MALAYSIA

1 IiMALAYSIAINTERNATIONAL TRADE ANDINDUSTRY REPORT2009 Ministry of International Trade and Industry MalaysiaiiISSN 0128-7524 JUNE 2010 Copyrights ReservedFor sale of copies and further technical information refer to: Senior Director,Strategic Planning Division,Ministry of International Trade and Industry, Malaysia15th Floor, Block 8,Government Offices Complex,Jalan Duta, 50622 Kuala : 603 - 6203 4571 Fax : 603 - 6201 2573 MITI Homepage: : layout and printing services by:Reka Cetak Sdn. 6, Jalan Sri Sarawak 20B Taman Sri Andalas41200 KlangSelangor Darul EhsanTel : 603 - 3324 8272/ 3323 8272 Fax : 603 -3324 4584e-mail : : OF INTERNATIONAL TRADE AND INDUSTRY MALAYSIAFOREWORDThe Malaysian economy faced its toughest challenge in a decade in 2009. The global economic crisis tested the strength and resilience of our economy, particularly the manufacturing and services sectors.

2 As the Malaysian economy is highly dependent on trade, many sectors of the economy had to contend with shrinking global demand. However, MALAYSIA persevered through this difficult period. The Government was steadfast in fulfilling our international trade commitments. MALAYSIA did not retreat into protectionism to shield our economy. Instead, we embarked on a series of bold measures to liberalise the economy, implementing wide-ranging reforms to raise efficiency levels and boost investor confidence. In March, the Government unveiled the New Economic Model to focus efforts on raising income levels and productivity. A far-reaching Government Transformation Programme was also introduced to upgrade public sector delivery. The improvements we made in terms of Government and business efficiency were recently recognised by the IMD World Competitiveness Yearbook 2010 which ranked MALAYSIA among the top 10 most competitive nations in the world for the first time.

3 We aim to further introduce additional measures to ensure that we remain among the most competitive countries in the world. At the international level, we strengthened economic ties with our traditional trade partners and forged new relationships with emerging economies. With the implementation of the ASEAN-India Trade in Goods Agreement, the ASEAN-Australia-New Zealand FTA and the MALAYSIA -New Zealand FTA in 2010, market access for Malaysian products and services will be further enhanced. There remains a lot of work for us to do. The year 2009 ended with MALAYSIA recording total trade of billion, a decrease of from trillion in 2008. For the first quarter of 2010, trade volume recovered strongly, rising from the corresponding period the previous year. Our challenge now is to ensure sustainability of this growth , MALAYSIA approved billion of investments in the manufacturing sector in 2009.

4 This exceeded our annual investment target of billion set in MALAYSIA s Third Industrial Plan. We must continue to increase the level of private investment if we are to achieve our target growth rate of 6% this Ministry of International Trade and Industry will continue to work on measures to expand trade and to raise the level of private investment in the countr y. To fur ther accelerate growth and enhance competitiveness, we will continue to improve the domestic business climate and promote development of dynamic and innovative SMEs and entrepreneurs. We urge the private sector to complement the Government s efforts by putting resources into enhancing the quality of products and services. The Government will do its part to further improve the country s physical and soft infrastructure.

5 In turn, businesses must invest in R&D, undertake effec tive marketing and branding strategies and adopt industry best practices. Ultimately, we want the private sector to lead economic growth in the country. At MITI, we look forward to closer public-private collaboration to achieve our national goals. DATO SRI MUSTAPA MOHAMEDM inister of International Trade and IndustryMalaysiaivvCONTENTSCHAPTER 1world economic, trade and investment developments 1 Overview 1 Global Trade (Merchandise and Services) 1 Regional and Country Performance 2 Outlook 9 CHAPTER 2malaysia s external trade 13 Overview 13 Exports 14 Imports 16 Trade in Services 17 Direction of Trade 17 ASEAN 21 Trade Measures Introduced by MALAYSIA s Trading Partners 27 Outlook 29 CHAPTER 3investments 33 Overview 33 Policy Initiatives to Enhance Investments 33 Investment Agreements 35 Investments in the Manufacturing Sector 35 Projects Approved by Ownership 39 Projects Approved by Location 40 Implementation of Approved Manufacturing Projects 42 Investments in the Services Sector 42 Outlook 47 CHAPTER 4performance of the manufacturing sector 51 Overview 51 Electrical and Electronics Industry 53 Transport Equipment Industry 57 Aerospace Sub-Sector 62 Marine Sub-Sector 63 Petrochemical and Chemical Industry 64 Pharmaceutical Industry 69viMetal Industry 71 Machinery and

6 Equipment Industry 74 Textiles and Apparel Industry 76 Medical Devices Industry 79 Wood and Wood Products Industry 82 Rubber Products Industry 84 Palm Oil Industry 86 Processed Food and Beverages Industry 88 Outlook The Manufacturing Sector 92 development of Standards 92 Initiatives to Promote Information and Communication Technology for Trade Facilitation 95 Developments in the Halal Industry 98 Human Resource and Skills development 101 Research and development (R&D) 104 Branding 106 Automation 106 Utilities 107 Environment 108 CHAPTER 5performance of the services sector 121 Overview 121 Policy Initiatives and Measures in the Services Sector 121 Overall Performance 122 Performance of Selected Services Sub-sectors 123 Outlook 126 CHAPTER 6productivity and competitiveness 129 Overview 129 International Productivity Comparison 130 Productivity Performance of the Services Sector 132 Total Factor Productivity of the Services Sector, 2005-2009 132 Productivity Performance of the Manufacturing Sector 134 Total Factor Productivity of Selected Manufacturing Sub-Sectors.

7 2005-2009 135 Outlook 136 CHAPTER 7development of small and medium enterprises 139 Overview 139 Policy Initiatives in 2009 139 Performance of Financial Assistance Schemes 140 SME development Programmes 142viiInternational Cooperation 149 Outreach Programmes 151 Outlook 152 CHAPTER 8entrepreneur development 159 Overview 159 Policy Initiatives on Entrepreneurial development 159 Entrepreneurship Training Programmes 160 Training Programmes and Services 160 Promotion and Marketing 164 Major Promotion and Marketing Programmes 164 Cooperation Programmes with MALAYSIA Airport Holdings Berhad at LCCT and KLIA 169 Allocation of Bumiputera Special Shares 170 Entrepreneurs Outreach Programme 170 Outlook 171 CHAPTER 9engagement in bilateral free trade agreements 173 Overview 173 Progress in Implementation 173 Concluded and On-going FTA Negotiations 177 Outreach Programmes 178 Outlook 178 CHAPTER 10asean economic cooperation 181 Overview 181 Trade 181 Elimination of Non-Tariff Barriers 185 Investment 185 Services 187 Sectoral Cooperation 188 Regional Linkages with Dialogue Partners 191 Outlook 194 CHAPTER 11developments in the multilateral trading system 199 Overview 199 Developments in the Doha Round 199 Agriculture 200viiiNon-Agriculture Market Access 201 Services 202 Trade Facilitation 203 Special and Differential Treatment 204 Trade-Related Aspects of Intellectual Property Rights 205 Trade and Environment 205 Rules 206 Developments in Dispute Settlement Understanding 207 Implementation Issues under WTO Agreement 209 Accession to the WTO 209 Trade Policy Review 209 Technical Assistance 210 Other Issues 210 Outlook 211 CHAPTER 12developments in regional

8 Groupings 215 Overview 215 Asia Pacific Economic Cooperation 216 Organisation of the Islamic Conference 228 Group of Developing Eight 230 Other Regional Arrangemets 231 Outlook 232ixBOX ARTICLESCHAPTER 1 Box Stimulus Package Projects Implemented by the Ministry of International Trade and Industry (MITI) 11 CHAPTER 2 Box The Rising Importance of Emerging Markets 30 CHAPTER 3 Box Strategies to Enhance Domestic Investments 48 Box Forbes Global CEO Conference 49 CHAPTER 4 Box The Halal Industry Master Plan (HIMP) 110 Box Reach Implementation - MALAYSIA s Perspective 111 Box Policy Review of Iron and Steel Industry and the Implementation of Mandatory Standards on Iron and Steel Products 112 Box Review of National Automotive Policy 113 Box Progress on the Implementation of the Third Industrial Master Plan 114 CHAPTER 5 Box Services Sector Capacity development Fund 127 CHAPTER 6 Box Total Factor Productivity for a High Income Economy 137 CHAPTER 7 Box The Establishment of SME Corp.

9 MALAYSIA 153 Box The Annual SME Integrated Plan of Action 154 Box Impact of the Global Economic and Financial Crisis on SMEs 156 CHAPTER 9 Box MALAYSIA -New Zealand FTA 179 Box MALAYSIA -Japan Automotive Industry Cooperation (MAJAICO) 180 CHAPTER 10 Box 7th Package of the ASEAN Framework Agreement on Services 195 CHAPTER 11 Box 7th WTO Ministerial Conference, Geneva, 30 November 2 December 2009 212 Box Trade Policy Review of MALAYSIA 213 CHAPTER 12 Box APEC Self-Certification of Origin Pathfinder Initiative 233xTABLESCHAPTER 1 Table Leading Exporters and Importers in Merchandise Trade (2009) 2 Table GDP Growth of ASEAN-6 Economies 2 Table Foreign Direct Investment Flows to ASEAN Countries 3 Table Merchandise Trade of the People s Republic of China in 2009 3 Table Overview of the World Economic Outlook Projections 10 CHAPTER 2 Table MALAYSIA s Trade Performance, 2008-2009 13 Table Top Ten Trading Partners 14 Table Exports by Sector 15 Table Top Ten Export Destinations 17 Table Imports by End-Use 18 Table Top 10 Import Sources 19 Table MALAYSIA s Trade with ASEAN 22 Table MALAYSIA s Export to ASEAN under the CEPT Scheme, 2009 23 Table MALAYSIA s Major Exports under the CEPT Scheme, 2009 23 Table MALAYSIA s Trade with the European Union 26 CHAPTER 3 Table Approved Manufacturing Projects 35 Table Approved New and Expansion/Diversification Manufacturing Projects by Industry.

10 2008 and 2009 36 Table Approved Manufacturing Projects by Industry, 2008 and 2009 37 Table Manufacturing Projects Approved with Foreign Participation by Major Source 39 Table Manufacturing Projects Approved by State, 2008 and 2009 41 Table Approved Investments in the Services Sector, 2008 and 2009 43 Table Investments in the Manufacturing Sector, 2005 2009 48 CHAPTER 4 Table Manufacturing Sector Performance, 2009 51 Table Production Indices of Selected Manufacturing Industries, 2008 2009 52 Table Sales of Selected Manufacturing Industries, 2008 2009 52 Table Exports of Manufactured Goods, 2008 2009 53 Table Imports of Manufactured Goods, 2008 2009 54 Table Production Indices of Selected E&E Industry Sub-Sectors, 2008 2009 54 Table Production of Motor Vehicles, 2008 2009 58 Table Capacity Utilisation in the Motor Vehicles, 2008 2009 58 Table ASEAN Motor Vehicles Production, 2008 2009 58 Table Sales of Motor Vehicles, 2008 2009 59 Table ASEAN Motor Vehicles Sales, 2008 2009 59 Table Exports and Imports of Motor Vehicles, 2008 2009 61 Table Motorcycles Production in ASEAN, 2008 2009 61xiTable Sales of Motorcycles, 2008 2009 62 Table Motorcycle Sales in ASEAN, 2008 2009 62 Table Exports of Motorcycles, 2008 2009 62 Table Imports of Motorcycles, 2008 2009 62 Table Production Indices of Selected Petroleum Products including Petrochemicals and Plastic Products Sub-Sector, 2008 2009 64 Table Sales of Selected Petroleum Products including Petrochemicals and Plastic Products Sub-Sector.