JANUARY – MARCH 2008
QUARTERLY
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Malaysian Tin Products
MANAGEMENT COMMITTEE
FOR YEAR 2007/2008
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PRESIDENT MR. MAMORU KAWASAKI(ALTERNATE – MR. LOH YOON SOON) SELAYANG SOLDER SDN BHD
VICE-PRESIDENT MR. MAKOTO HARA (ALTERNATE – MR. KONG KEAN BENG) NIHON SUPERIOR (M) SDN BHD
HON. SECRETARY MR. C.S. LIM METAL RECLAMATION (IND) SDN BHD
TREASURER MR. JASON LEE HENKEL (MALAYSIA) SDN BHD |
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Letters to the Editor are
welcomed. We appreciate your feedback
to further improve our editorial content. Please address your letters to: The Editor The Malaysian Tin Products Newsletter P O Box 12560 50782 KUALA LUMPUR. |
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COMMITTEE MEMBERS MR. CHEN TIEN YUE ROYAL SELANGOR INTERNATIONAL SDN BHD EN. AB. PATAH MOHD PERUSAHAAN SADUR TIMAH MALAYSIA (PERSTIMA) BHD MR. KOJI TSUBONO SENJU (M) SDN BHD |
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SECRETARIAT ADDRESS The Malaysian Tin Products Manufacturers’ Association (MTPMA) 8th Floor, West Block Wisma Selangor Dredging 142-C, Jalan Ampang 50450 KUALA LUMPUR. |
EDITORIAL SUB-COMMITTEEMR. MAMORU KAWASAKI MR. LOH YOON SOON MR. MAKOTO HARA MR. C.S. LIM
MR.
JASON LEE MR. CHEN TIEN YUE TN. HAJI MUHAMAD NOR MUHAMAD EN. FAIZUL AZRI AZIZAN
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Tel: 03
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– 21616179 Email: mtpmasec@mtpma.org.my The Malaysian Tin Products Newsletter is published
quarterly by the Malaysian Tin Products Manufacturers’ Association (MTPMA).
The opinion and statements expressed in the Newsletter are not necessarily
those of the MTPMA or the Editorial Sub-Committee and neither endorsement nor
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Dear Members,
As we start this new year with the Newsletter’s first quarterly issue for 2008, my fervent hope is that readers will continue to benefit from this primary principal publication of the Association. The Newsletter also doubles-up as the Association’s important publicity and public relations organ. At this opportunity, I wish to express my personal note of thanks to those company members who have provided continued advertising support for the Newsletter’s current year’s edition.
Bank Negara reported that Malaysia posted a GDP growth of 6.3 per cent in 2007, which was one of its strongest in recent years. The growth was driven mainly by domestic demand, which offset slower growth in exports of goods and services.
For 2008, the country’s economic outlook remains bright, albeit under a more challenging global scenario. The Government had recently revised its official GDP growth estimate for this year to between 5.0 to 6.0 percent. This is down from its earlier projection late last year of between 6.0 to 6.5 per cent, amidst concerns over a global economic slowdown and the impact of the U.S. sub-prime mortgage crisis.
With regards to the manufacturing sector, it is anticipated to face a tough and difficult year ahead due to the expected continual slump in domestic and external demand. The sector’s performance during late last year and early this year, including the Electrical and Electronic (E & E) sector, had been quite abysmal. Although business leaders expect the sector to improve in the second half of 2008, but with an impending recession in the US, it would not be a sure matter.
Meanwhile, the tin-based manufacturing sector is having to contend with a double whammy. Besides the continuing demand slowdown, it also have to deal with the ever rising price of tin, which at end March 2008 breeched the psychological USD$20,000 per tonne level.
May I draw your attention to the fact that we will be holding our 18th Annual General Meeting on 23rd June 2008. As the day nears, I cannot help but reflect upon the many industry challenges we have encountered and resolved during the past year. Whilst we may individually respond to such challenges in our own distinct way, however, your Association’s Management Committee, would respond to such situations in much more broad-based and wholesome manner for the majority interests of the Association. We indeed, have to take account of the value of strategic alliances, relationships with customers, colleagues, business partners, associates and the like. It is a global approach, which needs to consider not only the welfare of our members, but the entire industry and the fraternity.
Again the forthcoming AGM will be an excellent opportunity for all members to meet, share and discuss matters and even catch-up with old acquaintances. An election of Management Committee members of the Association will be foremost in the AGM’s Agenda. But if you do wish to bring-up ideas and share your thoughts, you are certainly welcomed to do so at the end of the AGM’s business. So please do come to this importance once a year occasion.
In this first issue of the 2008 Newsletter, may I put on record my heartfelt appreciation for the support of all members, my colleagues in the Management Committee and the Secretariat that have made my tenure as the Association’s President over the past two years an experience that I will treasure throughout my life. Thank you all.
In ending this brief note, may I appeal to all members to do stay in touch with the Association, and to convey to the Secretariat any appropriate news you like to publish in the Newsletter so that they can be shared with other members. This way, we can make the Newsletter more interactive and members can derive further maximum benefit from it.
With best regards.
Mamoru Kawasaki
Electronic/Semiconductor Sector News
Cautious Outlook for Semiconductor Industry
There may be storm clouds ahead for the local semiconductor industry as it faces a slowing US economy amidst a more challenging global economic landscape. This is despite the emergence and growth of large consumer markets outside the US, which has created new opportunities for chipmakers.
TA Securities Holdings Bhd analyst Hafriz Hezry said the outlook for the industry this year would be “cautious” due to the slowdown in the US economy, the main growth driver for the world’s semiconductor sales. “If you look at the January sales figures for the past three years, this January was the worst. Even the month-on-month (December-to-January) figures were much weaker than that in the similar period in the previous three years,” he added. Hafriz said first-quarter figures in the industry were traditionally weaker but added that the latter part of this year would not offer much comfort in terms of revenue growth either.
George Scalise, president of US-based Semiconductor Industry Association, said in a report yesterday that worldwide sales of semiconductors increased nominally by 0.03% to US$21.5bil from January 2007 while excluding memory products, semiconductor sales were up 8.1% year-on-year. He said sales declined by 3.6% to US$22.3bil on a month-on-month basis compared with last December. “Virtually all product lines and all geographic markets experienced slightly lower sales in January,” Scalise said, adding that unit shipments of DRAMs and NAND flash grew modestly in January. “Even with healthy demand from important end-markets, however, a very competitive environment resulted in price pressures for these products, which in turn led to continued erosion in average selling prices.”
The report stated that unit shipments for personal computers (PCs) and cellular handsets were in line with expectations in January, with analysts projecting unit growth of 12% for PCs and between 12% and 15% for cellular handsets this year. PCs and cell phones make up 60% of worldwide industry sales.
Malaysian American Electronics Industry (MAEI) chairman Datuk S.H. Wong said it was still too early to predict what would be the impact on the local semiconductor industry. MAEI is a committee of the American Malaysian Chamber of Commerce. “There’ll definitely be an impact due to the US economic slowdown but we can only tell from the performance in the second half of the year,” he told StarBiz. Wong said there would be unit sales growth, barring any major issue that might crop up in the US although revenue growth was harder to predict.
(Source: The Star, 5 March 2008)
Economic News
Commodities on Steady Footing
The prices of global commodities are expected to remain steady, albeit at a slower phase, in the face of a slowing economy in the US. Many economists believe that major commodities such as wheat, soybean, palm oil, tin, crude oil, gold and nickel, could sustain their strong performance given continued strong demand from outside the US, especially emerging economies in Asia. The global boom in commodities, which enters into its sixth year, saw gold, crude oil, soybean, palm oil, tin, copper and nickel hitting all-time highs this year.
The benchmark commodity crude oil has reached a historic high of US$100 per barrel, gold US$915 per ounce, soybean over US$13 per bushel, crude palm oil (CPO) over US$1,000 per tonne, tin over US$16,000 per tonne and copper US$7,300 per tonne. Despite growing fears that the US is slipping into a recession, an economist with a foreign house said global demand from rapid industrialisation in China and India, as well as active infrastructure development in petrochemical and refinery projects in oil economies like the Middle East and Russia, would continue to be drivers for major commodity prices to remain high this year.
Crude oil can rally to US$130 per barrel this year given limited spare capacity and threats to supply. The International Energy Agency has forecast a 2.5% increase in demand in 2008 despite US inventories falling to a three-year low on Dec 28. The economist said: “There are two scenarios. If the US Federal Reserve further cuts interest rates, this will contain a slowdown in the US economy and push crude oil higher. However, if the US economy slips into recession, crude oil will likely register its biggest drop since 2001.”
Agriculture commodities, like wheat, soybean and corn, had soared to a 20-year high in 2007. Wheat and soybean rose by 70% CPO reached a dizzying level of above US$1,000 per tonne given its alternative use as biofuel feedstock, while corn gained popularity as a bio ethanol feedstock. “In the short term, it will be difficult to curb the exponential growth in demand for agriculture commodities given tightness in supply and hectarage for planting,” the economist added. The unpredictable changes in global climate can also affect production of crops worldwide.
On gold, the rally in bullion prices was driven by the weakening US dollar as well as fears of an economic slowdown in the US. The price of the metal, which is trading at just below US$900 per ounce, is expected to remain bullish as investors are likely to invest in gold given the instability in the global financial markets. However, base metals like copper, zinc and nickel are prone to be traded lower if the US heads for a recession. The performance of tin, which is still trading above US$16,000 per tonne, will also depend on the performance of other world metals.
AmInvestment Bank senior economist Manokaran Mottain opined that the boom in the global commodities would slow down with the weak US economy. “Crude oil may climb back to US$100 per barrel but then it will hit the low side of US$90 per barrel if the US really goes into recession,” he said. The first half of this year will be a critical period among policy makers and investors to gauge the position of the US economy.
Manokaran warned that the boom in global commodities was not merely driven by global demand from Asian emerging economies, but also hedge fund activities. “Of late, hedge funds are widely speculated in commodity trading. If the US economy continues to weaken, they (hedge funds) can withdraw from the booming commodities market.” Manokaran said one percentage point drop in the US gross domestic product (GDP) in the fourth quarter last year would trim export growth by 4%. “This will reduce China’s GDP by 0.5 percentage point,” he added.
(Source: The Star, 17 January 2008)
Report: UBS Facing US Subprime Banking Probe
US government prosecutors are investigating whether Swiss banking giant UBS misled investors by reporting inflated prices of mortgage-backed securities it held despite knowing those valuations had eroded, the Wall Street Journal said on Saturday. The Journal, quoting unnamed sources familiar with the probe, said the investigation by the US Attorney for the Eastern District of New York had not yet issued subpoenas. But the sources noted that the New York prosecutors work closely with the US Securities and Exchange Commission. The SEC recently expanded its own probes of both UBS and Merrill Lynch and Co Inc pricing of mortgage securities, a move which empowers the SEC to issue subpoenas, they said.
UBS was not immediately available for comment. A Merrill Lynch spokesman had no comment. UBS, Europe’s hardest-hit bank from the credit crisis, last week raised its subprime writedowns to US$18.4 billion. On Friday, the bank also urged its shareholders to dismiss a plan from some dissenting shareholders demanding an external probe into the bank’s subprime woes.
The US Justice Department on Wednesday said it was looking into whether fraud occurred in the packaging and selling of complicated mortgage securities like collateralised debt obligations (CDOs), the Journal said. The Federal Bureau of Investigation is looking at 14 unnamed companies in that probe, the agency said. On Friday, the top securities regulator in Massachusetts filed a civil complaint against Merrill Lynch, accusing the brokerage of selling unsuitable subprime mortgage-related securities to the city of Springfield.
Massachusetts Secretary William Galvin seeks to take away Merrill’s profits from a transaction in which it sold CDOs to the city. Merrill invested about US$14 million of the city’s money in CDOs last year, only to see most of the value erased. Separately, the city of Springfield said on Thursday that Merrill had agreed to pay it US$13.9 million after determining the city had not approved the purchase of the CDOs. UBS remains under fire at home. Shareholder advocacy group Ethos in December called for more clarity from UBS over its subprime losses, urging an independent probe. But UBS on Friday said there was no need for a separate investigation given that the country’s EBK banking watchdog was already probing the reasons which led to its losses. UBS last week stunned investors with its third round of subprime write-downs. It reported heavy fourth-quarter losses and a total 2007 net loss of Sfr4.4 billion.
(Source: New Street Times, 4 February 2008)
Will Boom In Commodities Last?
Until recently, there was an atmosphere of despair when the issue of commodities was discussed. The prices for raw materials and agricultural commodities have traditionally fallen, bringing despair to poor producers and increasing the debt of commodity-dependent developing countries. But something has happened in the past few years that bring hope – the demand and prices of most commodities have shot up, raising export revenues and incomes of farmers. In Malaysia, for example, there has been a boom in palm oil and rubber prices, increasing the incomes of Felda settlers as well as the big plantation companies. And on top of this are the record levels of oil prices.
Are these high commodities prices only a temporary phenomenon that will disappear with the downturn in the business cycle? Or will they last this time around? These and other questions were discussed last week at a dialogue on commodities held in Geneva by the UN Conference on Trade and Development (UNCTAD). Opening the meeting, Unctad secretary-general Dr Supachai Panitchpakdi said: “It is difficult to imagine a more auspicious moment for a breakthrough in commodity policy,” he said. “We should try our utmost to grasp the opportunity.”
Supachai said commodity prices have risen strongly since 2002 since their sharp fall in 1997-2002. The oil price rose from its 1999 low to US$100 per barrel early this year, while UNCTAD’s price index for non-fuel commodities rose 114% since 2002 (with metal and mineral prices rising 265%, agricultural raw materials by 78% and tropical beverages by 66%). The price increases are due to new demand growth in Asia, especially China. If developing countries’ growth continues, the current commodity boom may mark the beginning of a changed commodities economy in the 21st century, and it is high time to identify policies to ensure the boom is a true engine for development. A note issued by Unctad highlighted these points:
Ø The recent rapidly growing demand for commodities will likely continue in the medium to long term, due to expected growth of developing countries, especially in Asia.
Ø The rise in oil prices has resulted in exporting countries struggling to make best use of the benefits, while importers are concerned about the impact on the poor and on economic growth.
Ø Mineral and metal prices have risen, with some at historic high levels, and increased revenue has opened up diversification opportunities but also macroeconomic challenges.
Ø The increase in prices of agricultural products, is positive for exporting developing countries, but has caused concerns for those importing food, with the jump in food prices causing insecurity and riots in some countries.
Ø Commodity dependent countries should diversify production and exports by adding value or shifting to higher value products, but there are increasing technical barriers especially food standards.
In recent years, rapid growth in Asia, particularly China, has spurred demand for commodities, said UNCTAD. Rapidly growing demand will likely continue in the medium to long term, given demographic factors and industrialisation trajectories of developing countries. On oil and gas, Unctad noted that the current price increases have had limited effect so far on global inflation and growth, but may become a brake on growth.
Accordingly, sustainable energy strategies should be devised, also taking account of climate change, including through optimisation of fossil fuel use and developing renewable energy sources. Bio fuels hold the potential of improving national and local energy security, but the environmental and food security issues must be addressed. On minerals and metals, the note said that prices had risen, in several cases, to record levels. The revenue increases had opened up possibilities for broader based, diversified development. Mineral dependent countries often need to deal with macro-economic challenges arising from large export surges, including a tendency towards higher inflation and for the real exchange rate to appreciate.
On agricultural commodities, the Unctad note said the recent price boom was good news, but the record is mixed. While countries exporting vegetable oilseeds and oils, cereals, dairy products and some meat products have seen their terms of trade improve over the past few years, some of those exporting tropical agricultural products have seen the prices of their exports outpaced by those of their imports. Unctad noted that in agricultural markets, periods of high prices tend to be short-lived compared to periods of low prices. An issue is how to cope with the eventual “bust” phase, which inevitably will come, in the price cycle.
Commodity dependent countries need to diversify production and exports by adding value or shifting to higher value products. But this is hindered by the increasing use of food safety standards that block imports from developing countries. The Unctad meeting discussed in detail the prospects of various commodity categories and the experiences of countries, including Malaysia. Generally the mood was upbeat. But the big questions remained throughout: Can commodity prices finally “decouple” from a slowdown in the world economy? Will the new demand from China offset the expected fall in demand from the US, Europe and Japan?
(Source: The Star, 4 February 2008)
Total Trade in 2007 Hit Record RM1.1tril
Malaysia’s total trade in 2007 grew by 3.7 per cent to record RM1.11 trillion from RM1.07 trillion in 2006, the second year that total trade had surpassed the trillion ringgit mark, said International Trade and Industry Minister Datuk Seri Rafidah Aziz. Exports grew by 2.7 per cent from 2006 to RM605.10 billion, while imports grew by 4.9 per cent to RM504.57 billion. Export growth emanated from both traditional and emerging markets, especially China, Japan, Australia, Indonesia, the Netherlands, Germany, the United Arab Emirates, Korea, Vietnam, India and Pakistan. “The 14.5 per cent decline in Malaysia’s exports to the US was partly offset by the strong growth in aggregate exports to emerging markets,” she said, adding that it was attributed to the intensified promotional activities undertaken.
Rafidah said the predominance of Asia in Malaysia’s export markets was a major factor that enabled Malaysia to sustain its export growth last year. Major export destinations were Singapore (RM88.51 billion), Japan (RM55.24 billion), China (RM53.03 billion) and Thailand (RM29.98 billion). Bilateral and regional free trade agreements have provided further impetus to the growth of exports in the region.
Manufactured products exports totalled RM452.48 billion, she said, adding that it contributed 74.8 per cent of the share of total exports while minerals and mineral fuels and agricultural products were 14 per cent and 9.5 per cent respectively. “Overall, the export performance of products within the electrical and electronics (E&E) sector was mixed,” she added. Exports of semiconductor devices, integrated circuits, microassemblies and transistors increased by 3.2 per cent while exports of office machines and automatic data processing machines and parts declined by 9.2 per cent. In 2007, Malaysia continued to be a leading supplier of E&E products to Singapore, the US, China, Japan and Hong Kong.
HSBC Bank economist Robert Prior-Wandesforde described the trade data as the weakest data in six years, although the GDP has registered strong growths. He pointed out that domestic demand growth has moved in the opposite direction to export growth during 2007, due to a supportive policy stance as well ample liquidity, strong commodity prices and the widespread restructuring of balance sheets in the country which has left companies and households in their most comfortable financial position since the Asian crisis.
Wandesforde found Rafidah’s forecast for 2008 a little optimistic given the mounting growth concerns in the industrialised world. Much will depend on what happens to the global technology cycle, he warned, and this would affect Malaysia’s where 50 per cent of its exports of goods are from electronics. He also said the downturn in export growth in December at three per cent contrasted with the pick-up in industrial production numbers for the month. “Over the last three months, export growth has averaged 7.6 per cent – the strongest rise since January 2007. As such, we probably shouldn’t get too worried. Import growth has averaged 10.8 per cent during the same three month period – also comfortably the strongest since the beginning of last year,” he added.
(Source: New Straits Times, 13 February 2008)
Exports Seen Posting 7pc Growth this Year
Growth of Malaysian exports should accelerate to around seven per cent this year, from 2.7 per cent in 2007, in line with global economic expansion trends, International Trade and Industry Minister Datuk Seri Rafidah Aziz said yesterday. Asia, led by China and the Association of Southeast Asian Nations (Asean), is expected to continue being the major contributor to Malaysia’s export growth, she added. “If we can grow around that (seven per cent), I’m happy,” Rafidah said when announcing Malaysia’s trade performance for 2007 in Kuala Lumpur. “We have to be realistic. Our outlook is that it will be on an upward trend, hovering around the global forecast,” she said, adding that the upward momentum must be maintained.
Rafidah said that the projected 10.8 per cent economic growth for China will ensure its position among Malaysia’s top five markets this year, while Asean’s ability to sustain a 6.1 per cent growth will also be a contributory factor. Malaysian exporters need to identify and target markets offering the strongest potential based on these forecasts, she added. According to Malaysia External Trade Development Corp’s (Matrade) annual report, the country’s exports are expected to keep growing this year although the state of major trading partners’ economies will have an impact on the growth rate. The US is expected to grow 1.9 per cent, Japan 1.8 per cent, the Netherlands 2.5 per cent, Germany two per cent and the UK 2.3 per cent. Rafidah said that manufacturing exports are expected to perform strongly owing to positive investment trends in the sector over the last few years.
Investments have been particularly promising in industries such as electrical and electronics (E&E), chemicals, basic metals and petroleum. Semiconductor devices and integrated circuits will be the mainstay of Malaysia’s E&E exports this year, she added. According to the US-based Semiconductor Industry Association, global semiconductor sales are forecast to rise 7.7 per cent, led largely by demand for consumer products such as cell phones, personal computers, digital televisions and MP3 devices.
The report said Malaysia was expected to retain its position as one of the world’s leaders in oils and fats supply. Export earnings from palm oil are forecast to remain buoyant due to the continuous hike in global prices. Crude petroleum, liquefied natural gas and refined petroleum products will continue to figure strongly in Malaysia’s export performance this year as global petroleum prices remain high.
(Source: New Straits Times, 13 February 2008)
Investments Hit Record but Minister Cautious
Malaysia’s approved manufacturing investments jumped to a record last year as more foreigners were attracted by easier rules while the locals were buoyed by strong commodity prices. Approved manufacturing investments rose 30 per cent to RM59.9 billion, of which more than half were foreign direct investments.
International Trade and Industry Minister Datuk Seri Rafidah Aziz, however, was quick to caution that it would be difficult to maintain the performance amid the uncertain global economic outlook. “We have to be very realistic … Probably, we will not maintain the RM59.9 billion mark, but we will attract a high level (of investment). We have to work extra hard,” she said.
The increased investments came from capital-intensive projects in the electrical and electronics (E&E) industry; petroleum products, including petrochemicals, and basic metal products; and paper, printing and publishing. “Of the total investments in the manufacturing sector in 2007, foreign investments contributed 55.8 per cent, or RM33.4 billion (2006: RM20.2 billion), while domestic investments also saw the highest record to date at RM26.5 billion,” she said at the annual media conference by the Malaysian Industrial Development Authority in Kuala Lumpur yesterday.
Japanese investors put in the most money at RM6.5 billion, followed by Germany (RM3.7 billion), Iran (RM3.1 billion) and the US (RM3 billion). Almost 100,000 jobs will be created with these investments and there will be more demand for engineers, metallurgists, biotechnologists, microbiologists and pharmacists, Rafidah said. Foreign investors also reinvested some RM16.3 billion to expand and diversify their operations in the country last year.
Malaysia also continued to attract export-oriented companies. The government approved 323 projects with investments through 2,439 projects last year. The real estate sub-sector accounted for 33 per cent of the investments, followed by transport with 25.5 per cent. Domestic investments accounted for 83.5 per cent of the total approved projects. The services-related projects are expected to generate 49,770 jobs.
(Source: New Straits Times, 20 February 2008)
Strongest GDP Growth Since 2004
The economy withstood external uncertainties and weaker exports to grow 6.3 per cent in 2007, the strongest showing since 2004. Gross domestic product growth in the fourth quarter of 2007 alone was 7.3 per cent, Bank Negara Malaysia (BNM) said in a statement yesterday. It said the strong growth was due to robust domestic demand, driven by strong private consumption spending and investment activities. The official data beat market expectations and a Business Times poll which estimated 6.4 per cent growth for the fourth quarter and 6.1 per cent growth for 2007.
The central bank expects growth prospects to remain favourable this year, and the continued expansion of domestic demand, private business and investment activities, particularly with the implementation of projects under the Ninth Malaysia Plan. Consumption activities should also remain resilient in view of firm labour market conditions and high commodity prices.
The services sector was the main impetus to GDP growth, expanding 9.1 per cent and supported by double-digit growth from wholesale and retail trade, accommodation and restaurant as well as the finance, insurance, real estate and business services sub-sectors. Growth in the construction sector was sustained at 4.7 per cent in the fourth quarter supported by activities in the civil engineering and non-residential sub-sectors.
Output in the agriculture sector increased by 6.9 per cent following the expansion in crude palm oil output due to a recovery in yields. The mining sector also recorded robust performance as crude oil output rose 7.2 per cent, mainly driven by increased production in the Kikeh deepwater oil fields. The production of natural gas, however, declined due to lower external demand. Meanwhile, portfolio investment recorded a net inflow of RM6 billion, from minus RM21.9 billion in the third quarter, largely for purchases of debt securities by foreign investors which offset outflows due to purchases of equity securities abroad by residents.
Action Economics director of Asian economic forecasting David Cohen said GDP data released from Malaysia and Hong Kong showed the momentum of the Asian region. “Here is a balance of different forces – a global slowdown with real problems in the United States while most countries in Asia posted strong fourth quarter GDP data. “The January trade data in the region also point to healthy demand which goes to show that while global demand may be impacted by the US, there are other engines of growth like China,” he said.
(Source: New Straits Times, 28 February 2008)
NEC may Invest More in Malaysian Plant
Japan’s NEC Corp, a computer maker, may invest more in its factory in Penang to counter rising production cost in China. “Production cost in China is rising higher and higher. There will come a point when we will have to decide,” Makato Iwasaki, executive director of marketing for NEC Computers Asia Pacific Sdn Bhd, said in an interview in Kuala Lumpur.
NEC Computers, which makes laptops and desktops, operates a plant each in Penang and China. The Penang plant is responsible for about 60 per cent of its products sold in Asia-Pacific. The rest comes from its China facility. It has been making laptops and desktops from its Penang factory and exporting them to Asia-Pacific markets for more than 10 years. The factory in Bukit Mertajam can produce 100,000 laptops and desktops a year.
NEC Computers also employs some 50 Malaysians as part of its research and development team to localise laptop development. The company has said that it is not worried about changes in the Penang state government, which is now in the hands of opposition political parties. Iwasaki is optimistic of continued business-friendly policies and does not anticipate any drastic changes. “We’re hopeful of a dialogue session with the new Chief Minister to explore investment opportunities that will bring about mutual benefits for NEC, people in Penang and Malaysia’s economy,” he said.
Last year, foreign direct investment in the manufacturing sector in the country jumped 65 per cent to RM33.4 billion. Japan was the largest foreign direct investor in manufacturing for the second consecutive year. Its RM6.5 billion in approved investments, a record figure, was 48 per cent higher compared with RM4.4 billion in 2006. The bulk of Japanese investments, at RM5.4 billion, came from companies undertaking expansion or diversification in the electronics and electrical industry, reflecting the Japanese’ continued confidence in Malaysia as their offshore profit centre.
(Source: New Straits Times, 15 March 2008)
Escap Forecasts 5.8pc Malaysian Economic Growth
The United Nations Economic and Social Survey for Asia and Pacific (Escap) has projected that Malaysia’s economy will slow in 2008 to 5.8 per cent, due to mainly to slowing demand in electronic export markets. Last year, Malaysia’s economy grew by 6.3 per cent. While the main drag on exports is the weaker demand for semi-conductors and other electric products, any economic slowdown during the year will be cushioned by higher private consumption and fixed gross investment, Escap said.
Escap’s projection is in line with Bank Negara Malaysia’s (BNM) gross domestic product (GDP) growth forecast of five to six per cent for the year. UNDP Resident Representative for Malaysia, Singapore and Brunei Dr Richard Leete said growth in the region is expected to remain robust at 7.7 per cent in 2008. However, what started as a localised difficulty in the US housing market has gone global, and a slowdown output growth seems likely. “A concentration of the slowdown in sectors such as electronics could spell trouble for Malaysia as an open economy that relies heavily on international trade,” Leete said.
Leete, at the launch of the Escap 2008 in Kuala Lumpur yesterday, said even though Malaysia is exporting more to other emerging economies, this is unlikely to compensate for losses in larger more established markets. “A further appreciation of the ringgit in 2008 is also a possibility. Deteriorating terms of trade will hit the country’s exports,” he said. Weighing on the growth is the rising food and fuel prices which, Leete said, are both an inflation challenge as well as an increasing fiscal risk.
The survey also noted that inflation was expected to rise to 2.8 per cent. Inflation was at two per cent last year. Meanwhile, the director-general of the Institute of Strategic and International Studies (ISIS) Professor Dr Mahani Zainal Abidin, in analysing the Escap report, stressed on the importance of both private consumption and private investment. She pointed out that Malaysia is also diversifying its export markets. “Although we can’t say that there is a complete de-coupling from the US, but we are diversifying into the region,” Mahani added.
(Source: New Straits Times, 25 March 2008)
Economy Seen Growing 5% - 6%
The Malaysian economy is projected to expand by 5% to 6% in 2008, slower than last year’s 6.3%. “As a small and highly open economy, the outlook will be influenced by the current high degree of uncertainties in the global economic and financial environment, including problems associated with the international credit markets and financial institutions,” Bank Negara said. These uncertainties would have some impact on Malaysia, mainly through the trade and financial markets linkages. However, it said, the resilience of the Malaysian economy to weather a slowdown in the global economy had strengthened over the years.
First is the emergence of domestic demand as a key driver of growth. “The strong economic growth of 6.3% in 2007 was achieved due to the robust expansion in domestic activities despite a moderation in external demand,” it said. Second, Malaysia’s export markets are increasingly diversified, with almost 54% of total exports going to the Asian ex-Japan economies compared with 46.2% in 2001. Meanwhile, the share of Malaysia’s exports to the US declined to 15.6% in 2007 from 20.2% in 2001. Thus, while global growth is expected to moderate in 2008 due mainly to slower growth in the US, and to a lesser extent, in Europe and Japan, the outlook for strong economic growth in the Asian region and other emerging economies would support the export sector.
Third, as a commodity producer, Malaysia will continue to benefit from high prices of crude oil, palm oil and rubber. In addition, the strong base in the commodity sector would further strengthen the linkages with downstream activities, including the resource-based industries which will continue to benefit from the robust domestic demand as well as demand from the regional economies, Bank Negara said.
All economic sectors are projected to record strong growth in 2008, except manufacturing, which is forecast to moderate to 1.8% from 3.1% last year. This is due to the expected weak performance of the export-oriented industries in an environment of projected moderation of global economic growth. Nevertheless, the impact is expected to be softened by sustained growth in the semiconductor segment led by demand emanating from the Asia-Pacific. The Beijing Olympics 2008 as well as the expansion in mobile penetration in emerging markets are anticipated to generate strong demand for semiconductors. However, the non-electronics and electrical industries, particularly domestic-oriented and selected resource-based industries that export mainly to the region, are expected to perform favourably during the year.
(Source: The Star, 27 March 2008)
Member News
Royal Selangor Carving its Niche Abroad
If there is one name that defines pewter as elegant decor for home and living, sophisticated utensils for wining and dining, lovely gifts for any occasions and wearable accessories, it has to be Royal Selangor. Unlike its more glamorous cousins such as gold and silver, pewter has been elevated to a branded status around the world thanks to Royal Selangor. With a history dating back to 1885, the company has constantly reinvented itself to adapt to market conditions and customer needs. The key to product development was constant innovation, said Royal Selangor International Sdn Bhd general manager Yong Yoon Li. In a span of more than a century, the homegrown brand can now be found in more than 20 countries since Yong Koon, Yoon Li’s great-grandfather, founded a pewter ware company called Ngeok Foh.
Then, pewter was used to produce utilitarian items such as teapots, tea caddies, candle stands and incense burners that were commonly found in the homes of the early Chinese immigrants. When the British colonised Malaya, there was demand for tankards and ashtrays and, eventually, designs began to evolve. As business prospered, the company – then known as Selangor Pewter – started its export activities in the late 1970s. Presently, 50% of Royal Selangor’s production is exported. In Malaysia, it has about 40 outlets.
Yong said the company set up its own offices with warehousing facilities in major markets such as Australia, Japan, Hong Kong, China, Singapore, Britain and North America. Emerging markets like the Middle East and India are also important to Royal Selangor. “We owe much of our success to the spirit of innovation and an attitude of constantly trying to improve ourselves and remain relevant to our customers,” he told StarBiz. One of Royal Selangor’s first export destinations was Australia. Yong said at that time, the company embarked on a global expansion strategy with a brand that was relatively unknown outside of Malaysia. “We worked with a local partner who helped build the brand and also developed a distribution network of retailers and department stores in the country,” he said.
By the mid-1980s, Royal Selangor began to export to Britain, a market that is currently one of its most exciting and challenging. It was extremely difficult to create a strong distribution network, as Britain was already an established market for home and gift segment. However, its marketing team realised that there was a niche area that the company could address, said Yong. “This niche in children’s gifts is now one of our best-selling categories. We are leading Britain with our Christening gifts with just under 1,000 retailers representing our brand, including prestigious stores like John Lewis, Goldsmiths, and Mappin and Webb. With such a strong foothold with reputable retailers, they began to take on more of our items, such as drink ware and home ware,” he said, adding that the designs had picked up several accolades, including the 1997 UK Gift of the Year by the Giftware Association of Britain.
One of the most important brand-building strategies employed by Royal Selangor was retail presence in major shopping destinations. The company operates its own retail stores in major cities such as London, Tokyo, Melbourne and Toronto. “We recently added Jakarta to this list and, by mid-year, Beijing will join in too. Managing these retail stores is very expensive but we find it necessary to build and nurture our brand in these markets,” said Yong.
He also feels that Royal Selangor is easily acceptable and recognisable worldwide as its products are well designed and made. This is the company’s edge over its peers in the premium home and gifts market. Yong admits that the company is still relatively unknown in certain markets. “For instance, we would like to develop our presence in the US. With the experience and knowledge we have gathered from our Western offices, we are confident that we can grow our US business,” he said.
As the company is handed down from one generation to another, how does it ensure that the brand remains relevant and retains its worldwide appeal? The answer is design, which plays an important role in Royal Selangor’s strategy to differentiate its brand from the competition. The company understands that today’s sophisticated shoppers will indulge in well-designed and exquisite items for their homes; hence its emphasis has been to push the boundaries of design for contemporary urban living.
Royal Selangor constantly seeks fresh ideas by commissioning new designers from around the world, said Yong. “Recently, we engaged zuii, an Australian design studio, to conceive our new home ware range. As a result, we were mentioned in several internationally-acclaimed magazines, such as Vogue Living and Wallpaper,” he said. Core to the Royal Selangor brand is innovation, which envelops every business aspect. This is not limited to product design and development but also encompasses the way the company reaches out to customers.
Yong said the company’s retail stores and online shop provide direct access to customers and receive feedback. “Recently, we put in a lot of effort to refurbish our retail stores by taking into account customers’ feedback,” he added. Royal Selangor is certainly no stranger to accolades, as it has picked up numerous awards for design and manufacturing or retail excellence. For brand recognition, it was ranked 29th in a Top 50 Asian Brand survey conducted by Interbrand in 1999. It was one of only two Malaysian brands (the other being Malaysia Airlines) on the list. It is also recognised by some well-known branding and marketing gurus and has been mentioned in books by Paul Temporal, Martin Roll and Jack Trout.
(Source: The Star, 16 February 2008)
MRB to Increase Output
Metal Reclamation Bhd (MRB) expects to ramp up production to 95% of annual capacity within the next six to nine months, managing director Lim Sheng Seaw said. “We are currently running at 30% of our annual capacity of 50,000 tonnes and are targeting 85% to 95% within the next six to nine months,” he said after the company EGM yesterday. Last September, MRB secured a six-year credit facility of up to RM50mil from South-East Asian Strategic Assets Fund LP, a joint venture between CIMB Group and Johannesburg-based Standard Bank.
Lim said MRB did not have sufficient working capital to build its inventory, especially with the rising cost of raw materials. “The loan will be used as working capital to purchase the raw materials we need to increase our capacity,” he said. According to Lim, lead prices are currently hovering around US$3,100 to US$3,200 a tonne on the London Metal Exchange (LME). MRB, a specialist in the field of lead and lead alloy product manufacturing, is registered with the LME.
On whether the company was running at a loss, Lim said: “We are currently operating at breakeven level. The funds will help put us back on track and we are confident of seeing profits again (within six to nine months).” MRB’s core markets include South-East Asia, the Indian sub-continent, the Middle East and parts of East Africa. Only 20% of its business is based locally. Currently, it has a plant at Westport.
In light of rising raw material prices, Lim said the outlook of the industry was “very bright.” “About 70% of the world production of lead goes into batteries of some sort, which are a vital component in our daily lives,” he said, adding that the battery business was practically recession-proof. “Economies in South-East Asia, China and India are also growing rapidly and given the fact that there is also a world shortage of metal, consumption of metal is increasing,” he added.
(Source: The Star, 16 February 2008)