Agriculture, Food & Beverage Sector Profile - Kuala Lumpur, Malaysia

May 2010

Contact:
Mr. John Nojey
Trade Commissioner
Kuala Lumpur, Malaysia


1. Sector Overview

Since 2005, Canadian agricultural exports to Malaysia have experienced an upward growth trend, from $66.9 million in 2005 to $119.7 million in 2009. During this period, exports experienced significant fluctuation reaching a peak of $248.8 million in 2008, largely due to high prices for grains and oilseeds.  Imports from Malaysia have also experienced significant increases since 2005, resulting in a slight trade deficit for Canada in 2009.  Since 2005, Canadian-Malaysian agri-food trade is up 182%, from $142.2 million to $258.7 million in 2009.

However, year over year agri-food exports, from 2008 to 2009, have experienced a dramatic 51.9% decline, partially due to a collapse in prices for bulk commodities.  Quantity exported has also fallen for some commodities including non-durum wheat and meslin(-70.2%), and canola (-68.7%).  Soybean exports have been relatively stable with a 4.1% increase in quantity helping to offset a 6.3% average price decline. 

Of Canada's total agri-food exports to Malaysia, Soybeans account for the largest share of exports at 47.3%.  Wheat and meslin, which in 2008 was Canada's most valuable agri-food export now accounts for just 29.1% of the total.  Vegetables, canola oil, and frozen fish accounted for 3.7%, 3.5%, and 3.3% respectively in 2009.

Agricultural Exports - Million ($CAD)
  2005 2006 2007 2008 2009
1201 Soybeans 26.4 51.9 37.2 58.1 56.7
1001 Wheat and Meslin 14.4 46.5 58.3 116.7 34.8
2004 Vegetables Nesoi, Prepared or Frozen 1.7 2.1 3.9 3.5 4.5
1514 Rapeseed, Colza or Mustard Oil 13.5 18.6 12.2 29.8 4.2
0303 Fish, Frozen 0.1 0.1 0.0 0.8 4.0

Canadian agri-food imports increased slightly in 2009 to $140.0 million from $126.9 million in 2006. Palm oil imports, which increased 102.86% from 2008, was Canada's largest import from Malaysia and is responsible for much of the growth in overall agri-food imports.  Other oils including vegetable, palm kernel, and coconut oil were also significant imports from Malaysia. Cocoa products remained important, constituting 10.8% of total agri-food imports.  Refined cocoa products such as butter, fat, and oil increased 9.6% from $11.0 million in 2008, to $12.0 million in 2009.

The Food Processing Industry

The Malaysian food processing industry is fragmented and largely dominated by small to medium companies with many family-owned. A small percentage of which are large companies such as Hwa Thai, Yeo Hiap Seng, and Nestle.

Although exports have improved greatly in recent years, Malaysia remains a net importer of processed food. The key problems faced by the industry include shortage of raw materials, lack of technology and limited research and development. As of 2008, the food processing sector accounts for about 10% of Malaysia's manufacturing output with products exported to over 200 countries.

Cocoa processing remains an important sub-sector within the food processing industry.  Malaysia is currently the 5th largest producer of processed cocoa in the world, and the largest processer in Asia.  While Malaysia remains an important site for cocoa processing, the country is a net importer of raw cocoa. 

The demand for health foods, minimally processed fresh foods and organic foods is expected to increase. Malaysia is moving towards organic farming. Besides organic products, health foods include low caloric, fibre/nutrient enriched products, fruits juices and herbal products. A value-added palm oil-based specialty product to cater to demand from health conscious and vegetarian consumers is also a potential for further development in Malaysia.

There is an increasing trend towards the production of convenience foods and manufacturers are introducing new convenience foods with Asian recipes to meet the additional interest in ethnic foods in the chilled and frozen form including pre-cooked as well as retort pouch products.

Food flavours and seasonings, sweeteners and palm oil-based additives are some of the products providing vast potential for further development in food ingredients sub-sector.

Recognised as a modern Islamic country, Malaysia has the added advantage of becoming an important base for the production of halal food (food suitable for Muslim consumption).

Major food products manufacturers in Malaysia:

Hup Seng Perusahaan Makanan (M) Sdn Bhd
Address : 14, Jalan Kilang,
Kawasan Perindustrian Tongkang Pecah,
83010 Batu Pahat,
Johor, Malaysia.
Tel: 607-4151211
Fax: 607-4151777
Email : hupseng@tm.net.my
http://www.hupseng.com

Hwa Tai Industries Berhad
No. 8, Jalan 1/1,
Taman Industri Selesa Jaya,
43300 Balakong,
Selangor Darul Ehsan,
Malaysia.
Tel: +603 8961 0900
Fax: +603 8961 1501
Email: morgantay@hwatai.com.my or enquiry@hwatai.com.my
Website: www.hwatai.com

Mamee Double-Decker (MDD) Food Specialities Sdn Bhd
Lot 2, Jalan P / 9B, Seksyen 13,
Kawasan Perindustrian Bangi, 43650 Bandar Baru Bangi,
Selangor, Malaysia
Tel 603 - 8925 5266
Fax 603 - 8925 7266
www.mamee.com

Oriental Food Industries Sdn Bhd
Plot 93, 96A & 96B, Jalan Usaha 7,
Ayer Keroh Industrial Estate,
75450 Melaka, Malaysia
Tel: +6062310333
Fax: +6062322066
Email : ofi@tm.net.my
www.orientalfoodind.com

Perfect Food Manufacturing (M) Sdn. Bhd.
AG 6876, Alor Gajah Industrial Estate
78000 Alor Gajah, Melaka
Malaysia
Tel: (06) 556 1401
Fax: (06) 556 2476
Email : pfm@tm.net.my
Website: www.perfect.food.com

Yee Lee Corporation Bhd.
Address : Lot 85 Jalan Portland,
Tasek Industrial Estate,
31400 Ipoh,
Perak Darul Ridzuan,
Malaysia.
Telephone : 605 - 291 1055
Fax: 605 - 291 9962
Email : info@yeelee.com.my
Website: www.yeelee.com.my

Yeo Hiap Seng (M) Bhd
7, Jalan Tandang
Petaling Jaya, Selangor
Malaysia 46050
Fax: +60 3 7781 3509
Phone: +60 3 7787 3888
Website: www.yeos.com.my

Major foreign manufacturers in Malaysia:

Nestlé (Malaysia) Berhad
Nestlé House
4, Lorong Persiaran Barat
46200 Petaling Jaya
Selangor, Malaysia.
Tel: +603-7965 6000
Fax: +603-7965 6767
Nestlé Consumer Services Free Phone : 1-800-88-3433
Website: www.nestle.com.my/

Campbell Soup Southeast Asia Sdn Bhd
Lrg Kilang A, Off Jalan Kilang
46050 Petaling Jaya,
Selangor, Malaysia
Tel: 03-7787 6288
Website: www.campbellsoup.com.my

F&NCC Beverages Sdn Bhd
No 1. Jalan Bukit Belimbing
26/38 Persiaran Kuala Selangor, Seksyen 26
Shah Alam, Selangor
Malaysia 40400
Fax: +60 3 5192 4003
Phone: +60 3 5101 4230
Website: www.fn.com.my/

Dutch Lady Milk Industries Berhad
P.O. Box 122,
46710 Petaling Jaya,
Selangor
Malaysia
Website: www.dutchlady.com.my

Carlsberg Marketing Sdn Bhd
No 55, Persiaran Selangor, Section 15,
40200 Shah Alam, Selangor,
P.O. Box 10617, 50720 Kuala Lumpur, Malaysia
Tel: 03-55226688 Fax: 03-55191931
Email: enquiry@carlsberg.com.my
Website: www.carlsberg.com.my


2. Market and Sector Challenges (Strengths and Weaknesses)

Competitors

As an APEC and ASEAN member, Malaysia relies heavily on its many association partners as import sources, making the country a much more challenging market for Canadian firms and exporters to penetrate. However, with the implementation of many policies designed to support export and import growth and newly signed bilateral trade agreements, Malaysia is increasingly making its presence known on the international trade stage. As of 2008, Malaysia's principal agri-food import sources include Indonesia (20.4%), Thailand (11.0%), India (8.8%), Australia (7.6%), China (7.2%), and the United States (6.0%). Although Canada represents only 1.9% of Malaysian agri-food imports, Canada has consistently remained one of the top 15 importers to Malaysia, and is currently in 12th place

Opportunities for Canadian agri-food exporters in the Malaysian marketplace include products such as breakfast cereals, pasta, wine (red, sparkling, Icewine), fish and seafood (lobster, mussels, salmon, halibut), halal processed meat (corned beef), fruit juices, fresh temperate fruits and vegetables, frozen vegetables (especially potatoes), dried fruits, nuts, pet food, baby food (particularly dairy products), and packaged/frozen food (snack/health bars, ready meals).

Access Issues

As a country of continual trade and investment interest for Canadian exporters and investors, Malaysia offers excellent potential for Canadian firms wanting to penetrate emerging Southeast Asian markets. To facilitate successful market entry, Canadian exporters are encouraged to develop market entry strategies that include working with a local importer and distributor to develop a presence, gain valuable market and business practices advice, and best position a product to meet local tastes, laws and pricing.

As a member of the WTO, AFTA, and APEC, Malaysia implements international accords and policies from these bodies. The majority of Malaysia's requirements governing its imports correspond to WTO or APEC regulations, while others are specific to the country. Of particular importance are The Food Act 1983 and The Food Regulations 1985 laws, as they are valid for both imported and locally manufactured food. The main objective of these laws is to ensure the quality and safety of foodstuffs for Malaysian consumption. Although Malaysia remains a free-market economy, it does hold several import regulations which Canadian exporters should be aware of before entering the market:

While Malaysia continues to liberalize its tariff regime and its economy remains open and transparent, some products and sectors are still protected by high tariffs and import licensing requirement.

An import licence is required for certain commodities, mostly agricultural products including meat, eggs, all dairy products, wine, plants, cereal flours, and seafood. Import licences are issued by the Department of Veterinary Services Malaysia, or from the Fisheries Development Authority of Malaysia for seafood.

At Malaysia's 34 entry points around the country, all imported foodstuffs are subject to random checking, testing and sampling. If all documentation is present and in order, no delays should occur.

Transportation, communications and infrastructure in Malaysia are modern and efficient. Major ports for peninsular Malaysia are located at Port Klang (national port), Penang, Kuantan and Pasir Gudang. Main ports for East Malaysia are located at Kuching and Kota Kinabalu.

In addition to import licences for meat and meat products, halal meat must be accompanied by halal certification issued by a Malaysian approved Islamic organization. Halal certification is also suggested for other non-meat based products such as snacks, confectionery, dairy and bakery products, since halal products are considered to be of higher quality and have added marketing value.

Malaysia has many specific packaging and labelling requirements. Visit gain.fas.usda.gov/Recent GAIN Publications/EXPORTER GUIDE ANNUAL_Kuala Lumpur_Malaysia_10-2-2009.pdf for more information.

Imports from non-ASEAN countries are subject to customs and tariffs. Although most import duties range from 0% to 30%, they can go as high as 200% for luxury goods, tobacco, alcohol, processed and high-value food products. However, the AFTA is set to bring tariffs down to a maximum of 5% for all member countries. The Royal Customs and Excise Department of Malaysia is responsible for the administration of taxes. Visit www.customs.gov.my for more information.

In order to ensure the success of their export ventures, Canadian exporters are encouraged to refer to the following websites for further information regarding tariff, customs and import regulations:

The Canadian Trade Commissioner Service and the DFAIT website.

Malaysia's non-tariff barriers to imports of food and agrifoods

Aside from localised law covering import licensing, food health and safety, labelling and other matters, e.g. halal, Malaysia's main non-tariff barriers to trade as identified by an ongoing ASEAN/APEC study lie in:

Monopolistic control over the import of rice, a strategically important staple food item for Malaysia.

This exists to ensure that the supply and price for the commodity are not subject to speculation and price manipulation. The price of rice (standard and premium grade) is controlled by law and administered by the Ministry of Agriculture, Malaysia, under the Rice (Grade and Price Control) order 1992.

Discretion import licences exist for a number of products that are deemed as sensitive by the Malaysian government.

Most of these products were subject to tariff rates quotas (TRQ) under Malaysia's GATT Uruguay Round commitment although some of these TRQs are no longer enforced. The products include pork, sugar, chicken, cabbage (some types), unroasted coffee, wheat flour and liquid milk.

In recent years, the licensing authorities have taken a more liberal stance on issuing import licences for pork, chicken parts, wheat flour and liquid milk so imports have increased and are becoming part of the local market. The import licensing of these products now focuses more in food health and safety issues rather than protecting local industries. As a result, the key challenge for imported pork and chicken is the highly competitive local pork, chicken and flour milling industries.

Liquid milk has a different scenario as the Malaysian dairy farming industry is amongst the weakest in ASEAN. Trade sources comment that liberalisation of this market to independent imports, e.g. non-Malaysian brands, is still quite slow. For Malaysian brand-owners, importing liquid milk (bulk and retail packed) from Australia for sale under their own brands does not appear to be a major problem today.

It should be noted that:

The retail price of a range of basic food products is controlled by the Malaysian government. The products include sugar, some milk products, e.g. sweetened condensed milk, wheat flour, cooking oil, some vegetable and chicken.

Although not specifically a barrier to trade, trade sources comment that these price controls make it difficult for imported versions of these products to compete in the Malaysian market.

These controls exist to ensure that the supply and price for these basic food products are not subject to speculation and price manipulation, especially during festive seasons. Small and medium sized businesses in Malaysia have a strong tendency to manipulate supplies and increase pricing in the period just prior to:

Hari Raya Puasa, the main Muslim celebration at the end of Ramathan, the fasting month; Chinese New Year; and Deepavali, the main Hindu festival.

Overall, Malaysia's main non-tariff measures exist for reasons that are not aimed at establishing barriers to trade in imports. They are in place to establish some level of order in the market for staple food that have in the past been subject to supply and price manipulation that is detrimental to Malaysia's consumers, especially the lower income groups.

Products identified by Malaysia as sensitive for its AFTA commitments

The only products identified in this category for the AFTA commitments were:

Sensitive agricultural products: Rice, and a specific range of tropical fruits. Examples are bananas, melons and pineapples.

Future liberalisation of a number of these markets is now being considered by a working group set up under the auspices of the High Level Taskforce on ASEAN Economic Integration. Based on recent statements by the Chairman of this working group, liberalisation of the markets for such sensitive products is a longer term rather than shorter term goal.

General exclusion from AFTA as Malaysia is a majority Muslim country: Alcoholic drinks


Canadian Government Contacts

High Commission of Canada in Malaysia
Email: john.nojey@international.gc.ca
Website  www.tradecommissioner.gc.ca

Agriculture and Agri-Food Canada
Sir John Carling Building
930 Carling Ave
Ottawa, Ontario
K1A 0C7
Telephone: 613-759-1000
Fax: 613-759-7977
Website: www.agr.gc.ca

Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2
Website: www.tradecommissioner.gc.ca


The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information.