EU-MALAYSIA BUSINESS · 2019-04-19 · EUMCCI Trade Issues and Recommendations 2016 EU-MALAYSIA...

EUMCCI Trade Issues and Recommendations 2016

EU-MALAYSIABUSINESS

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EU-Malaysia Chamber of Commerce and IndustrySuite 10.01, Level 10, Menara Atlan, 161B Jalan Ampang, 50450 Kuala Lumpur, MalaysiaTel: +603 2162 6298 Fax: +603 2162 6198 E-mail: [email protected]

Partners:

Associate Partners:

This document has been produced with partial financial assistance of the European Union. The contents of this document are the sole responsibility of EUMCCI and can under no circumstances be regarded as reflecting the position of the European Union.

For all editorial enquiries, or to order a copy of this publication, please call: (+60) 03-2162 6298 or contact us at: [email protected].

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the prior written permission of EUMCCI.

Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, �nancial or otherwise, sustained by any person using this publication.

EU-Malaysia Chamber of Commerce and IndustrySuite 10.01, Level 10, Menara Atlan, 161B Jalan Ampang, 50450 Kuala Lumpur, MalaysiaTel: +603 2162 6298 Fax: +603 2162 6198 E-mail: [email protected]

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TS Introduction .. ...................................................................................................... 4

1 EU-Malaysia Chamber of Commerce and Industry . ....................................... 5

2 Overview of Malaysian Economy .................................................................. 11

Economic Outlook for Malaysia 2016 ............................................................... 12

ASEAN Economic Outlook for 2016 ................................................................. 14

3 Key Measures .................................................................................................. 15

4 SEBSEAM Market Reports: Executive Summary .......................................... 19

5 Issues by Sector .............................................................................................. 27

5.1 Aerospace ................................................................................................. 28

5.2 Automotive ................................................................................................ 32

5.3 Green Building and Sustainable Communities ............................................ 39

5.4 Human Resources ..................................................................................... 42

5.5 Logistics & Transport ................................................................................. 47

5.6 Research and Innovation ........................................................................... 52

5.7 Smart Grid Technologies in Malaysia .......................................................... 53

5.8 Wines & Spirits .......................................................................................... 57

6 EU-ASEAN Business Council: ASEAN Key Measures .................................. 61

7 Appendix ....................................................................................................... 65

Table A1 The Global Competitiveness Index 2015-2016 and 2014-2015 comparisons .................................................................................... 66

Table A2 Malaysia’s Total Trade 1991-2015 .................................................... 68

Table A3 Malaysia’s Trade with European Union 1991-2015 ........................... 69

Table A4 Malaysia’s Total Trade By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU)) ..... 70

Table A5 Malaysia’s Total Export By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU)) ..... 71

Table A6 Malaysia’s Total Import By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU)) ..... 72

Table A7 Doing Business in Malaysia .............................................................. 73

Table A8 Manufacturing Project Investment In Malaysia By Country, 2015 ...... 73

Table A9 Manufacturing Projects Investment In Malaysia By Country, 1980-2015 ....................................................................................... 74

Table A10 Manufacturing Project Investment In Malaysia By EU Country, 2015 ... 74

Table A11 Manufacturing Project Investment In Malaysia By EU Country, 2015 ... 75

Table A12 Service Sector Investment in Malaysia by EU Country, 2006 - 2015 .................................................................................... 75

Table A13 Total Trade By Major Trade Partners 2015 ........................................ 76

Table A14 Total Trade By Major Trade Partners Divided Into Imports And Exports 2015 ............................................................................ 76

EUMCCI Trade Issues and Recommendation 20164

The EU-Malaysia Chamber of Commerce and Industry (EUMCCI) is established with the aim to facilitate trade and investment between the European Union and Malaysia. With that mission, we are proud to present to you our annual EUMCCI Trade Issues and Recommendations 2016 publication.

This publication raises key issues in specific sectors in Malaysia, reflective of the business experience of EUMCCI’s industry committees. We hope these recommendations contribute to further improving the business environment in Malaysia, and to the overall promotion of Malaysia as a regional hub and gateway to ASEAN.

The EUMCCI Committees work hand-in-hand with key players in their respective industries to provide on the ground perspectives on trade issues between the European Union and Malaysia. Following the successful negotiation of several trade agreements, the Ministry of International Trade and Industry have announced that Malaysia and the European Union have agreed to resume discussion on an EU-Malaysia free trade agreement (FTA) after several years. This is good news for many businesses in Malaysia as this will further accelerate investments coming into Malaysia.

The EU is Malaysia’s third largest trading partner, and second largest source of foreign direct investment. EUMCCI is confident that the EU, as the world’s largest economy with 28% share of global GDP, will continue to strengthen its presence in Malaysia and contribute to long term sustainable growth.

Sincerely,

Fermin FautschChairman

FO

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EUMCCI Trade Issues and Recommendation 2016 5


EU-MALAYSIA BUSINESS

EU-Malaysia Chamber of

Commerce and Industry


1. EU-Malaysia Chamber of Commerce and IndustryAbout Us

EUMCCI’s mission is to promote, support and develop EU business interests in Malaysia, as well as facilitate trade, commerce and investments between the EU and Malaysia. In order to fulfil its mission, EUMCCI carries out activities that will catalyse and stimulate the exchange, collaboration, and partnership of European companies in Malaysia with the Malaysian business community, business associations, relevant ministries, official representations and other Chambers in Asia since 2003.

Objectives

• High profile lobbying/dialogue with institutions, government• Speed up decisions and actions within the ministries and authorities• Promote and market EU technologies, SMEs products and services in Malaysia• Facilitate the dialogue between the European private sector and Malaysian government• To develop and enhance EU position and image in Malaysia

EUMCCI Committees – Strong Lobbying Tool

The EUMCCI Committees are platforms for EUMCCI members of specific sectors. The Committees meet regularly to discuss issues affecting their particular industries, to hold seminars with guest speakers from the government, academia and business and to lobby with the government. Each committee is responsible for writing a position paper outlining the most pressing business problems and recommendations for the government to reduce these issues. Every year all papers drafted by the Committees are compiled into the EUMCCI ‘Trade Issues & Recommendations’ paper. This document is circulated among government administrations, relevant authorities in Malaysia and the European Commission in Brussels.

At the moment, EUMCCI has the following committees:

Aerospace

Head of Committee : Mr. David A Jones, General Manager, RUAG Aviation Malaysia Sdn Bhd

Deputy Head : Mr. David F.J Davies, Chief Executive Officer, SME Aerospace Sdn Bhd

The EUMCCI Aerospace Committee offers members a platform to discuss and raise key issues that are affecting the Aerospace Industry. The Committee provides members the space to exchange, brainstorm and develop new ideas to strengthen the representation of major companies in the industry to help promote Malaysia as the ASEAN Aerospace Hub.

The Committee aims are:

1. To ensure the EUMCCI Aerospace Committee is recognised by government stakeholders

2. To ensure the Malaysian Aviation Safety Standards are in compliance with the European Safety Agency (EASA)

3. To promote and increase the European Airlines presence in Malaysia

4. To address the issue of human capital in Malaysia specifically to the Aerospace Industry

5. To develop Malaysia into the centre for Aerospace Manufacturing


Automotive

Head of Committee : Mr. Klaus Landhaeusser, General Manager, Automotive Sales, Original Equipment, South East Asia (AZ/SOE-MY), Robert Bosch Sdn Bhd

Deputy Head : VACANT

The goals of the EUMCCI Automotive Committee are to raise the issues related to automotive industry with the Malaysian authorities, and build a constructive working relationship to ensure a cooperative approach with market access or regulatory issues and to develop Malaysia into the ASEAN Automotive Hub


1. To advocate for Malaysian Vehicle Safety Standards to be in compliance with the UNECE Standards

2. To assist Malaysia in increasing motor vehicle emission standards from Euro 2 - Euro 4

3. To propose and recommend that Malaysia reviews the Fuel Quality to be in compliance with the

EU Fuel Quality Directive

4. To address the issue of human capital in the Automotive Industry in Malaysia

5. To conduct an analysis on the strengthens & opportunities of the automotive industry in Malaysia

Green Building and Sustainable Communities Committee

Head of Committee : Gregers Reimann, Managing Director IEN Consultants Sdn Bhd

Deputy Head : Mr. Allan H.Jensen, Senior Director, Danfoss Asia-Pacific

The goal of the EUMCCI Green Buildings and Sustainable Communities (GBSC) Committee is to advocate for changes in construction practice and technology, to reduce the environmental impacts of the built environment, while creating an opportunity for Malaysia to become more competitive in the international property Market.


1. To promote and encourage the green building practice in Malaysia among the construction industry

2. To coordinate with government stakeholders to develop green building standards

3. To lobby for mandatory energy efficiency label for buildings


Human Resources

Head of Committee : Mr. R. Ravindra Kumar, Partner Raja Darryl & Loh – Advocates and Solicitors Deputy Head : VACANT

The EUMCCI HR Committee goal is to actively gather feedback and views from members on important and pressing HR issues and channel them to the relevant stakeholders. The committee also promotes the importance of human capital in general and among member companies specifically.

The Committee aims to: 1. Address changes in the legislations that would affect business and update members on these changes

2. Work with universities and industry players to improve the quality of fresh graduates

3. Engage with Ministry of Human Resources and Ministry of Education to address the Issue of

underqualified talent. The period shouldn’t be there for the document to be more consistent.

4. Further strengthen stakeholder relationships with Immigration Department, MIDA, TalentCorp, MDeC

Logistics and Transportation

Head of Committee : Mr. Claus Kuhnert, Director Contract Logistics/SCM, Schenker Logistics (Malaysia) Sdn Bhd Deputy Head : VACANT

The EUMCCI Logistics & Transportation Committee’s goal is to promote long term sustainable

logistics policies and infrastructure to give Malaysia a competitive edge In ASEAN.

The Committee aims are:1. Develop understanding of environmental impact of economic transformation from the transport

and logistic perspective in Malaysia

2. Share case studies of EU best practices for promoting and developing sustainable logistic and transportation solutions that reduce GHG emissions

3. Advocate for better policies to reduce setbacks and constrains of the Logistics and Transportation Industry.


Research and Innovation

Head of Committee : Prof. Graham Kendall, Chief Executive Officer of MyResearch Sdn Bhd, Vice Provost, University of Nottingham

Deputy Head : Prof. Dr. Rofina Yasmin Bt. Dato’ Othman, UM Director of Centre for Innovation and Commercialisation (UMCIC), University of Malaya

The EUMCCI Research and Innovation Committee provides a platform to build partnership

between relevant stakeholders from the government agencies, industry and academia to discuss and implement strategies related to research and innovation. The Committee facilitates ongoing education in the area of research and innovation, explores the links between research and innovation and entrepreneurship, seeking ways to exploit these benefits of the research, industrial communities.

The Committee aims are: 1. To create a Malaysian Think tank research Committee

2. To create opportunities for Malaysian Research via Horizon 2020 platform

3. To focus on Research and Innovation in specific areas (Palm Oil, Aerospace, Agri Food, Intellectual Property and Sustainable Development)

4. Develop better links with industry players and academia

Smart Technologies (Smart Grid) Committee

Head of Committee : Mr. Anand Menon, CTO & Head of Engineering ASEAN, Siemens Malaysia Sdn. Bhd - Energy Management

Deputy Head : VACANT

The goal of EUMCCI Smart Technologies (Smart Grid) Committee is to promote smart technologies in line with the country’s development plan and to be a support system in achieving the Malaysian Government’s Road Map.

The Committee aims: 1. To identify potential areas in line with the country’s development

2. To share case studies of the EU Best Practices for development of smart technologies that would be beneficial to Malaysia

3. To engage with relevant stakeholders on necessary and relevant smart technologies


Wines and Spirits

Head of Committee : Mr. Mathieu Duchemin, Managing Director, Moët Hennessy Diageo Malaysia Sdn Bhd

Deputy Head : Mr. Terence Ong, Pernod Ricard Malaysia Sdn Bhd

The EUMCCI Wines and Spirits Committee, comprising market leading companies engaged in the importing and selling of wines and spirits in Malaysia, acts as a body to engage with the stakeholders concerning issues related to wine and spirit industry in Malaysia.

The Committee aims:

1. To formulate joint policy responses to improve market access through the reform of the alcohol tax regime.

2. To engage with the Ministry of Health in regards to Food Regulations and provide recommendations in reference to the Regulations concerning wines and spirits.

3. To ensure the efficient implementation of the Malaysian Tax Stamp system.

4. To promote and establish a regular communication and well-informed relationship with government authorities and other interested parties in order to create optimum acceptability of the branded alcohol products.

5. To promote and support the responsible consumption of alcohol as well as measures to ensure socially responsible drinking among the non-Muslim population in Malaysia.



Overview of Malaysian Economy


Economic Outlook for Malaysia 2016

As a core member of ASEAN, Malaysia continues to attract European trade and investment through its leadership role overseeing the launch of the ASEAN Economic Community in 2015, as well as its continued pursuit to become a developed country by 2020 through focusing on human capital, people’s welfare, inclusivity, innovation & productivity, and infrastructure. In 2015, Malaysia’s efforts were recognised by several global indices—ranked 18th out of 189 economies in the World Bank’s Doing Business Report 2015; and 20th out of 144 economies in the World Economic Forum’s Global Competitiveness Report 2014-2015.

Malaysia, however, faces ongoing global economic challenges, reflected in the recent revision to the Budget 2016. Nevertheless, even amidst the implementation of the Goods and Services Tax, the impact of falling oil prices, and the weakening ringgit, the economy beat expectations to maintain a steady growth of 5% in 2015. The economy is expected to grow 4.0%-4.5% in 2016.

The economy in Malaysia will still be trade-oriented, with the domestic government as its biggest customer. As it was in previous years, the main factors influencing GDP will be the fluctuation in oil prices, the exchange rate of the Malaysian ringgit and the amount of public investment, whereby 150.6 billion RM is DDI, and 36.1 billion RM is FDI1.

The Malaysian currency, while dependent on the oil prices and the position of dollar, is nevertheless expected to be stable on an average level of about 4.20 RM per US dollar in 20162.

Private consumption and investment both increased in 2015. Private consumption rose to 6% compared to 7.1% in 20143. Private investment grew to 6.4% in 2015, compared to 9% in 2014. The oil price is projected to increase from 58 US Dollar per barrel in 2015 to 70 US Dollar per barrel in 20164. Private consumption is projected to increase 5.1% and private investment 5.5% in 20165, thanks to the ongoing efforts of the Economic Transformation Program.

Public consumption was 4.3% in 2015, estimated to grow 2% in 2016. Public investment is estimated to grow from -0.1% in 20156. 1.1% in 2016.

In 2016, investment is projected to strengthen on prospects for improved economic growth in the major industrial economies and some improvement in demand for oil and commodities. The government is looking to stimulate growth through fiscal policy but is constrained by its pledge to narrow the budget deficit.

1 MIDA, 2015, Driving Sustainable Growth


3 Ministry of Finance, Malaysia, Bank Negara Malaysia “Annual Report 2015”





Exports from Malaysia slowed down in 2015 - 1.8%, in comparison with 6.4% in 2014, and 2.4% in 2013. However, total balance value is higher than 2014 and 2013. Exports and imports expect to remain in surplus. Private consumption and robust consumer expenditure will help the economy to pick up speed again7.

Labor participation rate in 2015 was 67.8%, and looks to remain stable in 2016. The minimum wage was raised to 1000 MYR/month, while the average wage was 2231 MYR/ month and is projected to rise as country develops. Unemployment rate remained well below the 4% (government target) of full employment in 20158.

Fiscal deficit improved to an estimated 3.2 % of GDP in 2015.

In 2015 the inflation rate was lower than initially projected, 2.1% compare to 3.2 % in 20149. Malaysia is one of the top investment destinations among the world’s top 20 most competitive economies. The highest ranked among developing Asian countries, it also continues to rank ahead of economies such as Belgium, Luxembourg, Australia, France, Austria, Ireland, Saudi Arabia and The Republic of Korea. According to the Baseline Profitability Index (BPI), a ranking of investment attractiveness, Malaysia improved from 11th (2014) to 6th (2015) out of 100 countries. According to Forbes, Malaysia is ranked the 34th best country to do business in the world, the second highest ranked among ASEAN countries. Kuala Lumpur won recognition in the sustainable cities index as 26th of 50, the 7th among Asia Pacific Countries, and the 2nd among ASEAN’s countries.

Malaysia’s trade with EU, consistent with global trends, slowed down in 2015. Malaysia is the EU’s second largest trading partner within ASEAN. For 2015 the total trade between EU and Malaysia increased by 3.1%10.

Following the launch of the ASEAN Economic Community at the ASEAN Leaders’ Summit in Kuala Lumpur in November 2015, European businesses expect the AEC to accelerate social and industrial development of ASEAN and its member states. Equally crucial for Malaysia, with the successful negotiation of the EU-FTA with Vietnam, is the re-launch of FTA negotiations with the Philippines and Malaysia. The EUMCCI, along with the EU-ASEAN Business Council, hope that these negotiations can be conducted with similar success and swiftness to that of Vietnam.

7 Ministry of International Trade and Industry, Ministry of Finance, Department of Statistics, Malaysia

8 Manipal International University, Malaysia, “Examining the Mid- and Long-Term Structural Unemployment in Asia – Pacific”


10 Ministry of International Trade and Industry, Ministry of Finance, Department of Statistics, Malaysia


2015 was a crucial year for ASEAN. The establishment of the ASEAN Economic Community is a beginning for facilitating and stimulating trade between the ASEAN Community. AEC is projected to stimulate growth in South East Asia as well as facilitate trade and create a stable business environment for the ASEAN economical community.

According to the World Bank, growth is expected to be supported by fiscal stimulus, continuing lower oil prices, accommodating monetary policy and rising wages. Nevertheless, global growth forecasts have been revised downwards by both the IMF and the World Bank. The 2016 annual global estimate for the world economy is 3.4% according to IMF . While the prediction for 2016 and 2017 are moderate, we can see more optimism for 2018 when the economy is forecasted to stabilize.

The forecasts from The World Bank and IMF are a sign of slowing economies in 2016. However, ASEAN’s economy continues to demonstrate growth. In 2016 ASEAN is expected to expand at 4.5%, led by Myanmar, Laos, and Cambodia at a 7% expansion rate.

The Global Economic Prospects forecasts Thailand’s economy as one to watch closely in 2016, pending the improvement of the political situation. On the other hand Vietnam continues to develop rapidly. FDI in 2015 increased to 12.5% (22.76 billion US). The country attracts more foreign investors because of the opportunities resulting from the successful conclusion of free trade agreements. It is expected to grow just as fast in 2016 mostly thanks to the accelerating private consumption and foreign investments.

The EU plays a significant role in the region of South East Asia, as ASEAN’s second largest trading partner, after China, and the largest source of FDI to ASEAN. With a presence of over 11,000 in ASEAN, European businesses continue to contribute to the long-term growth of the region, enhance its competitiveness, and overall business environment.

ASEAN Economic Outlook for 2016

11 World Bank, 2015, Global Economic Prospects 2016

12 OECD, 2015, ”Economic Outlook for Southeast Asia, China and India 2016”

13 2015, EU-Malaysia “Trade and Investment 2015”, EU Delegation Malaysia



Key Measures


EUMCCI continues to play an active advocacy role in raising issues of concern by our members in the area of trade, investment and economic development. We are grateful for the strong sense of commitment and reception by the Malaysian Government on the national level and State Government at local level to the concerns of EU and Malaysian businesses. Reflecting this spirit of cooperation, our 2016 recommendations are related to the areas of successes already achieved by Malaysia in the recent years.

1. Enhance transparency and minimise level of corruption

In Malaysia, nearly all services require a licence but the criteria / requirements for granting a license is not made publicly available. Thus, there is significant room for administrative discretion in determining whether to grant a license, leading to misunderstanding, delays and a lack of predictability for service suppliers. This situation also applies in regard to customs import procedures and requesting permits to import. Permits or requests for authorisation to import a product may take years to obtain or they are sometimes put on hold for an indefinite amount of time where it is not clear on what basis they will be granted and how long the process will take. Overall, the lack of transparency makes taking these necessary steps difficult, and it increases chances for corruption and fraud.

As a signatory and member of the UN Global Compact, EUMCCI members in collaboration with local and International stakeholders continues the fight in combating corruption. EUMCCI urges the Malaysian Government to create level playing field for all companies in Malaysia. Policies which give preferences to locals in many ways – not only the 30% Bumiputra ownership, but requirements for employment, licenses for banks or telecoms licenses granted to local companies, preferential treatment for local companies in many sectors, and in particular, favouritism in government procurement, where foreign companies are prohibited from having access, create discriminatory practices.

2. Fair and open competition in Malaysia and with international trading partners

Since the approval of Malaysia’s Competition Act in January 2012, whose key areas are the prohibition of anti-competitive behaviour and abuse of dominant position, there has been an improvement in this area, but still more needs to be done, both in terms of increasing the awareness of the Act among businesses, and in terms of its real implementation and enforcement on the ground. Such a framework will provide the level playing field needed as Malaysia seeks to achieve developed country status. It is crucial that the mind-set of conducting business by Malaysian companies, private as well as GLCs, undergoes a significant transformation for this competition policy to achieve its purpose.

In the international trading scene, sufficient efforts need to be deployed by the Government to defend Malaysian companies, including European investors in Malaysia, against unfair trading practices of private or public companies of other countries. WTO and FTA rules must always be respected in antidumping, countervailing and other similar procedures, whether opened by Malaysian government against harmful imports, or by other governments against Malaysian producers. This is a highly sensitive issue, especially in industries where a significant overcapacity has been created, such as steel making and some petrochemicals. But it is crucial that unfair trading practices are tackled, even when this involves close partner countries in Asia, including within ASEAN.

Key Measures


3. Creating an efficient and equitable tax system

In April 2015, the Malaysian Government implemented the Goods and Services Tax (GST). This implementation of the GST is a step forward in creating an internationally recognized tax system.

The implementation of GST looks to increase compliance and reduce red tape as under the SST (Sales & Service Tax). The implementation of GST has also seen increase in government’s revenue by RM 21 billion in comparison to the SST.

Any review of the tax system should aim to broaden the tax base and balance issues of efficiency with equity, so that the impact of any new taxes is fairly distributed amongst the people who will be paying it. Even where the tax system is able to broaden the tax base and increase revenue, the desired end result will not be achieved if there is no effective monitoring system to ensure that every ringgit produces a corresponding benefit to the nation. There is therefore a need to measure the benefit achieved from each expenditure and to take effective measures to control loss.

4. Fostering innovation and protecting intellectual property

The Malaysian Government during the tabling of the Budget 2016 has stressed the importance of innovation and creativity in building the nation towards a higher income, inclusive and sustainable economy. We applaud the government’s Initiative in declaring 2016 as Malaysia Commercialisation Year, and spurring commercialisation of R&D products by local research institution. Some of the initiatives include:

a) SMEs spending up to RM 50,000 on R&D projects annually are eligible to claim double tax deduction automatically

b) RM 200 million allocation under the Funding Scheme for Technology and Innovation Acceleration.

The Ministry of Science Technology and Innovation (MOSTI) has two grant schemes, TechnoFund and InnoFund that has a section that looks specifically into protection of IPR and commercialisation of ideas and inventions.

Malaysia and the EU can look at fostering research and innovation links via the Horizon 2020, a framework programme for innovation and research by the European Union. This is beneficial to Malaysia, since many projects are international in scope and Malaysia already enjoys the benefits of existing EU R&D projects.

5. Enforcement of laws

While Malaysia has very good laws governing many sectors, enforcement is somewhat lacking. We recommend all government agencies place a greater focus on law enforcement, including by imposing related penalties. There is currently a lack of consistent enforcement – even where there are clear rules in place, these may not be enforced, or the rules may be enforced differently by various inspectors leading to different outcomes under similar circumstances.


6. Development of Human Capital

Talent is a critical enabler for economic growth, with the government targeting 3.7 percent annual labour growth. Lack of a qualified workforce is one of the biggest impediments that investors identify with doing business in Malaysia, and demand for talent is ongoing.

In the Budget 2016, the Malaysian Government has identified several measures to be undertaken to address the issues of human capital:

a) Improving the quality of English Language under the Malaysian Education Blueprint 2013 - 2025.

b) Increasing tax relief for those pursuing higher education

c) Ministry of International Trade and Industry (MITI) to establish an Industrial Skills Committee to coordinate Transforming Technical and Vocational Education and Training (TVET) programmes in collaboration with industries

d) Implementation of programmes such as “Train & Replace” in selected fields such as hospitality, shipping and transport to improve the management of foreign works,

EUMCCI congratulates the Government for their efforts and more importantly reviving the importance of the English Language. Every effort must be made to enhance the teaching of English in schools and university to ensure that graduates are better equipped when they enter the labour market.




SEBSEAMMarket Reports:

Executive Summary


Executive Summary

Malaysia provides large potential for European dairy companies to enter the market since the country does not only perform well in its overall economic development but particularly provides a dairy market that is driven by rapidly increasing demand.

Due to the country’s local climate conditions, the amount of milk that is produced domestically is not sufficient to meet the increased demand. As one of the results, the prices paid by Malaysian cons-reefs for dairy products are much higher than in Europe, turning the Malaysian dairy market into a very attractive market, especially for companies who are interested to export milk or their manufactured dairy products. Beside the top origin countries Australia and New Zealand, several European countries including France, Germany, Belgium and the Netherlands are among the top 10 origin countries for many dairy product categories.

The study points out Malaysia’s import regulations and provides an overview about the most important regulations for potential European dairy companies such as the Food Regulations 1985 regarding labeling requirements, food additives, and packaging. Furthermore, the study offer an overview of Malaysia’s import regulations and procedures as well as the particular steps to get an import permit for dairy products through the e-permit system.

It is highlighted that Malaysia is characterized by a colourful composition of different ethnicities, cultures and religions. Due a large share of Muslims who currently account for about 61% of Malaysia’s population, the Halal certification by JAKIM plays a crucial role. This certification is defined as the examination of particular product processes and the fulfillment of hygienic, sanitation and safety requirements. Although it is not compulsory it is highly recommended for European dairy companies who want to sell their products in the Malaysian market to apply for the Malaysian Halal certification at JAKIM or have their products already certified before exporting those to Malaysia by one of the Halal Certification Bodies in Europe recognized by JAKIM. A list of these Certification Bodies has been included in this study.

Due to Malaysia’s many different distribution and retail opportunities, another important aspect is the right choice of retailer. In order to reach the particular target audience, foreign dairy companies are able to choose their most suitable strategy, such as utilizing the excellent reputation of European dairy products in Malaysia and targeting Malaysia’s high-income class, or targeting families and the country’s growing middle-income class. Furthermore, in order to get in touch with the local retailers and parties, it is highly recommended for European companies who have only limited experience with the Malaysian dairy market to cooperate with an experienced local food distributor.

Potential and Challenges of Dairy Products in the Malaysian Market 2015Market Analysis with Focus on Import Regulations and Halal Certification in Malaysia

The full report can be found at:http://www.eumcci.com/agribusiness-sector


Executive SummaryMarket Research Report on Energy, Utilities, Environmental Services 2014Malaysia’s Aspirational Journey Towards an Inclusive Low Carbon Economy

• “Europe’s energy security is about world energy security. The EU is not an isolated island neither does it want to be. In this interconnected and interdependent world, ASEAN is a key player to collaborate with – as energy security is a shared concern;”2

• The ten members of the Association of Southeast Asian Nations (ASEAN) – along with China and India – are shifting the centre of gravity of the global energy system towards Asia. But how will Southeast Asia’s fuel mix evolve? And what will the region’s supply and demand balance mean for oil, gas and coal trade?3

• Opportunities in ASEAN abound for cleantech investors – as the overall political and social environment in ASEAN is thinking clean. Pollution is politically incorrect and energy efficiency in all sectors commands the day;4

• Malaysia as chair of ASEAN5 oversaw the establishment of the ASEAN Economic Community or AEC in 2015.6 This is critical as the prospect of a single ASEAN economy remains awesome. Foreign multinationals all over the region are leveraging on ASEAN integration efforts, well ahead of ASEAN companies. As a single economy, with a GDP of US$2.4 trillion, ASEAN would be the seventh largest in the world. On the basis of present growth rates it will be the fourth largest by 2030. It already has the world’s third largest population in aggregate, about 50% of whom are under 30. ASEAN would reap the demographic dividend even as an ageing population afflicts the major economies, including China. ASEAN is among the top in the world in the growth of the middle class, which will drive a huge consumer boom;

• In varying terms, Malaysia has demonstrated visible progress in the development and implementation of EE policies and measures. Their level of effectiveness, however, varies and there remain major barriers to improving energy efficiency. Leveraging on EU energy sustainability leadership7 would be a strength that can help expedite Malaysia’s energy efficiency and green governance reforms – as well, opening new opportunities, as access to sustainable energy is a driver for development, in delivering health, education, food security and inclusive growth;

2 ASEAN-EU SEMINAR ON ENERGY SECURITY and INVESTMENT REGULATION FRAMEWORK ON INTER-CONNECTIONS; Opening Remarks by H.E., Ambassador Jean-François Cautain, EU Head of Delegation, Phnom Penh, Cambodia, 10-11 September 2012;

3 World Energy Outlook Special Report 2013: Southeast Asia Energy Outlook; http://www.iea.org/publications/freepublications/publication/name,43534,en.html ;

4 Barbara Jones, shareholder Greenberg Traurig LLP;

5 Taking the chair, not warming the seat, Tan Sri Dr. Munir Majid, Saturday June 28, 2014 http://www.thestar.com.my/Opinion/Columnists/Comment/Profile/Articles/2014/06/28/Taking-the-chair-not-warming-the-seat-Malaysia-must-lead-to-bring-Asean-to-the-people/;

6 Asian Economic Integration Monitor, pg 44, October 2013;

7 Powering the World: The European Union’s Work on Energy; http://ec.europa.eu/europeaid/what/energy/sustainable/documents/factsheet-energy-for-all_en.pdf;


• The government is pushing for increased use of renewable energy through targets by establishing an organisational structure to facilitate the targeted growth. To a large extent, these targets can be fulfilled by the large biomass resource of the country. A feed-in tariff scheme has been put in place, but high energy subsidies present an obstacle for renewable energy uptake;

• Energy costs are still the primary driver of abatement efforts – and climate change represents an important opportunity for business, as well a risk – and so companies must adapt to a carbon- constrained world.8 Ten years ago, a lot of business executives realized that environmental concerns were real business challenges. But mostly, they were protecting themselves against downside reputational risks. Today, an increasing number of businesses have figured out there’s not only the downside to be protected against, but there’s tremendous upside profits to be made by serving a market that’s increasingly interested in green goods and services. And costs can be dramatically slashed when companies operate in a way that’s more efficient;9

• The evolution of energy demand and supply in Southeast Asia will be determined by the interplay of a number of factors, the likes of which being, government policies, demographic change, urbanisation, economic trends including shifts in the structure of economic activity, energy pricing and technological developments. However, a caveat: There exist discriminatory trade facilitation measures in the region. Regional preferential trade facilitation measures are not ideal because they are opaque and often complex—they in the long run, should be multilateralized on a de facto basis to reduce the administrative burden;10

• Energy-efficient products have been quite slow to penetrate Asian markets due to barriers such as low electricity tariffs, high first-purchase cost of products and lack of awareness about the monetary benefits of investing in efficient equipment;11

• Increasingly, ASEAN policy-makers recognize energy standards and labels as policy tools not only for promoting energy efficiency – but also as powerful, cost-effective tools for market transformation – as these benefit national economies, local and international manufacturers and the natural environment;12

8 How Do Companies Do Business in a Carbon Constrained World_Ernst & Young;

http://www.ey.com/Publication/vwLUAssets/How-do-companies-do-business-in-a-carbon-constrained-world/$FILE/Economics-of-Carbon.pdf;

9 Fred Krupp on the benefits of monitoring resource use; McKinsey Quarterly; April 2014 http://www.mckinsey.com/insights/energy_resources_materials/fred_krupp_on_the_benefits_of_monitoring_resource_use?cid=ResourceRev-eml-alt-mkq-mck-oth-1404;

10 Asian Economic Integration Monitor, pg 54, October 2013;

11 ASEAN Guideline on Off-grid Rural Electrification Approaches http://aseanenergy.org/index.php/publication/2013/04/11/asean-guideline-on-off-grid-rural-electrification-approaches;

12 ASEAN RENEWABLE ENERGY DEVELOPMENT AND ITS ASSOCIATED ACTIVITIES; ASEAN CENTRE FOR ENERGY; DECEMBER 2013 http://aseanenergy.org/media/documents/2013/12/20/a/s/asean_renewable_energy_1.pdf;


• Governments and business will need to consider the value put on energy sector resilience, in light of the industry’s historic inability to absorb economic, political and environmental shocks. Governments should aim to depoliticize the energy debate in order to support stable and long- term policy measures, undertake a transparent and objective assessment of the value of energy to determine the most resilient energy mix, and embrace centralized energy planning to counter the uncertainty of the market while still fostering private sector participation;13

• Innovation in non-generation infrastructure and technology will not only drive efficiencies and boost deployment, but also represents a significant investment opportunity for emerging markets. The digitalization of energy in particular will create a revolution that will have significant social, economic and environmental impact;14

• Risks associated with renewable energy projects stem both from underlying economic factors and barriers that are non-economic in nature. An economic barrier is present if the cost of a given technology is above the cost of competing alternatives, even under optimal market conditions – as technological maturity and economic barriers are very directly connected;15

• Only if the barriers to deployment are sufficiently understood, can the right enablers be put into place. Given the dynamics of deployment, barriers to deployment are not static. They vary from country to country and also depend on: the maturity of a given energy technology; the state of the domestic markets for this technology; and the state of the global markets for this technology;16

• In most developing countries, it is difficult to get political support for emissions reduction policies because policy makers are more likely to prioritize economic and social needs over environmental issues. The passing of emissions mitigation policies through political and bureaucratic processes can be a challenge for developing countries;17

13 BP Statistical Review of World Energy June 2013, Group Chief Executive’s Introduction, http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf;

14 BP Statistical Review of World Energy June 2013, Group Chief Executive’s Introduction, http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf;

15 Op.Cit.

16 Ibid; 17 Political economy of climate change policy in the transition region; http://www.ebrd.com/downloads/research/transition/trsp8.pdf;

The full report can be found at:http://www.eumcci.com/energy-utilities-environmental-services-sector


The study provides European small- and medium-sized enterprises (SMEs) profound insights into the Malaysian construction industry and identifies opportunities and challenges in the market. It includes the latest market data, legal framework conditions, future directions and a detailed examination of the focal areas: architectural, engineering and quantity surveying services.

As the world trend suggests, SMEs have a big influence on the economic development and act as a key economic driver. They also play an important role in the promotion of innovation and the creation of employment opportunities across the world. In the Malaysian construction industry, around 90 percent of the construction companies are SMEs. These SMEs hold a major role as either the general contractor or sub-contractor of large construction companies, particularly for small- and medium- sized projects. In July 2015, the Malaysian construction market was liberalized to a certain extent, as foreign companies and experts are now able to enter the Malaysian market more easily than before and therefore should approach this opportunity propitiously.

It is without doubt that the Malaysian construction market is highly competitive. Nonetheless, over the years, the Malaysian government has been supportive of its construction industry by implementing a number of plans and initiatives including: Construction Industry Master Plan (CIMP) 2006-2015; Industrial Master Plan 3 (IMP 3) 2006-2020; 10th Malaysia Plan (10MP) 2011-2015; 11th Malaysia Plan (11MP) 2016-2020; as well as initiatives through its annual budget policy. In its aim to establish the local construction industry as a global player with a world class innovation and knowledge reputation, the Malaysian government tries to further promote technological development, as well as quality and performance development within the industry. In order to compete at best and achieve its Vision 2020 to become a fully-industrialized country, Malaysia needs to sharpen the focus of its business services sector. This means, concentrating attention on the sectors in which it has an advantage and where its products and services are differentiated.

As a member of the World Trade Organization (WTO), Malaysia has joined rounds of negotiations on various agreements on trade in services. The General Agreement on Trade in Services (GATS) aims to expand the services trade by liberalizing progressively through successive rounds of negotiations. Under GATS, Malaysia’s commitments are for CPC code 511 – 517 in terms of market access and are limited to Mode Supply 3 (commercial presence) covering a representative office, regional office, or locally incorporated joint-venture Corporation with Malaysian individuals or Malaysian-controlled corporations or both with foreign equity not exceeding 30 percent. In 2012, 18 sub-sectors of the service sector experienced a first light deregulation of the market, including architectural, engineering and quantity surveying services. With the latest amendment of the Registration of Engineers (Amendment) Act 2015 and The Regulations of Engineers (Amendment) Regulations 2015, all (citizens and non-citizens of Malaysia) are treated equally, undergoing the same examination, qualification, registration procedure etc. Moreover, any person other than a Professional Engineer with Practicing Certificate can now be a director and hold equity in a consulting firm. The current ruling is as follows:

• One third of the directorship may be held by others• 30% of the equity may be held by others

Executive SummaryThe Professional Services Sector in Malaysia 2015: Potential for EU SME’s in the Malaysian Construction Industry: Engineering, Architectural and Quantity Surveying Services


The liberalization process of the architectural, engineering and quantity surveying services as part of the service sector requires a great amount of coordination work between relevant Boards, the Immigration Office and the Malaysian agency Talent Corporation in charge of attracting and maintaining local and foreign talent in the country. The Malaysian government tries to exert influence on the market by providing incentives. Companies who fit into the criteria of the incentives and offer products or services that meet the market demand have higher chances of success. Howbeit, the ongoing liberalization process in the Malaysian construction industry can be assessed as very positive. This step loosens the regulations for foreign professionals and companies. With the liberalization process implemented in full force, it is expected to foster a lot of opportunities for western companies to either access the Malaysian market directly, or indirectly via the Malaysian market to establish a foothold into the ASEAN market. It will enable foreign professionals to register and work in Malaysia without any citizenship requirement and also to fully own a company. Therefore the market is easier to access and address, which represents a great opportunity for foreign companies. Further liberalization is, however, still in progress.

In so far, there are several areas within the Malaysian construction industry with the most opportunities. This comprises of services such as: architectural, construction project management, engineering consultancy, energy efficiency, green design, facilities management as well as interior design. With the influx of European companies penetrating the Malaysian market over the recent years, it can be observed that there has been a growing number of European players in the specific niche markets within the construction industry where European expertise is most valued. Additionally, it is worth emphasizing that companies, which are able to serve niche markets, such as green building, possess great potential in the Malaysian construction market. This is because, in areas such as green building (including related technologies), sustainable construction as well as operations and management of facilities, the market in Malaysia is still in the initial stage, with only a small number of players - widening the gap between supply and demand. To promote the market and its progress, the Malaysian government did not impose any restrictions in terms of foreign equity, nor the total or partial foreign ownership of subsidiaries. Also, it was further revealed that green building and sustainable construction will be given more attention in the future. This offers exciting growth potential for European companies.

It is apparent that the construction industry is not immune to ineffective quality management, which in turns led to higher costs, delays, disputes and project failures – this opens enormous market opportunities for European SMEs. European companies in particular have a competitive advantage in terms of high-end technologies, apart from their extensive experience and knowledge in the industry. Furthermore, the technological gap that exist within Malaysia has prompted as well as encouraged the Malaysian companies to invest in the European high-end technologies. Even so, European companies have been competing with Chinese companies in the market as the Chinese now not only provide a wide array of machinery and equipment but also cheap labor as well as financial support. Moreover, Chinese competitors are becoming increasingly important in financing projects and undertaking large-scale infrastructure projects. Regardless, European companies and professionals still possess a greater experience in terms of maximizing work areas and efficiency in limited spaces. Compared to the Chinese, Europeans are used to working in an environment with less employees, less machinery as well as limited working space, due mainly to higher labor cost in the region. This gives European companies a competitive advantage especially in areas like Kuala Lumpur or Klang Valley where working spaces may be limited. In addition, at the moment, the


commonly used standard in the Malaysian construction industry is the British standard. However, there is a current development toward the implementation of European codes and an alignment to the European Norm (EN) of the construction industry. EN standard will offer a broader acceptance and enable a better cooperation between European and Malaysian companies.

There also exist opportunities for software solutions providers, which are assimilated to the needs of the construction industry. In fact, a number of companies from Europe, are already offering their IT solutions to the Malaysian market, with the primary focus being Building Information Modeling (BIM), which is a method of optimized planning, implementation and management of buildings. On top of that, BuildingSMART International, an international non-governmental, non-profit organization has also been actively promoting BIM. Subsequently, the developments on the market suggest that this method will be the standard in the long-run, not only in Malaysia, but also in many other countries. Therefore, it can be predicted that demand is highly likely to continue increasing, as only limited expertise in this field exists. With the right experience, knowledge and technology, this business segment offers great opportunities for European service providers.

Additionally, in the energy sector, Malaysia is still lacking momentum as energy prices in Malaysia are relatively low. The government has failed to increase prices at a relevant scale during the last 10 years, resulting in a constant low price level of oil, gas and electricity. The price, however, is expected to increase in the future as Malaysia beomes more aware of its energy usage. Energy Efficiency Labels systems implemented for buildings in Europe as well as the introduction of the “Energy Pass” system have been proven to be advantageous. This in turns, serve as an opportunity for European partners who bring along with them a considerable experience and expertise in the field of energy saving as renewable energy.

In conclusion, with the liberalization process in progress, the Malaysian professional services in the construction industry offers European SMEs a tremendous potential for investment opportunities. This move by the Malaysian government is intended to not only promote competition but also to move forward and improve the exports of Malaysian services abroad.

The full report can be found at: http://www.eumcci.com/professional-services-sector




Issues by Sector


5.1 Aerospace

Introduction

There have been several encouraging developments to further strengthen the Malaysian aerospace sector over the past year. This followed the launch of the updated National Aerospace Blueprint at the 2016 Langkawi International Maritime and Aerospace Exhibition by the Malaysian Industry Group for High Technology. It is pleasing to note that two of the EUMCCI Aerospace Committee members were invited to facilitate meetings leading to the final blueprint publication. This strategic document outlines industry growth across each of the four sectors namely maintenance, repair and overhaul; aero manufacturing; systems integration and engineering and design services as well as education and training. The blueprint is focused on developing the aerospace industry in Malaysia as it aspires to become the leading aerospace nation within Southeast Asia by 2030.

In 2015, the aerospace industry contributed more than RM12bn in revenue and employed more than 19,500 personnel. Of this, MRO activity was valued at around RM5.3bn. Malaysia’s intent is to be the preferred global aerospace outsourcing centre through participation in “design and build” activities in future international aircraft programmes. In addition, Malaysia wishes to secure more of the domestic and international MRO and aerospace manufacturing market as well as developing its capability in systems integration. These promoted areas provide opportunities for foreign aerospace players to invest in Malaysia either through joint-venture with local companies or 100% foreign direct investment.

Following issue of the blueprint and to further develop the aerospace industry in Malaysia there have been a number of exciting developments. In this respect it has been decided to form the National Aerospace Industry Coordinating Office (NAICO) under the Ministry of International Trade and Industry to oversee the blueprint implementation. This is an excellent step forward in ensuring cohesion amongst the various aerospace players. EUMCCI aerospace committee members have been invited to work with NAICO in formulating their approach. The Malaysian government have also decided to ensure that the previous goal of corporatisation of the DCA will be realised. In addition it has been decided to form the National Aviation Commission working alongside DCA as part of the Ministry of Transport to oversee the fair development of the aviation sector. Finally and to add to the increased desire to bring the Malaysian aerospace industry closer together and propel the industry regionally and globally it has been decided to launch the Malaysian Aerospace Industry Association on March 28, 2016.

It has also been pleasing to see that there have two significant infrastructure developments in support of the local aerospace industry. The first of these has been the MARA led Asia Aerospace City. This has commenced operations to undertake airframe MRO work and act as a post diploma training institution. This is part of the government initiative to encourage more skilled manpower to enter into the industry both at technician and design engineer levels. With more than 150 organisations in Malaysia actively engaged in a variety of aerospace activities, it will prove essential to ensure good human capital development. Secondly Malaysia Airports have embarked on an ambitious plan to create an Aeropolis consisting of an aerospace belt across 3 airport developments namely KLIA, Subang and Malacca. The full details of this program have yet to be released but will no doubt offer further encouragement to those considering investing In Malaysia.

The Aerospace Committee through various meetings, forums and seminars has been promoting the activities of the aerospace community in Malaysia. It provides the platform to bring together the private sector, agencies and associations and academics to engage in open dialogue and provide


opportunities to submit relevant concerns and recommendations. The Committee’s key activities focus on sectors including MRO, Air Transport, Aviation Training and Manufacturing. The Committee encourages dialogue with a range of key stakeholders, including the relevant government bodies addressing aerospace trade issues, building consensus in support of its recommendations. With the formation of the National Aviation Commission and NAICO the Aerospace Committee will continue to be actively supporting the various government initiatives to further accelerate the aerospace industry’s development.

Issue: Aerospace technology development

Issue: The government’s desire to encourage growth in aerospace manufacturing has been significantly advanced through Rolls-Royce investment in working with UMW to manufacture fan casings in Malaysia. This is important in that it will almost certainly encourage other foreign manufacturers to more seriously consider Malaysia as their regional manufacturing hub and other vendors to support UMW to come into the Industry. Whilst the government encourages collaboration between industry players to offer design and build capabilities to global customers, it is important that this is further encouraged to ensure that Malaysia is well -placed on large scale international programmes. This would enable Malaysia to move further up the value chain and compete on much larger programmes.

The government should also consider offering financial guarantees to permit pre-qualification of any tender submissions as well as supporting Malaysian manufacturers in securing ISO AS9100 and NADCAP approvals. There is also a need to similarly offer financial assistance to encourage companies to become more productive through automation and mechanisation.

In respect of MRO development, it is considered that this could be transformed through encouraging foreign companies to collaborate with local service providers to work towards closing existing capability gaps. This could be achieved through various incentive initiatives including improved management of offset implementation as led by the Technology Development Agency under the Ministry of Finance. In addition by encouraging these MRO organisations to gain EASA approval it would ensure that significantly more work is carried out in country. Further with the Malaysian government’s desire to enter into more Performance Based Contracts, local service providers would be better prepared to meet this need through such collaboration.

Recommendations

1. In order to assist in greater industry development in both MRO services and manufacturing, it is considered important that the various government institutions strongly encourage collaboration within the aerospace industry in Malaysia. This could be further supported during government tenders. Additionally when offset applies the various agencies should emphasise the importance of collaboration with both foreign and local service providers as opposed to competing on programmes.

2.. Programmes through various government grants and tax breaks need to be established to support aerospace companies in developing process led productivity improvements as well as ensuring that the necessary AS9100 and NADCAP approvals are obtained.

3. The government should consider establishing an underwriting scheme to enable SME aerospace


companies to successfully secure contracts with tier one manufacturers and OEM’s. A barrier to entry into the industry by larger customers is a perceived risk as they cannot offer a large OEM sufficient guarantee. This would send a very strong message to the major players regarding the support from government to the industry, yet there would be no cost, as the guarantee would be offered on a case by case basis and the risk analysed.

4. The government should be looking to place packages of work, as opposed to outright grants such that the industry is encouraged to invest in its own future and become self-sustaining. Through managing even basic offset packages this would ensure that the industry grows organically and ensures that more companies are being brought into the industry at all levels.

5. The government should encourage all MRO companies wishing to offer their services regionally and internationally to obtain EASA certification and where possible this should be in collaboration with the DCA.

Issue: Encouraging foreign investment

Issue: Within the aerospace MRO sector, much of both the commercial and government work is exported and performed by foreign based organisations. In order to encourage additional foreign investment in Malaysia for MRO services, particularly where there are gaps in existing capability, it is considered that a mechanism of providing some form of preference be given to encourage capability development by foreign investors over foreign companies performing such work overseas. It is considered that a moderate change in domestic market access policy would encourage further development of capabilities and allow more work to be carried out in the country rather than be placed overseas. As part of this policy, priority should be given to Malaysian origin companies which have the necessary capability and competency. Improvements in processes would also ensure the industry becomes more efficient and cost effective. In manufacturing Malaysia should be aiming to become a Tier 2 supplier to the global industry. The Aeropolis development and design centre within the Asia Aerospace City will further assist in this respect.

Furthermore, as has been very recently put forward by the Malaysian government, foreign organisations should be encouraged to partner with Malaysian based companies in order to nurture manufacturing and MRO capability development in country. This could be achieved by offering access to government work in tenders as well as through both involvement in contractualisation and offset policy for large capital purchase programmes. Such policies would be particularly beneficial as the country aspires to accomplish more systems design and integration work in country. In this way Malaysian companies would be better placed to offer services not only to Malaysia but also to other countries within ASEAN as AFTA gains momentum.

Recommendations

1. It is considered that government policy be reviewed in respect of managing offset for procurement programmes which are of significant value. This is to ensure local capability development with the preference to work with local companies and should be leveraged for all such procurement in the country, whether government based or commercial. Where local capability development is not possible, either in manufacturing or MRO, this could be achieved through encouraging further foreign investment in Malaysia, either in partnership with local companies or if not then as Malaysian registered wholly owned foreign enterprises.


2. To encourage the development of the aerospace industry in the country both local and foreign companies based in Malaysia should be offered preferential access to government contracts including direct procurement agreements over companies outside Malaysia.

3. Where possible EU based SME’s should be encouraged to collaborate with Malaysian SME’s to drive technology development in country. This could be achieved through a business matching programme.

Issue: Availability of engineering talent in Malaysia

Issue: Whilst we applaud the efforts made by the government in ensuring adequate supply of technician and engineering talent in Malaysia in order to support the growth of the aerospace industry, we feel that this is proving increasingly more difficult. This is due to both industry growth both in Malaysia and abroad and the need for more specialism. The recent development of the Asia Aerospace City by MARA is a significant step In the right direction. Ensuring there are sufficient resources within the aviation sector is also true for front-desk employees including reservations and airport personnel and there should be more schools and colleges focused on this sector.

The development of technicians with international (EASA) qualifications, whilst carried out in Malaysia to a limited extent, is essential to encourage further foreign investment in MRO activities. In addition there is a need to develop a critical skill base in manufacturing of composites (where UniKL MIAT is offering such a programme), sheet metal fabrication and precision machining rather than being overly dependent on foreign labour. The policy for a common approach to regulatory standards and approvals needs to be reviewed and ratified by all ASEAN member states as a starting point for harmonisation of engineer/technician training and licensing. Malaysia as the current chair of ASEAN should consider initiating and taking the lead in this objective.

To further support both the design and manufacturing industries, engineering graduates with the ability to apply critical thinking and who are not afraid to be innovative are required if Malaysia is to achieve its aim to become a hub for design and build programmes. There is also a need to ensure continuous development of technicians and engineers skill base within the industry. Further Malaysia should give serious consideration to the adoption of an aerospace apprenticeship programme similar to the schemes within many European countries.

Recommendations

1. It is considered that the aerospace industry offers continuous development training of staff under an HRDF programme.

2. A regular dialogue should be initiated and encouraged by the government to engage the various technical colleges and universities with the industry in order to review the mechanisms on closing the gap, as well as how both should work together to ensure improved availability of suitable local talent.

3. Malaysia should adopt an apprenticeship programme for all technicians entering the aerospace industry similar to European schemes.

4. One area of technician training where there is lack of appropriate talent is in component maintenance


skills and It is considered that the various aerospace colleges work with industry players to exploit this opportunity.

5. As Malaysia has ambitions to grow the tourism industry, a priority should be to develop schools/universities where tourism is a specialty to teach both technical skills and customer service..

5.2 Automotive

NAP 2014

On 20th January 2014 the Malaysia National Automotive Policy (NAP) 2014 was unveiled. The main initiative of NAP 2014 was aimed at making Malaysia the regional hub for EEVs, which would see the government providing soft loans of RM2 billion and issuing three to four EEV manufacturing licences by 2018.

To kick-start the EEV programme, the exemption of excise duties and import taxes for completely knocked-down (CKD) vehicles would be extended until 31st December 2015 for hybrids, and 31st December 2017 for electric vehicles. Beyond those dates the exemptions will be determined based on the strategic value of what the CKDs bring and their respective investments. The exemption of duties for hybrid completely built up (CBU) vehicles ended on Dec 31, 2013, but CBUs imported last year and sold in this year would still be exempted from tax and duties.

Although there is no clear cut definition of EEVs, it appears that EEVs will go beyond technology specific criteria as well as engine size-based criteria and should include also consumption levels. This is a key step forward and will likely create a fair level playing field which will benefit the automotive industry as a total.

1. Reduce car prices – Firm commitment to revamp the excise duties structure

The government will introduce a new framework designed to bring car prices down gradually by 20% to 30% by the year 2017. Presently, excise duties on cars will not be abolished just yet. The government is open to the possibility to reduce excise duties when the fiscal situation permits. Instead, car prices will be reduced through the policy’s new grounds at promoting competition via the incentives given based on the new liberalised EEV classification, and the customised incentives that will be provided from the local manufacture of said EEVs.

2. Market Liberalisation – Open Approved Permits (APs)

The status has been unchanged and it came as a surprise when the Minister of International Trade announced that the government will review its decision to abolish Approved Permits (APs). Instead, the government has opted to conduct an in-depth study to assess the termination’s impact amongst the industry’s Bumiputera participation. Approved permits (APs) must come to an end soon. AP for franchise holders should be no limit for franchise holders and sales companies in bringing in CBU vehicles. The NAP should adhere to its targeted timeline.


3. EURO 4 Fuel Quality

The NAP does not contain details on the implementation of Euro 4 fuel (diesel and petrol), to replace the current Euro 2 standards. This appears to be a policy inconsistency, as EEVs are supposed to meet both efficiency and emission hurdles, which require the availability of Euro 4 fuel.

Back in November 2014, Minister of International Trade and Industry Y.B Dato’ Sri Mustapa Mohamed revealed the updated timeline for the introduction of upgraded fuels in Malaysia: Euro 4 RON 97 in September 2015, Euro 4 RON 95 in October 2018, Euro 5 diesel in September 2020, Euro 5 RON 95 and RON 97 in September 2025. The fact that BHPetrol and Shell has already, independently of the governments’ fuels roadmap, introduced Euro 5 diesel fuel in selected stations in several states of the country, has shown that the oil industry is capable of supplying higher graded fuels even ahead of the timeline. The government is therefore urged to ensure to meet timeline on the introduction of Euro 4 fuels without further postponement.

4. EEV Incentives - Unclear

It is still unclear what will happen with NAP2014 EEV after 31st December 2015. It is very difficult for different brands to invest in the local assembly of EEV technology, if it is not clear what will happen in form of incentives after 2015.

In the EU, there exists a very well developed “end of life cycle” process. This drives several factors:• Safe and healthy vehicles on the roads• Emission control• Stimuli for consumers to buy a new vehicle.

It is of utmost importance that this is taken into view in Malaysia.

Key recommendations of the Automotive Committee:

- Alignment of automotive products with international UNECE standards- Consolidation of approval and homologation processes- Adoption of higher fuel quality and emission standards- Harmonisation of rules of origin- Technology-neutral vehicle taxation scheme- Availability and quality of skilled workforce


Background to ASEAN market

With the implementation of AEC 2015, ASEAN will reach a prominent position to attract foreign investment. As ASEAN is set to become the world’s sixth-largest automotive market by 2018, it is expected that regional sales will double to nearly 4.7 million vehicles from 2.4 million last year. Therefore, its 10 member-states continue to facilitate significant investments to flow into this region. A harmonisation of standards and regulations has to be seen as an essential step to the success of AEC 2015. Only with such a harmonisation can the creation of a single manufacturing base as well as the free movement of goods be ensured.

According to the “CEO 360 Degree Perspective of the Automotive Industry in ASEAN”, Indonesia, Malaysia, Thailand and Vietnam are demonstrating a compound annual growth rate (CAGR) of 10.1 percent. Sales in Thailand and Indonesia have reached over 1 million vehicles each, and a significant increase in production is expected based on local demands, with Thai dominance of nearly 2.5 million vehicles produced last year alone.

Production of Motor Vehicles

In addition to serving the regional market, ASEAN has assumed a greater role as a global supplier of automotive, and is expected to grow in importance due to a competitive production base with strong competencies in certain product ranges. This will increase substantially not only in terms of economic growth, but also in terms of employment and technological advancement.

Since the last ASEAN-EU Business Summit in 2015, the automotive sector has seen significant improvements by the various governments, particularly in regulations and incentives to encourage adoption of low-emission vehicles. While there has been progress in many areas, others still need to see further improvement.

(Source: ASEAN Automotive Federation, 2015)

CountryPassengerVehicles

Commercial 2015 2014 Variance

(%)

Indonesia 736,664 276,627 1,013,291 1,208,019 -16%

Malaysia 591,298 75,376 666,674 666,487 0.03%

Philippines 116,381 172,228 288,609 234,747 23%

Thailand 356,063 443,569 799,632 881,832 -9%

Vietnam 116,228 93,039 209,267 133,588 57%

TOTAL 1,916,634 1,060,839 2,977,473 3,124,673 -1.47%


The EU-ASEAN Business Council (EU-ABC) has identified key areas in order to raise ASEAN global competitiveness:

1. Alignment of automotive products with international UNECE standards

The harmonisation of automotive product standards is essential as a basis for a single manufacturing base. As work has begun within ASEAN on the alignment of technical requirements, 50 UNECE regulations have been identified where 19 of those have been prioritised and will form part of the Mutual Recognition Arrangement (MRA) for automotive products in ASEAN.

The 19 Priority UNECE Regulations for Harmonisation are:

Regulation number

ECE R13

ECE R13H

ECE R14

ECE R16

ECE R17

ECE R25

ECE R30

ECE R39

ECE R40

ECE R41

ECE R43

ECE R46

ECE R49

ECE R51

ECE R54

ECE R60

ECE R75

ECE R79

ECE R83

Topic

Heavy vehicle braking

Braking of passenger cars

Safety-belt anchorages

Safety-belts

Strength of seats, their anchorages and head restraints

Head restraints (headrests)

Tires for passenger cars and their trailers

Speedometer

Exhaust Emission

Noise emissions (L Category)

Safety glass

Devices for indirect vision (Rear view mirror)

Diesel Emission

Noise Emissions of M and N categories of vehicles

Tires for commercial vehicles and their trailers

Driver Operated Controls

Tires for motorcycles/mopeds

Steering Equipment

Exhaust Emissions of M1 and N1 vehicles


While discussion within the Automotive Product Working Group (APWG) under the ASEAN Consultative Committee on Standards & Quality (ACCSQ) is ongoing, 19 regulations have been identified but have yet to be agreed among APWG members. Based on this priority, regulations of their respective local agencies have been implemented according to their domestic industrial standards. Hence, this non-uniform progress is hindering the advancement of these priorities to be harmonised, where a different pace of adoption is observed within each market. More importantly, an identical methodology is yet to be seen when implementing UNECE standards across ASEAN.

Alignment with the Global Technical Regulations (GTRs) will help increase ASEAN’s competitiveness, and will enable the export of automotive technologies to those countries that follow the UNECE standards. The alignment with international standards will furthermore ensure global automotive competiveness as these standards not only serve local demand; they also fulfil more stringent global requirements for road safety and environmental protection.

Recommendation

ASEAN should adopt UNECE regulations for automotive products and to work closely with all member countries in the region in order to align the 19 priority UNECE standards. The target is to achieve a single regulatory regime in ASEAN by 2015. ASEAN should implement identical testing procedures using the same metrology method, standards, and application regulations.

2. Consolidation of approval and homologation processes

Depending on domestic requirements, different approval and homologation processes have been observed. Local agencies (mostly members of APWG under ACCSQ) require manufacturers to comply with local mandatory certification standards on top of the international standards that need to be adhered to.

This redundancy has a substantial impact on the cost and time spent due to unnecessary duplication of processes, as one test report and/or plant audit accepted by one agency is not accepted by other agencies. More importantly, this will have a direct impact on the development of the concept of a single manufacturing base in ASEAN to allow free flow of automotive products within the region. Hence this will further hinder the investment opportunity for ASEAN to become a global automotive player as it would only serve domestic markets. This consolidation of approval and homologation processes will also facilitate the formation of a single regime for future regional agreements with other key trade partners such as the EU.

Recommendation

ASEAN should create a single regulatory regime for approval and homologation processes to improve time and cost efficiency. We strongly advocate relevant authorities to accept test reports by qualified foreign bodies and align their standards in order to facilitate exports based on UNECE-approved regulations.


3. Adoption of higher fuel quality and emission standards

Globally, automakers have already moved towards modern low carbon emission technologies in order to comply with Euro V/VI standards and to reduce vehicle emission significantly. In order to become a single manufacturing base for the global automotive market, it is essential that ASEAN harmonises emission regulations and fuel quality standards across the region and complies with international standards and best practises.

A higher fuel quality with low sulphur content for both petrol and diesel fuel is essential for the introduction of modern low emission technologies. The low fuel quality in most of the ASEAN countries (except Singapore and Thailand) is the biggest hurdle for the introduction of such modern low emission technologies. Low fuel quality standards are not only having an adverse impact on the environment, but also cause a serious disadvantage to the end-consumer since they do not have access to the latest innovations available since the technical requirement of such modern technologies require fuel of higher quality.

In addition, those low quality standards make it also difficult for the local automotive industry to export their technologies due to lack of competitiveness since the most important automotive markets have already adopted Euro 4 and above technologies. This fact also limits the foreign investment in the ASEAN countries since the automotive industry players would need to manufacture with two different standards, Euro 2 for the local and Euro 4 for the International demand.

While ASEAN countries are encouraging and developing policies on fuel economy improvements for vehicles that are manufactured, assembled or sold in their respective countries, the availability of high quality fuel is actually one of the most effective means to reduce fuel consumption, leading to less dependency on crude oil imports, lowering fuel subsidies (where applicable) and increasing foreign direct investment (FDI). Currently, there is no clear plan to align those fuel quality standards across the ASEAN region.

Recommendation

The introduction of higher fuel quality and emission standards is the pre-requisite for the introduction of environmental-friendly low emission technologies and the necessary export business. In order to prepare for the AEC and to enable free movement of goods, ASEAN will have to implement more stringent fuel quality and emission standards and harmonise those standards across the region. A concrete roadmap of implementation is urged by automotive manufacturers and the oil companies.


4. Harmonisation of the Rules of Origin

Rules of Origin and local content are differently defined across ASEAN countries, despite promoting local content requirements (40%). Without harmonised rules, local OEMs encounter higher production costs. As such, cheaper imported parts are preferred as compared to those produced locally, and this adversely impacts the local manufacturers and hence local employment.

In addition, different certification processes by different local authorities have resulted in complexity in applying the Rule of Origin. This impedes the integration of ASEAN to become a single manufacturing hub and market.

Recommendation

The Automotive sector recommends a harmonisation of related implementing procedures for the local content and Rules of Origin application as a part of the approval and homologation processes, in order to become a single manufacturing hub by 2016.

5. Technology-neutral vehicle taxation scheme

Environmental issues are becoming a major factor in general, and in the automotive industry in particular. Therefore, we strongly advocate that vehicle taxation schemes should be based on the effective carbon dioxide (CO2) emission levels of vehicles, with technology-neutral regulations across the ASEAN countries. With a clear focus on the emission output of vehicles, the best (cleanest) vehicle technologies will be incentivised, and not by selected drive types only. This will enhance competitiveness and productivity between all market players and give the end-consumer a wide range of options. With such a taxation scheme, the consumers will be more likely to choose environmentally friendly vehicles, which would lead to a gradual decrease of the usage of old, high-pollution vehicles. This would demonstrate a shift towards clean, green vehicles a reduction in overall fuel consumption and fuel subsidies (where applicable).

Recommendation

ASEAN should promote to member countries the introduction of a technology-neutral emission based taxation scheme, such that vehicles with low CO2 emissions would receive a tax relief whereas high fuel consumption and high CO2 emission vehicles would be taxed higher, independent of their power train technology.


6. Availability and quality of skilled workforce

As the growth in the automotive industry area is expected to continue, an increasing shortage in labour and skilled workforce is being experienced at all levels across ASEAN, particularly in the highly-skilled and technology-intensive manufacturing sector.

Despite an increase in the number of graduates and qualified engineers, ASEAN continues to experience a shortage of labour as these graduates do not meet the increased industrial standard requirements. There is a need to develop a critical skill base workforce if Malaysia is to achieve its aim to become an EEV hub. There is also a need to ensure continuous development of technicians and engineers skill base within the industry. Public-private partnerships would be essential in order to close the gap until the curriculums are adjusted accordingly.

For these reasons, ASEAN productivity in industrial sectors, particularly in the automotive industry, has yet to realise its full capacity.

Recommendation

ASEAN Governments should facilitate Public-Private partnerships in engineering and technical trainings to ensure that the workforce meets industrial demand, as well as allowing free movement of unskilled workforce where appropriate. In the longer term, the improvement of educational standards that incorporate industrial trainings as part of the academic curriculum should be considered in order to improve the quality of workforce.

5.3 Green Building and Sustainable Communities

Introduction

Green Building and Sustainable Communities committee encourages the principles of sustainable development of the built environment. The committee embraces principles of environmental responsibility, social awareness and economic profitability. EUMCCI endorses the Green Building movement as a great opportunity for Malaysia to make and accelerate changes in construction practice and technology, to reduce the environmental impacts of the built environment, while creating places that are healthier and provide better living comfort for the Malaysian society. Furthermore, with the increasing worldwide demand for green building space, the green building movement gives Malaysia the opportunity to become more competitive in the international property market.

Status

Over the last five years Malaysia has experienced a concerted shift towards the development of green buildings, driven mainly by market demand. A study published in 2012 by the Malaysian National Property Information Centre, Finance Ministry reported that the green office buildings can achieve higher rental rates by 0.50 to 2.25 RM/ft2 and higher rental growth by 0.50 to 1.00 RM/ft2 compared to conventional buildings. The demand continues to rise as environmental awareness


grows and more companies embrace the practice of corporate social responsibility. Other drivers that have been noted include governmental support in the form of fiscal incentives and the growing evidence of green building operational cost and occupant health and comfort benefits.

The Malaysia Green Building Confederation (MGBC) is a not-for-profit, non-governmental organisation established in April 2009. It is supported by two professional organisations the Malaysian Institute of Architects (PAM) and the Association of Consulting Engineers Malaysia (ACEM). In May 2009, PAM and ACEM launched the Green Building Index (GBI), a voluntary green building labelling method. GBI classifies construction projects in four categories i.e. Platinum, Gold, Silver or Certified, depending on the scores achieved. Evaluation is based on six key criteria: Energy Efficiency, Indoor Environment Quality, Sustainable Site Planning & Management, Material & Resources, Water Efficiency and Innovation. GBI labelling tools are continuously being developed, and more than 150 million square feet of green building space has been registered for GBI certification, in part thanks to Malaysian Government incentives. Subsequently, other Malaysian green building labelling tools have emerged on the market, including GreenRE (2013), launched by the Real Estate And Housing Developers’ Association Malaysia (REHDA) and MyCREST (2014), soft-launch by the Ministry of Works while the state of Melaka launched their state-specific Green Seal (2014)

In November 2011 the Cabinet of Malaysia approved a “Green Neighbourhood and Low Carbon City” framework and assessment system. The new assessment system targets to address climate change effectively via an urban planning system and was developed by the Ministry of Energy, Green Technology and Water (keTTHa) with the support from Malaysia Green Technology Corporation and Malaysian Institute of Planners.

EUMCCI supports the adoption and the ongoing development of market-based green building transformation systems aimed to meet Malaysia’s requirements, although we would welcome a single, unified system. The transition to sustainable construction practices is as much a business opportunity as a crucial response to the urgency and importance of environmental concerns and could alter the face of the Malaysian construction industry for the better.

Issues

The issues pertaining to Green Buildings and Sustainable Communities are multi-facetted. Buildings consume about 40% of global energy, 25% of global water, 40% of global resources, and they emit about one third of the global greenhouse gas emissions. Add to this the impact from the transportation, water, waste and pollution issues within cities and communities and the impact and complexity becomes even bigger. For this EUMCCI committee to be effective, it has been decided to focus our efforts around one key issue: reducing the energy consumption of buildings during operation, which accounts for the bulk of the energy consumption and greenhouse gas emission of buildings in a life-cycle perspective. Moreover, about 80% of the economical energy efficiency measures in the building sector are never implemented, which emphasises the relevance of our focus issue.


FOCUS ISSUE: Implementation of mandatory energy efficiency labelling for buildings

Energy Efficiency Labelling systems are already well known on the market for products such as refrigerators, air-conditioning units, televisions and light bulbs. The label allows the consumer to make an informed choice at the point of purchase. The label states the energy efficiency rating of the product, with 1-star being the least energy efficient and 5-stars being the most energy efficient. Moreover, the label also states the annual energy consumption of the product based on standardised test conditions. As such, the label allows the consumer to undertake a life-time cost analysis, which more often than not shows that the cheapest option is the energy efficient option even if the acquisition or rental cost is slightly higher.

The intention of the Energy Efficiency Labelling system is to apply the same logic to buildings, where the label will inform the building purchaser/owner of the operational energy cost for the building. Moreover, the energy label would have the added effect of incentivising building owners to undertake efficient retrofitting of buildings, as the investment in energy efficiency would be partially recuperated at the point of sale, as the improved energy label rating would increase the price of the building.

The Energy Efficiency Label should be mandated at the point of sale or leasing of both new and existing buildings. The energy efficiency scale for the label should be adjusted in accordance with the changes to the relevant building codes.

An energy efficiency label scheme for buildings has been successful in the EU and it can become a strong tool in Malaysia to set minimum requirements for energy efficiency of buildings. Instigating such a certification scheme would create employment through the establishment of inspector jobs as well as give rise to growth among participants in the building industry. Moreover, pursuing energy efficiency is in the national interest of Malaysia as the total energy footprint will be reduced significantly.

Recommendation

Introduce a mandatory energy efficiency label for buildings based on a standardised calculation method and/or audit, which will drive energy efficiency and life-cycle cost savings in the building sector for new as well as existing buildings.

Success story

The power utility, Tenaga National Berhad (TNB), was given the EUMCCI Innovation & Leadership Award (2015) for its annual Home Energy Report website initiative that has been rolled out for 200,000 of its customers. This online initiative gives three significant benefits to the TNB customers, namely enabling the customers to tracking, understanding and reducing their electricity consumption, all of which is very much aligned with the focus issue of the EUMCCI Green Building and Sustainable Communities Committee.


5.4 Human Resources

Introduction

EUMCCI continues to highlight two major issues affecting the labour market (i) insufficient supply of labour to meet the demands of the market and (ii) the lack of quality labour to meet the requirements of employers.

Issue: Insufficient supply of labour to meet the demands of the market

EUMCCI is very concerned with the labour shortage problem affecting its member companies, particularly in industries that are heavily dependent on foreign labour like the construction and manufacturing industry. With the move by the Deputy Prime Minister to freeze recruitment of foreign labour, many industries are faced with serious manpower issues, especially for jobs at the elementary level and unskilled labour category. This problem is further exacerbated by the perceived unreliability of Malaysian workers.

Recommendations

The EUMCCI urges that the freeze ought to be lifted promptly to help facilitate certain industries like construction and manufacturing that are very much still dependant on foreign labour. If there is to be a freeze, the relevant stakeholders must ensure that sufficient notice is given to companies to ensure that alternatives can be implemented.

Facilitate employers’ access to school leavers every year. This can be done through local Labour Offices, implementing a registration system for school leavers (post-PMR, SPM or STPM) who are unable to qualify for further education, particularly in the rural areas of the country. Commitment from the corporate sector can be gained in providing employment and the necessary skills training to this group. In the long run, this will help school leavers join the labour force quickly and perform efficiently.

Revive apprenticeships, vocational schools and technical training schemes for youth. For those who do not excel academically and do not qualify for tertiary or further education, this will be a good alternative for their future careers. Skills for the manufacturing and construction sectors, as well as hotel and restaurant industries could be taught under such schemes to help meet the labour demands there. Partnerships with companies in the corporate sector can be formed to provide the necessary practical training for students under these schemes.

Implement compulsory Industry Skills Programmes for school students prior to their graduation to better prepare them for employment. A minimum period of two weeks can be considered and it can be carried out during the school holidays. Companies in the private sector can be encouraged to offer this programme to students as a corporate responsibility commitment.

Increase the labour force participation rate of women, retirees and students by introducing less stringent and employer-friendly labour laws that encourage the hiring of these groups. The recent proposal of a higher retirement age is perhaps one of the government’s answers to addressing the labour shortage issue. In this respect, EUMCCI maintains that the proposed higher retirement age should not be mandatory but instead, flexibility should be given to employers to re-employ retirees up to a higher age and under less stringent employment laws.


Issue: Lack of quality labour to meet requirements of employers

To cope with their labour needs, many EUMCCI companies have been replacing foreign labour with Malaysian workers. However, instead of providing much needed workforce stability, companies generally have to cope with the unreliability and low competence of local hires. The most common complaint of employers is the lack of work ethics, i.e. unpredictable attendance, tardiness and breach of employment contract which make resource planning difficult on a daily basis.

In terms of competence, while many initiatives have been undertaken to prepare the younger generation to meet the demands of a knowledge based and technology intensive economy, the large pool of school leavers and fresh graduates that enter the labour market every year are still found wanting in certain areas. Poor verbal and written communication in the English language, lack of critical thinking and analytical skills seem to be the general observations of employers.

Another issue that employers are constantly having to battle is the trend of job-hopping. According to statistics released by the Malaysian Employers Federation (MEF) recently, the staff turnover rate of Malaysian companies is high with an average of 18.8% in the manufacturing sector and 20.8% in the non-manufacturing sector. Companies have to pay high salaries to retain employees due to market forces, but employers are questioning if the skills, knowledge, experience and work ethics of workers have increased in tandem. The cost of labour is spiralling upwards but the return on investment is questionable.

EUMCCI’s position is that while employers should play an active role in developing the competencies of the workforce, greater efforts should be directed to the development of essential skills and to increase their employability prior to them entering the labour market.

Recommendations

Increase the quality of the teaching of the English language in Malaysia’s education system, focusing on grammar and verbal communication. English is a common business language and a higher level of proficiency is desired among our younger generation. For a large number of jobs, particularly in the service industry, employers need workers who can converse in decent English. Many job seekers now fail to meet the requirements in this area even during job interviews.

Make industrial training or attachment with companies mandatory for tertiary education students and introduce this concept at secondary level education in schools, as an extra-curricular activity which students can earn merit points from. This will better prepare them for the demands of the working environment when they join the labour force in the future.

Curb the job-hopping trend and rampant breach of contract incidents among workers by introducing a law that mandates a minimum term, e.g. one year, in contracts of service, with clear and enforceable penalties for both parties if breached. This is aimed at ensuring a greater stability in the workforce and preventing workers from abandoning their jobs with little or no notice to employers.

Revamp the education system to focus more on experiential and self-discovery learning among our school children and reduce instructional style teaching at all levels of education. Include syllabus that prepare them for the demands of the working environment, e.g. work ethics, personal discipline and commitment to excellence. Creative teaching methods such as workplace simulation, business games and role playing should be included in the system to inculcate awareness and develop skills for the workplace even at a young age.


Involve companies and employers in dialogues with the Ministry of Education to improve the country’s education system. EUMCCI applauds the announcement by the Deputy Prime Minister that the Education Ministry will be holding a nationwide National Education Dialogue series to obtain views from various stakeholders. EUMCCI stresses that it is imperative for the private sector and employers to be involved in this process.

In industries that critically require talents for the advancement of knowledge and capabilities in the country, for example in the IT and Communication industry, EUMCCI recommends that the hiring of foreign talents be made easier, and even encouraged for the purpose of knowledge transfer.

In summary, EUMCCI reiterates that labour supply and labour productivity in Malaysia are our main concerns and we maintain that the EUMCCI is committed to collaborative efforts with the Malaysian government in addressing these labour issues.

Minimum Wage Act

The objectives of minimum wage are aiming for Malaysia to become a high-income economy nation, to reduce poverty and to reduce nation’s dependence on unskilled foreign labour.

Current Scenario

• Malaysian Trades Union Congress (MTUC) is in favour of only one national minimum wage, not sector-based minimum wages, and they want it to cover all workers, including foreigners.

• There is a lack of laws covering the welfare of workers in Malaysia

• The MTUC has suggested RM 900 as the rate for the minimum wage, based on the minimum daily expenditure of an average worker, with an additional RM 300 as the cost of living allowance (COLA)

• Many companies complain to have too a short time frame/ transition period to implement the new act.

• Since this is a new act and as such there are bound to be some teething issues. This is unavoidable as some matters may not have been anticipated by the government while drafting the legislation.

• Many sectors in Malaysia are foreign worker dependent

• There is existence of Monopsony in Malaysia Labour Market

• Labour market in Malaysia is not fully competitive


Issue: Minimum Wage

The Prime Minister has proposed in his budget speech that Minimum Wage will go up to RM1,000 for Peninsula Malaysia and RM920 for Sabah and Sarawak. The new minimum wage will be implemented in all sectors except domestic service or domestic maids effective 1.7.2016.

SMEs risk being badly affected by the minimum wage rule as it would have an adverse impact on the operational costs of the companies. SMEs do not have large financial reserves to cushion the high operative cost. Hence if our workforce in the country is not sufficiently trained, they could be too expensive to hire compared to other countries in the region.

• It will be costlier for employers to hire workers; will reduce Malaysia’s competitiveness for FDI if productivity does not grow in tandem

• does not guarantee job creation, but may instead increase unemployment

• foreign labour spending power is not in Malaysia: they send their money back to their home country, results to huge outflow of money “hyperinflation”

• It may also result that “desperate companies” may hire illegal workers: increase informal labour

Recommendations

• Minimum wage should take into account the type of employment, location, and the economic sector involved

• Companies should be given a reasonable grace period for its implementation

• Efforts should be made to raise incomes overall; any increase to wages must be determined by the productivity of workers

Issue: Employees Insurance for SMEs

Currently, only MNCs have the Group PA/PD and Hospitalisation Insurance as a benefit. Most of the SMEs in the country should insure their employees at least with some basic Group PA/PD and Hospitalisation Insurance. The premiums are affordable and employers just need to demonstrate their commitment to their employees’ welfare as this goes a long way for the employees to have a sense of security. SOCSO has its limitations.

Recommendation

All employers should take out Group PA/PD & Hospitalisation Insurance for their employees.


Issue: Lack of Government engagement with industry

Recommendation

The government should continue with the tripartite meetings (e.g. the National Joint Labour Advisory Council, etc.) between employer organisations, the government and labour unions. This has been a past practice which needs more regularity and genuine interest especially on the part of the government and employers. This would serve as a useful feedback mechanism to make improvements and reduce friction and improve communication.

Issue: Education: The Highlights of the Malaysia Education Blueprint 2013-2025

The blueprint highlights the aspirations to ensure universal access and full enrolment of all children from preschool through to upper secondary school level by 2020. It aspires for Malaysia to be in the top third of countries in terms of performance in international assessments, as measured by outcomes in the Trends in International Mathematics and Science Study (TIMSS) and the Programme for International Student Assessment (PISA) within 15 years, to halve the current urban-rural, socio-economic and gender achievement gaps by 2020, to create a system whereby students have opportunities to build shared experiences and aspirations that form the foundation for unity, and to further maximise student outcomes within the current budget levels.

The Blueprint is indeed a commendable long term education plan for the nation. It possesses elements of international benchmarking, and is capable of shifting future generations to a more creative, innovative and competitive society through the high order thinking skills developed along the education process.

Nevertheless, the plan appears to have numerous teething problems due to the rapid implementation. These problems may adversely affect the pioneer groups in all primary 1 to 3 and secondary 1 - 2 nationwide.

Recommendations

• Form pilot groups, from a number of low, medium and high performing schools to test the system instead of immediately imposing it on all schools in the country.

• The new education framework is rather complex, and requires greater engagement of stakeholders, especially the Ministry, teachers and parents.

• Ensure competence and delivery of human resource needed by schools. These will have to be made available by the Ministry, and coordination among the various divisions at the Ministry is imperative to ensure for example resources are available or can be made available to all schools in time for each and every lessons or learning units specified by the curriculum development division.


• Decentralising education can serve to make the education system more efficient as well as more democratic. Decentralising power away from the Ministry of Education and dispersing it to elected councils creates the conditions for better public services and a more robust society.

The EUMCCI congratulates the Government for their efforts and more importantly reviving the importance of the English Language. Every effort must be made to enhance the teaching of English in schools and university to ensure that graduates are better equipped when they enter the labour market.

5.5 Logistics & Transport

Introduction

Integration under The Association of Southeast Asian Nations (ASEAN) will create an ASEAN Economic Community (AEC) by the end of 2015 (a single market), where ASEAN is set to be a region with free movement of goods, services, capital, investment and skilled labour. 2014 was critical for Malaysia in terms of preparation for the AEC and its Chairmanship of ASEAN in 2015. Logistics has been identified as one of the priority sectors for the ASEAN integration, where liberalisation and harmonisation efforts are supposed to be accelerated. With its strategic location in ASEAN, it is crucial to further tap on Malaysia’s key strengths in logistics. There is a risk of delays to the implementation date or a more staggered approach of the liberalisation which would reduce the benefits and render the AEC a mere aspirational target. As Malaysia’s regional neighbours, such as Thailand and Vietnam, are strongly improving their logistics infrastructure and networks among the ASEAN countries, Malaysia will most likely face high competition from these manufacturing hubs in becoming an attractive logistics hub in ASEAN.

The EUMCCI Key Logistics Spots nationwide survey shows that Malaysia is particularly strong in the availability of general warehouse space, and in accessibility and connectivity of logistics locations and availability of logistics education. However, areas of improvement are the transparency, efficiency and a more facilitative role of the government, in particular related to customs administrative procedures, as well as ICT infrastructure.

The logistics sector, capitalising on the country’s competitive advantages (good quality of infrastructure, solid manufacturing and growing services industries, competitive pricing and introduction of ICT enhancements in numerous nodal points), could make Malaysia an attractive logistics hub in ASEAN, in particular in light of the growing e-Commerce in Malaysia, currently the second largest in ASEAN.

The real value of Malaysia’s total trade will rise by 4.5% in 2015.

* Total cargo volume handled at Port Klang will rise by 1.4% to 202.33mn tonnes in 2015, while volume at the port of Tanjung Pelepas will rise by 3.7% to 131.02mn tonnes.

* 2015 box traffic at Port Klang is exceeding 7%


Issues

1. High cost of labour in Malaysia as compared to other ASEAN countries. A critical issue is also the restrictions on foreign labour at KLIA, in particular in the cargo area. Operators in the cargo area are not able get quality local workers and the resulted in many inefficiencies and delays in cargo handling due to the shortage of workers.;

2. Regulatory function of customs leads to complexities in efficient third party and fourth party logistics operations;

3. ICT infrastructure is not strong enough and without sufficient coverage;

4. Transport and warehouse security need to be enhanced;

5. Lack of truck drivers for the logistics industry; and.

6. Lack of long-term integrated planning between the various modes of transportation.

7. Capriciousness of customs and lack of transparent procedures. (U-Kastam will bring improvement)

8. Administration and registration processes sometimes inefficient and unattractive for newcomers in Malaysian market.

Recommendations

1. To focus on strengthening and attracting international logistics service providers that support existing key clusters of Malaysia, like in oil and gas and palm oil;

2. Conduct focused dialogue sessions with the logistics industry to prepare the industry for AEC and ensures its competitiveness (addressing issues relating to the Postal Act, Strategic Trade Act, Custom Law and not least the Competition Act);

3. Increase emphasis on education and research in logistics and supply chain management to increase the skills of the logistics sector;

4. Promote the use of foreign truck drivers and relax the restrictions on foreign workers for cargo handling at KLIA;

5. Promote development and use of energy efficient solutions in the logistics and transportation industry in Malaysia;

6. To leverage its strength of its Halal brand, Halal industry, logistics infrastructure, Islamic education, Islamic financing and its people in creating investment opportunities for halal regional distribution centres in Malaysia.

7. Create neutral and central point of arbitration for forwarding companies and custom brokers, to get fast decisions on pending cases.

8. Reform administration and registration areas to attract business transfers from Singapore to Malaysia; i.e. the registration process for pharmaceutical products takes 9 months and is an obstacle for major pharma companies to change their distribution practice from Singapore.


Furthermore, some concrete issues presented below can be considered “quick wins” requiring little change in policy but would have a large impact on the flow of goods to and from Malaysia and subsequently on Malaysia’s competitiveness:

1. Implementation of both ASEAN Harmonised Tariff Nomenclature (AHTN) and Perintah Duti Kastam

Currently, Malaysia is the only country in ASEAN which applies two different sets of tariff nomenclature i.e. AHTN and Perintah Duty Kastam (PDK), despite an agreement in 1995 to implement only the AHTN. This is causing additional costs and substantial complexities for traders as they have to use two different sets of tariff nomenclature: one for ASEAN origin, and another for non-ASEAN origin. As with the other ASEAN countries, there is no revenue impact for Malaysia to implement the AHTN, as it takes into account all the tariff requirements of the PDK.

Recommendation

To fulfil Malaysia’s ASEAN commitment to implement only the AHTN as soon as possible.

2. Export Declaration Threshold:

Currently, every export requires a full, formal customs declaration (K2 form). This is a significant burden on trade, and a cost to export by Malaysian exporters, which reduces competitiveness. Other countries in ASEAN and Asia have instituted simplified declaration up to a certain value, in order to reduce the cost of export.

Recommendation

To institute an export declaration threshold at least of RM5000, below which a simplified declaration need only be submitted for risk assessment and statistical monitoring.

3. De minimis increase for Malaysia:

In order to facilitate trade one of the keys is to simplify customs procedures and reduce costs for importers and exporters. A policy seen as essential for simplifying customs procedures is the introduction of a value threshold for tax and duty collection. This includes implementation of commercially useful so called “de minimis values”, which exempt low-value importations from revenue collection. The current de minimis threshold in Malaysia of RM500 has not been revised since 2002 (when it was revised from RM200 to RM500). Since then, the cost of duty collection has increased significantly, but the amount of revenue collected has not increased. In addition, Malaysia has significantly reduced tariff lines which are dutiable. A study undertaken by the Conference of Asia Pacific Express Carriers (CAPEC) shows that a USD 200 de minimis implies significant net benefits (cost savings) of at least USD 22.5 million per year for Malaysia, constituting cost savings both for Royal Malaysia Customs and the business community. This is especially relevant for Malaysia


as a rapidly growing e-Commerce market. Such a move would also significantly enhance ASEAN integration.

Recommendation

Malaysia to consider increasing the de minimis to at least USD 200.

4. Land border with Singapore

A significant amount of trade between Malaysia and Singapore is transported by land at the Johor Bahru-Singapore border. At the moment, the border gets severely congested, in particular during peak hours, slowing exports to Singapore, where in worst cases crossing the border can take up to eight hours or more. The main reason for this is a lack of adequate infrastructure, in particular the absence of dedicated lanes for reliable transport companies. Customs controls are also at times excessive with a high rate of physical inspections and manual paperwork for customs clearance. This hampers connectivity to Singapore and hampers the realisation of Iskandar’s investment potential.

Recommendation

Look into ways to reduce border congestion (expand infrastructure and look at ways in the short term to use existing facilities more efficiently) and simplify customs controls, moving towards sharing data with Singapore customs (i.e. to look at ways of avoiding duplicate submissions for import and export), fully automated procedures and risk profiling as well as joint customs controls.

A. Sustainable Logistics

Sustainability initiatives become more and more important for global and local players and companies, and authorities in Malaysia are starting to develop a sustainable logistics and mobility strategy. This means addressing environmental pollution, CO2 emission reduction, as well as the improvement in energy efficiency and the use of renewable sources of energy (like waves, wind and sunshine).

In some countries companies have started with initiatives such as better warehouse design, using daylight through the warehouse roofing, the use of recycled materials in building materials and finishing, solar panels to reduce energy consumption, wind turbines, use of LED/LVD lights, collection of roof water, etc. Many countries in Europe also have started with green transportation initiatives, by moving to cleaner fuels for their trucks (like bio-diesel or gas), promoting the use of lower polluting sea and river vessels instead of trucks, coordinated transport and starting in big cities, green city logistics schemes. With rising fuel cost many companies are investing heavily in both technology, ICT and operating procedures to improve energy efficiency for the benefit of both the profitability and environment.


Additional factors

• Liberalisation of the logistics sector by end 2015 which will open the ASEAN markets for the logistics industry, where one of the criteria for foreign investment will be the existence of and support for sustainable logistics;

• Singapore, Japan and Hong Kong have made strong commitments to a sustainable logistics programme;

• Existence of international Green/ECO standards such as USGBC LEED 2009 (for green buildings) and ISO 14001; and

Issues

• To address the existing incentives given to Malaysian companies to start adopting sustainable logistics and their expectations from the Malaysian government to realise the sustainability initiatives;

• To address potential of sustainable logistics in Malaysia when there has been a shift to more offshore manufacturing and more frequent Just in Time (JIT) deliveries resulting in negative impacts on environmental performance of supply chain;

• There is little focus on the costs effectiveness of sustainable logistics in Malaysia; and

• Very few local players are championing sustainable logistics in Malaysia and there is a lack of primary infrastructures in place to develop sustainable logistics.

Recommendations

• The Malaysian Logistics Council to establish a Sustainability Logistics Task Force to table and advocate the sustainability incentives for the Malaysian government Budget 2015. Experience from Europe underlines the effectiveness of centrally administered monetary incentive schemes to boost policy compliance among the industry. This would be an efficient way of rapidly promoting sustainable logistics and transport in the country.

• To conduct a study how the Economic Transformation Programme will impact the need for transportation in Malaysia and the potential environmental impact of increase use of existing modus operandi considering pollution from moving goods and people by various means of transport but also taking into account pollution from increasing congestion. This could potentially also look at the economic loss to Malaysia from delays and congestion.

• Prepare a long term roadmap for sustainable development that fits in the respective industry’s business model which seeks to achieve a more efficient method in measuring carbon footprint and implementing diverse strategies to mitigate the environmental impact of operations and transport. Sustainability can take various forms – from large scale procedural revisions to simple improvements in enhancements in efficiency (kilometres driven or loading capacity usage). The development of infrastructure in Malaysia has been lacking an integrated view on the connectivity


of the various modes of transportation and a clear roadmap for sustainable development taking both the AFTA and the economic development into consideration. Finally, it is critical to address how the various government subsidy programmes influences the decision of transport and logistics and whether it drives the desired behaviour.

• European experts and local champions could assist other Malaysian companies in remodelling logistics processes in order to improve costs effectiveness and environmental impacts within an organisation via EUMCCI’s Expert Transfer Sessions. For example: the introduction of fuel cell forklifts and hybrid trucks in a fleet and the maximisation of loading factors, surface utilisation and redesigning the distribution network without comprising JIT deliveries.

• Malaysian companies should consider adopting available ICT solutions to optimise the fuel efficiency by operating in smarter manner.

• Malaysia to review the bumiputra requirements in customs brokerage services so as to align it with the thresholds applicable to other logistics and supporting services.

• Furthering the collaboration between the Malaysian government, the domestic and international logistics industry and non-governmental organisations to advocate sustainable logistics nationwide.

Europe as the global leader in green technology innovation, application and policy incentive schemes can lend a helping hand to Malaysia in its process to go green not just logistically. Enhanced dialogue and policy exchange can greatly accelerate the national efforts in sustainable and renewable energy, as well as promote the supply and usage of green technologies.

5.6 Research and InnovationIntroduction

The EUMCCI Research and Innovation Committee is a forum for university and industry stakeholders to communicate and collaborate. The committee provides a knowledge and technology exchange mechanism to enhance product development, increase competitive advantage and enable companies to react to new challenges and opportunities.


The mains aims of the committee are as follows:

• Provide an inclusive environment for all relevant stakeholders, enabling projects to be initiated which may not otherwise be possible

• Host networking events, with specific themes, in order to promote and encourage various initiatives

• Highlight funding opportunities that enable university/industry collaboration

• Engage with government agencies to promote the committee and to seek their engagement in the broad area of research and innovation

• Support the reporting of successes, and case studies in trade magazines, local and international press and scientific journals

• There are obvious synergies with many of the other EUMCCI committees and we would expect to interact with the other committees when there are opportunities to do so

The focus throughout 2016 will be on the funding opportunities that are available to promote university and industry collaboration. A key aim this year will be to hold an event to inform the community about the EU’s Horizon 2020 funding vehicle, which is an obvious opportunity for members of this committee.

5.7 Smart Grid Technologies in Malaysia: Status and Scenario

Introduction

Malaysia has thirteen (13) states and three (3) Federal Territories. The South China Sea separates Peninsular Malaysia and East Malaysia. Peninsular Malaysia has eleven states and two Federal Territories while East Malaysia has two states Sabah and Sarawak and the Federal Territory Labuan.

The electricity suppliers in Malaysia are following:Peninsular Malaysia : Tenaga Nasional Berhad (TNB)Sabah : Sabah Electricity Sdn.Bhd (SESB)Sarawak : Syarikat SESCO Berhad (SEB), 100% share held by Sarawak Enterprise Corp BerhadLocal distribution companies run by TNB, SESB, SEB and 42 other local companies

Privatization and electricity regulations have been initiated in three regions – Peninsular Malaysia, Sabah and Sarawak by TNB, SESB and SEB. TNB has 7.7 million customers while SESB and SEB have 500,000 and 414,000 customers respectively. These three utilities are vertically integrated – from power generation to distribution. In the central government, the Economic Planning Unit (EPU) of the Prime Minister’s department manages national policy for electricity and energy. The key stake-holders in establishing national policy, technology standards and relevant work topics concerning smart grid are as below:


- Ministry of Energy, Green Technology and Water( KeTTha)- Energy Commission ( ST)- Standards and Industrial Research Institute of Malaysia ( SIRIM)- TNB

The existing transmission grid in the country extends to 28,104 circuit kms covering voltage ranges of 500kV, 275kV and 132kV. The grid is known for its reliability, which reflects in System Average Interruption Duration Index (SAIDI) of 72 minutes/year in Peninsular Malaysia, while it is 0.70 minutes/year for Singapore. The utilities in Malaysia are striving to reduce the index by improving the reliability of the grid system.

There has been a huge sum proposed for T&D infrastructure enhancement during 2013-2016, which is around $6.0 billion. This includes the smart grid investments, new substation and transmission line projects, distribution grid automation and replacements.

Necessity for Smart Grid

The peak power demand from the customers is projected to grow at3 -3.5% annually in the next 5 years, and expected to double in the next 20 years.

The national goal of the Smart Grid program is to reduce carbon emissions to 40% of the 2005 level and increase renewable energy levels to 2,080 MW and 4,000 MW by the end of 2020 and 2030 respectively.

This, in turn, would reduce the nation’s dependence on natural gas & coal and enable withdrawal of national electricity subsidies.

The renewable energy potential in Sabah region is 2,700 MW, while the tapped capacity is only 72.5 MW in 2014, according to the Ministry of Green Technology and Water. This constitutes hydro, biomass and geothermal sources of energy. However, the weak grid system has to be strengthened to manage this additional supply of power to the grid.

Transmission Voltages

Transmission MVA (2012)

Transmission Circuit km (2012)

Electrification rate(2013)

T&D Investment

Regulatory Body

Transmission Company

500kV, 275kV, 132kV

105,474 MVA

28,104 circuit km

99.4%

Around $6.0 billion during 2013-2016

The Energy Commission of Malaysia

Tenaga Nasional Berhad (TNB), Sabah Electricity Sdn Bhd (SESB), Sarawak Energy Berhad (SEB)


Long-term drivers such as demand for the growth of energy, need for replacement of aging and outdated infrastructure, and the challenge to create a sustainable energy system are focusing on the means to systematically optimise the energy system through an intelligent network infrastructure termed “Smart Grid”.

Smart Grid Road Map

As a first step to preparation for a national road map, Energy Commission initiated a National Lab with key stake-holders and chosen technology providers over two workshops laying focus on following:- Smart Grid ( meter) pilot and roll-out- Industry development- Policy regulation and standard

TNB, being the biggest utility, has embarked upon a Smart Grid development plan with focus on three key areas as follows:- Operational efficiency improvement- Network efficiency improvement and demand side management- Renewable energy integration to reduce CO2 emissions

Ongoing activities

TNB had embarked on an Automated Metering Infrastructure (AMI) pilot with 1,000 meters in the state of Malacca and Putrajaya, with various communication technologies being tested. In this connection, earlier, TNB had also organised a Carnival Day with a road-show on smart metering to get the message across to the wider audience.

With the pilot coming to a close very soon, TNB has announced a nation-wide roll-out in several phases spread over six (6) years. The first phase is expected to commence before mid 2016.

In parallel, the research wing of TNB is also involved in studies in the areas of distribution automation and integration of renewable energies, with pilots being planned in 2016.

Renewable Energy Mix and Cumulative CO2 Avoided, Malaysia

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%2015

5.50%RE Power Mix

11.1Cumulative CO2

Avoided (mt)

Cum

ulat

ive

CO

2 A

void

ed (m

t)

Cum

ulat

ive

RE

Cap

acity

(MW

)

2020

11%

42.2Year

2030

17%

145.1


In 2014, TNB collaborated with smart grid platform company Trilliant in order to exchange technical information and to provide training to deliver smart grid benefits such as energy efficiency and reliability to the entire customer base of TNB.

RF Mesh, PLC and cellular technologies have been chosen as communication medium for the AMI roll-out.

SEB is also in the process of conducting feasibility studies in the areas of distribution automation, distribution management systems, outage management systems, and smart metering.

The stake-holders have also been spending valuable time to visit sites and offices in advanced countries to witness performance and make evaluations to adapt these technologies to local market conditions.

Potential

An AMI is necessary to implement time-of-use tariffs, a foundation to the demand side of management and an influence on consumers to optimise their energy consumption.

The successful completion of the above pilot is spiralling a phased roll-out of smart meters, thereby empowering consumers and initiating the demand side of management, besides other features such as demand response. Such a programme would also help in power quality improvement, load optimisation and integration of renewable energy into the grid which demands transparency at the load end for proper decision making.

Reduction in outage times thus reducing revenue losses is an important topic gaining attention. Sophisticated solutions exist which can address this besides reducing O & M costs.

Improvement in building efficiency is also seen as an important factor in trimming consumption. There is also a potential in evolution of smart townships with commercial and residential loads. This paves the way for improving energy efficiency and smart building technologies.

Conclusion

An increase in renewable energy integration into the electric power grid should have grid transparency at the distribution level in order to avoid power quality issues and to increase grid reliability and resilience. New technologies in the area of distribution automation, condition monitoring and asset management also play a vital role in increasing operational efficiency and efficient energy management in the transmission and distribution networks.

There is a growing awareness of the necessity to utilise smart grid, and the years 2014 and 2015 has seen an increase in activities with pilots in progress. The AMI roll-out to commence in 2016 is seen as a major step forward towards realisation of smart grid objectives.

An impediment is seen in the lack of funds to implement new technologies other than AMI on a trial basis which could slow down progress. However, if the stake-holders construct business models and analyse business use cases, they can come up with the justifications that are necessary in order to invest in time.


5.8 Wines & Spirits

Introduction

The EUMCCI Wines & Spirits Committee (Committee) comprises market leading companies engaged in the importing and selling of wines and spirits in Malaysia. The members represent more than 50 premium brands of wines & spirits that would constitute a significant proportion of wines & spirits imported and consumed in Malaysia. The main members are:- Moet Hennessy Diageo Malaysia- Pernod Ricard Malaysia- Remy Cointreau Malaysia

Our members are fully committed to the public health objective of encouraging moderate consumption amongst the non-Muslim population in Malaysia and in combatting alcohol abuse in all forms.

Tax Regime for Wines & Spirits

The Committee welcomes the decision of the authorities to change the excise tax structure to a specific tax system based on alcohol content which came into effect on 1 March 2016. The previous excise tax structure was administratively complex and unnecessarily complicated, with seven different excise rates for spirits and nine different rates for wines and a combination of ad-valorem, unitary and specific taxes.

The conversion of the excise tax regime to excise duties calculated based on alcohol content is in line with the recommendation of the Committee. The specific tax system based on alcohol content will make the regime simple and easy to administer and more efficient for revenue collection, which is in line with government’s initiative to enhance efficiency and tax collection, and reduce leakages. Specific taxation is internationally recognised as a best practice approach for excise taxation, and in adopted by most developed countries, including Australia, Japan, Canada, US ,the EU Member States, and Singapore.

Specific taxes are also consistent with health policy goals of addressing issue of alcohol misuse and abuse.

However, the new specific excise duty rates that came into effect on 1 March 2016 are significantly higher than what the industry has recommended to the authorities. This has brought the total tax burden on imported wines and spirits (import duty + excise) at a level even higher than before, which will continue to create an economic incentive for illicit traders to profit from avoiding tax and selling lower priced alcohol to consumers. This also directly affects government revenue, including the GST revenue.


The tax reform does not address the issue of tax discrimination. Indeed, pursuant to Article III:1 and III:2 of WTO GATT, Malaysia’s internal taxation regime should provide for similar tax treatment among directly competitive or substitutable products, whereas the current regime discriminates imported spirits vs locally produced Compounded Hard Liquor (CHL), and imported wine vs locally produced “wine”.

• The new excise tax regime has not addressed difference in tax treatment between imported spirits (RM150 per LPA) and CHL which are subject to a low excise taxation at the raw material stage (RM22.50 per LPA) .The tax is substantially lower compared to the excise duty on imported spirits. The differential in the excise tax is now even greater following the new higher excise rates for imported spirits and wines.

• Similarly, the excise tax regime treats differently imported wine (taxed at RM150 per LPA) and locally produced “wine”.

In addition, the excise duty on champagne and sparkling wine (RM450 per LPA) remains at a very high level and is three times higher than still wine, although both the products belong to the same category of wine. This is also not consistent with Malaysia’s efforts to attract high yield tourists and in establishing Malaysia as a leading business tourism destination.

Recommendations

a) Eliminate discrimination between (i) imported spirits and locally produced CHL, and (ii) imported wine and locally produced “wine”, in conformity with Malaysia’s obligation under Article III:1 and III:2 of WTO GATT. This could be achieved by putting in place a taxation system on locally produced spirits and wine equivalent to the newly introduced specific tax of RM150 per LPA on imported wines and spirits.

b) Review the unfair excise duty treatment for champagne/sparkling wine, which is three times higher than wine, although both belong to the category of wine. We recommend to adopt the same specific tax of RM150 per LPA newly introduced on still wines and spirits for Champagne and Sparkling wines, instead of RM450.

c) Eliminate import tariffs for wines and spirits under the pending EU-Malaysia FTA. That would significantly contribute to reducing the total burden of taxation on legally imported goods and reduce incentive for contraband trade, which would in fact contribute to increasing government revenue.

RM

per

Litr

e of

Pur

e A

lcoh

ol

Brandy & Whisky Rum, Vodka, Gin Still Wine Champagne/Sparkling WIne

700

600

500

400

300

200

100

0Excise Duty (RM per LPA)

Import Duty (RM per LPA equivalent)


3. Tax Stamps for Alcoholic Beverages

The industry’s preference was for the abolishment of the tax stamp system for alcoholic beverages as it has not been effective in ensuring tax compliance, and in preventing contraband and counterfeit of alcoholic beverages. It might be more effective to promote tax compliance through robust controls at all levels of the alcohol distribution chain combined with active and sustained enforcement, including the setting of taxes at a right and moderate level.

However, as the government has decided to continue with the tax stamp system (with enhanced tracking and tracing and security features), the industry hopes that it will be implemented efficiently, especially ensuring a short lead time for delivery of tax stamps after the submission of application, so as not to impose unnecessary administrative and costs burden on legitimate business operators.

Recommendation

The Committee would like to see the early implementation of a user-friendly online system, including quick Customs approval process, for the application of tax stamps which can help improve the lead time for supply of tax stamps. The industry stands ready to work with the Customs to continuously improve the tax stamp system so that it meets the objectives of its implementation.

With the enhanced monitoring and control features in the audit tools of the new tax stamp system, the Committee is hopeful that it will facilitate Customs in undertaking effective and sustained enforcement against contraband and counterfeit products.

4. Amendments to the Malaysian Food Regulations 1985a) Draft amendments to Food Regulations 1985 pertaining to Alcohol beverages

Ministry of Health (MOH) has recently published two draft amendments to its Food Regulations 1985 pertaining to alcoholic beverages: Regulation 361 on general standard for alcoholic beverage, and Regulation 386A on Compounded Hard Liquor(CHL). Both proposed Regulations have been notified to the WTO TBT Committee on 1 December 2015.

MOH has consulted with the Committee on these two draft amendments in 2015. The proposed Regulation 361, Food Regulations 1985: General standard for alcoholic beverage includes matters relating to:

- Increase of the legal purchasing age from 18 to 21 years.- Display of alcoholic beverages for sale to be in a section specially designated for such products,

and separated from other food.- Health warning labelling: “Meminum Arak Boleh Membahayakan Kesihataan” (Consumption of

Alcohol Can be Harmful to Health) to be written in main label of the packaging/bottle, and in the location where alcoholic beverages are displayed for sale.

The health warning is of specific concern. It should be stressed that the Committee appreciates the public policy objective of the health warning. All its members support responsible consumption of


alcohol as well as measures and initiatives to ensure socially responsible drinking among the non-Muslim population in Malaysia. However, health warning labels are not the most effective means to communicate with the consumers on this issue. There are other effective means of communicating to consumers on the responsible consumption of alcohol and the dangers of its misuse.

On this issue, the Committee has submitted a Memorandum to the Ministry of Health on the concerns with the wording and the proposed mandatory requirement that it be written in the principal display panel (front label). The proposed wording of the health warning is not appropriate. Indeed, consumption of alcohol per se is not harmful to health, but it is the excessive consumption of alcohol that is harmful.

The second proposed new Regulation 386A, Food Regulations 1985: Compound Hard Liquor (CHL) is a welcome formulation of a standard for CHL in the Food Regulations 1985. Relevant inputs have been provided by the Committee during the consultations held with MOH. CHL products which are labelled and retailed as imported spirits such as “brandy’, “whisky” or “vodka” do not meet the standards prescribed for such products in Malaysia’s Food Regulations.

b) Alcohol beverages standards

It would be timely to review all the existing standards for wines and spirits in the Food Regulations so that they are updated and be consistent with international standards.

c) Traceability

Traceability information for wine and spirit products are embedded in lot/batch codes which can be used to identify production premises, the source of raw materials and date of production. They are critical for consumer safety in case of any food safety incident, as lot identification allow us to withdraw or recall unsafe products in a timely and efficient manner. Traceability is a cornerstone of food safety policies.

Products whose traceability codes (lot/batch codes) have been tampered with, removed or replaced in any way should not be allowed to be sold in the Malaysian market.

Recommendation

a) Should the Malaysian government decide to introduce the mandatory health warning labelling requirement, we respectfully request that the regulation allow the mandatory health warning statement specific to Malaysia appear on the back label or on a supplementary label affixed anywhere on the bottle, as is the prevalent practice in countries that require health warning statements. The wording of the health warning statement be reviewed as it is the excessive consumption of alcohol that is harmful to health, and not the consumption of alcohol per se.

b) The industry stands ready to work with MOH on an exercise to review the existing standards for wines and spirits in the Food Regulations, and if necessary bring them up-to-date to international standards.

c Legal protection should be put in place for the alcoholic beverages traceability codes: the removal of existing traceability information should be prohibited and penalties should be imposed for their removal.




EU-ASEAN BUSINESS COUNCIL

Working with ASEAN: Supporting European Business


Executive SummaryThe EU-ABC welcomes the AEC Blueprint 2025 and the commitments contained within it. The EU-ABC is especially pleased to note the several references within the new AEC Blueprint to the need for more and enhanced dialogue and consultation with the private sector. In that regard, we respectfully request ASEAN and its Member States to actively involve the EU-ABC in working level discussions on the development of policies, rules, regulations and standards needed to ensure the full implementation of the AEC by 2025 to the benefit of ASEAN and European businesses alike.

European businesses are fully committed to ASEAN and the European business community welcomed the formal launch of the AEC at the end of 2015. The AEC marks an important milestone in ASEAN’s development. It is, as is clearly recognised in the AEC Blueprint 2025, just the beginning of a longer journey to the creation of a fully integrated and harmonised region. Much work lies ahead. The EU-ABC looks forward to working with ASEAN and its various working groups to help the region achieve its ambitions in this respect.

The ultimate aim of the EU-ABC is to further the trade and investment relationship between our two regions. A major milestone would be the establishment of a comprehensive ASEAN-EU Free Trade Agreement (FTA). In the shorter term, we will support the work of the EU on the finalisation of the bilateral FTAs between the EU and ASEAN Member States that are currently under negotiation. We also encourage the recommencement of negotiations where talks have stalled in recent years and the beginning of the negotiations with other ASEAN Member States. We see no reason why several negotiations could not take place in parallel. The EU-ABC also expects to play a full and active role in any pre-negotiation discussions on an ASEAN-EU FTA and suggests that the European Commission and ASEAN put in place a work programme as a precursor to formal negotiations to serve as a scoping exercise with a view to ironing out any difficulties.

The EU-ABC is perhaps uniquely placed to offer support and assistance to ASEAN as it continues along the economic integration path. We were greatly encouraged by the AEC Blueprint 2025, especially the commitments to greater private sector dialogue and consultation. Industry has an important and vital role play in the economic and social development of regions, so it is vital that the voice of business is heard and taken account of as moves are made to further harmonise rules, regulations and standards across ASEAN and to ensure there is true free movement of goods, services, investment and capital.

We note the commitment in the AEC Blueprint 2025 that “the immediate priority is to complete the implementation of measures unfinished under the AEC Blueprint 2015 by end-2016” . There is much that needs to be done in this respect, especially in the area of Non-Tariff Barrier elimination and trade facilitation – a key deliverable for Laos during its Chairmanship. This is a hugely ambitious target but some early quick wins are possible. As a first step, ASEAN Member States should implement and operationalise all protocols of AFAFGIT, AFAFIST and ACTS and to get the National Trade Repositories set up, as a stepping stone towards the ASEAN Trade Repository. A full list of our suggested short-term goals for the AEC are set out below.

The EU-ABC would like to express its gratitude to ASEAN for the opportunity to engage in an ongoing dialogue with our ASEAN partners and looks forward to working with ASEAN as it continues to develop and augment the AEC through the 2025 Blueprint.


Suggested Short-term Recommendations/Goals for ASEAN in 2016

AEC 2025 Reference

Trade in Goods (Section II.A1)

Trade in Services (Section II.A.2)

Investment Environment (Section II.A.3)

Financial Integration, Financial Inclusion & Financial Stability (Section II.A.4)

Facilitating movement of Skilled Labour & Business Travellers (Section II.A.5)

Enhancing Participation in Global Value Chains (Section II.A.6)

EU-ABC Short-term Recommendations/Suggested 2016 ASEAN Goals

• Ratification and transposition of key ASEAN agreements into national law such as:

- ASEAN Framework Agreement on the Facilitation of Goods In Transit (AFAFGIT);

- the ASEAN Framework Agreement for the Facilitation of Inter-State Transport (AFAFIST);

• Operationalise the ASEAN Customs Transit System pilot programme involving Singapore, Thailand and Malaysia including an Authorised Transit Trader programme.

• Implementation of the ASEAN Harmonised Tariff Nomenclature (AHTN) as the one and prevailing tariff nomenclature in all ASEAN Member States for all its trade.

Establish formal plans, with concrete dates, for the removal of foreign equity constraints in key sectors (e.g. insurance; transport and financial services).

Respective ASEAN Member States to submit a timeline for when commitments on majority FDI ownership thresholds to be brought in line with the ACIA are to be implemented.

• Establish an ASEAN Payments Council. The role of this council is to initiate, promote and manage the standardisation of payments in ASEAN. The first order of business is to harmonise cross-border payments through a scheme for cross border credit transfers.

• Ongoing dialogue with Central Bank Governors and Deputy governors is fully supported and required to drive this market coordination and harmonisation together with the Working Committee on Payments & Settlement Systems (WCPSS).

Each ASEAN Member State review its domestic legislation to ensure compatibility with the existing Mutual Recognition Agreements (MRAs) within ASEAN.

In order to facilitate SME participation in global value chains, ASEAN to introduce a threshold for waiver of Certificate of Origin for shipments below USD 2,000.


Suggested Short-term Recommendations/Goals for ASEAN in 2016

AEC 2025 Reference

Good Governance (Section II.B.6)

Effective, Efficient, Coherent and Responsive Regulations and Good Regulatory Practice (Section II.B.7)

Enhanced Connectivity and Sectoral Co-operaton (Section II.C)

Strengthening the role of MSMEs (Section II.D.1)

Strengthening the role of the private sector (Section II.D.2)

EU-ABC Short-term Recommendations/Suggested 2016 ASEAN Goals

Establish an ASEAN-wide guideline for Good Governance and Good Regulatory Practice including the automating of Government procedures and filings wherever practically possible.

• ASEAN to put a mandatory mechanism in place that any trade or investment measure which impacts ASEAN integration is proceeded by a regulatory impact assessment.

• The actual impact of any regulations to be regularly reviewed with the private sector so as to ensure that there are not any adverse or unforeseen negative impacts.

• ASEAN to ensure ratification of the AFAFGIT and the AFAFIST in order to pave the way for the implementation of the pilot project of the ACTS.

• ASEAN Member States to submit a plan for targeted transposition into national law of the AFAFGIT and AFAFIST.

• All ASEAN Member States to use the AHTN as the one and prevailing tariff code for all trade.

• Commitment to automate all customs procedures by 2017.

• ASEAN to implement a so called “de minimis” baseline of USD 100 to exempt low-value shipments from duties, taxes and burdensome paperwork such as licensing requirements.

• To help dismantle the barriers to cross-border e-Commerce for ASEAN’s SMEs, in 2016 ASEAN to formulate an action plan which identifies said barriers and recommends concrete solutions to overcome them.

ASEAN to quickly formalise the involvement of Business Councils in ASEAN Working Groups which are key to fulfilling the objectives of the AEC 2025 Blueprint, as full dialogue and consultation partners.




Appendix


Table A1.The Global Competitiveness Index 2015-2016 and 2014-2015 comparisons© 2015 World Economic Forum

Country / EconomyGCI 2015-2016 GCI 2014-2015

Rank RankScore Change

SwitzerlandSingaporeUnited StatesGermanyNetherlandsJapanHong Kong SARFinlandSwedenUnited KingdomNorwayDenmarkCanadaQatarChinese TaipeiNew ZealandUnited Arab EmiratesMalaysiaBelgiumLuxembourgAustraliaFranceAustriaIrelandSaudi ArabiaKorea, Rep.IsraelChinaIcelandEstoniaCzech RepublicThailandSpainKuwaitChileLithuaniaIndonesiaPortugalBahrainAzerbaijanPolandKazakhstanItalyLatviaRussian FederationMauritiusPhilippinesMaltaSouth AfricaPanamaTurkeyCosta RicaRomaniaBulgariaIndiaVietnamMexicoRwandaSloveniaMacedonia, FYRColombiaOmanHungaryJordanCyprusGeorgiaSlovak RepublicSri LankaPeruMontenegro

123456789

10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061626364656667686970

12358674

109

111315161417122018192223212524262728302937313540334134364438435049425339524756484551595471686162706366466064586975736567

5.85.75.65.55.55.55.55.55.45.45.45.35.35.35.35.35.25.25.25.25.15.15.15.15.155

4.94.84.74.74.64.64.64.64.54.54.54.54.54.54.54.54.54.44.44.44.44.44.44.44.34.34.34.34.34.34.34.34.34.34.24.24.24.24.24.24.24.24.2

0001300-41-10122-11-52-1-111-21-10001-16-126-25-3-25-2286-28-75-17-2-6-160

161244

1135

-16-30-7385-4-3


Country / EconomyGCI 2015-2016 GCI 2014-2015

Rank RankScore Change

BotswanaMoroccoUruguayIran, Islamic Rep.BrazilEcuadorCroatiaGuatemalaUkraineTajikistanGreeceArmeniaLao PDRMoldovaNamibiaJamaicaAlgeriaHondurasTrinidad and TobagoCambodiaCôte d’IvoireTunisiaAlbaniaSerbiaEl SalvadorZambiaSeychellesDominican RepublicKenyaNepalLebanonKyrgyz RepublicGabonMongoliaBhutanArgentinaBangladeshNicaraguaEthiopiaSenegalBosnia and HerzegovinaCape VerdeLesothoCameroonUgandaEgyptBoliviaParaguayGhanaTanzaniaGuyanaBeninGambia, TheNigeriaZimbabwePakistanMaliSwazilandLiberiaMadagascarMyanmarVenezuelaMozambiqueHaitiMalawiBurundiSierra LeoneMauritaniaChadGuineaMauritaniaYemenChadGuinea

7172737475767778798081828384858687888990919293949596979899

100101102103104105106107108109110111112113114115116117118119120121122123124125126127128129130131132133134135136137138139140141142143144

7472808357

7778769181859382888679

1008995

115879794849692

10190

10211310810698

10310410999

118112

114107116122119105120111121117

125127124129128123

130134131133137132139138141142143141142143144

4.24.24.14.14.14.14.14.14444444444

3.93.93.93.93.93.93.93.93.93.93.93.93.83.83.83.83.83.83.83.83.73.73.73.73.73.73.73.73.63.63.63.63.63.53.53.53.53.43.43.43.43.33.33.33.23.23.23.13.133

2.82.9958349662.9581186332.8465777262.79292618

3079

-18-7600-31103

10-230-81205

n/a-540

-110-53-92

1263-6-2-22-992

-1112-6273

-122-81-4

-12223-131-5

-12903-103-3313330000

Source: World Economic Forumwww.weforum.org/gcr


Table A2.Malaysia’s Total Trade 1991-2015

Year Export Value RM (Billion)

Export Growth Rate

Import Value RM (Billion)

Import Growth Rate

Total Trade Value RM (Billion)

Total Trade Growth Rate

Trade Balance

Value RM (Billion)

1991 94.5 18.6% 100.83 27.4% 195.33 23.0% -6.33

1992 103.66 9.7% 101.44 0.6% 205.1 5.0% 2.22

1993 121.24 17.0% 117.4 15.7% 238.64 16.4% 3.83

1994 153.92 27.0% 155.92 32.8% 309.84 29.8% -2

1995 184.99 20.2% 194.34 24.6% 379.33 22.4% -9.36

1996 197.03 6.5% 197.28 1.5% 394.31 3.9% -0.25

1997 220.89 12.1% 220.94 12.0% 441.83 12.1% -0.05

1998 286.56 29.7% 228.12 3.3% 514.69 16.5% 58.44

1999 321.56 12.2% 248.48 8.9% 570.04 10.8% 73.08

2000 373.27 16.1% 311.46 25.3% 684.73 20.1% 61.81

2001 334.28 -10.4% 280.23 -10.0% 614.51 -10.3% 54.05

2002 357.43 6.9% 303.09 8.2% 660.52 7.5% 54.34

2003 397.88 11.3% 316.54 4.4% 714.42 8.2% 81.35

2004 481.25 21.0% 399.63 26.3% 880.89 23.3% 81.62

2005 536.23 11.4% 432.87 8.3% 969.1 10.0% 103.36

2006 589.24 9.9% 478.15 10.5% 1067.39 10.1% 111.09

2007 604.3 2.6% 502.04 5.0% 1106.34 3.6% 102.26

2008 663.01 9.7% 519.8 3.5% 1182.82 6.9% 143.21

2009 552.52 -16.7% 434.67 -16.4% 987.19 -16.5% 117.85

2010 638.82 15.6% 528.83 21.7% 1167.65 18.3% 109.99

2011 697.86 9.2% 573.63 8.5% 1271.49 8.9% 124.24

2012 702.64 0.7% 606.68 5.8% 1309.32 3.0% 95.96

2013 719.81 2.4% 649.19 7.0% 1369.00 4.6% 70.63

2014 766.12 6.4% 683.01 5.3% 1449.13 5.9% 83.11

2015 779.95 1.8% 685.65 0.4% 1465.60 1.1% 94.30

Sources: Ministry of International Trade and Industry, Ministry of Finance, Department of Statistics, Malaysia


Table A3.Malaysia’s Trade with European Union 1991-2015

Year Export Value RM (Billion)

Export Growth Rate

Import Value RM (Billion)

Import Growth Rate

Total Trade Value RM (Billion)

Total Trade Growth Rate

Trade Balance

Value RM (Billion)

1991 14.45 17.3% 15.55 22.6% 30 20.0% -1.11

1992 15.92 10.2% 13.97 -10.2% 29.89 -0.4% 1.95

1993 18.13 13.9% 15.12 8.2% 33.25 11.2% 3.01

1994 22.24 22.7% 23.29 54.0% 45.53 36.9% -1.05

1995 26.65 19.8% 30.27 30.0% 56.92 25.0% -3.63

1996 27.44 3.0% 28.94 -4.4% 56.38 -0.9% -1.5

1997 32.36 17.9% 31.87 10.1% 64.23 13.9% 0.49

1998 47.55 46.9% 27.62 -13.3% 75.17 17.0% 19.93

1999 51.56 8.4% 29.55 7.0% 81.11 7.9% 22

2000 52.22 1.3% 34.28 16.0% 86.5 6.6% 17.94

2001 47.35 -9.3% 36.52 6.5% 83.87 -3.0% 10.83

2002 45.43 -4.1% 35.28 -3.4% 80.71 -3.8% 10.15

2003 50.09 10.3% 37.76 7.0% 87.85 8.8% 12.32

2004 60.68 21.1% 47.89 26.8% 108.57 23.6% 12.78

2005 63.3 4.3% 50.37 5.2% 113.67 4.7% 12.93

2006 75.53 19.3% 54.62 8.4% 130.15 14.5% 20.9

2007 77.71 2.9% 59.84 9.6% 137.55 5.7% 17.87

2008 74.8 -3.7% 61.61 3.0% 136.41 -0.8% 13.19

2009 60.1 -19.7% 50.77 -17.6% 110.87 -18.7% 9.33

2010 68.96 14.7% 54.12 6.6% 123.08 11.0% 14.57

2011 72.05 4.5% 58.86 8.8% 130.91 6.4% 13.19

2012 62.17 -13.7% 65.53 11.3% 127.70 -2.5% -3.36

2013 65.29 5.0% 70.50 7.6% 135.79 6.3% -5.21

2014 72.84 11.6% 71.14 1.1% 143.98 6.2% 1.70

2015 78.92 8.4% 69.59 -2.2% 148.52 3.1% 4.5

Sources: Ministry of International Trade and Industry, Ministry of Finance, Department of Statistics, Malaysiahttp://www.statistics.gov.my/portal/download_External/download.php?file=ExternalTrade/2013/DEC/04JADUAL_DEC_2013.xls


Table A4.Malaysia’s Total Trade By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU))

Rank Country

2012 2013 2014 2015

RM MilShare%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change%

Total 127,695.9 100.0 -3,277.4 -2.5 135,789.2 100.0 8,093.2 6.3 143,979.4 100.0 8,190.2 6.0 148,518.0 100.0 4,523.8 3.1

1 GERMANY,FEDERALREPUBLIC OF

39,232.6 30.7 -1,199.8 -3.0 39,424.3 29.0 191.7 0.5 41,020.8 28.5 1,596.5 4.0 43,026.5 29.0 2,004.6 4.9

2 NETHERLANDS 23,568.8 18.5 676.8 3.0 26,123.8 19.2 2,554.9 10.8 31,650.4 22.0 5,526.6 21.2 32,502.8 21.9 852.1 2.7

3 UNITEDKINGDOM

13,638.0 10.7 339.9 2.6 14,164.3 10.4 526.3 3.9 15,022.6 10.4 858.3 6.1 16,449.7 11.1 1,414.4 9.4

4 FRANCE 18,486.2 14.5 907.2 5.2 18,928.7 13.9 442.5 2.4 17,633.9 12.2 -1,294.8 -6.8 14,333.2 9.7 -3,300.8 -18.7

5 ITALY 8,226.3 6.4 -425.5 -4.9 9,077.8 6.7 851.6 10.4 8,779.6 6.1 -298.2 -3.3 8,830.4 5.9 50.2 0.6

6 BELGIUM 4,941.7 3.9 -171.2 -3.3 5,625.0 4.1 683.2 13.8 5,606.5 3.9 -18.5 -0.3 6,334.4 4.3 727.9 13.0

7 SPAIN 2,856.1 2.2 -298.4 -9.5 3,316.0 2.4 459.9 16.1 4,132.1 2.9 816.1 24.6 4,228.9 2.8 96.7 2.3

8 SWEDEN 3,394.9 2.7 -105.8 -3.0 3,282.8 2.4 -112.1 -3.3 3,125.7 2.2 -157.1 -4.8 3,265.4 2.2 139.7 4.5

9 AUSTRIA 1,689.2 1.3 -752.8 -30.8 2,027.9 1.5 338.7 20.1 2,505.7 1.7 477.8 23.6 3,104.7 2.1 598.9 23.9

10 POLAND 1,437.5 1.1 139.3 10.7 1,967.0 1.4 529.5 36.8 2,397.0 1.7 430.0 21.9 2,236.9 1.5 -160.1 -6.7

11 CZECHREPUBLIC

1,238.1 1.0 -555.2 -31.0 1,410.0 1.0 171.9 13.9 1,773.9 1.2 363.9 25.8 2,123.3 1.4 349.4 19.7

12 DENMARK 1,242.0 1.0 -131.3 -9.6 1,327.7 1.0 85.8 6.9 1,521.3 1.1 193.6 14.6 1,837.8 1.2 316.5 20.8

13 IRELAND 1,503.0 1.2 -767.6 -33.8 1,376.1 1.0 -126.9 -8.4 1,768.3 1.2 392.2 28.5 1,735.8 1.2 -32.5 -1.8

14 HUNGARY 934.9 0.7 -839.6 -47.3 1,168.3 0.9 233.3 25.0 1,223.2 0.8 54.9 4.7 1,324.1 0.9 100.9 8.2

15 GREECE 472.1 0.4 163.3 52.9 458.0 0.3 -14.1 -3.0 1,019.3 0.7 561.3 122.6 1,183.3 0.8 164.0 16.1

16 FINLAND 1,662.0 1.3 -286.6 -14.7 2,018.5 1.5 356.4 21.4 1,162.1 0.8 -856.4 -42.4 1,147.8 0.8 -14.3 -1.2

17 CYPRUS 93.1 0.1 -35.7 -27.7 162.1 0.1 69.0 74.1 250.9 0.2 88.8 54.8 976.7 0.7 725.9 289.4

18 MALTA 174.5 0.1 53.4 44.1 221.2 0.2 46.7 26.7 262.5 0.2 41.3 18.7 546.3 0.4 283.8 108.1

19 ROMANIA 356.7 0.3 -83.0 -18.9 389.1 0.3 32.4 9.1 422.0 0.3 32.9 8.5 488.1 0.3 66.1 15.7

20 SLOVENIA 158.3 0.1 10.4 7.0 419.7 0.3 261.4 165.1 449.0 0.3 29.3 7.0 457.6 0.3 8.7 1.9

21 PORTUGAL 703.2 0.6 136.1 24.0 748.5 0.6 45.3 6.4 540.9 0.4 -207.6 -27.7 456.8 0.3 -84.0 -15.5

22 SLOVAKIA 298.3 0.2 -128.6 -30.1 295.8 0.2 -2.5 -0.8 476.2 0.3 180.4 61.0 431.2 0.3 -44.9 -9.4

23 LITHUANIA 422.6 0.3 163.8 63.3 264.7 0.2 -157.9 -37.4 267.8 0.2 3.1 1.2 365.9 0.2 98.1 36.6

24 BULGARIA 204.1 0.2 -75.4 -27.0 320.5 0.2 116.4 57.0 313.3 0.2 -7.2 -2.2 360.7 0.2 47.4 15.1

25 ESTONIA 170.8 0.1 -24.9 -12.7 252.7 0.2 81.9 48.0 295.5 0.2 42.8 16.9 304.7 0.2 9.2 3.1

26 LUXEMBOURG 262.2 0.2 -79.5 -23.3 369.7 0.3 107.4 41.0 99.0 0.1 -270.7 -73.2 182.7 0.1 83.7 84.6

27 LATVIA 258.8 0.2 107.7 71.2 588.7 0.4 329.9 127.5 181.3 0.1 -407.4 -69.2 180.7 0.1 -0.7 -0.4

28 CROATIA 69.7 0.1 -14.5 -17.2 60.1 0.0 -9.6 -13.7 78.7 0.1 18.6 30.9 101.4 0.1 22.8 29.0

Source: Ministry of International Trade and Industry, Department of Economic and Trade Relations


Table A5.Malaysia’s Total Export By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU))

Rank Country

2012 2013 2014 2015

RM MilShare%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change%

Total 62,167.2 100.0 -9,935.3 -13.8 65,292.0 100.0 3,124.8 5.0 72,838.5 100.0 7,546.5 11.6 78,923.9 100.0 6,085.6 8.4

1 NETHERLANDS 18,558.2 29.9 -722.5 -3.7 20,716.0 31.7 2,157.8 11.6 23,437.8 32.2 2,721.8 13.1 23,395.0 29.6 -42.8 -0.2


16,019.9 25.8 -2,436.0 -13.2 16,512.1 25.3 492.2 3.1 17,859.5 24.5 1,347.4 8.2 19,638.8 24.9 1,779.4 10.0

3 UNITEDKINGDOM

6,807.4 11.0 -349.3 -4.9 6,848.0 10.5 40.7 0.6 7,921.9 10.9 1,073.9 15.7 9,318.0 11.8 1,396.1 17.6

4 FRANCE 5,461.2 8.8 -2,605.2 -32.3 5,466.0 8.4 4.7 0.1 5,169.7 7.1 -296.3 -5.4 5,738.5 7.3 568.8 11.0

5 BELGIUM 2,280.7 3.7 -697.4 -23.4 2,486.9 3.8 206.2 9.0 3,250.4 4.5 763.5 30.7 3,746.8 4.7 496.4 15.3

6 ITALY 2,944.2 4.7 -666.2 -18.5 3,205.1 4.9 261.0 8.9 2,952.8 4.1 -252.3 -7.9 3,636.1 4.6 683.3 23.1

7 SPAIN 1,567.5 2.5 -375.9 -19.3 1,453.5 2.2 -113.9 -7.3 1,780.6 2.4 327.1 22.5 2,321.1 2.9 540.5 30.4

8 POLAND 935.0 1.5 54.9 6.2 1,071.7 1.6 136.8 14.6 1,617.8 2.2 546.1 51.0 1,505.4 1.9 -112.4 -6.9

9 SWEDEN 1,392.9 2.2 -133.5 -8.7 1,341.9 2.1 -51.0 -3.7 1,178.5 1.6 -163.4 -12.2 1,470.0 1.9 291.5 24.7

10 CZECHREPUBLIC

889.8 1.4 -562.8 -38.7 867.3 1.3 -22.5 -2.5 1,133.5 1.6 266.2 30.7 1,243.5 1.6 110.0 9.7

11 GREECE 376.0 0.6 111.2 42.0 330.6 0.5 -45.3 -12.1 971.3 1.3 640.7 193.8 1,134.3 1.4 163.0 16.8

12 HUNGARY 681.7 1.1 -566.0 -45.4 697.1 1.1 15.3 2.3 827.8 1.1 130.7 18.7 858.0 1.1 30.2 3.7

13 DENMARK 596.7 1.0 -162.6 -21.4 546.8 0.8 -50.0 -8.4 621.4 0.9 74.6 13.6 682.8 0.9 61.4 9.9

14 AUSTRIA 204.0 0.3 -187.0 -47.8 474.5 0.7 270.5 132.6 668.1 0.9 193.6 40.8 636.4 0.8 -31.8 -4.8

15 IRELAND 532.2 0.9 -48.9 -8.4 467.3 0.7 -64.9 -12.2 512.1 0.7 44.8 9.6 561.2 0.7 49.1 9.6

16 FINLAND 836.8 1.3 -172.6 -17.1 642.6 1.0 -194.2 -23.2 506.2 0.7 -136.4 -21.2 521.3 0.7 15.1 3.0

17 SLOVENIA 93.0 0.1 -8.0 -7.9 329.1 0.5 236.0 253.7 370.3 0.5 41.2 12.5 398.7 0.5 28.4 7.7

18 ROMANIA 284.8 0.5 -67.0 -19.0 275.4 0.4 -9.3 -3.3 320.8 0.4 45.4 16.5 364.1 0.5 43.3 13.5

19 SLOVAKIA 246.5 0.4 -82.4 -25.1 238.4 0.4 -8.1 -3.3 403.0 0.6 164.6 69.0 322.9 0.4 -80.0 -19.9

20 PORTUGAL 431.7 0.7 -77.2 -15.2 313.8 0.5 -117.9 -27.3 299.0 0.4 -14.8 -4.7 286.8 0.4 -12.2 -4.1

21 BULGARIA 118.9 0.2 -81.6 -40.7 154.9 0.2 36.0 30.3 184.5 0.3 29.6 19.1 224.2 0.3 39.8 21.6

22 ESTONIA 158.1 0.3 -28.4 -15.2 231.1 0.4 73.0 46.2 247.8 0.3 16.7 7.2 218.4 0.3 -29.4 -11.9

23 MALTA 100.2 0.2 14.3 16.6 127.7 0.2 27.5 27.4 177.7 0.2 50.0 39.2 193.6 0.2 15.9 8.9

24 LITHUANIA 167.8 0.3 -22.1 -11.6 112.1 0.2 -55.7 -33.2 171.3 0.2 59.2 52.8 157.7 0.2 -13.5 -7.9

25 LATVIA 200.6 0.3 82.6 70.0 220.1 0.3 19.6 9.8 124.4 0.2 -95.7 -43.5 142.0 0.2 17.5 14.1

26 LUXEMBOURG 160.8 0.3 -98.1 -37.9 73.2 0.1 -87.6 -54.5 23.0 0.0 -50.2 -68.5 102.6 0.1 79.5 345.4

27 CROATIA 62.5 0.1 -9.1 -12.7 53.6 0.1 -8.9 -14.2 66.1 0.1 12.5 23.2 73.8 0.1 7.8 11.8

28 CYPRUS 58.1 0.1 -38.5 -39.8 35.1 0.1 -23.1 -39.7 41.3 0.1 6.2 17.5 31.7 0.0 -9.4 -22.9



Table A6.Malaysia’s Total Import By Country, Annual from 2012 to December 2015 (EUROPEAN UNION (EU))

Rank Country

2012 2013 2014 2015

RM MilShare%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change% RM Mil

Share%

Change(Value)

Change%

Total 65,528.8 100.0 6,657.9 11.3 70,497.2 100.0 4,968.5 7.6 71,140.9 100.0 643.7 0.9 69,594.2 100.0 -1,561.8 -2.2


23,212.7 35.4 1,236.3 5.6 22,912.3 32.5 -300.5 -1.3 23,161.3 32.6 249.0 1.1 23,387.6 33.6 225.2 1.0

2 NETHERLANDS 5,010.6 7.6 1,399.2 38.7 5,407.7 7.7 397.1 7.9 8,212.6 11.5 2,804.9 51.9 9,107.8 13.1 894.9 10.9

3 FRANCE 13,025.0 19.9 3,512.5 36.9 13,462.8 19.1 437.8 3.4 12,464.2 17.5 -998.6 -7.4 8,594.8 12.3 -3,869.6 -31.0

4 UNITEDKINGDOM

6,830.7 10.4 689.2 11.2 7,316.3 10.4 485.6 7.1 7,100.7 10.0 -215.6 -2.9 7,131.7 10.2 18.2 0.3

5 ITALY 5,282.1 8.1 240.7 4.8 5,872.7 8.3 590.6 11.2 5,826.8 8.2 -45.9 -0.8 5,194.3 7.5 -633.1 -10.9

6 BELGIUM 2,661.1 4.1 526.1 24.6 3,138.1 4.5 477.0 17.9 2,356.1 3.3 -782.0 -24.9 2,587.6 3.7 231.5 9.8

7 AUSTRIA 1,485.1 2.3 -565.8 -27.6 1,553.3 2.2 68.2 4.6 1,837.6 2.6 284.3 18.3 2,468.3 3.5 630.7 34.3

8 SPAIN 1,288.7 2.0 77.6 6.4 1,862.5 2.6 573.8 44.5 2,351.6 3.3 489.1 26.3 1,907.8 2.7 -443.8 -18.9

9 SWEDEN 2,002.0 3.1 27.8 1.4 1,940.9 2.8 -61.1 -3.1 1,947.2 2.7 6.3 0.3 1,795.4 2.6 -151.8 -7.8

10 IRELAND 970.8 1.5 -718.7 -42.5 908.8 1.3 -62.0 -6.4 1,256.2 1.8 347.4 38.2 1,174.6 1.7 -81.6 -6.5

11 DENMARK 645.2 1.0 31.3 5.1 781.0 1.1 135.7 21.0 899.8 1.3 118.8 15.2 1,155.0 1.7 255.1 28.3

12 CYPRUS 35.0 0.1 2.8 8.7 127.1 0.2 92.1 263.3 209.7 0.3 82.6 65.0 945.0 1.4 735.3 350.6

13 CZECHREPUBLIC

348.4 0.5 7.6 2.2 542.7 0.8 194.3 55.8 640.3 0.9 97.6 18.0 879.7 1.3 239.4 37.4

14 POLAND 502.6 0.8 84.4 20.2 895.3 1.3 392.7 78.1 779.2 1.1 -116.1 -13.0 731.6 1.1 -47.7 -6.1

15 FINLAND 825.3 1.3 -114.0 -12.1 1,375.9 2.0 550.7 66.7 655.9 0.9 -720.0 -52.3 626.6 0.9 -29.4 -4.5

16 HUNGARY 253.2 0.4 -273.6 -51.9 471.2 0.7 218.0 86.1 395.4 0.6 -75.8 -16.1 466.0 0.7 70.7 17.9

17 MALTA 74.3 0.1 39.2 111.6 93.4 0.1 19.2 25.8 84.8 0.1 -8.6 -9.2 352.6 0.5 267.9 316.0

18 LITHUANIA 254.8 0.4 185.9 269.8 152.5 0.2 -102.2 -40.1 96.6 0.1 -55.9 -36.7 208.2 0.3 111.6 115.6

19 PORTUGAL 271.5 0.4 213.3 366.6 434.7 0.6 163.2 60.1 241.9 0.3 -192.8 -44.4 170.0 0.2 -71.8 -29.7

20 BULGARIA 85.2 0.1 6.2 7.8 165.7 0.2 80.4 94.3 128.8 0.2 -36.9 -22.2 136.5 0.2 7.6 5.9

21 ROMANIA 71.9 0.1 -16.0 -18.2 113.7 0.2 41.7 58.0 101.2 0.1 -12.5 -11.0 124.0 0.2 22.8 22.6

22 SLOVAKIA 51.7 0.1 -46.2 -47.2 57.4 0.1 5.6 10.9 73.2 0.1 15.8 27.6 108.3 0.2 35.2 48.1

23 SLOVENIA 65.3 0.1 18.5 39.4 90.7 0.1 25.4 38.8 78.7 0.1 -12.0 -13.2 58.9 0.1 -19.8 -25.1

24 LUXEMBOURG 101.4 0.2 18.7 22.5 296.5 0.4 195.0 192.3 76.0 0.1 -220.5 -74.4 80.1 0.1 4.2 5.5

25 LATVIA 58.2 0.1 25.1 75.7 368.6 0.5 310.4 533.1 56.9 0.1 -311.7 -84.6 38.7 0.1 -18.2 -31.9

26 GREECE 96.1 0.1 52.1 118.1 127.4 0.2 31.3 32.6 48.0 0.1 -79.4 -62.3 49.0 0.1 1.0 2.0

27 ESTONIA 12.7 0.0 3.5 38.3 21.6 0.0 8.9 70.1 47.7 0.1 26.1 120.6 86.3 0.1 38.7 81.2

28 CROATIA 7.2 0.0 -5.4 -42.9 6.5 0.0 -0.7 -9.7 12.6 0.0 6.1 94.1 27.6 0.0 15.0 118.8



Table A7.

Table A8.

Doing Business in Malaysia

Manufacturing Project Investment In Malaysia By Country, 2015

Source: MIDA

Topic Rankings DB 2016 Rank DB 2015 Rank Change in Rank

Ease of Doing Business Rank 18 17 -1

Starting a Business 14 12 -2

Dealing with Construction Permits 15 15 No Change

Getting Electricity 13 13 No Change

Registering Property 38 36 -2

Getting Credit 28 24 -4

Protecting Investors 4 4 No Change

Paying Taxes 31 32 1

Trading Across Borders 49 48 -1

Enforcing Contracts 44 44 No Change

Resolving Insolvency 45 43 -2

Source: World Bank Group, Doing Business Projecthttp://www.doingbusiness.org/data/exploreeconomies/malaysia

Rank Country

2015

Number of Projects Employment Investment (RM)

TOTAL 358 47,272 21,941,647,823

1 USA 19 13,559 4,150,211,956

2 JAPAN 60 5,201 4,009,336,753

3 EU 62 5,710 3,333,909,317

4 HONG KONG 9 2,943 3,180,851,671

5 CHINA 17 5,127 1,872,018,445

6 ASEAN (Malaysia excluded) 88 5,366 1,395,795,459

8 KOREA, REP. 22 1,653 1,353,410,002

9 TAIWAN 24 3,365 1,275,497,216


Table A9.

Table A10.

Manufacturing Projects Investment In Malaysia By Country, 1980-2015

Manufacturing Project Investment In Malaysia By EU Country, 2015

Rank Country

1980-2015

Number of Projects Employment Investment (RM)

Total 26,081 3,429,633 719,552,789,612

1 EU 2,245 262,835 107,303,144,827

2 JAPAN 3,362 451,387 103,650,821,056

3 USA 1,131 281,585 93,877,113,444

4 ASEAN (Malaysia excluded) 4,706 571,783 63,699,555,474

7 TAIWAN 2,468 375,467 34,548,920,398

8 KOREA, REP. 536 74,519 27,280,741,891

9 AUSTRALIA 523 37,636 23,485,058,867

11 CHINA 329 47,153 17,258,765,211

Rank Country

2015

Employment Investment (RM)

TOTAL 9,230 8,340,625,995

1 GERMANY 1,681 4,398,109,867

2 IRELAND 1,092 1,143,009,553

3 ITALY 428 1,060,800,000

4 NETHERLANDS 3,513 816,202,476

5 UNITED KINGDOM 353 393,021,658

6 SPAIN 111 208,150,000

7 AUSTRIA 1,180 157,824,000

8 FRANCE 432 113,835,828

9 DENMARK 431 35,930,000

10 FINLAND 9 13,742,613

Source: MIDA

Source: MIDA


Table A12.

Table A11.

Service Sector Investment in Malaysia by EU Country, 2006 - 2015

Manufacturing Project Investment In Malaysia By EU Country, 2015

Rank Country

2006-2015


TOTAL 9,636 5,431,196,936

1 FRANCE 348 2,109,165,383

2 GERMANY 6,768 962,312,104

3 IRELAND 538 936,848,826


5 SWEEDEN 132 337,263,834

6 NETHERLANDS 674 229,676,559

7 DENMARK 81 175,695,147

8 BELGIUM 55 75,467,283

9 LUXEMBOURG 78 49,403,200

10 FINLAND 29 38,833,067

11 SPAIN 53 19,648,383

12 ITALY 33 17,358,932

13 AUSTRIA 27 9,482,753

14 ICELAND 12 5,186,764

15 CYPRUS 20 4,245,453

16 PORTUGAL 5 1,880,100

17 GREECE 4 968,250

18 SLOVAKIA 1 315,590

Rank Country

2015


TOTAL 4,296 2,927,264,632

1 GERMANY 1,297 1,160,767,934

2 NETHERLANDS 2,681 976,508,500

3 SWEDEN 168 630,835,360


5 ITALY 83 120,771,514

6 FRANCE 54 25,341,324

7 DENMARK 0 12,350,000

8 HUNGARY 13 690,000

Source: MIDA

Source: MIDA


Table A13.

Table A14.

Total Trade By Major Trade Partners 2015

Total Trade By Major Trade Partners Divided Into Imports And Exports 2015

Source : Monthly External Trade Statistics, December 2015 (Full Publication)Link : http://bit.ly/1PWj9cD

Source : Monthly External Trade Statistics, 2015 (Full Publication)Link : http://bit.ly/1PWj9cD

China

Singapore

E.U.

United States

Japan

Thailand

Taiwan

Indonesia

Kore, Rep. of

Hong Kong 3.3

3.8

4.1

4.1

5.9

8.7

8.8

10.1

13

15.8

Total Trade: RM 1465.6 billion

Total Trade by Major Countries, Jan - Dec 2015

0 2 4 6 8 10 12 14 16 18

China

Singapore

E.U.

United States

Japan

Thailand

Taiwan

Indonesia

Kore, Rep. of

Hong Kong

Total Exports: RM 779.9 billionTotal Imports: RM 685.7 billion

Total Trade by Major Countries, Jan - Dec 2015

4.7

3.2

3.7

3

5.7

9.5

9.4

10.1

13.9

13

1.7

4.5

4.5

5.3

6.1

7.8

8.1

10.2

12

18.9

0 2 4 6 8 10 12 14 16 18 20

ImportsExports


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EU-MALAYSIA BUSINESS · 2019-04-19 · EUMCCI Trade Issues and Recommendations 2016 EU-MALAYSIA...

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