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A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

2020 is RM34 billion (USD10.6 billion), In 2009, Malaysia had 4.7 million mix, that Dato’ Jacob D. Sagan sees as a with an average annual growth of 6.9%. planted hectares of palm oil that produced major strength for Malaysia: “We are very A chemical hub for Southeast Asia By 2020, we have also targeted that the over 19 million tons of crude palm oil lucky to have a multi-racial population exports of chemicals will reach RM36.7 and crude palm kernel oil, over 2 million made up of Indians, Chinese and our local This research has been conducted by Clotilde Bonetto Gandolfi, Thomas Willatt, Mark Storry and Vanessa Acuña of Global billion (USD 11.5 billion).” tons of which are used in oleochemical Malaysians, and of course the English Business Reports “Malaysia is successful in attracting manufacturing. Natural rubber production speaking background that we have. One of investments in the chemical industry has led to the country becoming a leading Malaysia’s major pull factors is this large because of the availability of feedstock and manufacturer of rubber products and pool of young, educated and trainable From its beginnings as an agriculture- companies here in Malaysia,” points out also because of the supporting government home to industries that consume large workforce.” based economy, founded on its rich Datuk Jalilah Baba, Director General of Introductıon policy in terms of providing a conductive quantities of synthetic rubber and specialty Infrastructure is another key benefit of resources of natural rubber and palm oil, the Malaysian Industrial Development environment for doing business, providing chemicals. Malaysia that Dato’ Jacob D. Sagan is the 80s and 90s saw a government-driven Authority (MIDA). Since the nation’s establishment as stability and the strong support of MIDA The Chemicals Industries Council of keen to highlight: “The great advantage shift towards manufacturing and industry Her organization can take some of the in ensuring the needs of the investors are a unified state in 1963, Malaysia has Malaysia (CICM) has over 100 members to manufacturers in Malaysia has been in areas such as computers and consumer responsibility for this: “The role of MIDA met,” believes Datuk Jalilah Baba. and promotes co-operation among the nation’s persistent drive to develop developed a strong international electronics. is to provide facilities for investment The areas in which the chemical industry chemical companies and the development and upgrade its infrastructure and, over reputation as a keenly ambitious country. Malaysia is no longer considered as a promotion and approval. Once the projects in Malaysia is especially advanced are of the chemical industry in Malaysia. Sobri the years, this investment has paid off and The country sits at an enviable location at developing economy and has committed are given approval, we follow up on all petrochemicals and oleochemicals, due Ahmad, General Manager of CICM, sees the requirements of the investors so that serious bottlenecks have been avoided,” itself to being acknowledged as a fully to the rich natural resources with which good potential for further development: the centre of Southeast Asia, flanked by they can realize their projects very fast,” he says. Today Malaysia can boast of developed nation. Since 2006, the the nation is blessed. In 2007, oil and “The chemical industry fundamentals for one the world’s most important shipping government has been implementing she continues. gas reserves in Malaysia amounted to having one of the most well developed growth are here. The global chemicals infrastructures among the newly lanes; the Malacca Strait. For centuries “Vision 2020”, a target for reaching fully 20.18 billion barrels equivalent and the market is moving towards the main industrializing countries of Asia. developed nation status by year 2020. This Chemicals – a Malaysian Government estimates that at current markets in China and India, and we are this region has been regarded as a Industries in Malaysia are mainly located involves a series of economic and business production rates Malaysia will be able to well placed to serve these markets.” gateway to Asia for traders and investors anchor industry in the 200 industrial estates or parks, and policies, as Dato’ Jacob D. Sagan, Deputy produce oil for up to 18 years and gas for and has become well established as a Minister for International Trade and Dr. A. Hapiz Abdullah, Chairman of a further 35 years. 18 free industrial zones that have been Chemical Industries Council of Malaysia Malaysian strengths center for global trade. Industry (MITI) explains: “Its aim is to The local agricultural sector is developed throughout the country. The make Malaysia the preferred investment (CICM) and Managing Director of dominated by palm and rubber plantations, Malaysia has a population of over 28 Port Klang Free Zone (PKFZ) is one destination and among the most globally DuPont Malaysia considers the chemical which have led to the nation becoming million and GDP per capita is second example where 1000 acres of land have Building on stability competitive trading nations by 2020.” sector: “One of the anchor industries in a top producer and exporter of natural in Southeast Asia, after Singapore. The been recently allocated, sent conveniently Malaysia is a market oriented economy The nation has already been hugely Malaysia. It forms the building blocks of rubber and palm oil. population is made up of a rich multicultural adjacent to Malaysia’s busiest port. Within that has achieved continued political successful at attracting foreign direct local manufacturing.” stability and is well-known for its pro- investment and in 2010 it ranked in the Malaysia boasts one of the most business government that welcomes IMF’s top ten most competitive economies developed chemical industries of the international investment with liberal and for the first time in the nation’s history. world. The nation exports chemical transparent policies. “We are hosting about 5,000 foreign products worldwide and the sector represents the second largest contributor to manufactured exports. “The chemical industry is one of the leading industries in Malaysia, that, under our industrial master plan from 2006 to 2020, will be developed further,” explains Dato’ Jacob D. Sagan, who demonstrates this with his ministry’s keen ambition for further investment in the sector: “Targeted investment in the chemical industry between 2006 and

Dr. A. Hapiz Abdullah, Chairman of Chemical Industries Council of Malaysia (CICM) and Ybhg Dato’ Ir Dr Johari Basri, Director General of the Department of Occupational Safety Dato’ Jacob D. Sagan, Deputy Minister for and Health (DOSH) at the Responsible Care Awards 2009 International Trade and Industry A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

PKFZ selected industries can operate with impressive growth over the past twenty 2010 is an important year in ASEAN considerable tax incentives. Tan Sri Dato’ years by focusing on supplying the economic integration. AFTA is now fully Dr. James Alfred, Co-Chairman of the local furniture industry, a market highly operational for the ASEAN Six (Brunei, PKFZ Executive Committee says: “We dependent on exports. However, the Indonesia, Malaysia, the Philippines, welcome many aspects of the chemical crisis forced the company to change their Singapore and Thailand). This means sector to join us at PKFZ. It is an excellent strategy: “Our business was totally exposed that 99.1% of products can be traded duty opportunity for exporters to be close to the furniture market and the American free from this year on and that all duties to one of the leading ports of the world crisis cut the sales of furniture by more will be eliminated by 2015 for the whole whilst enjoying the tax free status.” than half. In response, we have diversified ASEAN. New sites, like PKFZ, are fully equipped into other industries over the past two In addition, free trade agreements with infrastructure facilities such as years, such as packaging, cigarettes and are now fully operational between the roads, water supply, telecommunications, the car industry. The crisis initially hit us ASEAN and China and Korea. Further and are continuously being developed Mr. Herbert Dittmar, Managing Director, hard, but now that we are diversified we agreements are in commencement between Bayer Co. Malaysia throughout the country. The government don’t feel the crisis anymore,” founder the ASEAN and India, Australia and New has identified six corridors of development and Managing Director, Lee Seng Thye Zealand. in the country where specialized parks Datuk Jalilah Baba, Director General relates. Tiam Chong Kong, Group Chairman continue to be developed to cater for the of the Malaysian Industrial Development In fact Techbond are now adding of Behn Mayer Chemical Holdings, the needs of specific industries. Authority (MIDA) explains: “I think capacity to their operations and see a Southeast Asian holding company of the ASEAN has learned from its previous bright future: “This year we open the German multi-national, elaborates on the Crisis recovery experience in 97-98 of our regional first Emulsion Polymeric-Isocynate (EPI) opportunities. “Here at Behn Mayer we have operations in a number of ASEAN Last year, no industry or market was totally financial crisis. It made us better prepared factory in Malaysia that will produce 500 to face the global economic crisis. We also tons per month. Our turnover was around countries. The biggest advantage to us insulated against the global financial is that we can expand our operations have the support of the ASEAN region RM30 million in 2009, but we target a crisis and a nation that relies upon exports anywhere in ASEAN without having to where there is good co-operation among turnover of RM60 million within the next for around 80% of gross domestic product worry about tariff barriers.” ASEAN countries.” two years.” was obviously particularly exposed. In Local chemical distributor, World response to the crisis, in March 2009 the Herbert Dittmar, Managing Director, Bayer Co. Malaysia, shares this regional Wide Resins and Chemicals (WWRC), is Malaysian government announced a RM67 ASEAN open trading another company that is benefiting from billion (US$21 billion) stimulus package optimism: “It seems that Asia Pacific has gotten through the global downturn opportunities opportunities associated with Malaysia’s designed to strengthen liquidity in the open trade policies. WWRC is starting a fairly well and we’re quite confident that Malaysia is a founding member of markets and boost consumer confidence new titanium oxide agency for China’s its growth will continue. The source of the Association of Southeast Asian by guaranteeing bank deposits. biggest producer, Dongjia Group. that growth is that more and more of the Nations (ASEAN) and is committed Overall, the economy contracted 1.7% Titanium dioxide, the white pigment, demand is generated domestically as the to unifying the region into a potent for the whole year 2009 as a result of the has strong demand growth in Malaysia. reliance on North American and European international force. With the full realization global economic downturn; far less than The ASEAN-China FTA has opened this consumption is reducing.” of the ASEAN Free Trade Area (AFTA) the first anticipated contraction of 3%. market to Chinese imports. During the crisis, it was often small Malaysia will benefit from a single market The country registered a 10.1% GDP “We are very lucky that we entered into and medium enterprises (SMEs) that with a total population of 567 million, a growth in the first quarter of this year and this agreement at the right time as Dongjia is anticipating a 6 to 7% GDP growth for were impacted the greatest. Techbond, combined GDP of US$1,064 billion and a completed their expansion last year, and 2010. a local adhesives company, had enjoyed total trade of US$1,442 billion. we are very excited about the regional opportunities with this product,” says WWRC Malaysia Managing Director, Teoh Weng Chai. The free-trade agreement with China could, however, be a double edged sword. China’s huge chemical and petrochemical industry dwarfs that of Malaysia and indeed that of any ASEAN member. Critics are concerned that this agreement will lead to a movement of manufacturing facilities to China from ASEAN countries due to the lower costs of labor as well as the critical mass developed there. Paul Harrap, Head of Southeast Asia for Siegwerk, the German ink manufacturer says: “We haven’t seen any large effect on the market yet, but it is too early to say. For multi-nationals like us we feel it will benefit our activities here, but stand alone companies, especially manufacturers, will find it considerably more difficult to compete.” A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

Sobri Ahmad, General Manager, The long term reliability and security exploration and production of oil and gas to Regulatory CICM, agrees with this emphasis on Petrochemicals of gas supply is the most important downstream refining and petrochemicals, the Malaysian chemical sector meeting foundation of the country’s petrochemical and the manufacturing and distribution of Environment international regulations: “We are working The petrochemicals sector in Malaysia industry. Malaysia has the world’s 14th various products. to conform to the regulations imposed by has enjoyed rapid growth, mainly largest natural gas reserves and 23rd The history of Petronas’ diversification A key challenge for the Malaysian countries around the world. These will largest crude oil reserves. These reserves has been closely tied to the government’s attributed to the availability of oil and chemical industry is in the establishment eventually be very useful as they clarify are complemented by partnerships with vision on national development. In 1981 the requirements and will mean that our gas as feedstock at competitive prices. other ASEAN gas producers such as Malaysian government initiated the “Gas of high local regulatory standards and products will be accepted worldwide. It This has been catalyzed by the well- Vietnam, Indonesia and the Malaysia Masterplan” with the idea to expand gas the meeting of international regulation. may be hard but we have to go through Thailand Joint Development Area (JDA). production into the components of gas developed infrastructure, the strong base Malaysia is fully aware of the importance that learning curve,” he says. CICM’s core such as methane, ethane, propane and activities include facilitating compliance of supporting services and the country’s Petronas – Malaysia’s butane. This supported the government’s of creating strong domestic standards in national policy on fuel diversification with regulatory and international standard cost competitiveness. oil and gas steward order to establish a global brand for its requirements such as the UN’s Globally whilst expanding the value chain of rich Harmonized System (GHS) and the EUs Petronas, short for Petroliam Nasional natural gas resources. chemical goods. Mr. Sobri Ahmad, General Manager, ased on these strengths, Malaysia REACH regulation. The association also Berhad, was founded in 1974 and vested The “Gas Masterplan” was followed Chemical Industry Council Malaysia (CICM) now enjoys a vibrant petrochemical IRIM QAS International is Malaysia’s encourages the continuous improvement with the exclusive ownership and control of by the 1993 “Petrochemical Masterplan” Bindustry, dominated by the national the country’s entire oil and gas resources. whereby Petronas was tasked to venture leading certification, testing and of health, safety and environmental oil company, Petronas, but inclusive of Petroleum has been a major driving force inspection body that offers conformity assessment services performance through their own Responsible Care Program further downstream into the petrochemical S many major international players. There in the nation’s economy and Petronas has arena as a continuation of the group’s for commercial purposes and to support government regulatory (RCP). The Malaysian industry feels that they are well prepared are 42 companies in operation producing been entrusted with the responsibility of integration and diversification. It has enforcement. “Our certification helps Malaysian industries enter to achieve REACH compliance, as Dr. Hapiz Abdullah, President petrochemicals with a combined capacity adding value to the nation’s hydrocarbon grown from an initial capacity of just markets where these considerations are a necessity,” explains of CICM and Managing Director of DuPont Malaysia explains: of 12.9 mtpa. Malaysia can now produce resources and moving up the value chain 600,000 tpa of urea in 1985 to become Khalidah Mustafa, Managing Director, SIRIM QAS International. “CICM is working with the government, through MITI, to go and export a wide range of major in steering the nation towards its aim of a globally significant producer in excess She feels that their service is essential in transmitting overseas on campaign to create awareness on the necessary steps for petrochemical products from world becoming a high-income economy. of 10 million tpa production, with a the message that Malaysia is a manufacturer of quality products companies to achieve compliance. Cost is another issue and so class plants that have also significantly Head-quartered in the iconic Petronas broad product range. The company now “What SIRIM QAS International provides is that extra edge we try to assist members in finding ways that they can either contributed towards the development of twin towers, the Petronas Group today has expresses the desire to continue to the to develop the confidence of the buyers overseas. We use pool their resources or find a fair and decent price to proceed local downstream services and processing interests in 31 countries and is engaged in next phase of growth. international standards and methodology to attest to the quality individually.” Sobri Ahmad adds: “The deadline for oleochemical facilities by providing a steady supply of “The Petrochemicals side may not and reliability of Malaysian products and services. We recognize groups is November 2010 and they are all in place. Other sectors a wide spectrum of petroleum activities. provide the volume of other divisions, that confidence in Malaysian exports can only be achieved if have a 2015 deadline for which we still have a lot to do but we are feedstock. Their integrated operations span upstream people are also confident in our own capability.” confident that we will meet that deadline.” Malaysia has also developed its regulatory environment in order to be more attractive to international companies looking to undertake R&D operations. Sumitomo Chemical is a company that places a tremendous emphasis on innovation and Andrew Sutton, Managing Director of Sumitomo Chemical Enviro-Agro Asia Pacific and Head of Environmental Health South & Southeast Asia, believes Malaysia has achieved a high standard of Intellectual Property protection: “We operate a state of the art research facility for the development of tropical, public health related products intended for the global market. Here in Malaysia, we are happy that the intellectual property laws are well controlled and set up to cover and protect fairly.” This regulatory protection combined, with the nation’s cost competitiveness, has led Sumitomo Chemical to expand in both scope and scale: “We began as a testing facility and have grown into a global centre for primary development. We have recently doubled the size of our operations and are looking to invest further,” explains Mr. Sutton.

Sumitomo Chemical’s employee working in the company’s world class technical service laboratories for the insecticide business A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

one holding company. It is believed that Benefiting from says Yusri Yusof, General Manager of and Hi-Essence, have already joined and the listing will generate in excess of clustering Ethylene Malaysia. the park expects the industrial lots to be USD 2 billion. The further integration of the fully taken up by 2015, attracting RM2 Three major petrochemical zones have petrochemical to plastic value chain is being billion worth of investment. been established in peninsular Malaysia; Success through encouraged through the establishment The Kertih Petrochemical Complex two on the east coast, at Kertih in of the Kertih Plastic Park (KPP). Using includes Centralised Utilities Facilities, international Terengganu state and Gebeng in Pahang partnership state; and one in the south, in Pasir attractive tax incentives, the park aims to operated by Petronas, that supplies Gudang, Johor state. Each integrated promote further downstream investments facilities to all of the plants. There is a Since its entrance into the petrochemical complex includes crackers, syngas and and enhance capability in the local port, a warehousing facility, a water supply sector, Petronas has focused on successful aromatics facilities. “Clustering is a major plastics industry by providing technical system, and a railway system linking the partnerships with international companies advantage, especially in the chemical and vocational training to complement the Gebeng complex. There are also centralized that offer experience and expertise in order and petrochemical industry because work of the local educational institutions. tankage and storage facilities available to systematically transfer know-how to they need to use centralized facilities. the local work force without jeopardizing Two companies, Latenfield Pipe Industries through Kertih Terminals, operated as a Clustering also creates a concentration the viability of operations. of skilled manpower in the same area The emphasis has been on working and encourages the establishment of together to benefit from mutual educational institutions to support these understanding to increase production, sales facilities and their investors,” says Datuk and generate more profit. International Jalilah Baba, Director General of MIDA. companies that have worked with Petronas One such example is the Petronas in this field include BASF, BP Chemicals, Petroleum Industry Complex (PPIC) Dow Chemical Company, ExxonMobil, in Kertih, which has so far drawn over Petronas workers inspect part of their world class petrochemical complex in Kertih, Malaysia Idemitsu, Mitsui and Sasol. RM70 billion in investments for both the Mr. Kamarudin describes some of the upstream and downstream developments benefits of this policy: “We learn from but our profits are good and we achieve decided to be at the front end of the value and comprises a total of 41 plants and the partner, understand the market, gain a high return on investment thanks to chain but with some differentiation.” facilities. market intelligence, market trend and over our proximity to demand centers and the Despite the recent emphasis on growing Six gas processing plants supply about the years, the know-how is transferred to efficiency that stems from the group’s the group’s global presence, he also 80% of Malaysia’s power needs through integrated operations,” explains Kamarudin indicates that future investment will be us. In all joint ventures it is important the Peninsular Gas Utilization (PGU) B. Zakaria, SVP Downstream Operations, closer to home: “The focus will be to be to understand each other’s goals and system and provide the feedstock to the Petronas Group. Mr. Kamarudin describes in Malaysia for the time being because needs and to be reasonable in finding a petrochemical complexes in Kertih and the future targets: “Petronas intends to our assets in Malaysia have been very healthy balance and good relationship. Gebeng. The eleven petrochemical plants become a key petrochemical player in productive and risk is manageable here.” We are a national oil company and need within Kertih produce a broad range of the Asia Pacific and a partner of choice. Petronas Group recently announced to localize the benefits of our company’s products that include ammonia/syngas, Being a key player means you have to its intention to list its petrochemical unit success as much as we can whilst staying ethylene, polyethylene, aromatics, vinyl have significant presence and so we on the Malaysian stock exchange, Bursa competitive. We understand that joint chloride monomer, polyvinyl chloride, have to grow. We are not going to be a Malaysia, by the end of this year. All venture companies come here looking olefins, ethylene oxide/glycols, butanol/ chemical company like BASF or Dow, the assets related to the petrochemical for what we can bring to the table as derivatives, acetic acid and low density that are focused on end use chemicals. We sector under the group will be put under partners.” polyethylene for the domestic and export markets. Ethylene Malaysia and Polyethylene Malaysia were two of the earliest plants added to the complex in 1991. The Ethylene plant is a joint venture between Petronas, BP Chemicals and Idemitsu. The Ethylene plant uses ethane feedstock from the onsite gas processing plant to crack 400,000tpa of ethylene that is sold to the Polyethylene and VCM plants in Kertih and the Idemitsu Petrochemical plant in Johor. The Polyethylene plant, a joint venture between Petronas and BP Chemicals, produces several grades of polyethylene resin for domestic and regional plastic fabricators and converters under the “Etilinas” brand. “Operators have to focus not just on their own unit, but on the upstream and downstream units, which creates a pool of people that can optimize the entire value chain. It creates an effective synergy not just between plants, but also among our service providers,” A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

but has now expanded into a diversified exporter. Here we can be close to our Yasuhiko Sasada, Managing Director group that includes a major focus on Plastics local customers and yet well equipped to of Toray Plastics (Malaysia) explains chemical trading and distribution. distribute across the region” says Narumi the global importance of Malaysian Ancom are also currently in discussion Malaysia is one of the largest plastic Hata, Managing Director of Idemitsu operations: “It was our first ABS resins with Petronas to have a fixed supply producers in Asia and is able to produce Malaysia. manufacturing base outside of Japan and of urea to combine with methanol and high-quality products in the plastic Toray Industries, the Japanese chemical has become the largest producer of ABS produce glue for the particle-board market conglomerate, began operations in resins in SE Asia.” in Vietnam, Thailand and Myanmar. “It packaging sector at competitive prices Malaysia in 1992 with a 35,000tpa factory Yule Catto & Co Plc has a large will expand the methanol business for due to the ready supply of feedstock. The of acrylonitrile butadiene styrene (ABS) presence in Malaysia, both through its Petronas, the urea business for Petronas average growth of the plastics industry plastic resin. It has since expanded nearly wholly owned subsidiary Revertex, and and also the exports of Malaysian particle- over the past 10 years has been in the ten times to its present capacity of over joint venture called Synthomer. Revertex board to countries within the region. It 330,000tpa for high quality ABS resin that is very well known in Malaysia as a helps us, it helps Petronas and it helps region of 15% and in 2008, total trade it markets under the brand name Toyolac manufacturer and marketer of natural the nation by expanding the market for for plastic products was RM14.94 billion and exports globally. rubber concentrates that has successfully Mr. Muhtar Hashim, particle-board.” (US$4.68). Executive Director, Petronas has also helped create a thriving Ancom Berhad oil and gas engineering community that alaysian polyvinyl chloride includes both international EPC majors (PVC) demand is roughly and locally developed engineering petrochemical cluster. The 200,000 tons and is dominated specialist firms like Innovative Fluid M company was Malaysia’s first by three domestic producers. One of Processes and Minconsult. In order to and largest integrated producer which, Industrial Resins Malaysia (IRM,) of olefins and polyolefins, and do business with Petronas or its related has a forty year history in the market now controls a market share of companies, these service providers must and a 50,000tpa PVC and 35,000tpa roughly 40% in both Malaysia acquire a special license. downstream compounding capacity. Initially, these licenses were based on and Indonesia. As PVC consumption is traditionally company equity and local participation, focused on the construction sector, their but the conditions have now developed to products have been key to the nation’s Spearheading the include specification on ISO certification development: “We’ve served Malaysia development of and HSE auditing. Sarjit Singh, General well over the last 40 years. The pipes and Manager of Rotary MEC (M) sees this as other businesses cables that have built this country have a positive influence: “This requirement been derived from our products,” recalls Petronas’ Kertih Petrochemical Complex produces a rich and services increases the professionalism of our Dato’ Abd Karim Bin Ahmad Tarmizi, array of petrochemical products One of the main aims of sector and makes us more relevant to do CEO of IRM. Petronas Group, as a national jobs overseas.” Now that the nation is reaching a joint venture between Petronas, Vopak oil company, is in ensuring that the iPerintis is one of the leading ICT service more developed state, Dato’ Abd Karim and Dialog Group. Law Say Huat, Chief nation takes maximum benefit from its providers in Malaysia. It began as Petronas Bin Ahmad Tarmizi is looking for the Executive Officer Kertih Terminals, shared resource. “What comes out of our Group’s in-house e-business support. In next opportunity. “One possible focus sums up the benefits of the relationship: petrochemical plants is a feedstock for 2004, iPerintis was spun off and made for the future is to use PVC to form “Dialog specializes in engineering and an entire downstream chain of industries. fully independent. It won the contract to wood composites without making use of procurement and Vopak is a global tank We pass on semi finished material, which provide all ICT services to Petronas as an timber,” he explains. terminal operator. Each partner brings is developed by other industries until the outsourced contractor. “We’ve become the “We are working on utilizing palm oil different expertise and experience. As final product is distributed to the end user. preferred supplier for IT with the intent of fibers, waste from oil extraction. There a specialized terminal operator our A supply chain of industries has been built reducing cost and ensuring that IT was are millions and millions of tons of that emphasis is very different from a trader, on the foundation of our manufacturing used appropriately across the group. We material being thrown away, being burnt or even a producer. It is our core business sites,” explains Kamarudin B. Zakaria. are run at arm’s length with our own and being used for composting. In another and it makes a huge difference in how the Beyond obvious dependants in the policies and procedures,” explains John terminal is operated.” Miller, Managing Director of iPerintis. year or so, we hope to reach results and plastics sector, the Petronas’ petrochemical market this product across the world.” Kertih Terminals operates over 40 operations have spawned the development Having spun the company off has meant that the company must now compete with The Idemitsu Group was another pioneer tanks, with a total volume of around of a myriad of other services. 400,000 cubic meters. Mr. Law describes other international ICT companies, but Mr. petrochemical investor in Malaysia and “Petronas supplies a range of the extent of its integration with the local Miller believes that they are well equipped partner with Petronas in the Ethylene intermediate petrochemical products. facilities: “Raw materials are brought for that challenge “Petronas is huge and plant in Kertih. In 1994 they built the first People like us have been able to continue in and stored in our tanks before being very complex and we’re managing the polystyrene (PS) plant in the ASEAN that directly fed to the plants. The plants developing our distribution network and IT end to end in that environment. Our today has a capacity of 146,000tpa and a manufacture their finished products, many industries have grown because of credentials are very strong and have the 60% market share in Malaysia. which are then run directly back to the availability of these products,” agrees international accreditation to back that Exports are becoming increasingly our tanks. From there the products are Muhtar Hashim, Executive Director, of up.” Mr. Miller also believes that the important for this company as domestic exported, whether through vessels, tank Ancom Berhad. experience gained within a group such as consumption has contracted due to the trucks, ISO tanks, or drums.” Ancom Berhad is an example of a Petronas has given the company a unique transfer of appliance manufacturing to Titan Chemicals Corp. is the second Malaysian company that is making an insight into the oil sector: “We understand China. “We have a lot of history in this largest petrochemical manufacturer in the increasing impression on the global the business end to end, from upstream market and a long history with Petronas, market that operates ten plants across the stage. The company began as a pioneer to downstream and can talk the same which has given us the experience and south of Malaysia, in the Pasir Gudang manufacturer of agrochemicals in Malaysia language.” expertise to find success as a regional A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

polyurethane or Nitrile This sector was not immune to the global plants and equipment for the oleochemical butadiene rubber (NBR). Oleochemicals financial crisis and demand during 2009 fell industry. The company has over 40 “If you look at all types of by 10-15%. “The palm oil price plunged years experience internationally and has gloves, the growth rate is around Oil palm was first introduced to the and customers did not take delivery of installed over 400 facilities. The regional 10% per year, which is driven Malaysian peninsula by Scotsman William the products they had ordered. Defaulted Managing Director, K. K. Khoo, sees mostly by the health industry Sime and English banker Henry Darby in contracts hit all the players,” Mr. Tan good opportunities for growth in the local demand. NBR is growing at Kean Hua, Chairman of The Malaysian oleochemical sector: “Oleochemicals will a faster rate than any of the 1910. Originating from West Africa, the Oleochemical Manufacturing Group be growing substantially in Malaysia and other types of materials put into plant was commercialized very successfully (MOMG) and Chief Operating Officer of also in Indonesia. Demand is increasing gloves, about 15% per year,” in the Malaysian tropics as an edible IOI Oleochemicals explains. “But we have and people are putting up capacity as there explains Dr. Catlow. recovered quite quickly. During the second is a need for more natural products.” The The world market for NBR oil mostly used in the food industry. It half of last year everything came back to company balances its global operations latex is around 400,000 tons also has a vital role as a raw material for normal and plants are now working at their by concentrating design and R&D at its and growing by 15,000 tons a oleochemicals, which are used in various capacity,” he continues. European base and then undertaking year. Revertex are the number manufacturing industries, including Desmet Ballestra is the world leader in procurement and execution at its local one supplier in the world of the fields of engineering and supply of operations. Mr. Khoo sees this local Dr. Brendan Catlow, Facilities of Industrial Resins Malaysia (IRM), NBR latex and Dr. Catlow has pharmaceuticals, cosmetics and detergents. CEO, Revertex and Synthomer manufacturer of PVC, resins and compounds no intentions of letting that Southeast Asia has become the global hub change: “In January 2007, NBR diversified into manufacturing polymers “The European polymer business for capacity was just over 50,000 tons, today for palm oil production and Malaysia the and resins. Yule Catto remains the most important in it’s over 100,000 tons and we’ve just leading producer and exporter of basic Synthomer Group operates in four terms of size, but it is hampered by the low got approval to add another somewhere oleochemicals in the world. continents with 12 production sites and GDP rates in Europe. This is insufficient between 15,000 and 20,000 tons which provides a portfolio of speciality polymers for Yule Catto’s ambitions and so they will be online in Q1 next year. We’re s the world’s second largest that are unique to the world’s polymer look to us in Asia to provide the major already looking at the feasibility study producer of palm oil, the crop industry. growth,” says Dr. Brendan Catlow, CEO, represents one of Malaysia’s major The Synthomer business was brought to Revertex and Synthomer. for an additional 40,000 tons that we A socio-economic drivers and an important intend to get online by the end of 2012. Malaysia in 2001 and has since invested The primary market for Revertex pillar of the economy. In 2009, the country That would take us to close to three times over RM100 million in a polymerization is dipped rubber gloves, which can be produced 17.5 million tons of palm oil, of plant. produced from natural rubber, PVC, the capacity that we had in 2007.” which around 90% was for export. The total revenue generated from these exports was valued at RM49.6 billion, 7.5% of the country’s GDP. Currently the industry provides employment to about 570,000 Malaysians, including about 30,000 small holders. The Malaysian “big six” palm oil planters are IOI Group, Sime Darby Bhd, Kual Lumpur Kepong Bhd (KLK), Boustead Holdings Bhd, Felda Holdings Bhd and United Plantation Bhd. Together they represent almost 60% of the country’s annual production.

Malaysian oleochemical output The Malaysian oleochemical industry has, since the 80s, expanded rapidly with the granting of incentives by the government. A total of 2.168 million tons of oleochemical products were produced in 2009. The main raw materials used in the manufacture of basic oleochemicals in Malaysia are palm kernel oil, palm stearin, palm kernel fatty acids distillate and crude palm oil. Malaysia accounts for approximately 26% and 13% of the global capacities for fatty acids and fatty alcohols respectively. Almost all oleochemicals produced in Malaysia are exported, which account for 13.2% of the total export revenue of oil palm products per year. The major export markets are the EU, China, US and Japan. A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week presence as crucial to their success: “The The industry is highly vertically At the time, this company was a investors are mainly local here, so you integrated in Malaysia, as nearly all of loss making enterprise, but due to the Interview with Tan Sri Datuk Dr. Yusof Basiron, have to be here to be close to them. To the major plantation owners have seen the advantages of integration, went into have a strong presence locally is a very advantage of downstream operations. “We profit after two years and has shown CEO, Malaysian Palm Oil Council important factor for future development.” went into manufacturing as a form of palm sustained profitability ever since. IOI Could give us some background on Palm oil is suffering from negative Ivo Bols, Vice President and General oil price hedge. When the raw materials go Oleochemicals have since developed Manager, Merchant Gases-Asia for Air up, the plantation side is more profitable. and diversified into a range of basic and the Malaysian Palm Oil Council in perception of its sustainability. Products also sees strong opportunities in When the price of raw material goes down, specialty oleochemicals. It is the leading terms of its main mission and the How would you address those this sector going forward: “The companies the manufacturing operation becomes producer of vegetable oil-based fatty objectives that you are currently concerns? operating in oleochemicals here are more profitable,” explains Mr. AK Yeow, acids, with a 10% global market share. following? mostly from a plantation background that Managing Director, KLK Oleo. According to Dato’ Lee Yeow Chor, it I think that these issues are over- had alliances with international chemical KLK Oleo Group is part of Kuala was by taking advantage of the company’s We are here to help promote the exaggerated and demonize palm companies. They have worked out where Lumpur Kepong Berhad. “We have early entrance into the market that it has palm oil image and facilitate palm oil to an extent. The issue of their niche is and what their added value built on a foundation of being a grower enjoyed such downstream success: “As oil market penetration. We engage deforestation and loss of habitat is very quickly. As a core business it has a and processor of edible oil, and since a pioneer in this business, it has afforded our stakeholders by disseminating is totally unfounded because we stable trajectory due to the diversification adapted to the downstream market. That us the luxury of establishing a reputation market information and working have committed to conserve our of products and customers and the fact understanding of raw material market in the global market early on and the with the industry to find solutions forest. The issue of global warming that the finished products travel well.” mechanisms has been a huge advantage,” flexibility to select the markets which we for any challenges we face. contributed by deforestation says Mr. Yeow. wanted to venture into. In particular, this due to palm oil is not borne by Going downstream IOI Group, are another palm plantation has given us better access to the premium We also work with The Malaysian Palm Oil Board to any scientific facts at all. Palm oil is actually helping to Due to the land bank limitation on palm group that saw the downstream advantage markets in Japan, Korea and Europe.” The circulate and enhance the acceptance of the new mitigate global warming as it provides tree cover and oil, in order for the business to grow in early on. They handle 77 estates with a company is now focusing on growing their technology, information or products that they generate absorbs carbon dioxide. The whole country is a net Malaysia the industry has invested heavily total plantation area of 158,649 hectares. presence in the booming consumption through their R&D programs. sequester of carbon dioxide rather than carbon emitter, in downstream operations. “There needs Dato’ Lee Yeow Chor, Group Executive markets of China and India. unlike most developed countries. to be more processing, more value added Director, IOI Group says: “In the mid IFFCO Malaysia, an Emirates What would you describe as the main strengths that activities undertaken here so that there is nineties the palm oil market was quite headquartered brand manager and higher export value and more income for volatile and so, in order to create a natural distributor of food products and soaps, Malaysia has in terms of producing and exporting How important is the oleochemical industry to the country and the people,” says Datuk hedge, we acquired Palmco, Malaysia’s have also taken downstream integration to palm oil? Malaysian palm oil producers? Jalilah Baba, Director General of MIDA. pioneer oleochemical company.” a new level in Malaysia. Their plant is the Of the total palm oil that Malaysia produces, 90% will Malaysia is one of the leading countries in oleochemicals. be exported. We have been in the business for a long We are currently supplying more than 20% of the world’s time and have a well established industry. People oleochemical raw materials and are becoming a reference have come to trust us and to respect our commitment point and preferred partner for people who want to to supplying good quality palm products. We have a build oleochemical operations. I think the industry is “brand” of Malaysian palm oil that people choose as here to stay and we will enhance its contribution to the their preferred source. I think it is the best there is in the economy, both upstream and downstream, in whatever world of palm oils and fats. Palm oil from Malaysia has way we can. an assured quality backed by law and a quality control system at all levels of production and export. This is We feel that palm oil’s role in developing and supplying the differentiating factor that separates us from other sources. raw materials for the oleochemical industry should continue and become even more prominent in the future. Oleochemicals consume around two million tons Given that the amount of land that can be allocated to of our products each year. plantation is now limited, what do you think is the best way for your industry to grow? We hope to be entrusted to become more dominant We have a few options. We recognize our need to as a raw material supplier because palm is the most balance our land use and land allocation. We have convenient, productive and competitive raw material to pledged to keep at least 50% as permanent forest for meet this new demand. conservation purposes. That is making it less possible for us to be land dependent. Based on our research In Malaysia, you can make use of the world’s best capability I think that we can continue to improve production and processing location, take advantage of productivity, which could double current output our cost competitiveness and easily export the product without really increasing planted areas. to the main consumption markets.

We can also increase vertical integration, and not just Having the expertise and technology involved in the downstream. If land is the formula for success, we production, processing and oleochemical development, can also participate in other countries where they have I’m sure Malaysia will continue to play a dominant role in ample agricultural land for oil palm to be planted. the oleochemical industry. A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week presence as crucial to their success: “The The industry is highly vertically At the time, this company was a investors are mainly local here, so you integrated in Malaysia, as nearly all of loss making enterprise, but due to the Interview with Tan Sri Datuk Dr. Yusof Basiron, have to be here to be close to them. To the major plantation owners have seen the advantages of integration, went into have a strong presence locally is a very advantage of downstream operations. “We profit after two years and has shown CEO, Malaysian Palm Oil Council important factor for future development.” went into manufacturing as a form of palm sustained profitability ever since. IOI Could give us some background on Palm oil is suffering from negative Ivo Bols, Vice President and General oil price hedge. When the raw materials go Oleochemicals have since developed Manager, Merchant Gases-Asia for Air up, the plantation side is more profitable. and diversified into a range of basic and the Malaysian Palm Oil Council in perception of its sustainability. Products also sees strong opportunities in When the price of raw material goes down, specialty oleochemicals. It is the leading terms of its main mission and the How would you address those this sector going forward: “The companies the manufacturing operation becomes producer of vegetable oil-based fatty objectives that you are currently concerns? operating in oleochemicals here are more profitable,” explains Mr. AK Yeow, acids, with a 10% global market share. following? mostly from a plantation background that Managing Director, KLK Oleo. According to Dato’ Lee Yeow Chor, it I think that these issues are over- had alliances with international chemical KLK Oleo Group is part of Kuala was by taking advantage of the company’s We are here to help promote the exaggerated and demonize palm companies. They have worked out where Lumpur Kepong Berhad. “We have early entrance into the market that it has palm oil image and facilitate palm oil to an extent. The issue of their niche is and what their added value built on a foundation of being a grower enjoyed such downstream success: “As oil market penetration. We engage deforestation and loss of habitat is very quickly. As a core business it has a and processor of edible oil, and since a pioneer in this business, it has afforded our stakeholders by disseminating is totally unfounded because we stable trajectory due to the diversification adapted to the downstream market. That us the luxury of establishing a reputation market information and working have committed to conserve our of products and customers and the fact understanding of raw material market in the global market early on and the with the industry to find solutions forest. The issue of global warming that the finished products travel well.” mechanisms has been a huge advantage,” flexibility to select the markets which we for any challenges we face. contributed by deforestation says Mr. Yeow. wanted to venture into. In particular, this due to palm oil is not borne by Going downstream IOI Group, are another palm plantation has given us better access to the premium We also work with The Malaysian Palm Oil Board to any scientific facts at all. Palm oil is actually helping to Due to the land bank limitation on palm group that saw the downstream advantage markets in Japan, Korea and Europe.” The circulate and enhance the acceptance of the new mitigate global warming as it provides tree cover and oil, in order for the business to grow in early on. They handle 77 estates with a company is now focusing on growing their technology, information or products that they generate absorbs carbon dioxide. The whole country is a net Malaysia the industry has invested heavily total plantation area of 158,649 hectares. presence in the booming consumption through their R&D programs. sequester of carbon dioxide rather than carbon emitter, in downstream operations. “There needs Dato’ Lee Yeow Chor, Group Executive markets of China and India. unlike most developed countries. to be more processing, more value added Director, IOI Group says: “In the mid IFFCO Malaysia, an Emirates What would you describe as the main strengths that activities undertaken here so that there is nineties the palm oil market was quite headquartered brand manager and higher export value and more income for volatile and so, in order to create a natural distributor of food products and soaps, Malaysia has in terms of producing and exporting How important is the oleochemical industry to the country and the people,” says Datuk hedge, we acquired Palmco, Malaysia’s have also taken downstream integration to palm oil? Malaysian palm oil producers? Jalilah Baba, Director General of MIDA. pioneer oleochemical company.” a new level in Malaysia. Their plant is the Of the total palm oil that Malaysia produces, 90% will Malaysia is one of the leading countries in oleochemicals. be exported. We have been in the business for a long We are currently supplying more than 20% of the world’s time and have a well established industry. People oleochemical raw materials and are becoming a reference have come to trust us and to respect our commitment point and preferred partner for people who want to to supplying good quality palm products. We have a build oleochemical operations. I think the industry is “brand” of Malaysian palm oil that people choose as here to stay and we will enhance its contribution to the their preferred source. I think it is the best there is in the economy, both upstream and downstream, in whatever world of palm oils and fats. Palm oil from Malaysia has way we can. an assured quality backed by law and a quality control system at all levels of production and export. This is We feel that palm oil’s role in developing and supplying the differentiating factor that separates us from other sources. raw materials for the oleochemical industry should continue and become even more prominent in the future. Oleochemicals consume around two million tons Given that the amount of land that can be allocated to of our products each year. plantation is now limited, what do you think is the best way for your industry to grow? We hope to be entrusted to become more dominant We have a few options. We recognize our need to as a raw material supplier because palm is the most balance our land use and land allocation. We have convenient, productive and competitive raw material to pledged to keep at least 50% as permanent forest for meet this new demand. conservation purposes. That is making it less possible for us to be land dependent. Based on our research In Malaysia, you can make use of the world’s best capability I think that we can continue to improve production and processing location, take advantage of productivity, which could double current output our cost competitiveness and easily export the product without really increasing planted areas. to the main consumption markets.

products that rely upon both for various components,” says Dato’ in Asia it’s natural for plantations to focus more are now working together on nine other joint Lee Yeow Chor of IOI Group. on basic oleochemicals due to the feedstock ventures in Indonesia, China, Africa, Australia, Mr. Tan Kean Hua, Chairman of MOMG explains: “Due to the advantages. Having a strong foundation in basic Turkey and Latin America.” commitment to limiting the land available for palm plantation, oleochemical is very important to grow and Malaysian palm oil output is limited to around 60 mill tons. At create synergies that will make our specialties Challenges present we only go one or two steps down the oleochemical value more competitive. The advantage of specialties Despite the nation’s rich oil and gas resources, chain. We need to be looking at the third or fourth steps down that is that it leaves the company less exposed to the oleochemical industry is facing some chain in order to maximize our resource.” economic and commodity volatility,” Dr. limitations. “The key challenge facing our One company that is bucking this trend is Southern Acids, Kongkrapan continues. “Looking at our five members in the desire to move downstream is one of the earliest investors in oleochemical production. Group year plan, we want to at least double our natural gas supply. Guaranteed medium to long General Manager Leong Kian Ming, a relative new comer to the business and be considered the number one term gas supply is essential to produce more oleochemicals scene, brought in to re-invigorate the company, oleochemical company in the world. This is downstream chemicals, but getting extra supply states: “Basic oleochemicals are our core strength. That’s what quite an ambitious plan that includes growth of both the basic oleochemicals and specialties. for manufacturing expansion or downstream we do best and that’s what we will keep doing”. When questioned The benchmark has to be very clear. It is not development is very difficult,” Mr. Tan Kean on how the company will grow, if not down-steam, he robustly just size or revenue that matters, but how we Hua, Chairman of MOMG explains. Mr. GC responds: “I’m very confident when I say India and China will be are perceived by the customer and the market. Mr. GC Tan, Managing Director of Tan of Pacific Oleochemicals concurs: “Energy core areas of growth in the future. If we look at the key driver of Pacific Oleochemicals If customers have the choice they must to prefer is the most important variable cost after raw the oleo-chemical industry, demand from the end user which is to business with us,” insists Dr. Kongkrapan. material. The domestic industry uses only 12% growing and growing in these two countries.” Another example of international partnership between a of the total gas produced in Malaysia, whilst the majority goes to plantation major and more downstream specialist is Felda IFFCO. Independent Power Producers or is assigned to long term export Shift of power to the ASEAN This is a joint venture between Felda, the government’s agricultural contracts. We hope that the renewal contracts with IPPs and other The global oleochemical market used to be dominated by prominent development body, and IFCCO, the aforementioned Middle nations can be amended so that more gas can be committed to western producers of basic oleochemicals. The fast development Eastern food company that brings technological and marketing industrial growth here.” Despite these challenges, Mr. Tan Kean of oleochemicals production capacity in ASEAN, with its strong capabilities. Ras Manikkam, Regional Managing Director – Asia Hua, Chairman of MOMG, has optimism for the future: “We are raw material integration, has caused a drastic reorganization in the Pacific, of Felda IFFCO Asia Pacific explains how the relationship poised for growth. The palm oil and oleochemical sectors are global oleochemicals scenario. began with a palm oil distillery in Port Klang: “We took a loss extremely important in terms of the Malaysian growth strategy. Pacific Oleochemicals was established in 1980 and was among making operation into profit within twelve months and, after It’s a renewable resource that is in line with global warming the sector’s pioneers. From 1987 the company was operated running that for two years, it gave the JV partners confidence that concerns. It’s such a beautiful raw material we have. It’s really the as a joint venture between Akzo Nobel and Lam Soon Group, we can do better and expand this model into other markets. We golden oil for Malaysia and we need to support this industry.’ until Akzo Nobel divested in 2006. “We enjoyed 20 good years with Akzo Nobel and gained a lot from the international culture only facility that has the capacity to take in a vegetable oil and they instilled. The benefit is now that we operate like an MNC, take out 2,500 tons per month of fully packaged and branded soap such as incorporating their systems like HSE. Since the Akzo bars. “It is a fully integrated oleochemical and soap plant. We Nobel divestment we have made impressive growth in our integrated to get control of raw material and quality,” explains customer base,” says Mr. GC Tan, Managing Director of Pacific Manish Bhoopal, General Manager, IFFCO Malaysia. Oleochemicals. The majority of soap bars from this facility are exported across The company is situated in the south of Malaysia, and Mr. Tan the world. Mr. Bhoopal states that Malaysia was chosen for this feels it to be an excellent location to undertake oleochemical facility because of the proximity of raw material and the fact that manufacturing: “For the past ten years, whenever we have it is an international transport hub. considered expansion we have analyzed other locations, including The food industry also represents a downstream opportunity Indonesia and China. But, after completing evaluation we have for local manufacturers. Danisco is a world leader in food always decided it best to add to the existing operations. In this ingredients, enzymes and bio-based solutions with a long history way we can capitalize on the human resource that we have of sourcing palm oil from Malaysia where they also manufacture developed here as well as the proximity to our raw materials. We a large variety of products that are exported globally. “Malaysia are served by three ports, if you include Singapore, the closest is a strategically important site for Danisco. Our competitors being just five minutes away.” are here and oleochemical based ingredient manufacturing in The oleochemical sector has presented opportunities for private Malaysia is definitely growing,” says Tim Kirk, Global Supply sector intra-regional collaboration in the ASEAN. Although Chain Director, Danisco Malaysia. global in its operations, Emery Oleochemicals takes pride from Although 95% of products manufactured are exported globally, its regional ownership. It is a 50/50 joint venture between PTT Mr. Kirk finds the country an excellent location to undertake Chemicals, a subsidiary of the Thai state-owned petroleum operations. “We’ve been able to make this site offer everything. firm PTT Plc., and Sime Darby Bhd, a Malaysian conglomerate We are both cost competitive and versatile,” he says “It’s close and plantation giant. “PTT Chemical is strong in downstream to raw material, has a good labor source and you find people here chemicals and Sime Darby are the number one palm producer that know what they are talking about. We’ve been here 19 years in the world. Where it intersects is the natural based chemicals. and have built the culture that our company requires. On paper it Both parents have clearly stated that they want to grow their couldn’t make more sense as a manufacturing base.” natural based chemical business through Emery,” explains Dr. There is also the opportunity to utilize the available range of Kongkrapan Intarajang, CEO, Emery Oleochemicals. petrochemical products for the manufacture of higher value- Emery Oleochemicals consider their Malaysian manufacturing added products such as surfactants and washing preparations. base as key to remaining globally competitive. Production is “The idea is to establish a green chemical hub, where Malaysia’s spread fairly evenly between production sites in Malaysia, USA petrochemical and oleochemical resources can combine to create and Europe. “In Europe and the US we focus on specialties, whilst A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

other principals to make the most of our countries to develop the business because want to develop a product for the future, Specialty infrastructure advantages. BAB can offer Distribution we are a successful business with them in the first people that they call is us because broader solutions and more integrated Europe or even in the US.” Henri Nejade we have that strong relationship.” chemicals solutions of non-conflicting products. It’s Many local and international companies explains. Mr. Khoo sees the greatest opportunities a unique situation and extends the product compete for the opportunity to distribute Local players in this market emphasize for his company via growth in portfolio,” says Herbert Dittmar, Managing the advantage of their in depth know- partnership with fellow Malaysian SMEs: The demand growth for chemicals, Director, Bayer Co. Malaysia. specialty chemicals within Malaysia and how of not only the infrastructural and “International principles depend on us as both commodity grade and specialty, in Koid Boon Han, Head of BAB across the region. The market is served by transport links, but also the Malaysian a lot of SMEs are coming up fast and so Malaysia is evidenced not only by the Malaysia explains the broad markets that a range of international names including business mindset and trading culture. principles rely on our in-depth knowledge they cover: “Electronics is the number Worldwide Resins & Chemicals Sdn Bhd of the local industry developments.” investment in manufacturing operations, one export for Malaysia and represents Brenntag, Connell Brothers (CBC) and is a distribution company with a focus on A further opportunity for distributors is but also by the existence of sophisticated close to 50% of our market segment. Our DKSH and a larger local community specialty chemicals that began operations the reputation that Malaysia is developing marketing networks of both local second biggest segment is automotive. that includes Bayderm, EAC Industrial in Malaysia in 1991 as an extension of the as a trans-shipment hub for both specialty experts and major international players. Malaysia is actually a bigger automotive Ingredients, Suka, Rica Marketing WWRC Group in Singapore. The group and commodity chemicals. Singapore has Mr. Teoh Weng Chai, Executive Director of consumption base than Indonesia and takes great pride in its Asian roots and traditionally dominated this service, but The numerous international and local Worldwide Resins & Chemicals (WWRC) Thailand. However, our business also and World Wide Resins and Chemicals coverage across the region. Teoh Weng many players see the potential for south companies that operate in this field see covers everything from construction to (WWRC). Chai, Executive Director of Worldwide Malaysia to capitalize upon the limited various opportunities and have applied a range of strategies water treatment to petrochemicals.” Resins & Chemicals highlight’s the land area that Singapore can dedicate in order to take greatest advantage and provide the optimum Merck, a global leader that traditionally occupies niche markets renntag AG, the global market leader advantages that the group takes from its to this industry. Vopak, the terminal and focused on highly innovative products as a technology in full-line chemical distribution, is local origin and regional presence: “We are operation specialist, acquired the 17 bank service to customers. leader, established a small operation for selling and distributing Baggressively growing its presence the only local group or local company that Pasir Gudang terminal which sits at the their products in 1989. Now, 230 employees distribute the entire in this region. Henri Nejade, CEO of has a complete presence in Southeast Asia southern tip of Peninsular Malaysia. ayer Co. is well known internationally as a leading provider product portfolio of Merck, including pharmaceuticals, consumer Brenntag’s Asia Pacific Operations and greater China. We are local and we Surizan Khalil, General Manager, Vopak of chemicals and pharmaceuticals. All the company’s healthcare and chemicals. outlines the market: “Global distribution know the Asian culture of doing business” Terminals Pasir Gudang is realistic about Boperational subgroups (material science, health care and crop Justus Krause-Harder, Managing Director, Merck Malaysia in the world today is US$110 billion. Suka Chemicals Sdn Bhd was formed the challenge that they face in establishing science) are marketed in Malaysia, but here Bayer MaterialScience sees an increase in chemical demand in two areas. “One area is Brenntag are the number one by far and we in 1990 and grew by expanding with the this industry and yet optimistic about the is represented through the Bayer Agency Business (BAB). In this anything to do with quality control within regulated industries, have only 7% of the global market. Asia range of industries that they serve; which opportunity this represents: “In certain way, Bayer used Malaysia as a test ground for a new business might it be pharmaceutical industry or food and beverage. We Pacific today is close to US$32 billion, now includes coatings, plastics, food, ways, we cannot compete with Singapore model for the company. “The underlying strategic intent behind supply to these customers to enable them to do a thorough quality nearly 30% of the market, which is huge pharmaceuticals and rubber. Mr. Khoo in terms of some efficiency and the BAB was to create a one-stop-shop trading platform. At the testing and analysis up to international regulatory standards. but still very fragmented and local. We Heng Ah, Managing Director of Suka advantage of being well known. But we beginning it was very much Bayer focused and then opened to This is an area that is increasing as Malaysia develops as an believe there’s a need to consolidate the Chemicals points out: “Many of these want to take advantage of what we can exporting nation that needs to adhere to international rules and market quickly to respond to the market industries are less known internationally offer, such as the competitiveness of our regulations,” Mr. Krause-Harder explains. and the suppliers’ needs, and so that we and so major chemical producers in EU or ports rate and storage rate which we can In this field Mr. Krause-Harder sees particular opportunities can develop an effective business model US are not so familiar with their needs.” offer to customers. At the same time, it in the local pharmaceutical industry, particularly in acting for global key accounts.” Through relationship building and a takes some time for it to be noted that we as a supplier to local pharmaceutical manufacturers. Although they are relatively new to this strong knowledge of the products that can provide a service equal to Singapore. “Pharmaceuticals need to do quality testing, quality control, market, Brenntag leverage on the fact that they market, Mr. Khoo sees a strong future But we are not only competing with analysis and additionally require raw materials and ingredients their name is well known globally: “Our for Suka Chemicals: “We focus on our Singapore but also complementing what for the production of pharmaceuticals,” he explains. Another suppliers ask us to be present in different customers and if they have any problem or they have.” growth area highlighted by Merck is on the research side. “In bioresearch, we see funds being allocated by the government to establish local research and we are supporting that through our activities. We support such initiatives from the government to foster a broader base of local homegrown researchers and world- class research in this country,” Mr. Krause-Harder adds. Chemical Company of Malaysia Sdn (CCM) is a holding company principally engaged in the manufacture and marketing of fertilizers, chlor-alkili products and pharmaceutical and healthcare products. Trading is also a major part of their chemical business, CCM Chemicals, which covers a large spectrum of segments. “It is split into performance specialty chemical business and the industrial chemical business. The performance specialty chemical business covers electronic, biocide, polyurethane and quite a few other sections,” explains Nazmi bin Sallehhudin, Director, CCM Chemicals. CCM Chemicals is now keen to take its local expertise to a regional and then global level according to Nazmi bin Sallehhudin: “We know that we need to go global and one of the ways to be effective in the market is to be a regional operating unit instead of purely Malaysia focused. It benefits us in many ways. As Southeast Asia grows, we grow and we can learn at the same time.” A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

a true understanding of your products and Rubber gloves production processes.” Mr. Lim Kuang Sia also sees the One of Malaysia’s key natural resources value in investing in quality chemical that lends itself to chemical demand is products for his process: “For some people, the first consideration is the price in the manufacturing of rubber products, of a chemical. I look at what benefits a such as gloves. Despite no longer being chemical can bring to my company and the world’s top exporter of natural how it can create value. We don’t believe rubber, Malaysia has maintained its in jumping between suppliers all the time to achieve slight price benefits. We want status as the number one rubber glove our customers to consider us an anchor manufacturer. During the financial supplier. This is key to achieving an edge over my competitors,” he says. crisis, this sector proved itself resilient as Mr. Wong Siew Yap, Managing Director, demand for rubber gloves grew steadily John Arrol, Managing Director of MOX-Linde Gases and Chairman, Malaysian Dato Lim Kuang Sia, CEO and Managing Connell Brothers Malaysia, the Pacific Industrial Gas Manufacturers Association in 2008/2009. This represents a huge Director of Kossan Rubber Industries Rim distribution specialist, sees great (MIGMA) opportunity for chemical producers and potential in rubber gloves: “Last year distributors in coatings, pigments and his company has achieved a compound was good for rubber gloves. Whilst many industries were reeling, surgical and other associated needs. growth of 30%. He attributes a large inspection gloves grew by 5-10% and we Industrial gas part of that success to his chemical are expecting a similar growth again this background and the importance that he As the Malaysian economy has developed ne of the leaders and pioneers of year.” from an agricultural base to its current more Malaysia’s rubber glove industry places on the chemical advancement of This industry has huge potential for industrialized state, it has attracted many high tech Ois Lim Kuang Sia, the founder and the company: “The chemicals that we use specialty chemical demand. “We supply CEO of Kossan Industries. manufacturing industries that continue to demand and our understanding of them are very raw materials into their industry and work Regarded as one of Malaysia’s most quality industrial gas products. Industries such as important to the success of our business. with our suppliers to reformulate and keep successful entrepreneurs, he established electronics, silicon wafers and solar cells require If you are able to explain each chemical improving and optimizing the use of their his company in 1979 and since 2002 more consistently purified and mixed gases for their process and why it happens, you can gain materials,” Arrol continues. production and fabrication processes.

he Malaysian industrial gas sector has recently become Tincreasingly competitive as the major international players and local competitors vie for market share. This market had been traditionally dominated by a sole player. MOL (Malaysian Oxygen Limited, a BOC company) was incorporated in 1960 and merged with an Air Liquide company to become MOX in 1979. In 2007, this partnership was broken up as the company was successfully acquired by the Linde Group. “We are currently celebrating the 50th year of incorporation. MOX Linde is very proud success story for Linde Group, but we Hwa, Managing Director of Air Liquide of the fact that the company has been the will continue to transform ourselves Malaysia. market leader from the very beginning into a better organization. Despite our “Our first significant contract is with and has grown with the development of market share, we acknowledge and Petronas for a large oxygen facility. the country and its industries,” explains respect the competition here and cannot As an anchor customer, that gives us a Wong Siew Yap, Managing Director, be complacent. We continue to invest in golden opportunity to establish a base MOX-Linde Gases as well as the facilities that not only cater for future in Malaysia.” Having just reentered the Chairman of the Malaysian Industrial Gas expansion but that also enhances the market in 2007, Soh Tong Hwa is keen Manufacturers Association (MIGMA) robustness of our whole supply stream.” to quickly establish a reputation as a “We consider ourselves as having Since divesting from MOX, Air “very strong player in the market”. the most robust supply and service Liquide is now fully focused on Air Products entered this market reliability in the country as a result reentering this market under their in 1988 through a local joint venture, of the infrastructure and continuing own banner. “Following the split, Air which they took full control of in 2007. investments built up over the last 50 Liquide knew that they had to come back Today they hold the number two position years,” Wong Siew Yap continues. into this market due to the growth rates for industrial gases with a 22% market “The takeover has been a great of industrial gas,” explains Soh Tong share. A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

Ivo Bols, VP Merchant Gases Asia to see a company or a team representing all opportunities: “It is a market driven by and Regional Executive, Air Products Paints the things that they want. We’re working consumer demand and the improvements has no illusion about the challenge that together with all of our Akzo Nobel that people are making to their lifestyles. the company faces: “Air Products are The decorative paint market is worth colleagues, giving a one-face and one-team As the population in and around Malaysia relatively new to this market, but we’ve RM1.1 billion and is a sector where approach to developers and customers.” move to higher income levels, we see got a good track record as an entering Nippon Paint operates four continued demand growth”. challenger. Our advantage has been that international players compete furiously manufacturing plants in Malaysia that Peder Bohlin, Jotun Malaysia we have started and grown with a local for the Malaysian consumer. You cannot collectively produce 84 million liters. Managing Director and Regional Director partner. We target strong market shares drive very far down Malaysia’s highways It plans next year to invest about RM40 for Southeast Asia Jotun, also sees great potential in this market: “There is a in the growth segments of the market. million for extension work at its Shah without being exposed to a billboard correlation between GDP growth and For example, we are well known as Alam plant. Yaw Seng Heng, Managing a preferred hydrogen supplier, which from one of the major manufacturers. The paint consumption. In Singapore paint Director of Nippon Paint Malaysia predicts consumption per capita is around US$15, is used in the domestic oleochemical country has 35 listed paint manufacturers, 6-7% p.a. growth in the market and plans while in Malaysia is US$5, and so based industry.” many of them subsidiaries or regional to maintain their position. “Innovation is on the continued economic development A local player in this industry is BIG here we see great upside.” Industrial Gas Sdn Bhd, which has 28 offices of multinational companies. key in this market as the consumer is very Jotun Group plan to make Malaysia years in operation and is Sarawak’s selective, which causes the industry to the regional manufacturing hub for its CI Paints Malaysia was formed in continuously launch new products in line largest supplier of industrial gas. advanced product lines. The company 1959, and became a part of AkzoNobel with the consumer’s environmental and Philip Yong, General Manager, BIG has decided to replace its Singaporean during the acquisition of ICI Paints in quality requirements.” Industrial Gas Sdn Bhd. explains their I manufacturing operations with a service 2008. AkzoNobel is the world’s largest As paint products increase in niche in the market: “The large MNCs centre and build a new 40 million liter paint and coatings company, but lacked complexity, the need for high quality that operate here are not focused on the manufacturing plant in Malaysia, to be a presence in Malaysia before this chemical ingredients also becomes more small companies that only require small opened in March 2011, and combine with acquisition. Jeremy Rowe, Managing important. “We mainly source our raw volumes. We take pride in supporting the current 50 million liter Malaysian Director Southeast Asia & Pacific (SEAP) materials from a range of international up and coming local enterprises so that facility to supply both the Singaporean for AkzoNobel Decorative Paints says: suppliers such as BASF, Bayer and Dow. they can grow, particularly in high-tech and Malaysian markets. Due to our long history in this industry industries where we can also supply “Malaysia has always been at the heart of we have built excellent relationships innovative products such as mixed, Kertih Terminals, operated in joint venture between Petronas, Vopak and Dialog Group, plays ICI’s business. With the integration of ICI a key role on the complex’s logistical efficiency with these companies that allow us an specialty or purified gases.” and AkzoNobel, our Malaysian operations Questions or comments regarding can leverage off the global capabilities of advantage in developing new products,” this report should be directed to: being the world’s biggest. We can draw Yaw Seng Heng explains. Clotilde Bonetto Gandolfi from resources around the world.” One key raw material in paint [email protected] This view is shared by Goh Cheok production is the pigment titanium Thomas Willatt Weng, Managing Director of ICI Paints dioxide. All of the world’s major titanium [email protected] (Malaysia): “Overnight we became a dioxide manufacturers have operations in Mark Storry much larger organization with a lot of best the region, but the nation’s only domestic [email protected] practices that we can leverage on and that facility is operated by Huntsman. Daryl Vanessa Acuña really helps a lot because customers today Wood, Commercial Director, Huntsman [email protected] want a one-stop-center. They would prefer Pigments, Asia Pacific, sees long term A Global Business Reports Publication, presented with Chemical Week A Global Business Reports Publication, presented with Chemical Week

that gives me a lot of confidence and the Tan Sri Dato’ Dr. James Alfred, Conclusion ability to recommend Malaysia for further Co-Chairman of the PKFZ Executive investment,” he continues. Committee and Chairman of Federation The Malaysian chemical industry boasts “Malaysia is at an interesting moment of Malaysian Manufacturers, Selangor world-renowned petrochemical and and it is in a great position to supply China Branch, agrees that the country is on the and the Asian countries that represent right path and encourages the government oleochemical industries. As we have seen, future growth. Compared to where it was to remain open to foreign investors: “We the country has built upon its natural ten years ago, there has been an incredible must become market-driven in order change. There’s been a huge focus on to sustain our growth and clean up any resources and strategic trading location inefficiency that exists in the public and to develop industries that will support quality and compliance and it’s been right across all industries. I’m very optimistic private sectors. This way, I think we will its population in their drive towards high about the future here. The Government be recognized as a developed nation even before 2020.” income lifestyles. has created a good platform for local companies and MNCs. That platform will any overseas investors see encourage Malaysia to become a strong GBR would like to thank: further potential for this market base for manufacturing and export across Mbased on the favorable economic the world,” agrees John Arrol, Managing Ministry of International Trade and developments in the region and the demand Director of Connell Brothers Malaysia. Industry growth linked with continued income gains As competition in petrochemicals grows Chemical Industries Council of among the domestic population. from the Middle East and Malaysia’s Malaysia “With the new economic policy, the ASEAN neighbors become more advanced government has recognized their shortfalls in their oleochemical operations, Malaysia Federation of Malaysian and very much owned up to any problems,” must focus on its strengths to retain its Manufacturers explains Herbert Dittmar, Managing competitive advantages. Despite these Malaysian Industrial Development Director, Bayer Co. “Everything is not challenges, it is clear that the Malaysian Agency perfect in Malaysia, but the important market offers abundant opportunities thing is that the Government is open. in a variety of avenues for chemical Malaysian Palm Oil Council They are addressing their issues head- manufacturers, distributors and service Petronas on and, from a corporate point of view, providers.