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“Market Watch 2012”

The Rubber Sector in Malaysia

General information about Malaysia

Malaysia is centrally located within the Association of South-East Asian Nations (ASEAN).

Consisting of two regions separated by the South China Sea — the Malaysian Peninsula and the

states of Sabah and Sarawak on the island of Borneo — Malaysia is a federation of 13 states and

three federal territories. The former British colony gained its independence in 1957. Since

Independence, Malaysia has adopted the political system of a parliamentary democracy with a

constitutional monarch whose position is rotated every five years between each of the nine

hereditary state rulers. The political scene has been characterized by an extra-ordinary degree of

political stability and continuity through an encompassing national coalition of political parties.

Its territory comprises approx. 330,000 sq km, four fifths of which are covered by tropical

rainforest. Due to its bio-diverse range of flora and fauna offering excellent beaches and brilliant

scenery, the country is one of the region‘s key touristic destinations. Malaysia is a multi-ethnic,

multicultural and multilingual society with 28.66 million members. Ethnic Malays make up the

majority of the population at 57.1% followed by Chinese at 24.6%, Indian at 7.3% and other local

ethnicities at 11%. The Malaysian constitution guarantees freedom of religion, although Islam is

the largest and official religion. Approx. 61.3% of the population practice Islam, 19.8% Buddhism,

9.2% Christianity, 6.3% Hinduism, and 2.6% practice Confucianism and other traditional Chinese

religions. The official language of Malaysia is Bahasa Malaysia, but English as well as Chinese are

the business languages.

Economical Overview

Malaysia is a dynamic country which is constantly evolving. Being a middle-income country,

Malaysia has transformed itself since the 1970s from a producer of raw materials into an

emerging multi-sector economy spurred on by high technology, knowledge-based and capital-

intensive industries. Malaysia‘s Economic Performance ranking improved to 7th place out of 59

economies this year compared with 12th position in 2007.1 It is one of the 20 largest trading

nations worldwide and was headed of Taiwan, Sweden, Canada, Australia, the United Kingdom

1 ―Malaysia‘s economy attains 7th position‖, New Straits Times, 20th May 2011.

“Market Watch 2012”, The Malaysian Rubber Industry

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and Switzerland.2 The World Competitiveness Yearbook 2011 Report released by the Institute for

Management Development (IMD) continued to rank Malaysia as among the top 5 most competitive

nations in the Asia-Pacific region, taking 6th position in the 20 million population category and 2nd

position after Taiwan in the GDP per capita less than US$20,000 category.3 Moreover, the country

is the 21th largest exporter among all trading nations worldwide.

Strategically located in the heart of South-East Asia, Malaysia offers a cost-competitive location

for investors intending to set up offshore operations in order to manufacture advanced

technological products for both regional and international markets. In addition, Malaysia has a

market-oriented economy which is supported by pro-business government policies. Last year, the

Malaysian Government launched the Economic Transformation Programme (ETP) which is

managed by PEMANDU (Performance Management & Delivery Unit) under the patronage of the

Prime Minister.4 The ETP identifies 12 National Key Economic Areas (NKEAs) which are drivers of

economic activities that have the potential to materially contribute to the growth of Malaysia. Its

objective — also known as ―Vision 2020‖ — is to transform Malaysia into a ―high income country‖

by year 2020. The programme will lift Malaysia‘s Gross National Income (GNI) to US$523 billion by

2020, and raise per capita income from US$6,700 to at least US$15,000, meeting the World Bank's

threshold for high income nation.5 To achieve the targets set, Malaysia needs an annual growth of

GNI of 6%. There are plans to revitalize Malaysia's private sector, to grow the service sector from

58 to 65% and to create 3.3 million new jobs.6 The Government will also introduce other

transformation plans in 2012.7

In Malaysia, the 2011 GDP growth edged lower to 4.0 percent year-on-year due to a weaker

domestic demand. Further implementation of ETP projects and a RM232.8 billion 2012 Budget

tabled by Prime Minister Datuk Seri Najib Razak will boost domestic demand, but unlikely to

offset underperformance in net exports8.

2 Ibid.

3 Ibid.

4 See www.pemandu.gov.my . 5 Forbes.com, 21st September 2011. 6 Ibid. 7 ―Malaysia Budget 2012 Main Highlights‖, www.financesentral.com accessed on 21st November 2011. 8 Malaysian Economic outlook by Malaysian Institute of Economic Research (MIER), www.mier.org.my/outlook 21.11.‖


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Economical Key facts Malaysia9

Currency: 1 Ringgit (RM) = 100 Sen

Exchange rates: 1 EURO = RM4.3; 1 US$ = RM3.2 (17.11.2011)

GDP (billion RM): 2009: 679.94; 2010: 765.97; 2011: 829.34

GDP - real growth rate: 2010: 7.2%; 2011: 4.0%, 2012: 5.0% (est.)10

Inflation rate: 3.3-3.5 % (est. 2012 IMF)

Exports: RM513.59 billion (Jan- Sep 2011)

Exports - commodities: Electronics 34.5%; petroleum & products 9.9%; palm oil

9.3%; chemical products 6.9%; machinery 3,4%; manufactures

of metal 3.0%; rubber products 2.6%

Exports – partners: Singapore 13.3%, China 12.5%, Japan 10.5%, USA 9.5%,

Thailand 5.3%, Hong Kong 5.1%, Germany: 2.7%

Imports: RM424.37billion (Jan – Sep 2011)

Imports - commodities: Electronics 31.2%, petroleum & products 10.1%, chemical

products 9.2%, machinery 8.0%, manufactures of metal 5.9%,

transport equipment 5.1%, iron & steel products 4.3%, optical

& scientific equipment 3.2%, processed food 2.2%, other

products 20.8%

Imports - partners: Japan 12.6%, China 12.6%, Singapore 11.4%, USA 10.6%,

Thailand 6.2%, Germany 4.0%

Unemployment rate: 3.0% (2011)11

Average wage 2011: Project manager IT: RM8,415, lecturer/speaker: RM3,459,

mechanical engineer: RM3,070, account executive: RM2,572,

plantation worker: RM85012

9 Malaysia External Trade Development Corporation (MATRADE), www.matrade.com.my . 10 Malaysian Institute of Economic Research (MIER), www.mier.org/outlook/ accessed on18th November 2011. 11

Bank Negara Malaysia, Economic and Financial Data for Malaysia, last updated on 14th November 2011. 12 www.payscale.com/research/MY/Conutry=Malaysia/Salary accessed on 21th November 2011.


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Population below poverty line: 3,6%13

Bilateral Trade: Malaysia & Germany

Malaysia is EU‘s second largest trading partner inside ASEAN, behind Singapore, with bilateral

trade in goods reaching 31.9 billion Euros in 2010 and the EU‘s 22nd largest trading partner.

Germany enjoys intensive trade relations with Malaysia and is one of the main foreign investors in

Malaysia, while among members of the European Union, Germany is Malaysia‘s leading trade

partner.14 Besides, Malaysia ranks 2nd as a consumer of German products among the ASEAN

countries.

Rubber Sector Overview

The rubber products industry can be categorized into the latex, tires and tire- related and

industrial as well as general rubber products. For example, Latex products include rubber cloves,

catheters, latex thread, condoms and foam products. Malaysia is the world‘s largest exporter of

rubber gloves with an average annual GDP of RM6 billion. The rubber gloves industry has been

generally recession-proof and has recorded increases in exports since 2000.

With regard to the number of employers hired in the rubber estates, there was an increase by

497 persons (4.8%) in 2011. However, when comparing the monthly figures, there was a decrease

of 0.1% from August to September. In total, there were 10.943 people working in the rubber

estates in September 2011. However, the increase of employees working in this industry is clearly

visible in the figure below whereas most workers were employed in the month of July.

13 Index Mundi, www.indexmundi.com/g?r.aspx?v=69 accessed on 18th November 2011. 14 http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/malaysia/ accessed on 21st November 2011.


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Figure 1: MATRADE (2011). Number of employees 2010/2011. Retrieved December 14, 2011 from http://www.matrade.gov.my/ Note: The latest data from October 2011 show again an increase of the number of workers employed in the rubber estates. For this month 11,053 persons were engaged and therefore, 94 persons more than in September.

Rubber Production and Consumption

The newest figures from October 201115 show a natural rubber production of 85,800 tones of

natural rubber which is an increase of 10, 4% compared to the previous month September.

However, the annual production was 8.8% fewer than in 2010.

The domestic consumption of natural rubber showed changes in both the monthly and annual

production. In 2011, the domestic consumption of rubber decreased by 6.6% compared to the

year before. Thus, the monthly production of natural rubber in October 2011 was about 35.394

tones, therefore increased by 8.5% compared to September 2011.

15 Department of Statistics Malaysia (2011). Monthly sector report: Rubber, November 2011. Retrieved December 20, 2011 from http://www.statistics.gov.my/portal/index.php?lang=en


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The industries that used natural rubber the most were the rubber gloves, rubber thread as well as

the tyres and tubes industry. Thereby, the rubber gloves industry had a percentage of 68.3%

while rubber thread and the tyres/tubes industry each had 10.5% and 8.3% respectively. All in all,

these industries contributed 86.9% of the total domestic consumption.

Exports

The countries to which most of the natural rubber from Malaysia is being exported generally are

China, Germany, the Republic of Korea and the United States as shown in Figure 1. Furthermore,

Portugal, the Netherlands, Turkey as well as the UK and the Islamic Republic of Iran each have

percentages of less than 2.8%. However, for October 2011 the Islamic Rep. of Iran and the UK

respectively accounted 3.4% and 3% of the total exports.

Figure 2:Department of Statistics Malaysia (2011). Exports by country. Retrieved December 20, 2011 from http://www.statistics.gov.my

The latest figures from October 2011 show that the overseas exports in October declined to

78.967 tonnes compared to September, whereby the overall exports increased by 1.3%

Besides, the Standard Malaysian Rubber (SMR) had a percentage of 93.9 of the total exports.

Moreover, the SMR 20 grade was the highest grade exported with a percentage of 57.6%.

However, in US$ speaking the whole rubber sector had exports in 2011 that were worth

$6,947.647Mio. Thereby, the market share of the rubber sector was 4,61%. Thus there was an


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increase of 38.4% compared to the previous year where total exports were only worth

$5,019.955Mio. The fewest exports for rubber took place in 2009 with a total of $2,965.269Mio.

Table 2: Total rubber exports Malaysia from 2009 to 2011

Total rubber

sector

2009 2010 2011 Change

2010/11 (%)

Exports in $

Millions16

2,965.269 5,019.955 6,947.647 38,40

Market share

(%)

3,07 3,87 4,61

From the overall rubber exports that were worth $6,947.647Mio., an amount of $3,085.022Mio.

can be ascribed to natural rubber. This however means that natural rubber has a share of 44.4%

of all rubber types exported. Especially, the exports of natural rubber increased from 2010 to

2011 with 74.26%. While the export of natural rubber in 2009 only brought a return of

$707.154Mio., it increased the following year with $1,770.307Mio. until $3,085.022Mio. in 2011.

Table 3: Natural rubber exports in Malaysia from 2009-2011

Natural Rubber 2009 2010 2011 Change

2010/11 (%)

Exports in $

Millions17

707.154 1,770.307 3,085.022 74,26

Market share

(%)

23.85 35.27 44.4

16 http://www.statistics.gov.my/ 17 http://www.statistics.gov.my/portal/index.php?


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Imports

When it comes to the import of natural rubber the main country was Thailand with a percentage

of 57.7. Moreover, other suppliers were from Vietnam, the Philippines, India, Cambodia and

Indonesia.

Figure 3: Department of Statistics Malaysia (2011). Imports of Malaysia by country. Retrieved December 20, 2011 from http://www.statistics.gov.my/

Even though, the import rate of rubber was higher in October 2011 than in the same month last

year (1,079 tonnes), specifically the imports of natural rubber in October decreased by 5.1%

(3,270 tonnes) and accounted an amount of 61,123tonnes in total. In contrast to that the imports

in September were still increasing by 14.464 tones (29%) and made up a total amount of 64.393

tones as shown in figure 4.

Figure 4: Total import of rubber to Malaysia as of September 2011.


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Figure 5: Total import of rubber to Malaysia as of October 2011.

Similar to the export figures, the money spent on imports for rubber increased as well. Whereas

Malaysia was spending $1,304.165Mio. for imports in 2009, they spent $1,951.198Mio. in 2010.

Thereby, the market shares each were 1.72% (2009) and 1.84% (2010). Until August this year, the

government already spent $2,699.569Mio. (2.17%) for the whole rubber sector. This is an increase

of 38.35% compared to the previous year.

With regard to natural rubber, there was also an increase of 35.44% in 2011. The amount of

money spent for imports of natural rubber almost doubled from 2009 to 2011. Besides, natural

rubber again had most of the share in the rubber sector between the years 2009 until 2011.

Table 4: Malaysia natural rubber imports & percentage market share from 2009 to 2011.

Natural Rubber 2009 2010 2011 Change

2010/11 (%)

Import in $

Millions

751.274 1,080.065 1,462.799 35.44

Market share

(%)

57.61 55.35 54.19


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Stocks

In October 2011, the level of stocks of natural rubber was 139.388 tonnes and went up by 1.9%

compared to the previous month. Furthermore, when one compares the overall stocks from 2010

and 2011, there is a new increase of 1%18.

Price

The average monthly price of both latex concentrate and Standard Malaysian Rubber (S.M.R)

dropped in October compared to September 2011. As shown in the figure 3 below, the average

price of S.M.R.20 was 1,364.40sen at the end of September. In the same month, one had to pay

854.90sen for the latex concentrate.

However, in October latex concentrate was worth only 806.0sen and S.M.R.20 1,261.95sen on

average. This means the average price respectively dropped 5.7% and 7.5%. But compared to the

year 2010, both prices were higher in October this year19.

18 Department of Statistics Malaysia (2011). Stocks in the rubber sector October 2011. http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1341%3Asummary-of-monthly-rubber-statistics-malaysia-october-2011-updated-12122011&catid=78%3Asummary-of-monthly-rubber-statistics-malaysia&lang=en 19Department of Statistics Malaysia (2011). Prices in the rubber sector October 2011. Retrieved December 19, 2011 from http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1341%3Asummary-of-monthly-rubber-statistics-malaysia-october-2011-updated-12122011&catid=78%3Asummary-of-monthly-rubber-statistics-malaysia&lang=en


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Figure 4: MATRADE (2011). Prices in the rubber sector 2010/2011. Retrieved December 20, 2011 from http://www.matrade.gov.my/ Table 5: Average monthly price of S.M.R. 20 & latex concentrate in sen/kg from May – October 2011.

Average monthly

price 2011

S.M.R.20 (sen/kg) Latex concentrate (sen/kg)

May 1,334.33 943.33

September 1,364.40 854.90

October 1,261.95 806.00


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Developments and productivity in the Industry

The world‘s top three rubber-producing countries namely Thailand, Indonesia and Malaysia

stopped setting export limit quotas following a rise in prices in the second half of 2009.

The worldwide spread of the influenza A (H1N1) has resulted in increased demand especially for

examination rubber gloves from overseas buyers. Local rubber glove producers have increased

production to their maximum capacity to meet the demand from international markets.

The imposition of mandatory standards of new tyres and approved permits on selected used tyres

had increased the standards of manufactured tyres in the market. The standards have been

imposed to reduce the number of tyre-related road accidents in the country.

According to the Malaysia Department of Statistics (2011), the ratio of total production to total

area tapped was 121.1Kg per hectare (kg/ha). In comparison to the figures from September,

productivity in October increased about 3.1%. However, the year-on-year productivity recorded a

decrease of 16.8%. The table below is a principal statistic for the years 2010/11 and covers

among others the production, export, import and consumption in the rubber sector.


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Table 2: Ministry of International Trade and Industry (2011). Principal Statistics: Rubber sectorMalaysia. Retrieved December 19,2011 from http://www.miti.gov.my/

Conclusion

Malaysia has positioned itself to be the world‘s leading producer and exporter of rubber products.

One of the challenges for the Malaysian rubber industry is to remain competitive against cheaper

products from low-cost producers, particularly the People‘s Republic of China and India, through

higher productivity and quality. The Malaysian rubber products industry also has to remain

resilient in competing with other natural rubber producing countries such as Thailand and

Vietnam, as these countries also have easy access to readily available raw materials.

Malaysian companies need to focus on R&D activities. Efforts have been made to improve

efficiency, productivity, and new product development in the downstream activities to produce

high value-added and high-technology rubber products such as for engineering, construction, and

marine applications. R&D is also required to comply with stringent standards and regulations

imposed by export markets, particularly in the EU.

Malaysia rubber product manufacturers and exporters will face greater challenges to penetrate

the global market, particularly the European market.


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The EU has implemented the Registration, Evaluation, Authorization, and Restriction of Chemical

Substances (REACH) regulations since the 1st of June 2007. With the deadline for the process of

pre-registering chemicals with the European Chemical Agency (ECHA) ending on the 1st of

December 2008, the rubber products industry will have to reformulate its products to comply

with the regulations. It was estimated that the rubber products industry would have to register

over 300 substances compared with 70 for the chemical industry, 40 for the pharmaceutical

industry and 38 for the petroleum industry.

However, Malaysian rubber manufacturers and exporters can benefit from the ASEAN-China Free

Trade Agreement, the Malaysia-Pakistan Closer Economic Partnership Agreement, the ASEAN-

Korea Free Trade Agreement, and the Japan-Malaysia Economic Partnership Agreement to gain

new market access in these countries. Intensifying promotional and branding activities, which

include the promotion of a ‗green‘ image in the finished products, need to be undertaken to

further strengthen Malaysia‘s position in the global market.


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Rubber Trade Fairs 2012 in Malaysia

Contact:

Mr. Thomas Brandt: [email protected]

Ms. Schvonne Choo: [email protected]

We hope the market report serves you with actual information on the Malaysian market. Our

core business is to establish contacts, finding distribution partners, project acquisitions, etc.

Our “Office-in-Office Concept” and our “Firmenpool Malaysia” will give you a permanent

address to develop the market. Please contact us for further information.

1. Intrade 2012

Date: 27 - 29 November 2012

Location: Kuala Lumpur, Malaysia

Rubber medical devices, rubber automotive components, engineered rubber

products, rubber sporting goods and other rubber products.

2. Rubber Plas Malaysia

Date: 19.07 – 22.07.2012

Location: Putra World Trade Center (PWTC), Kuala Lumpur

3. MARGMA International Rubber Glove Conferences and Exhibitions (IRGCE)

Date: 04 - 06 September 2012

Location: Kuala Lumpur, Malaysia

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