth High Level Trade Officials
Meeting held from 5-6 January 2006 in
• use of Rules of Origin agreed under the Islamabad, Pakistan, Malaysia strongly urged
Framework Agreement until new rules of for the accelerated implementation of the D8-
origin are adopted by the TNC; and PTA and also for deepening of tariff reduction.
The proposals currently under consideration
• safeguard measures taken, including anti- are:
dumping, subsidies and countervailing
measures to be consistent with relevant • reduction of tariffs on 8 per cent of tariff
WTO rules. lines having tariffs above 10 per cent;
206
• implementation of concession is four preferential tariff treatment. Negotiations are
years for developing member countries and scheduled for completion by the end of 2006.
six years for less developed member However, negotiations are progressing slowly.
countries; The deadline of July 2005 passed, with only
five countries submitting the lists of export
• elimination of para-tariffs and non-tariff interest.
barriers for goods under concession
immediately upon entry into force of the Malaysia's participation in this Round will
D8-PTA and within three years for least provide opportunity to diversify its exports to
developed country members; and non-WTO member developing countries.
Products of export interest to Malaysia include
• review of concessions three years after palm oil and related products, electrical and
entry into force of the D8-PTA, with electronics products, crude petroleum and
the objective of expanding product chemicals and chemical products.
coverage and/or deepening concessions and
shortening the implementation period. UNCTAD also reviews the developments
and issues in the post-Doha work programme
The D-8 PTA was finalised at the Sixth High that are of particular concern to developing
Level Trade Officials Meeting on 3-4 April countries. UNCTAD has stressed that the
2006 in Bali, Indonesia. The Agreement was multilateral process should acknowledge
signed during the Fifth D-8 Summit in Bali on economic development, which requires:
13 May 2006.
• flexibility in trade liberalisation;
United Nations Conference on Trade
and Development • institutional innovations;
The 52nd UNCTAD Trade and Development
Board Session was held in Geneva, • investment in human capital and
Switzerland, from 3-14 October 2005. The development-oriented infrastructure;
Session discussed issues relating to lessons
learnt from development and economic reform • universal access to essential services; and
efforts in the 1990s, new trade and
development perspective of interdependence • supply-side competitiveness.
and global economic issues.
Group of Fifteen
The Third Round of Negotiations on the Global The Group of Fifteen (G-15) Federation of
System of Trade Preferences among Commerce, Industry and Services held its
Developing Countries (GSTP) was launched 12th Annual Body Meeting in Cairo, Egypt
at XI UNCTAD Conference in Sao Paulo, Brazil from 19-20 June 2005. The Federation of
on 16 June 2004. This is aimed at reinvigorating Commerce, Industry and Services focused its
South-South cooperation and enabling discussions on the role of SMEs in promoting
developing countries to undertake further development in G-15 countries through the use
liberalisation of trade among themselves. of local resources.
In 2005, two Negotiating Groups on Market The 13th G-15 Annual Body Meeting is
Access and Rule-Making were established and scheduled to be held in Kuala Lumpur, hosted
the groups commenced discussions on by the National Chamber of Commerce and
approaches, procedures and modalities of Industry Malaysia from 22-24 May 2006. The
negotiations, as well as elements in Rules of meeting will focus on the enhancement of
Origin. Participating countries are required to economic and trade cooperation among SMEs
identify and submit export interest lists for through an electronics marketplace.
207
The European Union and Bulgaria are expected to accede to
In 2005, the European Union (EU) focused the EU either by 2007 or 2008.
on its internal integration process arising from
the EU enlargement in May 2004 from 15 to 25 Throughout 2005, the EU continued to engage
Member States. High unemployment and the actively with third country trading partners
need for economic reforms remain major in FTA negotiations, including the on-going
concerns for Europe. Progress in these areas negotiations with the Gulf Cooperation Council
would also dictate its future growth potential (GCC) and with the Latin American Southern
and its position as an engine of growth of the Cone Common Market (MERCOSUR). The
world economy. EU has also initiated negotiations for a bilateral
Partnership and Cooperation Agreement with
The EU has also been focusing on three ASEAN countries, namely Indonesia,
strengthening its domestic legislation on Singapore and Thailand.
consumer safety. After more than two years
of negotiations, the initial draft legislation on Trade and investment relations between
Registration, Evaluation and Authorisation Malaysia and the EU have also been
of Chemicals (REACH) was endorsed by strengthened with the convening of the First
the Council of Ministers in December 2005. Malaysia-European Commission Senior
The text of the draft legislation is expected to Officials Meeting on 24 May 2005 in
be discussed by the European Parliament and Cyberjaya. This marks the beginning of an
the Council in 2006 before the scheduled institutionalised dialogue on bilateral, regional
implementation in 2007. and multilateral issues between Malaysia and
the European Commission. Two Working
This regulation requires the registration of Groups were established to discuss trade and
basic information for around 30,000 substances investment, and cooperation issues.
(all existing and new substances exceeding
a production volume of one tonne) submitted The EU's trade with third countries is expected
by companies in a central database. In addition, to grow with the implementation of the revised
information on products' properties and Generalised System of Preferences (GSP)
potential hazards to humans and the Scheme, from 1 January 2006 - 31 December
environment need to be provided. 2008. The revised Scheme offers increased
preferential market access with the inclusion of
The avian influenza threat in October 2005 nearly 300 additional products for eligible
prompted the European Commission to countries under three schemes, namely the
suspend imports of poultry related products General Arrangement, Special Arrangement
from affected countries, including Malaysia. for Least Developed Countries (Everything
Other measures implemented include a ban But Arms Scheme) and the Special Incentive
on commercial imports of captive live birds Arrangement for Sustainable Development and
from third countries, regulating movements of Good Governance (GSP Plus Incentive
pet birds accompanying their owners and Scheme).
stockpiling of antiviral drugs. Malaysia is
cooperating with the EU to rescind the ban on Malaysia qualifies for preferential tariffs
imports of poultry products invoked since under the General Arrangement of the EU
October 2005. GSP. With effect from 1 January 2006,
preferential tariffs have been reinstated for
In 2005, the former Yugoslav Republic of consumer electronics, plastic and rubber,
Macedonia initiated negotiations on the wood, clothing, and cereals, malt and
accession process to become an EU member starches. Only animal or vegetable fats, oils
country. Turkey and Croatia are currently and waxes, which are basically palm oil,
involved in the accession process. Romania remain graduated.
208
Asia-Europe Meeting Various activities under the Trade Facilitation
Following the postponement of the Economic Action Plan were implemented by the Working
Ministers' and Senior Officials Meetings on Groups on:
Trade and Investment (SOMTI) in 2003 and
• Customs Procedures;
2004, the 10th SOMTI was held in Qingdao,
the People's Republic of China in July 2005. A • Standards and Conformity Assessment;
High Level Senior Officials Meeting within
• Intellectual Property Rights; and
the Framework of the Economic Ministers
was held in September 2005 in Rotterdam. • Electronic Commerce.
Box 11.2: Revised European Union Generalised System of Preferences
INTRODUCTION
The European Union Generalised System of Preferences (EU GSP Scheme) is a scheme of preferential trading
arrangements first introduced by the EU in 1971 to grant preferential market access for imports from developing countries
and economies in transition into the EU. Malaysia is a recipient of preference under the EU GSP Scheme since its
introduction.
In 2005, as an interim measure before a new Scheme is introduced, the EU announced a revised EU GSP Scheme for
implementation from 1 January 2006 to 31 December 2008.
MAIN FEATURES OF THE REVISED EU GSP SCHEME
The main features of the revised EU GSP Scheme that came into force on 1 January 2006 are:
• eligible countries are offered preferential market access under three packages:
(i) the basic General Arrangement involves reduction of duties by a preference margin of 3.5 per cent on MFN tariff rates
for sensitive products while the duties are at zero tariffs for non-sensitive products. In the revised Scheme, coverage
under the basic Arrangement has been expanded to 7,200 products, inclusive of additional 300 new products (mainly
agriculture and fishery products). A total of 3,900 products offered under the basic Arrangement are considered
sensitive;
(ii) the Special Arrangement for Least Developed Countries (Everything but Arms) provides duty-free and quota-free
market access to the world's 50 poorest countries for all products, except arms and ammunition; and
(iii) the Special Incentive Arrangement for Sustainable Development and Good Governance (GSP Plus) offers tariff
preferences of zero duty for a total of 7,200 products to countries which fulfil the following conditions:
- poorly diversified and dependent on a limited range of exports;
- GSP covered imports into the EU represents less than 1 per cent of total EU imports under GSP; and
- have ratified and implemented 16 core conventions on human and labour rights and seven (out of 11) of the
conventions related to good governance and the protection of the environment.
• 'Graduation' or withdrawal of GSP Scheme will take place when a product from a particular country exceeds 15 per cent
of total EU imports of the same product group under GSP over the last three consecutive years. For textiles and clothing,
the graduation threshold is set at 12.5 per cent of total EU imports.
Under the revised EU GSP Scheme, Malaysia only qualifies for the basic GSP Arrangement. From 1 January 2006, three
product sectors that were previously graduated for Malaysia have been reinstated into the Scheme, namely plastics and
rubber, wood and consumer electronics. Palm oil is the only product sector that still remains graduated for Malaysia.
Continued...
209
UTILISATION OF EU GSP SCHEME BY MALAYSIA
In 2005, the EU imports under the GSP Scheme amounted to RM192.6 billion ( 43.2 billion). The main beneficiaries of the
Scheme were India, which accounted for 17.9 per cent of total EU imports under the GSP, followed by the People's Republic
of China (10.3 per cent), Brazil (7.7 per cent), Thailand (5.6 per cent) and Viet Nam (5.6 per cent).
Of RM10.3 billion Malaysia's exports in 2005 to the EU which were eligible for preferential treatment, only RM6.2 billion or
60 per cent were exported under the Scheme. This accounted for only 3.2 per cent of total EU imports under the GSP.
Product sectors from Malaysia with the highest GSP utilisation rates were chemical products (except fertilisers) with a share
of 26 per cent of Malaysia's total preferential exports, followed by electro-mechanics (24 per cent), fishery products (6.6 per
cent), textiles (6.3 per cent) and base metals (5.9 per cent). Other products exported under the Scheme were air-conditioning
machines, vacuum cleaners, plastic toys, and electrical machines and apparatus.
The relatively low utilisation rate of the EU GSP Scheme by Malaysia is attributed to:
• the low preference margin of 3.5 per cent offered for sensitive products under the Scheme is deemed as not attractive
by Malaysian exporters;
• EU importers find the low margin of preference given to products as not appealing and are therefore not requesting
exporters to submit GSP documents when they export to the EU; and
• the current stringent and complex Rules of Origin requirements.
Why Should Exporters Use the Revised EU GSP Scheme

Malaysian exporters are encouraged to avail themselves of the revised GSP Scheme to enhance the export competitiveness
of their products to the EU market. The revised Scheme provides:
• the best market access terms into the EU market, particularly for eligible products which are considered non-sensitive as
they enjoy zero per cent tariffs;
• a more simplified and transparent graduation mechanism;
• preferences for additional 300 new products, mainly agriculture and fishery products;
• a competitive edge for similar products which are already graduated from competing countries, for example, the People's
Republic of China; and
• certainty and predictability to exporters, due to the unchanged nature of the Scheme for a period of three years, until 31
December 2008.
The EU is in the process of reviewing its overall Rules of Origin criteria, including those that govern GSP eligibility. Greater
flexibility on Rules of Origin is being considered, including facilitating regional cummulation where members of a regional
group can combine inputs from other countries of the same group to encourage greater utilisation of the GSP Scheme. The
new Rules of Origin is expected to be implemented in 2007.
CONCLUSION
In availing the EU GSP Scheme, the business community is requested to comply with the rules established by the EU. There
have been cases where the GSP privileges were misused by exporters, including the use of forged GSP 'A' forms and
exports of products from countries not eligible under the GSP as originating from Malaysia. Misuse of the privilege will have
a negative impact on the overall image of Malaysia as a reliable trading partner.
For further information on the revised EU GSP Scheme:
http://www.europa.eu.int/comm/trade/issues/global/gsps/legis/index_en.htm
http://delmys.cec.eu.int/en/eu_malaysia_relations/GSP
210
On Customs procedures, the Working Group to undertake a review of the ASEM Trust
continued to implement the Trade Facilitation Fund and explore options for future funding
Action Plan Deliverables for 2004-2006. In modalities.
the area of standards and conformity, the group
intensified its efforts on information exchange To enhance Asia-Europe Meeting, ASEM
by setting up a network of contact points, and members have agreed to the establishment of
exchanged views on a technical assistance an ASEM Virtual Secretariat. On private sector
programme, including identifying key products participation in ASEM, it was agreed that the
for alignment with international standards. current mechanism of private and public sector
On e-commerce, the People's Republic of interactions through the Asia-Europe Business
China will host the Fifth Asia-Europe Meeting Forum need to be strengthened.
(ASEM) E-Commerce Conference in 2006.
ASEM partners also agreed to concentrate on The Sixth ASEM Summit will be held in
a limited set of high priority areas where September 2006 in Helsinki and it is expected
immediate action could contribute to reducing that the Leaders will discuss key issues relating
or eliminating barriers. to Asia-Europe cooperation, including issues
related to energy, competitiveness and
The High Level Meeting endorsed three new globalisation.
initiatives to be pursued in 2006:
North America Free Trade Area
• Forum and Exhibition on Tourism and The USA's trade with the other two
Investment (led by the People's Republic of members of the North America Free Trade
China and Portugal); Area (NAFTA), namely Canada and Mexico,
accounts for 98 per cent of intra-NAFTA trade.
• Seminar on Tourism (led by Portugal and For the period January to November 2005,
the People's Republic of China); and US-NAFTA trade recorded an increase of
10.3 per cent to US$721.8 billion, compared
• Seminar on Energy Efficiency (led by Japan with US$654.4 billion for the corresponding
and the EU). period in 2004. For the period January to
November 2005, the USA's exports was
In the area of financial cooperation, the Sixth valued at US$303.8 billion and imports at
ASEM Finance Ministers Meeting held in US$418 billion to NAFTA countries.
Tianjin, the People's Republic of China in
June 2005 adopted the Tianjin Initiative on Among implementation problems faced by
Closer ASEM Economic and Financial this regional group concerns the USA's
Cooperation. Under this initiative, the Finance imposition of 27 per cent duty on Canadian
Ministers agreed to strengthen the ASEM softwood lumber products. While the NAFTA
economic and financial cooperation through tribunal has ruled that the terms of the
enhanced policy dialogue, technical assistance treaty provides for duty elimination, the USA
and by examining new approaches in further has not implemented this decision.
enhancing the Asia-Europe ties. The Tianjin
Initiative also agreed to establish an ASEM Individually, the NAFTA countries continued
Contingency Dialogue Mechanism for to pursue trade liberalisation through bilateral
Emergent Economic and Financial Events FTAs in 2005. The US Congress ratified
to undertake timely consultations and the Central American Free Trade Area
coordination in responding to emergencies. Agreement (Costa Rica, Dominican Republic,
The Finance Ministers also noted the important El Salvador, Guatemala, Honduras and
role of the ASEM Trust Fund in enhancing Nicaragua). FTAs negotiated and awaiting
financial cooperation between Asia and ratification by the US Congress are with
Europe. The Ministers have tasked officials Bahrain, Oman and two members of the
211
Andean Group, Colombia and Peru. On-going There are two stages of tariff reduction for
negotiations are with Southern African India, Pakistan and Sri Lanka:
Customs Union (Botswana, Lesotho, Namibia,
South Africa and Swaziland), Panama, Andean • reduce existing tariff rates to 20 per cent
Group (Colombia, Peru and Ecuador), within two years from the date of entry into
Thailand and the United Arab Emirates. The force of the Agreement; and
USA has also announced its intention to pursue
FTAs with Malaysia and the Republic of • subsequent tariff reduction from 20
Korea. Negotiations are expected to begin in per cent or below, to 0 to 5 per cent, shall
mid-2006. be done within a second time frame of
five years for India and Pakistan, and
Canada has on-going FTA negotiations six years for Sri Lanka, beginning from
with El Salvador, Guatemala, Honduras, the third year from the date of entry into
Nicaragua, the Republic of Korea, force.
Singapore, Dominican Republic, Andean
Countries (Bolivia, Colombia, Ecuador, Under the Early Harvest Programme, India,
Peru and Venezuela), Caribbean Community Pakistan and Sri Lanka will be reducing their
and Common Market (CARICOM) and Customs duties to 0 to 5 per cent by 1 January
the European Free Trade Association 2009, on products imported from Bangladesh,
(EFTA), and is conducting a joint study Bhutan, Maldives and Nepal, which will
with Japan on further trade liberalisation reduce:
between both countries. Mexico has initiated
negotiations with the Republic of Korea and • existing tariff rates to 30 per cent within
Singapore. the timeframe of two years from the
date of entry into force of the Agreement;
South Asian Association for and
Regional Cooperation
The members of the South Asian Association • subsequent tariff reduction from 30 per cent
for Regional Cooperation (SAARC), or below to 0 to 5 per cent shall be done
comprising India, Pakistan, Sri Lanka, within a second timeframe of eight years,
Bangladesh, Bhutan, Maldives and Nepal, beginning from the third year from the date
signed the South Asian Free Trade of entry into force.
Area (SAFTA) Agreement in January
2004. Under the Agreement, each country is allowed
to maintain a number of items, which is not
The SAFTA Agreement, originally scheduled offered for concession. The SAFTA Agreement
for implementation in January 2006, has been also provides for special and differential
postponed due to the delay in the ratification treatment for Bangladesh, Bhutan, Maldives
process. Individual member countries are and Nepal.
expected to announce the enforcement date
between January and June 2006. Except for Latin American Southern Cone
Pakistan and Sri Lanka, SAFTA has already Common Market
been ratified by the other SAARC member In 2005, Venezuela was accepted as a
states. full member of the Latin American
Southern Cone Common Market
The Agreement provides for the liberalisation (Mercado Común del Sur - MERCOSUR),
of trade in goods, which is scheduled for comprising Brazil, Argentina, Paraguay and
completion by 2016, where tariffs on products Uruguay. Potential members to this grouping
from the region will be progressively reduced are Bolivia, Chile, Colombia, Ecuador and
to 0 to 5 per cent. Peru.
212
MERCOSUR has a market size of 220 2005, and the First Meeting of the Fisheries
million consumers and a combined GDP of Focal Points held in Oman, from 2-4 May
more than US$1 trillion. In 2004, trade 2005.
within MERCOSUR expanded by 34 per
cent to US$17.1 billion, while MERCOSUR's In the construction sector, Malaysia organised
trade with the rest of the world grew by a Seminar on Exploring Global Construction
27.7 per cent to US$135.5 billion. Canada Opportunities on 16 September 2005 in
and the USA are the major import and export Kuala Lumpur. The seminar among others,
destinations. has facilitated focal points from both the
public and private sectors to identify and
At the Summit of the Americas in Argentina explore construction business opportunities
in November 2005, MERCOSUR countries and collaboration. This seminar was attended
agreed to defer negotiations on the Free by representatives from the public and private
Trade Area of the Americas due to concerns on sectors, involved in engineering, finance and
US farm subsidies. Similar concerns with the banking.
EU has also resulted in MERCOSUR deferring
FTA discussions with the EU, after the Sixth The Sixth IOR-ARC Council of Ministers
WTO Ministerial in Hong Kong in December Meeting held from 21-22 February 2006 in
2005. Tehran, Iran, agreed to:
MERCOSUR and the Republic of Korea • implement short-term and visible

are currently undertaking a joint study on a projects;
MERCOSUR-Korea Trade Agreement, which
is expected to be completed in mid-2006. • proceed to establish a Preferential Trade
MERCOSUR and India are also currently Agreement spearheaded by Iran, Kenya,
negotiating an FTA. Mauritius, Oman, Sri Lanka and Yemen,
while the others may decide to join at a
Indian Ocean Rim-Association for later stage;
Regional Cooperation
The Indian Ocean Rim-Association for • enlist country-based foreign direct
Regional Cooperation (IOR-ARC) was investment and to take a lead role in
established in 1997 to enhance economic promoting investment in IOR-ARC
cooperation, trade and investment among the countries;
Indian Ocean Rim countries. As at 2005, IOR-
ARC member countries totalled 18, comprising • hold an Economic Summit for leading
Australia, Bangladesh, India, Indonesia, Iran, business executives of IOR-ARC as part of
Kenya, Madagascar, Malaysia, Mauritius, the IOR-ARC 10th year celebrations in
Mozambique, Oman, Singapore, South Africa, 2007;
Sri Lanka, Tanzania, Thailand, United Arab
Emirates and Yemen. • establish links among existing early
warning systems that have been set in
In 2005, IOR-ARC continued to implement most Member States and carry out
activities related to trade and investment exchange of information and technical
promotion, fisheries development, tourism expertise; and
development and professional exchange
programmes. Two significant IOR-ARC • assign Heads of Diplomatic Missions
activities undertaken were the Workshop of the IOR-ARC countries based in
on Disaster Mitigation and Management, Pretoria, South Africa as a working
Tropical Cyclones Related Issues held in group to review the periodic work
New Delhi, India, from 16-17 March programme.
213
OUTLOOK The TPS-OIC has created greater opportunities
in trade and investment, as well as economic
The diversity of APEC economies and cooperation among OIC countries. The speedy
the wealth of expertise and experience implementation of TPS-OIC and the
available across a broad range of issues finalisation of D-8 PTA will expedite the
provide Malaysia with ample opportunities expansion of intra-OIC trade and investment
for information sharing, sourcing of linkages. More OIC countries are expected to
new knowledge and building capacity. participate in the TPS-OIC as they become
Therefore, it is important for Malaysia aware of the potential benefits of membership.
to continue to participate actively in
APEC discussions to ensure that agreed Malaysia will continue to support OIC
initiatives, targets and deadlines are initiatives and efforts in promoting the
realistic, practical and incorporate the economic development of OIC member states.
principles of flexibility, voluntarism To further strengthen bilateral relations with
and best endeavour, which form the these countries, Malaysia is also seriously
foundation of APEC consultation and considering entering into FTAs with individual
collaboration. OIC member countries.
214
APPENDICES
Organisations And Groupings -
Appendix 1
Membership
Organisation/
Grouping Member Countries/Economies
APEC Australia, Brunei Darussalam, Canada, Chile, People's Republic of China, Hong Kong,
Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea,
Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, United States of America and
Viet Nam.
ASEAN Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines,
Singapore, Thailand and Viet Nam.
ASEAN-CER ASEAN, Australia and New Zealand.
CEFTA Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia.
COMMONWEALTH Antigua and Barbuda, Australia, Bahamas, Bangladesh, Barbados, Belize, Botswana,
Brunei Darussalam, Cameroon, Canada, Cyprus, Dominica, Fiji Islands, Gambia, Ghana,
Grenada, Guyana, India, Jamaica, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta,
Mauritius, Mozambique, Namibia, Nauru, New Zealand, Nigeria, Pakistan, Papua New Guinea,
St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Sierra Leone,
Singapore, Solomon Islands, South Africa, Sri Lanka, Swaziland, Tanzania, Tonga,
Trinidad and Tobago, Tuvalu, Uganda, United Kingdom, Vanuatu, Western Samoa and Zambia.
D-8 Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey.
EAEC ASEAN, People's Republic of China, Japan and Republic of Korea.
ECO Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey,

Turkmenistan and Uzbekistan.
EU Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,
Portugal, Slovakia, Slovenia, Spain, Sweden and United Kingdom.
G-15 Algeria, Argentina, Brazil, Chile, Egypt, India, Indonesia, Jamaica, Kenya, Malaysia, Mexico,
Nigeria, Peru, Sri Lanka, Senegal, Venezuela and Zimbabwe.
GCC Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
IOR-ARC Australia, Bangladesh, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius,
Mozambique, Oman, the Seychelles, Singapore, South Africa, Sri Lanka, Tanzania, Thailand,
United Arab Emirates and Yemen.
MERCOSUR Argentina, Brazil, Paraguay, Uruguay and Venezuela.
NAFTA Canada, Mexico and United States of America.
Continued ...
217
Organisation/
Grouping Member Countries/Economies
NAM Afghanistan, Central African Republic, Algeria, Angola, Bahamas, Bahrain, Bangladesh,
Barbados, Belarus, Belize, Benin, Bhutan, Bolivia, Botswana, Brunei Darussalam,
Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Chad, Chile, Colombia, Comoros,
Congo, Cote d'Ivore, Cuba, Democratic Republic of Congo, Djibouti, Dominican Republic,
Ecuador, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Grenada,
Guatemala, Guinea, Guinea-Bissau, Guyana, Honduras, India, Indonesia, Iran, Iraq, Jamaica,
Jordan, Kenya, Democratic People's Republic of Korea, Kuwait, Lao PDR, Lebanon, Lesotho,
Liberia, Libya, Madagascar, Malawi, Malaysia, Maldives, Mali, Mauritania, Mauritius, Mongolia,
Morocco, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger, Nigeria, Oman, Pakistan,
Palestine, Panama, Papua New Guinea, Peru, the Philippines, Qatar, Rwanda, Saint Lucia,
Saint Vincent and the Grenadines, Sao Tome and Principe, Saudi Arabia, Senegal, Seychelles,
Sierra Leone, Singapore, Somalia, South Africa, Sri Lanka, Sudan, Suriname, Swaziland, Syria,
Tanzania, Thailand, Timor Leste, Togo, Trinidad and Tobago, Tunisia, Turkmenistan, Uganda,
United Arab Emirates, Uzbekistan, Vanuatu, Venezuela, Viet Nam, Yemen, Zambia
and Zimbabwe.
OECD Austria, Australia, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany,
Greece, Hungary, Iceland, Ireland, Italy, Japan, Republic of Korea, Luxembourg, Mexico,
the Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Spain, Sweden,
Switzerland, Turkey, United Kingdom and United States of America.
OIC Afghanistan, Albania, Algeria, Azerbaijan, Bahrain, Bangladesh, Benin, Brunei Darussalam,
Burkina Faso, Cameroon, Chad, Comoros, Cote d'Ivoire, Djibouti, Egypt, Gabon, Gambia,
Guinea, Guinea-Bissau, Guyana, Indonesia, Iran, Iraq, Jordan, Kazakhstan, Kuwait,
Kyrgyzstan, Lebanon, Libya, Malaysia, Maldives, Mali, Mauritania, Morocco, Mozambique,
Niger, Nigeria, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Senegal, Sierra Leone,
Somalia, Sudan, Suriname, Syria, Tajikistan, Togo, Tunisia, Turkey, Turkmenistan, Uganda,
United Arab Emirates, Uzbekistan and Yemen.
SAARC Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
SADC Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius,
Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
WTO Albania, Angola, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Bahrain,
Bangladesh, Barbados, Belgium, Belize, Benin, Bolivia, Botswana, Brazil, Brunei Darussalam,
Bulgaria, Burkina Faso, Burundi, Cambodia, Cameroon, Canada, Central African Republic,
Chad, Chile, People's Republic Of China, Colombia, Congo, Costa Rica, Cote d'Ivoire, Croatia,
Cuba, Cyprus, Czech Republic, Democratic Republic of the Congo, Denmark, Djibouti,
Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, European Community,
Fiji, Finland, Former Yugoslav Republic of Macedonia, France, Gabon, Gambia, Georgia,
Germany, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea Bissau, Guyana, Haiti,
Honduras, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica,
Japan, Jordan, Kenya, Republic of Korea, Kuwait, Kyrgyzstan, Latvia, Lesotho, Liechtenstein,
Lithuania, Luxembourg, Macau, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta,
Mauritania, Mauritius, Mexico, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Namibia,
Nepal, the Netherlands, New Zealand, Nicaragua, Niger, Nigeria, Norway, Oman, Pakistan,
Panama, Papua New Guinea, Paraguay, Peru, the Philippines, Poland, Portugal, Qatar,
Romania, Rwanda, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines,
Saudi Arabia, Senegal, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands,
South Africa, Spain, Sri Lanka, Suriname, Swaziland, Sweden, Switzerland, Taiwan, Tanzania,
Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab Emirates,
United Kingdom, United States of America, Uruguay, Venezuela, Zambia and Zimbabwe.
218
Appendix 2 Statistical Tables - Trade
Table 1:
Annual Trade, 1996-2005
Total Trade Exports Imports Balance of Trade
Period
(RM million)
2005 967,797.7 533,787.8 434,009.9 99,777.9

2004 880,817.2 480,740.3 400,076.8 80,663.5
2003 714,422.2 397,884.4 316,537.9 81,346.5
2002 660,520.5 357,430.0 303,090.5 54,339.6
2001 614,512.9 334,283.8 280,229.1 54,054.7
2000 684,729.2 373,270.3 311,458.9 61,811.4
1999 570,036.4 321,559.5 248,476.8 73,082.7
1998 514,687.6 286,563.1 228,124.5 58,438.6
1997 441,825.9 220,890.4 220,935.5 -45.0
1996 394,305.9 197,026.1 197,279.8 -253.7
Chart 1:
Annual Trade, 1996 - 2005
600
Exports
500
Imports
400
RM billion
300
200
Balance of Trade
100
-100
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
219
Table 2 :
Trade with Major Trading Partners, 2004-2005
2005 2004
Total Trade Share Exports Share Imports Share Balance Total Trade Share Exports Share Imports Share Balance
Country (RM million) (%) (RM million) (%) (RM million) (%) of Trade (RM million) (%) (RM million) (%) (RM million) (%) of Trade
Total 967,797.7 100.0 533,787.8 100.0 434,009.9 100.0 99,777.9 880,817.2 100.0 480,740.3 100.0 400,076.8 100.0 80,663.5
USA 160,951.2 16.6 105,032.9 19.7 55,918.3 12.9 49,114.7 148,061.5 16.8 90,181.5 18.8 57,880.0 14.5 32,301.5
Singapore 134,161.4 13.9 83,333.4 15.6 50,827.9 11.7 32,505.5 116,653.4 13.2 72,176.4 15.0 44,477.0 11.1 27,699.5
Japan 112,899.4 11.7 49,917.7 9.4 62,981.7 14.5 -13,063.9 112,289.4 12.7 48,552.5 10.1 63,736.9 15.9 -15,184.4
People's
Republic
of China 85,101.4 8.8 35,221.0 6.6 49,880.4 11.5 -14,659.3 71,438.2 8.1 32,148.5 6.7 39,289.7 9.8 -7,141.2
Thailand 51,612.0 5.3 28,722.9 5.4 22,889.1 5.3 5,833.7 44,950.3 5.1 22,953.9 4.8 21,996.5 5.5 957.4
Hong Kong 42,001.8 4.3 31,205.3 5.8 10,796.5 2.5 20,408.8 39,545.9 4.5 28,685.8 6.0 10,860.1 2.7 17,825.7
Republic of
Korea 39,548.7 4.1 17,944.7 3.4 21,604.1 5.0 -3,659.4 36,706.4 4.2 16,838.7 3.5 19,867.7 5.0 -3,029.0
Taiwan 38,786.9 4.0 14,813.4 2.8 23,973.5 5.5 -9,160.2 37,413.6 4.2 15,763.0 3.3 21,650.7 5.4 -5,887.7
220
Germany 30,524.0 3.2 11,258.5 2.1 19,265.5 4.4 -8,006.9 28,355.5 3.2 10,485.4 2.2 17,870.1 4.5 -7,384.7
Indonesia 29,145.4 3.0 12,579.7 2.4 16,565.7 3.8 -3,986.0 27,613.3 3.1 11,677.2 2.4 15,936.2 4.0 -4,259.0
Australia 26,213.2 2.7 18,042.4 3.4 8,170.8 1.9 9,871.6 22,575.9 2.6 15,782.8 3.3 6,793.2 1.7 8,989.6
Netherlands 20,802.3 2.1 17,451.6 3.3 3,350.8 0.8 14,100.8 19,194.6 2.2 15,759.8 3.3 3,434.8 0.9 12,325.0
Philippines 19,667.9 2.0 7,475.9 1.4 12,192.0 2.8 -4,716.1 18,072.7 2.1 7,362.3 1.5 10,710.4 2.7 -3,348.0
India 19,135.6 2.0 14,971.8 2.8 4,163.8 1.0 10,808.0 16,307.8 1.9 11,410.5 2.4 4,897.3 1.2 6,513.1
UK 15,992.1 1.7 9,470.1 1.8 6,522.0 1.5 2,948.1 17,195.7 2.0 10,556.3 2.2 6,639.4 1.7 3,916.8
France 12,572.7 1.3 6,912.6 1.3 5,660.1 1.3 1,252.5 12,624.5 1.4 7,081.1 1.5 5,543.4 1.4 1,537.7
United Arab
Emirates 9,831.8 1.0 6,993.3 1.3 2,838.5 0.7 4,154.8 7,619.7 0.9 5,903.1 1.2 1,716.6 0.4 4,186.5
Viet Nam 8,257.7 0.9 4,392.1 0.8 3,865.6 0.9 526.5 6,538.4 0.7 4,333.9 0.9 2,204.6 0.6 2,129.3
Saudi Arabia 7,651.2 0.8 1,792.0 0.3 5,859.3 1.4 -4,067.3 5,574.4 0.6 1,830.7 0.4 3,743.7 0.9 -1,913.0
Italy 7,368.0 0.8 2,673.8 0.5 4,694.2 1.1 -2,020.3 6,530.2 0.7 2,914.4 0.6 3,615.7 0.9 -701.3
Switzerland 5,437.5 0.6 746.4 0.1 4,691.2 1.1 -3,944.8 4,511.6 0.5 660.0 0.1 3,851.5 1.0 -3,191.5
Canada 4,979.7 0.5 2,846.9 0.5 2,132.8 0.5 714.2 4,770.1 0.5 3,011.1 0.6 1,759.0 0.4 1,252.2
Ireland 4,475.9 0.5 1,789.8 0.3 2,686.1 0.6 -896.3 3,687.9 0.4 1,443.8 0.3 2,244.1 0.6 -800.3
Belgium 3,464.1 0.4 2,039.4 0.4 1,424.8 0.3 614.6 3,655.8 0.4 2,118.5 0.4 1,537.3 0.4 581.1
Russia 3,440.7 0.4 1,803.9 0.3 1,636.8 0.4 167.1 3,328.0 0.4 1,545.7 0.3 1,782.3 0.4 -236.6
Brazil 3,391.2 0.4 1,413.3 0.3 1,977.9 0.5 -564.5 2,510.5 0.3 1,213.0 0.3 1,297.5 0.3 -84.5
New Zealand 3,316.9 0.3 2,033.5 0.4 1,283.4 0.3 750.1 2,982.1 0.3 1,687.4 0.4 1,294.7 0.3 392.7
Continued...
2005 2004
Total Trade Share Exports Share Imports Share Balance Total Trade Share Exports Share Imports Share Balance
Country (RM million) (%) (RM million) (%) (RM million) (%) of Trade (RM million) (%) (RM million) (%) (RM million) (%) of Trade
Sweden 3,272.1 0.3 815.9 0.2 2,456.2 0.6 -1,640.4 3,717.5 0.4 743.8 0.2 2,973.6 0.7 -2,229.8
South Africa 3,250.2 0.3 2,164.0 0.4 1,086.2 0.3 1,077.8 3,092.6 0.4 1,816.7 0.4 1,275.9 0.3 540.8
Spain 3,179.5 0.3 2,209.6 0.4 969.9 0.2 1,239.7 3,079.1 0.3 2,257.8 0.5 821.3 0.2 1,436.5
Mexico 3,058.0 0.3 2,547.5 0.5 510.4 0.1 2,037.1 3,004.2 0.3 2,493.6 0.5 510.6 0.1 1,983.0
Pakistan 3,017.8 0.3 2,803.6 0.5 214.2 neg. 2,589.5 2,870.9 0.3 2,664.9 0.6 206.0 0.1 2,458.9
Finland 2,717.1 0.3 1,891.8 0.4 825.3 0.2 1,066.4 1,754.5 0.2 1,063.1 0.2 691.4 0.2 371.6
Argentina 2,711.6 0.3 389.1 0.1 2,322.5 0.5 -1,933.4 1,683.2 0.2 252.9 0.1 1,430.3 0.4 -1,177.4
Iran 2,676.4 0.3 1,357.9 0.3 1,318.5 0.3 39.4 2,296.6 0.3 1,314.3 0.3 982.3 0.2 332.0
Turkey 2,293.7 0.2 2,024.2 0.4 269.5 0.1 1,754.7 1,722.5 0.2 1,511.8 0.3 210.7 0.1 1,301.0
Oman 2,237.9 0.2 306.8 0.1 1,931.1 0.4 -1,624.2 1,781.6 0.2 271.5 0.1 1,510.1 0.4 -1,238.6
Egypt 1,869.8 0.2 1,730.1 0.3 139.7 neg. 1,590.4 1,505.7 0.2 1,388.6 0.3 117.1 neg. 1,271.5
Sri Lanka 1,700.3 0.2 1,659.6 0.3 40.7 neg. 1,618.9 1,338.2 0.2 1,311.0 0.3 27.2 neg. 1,283.8
Bangladesh 1,632.8 0.2 1,550.2 0.3 82.6 neg. 1,467.7 1,448.8 0.2 1,384.1 0.3 64.8 neg. 1,319.3
Hungary 1,601.8 0.2 1,425.5 0.3 176.2 neg. 1,249.3 2,411.7 0.3 2,277.8 0.5 133.9 neg. 2,143.9
Kuwait 1,494.4 0.2 462.7 0.1 1,031.7 0.2 -569.0 666.7 0.1 410.2 0.1 256.5 0.1 153.7
Austria 1,472.8 0.2 933.8 0.2 539.0 0.1 394.9 1,435.2 0.2 900.2 0.2 535.0 0.1 365.2
Myanmar 1,435.4 0.1 929.2 0.2 506.1 0.1 423.1 973.6 0.1 567.5 0.1 406.1 0.1 161.5
221
Brunei
Darussalam 1,386.2 0.1 1,337.1 0.3 49.1 neg. 1,288.0 1,256.7 0.1 1,202.8 0.3 53.9 neg. 1,148.9
Denmark 1,300.1 0.1 717.6 0.1 582.4 0.1 135.2 1,151.9 0.1 612.3 0.1 539.6 0.1 72.7
Portugal 1,118.6 0.1 682.8 0.1 435.8 0.1 246.9 926.8 0.1 308.4 0.1 618.3 0.2 -309.9
Costa Rica 1,038.7 0.1 164.5 neg. 874.3 0.2 -709.8 870.0 0.1 144.9 neg. 725.1 0.2 -580.2
Ukraine 967.3 0.1 559.5 0.1 407.8 0.1 151.7 479.4 0.1 286.5 0.1 192.9 neg. 93.7
Czech Rep. 957.6 0.1 730.5 0.1 227.1 0.1 503.3 786.2 0.1 576.7 0.1 209.4 0.1 367.3
Chile 893.5 0.1 328.9 0.1 564.6 0.1 -235.7 883.0 0.1 361.1 0.1 521.9 0.1 -160.8
Nigeria 748.1 0.1 697.0 0.1 51.1 neg. 646.0 225.0 neg. 209.0 neg. 16.0 neg. 193.0
Poland 687.0 0.1 479.6 0.1 207.4 neg. 272.2 722.6 0.1 435.3 0.1 287.3 0.1 147.9
Yemen 636.1 0.1 450.9 0.1 185.3 neg. 265.6 539.0 0.1 422.2 0.1 116.7 neg. 305.5
Syria 627.6 0.1 621.9 0.1 5.7 neg. 616.2 568.4 0.1 566.6 0.1 1.7 neg. 564.9
Qatar 568.2 0.1 363.2 0.1 205.0 neg. 158.2 268.1 neg. 191.1 neg. 76.9 neg. 114.2
Bahrain 567.3 0.1 157.9 neg. 409.4 0.1 -251.4 429.0 neg. 131.6 neg. 297.4 0.1 -165.8
Jordan 530.7 0.1 430.7 0.1 100.0 neg. 330.7 1,474.8 0.2 1,305.9 0.3 168.9 neg. 1,136.9
Sudan 485.7 0.1 485.2 0.1 0.5 neg. 484.7 150.4 neg. 148.9 neg. 1.5 neg. 147.4
Norway 467.7 neg. 198.1 neg. 269.7 0.1 -71.6 432.3 neg. 194.8 neg. 237.5 0.1 -42.8
Cambodia 445.1 neg. 413.7 0.1 31.3 neg. 382.4 349.0 neg. 317.5 0.1 31.5 neg. 286.0
Ghana 442.4 neg. 254.8 neg. 187.6 neg. 67.2 302.8 neg. 211.5 neg. 91.2 neg. 120.3

Table 3 :
Major Export Destinations, 2004-2005
Exports
2005 2004
Country RM million Share Change RM million Share
(%) (%) (%)
Total 533,787.8 100.0 11.0 480,740.3 100.0
USA 105,032.9 19.7 16.5 90,181.5 18.8

Singapore 83,333.4 15.6 15.5 72,176.4 15.0
Japan 49,917.7 9.4 2.8 48,552.5 10.1
People's Republic of China 35,221.0 6.6 9.6 32,148.5 6.7
Hong Kong 31,205.3 5.8 8.8 28,685.8 6.0
Thailand 28,722.9 5.4 25.1 22,953.9 4.8
Australia 18,042.4 3.4 14.3 15,782.8 3.3
Republic of Korea 17,944.7 3.4 6.6 16,838.7 3.5
Netherlands 17,451.6 3.3 10.7 15,759.8 3.3
India 14,971.8 2.8 31.2 11,410.5 2.4
Taiwan 14,813.4 2.8 -6.0 15,763.0 3.3
Indonesia 12,579.7 2.4 7.7 11,677.2 2.4
Germany 11,258.5 2.1 7.4 10,485.4 2.2
Ukraine 9,470.1 1.8 -10.3 10,556.3 2.2
Philippines 7,475.9 1.4 1.5 7,362.3 1.5
United Arab Emirates 6,993.3 1.3 18.5 5,903.1 1.2
France 6,912.6 1.3 -2.4 7,081.1 1.5
Viet Nam 4,392.1 0.8 1.3 4,333.9 0.9
Canada 2,846.9 0.5 -5.5 3,011.1 0.6
Pakistan 2,803.6 0.5 5.2 2,664.9 0.6
Italy 2,673.8 0.5 -8.3 2,914.4 0.6
Mexico 2,547.5 0.5 2.2 2,493.6 0.5
Spain 2,209.6 0.4 -2.1 2,257.8 0.5
South Africa 2,164.0 0.4 19.1 1,816.7 0.4
Belgium 2,039.4 0.4 -3.7 2,118.5 0.4
New Zealand 2,033.5 0.4 20.5 1,687.4 0.4
Turkey 2,024.2 0.4 33.9 1,511.8 0.3
Finland 1,891.8 0.4 78.0 1,063.1 0.2
Russia 1,803.9 0.3 16.7 1,545.7 0.3
Saudi Arabia 1,792.0 0.3 -2.1 1,830.7 0.4
Ireland 1,789.8 0.3 24.0 1,443.8 0.3
Egypt 1,730.1 0.3 24.6 1,388.6 0.3
Sri Lanka 1,659.6 0.3 26.6 1,311.0 0.3
Bangladesh 1,550.2 0.3 12.0 1,384.1 0.3
Hungary 1,425.5 0.3 -37.4 2,277.8 0.5
Brazil 1,413.3 0.3 16.5 1,213.0 0.3
Iran 1,357.9 0.3 3.3 1,314.3 0.3
Brunei Darussalam 1,337.1 0.3 11.2 1,202.8 0.3
Austria 933.8 0.2 3.7 900.2 0.2
Myanmar 929.2 0.2 63.7 567.5 0.1
Sweden 815.9 0.2 9.7 743.8 0.2
Switzerland 746.4 0.1 13.1 660.0 0.1
Czech Republic 730.5 0.1 26.7 576.7 0.1
Denmark 717.6 0.1 17.2 612.3 0.1
Nigeria 697.0 0.1 233.6 209.0 neg.
Portugal 682.8 0.1 121.4 308.4 0.1
Syria 621.9 0.1 9.8 566.6 0.1
Ukraine 559.5 0.1 95.3 286.5 0.1
Sudan 485.2 0.1 225.9 148.9 neg.
Poland 479.6 0.1 10.2 435.3 0.1
Kuwait 462.7 0.1 12.8 410.2 0.1

222
Table 4 :
Major Sources of Imports, 2004-2005
Imports
2005 2004
Country RM million Share Change RM million Share

(%) (%) (%)
Total 434,009.9 100.0 8.5 400,076.8 100.0
Japan 62,981.7 14.5 -1.2 63,736.9 15.9

USA 55,918.3 12.9 -3.4 57,880.0 14.5
Singapore 50,827.9 11.7 14.3 44,477.0 11.1
Taiwan 23,973.5 5.5 10.7 21,650.7 5.4
Thailand 22,889.1 5.3 4.1 21,996.5 5.5
Republic of Korea 21,604.1 5.0 8.7 19,867.7 5.0
Germany 19,265.5 4.4 7.8 17,870.1 4.5
Indonesia 16,565.7 3.8 4.0 15,936.2 4.0
Philippines 12,192.0 2.8 13.8 10,710.4 2.7
Hong Kong 10,796.5 2.5 -0.6 10,860.1 2.7
Australia 8,170.8 1.9 20.3 6,793.2 1.7
UK 6,522.0 1.5 -1.8 6,639.4 1.7
Saudi Arabia 5,859.3 1.4 56.5 3,743.7 0.9
France 5,660.1 1.3 2.1 5,543.4 1.4
Italy 4,694.2 1.1 29.8 3,615.7 0.9
Switzerland 4,691.2 1.1 21.8 3,851.5 1.0
India 4,163.8 1.0 -15.0 4,897.3 1.2
Viet Nam 3,865.6 0.9 75.3 2,204.6 0.6
Netherlands 3,350.8 0.8 -2.4 3,434.8 0.9
United Arab Emirates 2,838.5 0.7 65.4 1,716.6 0.4
Ireland 2,686.1 0.6 19.7 2,244.1 0.6
Sweden 2,456.2 0.6 -17.4 2,973.6 0.7
Argentina 2,322.5 0.5 62.4 1,430.3 0.4
Canada 2,132.8 0.5 21.3 1,759.0 0.4
Brazil 1,977.9 0.5 52.4 1,297.5 0.3
Oman 1,931.1 0.4 27.9 1,510.1 0.4
Russia 1,636.8 0.4 -8.2 1,782.3 0.4
Belgium 1,424.8 0.3 -7.3 1,537.3 0.4
Iran 1,318.5 0.3 34.2 982.3 0.2
New Zealand 1,283.4 0.3 -0.9 1,294.7 0.3
South Africa 1,086.2 0.3 -14.9 1,275.9 0.3
Kuwait 1,031.7 0.2 302.2 256.5 0.1
Spain 969.9 0.2 18.1 821.3 0.2
Costa Rica 874.3 0.2 20.6 725.1 0.2
Finland 825.3 0.2 19.4 691.4 0.2
Denmark 582.4 0.1 7.9 539.6 0.1
Chile 564.6 0.1 8.2 521.9 0.1
Austria 539.0 0.1 0.7 535.0 0.1
Mexico 510.4 0.1 neg. 510.6 0.1
Myanmar 506.1 0.1 24.6 406.1 0.1
Portugal 435.8 0.1 -29.5 618.3 0.2
Bahrain 409.4 0.1 37.7 297.4 0.1
Ukraine 407.8 0.1 111.5 192.9 neg.
Norway 269.7 0.1 13.5 237.5 0.1
Turkey 269.5 0.1 27.9 210.7 0.1
Czech Republic 227.1 0.1 8.5 209.4 0.1
Liberia 224.6 0.1 * 20.6 neg.
Pakistan 214.2 neg. 4.0 206.0 0.1
Poland 207.4 neg. -27.8 287.3 0.1
Qatar 205.0 neg. 166.4 76.9 neg.

* - not meaningful
223
Table 5 :
Trade with ASEAN, 2004-2005
Exports Imports Balance of Trade
2005 2004 2005 2004 2005 2004
Country RM million Share Change RM million Share RM million Share Change RM million Share RM million
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
ASEAN 139,207.8 26.1 15.4 120,601.1 25.1 106,975.9 24.6 11.6 95,816.5 23.9 32,232.0 24,784.5
Singapore 83,333.4 15.6 15.5 72,176.4 15.0 50,827.9 11.7 14.3 44,477.0 11.1 32,505.5 27,699.5
Thailand 28,722.9 5.4 25.1 22,953.9 4.8 22,889.1 5.3 4.1 21,996.5 5.5 5,833.7 957.4
Indonesia 12,579.7 2.4 7.7 11,677.2 2.4 16,565.7 3.8 4.0 15,936.2 4.0 -3,986.0 -4,259.0
Philippines 7,475.9 1.4 1.5 7,362.3 1.5 12,192.0 2.8 13.8 10,710.4 2.7 -4,716.1 -3,348.0
Viet Nam 4,392.1 0.8 1.3 4,333.9 0.9 3,865.6 0.9 75.3 2,204.6 0.6 526.5 2,129.3
Brunei Darussalam 1,337.1 0.3 11.2 1,202.8 0.3 49.1 neg. -8.9 53.9 neg. 1,288.0 1,148.9
Myanmar 929.2 0.2 63.7 567.5 0.1 506.1 0.1 24.6 406.1 0.1 423.1 161.5
Cambodia 413.7 0.1 30.3 317.5 0.1 31.3 neg. -0.5 31.5 neg. 382.4 286.0
Lao PDR 23.8 neg. 149.5 9.5 neg. 48.9 neg. * 0.6 neg. -25.2 9.0
224
* - not meaningful
Table 6 :
Trade With NAFTA, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
NAFTA 110,427.4 20.7 15.4 95,686.2 19.9 58,561.5 13.5 -2.6 60,149.6 15.0 51,865.9 35,536.6
USA 105,032.9 19.7 16.5 90,181.5 18.8 55,918.3 12.9 -3.4 57,880.0 14.5 49,114.7 32,301.5
Canada 2,846.9 0.5 -5.5 3,011.1 0.6 2,132.8 0.5 21.3 1,759.0 0.4 714.2 1,252.2
Mexico 2,547.5 0.5 2.2 2,493.6 0.5 510.4 0.1 neg. 510.6 0.1 2,037.1 1,983.0

Table 7:
Trade With EU, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
EU 62,629.3 11.7 3.7 60,387.6 12.6 50,512.3 11.6 5.2 48,030.6 12.0 12,117.0 12,356.9
Netherlands 17,451.6 3.3 10.7 15,759.8 3.3 3,350.8 0.8 -2.4 3,434.8 0.9 14,100.8 12,325.0
Germany 11,258.5 2.1 7.4 10,485.4 2.2 19,265.5 4.4 7.8 17,870.1 4.5 -8,006.9 -7,384.7
UK 9,470.1 1.8 -10.3 10,556.3 2.2 6,522.0 1.5 -1.8 6,639.4 1.7 2,948.1 3,916.8
France 6,912.6 1.3 -2.4 7,081.1 1.5 5,660.1 1.3 2.1 5,543.4 1.4 1,252.5 1,537.7
Italy 2,673.8 0.5 -8.3 2,914.4 0.6 4,694.2 1.1 29.8 3,615.7 0.9 -2,020.3 -701.3
Spain 2,209.6 0.4 -2.1 2,257.8 0.5 969.9 0.2 18.1 821.3 0.2 1,239.7 1,436.5
Belgium 2,039.4 0.4 -3.7 2,118.5 0.4 1,424.8 0.3 -7.3 1,537.3 0.4 614.6 581.1
Finland 1,891.8 0.4 78.0 1,063.1 0.2 825.3 0.2 19.4 691.4 0.2 1,066.4 371.6
225
Ireland 1,789.8 0.3 24.0 1,443.8 0.3 2,686.1 0.6 19.7 2,244.1 0.6 -896.3 -800.3
Hungary 1,425.5 0.3 -37.4 2,277.8 0.5 176.2 neg. 31.6 133.9 neg. 1,249.3 2,143.9
Austria 933.8 0.2 3.7 900.2 0.2 539.0 0.1 0.7 535.0 0.1 394.9 365.2
Sweden 815.9 0.2 9.7 743.8 0.2 2,456.2 0.6 -17.4 2,973.6 0.7 -1,640.4 -2,229.8
Czech Republic 730.5 0.1 26.7 576.7 0.1 227.1 0.1 8.5 209.4 0.1 503.3 367.3
Denmark 717.6 0.1 17.2 612.3 0.1 582.4 0.1 7.9 539.6 0.1 135.2 72.7
Portugal 682.8 0.1 121.4 308.4 0.1 435.8 0.1 -29.5 618.3 0.2 246.9 -309.9
Poland 479.6 0.1 10.2 435.3 0.1 207.4 neg. -27.8 287.3 0.1 272.2 147.9
Greece 342.8 0.1 -14.5 401.0 0.1 29.0 neg. -4.2 30.3 neg. 313.8 370.7
Luxembourg 273.4 0.1 * 34.0 neg. 35.2 neg. 14.5 30.7 neg. 238.2 3.3
Slovak Republic 119.4 neg. 40.1 85.2 neg. 124.7 neg. 99.8 62.4 neg. -5.3 22.9
Estonia 113.3 neg. 62.0 69.9 neg. 13.6 neg. 63.5 8.3 neg. 99.7 61.6
Malta 92.5 neg. 9.9 84.2 neg. 185.9 neg. 46.0 127.3 neg. -93.4 -43.1
Lithuania 60.6 neg. 38.8 43.6 neg. 37.8 neg. 23.6 30.5 neg. 22.8 13.1
Cyprus 56.4 neg. 3.7 54.4 neg. 14.0 neg. -19.0 17.3 neg. 42.4 37.1
Latvia 44.2 neg. 6.9 41.4 neg. 19.7 neg. * 1.5 neg. 24.5 39.9
Slovenia 43.8 neg. 12.3 39.0 neg. 29.7 neg. 8.6 27.3 neg. 14.1 11.7

* - not meaningful
Table 8:
Trade With APEC, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
APEC 420,048.4 78.7 11.4 377,119.9 78.4 345,982.1 79.7 7.6 321,426.7 80.3 74,066.3 55,693.2
USA 105,032.9 19.7 16.5 90,181.5 18.8 55,918.3 12.9 -3.4 57,880.0 14.5 49,114.7 32,301.5
Singapore 83,333.4 15.6 15.5 72,176.4 15.0 50,827.9 11.7 14.3 44,477.0 11.1 32,505.5 27,699.5
Japan 49,917.7 9.4 2.8 48,552.5 10.1 62,981.7 14.5 -1.2 63,736.9 15.9 -13,063.9 -15,184.4
People's Republic
of China 35,221.0 6.6 9.6 32,148.5 6.7 49,880.4 11.5 27.0 39,289.7 9.8 -14,659.3 -7,141.2
Hong Kong 31,205.3 5.8 8.8 28,685.8 6.0 10,796.5 2.5 -0.6 10,860.1 2.7 20,408.8 17,825.7
226
Thailand 28,722.9 5.4 25.1 22,953.9 4.8 22,889.1 5.3 4.1 21,996.5 5.5 5,833.7 957.4
Australia 18,042.4 3.4 14.3 15,782.8 3.3 8,170.8 1.9 20.3 6,793.2 1.7 9,871.6 8,989.6
Republic of Korea 17,944.7 3.4 6.6 16,838.7 3.5 21,604.1 5.0 8.7 19,867.7 5.0 -3,659.4 -3,029.0
Taiwan 14,813.4 2.8 -6.0 15,763.0 3.3 23,973.5 5.5 10.7 21,650.7 5.4 -9,160.2 -5,887.7
Indonesia 12,579.7 2.4 7.7 11,677.2 2.4 16,565.7 3.8 4.0 15,936.2 4.0 -3,986.0 -4,259.0
Philippines 7,475.9 1.4 1.5 7,362.3 1.5 12,192.0 2.8 13.8 10,710.4 2.7 -4,716.1 -3,348.0
Viet Nam 4,392.1 0.8 1.3 4,333.9 0.9 3,865.6 0.9 75.3 2,204.6 0.6 526.5 2,129.3
Canada 2,846.9 0.5 -5.5 3,011.1 0.6 2,132.8 0.5 21.3 1,759.0 0.4 714.2 1,252.2
Mexico 2,547.5 0.5 2.2 2,493.6 0.5 510.4 0.1 neg. 510.6 0.1 2,037.1 1,983.0
New Zealand 2,033.5 0.4 20.5 1,687.4 0.4 1,283.4 0.3 -0.9 1,294.7 0.3 750.1 392.7
Russia 1,803.9 0.3 16.7 1,545.7 0.3 1,636.8 0.4 -8.2 1,782.3 0.4 167.1 -236.6
Chile 328.9 0.1 -8.9 361.1 0.1 564.6 0.1 8.2 521.9 0.1 -235.7 -160.8
Papua New Guinea 290.3 0.1 86.0 156.0 neg. 114.5 neg. 68.2 68.1 neg. 175.7 88.0
Peru 178.8 neg. -13.1 205.8 neg. 24.8 neg. -25.9 33.5 neg. 153.9 172.3

Table 9:
Trade with Major Countries in NAM, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
NAM 183,086.8 34.3 15.9 157,969.1 32.9 129,190.6 29.8 13.5 113,867.4 28.5 53,896.1 44,101.7
Singapore 83,333.4 15.6 15.5 72,176.4 15.0 50,827.9 11.7 14.3 44,477.0 11.1 32,505.5 27,699.5
Thailand 28,722.9 5.4 25.1 22,953.9 4.8 22,889.1 5.3 4.1 21,996.5 5.5 5,833.7 957.4
India 14,971.8 2.8 31.2 11,410.5 2.4 4,163.8 1.0 -15.0 4,897.3 1.2 10,808.0 6,513.1
Indonesia 12,579.7 2.4 7.7 11,677.2 2.4 16,565.7 3.8 4.0 15,936.2 4.0 -3,986.0 -4,259.0
Philippines 7,475.9 1.4 1.5 7,362.3 1.5 12,192.0 2.8 13.8 10,710.4 2.7 -4,716.1 -3,348.0
United Arab Emirates 6,993.3 1.3 18.5 5,903.1 1.2 2,838.5 0.7 65.4 1,716.6 0.4 4,154.8 4,186.5
Viet Nam 4,392.1 0.8 1.3 4,333.9 0.9 3,865.6 0.9 75.3 2,204.6 0.6 526.5 2,129.3
Pakistan 2,803.6 0.5 5.2 2,664.9 0.6 214.2 neg. 4.0 206.0 0.1 2,589.5 2,458.9
227
South Africa 2,164.0 0.4 19.1 1,816.7 0.4 1,086.2 0.3 -14.9 1,275.9 0.3 1,077.8 540.8
Saudi Arabia 1,792.0 0.3 -2.1 1,830.7 0.4 5,859.3 1.4 56.5 3,743.7 0.9 -4,067.3 -1,913.0
Egypt 1,730.1 0.3 24.6 1,388.6 0.3 139.7 neg. 19.3 117.1 neg. 1,590.4 1,271.5
Sri Lanka 1,659.6 0.3 26.6 1,311.0 0.3 40.7 neg. 49.7 27.2 neg. 1,618.9 1,283.8
Bangladesh 1,550.2 0.3 12.0 1,384.1 0.3 82.6 neg. 27.5 64.8 neg. 1,467.7 1,319.3
Iran 1,357.9 0.3 3.3 1,314.3 0.3 1,318.5 0.3 34.2 982.3 0.2 39.4 332.0
Myanmar 929.2 0.2 63.7 567.5 0.1 506.1 0.1 24.6 406.1 0.1 423.1 161.5
Nigeria 697.0 0.1 233.6 209.0 neg. 51.1 neg. 218.8 16.0 neg. 646.0 193.0
Syria 621.9 0.1 9.8 566.6 0.1 5.7 neg. 224.9 1.7 neg. 616.2 564.9
Sudan 485.2 0.1 225.9 148.9 neg. 0.5 neg. -66.4 1.5 neg. 484.7 147.4
Kuwait 462.7 0.1 12.8 410.2 0.1 1,031.7 0.2 302.2 256.5 0.1 -569.0 153.7
Yemen 450.9 0.1 6.8 422.2 0.1 185.3 neg. 58.7 116.7 neg. 265.6 305.5
Jordan 430.7 0.1 -67.0 1,305.9 0.3 100.0 neg. -40.8 168.9 neg. 330.7 1,136.9
Cambodia 413.7 0.1 30.3 317.5 0.1 31.3 neg. -0.5 31.5 neg. 382.4 286.0
Qatar 363.2 0.1 90.0 191.1 neg. 205.0 neg. 166.4 76.9 neg. 158.2 114.2
Chile 328.9 0.1 -8.9 361.1 0.1 564.6 0.1 8.2 521.9 0.1 -235.7 -160.8

Table 10 :
Trade with Major Countries in the OIC, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
OIC 38,196.1 7.2 9.2 34,964.2 7.3 31,874.4 7.3 20.0 26,555.9 6.6 6,321.7 8,408.3
D-8 22,742.8 4.3 12.9 20,149.8 4.2 18,641.2 4.3 6.3 17,533.1 4.4 4,101.6 2,616.7
Indonesia1 12,579.7 2.4 7.7 11,677.2 2.4 16,565.7 3.8 4.0 15,936.2 4.0 -3,986.0 -4,259.0
Pakistan1 2,803.6 0.5 5.2 2,664.9 0.6 214.2 neg. 4.0 206.0 0.1 2,589.5 2,458.9
Turkey1 2,024.2 0.4 33.9 1,511.8 0.3 269.5 0.1 27.9 210.7 0.1 1,754.7 1,301.0
Saudi Arabia 1,792.0 0.3 -2.1 1,830.7 0.4 5,859.3 1.4 56.5 3,743.7 0.9 -4,067.3 -1,913.0
228
Egypt1 1,730.1 0.3 24.6 1,388.6 0.3 139.7 neg. 19.3 117.1 neg. 1,590.4 1,271.5
Bangladesh1 1,550.2 0.3 12.0 1,384.1 0.3 82.6 neg. 27.5 64.8 neg. 1,467.7 1,319.3
Iran1 1,357.9 0.3 3.3 1,314.3 0.3 1,318.5 0.3 34.2 982.3 0.2 39.4 332.0
Nigeria1 697.0 0.1 233.6 209.0 neg. 51.1 neg. 218.8 16.0 neg. 646.0 193.0
Syria 621.9 0.1 9.8 566.6 0.1 5.7 neg. 224.9 1.7 neg. 616.2 564.9
Sudan 485.2 0.1 225.9 148.9 neg. 0.5 neg. -66.4 1.5 neg. 484.7 147.4
Kuwait 462.7 0.1 12.8 410.2 0.1 1,031.7 0.2 302.2 256.5 0.1 -569.0 153.7
Yemen 450.9 0.1 6.8 422.2 0.1 185.3 neg. 58.7 116.7 neg. 265.6 305.5
Jordan 430.7 0.1 -67.0 1,305.9 0.3 100.0 neg. -40.8 168.9 neg. 330.7 1,136.9
Qatar 363.2 0.1 90.0 191.1 neg. 205.0 neg. 166.4 76.9 neg. 158.2 114.2
Oman 306.8 0.1 13.0 271.5 0.1 1,931.1 0.4 27.9 1,510.1 0.4 -1,624.2 -1,238.6
Maldives 203.2 neg. 47.0 138.3 neg. 1.6 neg. 169.5 0.6 neg. 201.6 137.7
Algeria 194.2 neg. -43.8 345.7 0.1 3.4 neg. 533.9 0.5 neg. 190.8 345.2
Togo 190.8 neg. -14.1 222.2 neg. 5.4 neg. -43.8 9.6 neg. 185.4 212.6

Note: 1 - Member of D8
neg. - negligible
Table 11 :
Trade with OECD, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
OECD 263,564.2 49.4 9.4 240,977.5 50.1 208,044.6 47.9 2.0 203,961.4 51.0 55,519.6 37,016.2
USA 105,032.9 19.7 16.5 90,181.5 18.8 55,918.3 12.9 -3.4 57,880.0 14.5 49,114.7 32,301.5
Japan 49,917.7 9.4 2.8 48,552.5 10.1 62,981.7 14.5 -1.2 63,736.9 15.9 -13,063.9 -15,184.4
Australia 18,042.4 3.4 14.3 15,782.8 3.3 8,170.8 1.9 20.3 6,793.2 1.7 9,871.6 8,989.6
Netherlands 17,451.6 3.3 10.7 15,759.8 3.3 3,350.8 0.8 -2.4 3,434.8 0.9 14,100.8 12,325.0
Germany 11,258.5 2.1 7.4 10,485.4 2.2 19,265.5 4.4 7.8 17,870.1 4.5 -8,006.9 -7,384.7
UK 9,470.1 1.8 -10.3 10,556.3 2.2 6,522.0 1.5 -1.8 6,639.4 1.7 2,948.1 3,916.8
229
France 6,912.6 1.3 -2.4 7,081.1 1.5 5,660.1 1.3 2.1 5,543.4 1.4 1,252.5 1,537.7
Canada 2,846.9 0.5 -5.5 3,011.1 0.6 2,132.8 0.5 21.3 1,759.0 0.4 714.2 1,252.2
Italy 2,673.8 0.5 -8.3 2,914.4 0.6 4,694.2 1.1 29.8 3,615.7 0.9 -2,020.3 -701.3
Mexico 2,547.5 0.5 2.2 2,493.6 0.5 510.4 0.1 neg. 510.6 0.1 2,037.1 1,983.0
Spain 2,209.6 0.4 -2.1 2,257.8 0.5 969.9 0.2 18.1 821.3 0.2 1,239.7 1,436.5
Belgium 2,039.4 0.4 -3.7 2,118.5 0.4 1,424.8 0.3 -7.3 1,537.3 0.4 614.6 581.1
New Zealand 2,033.5 0.4 20.5 1,687.4 0.4 1,283.4 0.3 -0.9 1,294.7 0.3 750.1 392.7
Turkey 2,024.2 0.4 33.9 1,511.8 0.3 269.5 0.1 27.9 210.7 0.1 1,754.7 1,301.0
Finland 1,891.8 0.4 78.0 1,063.1 0.2 825.3 0.2 19.4 691.4 0.2 1,066.4 371.6
Ireland 1,789.8 0.3 24.0 1,443.8 0.3 2,686.1 0.6 19.7 2,244.1 0.6 -896.3 -800.3
Hungary 1,425.5 0.3 -37.4 2,277.8 0.5 176.2 neg. 31.6 133.9 neg. 1,249.3 2,143.9
Austria 933.8 0.2 3.7 900.2 0.2 539.0 0.1 0.7 535.0 0.1 394.9 365.2
Sweden 815.9 0.2 9.7 743.8 0.2 2,456.2 0.6 -17.4 2,973.6 0.7 -1,640.4 -2,229.8
Switzerland 746.4 0.1 13.1 660.0 0.1 4,691.2 1.1 21.8 3,851.5 1.0 -3,944.8 -3,191.5
Czech Republic 730.5 0.1 26.7 576.7 0.1 227.1 0.1 8.5 209.4 0.1 503.3 367.3
Denmark 717.6 0.1 17.2 612.3 0.1 582.4 0.1 7.9 539.6 0.1 135.2 72.7
Portugal 682.8 0.1 121.4 308.4 0.1 435.8 0.1 -29.5 618.3 0.2 246.9 -309.9
Poland 479.6 0.1 10.2 435.3 0.1 207.4 neg. -27.8 287.3 0.1 272.2 147.9

Table 12:
Trade with Major Countries in the Commonwealth, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
Commonwealth 142,862.8 26.8 14.5 124,768.5 26.0 75,566.4 17.4 10.4 68,460.0 17.1 67,296.4 56,308.5
Singapore 83,333.4 15.6 15.5 72,176.4 15.0 50,827.9 11.7 14.3 44,477.0 11.1 32,505.5 27,699.5
Australia 18,042.4 3.4 14.3 15,782.8 3.3 8,170.8 1.9 20.3 6,793.2 1.7 9,871.6 8,989.6
India 14,971.8 2.8 31.2 11,410.5 2.4 4,163.8 1.0 -15.0 4,897.3 1.2 10,808.0 6,513.1
UK 9,470.1 1.8 -10.3 10,556.3 2.2 6,522.0 1.5 -1.8 6,639.4 1.7 2,948.1 3,916.8
Canada 2,846.9 0.5 -5.5 3,011.1 0.6 2,132.8 0.5 21.3 1,759.0 0.4 714.2 1,252.2
230
Pakistan 2,803.6 0.5 5.2 2,664.9 0.6 214.2 neg. 4.0 206.0 0.1 2,589.5 2,458.9
South Africa 2,164.0 0.4 19.1 1,816.7 0.4 1,086.2 0.3 -14.9 1,275.9 0.3 1,077.8 540.8
New Zealand 2,033.5 0.4 20.5 1,687.4 0.4 1,283.4 0.3 -0.9 1,294.7 0.3 750.1 392.7
Sri Lanka 1,659.6 0.3 26.6 1,311.0 0.3 40.7 neg. 49.7 27.2 neg. 1,618.9 1,283.8
Papua New Guinea 290.3 0.1 86.0 156.0 neg. 114.5 neg. 68.2 68.1 neg. 175.7 88.0
Ghana 254.8 neg. 20.5 211.5 neg. 187.6 neg. 105.6 91.2 neg. 67.2 120.3
Mauritius 228.6 neg. 9.4 209.0 neg. 3.0 neg. -53.0 6.4 neg. 225.5 202.6
Maldives 203.2 neg. 47.0 138.3 neg. 1.6 neg. 169.5 0.6 neg. 201.6 137.7
Kenya 196.3 neg. 20.4 163.0 neg. 26.8 neg. 24.5 21.5 neg. 169.5 141.5
Tanzania 114.0 neg. 29.7 87.8 neg. 82.0 neg. 97.2 41.6 neg. 31.9 46.3
Fiji 93.7 neg. 21.1 77.4 neg. 1.6 neg. 428.6 0.3 neg. 92.2 77.1
Malta 92.5 neg. 9.9 84.2 neg. 185.9 neg. 46.0 127.3 neg. -93.4 -43.1

Table 13:
Trade with Major South Countries, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
South Countries 139,966.8 26.2 14.3 122,474.0 25.5 134,072.1 30.9 18.8 112,856.0 28.2 5,894.7 9,617.9
China 35,221.0 6.6 9.6 32,148.5 6.7 49,880.4 11.5 27.0 39,289.7 9.8 -14,659.3 -7,141.2
Thailand 28,722.9 5.4 25.1 22,953.9 4.8 22,889.1 5.3 4.1 21,996.5 5.5 5,833.7 957.4
India 14,971.8 2.8 31.2 11,410.5 2.4 4,163.8 1.0 -15.0 4,897.3 1.2 10,808.0 6,513.1
Indonesia 12,579.7 2.4 7.7 11,677.2 2.4 16,565.7 3.8 4.0 15,936.2 4.0 -3,986.0 -4,259.0
Philippines 7,475.9 1.4 1.5 7,362.3 1.5 12,192.0 2.8 13.8 10,710.4 2.7 -4,716.1 -3,348.0
Viet Nam 4,392.1 0.8 1.3 4,333.9 0.9 3,865.6 0.9 75.3 2,204.6 0.6 526.5 2,129.3
231
Pakistan 2,803.6 0.5 5.2 2,664.9 0.6 214.2 neg. 4.0 206.0 0.1 2,589.5 2,458.9
Mexico 2,547.5 0.5 2.2 2,493.6 0.5 510.4 0.1 neg. 510.6 0.1 2,037.1 1,983.0
South Africa 2,164.0 0.4 19.1 1,816.7 0.4 1,086.2 0.3 -14.9 1,275.9 0.3 1,077.8 540.8
Saudi Arabia 1,792.0 0.3 -2.1 1,830.7 0.4 5,859.3 1.4 56.5 3,743.7 0.9 -4,067.3 -1,913.0
Egypt 1,730.1 0.3 24.6 1,388.6 0.3 139.7 neg. 19.3 117.1 neg. 1,590.4 1,271.5
Sri Lanka 1,659.6 0.3 26.6 1,311.0 0.3 40.7 neg. 49.7 27.2 neg. 1,618.9 1,283.8
Brazil 1,413.3 0.3 16.5 1,213.0 0.3 1,977.9 0.5 52.4 1,297.5 0.3 -564.5 -84.5
Iran 1,357.9 0.3 3.3 1,314.3 0.3 1,318.5 0.3 34.2 982.3 0.2 39.4 332.0
Myanmar 929.2 0.2 63.7 567.5 0.1 506.1 0.1 24.6 406.1 0.1 423.1 161.5
Syria 621.9 0.1 9.8 566.6 0.1 5.7 neg. 224.9 1.7 neg. 616.2 564.9
Sudan 485.2 0.1 225.9 148.9 neg. 0.5 neg. -66.4 1.5 neg. 484.7 147.4
Kuwait 462.7 0.1 12.8 410.2 0.1 1,031.7 0.2 302.2 256.5 0.1 -569.0 153.7
Yemen 450.9 0.1 6.8 422.2 0.1 185.3 neg. 58.7 116.7 neg. 265.6 305.5
Jordan 430.7 0.1 -67.0 1,305.9 0.3 100.0 neg. -40.8 168.9 neg. 330.7 1,136.9
Cambodia 413.7 0.1 30.3 317.5 0.1 31.3 neg. -0.5 31.5 neg. 382.4 286.0

Table 14 :
Trade with Major Asian Countries, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
Asia 325,113.5 60.9 10.6 293,978.4 61.2 295,086.7 68.0 10.9 266,178.0 66.5 30,026.8 27,800.4
North East Asia 149,210.8 28.0 5.0 142,108.4 29.6 169,288.5 39.0 8.9 155,448.4 38.9 -20,077.7 -13,340.0
Japan 49,917.7 9.4 2.8 48,552.5 10.1 62,981.7 14.5 -1.2 63,736.9 15.9 -13,063.9 -15,184.4
China 35,221.0 6.6 9.6 32,148.5 6.7 49,880.4 11.5 27.0 39,289.7 9.8 -14,659.3 -7,141.2
Hong Kong 31,205.3 5.8 8.8 28,685.8 6.0 10,796.5 2.5 -0.6 10,860.1 2.7 20,408.8 17,825.7
Taiwan 14,813.4 2.8 -6.0 15,763.0 3.3 23,973.5 5.5 10.7 21,650.7 5.4 -9,160.2 -5,887.7
Asean 139,207.8 26.1 15.4 120,601.1 25.1 106,975.9 24.6 11.6 95,816.5 23.9 32,232.0 24,784.5
232
West Asia 15,217.6 2.9 6.7 14,256.7 3.0 14,276.1 3.3 47.4 9,682.3 2.4 941.5 4,574.4
Turkey 2,024.2 0.4 33.9 1,511.8 0.3 269.5 0.1 27.9 210.7 0.1 1,754.7 1,301.0
Saudi Arabia 1,792.0 0.3 -2.1 1,830.7 0.4 5,859.3 1.4 56.5 3,743.7 0.9 -4,067.3 -1,913.0
Iran 1,357.9 0.3 3.3 1,314.3 0.3 1,318.5 0.3 34.2 982.3 0.2 39.4 332.0
Syria 621.9 0.1 9.8 566.6 0.1 5.7 neg. 224.9 1.7 neg. 616.2 564.9
Kuwait 462.7 0.1 12.8 410.2 0.1 1,031.7 0.2 302.2 256.5 0.1 -569.0 153.7
Yemen 450.9 0.1 6.8 422.2 0.1 185.3 neg. 58.7 116.7 neg. 265.6 305.5
Jordan 430.7 0.1 -67.0 1,305.9 0.3 100.0 neg. -40.8 168.9 neg. 330.7 1,136.9
South Asia 21,244.5 4.0 25.3 16,949.5 3.5 4,504.4 1.0 -13.4 5,198.6 1.3 16,740.2 11,750.8
India 14,971.8 2.8 31.2 11,410.5 2.4 4,163.8 1.0 -15.0 4,897.3 1.2 10,808.0 6,513.1
Pakistan 2,803.6 0.5 5.2 2,664.9 0.6 214.2 neg. 4.0 206.0 0.1 2,589.5 2,458.9
Sri Lanka 1,659.6 0.3 26.6 1,311.0 0.3 40.7 neg. 49.7 27.2 neg. 1,618.9 1,283.8
Central Asia 226.1 neg. 264.0 62.1 neg. 41.5 neg. 29.4 32.1 neg. 184.6 30.0
Kazakhstan 183.1 neg. 379.6 38.2 neg. 38.5 neg. 58.1 24.3 neg. 144.7 13.9
Uzbekistan 34.4 neg. 80.4 19.1 neg. 0.1 neg. -87.6 0.9 neg. 34.3 18.2

Table 15 :
Trade with Major Countries in the Americas, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
Americas 114,048.8 21.4 15.3 98,886.0 20.6 64,837.4 14.9 0.6 64,475.9 16.1 49,211.4 34,410.1
North America 107,879.9 20.2 15.8 93,192.6 19.4 58,051.1 13.4 -2.7 59,639.0 14.9 49,828.8 33,553.6
USA 105,032.9 19.7 16.5 90,181.5 18.8 55,918.3 12.9 -3.4 57,880.0 14.5 49,114.7 32,301.5
Canada 2,846.9 0.5 -5.5 3,011.1 0.6 2,132.8 0.5 21.3 1,759.0 0.4 714.2 1,252.2
Central America 3,113.3 0.6 0.9 3,086.4 0.6 1,559.6 0.4 20.2 1,297.7 0.3 1,553.7 1,788.7
Mexico 2,547.5 0.5 2.2 2,493.6 0.5 510.4 0.1 neg. 510.6 0.1 2,037.1 1,983.0
Panama 275.8 0.1 0.2 275.2 0.1 131.8 neg. * 2.6 neg. 144.0 272.6
233
Costa Rica 164.5 neg. 13.5 144.9 neg. 874.3 0.2 20.6 725.1 0.2 -709.8 -580.2
El Salvador 42.8 neg. 6.3 40.3 neg. 2.6 neg. 79.7 1.4 neg. 40.3 38.9
Honduras 36.4 neg. -45.5 66.8 neg. 1.0 neg. 574.0 0.1 neg. 35.5 66.7
Guatemala 36.4 neg. -13.7 42.1 neg. 37.7 neg. -29.4 53.3 neg. -1.3 -11.2
South America 2,658.4 0.5 17.0 2,271.8 0.5 5,102.6 1.2 50.1 3,399.8 0.8 -2,444.2 -1,128.0
Brazil 1,413.3 0.3 16.5 1,213.0 0.3 1,977.9 0.5 52.4 1,297.5 0.3 -564.5 -84.5
Argentina 389.1 0.1 53.9 252.9 0.1 2,322.5 0.5 62.4 1,430.3 0.4 -1,933.4 -1,177.4
Chile 328.9 0.1 -8.9 361.1 0.1 564.6 0.1 8.2 521.9 0.1 -235.7 -160.8
Peru 178.8 neg. -13.1 205.8 neg. 24.8 neg. -25.9 33.5 neg. 153.9 172.3
Colombia 136.2 neg. 53.1 89.0 neg. 7.0 neg. -1.0 7.1 neg. 129.2 81.9
Venezuela 95.0 neg. 49.4 63.6 neg. 55.5 neg. 404.6 11.0 neg. 39.5 52.6
Ecuador 36.6 neg. 7.0 34.2 neg. 6.1 neg. 45.6 4.2 neg. 30.6 30.1
Uruguay 27.2 neg. -14.9 32.0 neg. 128.8 neg. 85.7 69.3 neg. -101.5 -37.3
Caribbean 397.2 0.1 18.5 335.2 0.1 124.2 neg. -10.9 139.3 neg. 273.1 195.8

* - not meaningful
Table 16 :
Trade with Major European Countries, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
Europe 66,255.4 12.4 3.7 63,899.1 13.3 57,622.7 13.3 6.3 54,184.2 13.5 8,632.8 9,714.9
EU 62,629.3 11.7 3.7 60,387.6 12.6 50,512.3 11.6 5.2 48,030.6 12.0 12,117.0 12,356.9
Other Europe 3,626.1 0.7 3.3 3,511.5 0.7 7,110.3 1.6 15.5 6,153.6 1.5 -3,484.2 -2,642.1
Russia 1,803.9 0.3 16.7 1,545.7 0.3 1,636.8 0.4 -8.2 1,782.3 0.4 167.1 -236.6
Switzerland 746.4 0.1 13.1 660.0 0.1 4,691.2 1.1 21.8 3,851.5 1.0 -3,944.8 -3,191.5
Ukraine 559.5 0.1 95.3 286.5 0.1 407.8 0.1 111.5 192.9 neg. 151.7 93.7
Norway 198.1 neg. 1.7 194.8 neg. 269.7 0.1 13.5 237.5 0.1 -71.6 -42.8
234
Romania 125.3 neg. 10.1 113.8 neg. 40.6 neg. 45.2 28.0 neg. 84.7 85.8
Bulgaria 75.3 neg. -11.7 85.3 neg. 32.6 neg. 46.5 22.2 neg. 42.7 63.1
Yugoslavia 39.3 neg. 50.7 26.1 neg. 3.5 neg. -75.6 14.2 neg. 35.9 11.9
Croatia 33.1 neg. -14.9 38.9 neg. 6.9 neg. 94.9 3.5 neg. 26.2 35.4
Iceland 11.3 neg. 34.1 8.4 neg. 1.3 neg. 5.2 1.2 neg. 10.0 7.2
Azerbaijan 8.7 neg. -97.8 396.2 0.1 neg. neg. * 0.2 neg. neg. 396.1
Macedonia 7.2 neg. * 1.1 neg. 0.1 neg. -29.7 0.1 neg. 7.1 1.0
Monaco 5.3 neg. 75.2 3.0 neg. 1.0 neg. 288.0 0.2 neg. 4.4 2.8
Georgia 4.6 neg. -96.7 138.6 neg. 4.7 neg. 48.9 3.1 neg. -0.1 135.4
Armenia 2.5 neg. -41.5 4.3 neg. 0.8 neg. * neg. neg. 1.7 4.2
San Marino 2.4 neg. * nil nil nil nil nil nil nil neg. nil
Albania 1.0 neg. -82.6 6.0 neg. 0.1 neg. -68.0 0.5 neg. 0.9 5.5
Montenegro 0.8 neg. 2.4 0.8 neg. neg. neg. neg. 0.1 neg. neg. 0.8
Moldova 0.4 neg. 7.7 0.4 neg. neg. neg. neg. neg. neg. neg. 0.4
Liechtenstein 0.4 neg. 1.8 0.4 neg. 0.1 neg. -12.6 0.1 neg. 0.3 0.3
Bosnia-Herzegovinia 0.3 neg. 4.0 0.3 neg. 2.3 neg. 48.8 1.5 neg. -2.0 -1.3

* - not meaningful
Table 17 :
Trade with Major African Countries, 2004-2005
2005 2004 2005 2004 2005 2004
(%) (%) (%) ( %) (%) ( %)
Total 533,787.8 100.0 11.0 480,740.3 100.0 434,009.9 100.0 8.5 400,076.8 100.0 99,777.9 80,663.5
Africa 7,649.1 1.4 26.8 6,030.6 1.3 2,511.2 0.6 5.2 2,386.2 0.6 5,137.9 3,644.4
South Africa 2,164.0 0.4 19.1 1,816.7 0.4 1,086.2 0.3 -14.9 1,275.9 0.3 1,077.8 540.8
Egypt 1,730.1 0.3 24.6 1,388.6 0.3 139.7 neg. 19.3 117.1 neg. 1,590.4 1,271.5
Sudan 485.2 0.1 225.9 148.9 neg. 0.5 neg. -66.4 1.5 neg. 484.7 147.4
Ghana 254.8 neg. 20.5 211.5 neg. 187.6 neg. 105.6 91.2 neg. 67.2 120.3
Mauritius 228.6 neg. 9.4 209.0 neg. 3.0 neg. -53.0 6.4 neg. 225.5 202.6
Kenya 196.3 neg. 20.4 163.0 neg. 26.8 neg. 24.5 21.5 neg. 169.5 141.5
Algeria 194.2 neg. -43.8 345.7 0.1 3.4 neg. 533.9 0.5 neg. 190.8 345.2
235
Togo 190.8 neg. -14.1 222.2 neg. 5.4 neg. -43.8 9.6 neg. 185.4 212.6
Tunisia 148.4 neg. 17.2 126.6 neg. 15.7 neg. -36.3 24.6 neg. 132.7 102.0
Morocco 129.4 neg. 24.9 103.6 neg. 57.4 neg. 122.8 25.8 neg. 71.9 77.8
Tanzania 114.0 neg. 29.7 87.8 neg. 82.0 neg. 97.2 41.6 neg. 31.9 46.3
Benin 100.0 neg. 122.2 45.0 neg. 3.5 neg. -48.0 6.6 neg. 96.6 38.4
Angola 88.9 neg. 7.6 82.6 neg. neg. neg. 136.3 neg. neg. 88.9 82.6
Djibouti 82.6 neg. 62.4 50.9 neg. neg. neg. 453.1 neg. neg. 82.6 50.8
Congo 62.9 neg. 154.0 24.7 neg. neg. neg. -96.9 0.3 neg. 62.9 24.5
Libya 61.3 neg. -47.6 117.0 neg. 42.6 neg. 79.4 23.7 neg. 18.7 93.2
Senegal 61.0 neg. 97.1 30.9 neg. 1.4 neg. 1,012.9 0.1 neg. 59.6 30.8
Gambia 60.1 neg. 5.0 57.3 neg. 0.9 neg. -85.9 6.3 neg. 59.3 50.9
Mozambique 57.6 neg. -5.3 60.9 neg. 2.8 neg. 715.3 0.3 neg. 54.9 60.5
Reunion Islands 51.8 neg. 77.9 29.1 neg. 1.6 neg. -68.8 5.1 neg. 50.3 24.1
Madagascar 50.6 neg. 39.8 36.2 neg. 8.0 neg. -46.7 14.9 neg. 42.7 21.3
Mauritania 48.6 neg. -41.8 83.6 neg. 4.9 neg. -54.0 10.6 neg. 43.7 73.0
Cameroon 34.9 neg. 39.1 25.1 neg. 111.4 neg. -34.1 169.2 neg. -76.5 -144.1
Zaire 33.1 neg. 78.5 18.5 neg. 9.0 neg. -82.3 51.0 neg. 24.0 -32.5
Ethiopia 32.1 neg. -5.0 33.8 neg. 21.1 neg. 141.0 8.7 neg. 11.0 25.0
Liberia 32.1 neg. 31.7 24.4 neg. 224.6 0.1 990.7 20.6 neg. -192.5 3.8

Table 18 :
Major Exports of Manufactured Goods to Top Ten Destinations, 2004-2005
2005 2004
Products Country RM million Share RM million Share

(%) (%)
Total 533,787.8 100.0 480,740.3 100.0
Manufactured Goods 413,132.6 77.4 376,822.9 78.4
Electrical & electronics products Total 264,698.9 49.6 241,483.1 50.2

USA 81,967.9 15.4 68,717.7 14.3
Singapore 43,891.8 8.2 40,862.7 8.5
Hong Kong 24,085.5 4.5 21,559.2 4.5
Japan 16,718.1 3.1 17,876.3 3.7
People's Republic of China 15,292.0 2.9 12,699.0 2.6
Netherlands 11,086.8 2.1 9,299.5 1.9
Thailand 10,367.5 1.9 9,215.8 1.9
Germany 6,897.2 1.3 6,734.2 1.4
Taiwan 6,000.6 1.1 7,390.8 1.5
France 5,197.0 1.0 5,474.1 1.1
Chemicals & chemical products Total 26,301.3 4.9 24,942.8 5.2

Thailand 2,493.2 0.5 2,184.7 0.5
Singapore 2,455.0 0.5 2,264.7 0.5
Japan 2,429.0 0.5 2,499.7 0.5
Indonesia 2,331.7 0.4 2,135.4 0.4
Hong Kong 1,933.3 0.4 1,687.5 0.4
India 1,394.2 0.3 1,064.0 0.2
Republic of Korea 1,232.4 0.2 1,120.6 0.2
Taiwan 1,059.6 0.2 1,244.2 0.3
USA 954.8 0.2 915.8 0.2
Machinery, appliances & parts Total 18,120.6 3.4 15,569.5 3.2

Singapore 4,248.6 0.8 3,155.7 0.7
USA 1,607.1 0.3 1,329.1 0.3
Thailand 1,521.1 0.3 1,352.8 0.3
Indonesia 1,130.3 0.2 1,124.7 0.2
Japan 1,106.7 0.2 940.3 0.2
Australia 626.3 0.1 456.1 0.1
Hong Kong 552.0 0.1 581.6 0.1
Germany 443.7 0.1 261.4 0.1
Spain 437.0 0.1 386.2 0.1
Wood products Total 14,638.9 2.7 14,074.3 2.9

Japan 3,626.7 0.7 3,763.4 0.8
USA 3,286.8 0.6 3,011.4 0.6
UK 806.2 0.2 934.4 0.2
Republic of Korea 775.7 0.1 690.3 0.1
Australia 621.1 0.1 683.2 0.1
Taiwan 603.5 0.1 542.8 0.1
People's Republic of China 532.2 0.1 507.7 0.1
United Arab Emirates 423.6 0.1 428.0 0.1
Singapore 372.0 0.1 413.7 0.1
Canada 243.5 neg. 239.4 neg.
Continued...
236
2005 2004

(%) (%)
Optical & scientific equipment Total 12,317.7 2.3 11,567.3 2.4

USA 2,755.1 0.5 2,429.2 0.5
Japan 1,832.0 0.3 2,106.1 0.4
Singapore 1,673.2 0.3 2,203.1 0.5
Netherlands 851.1 0.2 877.1 0.2
Thailand 813.3 0.2 295.7 0.1
Germany 508.5 0.1 397.8 0.1
Taiwan 390.4 0.1 290.4 0.1
Hong Kong 387.1 0.1 452.3 0.1
Republic of Korea 376.9 0.1 108.3 neg.
Manufactures of metal Total 10,847.9 2.0 9,621.6 2.0

Singapore 2,365.0 0.4 2,405.0 0.5
Japan 1,073.2 0.2 1,054.7 0.2
Thailand 900.0 0.2 644.0 0.1
USA 717.6 0.1 675.6 0.1
Australia 484.9 0.1 336.6 0.1
Hong Kong 452.0 0.1 435.8 0.1
Indonesia 442.9 0.1 343.5 0.1
Taiwan 402.4 0.1 331.1 0.1
Republic of Korea 379.8 0.1 205.5 neg.
Textiles & apparel Total 10,289.1 1.9 9,689.1 2.0

USA 2,927.6 0.5 2,937.4 0.6
Turkey 638.1 0.1 397.1 0.1
Singapore 461.9 0.1 506.6 0.1
UK 456.2 0.1 528.0 0.1
Japan 451.6 0.1 523.9 0.1
Hong Kong 352.6 0.1 454.4 0.1
Germany 347.9 0.1 270.0 0.1
Syria 340.1 0.1 246.0 0.1
India 323.2 0.1 283.8 0.1
Iron & steel products Total 7,002.8 1.3 7,235.9 1.5

Thailand 1,281.2 0.2 698.9 0.1
Singapore 830.9 0.2 731.9 0.2
USA 542.7 0.1 668.9 0.1
Australia 527.6 0.1 665.9 0.1
Viet Nam 410.3 0.1 777.2 0.2
Indonesia 410.1 0.1 252.6 0.1
Russia 319.4 0.1 412.8 0.1
Republic of Korea 232.6 neg. 377.2 0.1
Taiwan 206.3 neg. 177.6 neg.
Transport equipment Total 6,997.9 1.3 5,329.2 1.1

Singapore 1,176.5 0.2 1,302.2 0.3
Thailand 660.7 0.1 456.4 0.1
Nigeria 529.9 0.1 0.5 neg.
USA 519.7 0.1 422.6 0.1
UK 502.6 0.1 302.0 0.1
Indonesia 473.3 0.1 866.6 0.2
Taiwan 369.2 0.1 312.3 0.1
Viet Nam 277.0 0.1 62.9 neg.
Myanmar 240.6 neg. 4.7 neg.
Germany 207.3 neg. 178.8 neg.
Continued...
237
2005 2004

(%) (%)
Rubber products Total 6,985.5 1.3 6,183.6 1.3

USA 2,103.1 0.4 1,919.0 0.4
Japan 383.0 0.1 361.0 0.1
UK 368.0 0.1 343.7 0.1
Germany 296.4 0.1 266.1 0.1
People's Republic of China 290.3 0.1 175.5 neg.
Thailand 265.4 neg. 174.9 neg.
Italy 255.7 neg. 261.8 0.1
Australia 250.7 neg. 263.4 0.1
Brazil 230.3 neg. 171.4 neg.
France 209.2 neg. 173.2 neg.

238
Table 19 :
Major Imports of Manufactured Goods from Top Ten Suppliers, 2004-2005
2005 2004

(%) (%)
Total 434,009.9 100.0 400,076.8 100.0
Manufactured Goods 367,723.2 84.7 344,275.0 86.1
Electrical & electronics products Total 193,181.9 44.5 182,100.4 45.5

USA 34,311.1 7.9 35,854.3 9.0
Japan 24,293.9 5.6 25,063.3 6.3
Singapore 20,304.2 4.7 18,083.7 4.5
Taiwan 14,821.2 3.4 12,771.8 3.2
Philippines 10,482.4 2.4 9,189.2 2.3
Germany 9,711.4 2.2 9,126.5 2.3
Thailand 8,094.3 1.9 8,448.9 2.1
Hong Kong 6,797.0 1.6 6,437.6 1.6
Machinery, appliances & parts Total 36,355.1 8.4 32,894.6 8.2

Japan 9,143.1 2.1 8,436.0 2.1
USA 5,633.8 1.3 5,213.1 1.3
Germany 2,828.9 0.7 3,089.3 0.8
Singapore 2,466.0 0.6 2,234.9 0.6
Thailand 2,142.5 0.5 1,411.8 0.4
Taiwan 1,931.9 0.4 1,996.9 0.5
Italy 1,051.2 0.2 1,151.3 0.3
UK 842.0 0.2 903.7 0.2
Chemicals & chemical products Total 31,972.8 7.4 29,917.5 7.5

Singapore 5,119.4 1.2 4,467.3 1.1
Japan 4,303.9 1.0 4,052.1 1.0
USA 3,089.5 0.7 3,029.4 0.8
Thailand 2,387.6 0.6 2,457.4 0.6
Indonesia 1,718.1 0.4 1,654.0 0.4
Taiwan 1,419.1 0.3 1,358.2 0.3
Germany 1,289.7 0.3 1,251.4 0.3
India 747.0 0.2 612.8 0.2
Transport equipment Total 19,339.9 4.5 16,586.8 4.1

Japan 6,496.0 1.5 6,625.8 1.7
Germany 2,133.5 0.5 1,094.5 0.3
Thailand 2,052.5 0.5 1,475.8 0.4
USA 1,744.9 0.4 2,773.0 0.7
Indonesia 881.0 0.2 395.4 0.1
UK 565.4 0.1 402.5 0.1
Singapore 468.6 0.1 374.0 0.1
Netherlands 420.4 0.1 186.6 neg.
Continued...
239
2005 2004

(%) (%)
Iron & steel products Total 18,260.9 4.2 16,096.8 4.0

Japan 5,275.7 1.2 5,295.4 1.3
Taiwan 1,584.5 0.4 1,541.7 0.4
Italy 1,459.1 0.3 351.5 0.1
USA 1,101.9 0.3 852.3 0.2
Thailand 547.1 0.1 657.6 0.2
Australia 471.4 0.1 403.3 0.1
UK 435.3 0.1 652.0 0.2
India 401.5 0.1 375.1 0.1
Manufactures of metal Total 17,771.9 4.1 15,660.9 3.9

Japan 3,655.5 0.8 3,632.4 0.9
Australia 1,979.3 0.5 1,524.0 0.4
Singapore 1,417.7 0.3 1,204.2 0.3
Indonesia 1,233.6 0.3 839.5 0.2
USA 1,222.5 0.3 1,324.6 0.3
Taiwan 1,071.8 0.2 914.4 0.2
Thailand 736.6 0.2 457.9 0.1
Germany 507.3 0.1 471.5 0.1
Optical & scientific equipment Total 12,468.1 2.9 13,532.6 3.4

USA 2,967.5 0.7 3,434.1 0.9
Japan 2,937.2 0.7 3,338.1 0.8
Singapore 1,474.7 0.3 1,690.0 0.4
Hong Kong 1,172.4 0.3 1,230.9 0.3
Germany 593.0 0.1 781.5 0.2
UK 459.0 0.1 354.2 0.1
Switzerland 308.7 0.1 265.9 0.1
Taiwan 257.2 0.1 213.4 0.1
Thailand 156.7 neg. 226.0 0.1
Processed food Total 6,353.7 1.5 5,910.3 1.5

Australia 1,324.2 0.3 1,065.3 0.3
Thailand 879.1 0.2 1,192.3 0.3
New Zealand 667.3 0.2 706.1 0.2
USA 482.8 0.1 432.6 0.1
Brazil 417.5 0.1 66.1 neg.
Netherlands 338.7 0.1 325.7 0.1
Singapore 287.4 0.1 248.3 0.1
Indonesia 265.3 0.1 286.7 0.1
Denmark 165.8 neg. 91.0 neg.
Paper & pulp products Total 5,266.0 1.2 4,996.3 1.2

Indonesia 955.1 0.2 856.2 0.2
Japan 534.7 0.1 625.0 0.2
Taiwan 450.3 0.1 392.0 0.1
Thailand 423.1 0.1 390.4 0.1
USA 411.4 0.1 404.4 0.1
Germany 286.2 0.1 327.8 0.1
Singapore 228.3 0.1 227.4 0.1
Brazil 197.3 neg. 14.2 neg.
Continued...
240
2005 2004

(%) (%)
Manufactures of plastics Total 5,220.7 1.2 5,004.1 1.3

Japan 1,203.6 0.3 1,196.0 0.3
Singapore 831.2 0.2 799.1 0.2
USA 560.7 0.1 674.3 0.2
Thailand 392.1 0.1 322.5 0.1
Taiwan 304.9 0.1 328.2 0.1
Indonesia 185.4 neg. 208.1 0.1
Republic of Korea 166.5 neg. 165.8 neg.
Hong Kong 133.3 neg. 134.5 neg.
Germany 116.3 neg. 102.2 neg.

241
Table 20 :
Exports of Top Ten Products to Selected Destinations, 2004-2005
2005 2004
Products RM million Share Change RM million Share

(%) (%) (%)
Total 533,787.8 100.0 11.0 480,740.3 100.0
Manufactured Goods 413,132.6 77.4 9.6 376,822.9 78.4

Agricultural Goods 41,178.1 7.7 0.2 41,105.7 8.6
Mining Goods 70,212.1 13.2 26.9 55,314.1 11.5
ASEAN 139,207.8 26.1 15.4 120,601.1 25.1

Mining Goods 24,832.5 4.7 57.6 15,758.9 3.3
Electrical & electronics products 59,691.3 42.9 7.2 55,698.0 46.2

Refined petroleum products 12,262.6 8.8 56.5 7,833.2 6.5
Crude petroleum 11,969.7 8.6 63.0 7,345.0 6.1
Chemicals & chemical products 9,104.2 6.5 9.7 8,302.9 6.9
Machinery, appliances & parts 7,657.2 5.5 18.8 6,446.4 5.3
Manufactures of metal 4,155.4 3.0 4.2 3,988.3 3.3
Iron & steel products 3,168.9 2.3 18.7 2,669.6 2.2
Transport equipment 2,913.2 2.1 5.7 2,756.7 2.3
Optical & scientific equipment 2,865.0 2.1 -3.5 2,968.2 2.5
Processed food 2,524.6 1.8 9.5 2,306.2 1.9
USA 105,032.9 19.7 16.5 90,181.5 18.8

Mining Goods 1,469.9 0.3 -27.9 2,038.1 0.4

Wood products 3,286.8 3.1 9.1 3,011.4 3.3
Textiles & apparel 2,927.6 2.8 -0.3 2,937.4 3.3
Optical & scientific equipment 2,755.1 2.6 13.4 2,429.2 2.7
Rubber products 2,103.1 2.0 9.6 1,919.0 2.1
Palm oil 1,403.1 1.3 26.6 1,108.7 1.2
Chemicals & chemical products 954.8 0.9 4.3 915.8 1.0
Crude petroleum 935.9 0.9 -15.3 1,105.6 1.2
Manufactures of metal 717.6 0.7 6.2 675.6 0.7
EU 62,629.3 11.7 3.7 60,387.6 12.6

Mining Goods 580.5 0.1 20.1 483.5 0.1

Palm oil 3,999.6 6.4 2.4 3,905.8 6.5
Textiles & apparel 1,810.7 2.9 4.5 1,732.4 2.9
Rubber products 1,688.2 2.7 6.8 1,580.8 2.6
Crude rubber 1,683.7 2.7 -1.4 1,707.0 2.8
Wood products 1,677.5 2.7 1.5 1,652.9 2.7
Chemicals & chemical products 1,220.1 1.9 -20.7 1,538.0 2.5
Manufactures of plastics 1,179.4 1.9 30.7 902.1 1.5
Continued...
242
2005 2004

(%) (%) (%)
Japan 49,917.7 9.4 2.8 48,552.5 10.1

Manufactured Goods 30,649.4 5.7 -3.3 31,702.0 6.6
Agricultural Goods 2,546.9 0.5 -2.4 2,610.3 0.5
Mining Goods 16,048.7 3.0 18.4 13,552.1 2.8
Electrical & electronics products 16,718.1 33.5 -6.5 17,876.3 36.8

LNG 13,117.0 26.3 28.4 10,212.3 21.0
Wood products 3,626.7 7.3 -3.6 3,763.4 7.8
Refined petroleum products 1,710.3 3.4 -9.1 1,880.9 3.9
Crude petroleum 1,132.2 2.3 -11.2 1,274.9 2.6
Machinery, appliances & parts 1,106.7 2.2 17.7 940.3 1.9
Palm oil 982.2 2.0 -11.1 1,105.2 2.3

Mining Goods 1,423.3 0.3 -51.1 2,910.7 0.6

Palm oil 4,448.0 12.6 -16.0 5,292.9 16.5
Crude rubber 1,991.9 5.7 46.7 1,357.6 4.2
Saw logs & sawn timber 1,166.5 3.3 91.8 608.1 1.9
Optical & scientific equipment 982.7 2.8 73.1 567.6 1.8
Refined petroleum products 928.5 2.6 -24.5 1,229.9 3.8
Manufactures of metal 628.0 1.8 27.8 491.4 1.5
Iron & steel products 595.5 1.7 35.9 438.2 1.4

243
Table 21 :
Imports of Top Ten Products from Selected Sources, 2004-2005
2005 2004

(%) (%) (%)
Total 434,009.9 100.0 8.5 400,076.8 100.0

Mining Goods 36,309.8 8.4 37.9 26,330.7 6.6
ASEAN 106,975.9 24.6 11.6 95,816.5 23.9

Mining Goods 19,221.1 4.4 33.0 14,452.1 3.6

Refined petroleum products 14,677.9 13.7 32.5 11,076.6 11.6
Crude petroleum 2,368.3 2.2 70.5 1,388.9 1.4
Processed food 1,675.1 1.6 -15.5 1,984.5 2.1
Paper & pulp products 1,662.4 1.6 11.5 1,490.6 1.6
Japan 62,981.7 14.5 -1.2 63,736.9 15.9

Agricultural Goods 62.5 neg. -10.4 69.8 0.0
Mining Goods 173.1 neg. 5.1 164.7 0.0

Transport equipment 6,496.0 10.3 -2.0 6,625.8 10.4
Iron & steel products 5,275.7 8.4 -0.4 5,295.4 8.3
Manufactures of plastics 1,203.6 1.9 0.9 1,196.0 1.9
Non-metallic mineral products 536.4 0.9 -27.7 741.5 1.2
Paper & pulp products 534.7 0.8 -14.4 625.0 1.0
USA 55,918.3 12.9 -3.4 57,880.0 14.5

Agricultural Goods 855.1 0.2 -12.9 981.7 0.2
Mining Goods 888.5 0.2 68.7 526.7 0.1

Transport equipment 1,744.9 3.1 -37.1 2,773.0 4.8
Manufactures of metal 1,222.5 2.2 -7.2 1,324.6 2.3
Iron & steel products 1,101.9 2.0 29.5 852.3 1.5
Refined petroleum products 776.5 1.4 93.0 402.3 0.7
Manufactures of plastics 560.7 1.0 -16.8 674.3 1.2
Processed food 482.8 0.9 11.6 432.6 0.7
Continued...
244
2005 2004

(%) (%) (%)
EU 50,512.3 11.6 5.2 48,030.6 12.0

Agricultural Goods 510.6 0.1 -17.1 616.1 0.2
Mining Goods 305.2 0.1 -25.3 408.3 0.1

Machinery, appliances & parts 6,823.7 13.5 -2.9 7,027.1 14.6
Manufactures of metal 1,287.5 2.5 -10.3 1,432.4 3.0
Paper & pulp products 1,111.0 2.2 -10.7 1,244.5 2.6
Processed food 977.2 1.9 10.6 883.5 1.8

Mining Goods 1,045.0 0.2 134.8 445.0 0.1

Textiles & apparel 1,504.8 3.0 7.7 1,397.6 3.6
Optical & scientific equipment 999.1 2.0 20.2 831.0 2.1
Crude petroleum 820.6 1.6 237.5 243.1 0.6
Vegetables, roots, tubers 600.9 1.2 14.3 525.5 1.3
245
Bilateral Agreements On Trade And
Appendix 3
Investment
Trade Agreements
as at December 2005
No. Country Date of Signing No. Country Date of Signing
ASEAN WEST ASIA
1. Cambodia 04.02.1999 33. Iran 19.03.1989

2. Indonesia 16.10.1973 34. Iraq 17.02.1977
3. Lao PDR 11.08.1998 35. Jordan 02.10.1994
4. Myanmar 09.06.1998 36. Lebanon 23.03.1995
5. Thailand 06.10.2000 37. Syria 17.08.2003
6. Viet Nam 11.08.1992 38. Turkey 13.02.1977
39. United Arab Emirates 26.02.1962
CER 40. Yemen 11.02.1998
7. Australia 26.08.1958
New Agreement 20.10.1997 NORTH AMERICA
8. New Zealand 03.02.1961
New Agreement 17.10.1997 41. USA (TIFA) 10.05.2004
SOUTH ASIA SOUTH AMERICA AND

THE CARIBBEAN
9. Bangladesh 01.12.1977
10. India 11.10.2000 42. Argentina 01.07.1991
11. Pakistan 05.11.1987 43. Brazil 26.04.1996
44. Chile 21.06.1991
EAST ASIA 45. Colombia 14.08.1995
46. Cuba 26.09.1997
12. China 01.04.1988 47. Peru 13.10.1995
13. Japan 10.05.1960 48. Suriname 25.05.1998
14. North Korea 09.06.1979 49. Uruguay 09.08.1995
15. Republic of Korea 05.11.1962 50. Venezuela 26.11.1991
AFRICA EASTERN EUROPE
16. Algeria 11.08.2003 51. Albania 24.01.1994

17. Burkina Faso 23.04.1998 52. Bosnia-Herzegovina 26.10.1994
18. Egypt 08.01.1977 53. Bulgaria 20.05.1968
19. Ethiopia 22.10.1998 54. Croatia 26.10.1994
20. Ghana 03.12.1995 55. Macedonia 11.11.1997
21. Guinea 11.10.1999 56. Romania 01.03.1991
22. Libya 18.01.1977 57. Ukraine 19.08.2002
23. Malawi 05.09.1996 58. USSR (Russia) 03.04.1967
24. Mali 16.11.1990
25. Morocco 10.03.1997 COMMONWEALTH OF
26. Namibia 12.08.1994 INDEPENDENT STATES
27. South Africa 07.03.1997
28. Sudan 14.05.1998 59. Kazakhstan 27.05.1996
29. Swaziland 12.10.1998 60. Kyrgyzstan 20.07.1995
30. Tunisia 25.11.1992 61. Turkmenistan 13.05.1994
31. Uganda 16.04.1998 62. Uzbekistan 06.10.1997
32. Zimbabwe 09.07.1993
Source : Ministry of International Trade and Industry
247
Bilateral Payment Arrangements/Agreements
as at December 2005
IRANIAN MODEL POCPA
1. Iran 08.08.1988 26. Algeria 14.06.1992

2. Mozambique 27.04.1991 27. Pakistan 06.08.1992
3. Botswana 06.06.1991 28. Iraq 28.02.1993
4. Fiji 12.10.1991 (New agreement) 28.02.1995
5. Bosnia-Herzegovina 13.11.1996 29. Myanmar 21.01.1994
30. Iran 08.02.1994
ALADI MODEL 31. Bosnia-Herzegovina 13.11.1996
32. Cuba 26.03.1998
6. Venezuela 03.08.1990 33. Sudan 23.07.1999
7. Mexico 24.09.1990 34. North Korea 20.12.2000
8. Romania 20.05.1991 (New agreement) 15.04.2002
9. Zimbabwe 07.06.1991 35. Russia 10.07.2002
10. Chile 21.06.1991
11. Peru 13.11.1991 Note:
12. Algeria 31.01.1992 1. Iranian Model:- Under this model, the central banks are
13. Seychelles 21.09.1992 not involved in the settlement of financial claims arising
14. Tunisia 25.11.1992 from trade. The central banks will guarantee its own
15. Viet Nam 29.03.1993 importers i.e. if foreign importers do not pay, counter
16. Uzbekistan 28.06.1993 party central bank will pay the Malaysian exporters and
17. Argentina 03.12.1993 vice versa.
18. Albania 24.01.1994
19. Lao PDR 16.04.1994 2. ALADI Model:- Under this model, the central banks will
20. Turkmenistan 30.05.1994 guarantee payments to their respective exporters in
21. Philippines 20.05.1999 domestic currency and settle, on a period basis, the net
22. Kyrgyzstan 05.08.2002 amount due to each other in an agreed currency.
23. Thailand 20.09.2002
24. Indonesia 18.06.2004 3. Revolving Credit:- Under this model, Malaysia extends a
two-year credit period on a deferred payment basis to a
REVOLVING CREDIT foreign country for the importation of Malaysian Products.
25. Sudan 04.01.1992 4. POCPA:- Under this scheme, developing countries

(New agreement) 18.12.1993 would be able to import palm oil from Malaysia on
deferred payment terms for a period of 2 years. With
Source : Bank Negara Malaysia effect from August 2001, the POCPA fund has been
converted into a revolving fund.
248
Agreements on the Avoidance
of Double Taxation
EUROPE 34. Iran 11.11.1992

(Protocol) 22.07.2002
1. Sweden 21.11.1970 35. Sudan 07.10.1993
(New agreement) 28.02.2002 36. Turkey 27.09.1994
2. Denmark 04.12.1970 37. Jordan 01.10.1994
(Protocol) 03.12.2003 38. Mongolia 27.07.1995
3. Norway 23.12.1970 39. Viet Nam 07.09.1995
4. UK 30.03.1973 40. United Arab Emirates 28.11.1995
(New agreement) 10.12.1996 41. Kuwait 06.04.1997
5. Belgium 24.10.1973 (New agreement) 05.02.2003
(Protocol) 21.11.1995 42. Egypt 14.04.1997
6. Switzerland 30.12.1974 43. Uzbekistan 06.10.1997
7. France 24.04.1975 44. Kyrgyzstan 19.11.2000
(Protocol) 31.01.1991 45. Myanmar 09.03.1998
8. Federal Republic of 46. Bahrain 14.06.1999
Germany 08.04.1977 47. Morocco 02.07.2001
9. Poland 16.09.1977 48. Lebanon 20.01.2003
10. Romania 26.11.1982
11. Italy 28.01.1984 OCEANIA
12. Finland 28.03.1984
13. Russia 31.07.1987 49. New Zealand 19.03.1976
14. Netherlands 07.03.1988 (Protocol) 14.07.1994
(Protocol) 04.12.1996 50. Australia 20.08.1980
15. Hungary 24.05.1989 (2nd Protocol) 28.07.2002
16. Austria 20.09.1989 51. Papua New Guinea 20.05.1993
17. Albania 24.01.1994 52. Fiji 19.12.1995
18. Malta 03.10.1995
19. Czech Republic 08.03.1996 NORTH AMERICA
20. Ireland 28.11.1998
21. Croatia 18.02.2002 53. Canada 16.10.1976
22. Luxembourg 21.11.2002
23. Singapore 26.12.1968 SOUTH AMERICA
(Supplementary) 06.07.1973
(New agreement) 05.10.2004 54. Chile 03.09.2004
ASIA AFRICA
24. Japan 30.01.1970 55. Mauritius 23.08.1992

(New agreement) 19.02.1999 56. Zimbabwe 28.04.1994
25. Sri Lanka 16.09.1972 57. Namibia 28.07.1997
(New agreement) 16.09.1997 58. Republic 03.12.2003
26. India 25.10.1976 of Seychelles
(New agreement) 14.05.2001 59 . South Africa 26.07.2005
27. Thailand 29.03.1982
(Protocol) 10.02.1995 RESTRICTED AGREEMENT:
28. Republic of Korea 20.04.1982 (with respect to taxes on
29. Philippines 27.04.1982 income on air transport and
30. Pakistan 29.05.1982 shipping)
32. People’s Republic of China 23.11.1985 60. Saudi Arabia 18.07.1993
33. Indonesia 12.09.1991 (New agreement) 31.01.2006
(Protocol) 12.01.2006 61. USA 18.04.1989
62. Argentina 03.10.1997
Source: Ministry of Finance
249
Investment Guarantee Agreements
as at December 2005
CENTRAL AND EASTERN SOUTH ASIA

EUROPE
1. Albania 24.01.1994 37. India 03.08.1995
2. Bosnia-Herzegovina 16.12.1994 38. Pakistan 07.07.1995
3. Croatia 16.12.1994 39. Sri Lanka 16.04.1982
4. Czech Rep. 09.09.1996
5. Hungary 19.02.1993 NORTH AMERICA
6. Macedonia 11.11.1997
7. Poland 21.04.1993 40. Canada 01.10.1971
8. Romania 25.06.1996 41. USA 21.04.1959
WESTERN EUROPE EAST ASIA
9. Austria 12.04.1985 42. China 21.11.1988

10. Belgium-Luxembourg 22.11.1979 43. Mongolia 27.07.1995
11. Denmark 06.01.1992 44. Republic of Korea 11.04.1988
12. Finland 15.04.1985 45. North Korea 04.02.1998
13. France 24.04.1975 46. Taiwan 18.02.1993
14. Germany 22.12.1960
15. Italy 04.01.1988 WEST ASIA
16. Netherlands 15.06.1971
17. Norway 06.11.1984 47. Bahrain 15.06.1999
18. Spain 04.04.1995 48. Iran 22.07.2002
19. Sweden 03.03.1979 49. Jordan 02.10.1994
20. Switzerland 01.03.1978 50. Kuwait 21.11.1987
21. United Kingdom 21.05.1981 51. Lebanon 26.02.1998
52. OIC 30.09.1987
CENTRAL AND 53. Saudi Arabia 25.10.2000
SOUTH AMERICA 54. Turkey 25.02.1998
55. United Arab Emirates 11.10.1991
22. Argentina 06.09.1994 56. Yemen 11.02.1998
23. Chile 11.11.1992
24. Cuba 26.09.1997 AFRICA
25. Peru 13.10.1995
26. Uruguay 09.08.1995 57. Algeria 27.01.2000
58. Botswana 31.07.1997
ASEAN 59. Burkina Faso 23.04.1998
60. Djibouti 03.08.1998
27. ASEAN 15.12.1987 61. Egypt 14.04.1997
28. Cambodia 07.08.1994 62. Ethiopia 22.10.1998
29. Indonesia 22.01.1994 63. Ghana 11.11.1996
30. Lao PDR 08.12.1992 64. Guinea 07.11.1996
31. Viet Nam 21.01.1992 65. Malawi 05.09.1996
66. Morocco 16.04.2002
COMMONWEALTH OF 67. Namibia 12.08.1994
INDEPENDENT STATES 68. Senegal 11.02.1999
69. Sudan 14.05.1998
32. Kazakhstan 27.05.1996 70. Zimbabwe 28.04.1994
33. Kyrgyzstan 20.07.1995
34. Turkmenistan 30.05.1994 OCEANIA
35. Uzbekistan 06.10.1997
71. Papua New Guinea 27.10.1992
250
Appendix 4 Import Licensing
No. Product Approving Authority
1. Poultry (fowls, chicks, ducks, geese, turkeys, guinea fowls and pigeons), alive or
dead or any part thereof Veterinary Department
2. Meat and offals, fresh or preserved (dried, dehydrated, salted, pickled, smoked),
frozen or chilled, of buffaloes, cattle, sheep and goats Veterinary Department
3. Birds' nest, eggs of poultry, birds and testudinate (terrapin and the like), excluding
turtle eggs Veterinary Department
4. Rice and paddy, including rice flour, rice polishings, rice bran and rice vermicelli Ministry of Agriculture
and Agro-based Industry
5. Sugar MITI
6. Natural barium sulphate (barytes) MITI
7. Acetyl bromide Ministry of Health
8. Acetic anhydride, acetyl chloride Ministry of Health
9. Fireworks including fire crackers Police Department
10. Magnetic tape webs for video and sound recording MITI
11. Explosives, including: Police Department

- propellant powders;
- prepared explosives, other than propellant powders;
- safety fuses, detonating fuses, percussion and detonating caps, igniters, detonators;
- pyrotechnic articles;
- nitrocellulose;
- nitroglycerin;
- mercury fulminate;
- lead azide;
- lead styphnate;
- picric acid (trinitrophenol);
- 2,4,6 trinitrotolene (TNT);
- pentaerythritol tetranitrate (PETN);
- nitroguanidine; and
- trimethylenetrinitramine (cyclotrimethylene trinitramine).
12. Wood in the rough, whether or not stripped of its bark or merely roughed down,
wood, roughly squared or half-squared but not further manufactured Malaysian Timber
Industry Board
13. Safety helmets, except as worn by motorcylists or motor-cycle pillion riders MITI
14. Rice milling machinery including parts thereof Ministry of Agriculture

and Agro-based Industry
15. Automatic cassette or cartridge loaders MITI
16. Parts of automatic cassette or cartridge loaders MITI
251
17. All single colour copying machines, including Canon PC-10, Canon PC-25, Canon
NP 150, Canon NP 155, Mita DC 142RE, U-BIX 1800z, Xerox Copier RX 1025, all
multi-colour copying machines including Rank Xerox 6500, Canon NE Colour T and
Ricoh Colour 5000 and colour toner cartridges MITI
18. Any piece of equipment, apparatus, appliance or any other device capable of
producing the sound of a siren or any sound resembling that of a siren, irrespective
of its mode of operation Police Department
19. Apparatus of equipment to be attached to or connected to a public

telecommunication network or system SIRIM BERHAD
20. All radio communications apparatus capable of being used for telecommunications
in the frequency band lower than 3000 GHz or their motherboards, except for: SIRIM BERHAD
(i) receiver that is designed for use in the broadcasting services; and
(ii) radio telecommunications apparatus having a valid licence issued by the
Telecommunications Authority of any country or an International Automatic
Roaming (IAR) card issued by a licensed operator
21. Motor vehicles for the transport of persons, goods or materials (including sports
motor vehicles, other than those under heading No. 87.11): MITI
Motor cars and other motor vehicles principally designed for the transport of
persons (other than those of heading No. 87.02), including station wagons and
racing cars (excluding go-karts and ambulances) falling within subheading Nos:
8703.10 100, 8703.10 900, 8703.21, 8703.22, 8703.23, 8703.24, 8703.31, 8703.32,
8703.33, 8703.90
Motor vehicles for the transport of goods falling within heading No. 87.04
Multi sourcing parts falling within subheading Nos:

8708.99 111, 8708.99 112, 8708.99 113, 8708.99 114, 8708.99 115, 8708.99 121,
8708.99 122, 8708.99 123, 8708.99 124, 8708.99 131, 8708.99 132, 8708.99 133,
8708.99 134, 8708.99 135, 8708.99 140
22. Chassis fitted with or without engines, for motor vehicles of heading Nos.
87.02, 87.03, 87.04 or 87.05 and parts thereof: MITI
For motor vehicles falling within subheading Nos:

8703.21 321, 8703.21 322, 8703.22 321, 8703.22 322, 8703.23 321, 8703.23.322,
8703.23 323, 8703.23 324, 8703.23 331, 8703.23 332, 8703.23 333, 8703.23 334,
8703.24 321, 8703.24 322, 8703.31 321, 8703.31 322, 8703.32 321, 8703.32 331,
8703.32 332, 8703.32 333, 8703.33 321, 8703.33 331, 8703.33 332, 8703.90 310,
8703.90 331, 8703.90 332, 8703.90 333, 8703.90 334, 8703.90 335, 8703.90 341,
8703.90 342, 8703.90 343, 8703.90 344, 8703.90 345
For motor vehicles falling within sub-heading Nos:

8702.10 121, 8702.10 122, 8702.10 900, 8702.90 121, 8702.90 122 and
8702.90 900
For ambulance
252
For motor vehicles falling within heading No. 87.05

8703.10 100, 8703.10 900, 8703.21 221, 8703.21 222, 8703.21 400, 8703.22 221,
8703.22 222, 8703.22 400, 8703.23 221, 8703.23 222, 8703.23 223, 8703.23 224,
8703.23 231, 8703.23 232, 8703.23 233, 8703.23 234, 8703.23 400, 8703.24 221,
8703.24 222, 8703.24 400, 8703.31 221, 8703.31 222, 8703.31 400, 8703.32 221,
8703.32 222, 8703.32 223, 8703.32 231, 8703.32 232, 8703.32 233, 8703.32 400,
8703.33 221, 8703.33 222, 8703.33 231, 8703.33 232, 8703.33 400, 8703.90 221,
8703.90 222, 8703.90 223, 8703.90 224, 8703.90 225, 8703.90 231, 8703.90 232,
8703.90 233, 8703.90 234, 8703.90 235, 8703.90 400, 8704.10 211, 8704.10 219,
8704.10 311, 8704.10 319, 8704.21 210, 8704.21 220, 8704.22 210, 8704.22 220,
8704.23 210, 8704.23 220, 8704.31 210, 8704.31 220, 8704.32 210, 8704.32 220,
8704.90 210, 8704.90 220
23. Ships’ derricks; cranes; including cable cranes; mobile lifting frame, straddle
carriers and works trucks fitted with crane MITI
24. Fork-Lift trucks; other works trucks fitted with lifting or handling equipment MITI
25. Self-propelled bulldozers, angledozers, graders, levellers, scrapers, machanical

shovel, excavators, shovel loaders, tamping machines and road rollers MITI
26. Other moving, grading, levelling, scraping, excavating, tamping, compacting,

extracting or boring machinery, for earth, minerals or ores; pile-drivers and
pile-extractors; (excluding snow-ploughs and snow-blowers) MITI
27. Parts suitable for machinery falling within heading No. 84.31 MITI
28. Bodies (including cabs), for motor vehicles falling within heading Nos:
87.02, 87.03, 87.04 or 87.05: MITI
For ambulance

8703.21 221, 8703.21 222, 8703.21 321, 8703.21 322, 8703.21 400, 8703.22 221,
8703.22 222, 8703.22 321, 8703.22 322, 8703.22 400, 8703.23 221, 8703.23 222,
8703.23 223, 8703.23 224, 8703.23 231, 8703.23 232, 8703.23 233, 8703.23 234,
8703.23 321, 8703.23 322, 8703.23 323, 8703.23 324, 8703.23 331, 8703.23 332,
8703.23 333, 8703.23 334, 8703.23 400, 8703.24 221, 8703.24 222, 8703.24 321,
8703.24 322, 8703.24 400, 8703.31 221, 8703.31 222, 8703.31 321, 8703.31 322,
8703.31 400, 8703.32 221, 8703.32 222, 8703.32 223, 8703.32 231, 8703.32 232,
8703.32 233, 8703.32 321, 8703.32 331, 8703.32 332, 8703.32 333, 8703.32 400,
8703.33 221, 8703.33 222, 8703.33 231, 8703.33 232, 8703.33 321, 8703.33 331,
8703.33 332, 8703.33 400, 8703.90 221, 8703.90 222, 8703.90 223, 8703.90 224,
8703.90 225, 8703.90 231, 8703.90 232, 8703.90 233, 8703.90 234, 8703.90 235,
8703.90 310, 8703.90 331, 8703.90 332, 8703.90 333, 8703.90 334, 8703.90 335,
8703.90 341, 8703.90 342, 8703.90 343, 8703.90 344, 8703.90 345, 8703.90 400

8702.10 121, 8702.10 122, 8702.10 900, 8702.90 121, 8702.90 122, 8702.90 900

8704.10 211, 8704.10 219, 8704.10.319, 8704.10 311, 8704.21 210, 8704.21 220,
8704.22 210, 8704.22 220, 8704.23 210, 8704.23 220, 8704.31 210, 8704.31 220,
8704.32 210, 8704.32 220, 8704 90 210, 8704.90 220
For motor vehicles falling within subheading No. 8703.10
29. Motorcycles, autocycles and cycles fitted within auxiliary motor MITI
30. High speed duplicators, including master electronics control, master playback,
with or without loop bin and slave recorders, medicine making machines and CD
master machines MITI
253
31. Film or tapes for magnetic recording commonly known as 'pancakes', excluding
those in cassettes or cartridges MITI
32. Parts of high speed duplicators, including master electronics control, master
playback and slave recorders MITI
33. Arms and ammunition as defined under the Arms Act 1960, other than personal
arms and ammunition imported by a bona fide traveller Police Department
34. Saccharin and its salt Ministry of Health
35. Unmanufactured tobacco; tobacco refuse Ministry of Plantation

Industries and
Commodities
36. Road tractors for semi-trailers completely built-up, old MITI
37. Special purpose vehicles falling within heading No. 8705 MITI
38. Parabolic antenna for outdoor use SIRIM BERHAD
39. Parabolic equipment, antenna parts and accessories; SIRIM BERHAD

(i) satellite receiver (tuner);
(ii) video plexer;
(iii) antenna positioner;
(iv) feed horn;
(v) low noise block down converter and cover;
(vi) parabolic antenna mounts/stand and mounting brackets; and
(vii) actuators
40. Acesulfame K Ministry of Health
41. Substances covered by The Montreal Protocol: MITI
Annex A to the Protocol:
Group I:
CFC-11 Trichlorofluoromethane
CFC-12 Dichlorodifluoromethane
CFC-113 1,1,2-Trichloro 1,2,2-trifluoroethane
CFC-114 1,2-Dichlorotetra-fluoroethane
CFC-115 Chloropentafluoroethane
Group II:
Halon-1211 Bromochlorodifluoromethane
Halon-1301 Bromotrifluoromethane
Halon-2402 Dibromotetrafluoromethane
Annex B to the Protocol:
Group I:
CFC-13 Chlorotrifluoromethane
CFC-111 Pentachlorofluoroethane
CFC-112 Tetrachlorodifluoroethane
CFC-211 Heptachlorodifluoropropane
CFC-212 Hexachlorodifluoropropane
CFC-213 Pentachlorotrifluoropropane
CFC-214 Tetrachlorotetrafluoropropane
CFC-215 Trichloropentafluoropropane
CFC-216 Dichlorohexafluoropropane
CFC-217 Chloroheptafluoropropane
254
Group II:
CCI Carbon tetrachloride (Tetrachloromethane)
Group III:
CHCCI Methyl Chloroform 3 3 (1,1,1, Trichloroethane)
42. Liquid milk in any form including flavoured milk, recombined or reconstituted MITI
43. Liquid sterilised flavoured milk including flavoured milk, recombined or reconstituted MITI
44. Cabbage (round) FAMA
45. Coffee, not roasted FAMA
46. Cereal flours: of wheat or meslin (including atta flour) in packings not exceeding 5 kg MITI
47. Activated clay and activated bleaching earth MITI
48. Billets of iron or steel MITI
49. Bars and rods (including wire-rods), of iron or steel, hot-rolled, forged, extruded,
cold-formed or cold-finished (including precision made); hollow mining drill steel: MITI
Wire-rod
Bars and rods (excluding wire rods) not further worked than hot-rolled or extruded:
round
Bars and rods, cold-formed or cold-finished (including precision made): round
50. Alloy steel and high carbon steel in the form mentioned in heading Nos.
72.06 to 72.17: MITI
Wire-rod of high carbon steel, of stainless or heat resisting steel and

of other alloy steel
Bars and rods (excluding wire rods) and hollow mining drill steel of high carbon steel,
of stainless or heat resisting steel of other alloy steel
51. Standard wire, cables, cordages, ropes, plaited bands and the like, of aluminium
wire but excluding insulated electric wires and cables: MITI
of steel reinforced aluminium
of unalloyed aluminium
of other aluminium alloys
52. Insulated (including enameled or anodised) electric wire, cables, bars and strip and
the like (including co-axial cable), whether or not fitted with connectors: MITI
Telephone and telegraph (including radio relay) cables;
others:
Power transfer wire, cable, bars, strip and the like: paper insulated
53. All goods from Serbia, Montenegro and Israel MITI
54. Flat-rolled products of iron or non-alloy steel of a width of 600mm or more, clad,
plated or coated within heading No. 72.10 MITI
55. Flat-rolled products of iron or non-alloy steel of a width less than 600mm, clad,
plated or coated within heading No. 72.12 MITI
56. Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more,

hot-rolled, not clad, plated or coated MITI
57. Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more,

cold-rolled (cold reduced), not clad, plated or coated MITI
58. Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, not
clad, plated or coated MITI
255
59. Tubes, pipes and hollow profiles, of cast iron: sub-heading No. 7303.00.000 MITI
60. Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron)
or steel within heading No. 73.04 MITI
61. Other tubes and pipes (for example, welded, riveted or similarly closed), having
circular cross-sections, the external diameter of which exceeds 406.4mm, of iron or
steel within heading No. 73.05 MITI
62. Other tubes, pipes and hollow profiles ( for example, open seam or welded, riveted
or similarly closed ), of iron or steel MITI
63. Toxic chemicals and their precursors covered under the Convention on the
Prohibition of the Development, Production, Stockpiling and Use of Chemical
Weapons and on Their Destruction 1993 (CWC). Ministry Of Foreign Affairs
256
Temporary Exclusion And Sensitive
Appendix 5 Lists For Investment Under The
Asean Investment Area Agreement
Manufacturing Sector
BRUNEI DARUSSALAM
Sensitive List
Industries Closed to Both National and Foreign Investors

Manufacture of garments of categories 338, 339, 638 and 639 - for US market.
No more approval given.
Industries Open with Restriction to Foreign Investors

Industries utilising local resources, domestic market access and government facilities or the manufacturing of food-related
products.
Foreign investment must have at least 30% local participation. However, full foreign ownership is allowed if 100% of the
product is exported with exception of the manufacturing of food related products and use of local resources.
Industries Closed Only to Foreign Investors

Manufacture of cement.
Manufacture of drinking water either from tap or from local resources.
Subject to control
CAMBODIA
Sensitive List

Manufacture/processing of cultural items.
Subject to prior approval from relevant Ministries.
Sawn timber, veneer, plywood, wood-based products utilising local logs as raw material.
No new licence will be issued.
DBSA production. Toxic chemicals affecting health of community and impacting the environment.
Subject to prior approval from Ministry of Health and relevant ministries.
Production of toxic chemicals or utilisation of toxic agents.

Prohibited in accordance with an international treaty.
Manufacture of psychotropic substances.

Prohibited for these psychotropic substances:
- Brolamfetamine, Cathinone, DET, DMA, DMHP, DMT, DOET, Eticyclidine, (+)-Lysergide, MDMA, Mescaline,
4-Methylaminorex, MMDA, N-Ethyl-MDA, N-Hydroxy-MDA, Parahexyl, PMA, Psilocine, Psilotsin, Psilocybine,
Rolicyclidine, STP, DOM, Tenamfetamine, Tenocyclidine, Tetrahydrocannabinol, TMA.
Subject to prior approval from Ministry of Health for these psychotropic substances:
- Amfetamine, Dexamfetamine, Fenetylline, Levamfetamine, Mecloqualone, Metamfetamine, Methaqualone,
Methylphenidate, Phencyclidine, Phenmetrazine, Metamfetamine Racemate, Secobarbital, Amobarbital, Allobarbial,
Alprazolam, Amfepramone, Barbital, Benzfetamine, Bromasepam, Buprenorphine, Butalbital, Butobarbital, Cathine,
Camazepam, Chlordiazepoxide, Clobazam, Clonazepam, Clorazepate, Clorazepam, Cloxazolam, Cyclobarbital,
Continued ...
257
Delorazepam, Diazepam, Estazolam, Ethchlorvynol, Ethinamate, Etilamfetamine, Fencamfamine, Fenproporex,
Fludiazepam, Flunitrazepam, Flurazepam, Gluthethimide, Halazepam, Haloxazolam, Ketazolam, Lefetamine, Loflazepate
Ethyl, Loprazolam, Lorazepam, Lormetazepam, Mazindol, Medazepam, Mefenorex, Meprobamate, Methylphenobarbital,
Methyprylon, Midazolam, Nimetazepam, Nitrazepam, Nordazepam, Oxazepam, Oxazolam, Pemoline, Pentazocine,
Pentobarbital, Phendimetrazine, Phenobarbital, Phentermine, Pinazepam, Pipradrol, Prazepam, Pyrovalerone,
Secbutabarbital, Temazepam, Tetrazepam, Triazolam, Vinylbital
Manufacture/processing of narcotic drugs.

Prohibited.
Manufacture of weapons and ammunitions.

National defense policy.
Manufacturing of firecrackers and fireworks.

Subject to control.
Manufacturing related to defense and security.

National defense policy.
Industries Open with Restrictions to Foreign Investors

Manufacture of cigarettes.
Only for export (100% export).
Alcohol.
Movie production.
Subject to prior approval from relevant ministries.
Exploitation of gemstones
Bricks made of clay (hollow, solid) and tiles.
Rice mill.
Manufacture of wood and stone carving.
Silk weaving.
Subject to local equity participation.
INDONESIA
Temporary Exclusion List

Industries manufacturing communication devices:
- Telephone connection boxes.
Business reserved for small-scale enterprises.
Sensitive List

Saccharine.
Cyclamate.
Closed - Public health.
Saw mill.
Only in Papua using natural forest as raw material.
Plywood.
Only in Papua.
Clove cigarettes (with automatic machines).

Ratio of production manually and machinery.
Fire crackers and fire works.

Manufacturing of ammonium nitrate for explosive purposes.
National security.
Continued ...
258
Food and drink:
- Industries preparing shredded meat, boiled and then fried, and jerked meat; Industries preparing pickled/sweetened fruit,
vegetables and eggs; Industries preparing salted/pickled fish and other, marine biota; Industries making bread, cookies,
and the like; Industries making brown/coconut palm sugar; Industries making fermented bean paste used as condiment;
Industries making bean cake; Industries making bean curd; Industries making crisp, thin chip made of flour and peanut,
shrimp or small fish/crispy chips of banana, potato, bean cake, etc.; Industries making peanut snacks (fried peanuts with
out covering, salted peanuts, large white beans, onion beans); Industries making chips made of flour flavored with fish or
shrimp; Industries making condiment of fermented fish or shrimp; Industries making deep-fried, boiled, steamed cake;
Processing of palm, sugar palm and palmyra palm; and Honey bee industries.
Industries of various kinds of flour of grains, cereals, legumes and tubers:

- rice flours of various kinds; flour made of legumes; and flour made of dried cassava.
On condition of partnership with small-scale enterprises.
Yarn-finishing industries:
- yarn having a tie motive based on "tenun ikat"; using manually operated instruments.
Textile and textile products:

- traditional weaving industries (non machine woven cloth); industries making hand-written batiks; knitting industries using
hand operated instruments; and industries making rimless caps and headdresses.
Cloth printing and finishing industries: printing using hand operated instruments, except when it is integrated with the
upstream industries.
Industries of lime and products made of lime:

- quick lime;lime for chewing with betel leaves; slaked lime; lime for agricultural purposes and chalk.
Industries making clay articles for household purposes:

- unglazed household decorations; various kinds of unglazed vases; and unglazed household utensils.
Industries of clay articles for construction purposes:

- clay bricks; and unglazed clay roof tiles.
Industries making agricultural tools:

- mattocks; shovels; plows; harrows; pitchforks; crowbars; sickles; scrapes; sarap/lempak/bawak (reaping); small palm
knives; hoes for weed removal; emposan tikus (sprayer for killing rats); manually operated sprayer; manually operated rice
hullers; manually operated paddy and soy bean hullers; and manually operated looseners of corn grains.
Industries making cutting tools:

- short machetes; axes; large-bladed knives; and instruments for mincing onions/cassava/chips.
Plantation tools industry:

- knife to tap rubber; bowl to tap rubber; rubber freezing box; coffee peeler machines; and cashew nut peeler machine.
Industries making handicraft tools:

- trowels; wooden planes; planes; Beugel-beugel (traditional tools); kasut pleste (traditional tools for plaster); spatulas;
clamps; handsaw; hammers (of a small type); chisels; and pangut (traditional cutter).
Industries for maintenance and repair (workshops, including special workshops):

- small workshops including roving small workshops, tire repair, upholstery workshops, railway workshops, workshops for
ships maintenance, air filling/air pumps, traditional car body repair and the like, without modern instruments.
Industries for maintenance and repair (workshop including special workshops):

- repair of electrical devices for household purposes.
Industries making electrical devices and other components:

- various kinds of clamps; motor armature and track armature.
Continued ...
259
Professional, science, measure equipment and electronic controller industry:
- water meter box.
Industries of multivarious handicrafts:

- handicrafts using plants as raw materials; handicraft using animals as raw materials; imitation flowers and decorations;
handicrafts from mollusks and the like; handicrafts made of precious stone and marble and household equipment made
of bamboo and rattan.
Raw rattan processing

Traditional medicine product and medical instruments for non-medic.

Traditional Indonesian musical instruments.
Business reserved for small-scale Enterprises.
Industries Open With Restriction to Foreign Investors

Food and drink:
- milk processing industries/dairy product; fish flour industries (animal feed); tea processing industries; soy sauce industries;
processing industries: pepper; gnetum gnemon; cinnamon; vanilla; cardamon; nutmeg; and cloves; and granulated sugar
industries.
Industries of rubber products for industrial purposes.

- rubber rolls.
Industries manufacturing agricultural machinery.

- threshers; reapers; hydrotillers; and corn removers.
Industries manufacturing fluid machinery.

- hand operated water pumps.
Bicycles-making industries:
- industries making bicycle equipment.
Industries making silver crafts.

Processing and canning of fruits.
Various palm essence industry:

- sago palm essence.
Rice milling and threshing.

Copra industry.
Silk yarn spinning industry.
Downstream industry of pepper.
On condition of partnership with small-scale Enterprises.
Fish-smoking industries and the likes;

Wood carving industry.
Business reserved for small-scale enterprises
LAO PDR

Manufacture of products of copper, silver and gold (jewellery).
Manufacture of Lao dolls.
Manufacture of blankets/mattress with cotton and kapok.
Manufacture of authentic Lao musical instruments.
Reserved for Lao PDR citizen.
Continued ...
260
Manufacture of rice noodles products.
Subject to high ratio of local content (use of local material) and/or export requirements.
Manufacture of beer.
Manufacture of soft drinks.
Subject to joint-venture with domestic investors and/or export 100%.
Manufacture of tobacco products.

Subject to high ratio of local content, local equity participation and/or export 100%.
Sensitive List

Manufacture of all types of weapons and ammunitions.
Prohibited for security reasons.
Manufacture/processing of narcotic drugs.

Manufacture of cultural items destructive of the national culture and tradition.
Prohibited.
Manufacture of chemical substances and industrial waste hazardous to human life and the environment.
Prohibited for health and environment reason.

Manufacture of psychothopic substances.
Subject to specific details provided by Ministry of Health.
Manufacture of wood and wood products.

The establishment of new wood processing factory is not permitted, except for utilising raw material from the reforestation of
forest plantation.
Manufacture of chemicals and chemical products.

Not to be destructive to the environmental and society.
Manufacture of pharmaceuticals.
Manufacture of alcohol of all types.
Manufacture of motor vehicles of all types.
Subject to local equity participation and/or export or high ratio of local content.
MALAYSIA
Sensitive List
Industries Closed for Both National and Foreign Investors

Pineapple Canning.
Palm Oil Milling.
Closed except for projects with source of supply from own plantation.
Palm Oil Refining.

Closed for Peninsular Malaysia. Open for projects in Sabah and Sarawak with source of supply from own plantations.
Sugar Refining.
Closed
Liquors and Alcoholic Beverages.

Closed for projects that do not export 100% of their products.
Tobacco Processing and Cigarettes.

Closed for projects that do not export more than 80% of their products.
Sawn timber, veneer and plywood.

Closed for Peninsular Malaysia and Sabah. Open for Sarawak.
Continued ...
261
Wood-based products utilising local logs as raw material.
Closed for Peninsular Malaysia. Open for Sabah and Sarawak.
Petroleum Refining.
Closed for projects that do not export 100% of their products.
Ordinary Portland Cement.

Closed for non-integrated projects i.e., projects which do not produce their own clinker for grinding into ordinary Portland
cement.
Hot Rolled Steel Round Bars and Wire Rods.

Closed.
Steel Billets/Blooms.
Closed for projects that have capacity of below 350,000 tonnes.
Assembly of motorcycles, passenger cars, and commercial vehicles.

Closed.
Industries Open with Restrictions to Both Foreign and National Investors

Fabrics and Apparel of Batik.
Ordinary Portland Cement (Integrated Projects).
Maximum foreign equity ownership allowed is 30%.
Industries Open with Restrictions to Both Foreign and National Investors

Explosives, pyrotechnic products, propellant powders, detonating or safety fuses and the like.
Weapons and ammunition.
Prior approval is required from Ministry of Home Affairs.
MYANMAR

Manufacturing of pulp of all kinds.
Value-added product policy.
Manufacture of paper is required.

Production and marketing of basic construction materials, furniture, parquet, etc. using teak extracted and sold by the State-
owned economic organisation.
Only for export of high value-added wood-based products.
Sensitive List

Distilling, blending, rectifying, bottling, and marketing of all kinds of spirits, beverages or non-beverages.
Manufacture of wines.
Manufacture of malt and malt liquors, beer and other brewery products.
Manufacture of soft beverages, aerated and non-aerated products.
Manufacture of cigarettes.
Manufacture of monosodium glutamate.
Manufacture of corrugated galvanized iron sheets.
No new permit to be issued.
Manufacture of refined petroleum products.

Reserved for the State sector.
Manufacture of weapons and ammunition.

National Defense Policy.

Sawmilling and planning of wood.
National policy on forestry.
Continued ...
262
Manufacture of veneer sheets, manufacture of plywood, laminboard, particle board and other panels and boards.
Manufacture of bakery products.

Export requirement is compulsory.
Manufacture of pulp, paper and paperboard.

Integrated project is compulsory.
Manufacture of pharmaceutical drugs.

Well-known firms are to be considered.
PHILIPPINES
Sensitive List
Industries Open With Restrictions to Foreign Investors

Domestic market enterprises with paid-in equity capital of less than US$200,000.*
Foreign equity is restricted to maximum 40%.
Domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-up
capital of less than US$100,000.*
Foreign equity can be more than 40% if firm exports at least 60% of total production output.
Industries Closed Only to foreign Investors

Cooperatives*
No foreign equity allowed.
• No ISIC Code since this cuts across all sectors
SINGAPORE
Sensitive List

Chewing gum, bubble gum, dental chewing gum or any like substance.
Production prohibited for safety and social reasons.
Firecrackers.
Match sticks.
Production prohibited for safety reasons.

Publishing and printing of newspapers.
Foreign equity is subject to approval by relevant Ministry.
Beer and Stout

Water conservation.
Reproduction of recorded media. (e.g. CD, CD-ROM, VCD, DVD-ROM).

Intellectual Property Rights enforcement.
Pig iron and sponge iron.

Rolled steel products.
Steel ingots, billets, blooms and slabs.
Limited local steel scrap.
Continued ...
263
THAILAND
Sensitive List
Industries Closed to Both National and Foreign Investments

Manufacture of sugar from sugarcane.
Subject to Cabinet's decision.

Manufacture of carved wood.
Manufacture of Thai silk threads, Thai silk weaving or Thai silk pattern printing.
Manufacture of Thai musical instruments.
Manufacture of goldware, silverware, bronzeware or lacquerware.
Manufacture of crockery of Thai arts and culture.
Wood fabrication for production of furniture and utensils.
Foreign equity participation is restricted to 50% of registered capital.
Foreign equity participation of 50% or more of registered capital can be made, subject to the following:
- shall obtain permission from Minister of Commerce, with approval of Cabinet, and shall also fulfill following requirements:
- shall have Thai nationals, or juristic persons that are not foreigners under this Act, held not less than 40% of registered
capital. However, Minister of Commerce, with approval of Cabinet, may reduce said requirement to not less than 25
percent; and
- shall have Thai nationals held at least two-fifth of total directors.
Or
- shall receive promotion under Investment Promotion law, or shall obtain permission under law governing Industrial Estate
Authority of Thailand or other related laws.
Shall have minimum capital invested at commencement of business not less than that prescribed by Ministry of Commerce's
regulations, which in any case not less than 3 million Baht.
Shall apply for licence or certificate from Department of Commerce Registration.
Shall comply with other conditions prescribed in Foreign Business Act B.E. 2542 (1999) and other related laws.
Manufacture of plywood, veneer board, chipboard or hardboard.

Manufacture of lime.
Rice milling.
Foreign equity participation is restricted to not more than 50% registered capital.
Foreign equity participation of 50% or more of registered capital can be made, subject to the following:
- shall obtain permission from Director General of Department of Commercial Registration with approval of Foreign
Business Committee.
- shall receive promotion under Investment Promotion law, or shall obtain permission under law governing Industrial Estate
Shall have minimum capital invested at commencement of business not less than that prescribed by Ministry of Commerce's
regulations, which in any case not less than 3 million Baht.
Shall apply for licence or certificate from Department of Commerce Registration.
Manufacture of cigarette.
Manufacture of playing cards.
Shall obtain permission from Director-General of Excise Department according to Tobacco Act. B.E. 2509, or Playing Card
Act B.E. 2486.
VIETNAM

Manufacture of cultivation, processing, reaping machines, insecticide pumps, spare parts for agricultural machines and
engines.
Subject to export, technology and quality requirements.
Bicycle manufacture.
Electrical fans.
Manufacturing new types of products and subject to quality and export requirements.
Continued ...
264
Manufacture of electrical towers.
Export at least 50%.
Production of aluminium shaped bars.

Export at least 20%.
Single superphosphate fertiliser.

Production of H2SO4, H3PO4, LAS, industrial gasses, acetylene.
Common use paint.
Motorcycle and bicycle tyres and tubes; automotive tyres and tubes up to 450 mm.
Plastic water pipes used in agriculture, rubber gloves, labour sanitary boots.
Subject to export and quality requirements.
Consumer plastics.
Detergent, shampoo, soaps, washing liquid.
Zn, Mn batteries (R6, R14, R20).
Subject to export requirements.
Paper production.
In conjunction with development of local raw material resources. Common types of paper such as printing paper, writing
paper, photocopy paper are subject to at least 80% export requirement.
Fruit juice.
Subject to utilisation of local raw material and export requirements.
Electro-mechanical and refrigeration equipment.

Household electric appliances.
Subject to technology and export requirements.
Processing of aqua-products, canned sea foods.

Joint-Venture form, subject to material and technology requirements and export at least 80%.
Assembly of marine engines.

Subject to technology requirement.
Production and processing of wood.

Dairy processing.
In conjunction with development of local raw material resources.
Cane sugar production.

Vegetables oil production and processing.
In conjunction with development of local raw material resources and subject to export requirement.
Tanning.
In conjunction with development of local raw material resources, and subject to environmental processing requirement.
Sensitive List
Industries Closed to Both National and Foreign Investments

Production of firecrackers including fireworks.
Export 100%.

Fishing
Foreign investment shall not be licensed.
Beer and soft drinks.

Tobacco production.
Exploitation of gemstones.
Vertical shaft cement production and baked earth bricks and tiles.
Clay bricks.
Under 10,000 DWT cargo ships under 800 TEU container ships; lighters and under 500 seats passenger ships.
Continued ...
265
D6-D32mm construction steelrods, and D15-D114 mm seam steel pipe, zinc galvanized and colour sheets.
Production of NPK fertiliser.
Construction glass.
Fluorescent tubes and bulbs.
Fishing net production.
Lubrication oil, grease.
Alcohol.
Subject to brand, quality and export requirements.
Automobile assembly and manufacture.
Subject to local content requirement and planning of the Government.
Motorcycle assembly and manufacture.

Subject to local content requirement and planning of the Government and export at least 80%.
Assembly of consumer electronic products.

Subject to local content requirement.
Manufacture of TV sets and tubes.

Subject to local content requirement and export at least 80%.
Sanitary ceramics, porcelain and tiles.

Export 100% and subject to technology requirement.
Cement production.
Ready mixed concrete, stone crushing.
Industrial explosives and devices.
Exploitation, processing of rare and precious material, raw material; exploitation of clay for production of construction
material; exploitation, exportation of high-quality sand for production of construction and technical glasses.
Subject to planning of the Government.
266
Agriculture, Fishery and Mining Sectors
BRUNEI DARUSSALAM
Agriculture
Growing of cereals and other crops n.e.c,vegetables, horticulture specialties and nursery products, fruits, nuts, beverage and
spice crops.
Hunting, trapping and game propagation including related services activities.
Farming of cattle, sheep, goats, horses, asses, mules and hinnies, dairy farming.
Growing of crops, combined with farming of animals (mixed farming).
Agriculture and animal husbandry services activities, except veterinary activities.
Forestry
Forest plantations and nurseries.
30% local participation - for access to government facilities and sales to domestic market.
Sensitive List
Agriculture
Other animal farming; production of animal products n.e.c.
30% local participation is required for access to Government facilities and sales to domestic market.
Fishery
Offshore capture of fisheries (purse-seines and long lines)
Aquaculture
30% local participant is required.
Mining and Quarrying

Extraction of crude petroleum and natural gas.
Crude petroleum and natural gas are important natural resources and the backbone of the country's economy. Although
foreign investors are allowed to invest in petroleum mining activities, they cannot be certain that their participation interest in
their project will be 100%. His Majesty's Government has the right to acquire participation upon declaration of commerciality
of the field. Under the production sharing contract (PSC), His Majesty's Government through its Holding Company will
automatically have interest in the petroleum activities.
Silica mining.
Extraction of ground water.
Quarrying of stone.
30% local participation is required for utilising government facilities and domestic market access.
CAMBODIA
Sensitive List
Agronomy
Estate crops:
- medicinal/traditional herbs; and
- plantation of the above.
Business reserved for daily need of local farmers.
Livestock
- native chicken; native cattle and buffalo; and native duck.
Business reserved for national small-scale enterprises.
Continued ...
267
Fishery
- fishing (fresh water); catching of fingerling, caplo capio, giant fish, crocodile, probatus and jullieni fish.
Endangered species.
Forestry
- not applicable.
Depending on rule, law and regulation of Cambodia forest policy.
Mining
- radioactive minerals (uranium etc).
National security
Agronomy
- genetic resources (bio-diversity).
Environmental protection.
Fishery
- catching of fresh water fish.
Reserved for small local enterprises.
Forestry
- Not applicable.
On condition of partnership with local partner.
Mining
- small scale mining.
Reserved for local people.
Industries Open with Restriction to Foreign Investors
Agronomy
All type of:
- Food crops; Fruit crops; Industrial crops; and Processing industries.
On condition of partnership with the local of farmers' association and conservation of sustainability of natural resources.
(applicable to all).
Livestock
- chicken raising (broiler; layer); beef cattle raising; sheep raising; goat raising; pig raising; duck raising; dairy cattle raising;
and horse raising.
On condition of partnership with small-scale enterprises
Fishery
- not applicable.
Refer to Fishery Law.
Forestry
- forest products (finish products); zoology; forest park; and forest plantation for industry.
Based on National Forest Policy.
Mining
All foreign investments should be carried out under contract of work.
INDONESIA
Sensitive List
Agriculture
- estate crops: medical herbs, except ginger; plantation of pepper, belinjo, cinnamon, candlenut, vanilla, kapulaga
(amomum cardamomum), nutmeg, siwalan, sugar palm and leaf (lontar), clove, Pogostemon Catlin Benth, Uncaria
gambir.
Continued ...
268
Livestock
- native chicken.
Fishing
Catching of marine ornamental fish, catching area < 12 miles.
Hatchery
Aquaculture.
- freshwater fish hatchery.
Forestry
- contractors of logging.
- Apiculture exploitation.
- Exploitation of sugar palm, sago, rattan, candlenut, tree, bamboo and cinnamon plant forest.
- Exploitation of swallow nests in the nature.
- Exploitation of tamarind estates by small holders (tamarind seeds collection and processing).
- Exploitation of charcoal producing plant forest.
- Exploitation of tree sap producing plant forest.
- Exploitation of atsiri oil producing plant forest (pine oil, lawang oil, tengkawang oil, cajuput oil, kenanga oil, fragrant root
oil, and other)
General Mining
- radioactive minerals (uranium, etc.)
national security.
- small-scale mining.
On condition of partnership with small-scale enterprises. All foreign investments should be carried out under contract of
works. Conservation Forest Area is prohibited for all mining. Preserve Forest is prohibited for open cut mining.
Agricultural
Genetic resources (bio-diversity).
Aquaculture
Grow-Out
- freshwater fish culture.
Forestry
- utilisation of naturally growing forest;
environmental protection.
- utilisation of forest based on HPH (forest exploitation right).

- community forest utilisation right.
reserved for local people.
- genetic resources (bio-diversity).

environmental protection.
Agriculture
- Food crops; Cassava;
On condition of partnership with the local farmers located in production center of food crop concerned
Continued ...
269
Traditional herbal plantation.
- estate crops: oil palm; rubber; sugar; coconut; cocoa; coffee; tea; cashewnut; cotton; castor oil; ginger; fibre plants; (jute;
kenaf; rami; stevia; and rosela), areca-palm; banana of manila (Musa textilis); medical plants; fragrant root (akar wangi); palm;
tamarind (asam jawa); indigo; brass; kaempferia galanga (kencur); almond; turmeric; coriander; benth (pogostemon catlin);
tobacco; fragrant grass (sereh wangi); sesame seed; and herb (panzolzia zeylanica benn), (urang-aring).
On condition of special partnership programs and the need to have recommendation from the Ministry of Agriculture.
Aquaculture
Hatchery
- brackishwater shrimps hatchery.
On condition of partnership with national small-scale enterprises.
Grow-Out
- aquaculture of eel, escargot and crocodile.
Forestry
- Utilisation of Industrial Plantation
LAO PDR

Mining and agglomeration of hard coal.
Mining and agglomeration of lignite.
Extraction and agglomeration of peat.
Extraction of crude petroleum and natural gas.
Service activities incidental to oil and gas extraction excluding surveying.
Mining of iron ores.

Mining of non-ferrous metal ores, except uranium and thorium ores.
Mining of chemical and fertiliser minerals.
Extraction of salt.
Other mining and quarrying.
Subject to agreement with the Government and processing.
Sensitive List
Industries Closed to Foreign Investors

Operation of hatcheries in the reservoirs.
Reserved for Lao citizen.

Hunting, trapping and game propagation, including related service activities.
Subject to specific approval and agreement with the Government.
Forestry
Logging and related activities.
Logging is closed for both national and foreign investors; the other activities are subject to specific approval and agreement
with the Government.
Fishing and service activities incidental to fishing.

Operation of fish hatcheries in the Mekong River and its tributaries.
Subject to agreement with the Government and to follow the regulations of local authorities.
Production and processing of local and domestic fishes.

Subject to specific approval and agreement with the Government.
Mining of uranium and thorium ores.
Negotiation and agreement with the Government are needed (for security reason).
Quarrying of stone, sand and clay.

Subject to agreement with the Government and processing.
Continued ...
270
MALAYSIA
Sensitive List
Industries Closed to Foreign Investors

Extraction and harvesting of timber.
This activity is generally closed to foreign investors in Peninsular Malaysia and Sabah. However, for Sarawak, local
involvement and majority local control is required. Forest areas to be opened for such activities will be gradually reduced in
the future to enable the resources to be managed sustainably.
Capture of fisheries.
Foreign fishing companies are not allowed to fish in Malaysia's Exclusive Economic Zone (EEZ).
Industries Open with Restriction to Foreign Investors.

Oil and gas upstream industries.
Project must be carried out on a joint-venture basis with a wholly-owned subsidiary of the national petroleum corporation
(Petronas), whose equity in the joint venture will range from 15% to 60% depending on the block/area. The terms and
conditions of each block is negotiated on a case-by-case basis and the Production Sharing Contracts will adhere to rules and
regulations stipulated by the Malaysian Government with regards to the award of contract etc.
MYANMAR
Forestry
Extraction of hardwood and sale of the same.
Mining
Exploration and extraction of pearls and export of the same.
Exploration and extraction of metal and export of the same.
Carrying out other quarrying industries and marketing of the same.
The Government may permit by notifications.
Energy
Exploration, extraction and sale of petroleum.
Exploration, extraction and sale of natural gas and production of the products of the same.
Power
Production, collection and distribution of electricity.
Fishery
Fishing of marine fish, prawn and other aquatic organism.
Others
Railway transport service.
Air transport.
Courier activities other than national post activities.
Joint venture with State organisation.
Banking and insurance services.
To be liberalised later.
Continued ...
271
PHILIPPINES
Sensitive List

People's Small-scale mining programme.
Mining activities which rely heavily on manual labor using simple implements and methods and do not use explosives or
heavy mining equipment.
Maximum area of 20 hectares.
Investment not to exceed P10.0 million.
Ratio of labor cost to equipment utilisation cost is greater than or equal to 1.0 (based on 1 metric ton of ore).
No foreign equity allowed.
Forestry
Mining (other than small-scale mining).Deep sea fishing.
Agriculture in public land.
Foreign equity is restricted to a maximum of 40%.
SINGAPORE
Sensitive List

Pig farming.
Quarrying.
No more licenses issued.
THAILAND
Fishery, specifically marine animal culture.

Logging from plantation.
Artificial propagated or plant breeding
Foreign equity participation is restricted to not more than 50% of registered capital.
Foreign equity participation of 50% of registered capital or more can be made, subject to following conditions:
- shall obtain permission from Director-General of Department of Commercial Registration, with approval from Foreign
Business Committee.
- Shall receive promotion under Investment Promotion Law, or shall obtain permission under law governing Industrial Estate
Shall have minimum capital invested at commencement of a business not less than that prescribed by Ministry of
Commerce's regulations, which in any case not less than three million Baht.
Shall apply for licence or certificate from Department of Commercial Registration.
(These lists shall be reviewed at least once every year).
Sensitive List
Salt farming, including efflorescent salt production.

Rock salt mining.
Mining, including rock blasting or crushing.
Silkworm farming.
Foreign equity participation is restricted to not more than 50% of registered capital.
Foreign equity participation of 50% of registered capital or more can be made, subject to following conditions:
- Shall obtain permission from Minister of Commerce, with approval of Cabinet, and shall also fulfill following requirements:
Continued ...
272
- Shall have Thai nationals or juristic persons that are not foreigners under this Act, holding not less than 40% of registered
capital. However, Minister of Commerce with approval of Cabinet, may reduce said requirement to not less than 25%;
- Shall have Thai nationals helding at least two-fifths of total directors; or
- Shall receive promotion under Investment Promotion Law, or must obtain permission under law governing Industrial Estate
Shall have minimum capital invested at commencement of a business not less than that prescribed by Ministry of
Commerce's regulations, which in any case not less than three million Baht.
Shall apply for licence or certificate from Department of Commercial Registration.
(These lists shall be reviewed at least once every year).
VIET NAM

Manufacture of cultivation processing, reaping machines, insecticide pumps, spare parts for agricultural machines and
engines.
Subject to export, technology and quality requirement.
Paper production.
In conjunction with development of local raw material resources. Common types of paper such as printing paper, writing
paper, photocopy paper are subject to at least 80% export requirements.
Fruit juice.
Subject to utilisation of local raw material and export requirements.
Refrigeration equipment.
Subject to technology and export requirements.
Processing of aqua-products; canned sea foods.

Joint venture form, subject to material, technology requirements and export at least 80%.
Assembly of marine engines.

Subject to technology requirement.
Production and processing of wood.

Dairy processing.
In conjunction with development of local raw material resources.
Cane sugar production.

Vegetable production and processing.
In conjunction with development of local raw material resources and subject to export requirement.
Tanning.
In conjunction with development of local raw material resources and subject to environmental protection requirement.
Sensitive List
Industries Closed Only to Foreign Investors.

Fishing.
Foreign investment shall not be licensed.
Exploitation of gemstones.
Fishing-net production.

Exploitation, processing of rare and precious minerals, raw materials, exploitation of clay for production of exportation of high-
quality sand for production of construction and technical glasses.
Subject to planning of the Government.
273
Appendix 6 MITI And Its Agencies-Organisation Charts And Addresses
MITI ORGANISATION CHART

MINISTER
Deputy Minister (Trade) Deputy Minister (Industry)

Parliamentary Secretary
Secretary General
275
Deputy Secretary General (Trade) Deputy Secretary General (Industry)
International Trade Industrial Development
Policy & Multilateral Bilateral & Regional Investment Policy & Sectoral Policy &
Management Services Strategic Planning
Negotiations Relations Manufacturing Services Industrial Services
Agencies
ASEAN Asia Pacific Administration & Investment &

Legal Advisor Trade Services Sectoral Policy I MIDA
Economic Economic Finance Industrial Strategy
Cooperation Cooperation
Human Resource Manufacturing Restructuring of
Internal Audit Sectoral Policy II MATRADE
Management Services & Companies &
e-Commerce Industries
Information Coordination
Industry Services NPC
Technology Trade Practices
Media & Corporate

Communication SMIDEC
Resource Centre MIDF

MITI HEAD OFFICE JOHOR
Director
Johor Regional Office
Malaysia
Unit 15.01 and 15.02 Level 15, Wisma LKN
Block 10, Government Offices Complex
49 Jalan Wong Ah Fook
Jalan Duta
80000 Johor Bahru
50622 Kuala Lumpur
Johor
Malaysia
Tel : 60(7) 224 4639
Tel : 60(3) 6203 3022
Fax : 60(7) 224 9631
Fax : 60(3) 6203 2337
e-mail : zazman@miti.gov.my
60(3) 6203 1303
Website : www.miti.gov.my
KELANTAN
Director
MITI BRANCH OFFICES Ministry of International Trade and Industry
Kelantan Regional Office
PULAU PINANG 5th Floor, PKINK Building
Director Jalan Tengku Maharani Puteri
Ministry of International Trade and Industry 15000 Kota Bharu
Pulau Pinang Regional Office Kelantan
8th Floor, Tuanku Syed Putera Building Tel : 60(9) 748 3457
10300 Pulau Pinang Fax: : 60(9) 744 4167
Pulau Pinang e-mail : pghkb@miti.gov.my
Tel : 60(4) 262 5133
Fax : 60(4) 262 5131 SABAH
e-mail : lan@miti.gov.my Director
PERAK Sabah Regional Office
Director 3rd Floor, Block D & E
Ministry of International Trade and Industry KWSP Building
Perak Regional Office 49, Jalan Karamunsing
4th Floor, Wisma Wan Mohamed 88622 Kota Kinabalu
Jalan Panglima Bukit Gantang Wahab Sabah
P.O. Box 210 Tel : 60(88) 236 061
30720 Ipoh Fax : 60(88) 235 645
Perak e-mail : salehim@miti.gov.my
Tel : 60(5) 241 7751
Fax : 60(5) 241 7754 SARAWAK
e-mail : a_rizal@miti.gov.my Director
PAHANG
Sarawak Regional Office
Director
3rd Floor, Bank Negara Malaysia Building
Jalan Satok
Pahang Regional Office
93400 Kuching
Suite 8, 9th Floor, Teruntum Complex
Sarawak
Jalan Mahkota, P.O. Box 74
Tel : 60(82) 257 164
25000 Kuantan
Fax : 60(82) 417 835
Pahang
e-mail : abrahman@miti.gov.my
Tel : 60(9) 513 0851
Fax : 60(9) 513 0873
e-mail : nzainal@miti.gov.my
276
MITI OFFICES TOKYO
Minister Counsellor (Economy)
OVERSEAS
Department of Trade Affairs
Embassy of Malaysia
20-16 Nanpeidai-Cho
WASHINGTON DC Shibuya-ku
Minister Counsellor (Economics) Tokyo 150-0036
Embassy of Malaysia Japan
3516 International Court NW Tel : 81(3) 3476 3844
Washington DC 20008 Fax : 81(3) 3476 4972
United States of America e-mail : metrade1@ninus.ocn.ne.jp
Tel : 1(202) 572 9710
1(202) 572 9734 BEIJING
1(202) 572 9700 Minister Counsellor (Economy)
Fax : 1(202) 572 9782 Embassy of Malaysia (Economic Section)
1(202) 572 9882 No. 2 Liang Ma Qiao Bei Jie
e-mail : mitimydc@erols.com Chaoyang District
100600 Beijing
GENEVA The People's Republic of China
Minister Counsellor (Economics) Tel : 86(10) 6532 7990
Permanent Mission of Malaysia to the WTO 86(10) 6532 2533 ext: 235
International Centre Cointrin (ICC) Fax : 86(10) 6532 5032
3rd Floor, Block C e-mail : mitibj@china.com
20, Route de Pre-Bois
Case Postale 1909 NEW DELHI
CH 1215 Geneva 15 Minister Counsellor (Economy Affairs)
Switzerland High Commision of Malaysia
Tel : 41(22) 799 4040 50-M, Satya Marg
Fax : 41(22) 799 4041 Chanakyapuri
e-mail : muhd.noor@ties.itu.int New Delhi 110021
India
LONDON
Tel : 91(11) 2687 4865
Minister Counsellor (Economy)
91(11) 2611 1291/1297
Malaysian Trade Commission
91(11) 2688 1538
17, Curzon Street
Fax : 91(11) 2688 2372/1538
London W1J 5HR
e-mail : subash@miti.gov.my
United Kingdom
subash@tradenewdelhi.net
Tel : 44(20) 7499 7388
Fax : 44(20) 7493 3199
JAKARTA
BRUSSELS Counsellor (Economy)
Minister Counsellor (Economy) Embassy of Malaysia
Mission of Malaysia to the EU (Commercial Section)
Embassy of Malaysia in Belgium Jalan HR Rasuna Said, Kav X6
Avenue de Tervuren 414A No. 1-3 Kuningan
1150 Brussels Jakarta 12950
Belgium Indonesia
Tel : 32(2) 762 5939 Tel : 62(21) 522 4962
: 32(2) 776 0340 62(21) 522 4947
Fax : 32(2) 771 2380 Fax : 62(21) 522 4963
e-mail : miti.brussels@skynet.be e-mail : mitijkt@cbn.net.id
277
MANILA
Counsellor (Economy)
Embassy of Malaysia
(Trade Office)
3rd Floor, Malaysian Embassy Building
107 Tordesillas Street
Salcedo Village
Makati City
Metro Manila
Philippines
Tel : 63(2) 817 4581/4582/4583/4584/4585
63(2) 817 4551/4552/4553
Fax : 63(2) 816 3114
e-mail : tradecom@mozcom.com
SINGAPORE
Malaysian Trade Commission
80, Robinson Road #01-02
Singapore 068896
Singapore
Tel : (65) 6222 0126/1356/1357
Fax : (65) 6221 5121
e-mail : mitising@singnet.com.sg
BANGKOK
Embassy of Malaysia
Malaysia Trade Office
35, South Sathorn Road
Tungmahamek, Sathorn
Bangkok 10120
Thailand
Tel : 66(2) 679 2190-9
Ext: 2303, 2304, 2305
66(2) 679 2217
Fax : 66(2) 679 2200
e-mail : trade@samart.co.th
278
MIDA ORGANISATION CHART
MIDA BOARD MEMBERS
Chairman
Director General
MIDA Overseas Offices Deputy Director General I Deputy Director General II Government Representatives
Domestic Investment Promotion Foreign Investment Promotion
Manufacturing Services Petrochemical & Polymer Industries
Communications & Media Chemical & Life Sciences Industries
279
Information Management & Statistics ICT & Electrical Industries
MIDA State Offices Strategic Planning & International Cooperation Electronics Industries
Industry Support Machinery & Engineering Supporting Industries
Agro-based Industries Transport & Metal Industries
Textiles & Mineral Industries Secretariat
Director
Management Services
Corporate Management Services
Human Resource Development
Finance Management
Library Management
MIDA HEAD OFFICE JOHOR
Malaysian Industrial Development Authority
Room 15.03, Level 15
Malaysian Industrial Development Authority Wisma LKN
Block 4, Plaza Sentral No. 49, Jalan Wong Ah Fook
Jalan Stesen Sentral 5 80000 Johor Bharu
Kuala Lumpur Sentral Johor
50470 Kuala Lumpur Tel : 60(7) 224 2550/5500
Malaysia Fax : 60(7) 224 2360
Tel : 60(3) 2267 3633 e-mail : midajb@tm.net.my
Fax : 60(3) 2274 7970
e-mail : promotion@mida.gov.my KELANTAN
Website : www.mida.gov.my Malaysian Industrial Development Authority
5th Floor, Bangunan PKINK
MIDA STATE OFFICES

Jalan Tengku Maharani Puteri
15000 Kota Bharu
Kelantan
Tel : 60(9) 748 3151
PULAU PINANG
Fax : 60(9) 744 7294
e-mail : midakb@po.jaring.my
4.03, 4th Floor, Menara PSCI
39, Jalan Sultan Ahmad Shah
10050 Pulau Pinang MELAKA
Pulau Pinang
3rd Floor, Menara MITC
Tel : 60(4) 228 0575
Kompleks MITC
Fax : 60(4) 228 0327
Jalan Konvensyen
e-mail : midapg@po.jaring.my
75450 Ayer Keroh
Melaka
PERAK
Tel : 60(6) 232 2876/2877/2878
Fax : 60(6) 232 2875
2nd Floor, Perak Techno Trade Centre (PTTC)
e-mail : midamel@po.jaring.my
Bandar Meru Raya
Off Jalan Jelapang
KEDAH
30020 Ipoh
Perak
8th Floor, Bangunan PKNK
Tel : 60(5) 526 9961/9962
Jalan Sultan Badlishah
Fax : 60(5) 527 9960
05000 Alor Setar
e-mail : midaprk@po.jaring.my
Kedah
Tel : 60(4) 730 1203/731 3978
PAHANG
Fax : 60(4) 731 2439
Suite 3, 11th Floor e-mail : midaas@po.jaring.my
Kompleks Teruntum
P.O. Box 178 TERENGGANU
25720 Kuantan
5th Floor, Menara Yayasan Islam Terengganu
Pahang
Jalan Sultan Omar
Tel : 60(9) 513 7334
20300 Kuala Terengganu
Fax : 60(9) 513 7333
Terengganu
e-mail : midaphg@po.jaring.my
Tel : 60(9) 622 7200
Fax : 60(9) 623 2260
e-mail : midakt@pd.jaring.my
280
SABAH SAN JOSE
Malaysian Industrial Development Authority Malaysian Industrial Development Authority
4th Floor, Bangunan Bank Negara 226, Airport Parkway, Suite 480
Jalan Lapan Belas San Jose
Off Jalan Tun Razak California 95110
P.O. Box 11915 Tel : 1(408) 392 0617/0618
88821 Kota Kinabalu Fax : 1(408) 392 0619
Sabah e-mail : midasanjose@aol.com
Tel : 60(88) 211 411
Fax : 60(88) 211 412 CHICAGO
e-mail : midasbh@tm.net.my Malaysian Industrial Development Authority
John Hancock Center, Suite 1515
SARAWAK 875 North Michigan Avenue
Malaysian Industrial Development Authority Chicago
Room 404, 4th Floor Illinois 60611
Bangunan Bank Negara Tel : 1(312) 787 4532
No. 147, Jalan Satok Fax : 1(312) 787 4769
P.O. Box 716 e-mail : mida@midachicago.org
93714 Kuching
NEW YORK
Sarawak
Consul-Investment Consulate General of
Tel : 60(82) 254 251/237 484
Malaysia (Investment Section)
Fax : 60(82) 252 375
e-mail : mida_kch@tm.net.my
313 East, 43rd Street
New York
MIDA OFFICES NY 10017
Tel : 1(212) 687 2491
OVERSEAS Fax : 1(212) 490 8450

e-mail : mida@midany.org
EUROPE
UNITED STATES OF AMERICA
PARIS
BOSTON Malaysian Industrial Development Authority
Malaysian Industrial Development Authority 42, Avenue Kleber
2 Oliver Street, Suite 1107 75116 Paris
Boston France
MA 02109 Tel : 33(1) 4727 3689/6696
Tel : 1(617) 338 1128/1129 Fax : 33(1) 4755 6375
Fax : 1(617) 338 6667 e-mail : mida.paris@wanadoo.fr
e-mail : midaboston@aol.com
MILAN
LOS ANGELES Consul-Investment Consulate of Malaysia
Consul-Investment Consulate General of (Investment Section)
Malaysia (Investment Section) Malaysian Industrial Development Authority
Malaysian Industrial Development Authority 4th Floor, Via Vittor Pisani, 31
550, South Hope Street, Suite 400 20124 Milan
Los Angeles Italy
California 90071 Tel : 39(02) 6698 4614/4647
Tel : 1(213) 955 9183/9877 Fax : 39(02) 6698 4749
Fax : 1(213) 955 9878 e-mail : midamln@tin.it
e-mail : lacamida@aol.com
281
LONDON OSAKA
Director Malaysian Industrial Development Authority
Malaysian Industrial Development Authority 3rd Floor, Takahashi Building (Honkan)
17, Curzon Street 5-9-3, Nishi-Tenma, Kita-ku
London W1J 5HR Osaka 530-0047
United Kingdom Japan
Tel : 44(20) 7493 0616 Tel : 81(6) 6313 3121/3221
Fax : 44(20) 7493 8804 Fax : 81(6) 6313 3321
e-mail : midalon@btconnect.com e-mail : midaosaka@mida.or.jp
COLOGNE
SEOUL
Counsellor (Investment)
6th Floor, Rolex Haus
Embassy of Malaysia (Investment Section)
Dompropst-Ketzer-Str. 1-9
50667 Cologne
17th Floor, Korea First Bank Building
Germany
100, Gongpyung-dong
Tel : 49(221) 124 008/009
Jongro-gu, Seoul 110-702
Fax : 49(221) 136 198
Republic of Korea
e-mail : mida.cologne@t-online.de
Tel : 82(2) 733 6130/6131
STOCKHOLM Fax : 82(2) 733 6132
Embassy of Malaysia e-mail : midasel@chollian.net
Karlavagen 37 SHANGHAI
P.O. Box 26053 Consul (Investment)
S-10041 Stockholm Consulate General of Malaysia
Sweden Malaysian Industrial Development Authority
Tel : 46(8) 791 7690/7942 Units 807-809, Level 8
Fax : 46(8) 791 8761 Shanghai Kerry Centre
e-mail : mida@malemb.se No. 1515, Nanjing Road (West)
Shanghai 200040
ASIA PACIFIC Peoples' Republic of China
Tel : 86(21) 6289 4547/5298 6335
SYDNEY Fax : 86(21) 6279 4009
Malaysian Industrial Development Authority e-mail : midash@online.sh.cn.
Level 3, MAS Building
16 Spring Street, Sydney TAIPEI
NSW 2000 Director (Investment)
Australia Malaysian Friendship & Trade Centre
Tel : 61(2) 9251 1933 Malaysian Industrial Development Authority
Fax : 61(2) 9251 4333 8th Floor, San Ho Plastics Building
e-mail : midasyd@bigpond.net.au 102, Tun Hua North Road
Taipei 105
TOKYO
Taiwan
Tel : 886(2) 2713 2626
4th Floor, Aoyama, 246 Building
Fax : 886(2) 2514 7581
5-6-26, Minami Aoyama
e-mail : midatpe@ms18.hinet.net
Minato-ku, Tokyo 107-0062
Japan
Tel : 81(3) 3409 3680/3681
Fax : 81(3) 3409 3460
e-mail : midatokyo@midajapan.or.jp
282
MATRADE ORGANISATION CHART
BOARD OF DIRECTORS
Chief Executive Officer
Deputy Chief Executive Officer
283
Deputy Chief Executive Officer
(Promotion)
(Management Services & Development)
Internal Audit Unit
Product & Service Information

Asia / Africa America / Europe Pulau Pinang Branch Office Export Facilitation Strategic Planning Management
Promotion Technology &
Division Division Division Division Service Division
Division Statistics Division
Sabah Branch Office
Overseas Branch Offices

MATRADE HEAD OFFICE MATRADE OFFICES
Malaysia External Trade Development
Corporation
OVERSEAS
7th Floor, Wisma Sime Darby AFRICA
Jalan Raja Laut
50350 Kuala Lumpur CAIRO
Malaysia Embassy of Malaysia
Tel : 60(3) 2616 3333 Commercial Section (MATRADE)
Fax : 60(3) 2694 7362/7363 17th Floor, North Tower
Website : www.matrade.gov.my Nile City Building
Cornish El-Nil Street
Malaysia Export Exhibition Center (MEEC) Cairo
Ground Floor, Wisma PKNS Egypt
Jalan Raja Laut Tel : 2(02) 461 9063/9064
50350 Kuala Lumpur Fax : 2(02) 461 9065
Malaysia e-mail : cairo@matrade.gov.my
Tel : 60(3) 2692 8122
Fax : 60(3) 2698 4812 JOHANNESBURG
Malaysian Trade Centre
MATRADE Ground Floor, Building 5

Commerce Square Office Park
STATE OFFICES
39 Rivonia Road, Sandhurst
Sandton, Johannesburg
Republic of South Africa
PULAU PINANG Tel : 27(11) 268 2380/2381
Malaysia External Trade Development Fax : 27(11) 268 2382
Corporation e-mail : johannesburg@matrade.gov.my
1st Floor, FMM Building
2767, Mukim 1 NAIROBI
Lebuh Tenggiri 2 Malaysian Trade Commission
Bandar Seberang Jaya 3rd Floor, Victoria Towers
13700 Seberang Prai Tengah Kilimanjaro Avenue - Upper Hill
Pulau Pinang P.O. Box 48916
Tel : 60(4) 398 2020 00100 GPO Nairobi
Fax : 60(4) 398 2288 Kenya
e-mail : penang@matrade.gov.my Tel : 254(20) 273 0070/0071
Fax : 254(20) 273 0069
SABAH e-mail : nairobi@matrade.gov.my
Corporation
Lot C5.2A, 5th Floor, Block C
KWSP Building
Jalan Karamunsing
88100 Kota Kinabalu
Sabah
Tel : 60(88) 240 881/242 881
Fax : 60(88) 243 881
e-mail : sabah@matrade.gov.my
284
ASIA OSAKA
BEIJING Corporation (MATRADE)
Embassy of Malaysia 3rd Floor, Takahashi Building
Trade Section (MATRADE) 5-9-3, Nishi-tenma
C 501, & 502, Office Building Kita-ku
Beijing Lufthansa Center Osaka 530-0047
No 50, Liangmaqiao Road Japan
Chaoyang District Tel : 81(6) 6313 5015
Beijing 100016 Fax : 81(6) 6313 5016
People's Republic of China e-mail : osaka@matrade.gov.my
Tel : 86(10) 8451 5109/5110/5113
Fax : 86(10) 8451 5112 TOKYO
e-mail : beijing@matrade.gov.my Malaysia External Trade Development
Corporation (MATRADE)
GUANGDONG Ginza Showadori Building, 6F
Consulate General of Malaysia 8-14-14, Ginza, Chuo-Ku
Trade Section (MATRADE) Tokyo 104-0061
Unit 5305, Citic Plaza Office Tower Japan
233, Tianhe Bei Road Tel : 81(3) 3544 0712/0713
Guangzhou Fax : 81(3) 3544 0714
510610 Guangdong e-mail : tokyo@matrade.gov.my
People's Republic of China
Tel : 86(20) 3877 3865/3975 TAIPEI
Fax : 86(20) 3877 3985 Malaysian Friendship & Trade Centre
e-mail : guangzhou@matrade.gov.my Trade Section (MATRADE)
10F-D, Hung Kuo Building
SHANGHAI No. 167 Dun Hua North Road
Consulate General of Malaysia Taipei 105
Trade Section (MATRADE) Taiwan
Unit 807-809, Level 8 Tel : 886(2) 2545 2260
Shanghai Kerry Centre Fax : 886(2) 2718 1877
No. 1515, Nan Jing Road (West) e-mail : taipei@matrade.gov.my
Shanghai, 200040
People's Republic of China SEOUL
Tel : 86(21) 6289 4467/4420 Embassy of Malaysia
Fax : 86(21) 6289 4381 Trade & Investment Section
e-mail : shanghai@matrade.gov.my 17th Floor, SC First Bank Building
100, Gongpyung-Dong
HONG KONG Jongro-Gu
Consulate General of Malaysia Seoul 110-702
Trade Section (MATRADE) Republic of Korea
Ground Floor, Malaysia Building Tel : 82(2) 739 6812/6813/6814
50, Gloucester Road, Wanchai Fax : 82(2) 739 6815
Hong Kong SAR e-mail : seoul@matrade.gov.my
Tel : 85(2) 2527 8273/8109
Fax : 85(2) 2804 2866
e-mail : hongkong@matrade.gov.my
285
CHENNAI BANGKOK
Consulate General of Malaysia Embassy of Malaysia
Trade Section Trade Office (MATRADE)
Capitale 2A, 2nd Floor 35, South Sathorn Road
554 & 555 Anna Salai Tungmahamed, Sathorn
Teynampet Bangkok, 10120
Chennai 6000018 Thailand
India Tel : 66(2) 679 2131
Tel : 91(44) 2431 3722/3723 Fax : 66(2) 679 2200
Fax : 91(44) 2431 3725 e-mail : bangkok@matrade.gov.my
e-mail : chennai@matrade.gov.my
HO CHI MINH CITY
JAKARTA Consulate General of Malaysia
Embassy of Malaysia Trade Section (MATRADE)
Malaysia External Trade Development 1208, 12th Floor, Me Linh Point Tower
Corporation No. 2, Ngo Duc Ke Street
12th Floor, Plaza Mutiara District 1
Jl. Lingkar Kuningan Ho Chi Minh City
Kav. E.1.2, No. 1 & 2 Vietnam
Kawasan Mega Kuningan Tel : 84(8) 829 9023/8256
Jakarta 12950 Fax : 84(8) 823 1882
Indonesia e-mail : hcmc@matrade.gov.my
Tel : 62(21) 576 4297/4322
Fax : 62(21) 576 4321 WEST ASIA
e-mail : jakarta@matrade.gov.my
DUBAI
MANILA Consulate General of Malaysia
Embassy of Malaysia Malaysia Trade Centre
Trade Office (MATRADE) Lot 1-3 Ground Floor &
3/F, Malaysian Embassy Building 6-10 Mezzanine Floors
107 Tordesillas Street, Salcedo Village Al-Safeena Building, Near Lamcy Plaza
Makati City Zaabeel Road
Metro Manila P.O. Box 4598
Philippines Dubai
Tel : 63(2) 817 4581/4551/4553 United Arab Emirates
Fax : 63(2) 816 3114 Tel : 971(4) 335 5528/5538
e-mail : manila@matrade.gov.my Fax : 971(4) 335 2220
e-mail : dubai@matrade.gov.my
SINGAPORE
High Commission of Malaysia
JEDDAH
Commercial Section (MATRADE)
Consulate General of Malaysia
33-01/03 Shaw Tower
100, Beach Road
14th Floor, Saudi Business Centre
Singapore 189702
Madina Road
Singapore
P.O Box 20802
Tel : (65) 6392 2238
Jeddah 21465
Fax : (65) 6392 2239
Saudi Arabia
e-mail : singapore@matrade.gov.my
Tel : 966(2) 653 2143/2198
Fax : 966(2) 643 0274
e-mail : jeddah@matrade.gov.my
286
AUSTRALIA MILAN
Consulate of Malaysia
SYDNEY Commercial Section (MATRADE)
Consulate of Malaysia 5th Floor, Via Vittor Pisani, 31
Commercial Section (MATRADE) 20124 Milan
Level 4, Malaysia Airlines Building Italy
16 Spring Street, Sydney Tel : 39(02) 669 0501
NSW 2000 Fax : 39(02) 670 2872
Australia e-mail : milan@matrade.gov.my
Tel : 61(2) 9252 2270
Fax : 61(2) 9252 2285 MOSCOW
e-mail : sydney@matrade.gov.my Embassy of Malaysia
Trade Section (MATRADE)
EUROPE Mosfilmovskaya Ulitsa 50
Moscow 117192
PARIS Federation of Russia
Service Commercial De Malaisie Tel : 7(095) 147 1514/1523
(MATRADE) Fax : 7(095) 143 6043
De L'Ambassade De Malaisie e-mail : moscow@matrade.gov.my
90, Avenue des Champs Elysees
75008 Paris THE HAGUE
France Embassy of Malaysia
Tel : 33(1) 4076 0000/0034 Commercial Section (MATRADE)
Fax : 33(1) 4076 0001 Rustenburgweg 2
e-mail : paris@matrade.gov.my 2517 KE The Hague
The Netherlands
COLOGNE Tel : 31(010) 462 7759
Embassy of Malaysia Fax : 31(010) 462 7349
Trade Section (MATRADE) e-mail : rotterdam@matrade.gov.my
Rolex Haus, 6 Etage
Dompropst-Ketzer-Strasse 1-9 LONDON
50667 Cologne High Commission of Malaysia
Germany Commercial Section
Tel : 49(221) 124 000/007 3rd & 4th Floor
Fax : 49(221) 139 0416 17 Curzon Street
e-mail : cologne@matrade.gov.my London W1J 5HR
United Kingdom
BUDAPEST Tel : 44(20) 7499 5255/4644
Embassy of Malaysia Fax : 44(20) 7499 4597
Trade Section (MATRADE) e-mail : london@matrade.gov.my
Ground Floor, Museum Atrium
Dozsa Gyorgy ut 84/b
1068 Budapest
Hungary
Tel : 36(1) 461 0290
Fax : 36(1) 461 0291
e-mail : budapest@matrade.gov.my
287
NORTH AMERICA SANTIAGO
Oficina Commercial De Malasia
LOS ANGELES (MATRADE)
Consulate General of Malaysia Embajada De Malasia
Commercial Section (MATRADE) Avda. Tajamar 183
550 South Hope Street, Suite 400 Oficina 302 - Las Condes
Los Angeles California 90071 Santiago
United States of America Chile
Tel : 1(213) 892 9034 Tel : 56(2) 234 2647
Fax : 1(213) 955 9142 56(2) 431 0080
e-mail : losangeles@matrade.gov.my Fax : 56(2) 234 2652
e-mail : santiago@matrade.gov.my
MIAMI
Malaysia Trade Center
5201 Blue Lagoon Drive
Suite 928
Miami
Florida 33126
United States of America
Tel : 1(305) 716 4265/4266/4267
Fax : 1(305) 716 4264
e-mail : miami@matrade.gov.my
NEW YORK
Consulate General of Malaysia
3rd Floor, 313 East, 43rd Street
New York, NY 10017
United States of America
Tel : 1(212) 682 0232
Fax : 1(212) 983 1987
e-mail : newyork@matrade.gov.my
SOUTH AMERICA
SAO PAULO
Embassy of Malaysia
Trade Office (MATRADE)
771, Alameda Santos
Suite 72, 7th Floor
01419-001, Sao Paulo
Brazil
Tel : 55(11) 3285 2966
Fax : 55(11) 3289 1595
e-mail : saopaulo@matrade.gov.my
288
NPC ORGANISATION CHART
BOARD OF DIRECTORS
Director General
Deputy Director General I Regional Offices Deputy Director General II
289
Training & Systems
Industry Research P&Q Promotion Policy Research Corporate Services Northern Region Southern Region Sarawak Best Practices Services Research
Development
Division Division Division & Finance Division Office Office Region Office Division Division
Division
Management
Human Resource Corporate Secretariate East Coast Region Sabah Region Business Resource Information
Information System
Development Unit & Quality Audit Unit Office Office Development Unit Centre Unit
Unit
Accreditation &
Joint Venture Unit
International
Competitiveness
Unit
Asian Productivity
Organisation
NPC HEAD OFFICE EAST COAST
National Productivity Corporation

National Productivity Corporation 18th Floor, Kompleks Teruntum
Lorong Produktiviti Jalan Mahkota
Off Jalan Sultan 25000 Kuantan
P.O Box 64 Pahang
46904 Petaling Jaya Tel : 60(9) 513 1788/1789
Selangor Fax : 60(9) 513 8903
Tel : (603) 7955 7266/7050/7085 e-mail : npcwpt@npc.org.my
Fax : (603) 7957 8068/7955 1824/
7958 1697 SABAH
e-mail : marketing@npc.org.my
mcc@npc.org.my National Productivity Corporation
Website : www.npc.org.my Lot 7.7 & 7.8, 7th Floor
Block E, Bangunan KWSP
NPC REGIONAL
49, Jalan Karamunsing
88000 Kota Kinabalu
Sabah
OFFICES Tel
Fax
: 60(88) 233 245/456 498
: 60(88) 242 815
e-mail : npcwsb@npc.org.my
NORTHERN
SARAWAK
P.O Box 206 National Productivity Corporation
Jalan Bertam Lot 894, Lorong Demak Laut 3A,
13200 Kepala Batas Taman Perindustrian Demak Laut
Pulau Pinang Jalan Bako
Tel : 60(4) 575 4709 93050 Kuching
Fax : 60(4) 575 4410 Sarawak
e-mail : nro@npc.org.my Tel : 60(82) 439 959/960
Fax : 60(82) 439 969
SOUTHERN e-mail : sko@npc.org.my

No. 8, Jalan Padi Mahsuri
Bandar Baru UDA
82100 Johor Bahru
Johor
Tel : 60(7) 237 7422/7644
Fax : 60(7) 238 0798
e-mail : sro@npc.org.my
290
SMIDEC ORGANISATION CHART
MEMBERS OF THE CORPORATION
Chief Executive Officer
Promotion & Publication Strategic Planning Corporate Advisory Service Financial Assistance
Enterprise Development
Division Division Division & Technical Support & Monitoring
Division
Division Division
Policy & Planning Administration Industrial Linkage Information & Financial Assistance
Promotion Unit
Unit Unit Unit Advisory & Monitoring Unit
Service Unit
291
Research & Data Training & Human e-Business
Publication Unit
Management Unit Resource Unit
Unit SME Expert & Skill
Development Unit
Technology
Information Development Unit
Technology Unit
(System) Northern Regional
Office
Accounts &
Finance Unit Southern Regional
Office
Eastern Regional
Office
Sarawak Office
Sabah Office
SMIDEC HEAD OFFICE EAST COAST
Small and Medium Industries Development

Small and Medium Industries Development Corporation
Corporation Suite 9.01 & 9.02
701D, Level 7, Tower D, Uptown 5 Tingkat 9, Kompleks Teruntum
No.5, Jalan SS21/39 Jalan Mahkota
Damansara Uptown 25000 Kuantan
Damansara Utama Pahang
47400 Petaling Jaya Tel : 60(9) 512 6677/6678/6679
Selangor Fax : 60(9) 512 6676
Tel : 60(3) 7628 7400
Fax : 60(3) 7660 1919 SABAH
Toll free : 1 800 18 1801
e-mail : info@smidec.gov.my Small and Medium Industries Development
Website : www.smidec.gov.my Corporation
Lot 17, Blok A
SMIDEC REGIONAL
Tingkat 1,2 & 3 Kompleks SEDCO
Kampung Air, Jalan Laiman Diki
88000 Kota Kinabalu
OFFICES Sabah
Tel: 60(88) 255 850
Fax: 60(88) 255 603
NORTHERN
SARAWAK
Corporation Small and Medium Industries Development
No. 16 Corporation
Lorong Perindustrian Bukit Minyak 2 3rd Floor, Menara Grand
Taman Perindustrian Bukit Minyak Lot 42, Section 46
14100 Seberang Perai Jalan Ban Hock
Pulau Pinang 93100 Kuching
Tel : 60(4) 502 4207/4208 Sarawak
Fax : 60(4) 502 4205 Tel : 60(82) 252 955/238 955/256 955
Fax : 60(82) 253 955
SOUTHERN

Corporation
Aras Bawah, Wisma YPJ Holdings
No. 5, Jln. Sri Perkasa 1/3
Taman Tampoi Utama
81200 Johor Bahru
Johor
Tel : 60(7) 241 6031/6034/6100
Fax : 60(7) 241 6036/2862
292
MIDF ORGANISATION CHART
BOARD OF DIRECTORS
Board Risk Management ESOS Committee Board Executive Nomination &

& Audit Committee Committee Remuneration Committee
293
GROUP MANAGING DIRECTOR
Group Corporate Services Division Development Finance Division
Finance, Information Communication & Strategic Planning &

Control Assurance Risk Management Secretarial Human Resources & Project Support
Technology & Investor Relations Business Development Projects Department
Service Group Group & Legal Group Administration Group Department
Organisation & Group Group
Methods Group
MIDF CORPORATE SOUTHERN
OFFICE
Malaysia Industrial Development Finance
Berhad
Rooms 202 - 203
1st Floor, Bank Negara Building
Malaysian Industrial Development Finance
Jalan Bukit Timbalan
Berhad
80000 Johor Bahru
21st Floor, Amanah Capital Building
Johor
82, Jalan Raja Chulan
Tel : (607) 223 2727/224 3046
50200 Kuala Lumpur
Fax : (607) 223 5578
Malaysia
e-mail : johor@midf.com.my
Tel : 60(3) 2161 9011
Fax : 60(3) 2161 7580
KELANTAN
e-mail : infoseru@ac.amanah.com.my
Website : www.amanah.com.my
Berhad
MIDF HEAD OFFICE 5th Floor, PKINK Building
Jalan Tengku Maharani
P.O. Box 189
MIDF Berhad (3755-M) 15720 Kota Bharu
13th Floor, Bangunan MIDF Kelantan
195A Jalan Tun Razak Tel : 60(9) 748 3546
P.O.Box 12110 Fax : 60(9) 747 0389
50400 Kuala Lumpur e-mail : kotabharu@midf.com.my
Tel : 60(3) 2161 0066
Fax : 60(3) 2161 5973 PERAK
e-mail : inquiry@midf.com.my
Website : www.midf.com.my Malaysia Industrial Development Finance
Berhad
MIDF BRANCH OFFICES Lot 3-07C
3rd Floor, Seri Kinta Building
Jalan Sultan Idris Shah
NORTHERN 30000 Ipoh
Perak
Malaysia Industrial Development Finance Tel : 60(5) 241 1166/1157
Berhad Fax : 60(5) 254 2401
4th Floor, Wisma Leader e-mail : perak@midf.com.my
No. 8, Jalan Larut
P.O. Box 445 EAST COAST
10760 Pulau Pinang
Tel : 60(4) 229 8434/8435/8436 Malaysia Industrial Development Finance
Fax : 60(4) 229 8437 Berhad
e-mail : penang@midf.com.my B274, Grand & 1st Floor
Jalan Berserah
25300 Kuantan
Pahang
Tel : 60(9) 552 2485/552 6477
Fax : 60(9) 555 4740
e-mail : eastcoast@midf.com.my
294
SABAH

Berhad
3rd Floor, Bank Negara Malaysia Building
Jalan Tun Razak, Sinsuran
P.O. Box 11415
88815 Kota Kinabalu
Sabah
Tel : 60(88) 211 633
Fax : 60(88) 211 940
e-mail : sabah@midf.com.my
SARAWAK

Berhad
Rooms 401/402
4th Floor, Bank Negara Malaysia Building
Jalan Satok
P.O. Box 972
93720 Kuching
Sarawak
Tel : 60(82) 254 533
Fax : 60(82) 246 343
e-mail : sarawak@midf.com.my
295
Appendix 7 Abbreviations And Acronyms
3G Third Generation
4WD Four-Wheel Drive
ACS Assemblies for Construction Sites
AFAS ASEAN Framework Agreement on Services
AFTA ASEAN Free Trade Area
AHTN ASEAN Harmonised Tariff Nomenclature
AIA ASEAN Investment Area
AICO ASEAN Industrial Cooperation
AIDS/HIV Acquired Immunodeficiency Syndrome/Human Immunodeficiency Virus
AISP ASEAN Integration System of Preferences
AMBDC ASEAN Mekong Basin Development Cooperation
APEC Asia Pacific Economic Cooperation
ASEAN Association of South East Asian Nations
ASEAN 6 Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand
ASEAN+3 ASEAN, People's Republic of China, Japan and Republic of Korea
ASEM Asia-Europe Meeting
B2B Business-to-Business
B2C Business-to-Consumer
BIMP-EAGA Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area
BOP Balance of Payments
CARICOM Caribbean Community and Common Market
CBU Completely Built-Up
CCC mark China Compulsory Certification Mark
CD-ROM Compact Disc Read-Only Memory
CeBIT Centre for Office and Information Technology
CEP Comprehensive Economic Partnership
CEPT Common Effective Preferential Tariff
CIDB Construction Industry Development Board
CIPE Capital Investment per Employee Ratio
CKD Completely Knocked-Down
CLMV Cambodia, Lao PDR, Myanmar and Viet Nam
COMCEC Standing Committee on Economic and Trade Cooperation
CRC Cold-Rolled Coils
D-8 Group of Eight Developing Countries
DEHP Di (2-ethylhexyl) phthalate
DWT Dead Weight Tonnes
E&E Electrical and Electronics
EAFTA East Asia Free Trade Area
EC European Commission
ECOTECH Steering Committee on Economic and Technical Cooperation
EFTA European Free Trade Association
EHP Early Harvest Programme
EU European Union
297
FDI Foreign Direct Investment
FTAs Free Trade Agreements
G-15 Group of Fifteen
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs And Trade
GCC Gulf Cooperation Council
GDP Gross Domestic Product
GMP Good Manufacturing Practice
GSP Generalised System of Preferences
GSTP Global System of Trade Preferences
HACCP Hazard Analysis Critical Control Point
HRC Hot-Rolled Coils
HS Customs Harmonised System
IAI Initiative for ASEAN Integration
ICDT Islamic Centre for Development of Trade
ICs Integrated Circuits
ICS International Classification for Standards
ICT Information and Communication Technology
IDB Islamic Development Bank
ILP Industrial Linkage Programme
IMF International Monetary Fund
IMP2 Second Industrial Master Plan
IMP3 Third Industrial Master Plan
IMT-GT Indonesia-Malaysia-Thailand Growth Triangle
IOR-ARC Indian Ocean Rim-Association for Regional Cooperation
IP Code International Protection Code
IPCs International Procurement Centres
IPR Intellectual Property Rights
ISO/TS International Organisation for Standards/Technical Specification
IT Information Technology
JAKIM Jabatan Kemajuan Islam Malaysia
JMEPA Japan-Malaysia Economic Partnership Agreement
LDCs Least Development Countries
LNG Liquefied Natural Gas
M&E Machinery and Equipment
MATRADE Malaysia External Trade Development Corporation
MDC Multimedia Development Corporation
MEAs Multilateral Environmental Agreements
MERCOSUR Latin American Southern Cone Common Market
MFA Multi Fibre Agreement
MFN Most Favoured Nation
MICCI Malaysian International Chamber of Commerce and Industry
MICE Meetings, Incentives, Conferences and Exhibitions
MIDA Malaysian Industrial Development Authority
MIDF Malaysian Industrial Development Finance Berhad
MIHAS Malaysian International Halal Showcase
MISIF Malaysian Iron and Steel Industry Federation
MITI Ministry of International Trade and Industry
MNCs Multinational Corporations
MP3 Media Players
298
MPOB Malaysian Palm Oil Board
MPVs Multi-purpose Vehicles
MRA Mutual Recognition Arrangement
MS Malaysian Standard
MS IEC Malaysian Standards International Electrotechnical Commission
MSC Malaysia Multimedia Super Corridor of Malaysia (effective 7 April 2006)
MTCC Malaysian Timber Certification Council
MTCP Malaysian Technical Cooperation Programme
MyICMS886 Malaysian Information, Communication and Multimedia Services 886
NAFTA North America Free Trade Area
NAMA Non-Agriculture Market Access
NAP National Automotive Policy
NPC National Productivity Corporation
OECD Organisation for Economic Cooperation and Development
OHQs Operational Headquarters
OIC Organisation of Islamic Conference
PEKEMA Persatuan Pengimport dan Peniaga Kenderaan Melayu
PERODUA Perusahaan Otomobil Kedua
PIKOM Association of the Computer and Multimedia Industry, Malaysia
PROTON Perusahaan Otomobil Nasional
PTA Preferential Trading Arrangement
PTP Port of Tanjung Pelepas
R&D Research and Development
RBD Refined, Bleached & Deodorised
RDCs Regional Distribution Centres
REACH Registration, Evaluation and Authorisation of Chemicals
RTAs Regional Trade Arrangements
S&D Special and Differential
SAARC South Asian Association for Regional Cooperation
SAFTA South Asian Free Trade Area
SLFR Soft Loan for Factory Relocation
SLICT Soft Loan for ICT Adoption
SLSME Soft Loan for Small and Medium Enterprises
SMEs Small and Medium Enterprises
SMIDEC Small and Medium Industries Development Corporation
SOMTI Senior Officials Meetings on Trade and Investment
SPS Sanitary and Phytosanitary Standards
TBT Technical Barriers to Trade
TFP Total Factor Productivity
TNC Trade Negotiation Committee
TPS-OIC Trade Preferential System Among the Member States of the OIC
TRIPs Agreement on Trade-Related Aspects of Intellectual Property Rights
UK United Kingdom
UNCTAD United Nations Conference on Trade and Development
USA United States of America
WCO World Customs Organisation
WTO World Trade Organisation
299
www.miti.gov.my

Ysia Mala: International Trade and Industry

Uploaded by

Copyright:

Available Formats

Ysia Mala: International Trade and Industry

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ysia Mala: International Trade and Industry

Uploaded by

Copyright:

Available Formats

MALAYSIA

INTERNATIONAL TRADE AND INDUSTRY

Ministry of International Trade and Industry

Ministry of International Trade and Industry

For sale of copies and further technical information refer to:

Design, layout and publication services by:

Information Broadcasting Network (M) Sdn Bhd

Ampang Press Sdn Bhd

In respect of Malaysia's external sector, total trade increased by 9.9 per

Output of the manufacturing sector expanded by 5.1 per cent, with

In this Report, a new chapter on the performance of the services sector

In 2005, Malaysia continued to attract a significant level of investments,

At the multilateral level, Malaysia continues to participate in WTO

DATO' SERI RAFIDAH AZIZ

Table 1.1: World Real GDP Growth...................................................................................... 3

Table 2.1: External Trade ...................................................................................................... 11

Table 3.1: Halal Certifications Awarded to Companies, 2005.............................................. 36

Table 4.1: Approved Manufacturing Projects ....................................................................... 46

Table 5.1: Manufacturing Sector Performance, 2005 ........................................................... 63

Table 6.1: Accredited Professional Services ......................................................................... 123

Chart 4.1: Investments in Projects Approved, 1996-2005 .................................................... 45

Chart 6.1: Contribution of Services Sub-Sectors to Real GDP, 2005................................... 119

Box 2.1: Malaysia and Free Trade Area Agreements ......................................................... 29

Box 5.1: National Automotive Policy ................................................................................. 74

Box 10.1: ASEAN-China Free Trade Area .......................................................................... 189

Appendix 1: Organisations and Groupings - Membership ....................................................... 217

OVERVIEW inflows. The United Kingdom (UK) was the

USA 3.5 12,485.7 4.2

Latin America Canada 2.9 1,130.2 2.9

2005 Change 2004 2005 Change 2004

World 10,121.0 13.0 8,956.6 10,481.0 13.0 9,275.2

Asia 2,773.0 15.0 2,411.3 2,599.0 16.0 2,240.5

ASEAN 10 653.0 14.0 572.8 593.0 16.0 511.2

West Asia 529.0 36.0 389.0 318.0 19.0 267.2

Source: World Trade Organisation, 2006

In 2005, Asia accounted for US$543 billion or North America

1 Germany 970.7 9.3 7.0 1 USA 1,732.7 16.1 14.0

Source: World Trade Organisation, 2006

1 USA 353.3 14.6 10.0 1 USA 288.7 12.2 10.0

Source: World Trade Organisation, 2006

Africa while imports expanded by 22 per cent

Latin America INVESTMENT DEVELOPMENTS

World 896.7 100.0 29.0 695.0 9.0

Foreign Direct Investments in OUTLOOK

OVERVIEW Table 2.1:

Driven by economic expansion in both Trade Balance 99.8 23.7 80.7

RM billion Share Change RM billion Share

Total Trade 967.8 100.0 9.9 880.8 100.0

USA 161.0 16.6 8.7 148.1 16.8

Compiled by Ministry of International Trade and Industry

Description 2005 2004

RM billion Share Change RM billion Share

Total Exports 533.8 100.0 11.0 480.7 100.0

Manufactured Exports 413.1 77.4 9.6 376.8 78.4

Agricultural Exports 41.2 7.7 0.2 41.1 8.6

Mining Exports 70.2 13.2 26.9 55.3 11.5

Compiled by Ministry of International Trade and Industry

Country 2005 2004

RM billion Share Change RM billion Share