JULY – SEPTEMBER 2011
Malaysian Tin Products
NEWSLETTER
MANAGEMENT COMMITTEE
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PRESIDENT MR. MAKOTO HARA (ALTERNATE – MR. KONG KEAN BENG) NIHON SUPERIOR (M) SDN BHD
VICE-PRESIDENT MR. CHEN TIEN YUE (ALTERNATE – Ms. KEONG JOO DEE) ROYAL SELANGOR INTERNATIONAL SDN BHD
HON. SECRETARY MR. C.S. LIM METAL RECLAMATION (IND) SDN BHD
TREASURER MR. MAMORU KAWASAKI(ALTERNATE – MR. LOH YOON SOON) SELAYANG SOLDER SDN BHD
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COMMITTEE MEMBERS MR. JASON LEE HENKEL (MALAYSIA) SDN BHD
EN. AB. PATAH MOHD PERUSAHAAN SADUR TIMAH MALAYSIA (PERSTIMA) BHD MR. SENJU (M) SDN BHD |
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EDITORIAL SUB-COMMITTEEMR. MAKOTO HARA Mr. Kong Kean Beng MR. CHEN TIEN YUE MR. C.S. LIM MR. MAMORU KAWASAKI MR. LOH YOON SOON
MR.
JASON LEE TN. HAJI MUHAMAD NOR MUHAMAD EN. FAIZUL AZRI AZIZAN
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Dear Members,
At the beginning of the year, most if not all member companies of the Association have high expectations that the country’s relatively solid 2010 fourth quarter economic performance, particularly for the Electrical and Electronics (E&E) sector, would continue well into 2011. Despite the sharper-than-expected moderation in Malaysia’s economy, and the E&E sector, in the second quarter of 2011, there was still high hopes for a modest pick-up during the final half of the year.
However, as the third quarter 2011 drew to a close, I am disappointed to note that there is no sign of such a recovery. The latest available official figures released by the Government showed that in July, the E&E sector had experienced its fifth consecutive monthly exports contraction. Cumulatively, for the period from January to July 2011, the sector which traditionally is the largest contributor to Malaysia’s exports, had declined by 6.6 per cent year-on-year.
Global market confidence has been hard-hit in recent times by high unemployment figures in the US, the world’s largest economy, and the country’s credit rating downgrade by Standard & Poor’s. There are also concerns that the debt crisis in the EU will escalate. All these have resulted in manufacturers in the US and EU being cautious on new orders amid the slower economic growth outlook. Although economists have mixed views on whether there is a threat of a double-dip recession befalling these two major economic regions, they were in agreement that global growth has slowed, and there will be a prolonged period of subdued economic activity.
Based on the current economic situation, and due to the expected continuing waning demand from abroad, local analysts have projected Malaysia’s E&E sector to stagnate for the remainder of the year, possibly rebounding in early 2012 as leading economies such as the US and Japan recover from the slow down. The country’s overall exports performance, however, is likely to be buffered against any sharp decline by commodity exports which, at this juncture, are still growing at a robust pace.
For now, Bank Negara is keeping to the 2011 gross domestic product (GDP) growth target for the country of 5.0 to 6.0 per cent. It stated that, based on its current assessment, Malaysia could achieve at least a 5.0 per cent growth this year as the strength of the domestic economy remains intact. It did say, however, that if the US and EU were to slip into a recession, or if there were other trigger factors that would result in a disruption in the international financial markets, it would make a reassessment.
With warm regards.
PRESIDENT
Tek Seng in Solar Venture
Tek Seng Holdings Bhd will invest RM596mil over the next five years in solar photovoltaic (PV) cell manufacturing business, which is expected to start operations next year. Group executive chairman Loh Kok Beng told StarBiz that the company was now building a RM94mil plant in Bukit Minyak Science Park. “We will start production with one line for 60MW solar PV cells in the first quarter of 2012. Our plan is to gradually increase the production lines to eight by 2016. “In 2013, we will add one more line. We will add two production lines each year in 2014, 2015, and 2016,” he said. The solar PV business would be financed by internal funds and bank borrowings, Loh added.
A new subsidiary, TS SolarTech Sdn Bhd, has been set up to undertake the new business. Tek Seng has a 60% stake in the new unit. Tek Seng is getting its solar PV cell technological know-how from Schmid, a leading German solar power company. Loh said the group had started negotiating for sales orders with multinational companies in China. “TS SolarTech expects to generate RM130mil to RM170mil revenue in 2012. This means that the new business is expected to generate over 70% of the group's revenue for that year. About 50% of TS SolarTech's business will come from overseas while the remainder from domestic market,” he said.
Loh said the production of solar PV cells in Asia was expected to increase by 85% this year compared with 80% in 2010. Global production reached 20.5GW in 2010, up from 9.86GW in 2009. “In Malaysia, the cumulative capacity for photovoltaic cells is expected to reach 360MW in 2015, up from 29MW in 2011, representing a compounded annual average growth of 88%. “Malaysia is well positioned to increase its share to 17% of the global market by 2020,” he said. He added that the solar PV cell business would reduce the group's over dependence on polyvinyl chloride manufacturing and trading business.
(Source: The Star, 1 July 2011)
A Shot in the Arm for Flextronics’ Solar Ambition
Malaysia's bid to be ranked in the world's top three for solar megawatt (MW) output is set to get a shot in the arm with the expansion of Flextronics International Ltd's solar panel assembly in Johor. The company, whose electronics manufacturing expertise ranges from making medical devices to solar panel assembly, is set to ramp up its activities with the addition of a subcontracting deal from a new customer.
Flextronics Technology Malaysia Sdn Bhd's plant manager, Ng Wee Thong, said the expansion of the company's partnership with MEMC Electronic Materials Inc is set to see Flextronics' supersite here increase its current annual output of 500MW to 1.2 gigawatt by the end of 2012. "We are not only ramping up our solar panel assembly activities for existing customers but to also welcome new ones to this site," he told Business Times during a visit to the facilities.
Apart from reinvesting capital into its solar panel assembly operations, Ng said Flextronics is also looking to double its clean-tech employees to 2,000 by the end of this year. New hires are set to include engineers and production workers. Flextronics announced last year that it had entered into an agreement to produce solar modules for Q-Cells SE, one of the world's largest solar cell producers. The deal, which is one of the largest solar manufacturing contracts awarded in the industry to date, positions Flextronics as the leading EMS player in the Clean Tech market.
Flextronics had said it will dedicate 200MW of the capacity at its Clean Tech Super Site here to the production of Q-Cells' solar modules. The move was seen as a shot in the arm for the solar supply chain which is rapidly evolving in Malaysia, now ranked fifth in the world for solar megawatt output. In December last year, Flextronics and MEMC had inked an agreement for Flextronics to produce solar photovoltaic (PV) panels for MEMC's SunEdison subsidiary from Flextronics' Newmarket Ontario facility in Canada. In March this year, the agreement was expanded where Flextronics said it expects to build some 270MW of solar panels annually for SunEdison in Malaysia.
(Source: New Straits Times, 7 July 2011)
ECE Technologies to List on London’s AIM
ECE Technologies Sdn Bhd (ETSB), a Malaysian electrical and electronics products manufacturer, will list on the Alternative Investment Market (AIM) of London Stock Exchange on September 12 this year. The company will be listed under the name of ECE Zaira Ltd. In a statement, ETSB said it expects to raise RM45 million from its initial public offering (IPO), which will be used for its manufacturing plant expansion in the Northern Corridor Economic Region; building capacity for export-oriented products to target markets in Asia, Europe and the Middle East; new plants in Medan and Bogor to manufacture products specific for the Indonesian market as well as for working capital and to fund its listing expenses.
Under the IPO, ETSB is issuing 60 million shares of 15 pence each, totalling £9 million (RM45 million) for Malaysian institutional investors as well as global investors. ETSB director Mushtaq Hussin Ahmad said the move to list on London’s AIM was to position its brand in Europe, Africa and the Middle East as part of its long-term plan to be a global player. The listing was one of numerous deals signed during Prime Minister Datuk Seri Najib Razak’s working trip to the UK last week. Last year, ETSB recorded revenue of RM15 million. It expects to grow its revenue more than six times to RM100 million by year-end.
(Source: The Sun, 19 July 2011)
Inari Makes Good Gain on Debut
Inari Bhd, a manufacturer in the semiconductor industry, made a good gain on its listing debut yesterday despite a bearish market. The stock closed at 44.5 sen, 6.5 sen or 17 per cent more than its IPO (initial public offering), with 44 million shares changing hands. In contrast, Bursa Malaysia's benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) closed 6.94 points lower at 1,555.64. "We are happy with the opening price, which is within our expectations. We feel that it is the right time for us to raise funds to further expand and create an awareness of the company," Inari managing director Dr Tan Seng Chuan said after its listing ceremony here yesterday.
Inari has allocated RM25 million of the RM30 million raised from the IPO to fund its fourth plant in Penang. The plant will see a 46 per cent increase in manufacturing floor space and will subsequently help increase Inari's revenue by between 25 and 30 per cent once it is completed next year. The company posted a net profit of RM14.7 million for the nine-month period ended March 31 2011 on the back of a RM77 million turnover. It remains optimistic on its future performance based on firm orders from major customers, in tandem with strong demand for smart mobile devices such as smartphones and tablet computers.
"OEMs (original equipment manufacturers) are expected to continue outsourcing their production requirements to keep up with the fast pace of technological development. We are optimistic that the new plant will be going at about 90 per cent of its capacity, between six to eight months upon completion," said Tan. Inari is in the process of obtaining ISO 14385 certification to enable it to penetrate into the medical devices and equipment business, a move that should widen its revenue base.
Established in 2005, the company specialises in providing end-to-end and vertically integrated semiconductor packaging services for chips in radio frequency (RF) mobile technology and devices. Its packaged chips serve as key components in the manufacturing of a wide range of high technology wireless telecommunications products including smartphones and tablet PCs. Inari said industry projections for smartphones and the explosion in the number of tablet PCs have spurred it to expand its assembly capacity for RF chips to meet the wave of smart mobile services demand.
(Source: New Straits Times, 20 July 2011)
Softer Outlook for HDD Business
Local hard disk drive (HDD) component producers are reducing their dependency on the HDD business as the market is expected to grow at a slower pace over the next five years. Eng Teknologi Holdings Bhd chief executive officer Datuk Y.K. Teh said the HDD market had mature and would be growing at a single digit pace starting from next year. “According to the latest Trendfocus research report, shipment of HDD would be around 708 million units this year compared with 651 million in 2010. Starting next year until 2015, the compounded annual growth rate for HDD is expected to be about 8.9% per annum. “This is why we are looking to expand further our industrial product division which makes automated industrial valves used in water heaters for the United States market,” he told StarBiz.
Teh said the group would spend RM50mil this year to expand its HDD component production capacity. “Two of our customers, Western Digital and Hitachi, are in the process of merging. Our expansion exercise is to cater to the higher demand for HDD components, resulting from the merger,” he added. Eng Teknologi manufactures HDD components such as actuators, base-plates and separators for its customers.
Dufu Technology Corp Bhd also planned to reduce its dependency on the HDD business by focusing on industrial sensor, industrial control, and medical implant device products. Dufu chief executive officer P.Y. Yong said demand for the group's HDD components such as spacers and clamps were from China and Thailand, while demand from Singapore had fallen. “We expect contribution from the HDD components business to the company's revenue to drop to about 60% in 2012 from 70% this year. We will be investing RM8mil in the Penang plant in Bayan Lepas to upgrade this year,” he said. Dufu supplies HDD components to Seagate and Western Digital.
AT Systemisation Bhd managing director Beh Lai Lien said the HDD business was very volatile. “It could slow down for several quarters and demand could suddenly pick up again. We still see opportunities for our group in the HDD business,” he said. AT Systemisation makes precision machining parts for hard disk drive equipment. Western Digital in Penang focuses on manufacturing magnetic head and media components for HDD, which does not have an impact on the business of local HDD component manufacturers.
According to the California-based Trendfocus report, notebook PC sales should strengthen in the third quarter due to back-to-school sales, which generates higher demand for 2.5-inch mobile HDD. Mobile HDD shipments worldwide grew 7% to 75.36mil units in the second quarter of 2011 from the first quarter.
The report said Western Digital led in the mobile HDD segment with a 28% market share, while Seagate was second at 24%.
(Source: The Star, 8 August 2011)
Semiconductor Firms Brace for Challenging Times
Semiconductor and electronic firms in Penang are bracing themselves for the worst towards the latter part of this year when the economic slowdown and stock market selloff are expected to bite hard during a traditionally strong period. Pentamaster Corp Bhd executive chairman CB Chuah said orders from the company's customers for the fourth quarter were not coming in. “Usually orders from China, the US, and Europe would come in around this time for the fourth quarter. But, because of the global economic crisis, they are not,” he told StarBiz.
Chuah expects developed countries to cut consumer spending and that would in turn affect demand for consumer electronic goods. “Usually China would continue purchasing with the West slowing down but now even China is tightening,” he said. “Because the group performed satisfactorily in the first half, our business for the year should not be so badly impacted.” Chuah said the group's business was cushioned against the impact by demand for its glove-recycling machines that are used in the medical sector. “During challenging times, there will be more demand for glove-recycling machines to save cost,” he said.
Pentamaster is involved in the manufacture of semiconductor automated equipment for markets in China, the US and Europe, which is a key contributor of the group's revenue. Mini-Circuits Technologies (Malaysia) Sdn Bhd chairman and president Datuk Seri Kelvin Kiew said there was slowdown in the electronics, semiconductor and radio frequency component sectors. “China is still buying radio frequency components from us, but the margin is very low. The sale of radio frequency components to mobile telecommunication devices, however, has slowed down,” he said. “The situation is likely to worsen by year-end.”
Mini-Circuits specialises in manufacturing radio frequency components for wireless network infrastructure and mobile telecommunication devices. Globetronics Technology Bhd chief executive officer Heng Huck Lee expects its customers to exercise caution on orders for the remainder of the year. “So far there is no cancellation of orders. Our diversification into manufacturing of integrated circuits used in hard disk drives and timing devices has helped to cushion the impact of the slowdown on the group's business,” Heng added. Globetronics' core business is manufacturing integrated circuits and light-emitting diodes chips.
PIE Industrial Bhd managing director Alvin Mui said should the crisis in the US and Europe prolong, there would be an impact on its business in the fourth quarter as the US market generated about 50% of PIE's revenue. “But, regardless of the situation in the US and Europe, there will still be industrial activities that would require our industrial electronic products,” he said. “Thus we need to work harder to find new customers and broaden our revenue base to cushion the impact.” PIE is a specialist manufacturer of industrial sensor controls, bar code scanners and printed circuit assembled products. Apart from slower demand, some manufacturers are faced with a double whammy from rising costs.
Cepco Trading director Jansen Lim said the price of engineering plastic resin had soared by about 8% to US$2,480 per tonne currently. “The higher cost of raw materials will further slow down orders, especially in light of an economic crisis,” he said. “For our side, we should be able to achieve output target of 270 tonnes for this year due to the better sales in the first half of the year.” The Seberang Prai-based company is a trader and manufacturer of engineering plastic products used in consumer electronic products. Meanwhile, Malaysian American Electronics Industry chairman Datuk Wong Siew Hai said US multinational corporations still did not know what to expect. “Due to the uncertainties, they are tightening control over their expenses,” he added.
(Source: The Star, 15 August 2011)
PCB Manufacturers Going Through Slower H2
Local printed circuit-board (PCB) manufacturers supplying to branded smart phones and mobile computing devices are experiencing a slower second half due to the economic crisis in the United States, Europe and Japan, as well as the softening global sales of liquid crystal display (LCD) TVs. Qdos Sdn Bhd business development manager Jeffrey Hwang said in an interview that the group was expecting monthly sales of RM7mil to RM8mil in the second half, but so far it had only been able to generate monthly sales of between RM6mil and RM7mil. “The third quarter is normally a strong quarter as we usually get between RM7mil and RM8mil due to the forthcoming festive holidays. But due to the economic crisis in Europe and the US, orders from international manufacturers of branded mobile telecommunications and computing devices are not surging,” he said.
Qdos will be increasing production of its flexi-PCBs used in light-emitting diodes (LED) back-lighting of automobiles. “Flexi-PCBs for automobiles are higher value-added products that can help offset the rising cost of production due to rising gold prices and higher power costs,” he said. “To prevent margin erosion due to a stronger ringgit, we have started hedging against the greenback and develop alternative designs that consume fewer raw materials to sustain our margins,” he said.
Based in Bayan Lepas Free Industrial Zone, Qdos, a wholly-owned subsidiary of Suiwah Corp Bhd, specialises in the manufacture of flexi-printed circuits for mobile telecommunications and computing devices and the automotive industry. Qdos supplies flexi-PCBs to 10 major brandnames of smart phones and mobile computing devices. Flexi-PCBs, due to their flexible characteristics, are used to enable the design of trendy and sophisticated smart phones and mobile computers. GUH Holdings Bhd, meanwhile, is targeting to make up for lost business in the third quarter to achieve satisfactory results for its 2011 fiscal year ending in Dec 31, as the fourth quarter is seasonally slow.
As orders from electronics products companies in Japan slowed as a result of the tsunami, GUH registered about RM127mil in PCB sales for the first half of 2011, compared with RM140mil a year earlier. “However, the decline in revenue was partially offset by the increase in the average selling price of its PCB products due to higher mix of higher margin multi-layer PCBs,” group managing director Datuk Kenneth H'ng said. He added that there was concern the slower US economy and the debt crisis in Europe might have an adverse impact on GUH's PCB division. The group's PCB sales for the second half of 2011 should be more or less the same as in the second half of 2010. We are also working to increase production of higher-value PCBs for backlights used in the automotive industry,” he said.
GUH generated about RM138mil in PCB sales in the second half of 2010. The company makes rigid PCBs used in major brandnames of LED and LCD televisions. To diversify its business from being too dependent on the cyclical PCB division, GUH acquired in July a 70% stake in Teknoserv Engineering Sdn Bhd, an engineering firm specialising in waste-water and water treatment plants, for RM8.9mil. “The move marks GUH's entry into the water industry. With Teknoserv's know-how and GUH's financial backing, the former intends to bid directly for jobs in the sector, as opposed to being a sub-contractor now,” H'ng said.
Kontron Design Manufacturing Services (M) Sdn Bhd (KDMS), a subsidiary of Kontron AG, expects a weak fourth quarter this year. “Most of our customers in the industrial automation, automotive, medical and telecommunications sectors will be cautious in managing their inventories as they do not want to over-stock, which will carry forward to the next fiscal year,” KDMS chief executive officer Michael Riegert said.
He said the third quarter of 2011 was still strong for KDMS, as its key customers in the industrial automation, automotive, medical, and telecommunications sectors did not slow down order. Kontron is still projecting a double-digit growth of about 36% for 2011, compared with 44% a year earlier. “The growth we are projecting is unique to KDMS, which is not typical for the industry. We are spending about US$5mil this year to expand and upgrade our production facility to raise the output of PCB assembled products to 350,000 pieces this year, compared with 310,000 pieces in 2010,” Riegert said.
Located in Seberang Prai, KDMS makes PCB assembled and system integration products for the telecommunications, industrial, automotive, gaming and medical industries. According to the latest DisplaySearch's Quarterly Advanced Global TV Shipment and Forecast Report, total global TV shipments in 2011 are expected to drop by about 3% to 252 million units, as demand from many developed countries continues to be very soft. “Television shipments in North America are expected to grow only about 2% this year after a 4% growth in 2010, while Western European television shipments are expected to fall about 1.5%. In addition, after exceptional growth in 2009 and 2010 due to government incentive programmes, the Japanese television market will decline by over 40% in 2011,” the report said.
According to the Research In China's Global and China Flexible Printed Circuit Board Industry Report 2010-2011, global shipments of mobile phones are expected to increase 5.1% to 1.49 billion units in 2011 from 1.4 billion units in 2010. In 2012, global shipments of mobile phones are forecast to grow 2.1% to 1.5 billion versus 2011. The report forecast that global shipments of laptops will increase 5.7% to 203 million in 2011 from 192 million a year earlier. In 2012, global shipments of laptops are expected to grow 5.4% to 216 million.
(Source: The Star, 2 September 2011)
‘Have Single Minimum Wage’
The Malaysian Trades Union Congress (MTUC) has proposed that the Human Resources Ministry come up with a single set of minimum wage instead of having differing wages according to sectors. While lauding the passing of the National Wages Consultative Council 2011 Bill in Parliament on Thursday, president Mohd Khalid Atan said it must serve to benefit employees. "We are a small nation. We don't need different minimum wages. It's fine if one set is for the peninsula, and the other for Sabah and Sarawak," he said yesterday.
Under the bill, a council will be established to conduct studies related to minimum wages and make recommendations to the government according to sectors, types of employment and regions. Khalid said the council should have the power to decide so stakeholders would benefit from the move, adding that MTUC should also have a say on who would represent the union in the council. Malaysian Employers Federation (MEF) executive director Shamsuddin Bardan, meanwhile, said the council should not only focus on one issue – minimum wage – but also cover all wages. "For example, the council should come up with a yearly report on wages, which include performances of companies and employees, and inflation rates," he said, adding that there should be more members on the council. After all, this is all about employers and employees. Let them have the say and be the majority in the council," he said.
The bill states that the council shall have a minimum of 23 people, with the chairman, deputy chairman and at least five other members to be appointed from those who are not public officers, employers or trade union members. The bill also states that an employer who fails to pay his employees the basic wages as specified in the minimum wages order is liable to a fine of not more than RM10,000 for each employee. Shamsuddin added that the federation would try to have more discussions with the ministry.
(Source: New Straits Times, 2 July 2011)
Economist: Trend in US, Europe will affect Malaysia
Malaysia should keep an eye on political trends and unemployment rates in the United States and European countries as these factors will affect the local economy, says UBS Investment Bank managing director and global economist Paul Donovan. Due to persistent long-term unemployment in the United States and Europe, governments in these countries would want to protect their local jobs and therefore limit international trade, he said at a roundtable session with the media yesterday. As a result, Donovan said, politicians would try to run economies, which meant rising political risk in the global economy.
Donovan said while politics had always influenced Asian economies, the United States and European governments had for the past two decades maintained a declining role in managing their economies. “If we look back, the trend of reducing political risk will be reversed as politics is rising in the United States and Europe (now). What happens there will affect this region significantly. Malaysia, as a global open economy, will have to take note as decisions made in these foreign countries will have implications as to where the Malaysian economy is heading in the next few years,” he added.
Donovan said the Middle East remained potentially volatile but would not be the biggest political risk for this region. “Through regulation, governments are playing a direct role in managing the economy. Certain countries will impose capital control and restriction on investments, which changes capital flow around the world. The trade protection that the United States and Europe has put in place means that Asia has to change the way it generates growth,” he said. Donovan noted that exports would no longer be a reliable source for economic expansion. “Malaysia should look into (having a) domestic-focused economy with more domestic investments and consumption,” he said.
As for the world economy, Donovan said the forecast 3.9% growth had been slightly revised downward to 3.6% following the natural disasters in Japan recently. “At the start of this year, growth momentum was quite good. First-quarter GDP numbers were better than expected in Malaysia but economists say there will be a levelling off of growth. I believe we will now see a period of relative stability,” he said, attributing that to continued fair growth in the United States and Europe. He added that there would be limited slowdown in Malaysia in the second and third quarters. “We will see a trend-like growth globally, which will continue to keep the Malaysian economy at a reasonable growth rate of 4.5% or 5% over the next two years,” Donovan added.
However, he said, this also meant that things did not get worse or better, reflecting the unchanging unemployment rates and spare capacity in countries that had not recovered well from the recession in 2008 and 2009. The United States is facing its highest unemployment rate since 1983, with more than 40% of its citizens unemployed for more than six months.
(Source: The Star, 6 July 2011)
‘Pay Minimum Wage or Risk Fine’
Workers who are not paid according to the minimum wage when it is implemented at the end of the year, can report their employers to the Labour Department. Human Resources Minister Datuk Dr S. Subramaniam said once the minimum wage comes into effect, it would be compulsory for employers to comply or risk being fined. "The department will be monitoring the situation. But employees who feel they are not being given their rights can approach the department directly," he said yesterday. He said that once the provisions for the minimum wage became law, employers who fail to comply would be liable to a fine of not more than RM10,000 for each employee.
A study by the Human Resources Ministry in 2009 showed that 33.8 per cent of the 1.3 million workers covered earned less than RM700 a month. This is below the poverty line, which is RM720 a month. Dr Subramaniam said the proposed new legislation for a minimum wage provides for the setting up of a National Wages Consultative Council which would recommend an appropriate minimum wage. "This will help the ministry in meeting the objective of assisting the lowly paid workers."
He also said the council would make suggestions to the government based on sectors, types of employment and regions. He added that there would be a review of the minimum wage every two years.
He said the minimum wage should not be too low as it would not serve the purpose, nor too high as it may cause problems to the economy by forcing businessmen to relocate or close down their businesses. The Malaysian Trades Union Congress had earlier asked for the minimum wage to be set at RM900 a month.
(Source: New Straits Times, 7 July 2011)
Slower Full-Year Growth Expected
May's lower factory output as measured through the industrial production index (IPI) more or less confirms that economic growth for the second quarter and for the full year will be slower. Although not unexpected, with the Government already forecasting year-on-year gross domestic product (GDP) growth to be between 5% and 6% this year against 7.2% growth in 2010, external factors should make things all the more challenging and uncertain. Three of these factors weigh on global GDP growth: China's inflation, which hit a three-year high of 6.4% in June, the stubbornly high jobless rate in the United States and contagion fears in the eurozone.
HSBC Global Research's co-head Asian Economics Frederic Neumann said in a July 10 report that the persistent US high unemployment rate would mean a weaker summer employment outlook. “Asia will feel the chill mostly through exports. In fact, we've recently highlighted that export order growth has continued to slow across the region in June,” he said.
Neumann said stagnating external demand would persist beyond the end of Japanese supply chain disruptions, which was the main cause of Malaysia's drop in factory output. He said policymakers in the region would still proceed with a gradual and cautious adjustment to interest rates due to inflationary pressure. This adjustment would have to be balanced against currency appreciation, which would impact exports growth. “This, as we have long argued, is not simply a lagged effect of rising food and oil prices earlier this year, but reflects an underlying deterioration in the trade-off between inflation and growth in the region,” Neumann added.
He said there was clearly a need to raise key interest rates further despite slower growth in the second quarter because Asia's inflationary pressure was due to excess capacity not being able to cope with demand. JPMorgan Chase Bank's Singapore-based economist Ong Sin Beng expects industrial production to remain soft though some stabilisation may be expected in the June data before a recovery in the third quarter. “The main uncertainty is not so much with the direction of the data but with the strength of the recovery and this requires a somewhat firmer final demand footing in the third quarter,” he said in a report.
Ong said while some of the slowing owed to a moderation in final demand in the developed economies, a large part was due to an inventory adjustment following the sharp expansion in production in the first quarter. “In that context, the second-quarter softness is somewhat similar to the third quarter 2010 slowing, which took three months to reach the trough from the production peak,” he added.
The Statistics Department on Monday released May's IPI figures, which showed factory output declined 5.1% from a year ago, more than the median expectation of a 2.7% fall in a Bloomberg survey. This was also more than double the 2.2% drop recorded in April. The Government forecasts GDP to grow 5% to 6% this year with most economists expecting GDP to grow around 5.5%. Last year, growth came in at 7.2% year-on-year. GDP expanded 4.6% for the first quarter with economists expecting second-quarter growth to be slower on weaker external demand.
(Source: The Star, 13 July 2011)
Levy on Heavy Power Users from January
The government will impose a levy on heavy electricity users starting January 2012 and use the money to remunerate green energy producers under the Renewable Energy Act's feed-in tariffs (FiT). "Green energy producers will be rewarded via the feed-in tariffs. The funding is derived from polluters-to-pay concept," said Energy, Green Technology and Water Ministry's deputy secretary general for energy sector Badaruddin Mahyudin.
He said the Sustainable Energy Development Authority will set up the Renewable Energy Fund in September 2011 to collect the levy and oversee the implementation of the FiT. "Those who consume more than 300KW (kilowatts) per hour will be considered heavy energy users and they will be taxed. We estimate Tenaga Nasional Bhd (TNB) to collect RM300 million per year on behalf of the government to fund the green power producers. Please note, household customers consuming 200 units of electricity or less will not be affected by the renewable energy levy," he said. "Our ministry has, so far, received a RM189 million loan from the Finance Ministry to kick-start the Renewable Energy Fund," he added.
Badaruddin was speaking to reporters after launching the pre-show guide of POWER-GEN Asia 2011 here yesterday. The regional conference and exhibition on power generation, transmission and distribution will be held at the Kuala Lumpur Convention Centre from September 27 to 29. It was highlighted that manufacturers, which make up 40 per cent of TNB's clientele, are the likely target group to be slapped with the renewable energy levy. Badaruddin said the government is aware that the largest contributor to the levy will be from the industrial sector. He gave an assurance that the 1 per cent levy on the bills of heavy energy users will only minimally impact the industry's manufacturing cost. Moreover, the industrial sector may want to offset the incremental electricity cost by being more energy-efficient at their factories or even generating green power, thus benefit from the FiT.
To date, TNB's small renewable energy programme is only applicable to those generating up to 10MW. Come September 2011, the FiT will raise the bar to 30MW. Power is generated from sustainable sources that include hydro, solar, biomass and biogas. The FiT essentially guarantees green power producers a premium selling price over that generated from depleting and finite sources like oil, gas and coal. The FiT could, on a cumulative basis until 2020, facilitate avoidance of about 46 million tonnes of carbon dioxide emitted from conventional power generation. This is achieved if and when Malaysia generates at least 3,000MW of green power.
(Source: New Straits Times, 13 July 2011)
Modest Slowdown Seen for Major Asian Economies
Asia's major economies are set for a modest slowdown in coming months, while next year's growth prospects hinge on how quickly inflation cools at home and demand recovers abroad, a Reuters poll showed. Economists have trimmed their 2011 and 2012 growth forecasts for China, India, and a handful of the other economies in the region since the last quarterly poll of Asian countries excluding Japan, conducted three months ago. However, they see little risk of a severe downturn. In China, for example, they predicted that growth would stay well above the 8% level needed to create enough jobs to keep up with a rapidly urbanising population.
Debt troubles in the United States and Europe are a big wild card. What was once unthinkable a US debt default has become a legitimate concern. If it happens, Asia's economists would need to rethink their assumptions. But for now, the biggest worry for Asia's largest emerging markets is that inflation remains hot while growth slows, forcing central banks into a more aggressive round of interest rate hikes or tighter restrictions on bank lending.
“The bigger risks confronting the Chinese and Indian economies at present stem more from domestic than international developments,” said Robert Prior Wandesforde, Credit Suisse's Asia economist based in Singapore. In particular, the presence of high and sticky inflation has forced the central banks of both countries to tighten policy, with potential adverse consequences for domestic activity,” he said.
Credit Suisse's forecasts for China were among the most bearish in the Reuters poll of 19 economists, calling for 8.7% growth for this year and 8.5% for next. In contrast, the median forecast was for 9.3% growth in 2011 and 8.8% for 2012. For India, economists cut their 2011 forecast to 7.9% from 8.3% in the previous poll, with the inflation rate outstripping growth at 8.5%. A string of interest rate rises may finally start to cool prices next year. The median forecast called for inflation to slow to 6.5%. For some of the smaller, export-focused economies, their fate is tied to that of the US and Europe. Both regions are struggling with slack domestic demand and debt troubles that show no sign of a quick resolution.
(Source: The Star, 19 July 2011)
Export Credit Insurance Provides Peace of Mind
For peace of mind when exporting goods, Malaysian manufacturers can turn to Exim Bank’s export credit insurance facility. Under the facility, the bank provides coverage against the risk of non-payment by overseas buyers or contract awarders. “Imagine a Malaysian contractor who has borrowed a loan from a commercial bank to get working capital, buy raw materials and employ staff, and then exports his goods to an overseas buyer. What happens if the overseas buyer doesn’t honour the payment? If the manufacturer cannot get the money, they won’t be able to service the loan and in some cases they face winding-up because the bank needs to get back its money,” Exim Bank’s export credit insurance vice-president Md Arop Othman said.
According to him, export credit insurance provides a solution to this problem. “We will provide advice on overseas buyers as to whether or not they are good companies to export to. “In the event they don’t honour the payment, Malaysian exporters can claim from Exim Bank and we will pay them so that their cash flow is not affected. “More importantly, they can service their loans from a commercial bank,” he said at The Star Outstanding Business Awards forum here recently. Arop said the export credit insurance facility was aimed at facilitating Malaysian manufacturers to venture into international markets and Malaysian contractors to secure contracts abroad. “That is why we were established by the government to protect the credit risk,” he said.
(Source: The Star, 19 July 2011)
Using RMB in Trade Settlements Saves Costs, Says Bank
Trades between China and emerging markets will increasingly be settled in renminbi (RMB) as it helps save costs, says banking group HSBC. Thomas Poon, head of business planning and strategy at HSBC in Hong Kong, said there were three key advantages in using the RMB for trade settlements - it saves hedging costs, reduces transaction costs and helps diversify currency portfolio. At present, trades between China and emerging markets are settled mainly in a third party currency, namely the US dollar.
"(With the US dollar), basically, both sides have to manage that fund exchange exposure and as a result, incur some hedging cost. If China is willing to promote and develop RMB more into a trade currency, then potentially the saving on hedging costs on the Chinese side can be passed back, or split 50-50, providing a saving to the government and the overseas market, and potentially reducing the (cost) of the transaction as well," Poon told reporters here yesterday after delivering a presentation entitled "The Rise of the Redback" at a business forum jointly organised by HSBC Malaysia and the Asian Strategy & Leadership Institute.
As it stands, more than half of China's trade is with emerging markets. There is already an increasing trend of the usage of RMB in trade transactions. "We think by 2015, more than half of China's total trade flows worth about US$2 trillion (RM6.02 trillion) will be settled in RMB," Poon said. On when the RMB may become fully convertible to other currencies, Poon said this may happen around 2020 although others expect it may happen earlier, around 2015.
He believes it would likely happen later than 2015 as there are still a lot of domestic structural issues that China needs to adress. He noted that the RMB could become the third highest turnover currency in the world if it were fully convertible.
(Source: New Straits Times, 20 July 2011)
Growth Forecast may be Lowered
Malaysian Rating Corp Bhd (MARC) may revise downwards its gross domestic product (GDP) growth target of 5.3% for the country this year. “The GDP growth number we are looking at, for the second quarter of 2011, is between 3.5% and 4%. If that materialises, then the overall picture for this year is not as robust as I initially thought it would be. But we should still have a GDP growth of 4% to 5% (for the full year),” MARC chief economist Nor Zahidi Alias said on the sidelines of the company's 2011 CEO Breakfast Forum yesterday.
For the first quarter of 2011, Malaysia recorded a GDP growth of 4.6%. To recap, in May this year, Malaysia's exports grew by 5.4% year-on-year to RM55.1bil, while imports rose by 5.6% to RM46.6bil, according to a recent Statistics Department statement. However, in May, both exports and imports declined month-on-month by 4.7% and 0.4% respectively. Also, the sales value of the manufacturing sector in May this year decreased by 3.7% month-on-month although it posted a year-on-year growth of 8% to RM47.8bil. Meanwhile, the Industrial Production Index (IPI) in May decreased by 5.1% year-on-year.
Guest speakers at the forum, which was moderated by MARC chief executive officer Mohd Razlan Mohamed, were Malaysian Industrial Develop-ment Authority (Mida) chairman Tan Sri Dr Sulaiman Mahbob and Institute of Strategic and International Studies (ISIS) senior analyst Dr Muhammed Abdul Khalid. The forum also saw the launch of the book entitled “Musings of a Financial Economist”, which is an anthology of Nor Zahidi's past articles in Malaysian Business magazine. Sulaiman said Mida's current policy was to increase the level of domestic direct investment (DDI) in the economy.
He said, as an example, for the past five to six years, the ratio of investments was about 60:40 in favour of foreign direct investment (FDI) in the manufacturing sector. “Our target is a 50:50 ratio. Currently, DDI is largely in the areas of plantation, construction and SMI (small and medium industries). However, we have not set a targeted timeframe to achieve this,” he told reporters after the forum. Sulaiman explained that a higher level of DDI would result in higher domestic value-added content, stronger potential for intellectual property asset creation and a buffer during a global economic slowdown, among other benefits. Sulaiman also pointed out that the services sector in Malaysia had a very high proportion of DDI.
According to Mida, DDI accounted for 88% of the RM247.4bil invested in the services sector from 2006 to 2010. Meanwhile, Muhammed Abdul said the Government's Economic Transformation Programme (ETP) needed to look at issues from the perspective of the man in the street. He pointed out that while the country recorded an average annual GDP growth of 5.3% from 2000 to 2009, employment wage growth was only 2.6% per annum against a backdrop of a 3.2% per annum growth in the consumer price index during the same period.
Muhammed Abdul also spoke about income inequality which had widened since 1970, and cited reports in 2010 that about 34% of 1.3 million workers earned less than RM700 a month (below the poverty line of RM720 per month), based on a study by the Human Resources Ministry. “Do we consider economic well-being or do we focus on FDI?” he questioned.
(Source: The Star, 21 July 2011)
Royal Selangor on Recycling Drive for Nature
Old pewter items that have lost their usefulness can now be recycled. Royal Selangor will melt the items and turn them into beautiful objects with nature-inspired designs. The 126-year-old pewter company has launched a donation drive for old and unwanted Royal Selangor pewter items. The recycling effort will benefit Malaysian Nature Society (MNS). At the recent launch of the donation drive, Royal Selangor International general manager Yong Yoon Li said: "Not many people are aware that pewter is actually recyclable. Every day at our factory, pewter swarf is collected and melted. We look forward to receiving old pewter items from our customers."
The donated items would be melted and made into figurines and wearable pieces to form part of the Alam collection inspired by Malaysia's forests. Malaysian sculptors Tengku Sabri Ibrahim and Zainal Abidin Musa are the designers for the collection, said Yong. "The Alam collection will be available in October and one-third of the sales from the collection will go to MNS to aid their efforts at habitat conservation and environmental education. We admire the work that the MNS does to conserve our forests and wildlife, and we feel that it would be the best recipient of the proceeds," he said.
He said the project came about because customers often wanted to know what could be done with disused items, he said. The first 100 donors will get a one-year membership with MNS. All donors are eligible for the lucky draw with the prize of a three-day two-night trip to the 130-million year-old Belum Rainforest sponsored by Royal Selangor. The pewter items can be donated at any Royal Selangor store. The closing date for the lucky draw is Sept 30. MNS executive director Clement Clifford said the Belum forest was under threat of logging and poaching activities. The collection will be available at Royal Selangor retail stores and online at www.royalselangor.com.
(Source: New Straits Times, 7 July 2011)
Royal Selangor Targets 5-10% Revenue Contribution from Online Biz This Year
The world's largest pewter maker Royal Selangor expects between 5% and 10% of its revenue to come from online business this year, as it sees improved online sales following a recent revamp of its website. This segment currently contributes less than 5% to revenue. Royal Selangor Marketing Sdn Bhd general manager Chen Tien Yue said the website revamp was in line with the company's aim to remain as an iconic world brand. "The company will continue to enhance its site with additional features by adding more pictures, easier site navigation and better search functionality. This is actually to attract more consumers as well as provide them with better solutions to do shopping online," Chen told SunBiz in an email interview.
The pewter maker started its online store, www.royalselangor.com, in 1998, to reach out to customers around the world. Its top markets for e-commerce are the United Kingdom, Australia, Malaysia, the US and Europe. It saw more matured e-commerce consumers in the developed markets shopping online compared with Malaysia, but Chen said more Malaysian consumers have started to join the online shopping bandwagon as they find it convenient.
Royal Selangor has grown from a small family-run business to one of the best-known pewter brands in the world. Complementing its pewter brand are two luxury names — its fine jewellery brand, Selberan and its 350-year-old sterling silver brand, Comyns. Chen said Royal Selangor plans to seize the growth opportunities in both Malaysia and abroad, especially Asia, as it receives good response from these markets. "We have evolved our product range and brand position in recent years so that a 30-year-old can walk into Royal Selangor and find the relevant products to fit his or her lifestyle," he said.
The pewter maker opened two stores in China last year: at the China World Shopping Mall in Beijing and the Hong Kong Plaza in Shanghai. To date, it has 22 department store concessions across 15 cities in China. "We are constantly evaluating new markets and often it requires finding the right partners to work with in each market. The level of investment in each market varies depending on the market entry approach," he said.
Following strong response from Malaysian consumers, Royal Selangor plans to add two new stores in the country by year-end, bringing the total number of outlets to 22. It recently added new stores at Pavilion Kuala Lumpur and Straits Quay, Penang. Royal Selangor, whose products are available in 20 countries, also offers over 500 pewter gifts, wine accessories and tableware online.
(Source: The Sun, 5 September 2011)
‘Royal’ Trophies to add Prestige
Two world-class sporting events – the Shanghai ATP Rolex Masters and Formula One Singtel Singapore Grand Prix – will have Royal Selangor as its official trophy this year. The 126-year-old pewter brand has been commissioned once again to create new, stunning trophies to be lifted by winners of both the events. The Shanghai ATP Rolex Masters trophy takes inspiration from the tournament venue, the Shanghai Qi Zhong Tennis Centre.
The trophy features eight panels that represent the competitive spirit of each player and the twist and turns of the battles on court. Measuring 30cm in height and 15cm in width, the trophy in brilliant finish is mounted on a matte finish nyatoh wood base. When viewed from the top, the trophy outline is similar to the design of the stadium roof that opens and closes like a camera iris.
The exciting Formula 1 Singtel Singapore Grand Prix trophy, meanwhile, features slim panels that represent the different nationalities competing in the race with fair sportsmanship. The entire structure is designed to resemble a high-rise building featuring sporadically arranged panels that create a sense of movement akin to the speed of the race. A long triangular panel in glossy, dramatic red finish is added to the structure to represent the main event sponsor, Singtel.
Royal Selangor Marketing general manager Chen Tien Yue who attended the trophy unveiling ceremonies in Shanghai and Singapore recently said the company’s involvement in these high-profile events enables them to showcase Royal Selangor’s heritage of design and craftsmanship to a global audience. Royal Selangor has also supplied trophies for various prestigious international sporting events including the 16th Commonwealth Games, World Cup Golf, 2009 East Asian Games and the F1 Shanghai Grand Prix. The Formula 1 Singtel Singapore Grand Prix takes place this weekend.
(Source: The Star, 23 September 2011)