overview of southeast asia and malaysia market · iskandar mega cities in 2025 emerging mega cities...

Presented to Malaysian Paint

Manufacturers’ Association

April 8, 2016

Overview of Southeast Asia and Malaysia Market End use industries and Paints & Coatings

“ We Accelerate Growth”

© 2015 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan.

Agenda

NOTE

Southeast Asia (SE Asia/ SEA), includes Indonesia, Malaysia, Thailand, Philippines, Vietnam, Singapore

2

1. Southeast Asia Macroeconomic environment

2. South East Asia Construction & Infrastructure Outlook

3 Malaysia - Coatings Market Snapshot

4 Conclusion

Southeast Asia Macroeconomic environment

Growth in Southeast Asia, though slowed down, is still at above average world

growth rates

6.8 7.0

6.8 6.6 6.4 6.3 6.4 6.6

7.8 7.8 7.4

6.8

6.3 6.0 6.1

6.3

5.6

5.0

4.5

4.9 4.9 5.0 5.0 5.0 5.1

6.9 7.2

7.5 7.5 7.6 7.7 7.7

2.3 2.2 2.4

3.1 3.1 2.7

2.4 2.0

-0.8 -0.5

0.9

1.5 1.7 1.6 1.6 1.6

2012 2013 2014 2015 2016F 2017F 2018F 2019F

Asia China SE Asia India US Euro

3.4

3.8 3.9 3.9

World Average

GDP Growth by regions (% y-o-y), 2012-2019

GD

P G

row

th (%

)

• Post a dip in 2014, Southeast Asia rebounded moderately to grow at ~ 5% in 2015, above the global average growth rate of ~ 3.5% in 2015

• World average has slowed down since 2011 (~ 4.2%), however, it is showing signs of moderate revival over next few years

3.4 3.4

3.5 3.8

4

Source: Frost & Sullivan

Macroeconomics

NOTE: SE Asia stands for Southeast Asia and includes 6 countries – Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam

SE Asia’s economy, is still expanding rapidly, despite the overall slowdown

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

in U

S$

Bil

lio

n

Indonesia

Malaysia

Philippines

Singapore

Thailand

Vietnam

Overall SE Asia

GDP: $894 Billion

GDP: $2,543 illion

GDP: $3,428 Billion

GDP: $1,825 Billion

Source: IMF; UKABC; Frost & Sullivan

5

Macroeconomics

• Southeast Asia is projected to grow at a CAGR of ~ 7.5-8% during 2015-19, and is expected to be nearly double of its value in 2010

GDP scenario, Southeast Asia, 2000-19

Across all Southeast Asian economies, rising urbanization trend will contribute to the

construction industry growth, thereby, bolstering the demand in coatings market

Indonesia Philippines Malaysia

42%

53%

61%

58%

47%

39%

2000 2010 2020

Urban Rural

48%

49%

52%

52%

51%

48%

2000 2010 2020

Urban Rural

62%

72%

78%

38%

28%

22%

2000 2010 2020

Urban Rural

Thailand

31%

44%

56%

69%

56%

44%

2000 2010 2020

Urban Rural

Vietnam

24%

30%

37%

76%

70%

63%

2000 2010 2020

Urban Rural

Note: SE Asia includes Singapore, which is 100% urban, in addition to Indonesia, Philippines, Malaysia, Thailand and Vietnam

Source: Word Bank, IMF

6

Macroeconomics

• Rising middle class population and increasing disposable income will drive the growth in demand for high-quality coatings

• As the construction industry flourishes, the demand for various types of coatings will increase in each country

Rising middle class population and increasing disposable income will drive up the

demand for high quality coatings

7

Source: The New Global Middle Class: A Crossover from West to East., China’s Emerging Middle Class : Beyond Economic Transformation; Frost & Sullivan

• Southeast Asia is a growing market of ~ 620 million people with a combined GDP of ~ $2.5 trillion as of 2015

• Middle class in Southeast Asia is growing with surging urbanization, and is projected to account for 65% of the population by 2030, thereby, spurring the demand for high quality coatings

• Indonesia, Vietnam and Philippines have the largest population and also host fast growing middle class population, which will drive the demand for high quality coatings

Macroeconomics

South East Asia Construction & Infrastructure Outlook

Emerging Asia as a whole is tipped to be the world’s fastest growing construction

market, accounting for ~ 40-45% share in global construction market

9

North America and

Western Europe

CAGR (2015-24) ~ 3.2%

Asia

CAGR (2015-24) ~ 7.2%

USD 2.8

Trillion USD 1.5

Trillion

USD 2.0

Trillion

USD 1.5

Trillion

Central Eastern Europe

CAGR (2015-24) ~ 6.4%

USD

0.369

Trillion

USD

0.211

Trillion

Latin America

CAGR (2015-24) ~ 7.3%

USD

0.675

Trillion

USD

0.357

Trillion

Middle East and North Africa

CAGR (2015-24) ~ 11.0%

USD

0.469

Trillion

USD

0.183

Trillion

Sub Saharan Africa

CAGR (2015-24) ~ 11.7%

USD

0.219

Trillion

USD

0.081

Trillion

Source: BMI Research 2015; Frost and Sullivan

World construction industry value is set to grow to USD 6.1 Trillion by 2024 from USD 3.7 Trillion

in 2015, at a CAGR of 5.7%

Legend

2015 2024

Key SEA* economies - Large

population, increased urbanization

and rising purchasing power will

translate into sharp growth in number

of middle-income households within

Asia. Middle Class in Indonesia is set

to increase three fold by 2020 and

reach 100 million by 2030.

NOTE: * SEA ~ Southeast Asia, including Indonesia, Malaysia, Thailand, Philippines, Vietnam, Singapore

Construction overview

07/12/2015

10

Note: A Mega City is a city with population of more than 8.0 million and a GDP of US$250 billion or more.

Mega Region: Cities combine with suburbs to form regions with a population over 15 million. Source: Department of Economics and Social Affairs, UN;

International Institute of Applied System Analysis; Frost & Sullivan

Urbanization, and evolution of regions and cities: Malaysia By 2025, almost 80% of the Malaysian population will live in urban areas, up from 74% in 2015, the highest urbanization rate among the developing ASEAN countries

Greater

Penang

Klang Valley

(Kuala Lumpur (KL), Klang,

Kajang, Subang Jaya, Petaling

Jaya, Selayang, Shah Alam,

Ampang Jaya, Putrajaya,

Sepang) (11 million)

Iskandar

Mega Cities in 2025

Emerging Mega Cities after

2025

Mega Regions in 2025

In 2013, 93.5% of the population

lived in urban areas in Klang Valley.

FT-Selangor-Negeri

Sembilan No. of

states

Urbanization

Rate

Contribution to

Malaysia’s Urban

Population in 2025

8 >80% 68.3%

2 70–79% 14.6%

4 60–69% 13.5%

2 50–59% 13.6%

West Malaysia and Klang Valley account for nearly 80% and 24% respectively, of Malaysia’s total population.

Klang Valley to contribute US$253 billion to the GDP by 2025

Urbanization and the Emergence of Mega Cities and Mega Regions, Malaysia, 2025


07/12/2015

11

Infrastructure led investments and growth: Malaysia Construction industry growth to be driven by long-term infrastructure projects, and by Government initiatives such as ETP*, and 11MP**

Subdued real estate demand, largely due to the reduced growth in wider economy and residential oversupply, is

the key reason behind a relative slowdown in the construction industry value projections

Source: BMI; Frost & Sullivan

0%

2%

4%

6%

8%

10%

12%

14%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2013e2014e 2015f 2016f 2017f 2018f 2019f 2020f

MY

R b

illi

on

Infrastructure Residential and Non-residential

Y-o-Y real growth (%)

Construction industry value in Malaysia

Yo

Y re

al g

row

th (%

)

9.8%

17.6%

9.2%

7.1%

5.6%

4.8%

4.7%

4.6%

12.6%

10.0%

13.3%

8.5%

7.9%

7.1%

7.1%

7.0%

10.9%

11.8%

10.6%

7.6%

6.4%

5.6%

5.6%

5.5%

0.0% 5.0% 10.0% 15.0% 20.0%

2013e

2014e

2015f

2016f

2017f

2018f

2019f

2020f

Overall Infrastructure Residential and Non-residential

Projected real growth rates (%), Malaysia

NOTE: 1. e - estimated, f – forecasted

2. * ETP - Economic Transformation Program

3. ** 11MP – Eleventh Master Plan

Infrastructure

projected to

grow faster


Government

focusing on

supporting the

underserved

affordable

housing

segment

07/12/2015

12

• Hotspots

o Bangkok, Rayong and Chonburi (Pattaya)

• Driving segment

• Infrastructure ~ MRT, airport expansion),

• Residential ~ condominiums

• Non-residential ~ industrial, restaurants,

commercial shops

• The expansion of mass transit lines is likely to generate new

residential demand in Bangkok's neighboring townships like

Nonthaburi, Pathumthani and Samut Prakarn

• Chonburi is home to Thailand's largest seaport and as

such there is strong demand for logistics and warehouse

space.

• Hotspots

o Ayutthaya, Kanchanaburi

• Driving segment - Infrastructure

(transportation and energy projects)

• Residential ~ driven by condominiums and

apartments

• Non-residential ~ driven by hotels

• Hotspots

o Nakhon Ratchasima, Khon Kaen,

Nakhon Panom, Nong Khai

• Driving segment – Infrastructure (rail and

bridges)

• Residential ~ driven by condominiums

• Non-residential ~ restaurants, shops, hotels

(mainly in Nakhon Ratchasima)

• Large property developers such as Land and

Houses, Prueksa Real Estate, Sansiri, AP

and Quality House – Property Investment,

are investing heavily in NE

• Hotspots

o Chiang Mai & Pisanulok ~ high

demand for condominiums,

o Chiang Rai, Pak Nam Pho, Mae

Sod district ~ gateway to

Myanmar,

o Chiang San and Chiang Kong ~

gateway to Laos

• Driving segment – Infrastructure

(high speed rail projects)

• Residential ~ driven by

condominiums

• Non-residential ~ driven by

restaurants and commercial shops

• Hotspots

o Surat Thani, Phuket, Hat Yai ~

gateway to Malaysia

• Driving segment - Non Residential

(hotels, restaurants, commercial shops,

resorts)

• Residential ~ driven by apartments

• Infrastructure ~ driven by rail and energy

&

&

Urbanization, and evolution of regions and cities: Thailand Bangkok & East to continue to grow substantially across all 3 segments; South leads in forecasted non-residential construction activity; North and NE to witness significant infrastructure development


07/12/2015

13

Infrastructure led investments and growth: Thailand In line with continual growth in public investments such as Infrastructure Investment Plan 2015-22 (~ THB 2.4 trillion), construction industry growth in Thailand to be led by infrastructure development

Private residential and non-residential (e.g. corporate office) demand is driven by growing urbanization,

development of the AEC, lower cost of living and lower corporate Income tax


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

0

100

200

300

400

500

600

2013e 2014e 2015f 2016f 2017f 2018f 2019f 2020f

TH

B b

illi

on

Overall Construction Y-o-Y growth (%)

Construction industry value in Thailand, 2013-20

Yo

Y g

row

th (%

)


Unstable political

climate, Ruble

depreciation

Government's push for infrastructure, easing monetary conditions, surge in investments from

Chinese and Japanese buyers, and near-term political stability has resulted in a positive outlook for

the forecasted period from 2015 onwards


Number of new condominiums in Bangkok’s central business

district is expected to surge 64% to 12,000 units this year, 70% of

them driven by the high-end and luxury segments

07/12/2015

14

Urbanization, and evolution of regions and cities: Indonesia Over 175 Million Indonesians to live in urban areas by 2025; Mega City Jakarta to contribute nearly

US$700 Billion to Indonesia’s GDP by 2025; Mega Region JaBoDeTaBek to account for 11% of

Total Population by 2025

Source: BAPPENAS; Department of Economics and Social Affairs, UN; International Institute of Applied System Analysis; Frost & Sullivan


07/12/2015

15

Construction industry growth in Indonesia to be driven by massive demand from low end and luxury property – leading to a shift towards low priced and high priced coatings

55% 47%

48% 45%

53%

52%

0%

10%

20%

30%

40%

0

40

80

120

160

200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Residential and Non-residential Infrastructure Construction Industry YoY Growth (%)

Co

nstr

uc

tio

n I

nd

ustr

y

Va

lue

(U

SD

Bil

lio

ns)

Construction Industry Value in Indonesia, in USD Billion, 2008-18

43.3

94.5

173.8

130.5

72.7

Co

nstru

ctio

n In

du

stry

Yo

Y G

row

th (%

)

• Strong middle class consumer spending made the residential business segment (houses, apartments and

condominiums) the largest contributor to Indonesia's property growth, accounting for about 60 percent of the total

property sector

• Indonesia is already being plagued by a backlog of 13.5 million property units and therefore President Joko Widodo

launched the “One Million Houses Program” in April 2015 - construction of 10 million new houses for the

country’s low-income people between 2015 and 2019

• Implementation of “Green building code” will slowly increase the demand of green materials

• Indonesian government announced it will allow foreigners to own luxurious apartments with a minimum value of IDR 5 billion – leading to 20% growth in luxury property NOTE: * RPJMN - National Medium‐Term Development Plan;

** MP3EI - Masterplan for the Acceleration and Expansion of Indonesia's Economic Development Plan

Historical (5-Year)

CAGR ~ 16.89% Projected (5-Year)

CAGR ~ 12.96%


Period CAGR (%), Residential and Non-residential CAGR (%), Infrastructure

2008-13 13% 21%

2013-18 13.8% 12.2%

Indonesia plans to invest USD 150 Billion in RPJMN* (2010-14) and USD 468 Billion in MP3EI**, with 70% of the combined total of this investment

to be fetched via PPP projects

07/12/2015

16

Construction industry growth in Vietnam to be driven by the positive regulatory changes, robust economic growth and favourable funding conditions

0%

10%

20%

0

5

10

15

20

25

30

2014 2015 2016 2017 2018 2019 2020 2021


Co

nstr

uc

tio

n I

nd

ustr

y

Va

lue

(U

SD

Bil

lio

ns)

Construction Industry Value in Vietnam, in USD Billion, 2014-2021

Co

nstru

ctio

n In

du

stry

Yo

Y G

row

th (%

)

• The residential building segment is on track for a recovery, with strong growth in demand in 2015. Easing of foreign

ownership restrictions will also help to spur demand, in turn boosting construction activity.

• With a considerable number of foreign manufacturers setting up production bases in the country, demand is also

on the rise for industrial properties, including industrial parks, warehouses and logistics facilities

• Vietnam’s growing middle-income class and its influx of foreign investment has resulted in rising demand for

better quality homes and commercial buildings and has also boosted the upmarket property segment, which is

dominated by foreign developers

• Introduced new ‘Housing Law’ and the ‘Law on Real Estate Business’ (passed in November 2014), which reduce

the restrictions on foreign ownership of residential and commercial properties

Historical (4-Year)


CAGR ~ 6.54 %



2014-17 5.46% 5.61%

2018-21 8.00% 6.71%

07/12/2015

17

Construction industry growth in Philippines to be driven by growth in public construction activity as the government's Public-Private Partnership programme gains traction and sustained momentum in private construction activity

0%

10%

20%

0

10

20

30

40

50

60

2014 2015 2016 2017 2018 2019 2020 2021


Co

nstr

uc

tio

n I

nd

ustr

y

Va

lue

(U

SD

Bil

lio

ns)

Construction Industry Value in Philippines, in USD Billion, 2014-2021

Co

nstru

ctio

n In

du

stry

Yo

Y G

row

th (%

)

• The upcoming elections in mid-2016 will weigh on growth, as a likely shift in leadership will cause a review of planned

and ongoing development projects.

• The Housing and Land Use Regulatory Board (HLURB) has set a target to construct 1 million housing units by

2016, and also announced the construction of over 300 condominium projects in Metro Manila, most of which will

be allocated to the mid-market segment

• The robust growth in the domestic construction industry is sustainable largely because of the phenomenal low interest

rate regime

• Besides strong residential project construction, other factors that will drive the growth of the construction sector are the

strong services income coming from the business process outsourcing (BPO) sector and the robust remittance

inflows that will boost housing demand

Historical (4-Year)


CAGR ~ 6.73 %



2014-17 6.86% 6.76%

2018-21 8.91% 8.44%

Malaysia - Coatings Market Snapshot

Trends in other key end-use industries

07/12/2015

19

Infrastructure led investments and growth: Malaysia Construction industry growth to be driven by long-term infrastructure projects, and by Government initiatives such as ETP*, and 11MP**

Growth potential in Malaysian housing market is modest compared to other key SE Asian economies - Malaysia’s

mortgage to GDP ratio is >30%, which is well above that for Indonesia, Thailand and the Philippines


26.6 32.1 36.1 39.6 42.6 45.5 48.6

51.9

14.7

16.6 19.3

21.5 23.6

25.8 28.2

30.7

0%

2%

4%

6%

8%

10%

12%

14%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2013e2014e 2015f 2016f 2017f 2018f 2019f 2020f

MY

R b

illi

on

Infrastructure Residential and Non-residential

Y-o-Y real growth (%)

Construction industry value in Malaysia

Yo

Y re

al g

row

th (%

)

9.8%

17.6%

9.2%

7.1%

5.6%

4.8%

4.7%

4.6%

12.6%

10.0%

13.3%

8.5%

7.9%

7.1%

7.1%

7.0%

10.9%

11.8%

10.6%

7.6%

6.4%

5.6%

5.6%

5.5%

0.0% 5.0% 10.0% 15.0% 20.0%

2013e

2014e

2015f

2016f

2017f

2018f

2019f

2020f

Overall Infrastructure Residential and Non-residential

Projected real growth rates (%), Malaysia


2. * ETP - Economic Transformation Program

3. ** 11MP – Eleventh Master Plan

Infrastructure

projected to

grow faster

Subdued real estate demand, largely due to the reduced growth

in wider economy and residential oversupply, is the key reason

behind a relative slowdown in the construction industry value

projections.

Construction

Government

focusing on

supporting the

underserved

affordable

housing

segment

Confidential 20

While overall automotive production has slowed down in recent years, it is expected to grow at CAGR ~ 3-3.5% over next 3-5 years, due to a modest economic growth rebound

Vehicles produced (‘000) Vehicle distribution

• Malaysia has emerged as a the third largest automotive production hub in the Southeast Asian region

• Automotive production in Malaysia is expected to reach 722,501 by 2019, at a CAGR of 3.5% between 2012 and 2019

• The Malaysian Government is increasingly focusing on boosting the production of energy-efficient vehicles such as

hybrid vehicles, electric vehicles, and other vehicles powered by alternative fuels such as Compressed Natural Gas

(CNG), liquefied petroleum gas (LPG), bio-diesel, ethanol, hydrogen, and fuel cell

• The government declared exemptions on import tax and excise duty on Completely Knocked Down (CKD) hybrid

vehicles imported between 1 January 2014 and 31 December 2015. For CKD electric vehicles, the period has been

extended till 31st December 2017

Source: Department of Land Transport

0

200

400

600

800

1000

1200

1400

2012 2013 2014 2015

Motor

Bus

Heavy Truck

Cars

Light CommercialVehicle

Light Commercial

Vehicle 5%

Cars 50%

Heavy Truck 0%

Bus 0%

Motor 45%

Automotive OEM

Confidential 21

Growth in number of vehicles on road has been slow especially over the past 2-3 years (CAGR 2012-14 ~ 2.8%), signalling dip in car sales

Vehicles on road (‘000) Average vehicle distribution

Source: Department of Land Transport

0

2000

4000

6000

8000

10000

12000

14000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CAGR ~ 6.6%

Passenger 92%

Commercial 8%

• Removal of fuel subsidies has led to higher operating expenses for manufacturers and distributors and reduced

disposable income for consumers

• The used-car market has been declining over the years due to intense competition in terms of price points from new

cars

• GST implementation in 2015 and decline in used car market has negatively impacted the demand for refinish coatings

CAGR ~

2.8%

Automotive refinish

Confidential 22

Ranked as the 10th largest exporter of furniture in the world, Malaysia exports around 80% of its production

Malaysia furniture export value

• Malaysia has always been known for its wood based furniture, owing to its natural resources. The government has set

an annual growth target of 6.5% for wood based furniture, estimated to reach up to RM53 billion by year 2020.

• In recent years, the growth has shifted from producing general products towards designing its own, and this has been

key in propelling Malaysia onto the international arena. Popular with overseas buyers of the middle to high category,

foreign buyers look to Malaysia for manufacturers who can meet their high production demand

• The government also plays an important role in nurturing the industry. Providing Pioneer Status for tax exemption and

Investment Tax Allowance, the pro-business environment makes doing business easier and faster

• Slowdown in furniture production is expected due to the slowdown in the domestic and export furniture demands.

Increasing competitive pricing from neighbouring countries, such as Indonesia and China, for finished furniture would

hinder growth of wood coatings in Malaysia

Malaysia main Importers

1650

1700

1750

1800

1850

1900

1950

2000

2050

2010 2011 2012 2013 2014

US

D m

illi

on

USA 31%

Japan 10%

Singapore 9%

Australia 5%

United Kingdom

5%

Canada 4%

UAE 4%

Others 32%

Furniture

Confidential 23

The electronics industry is focused on deepening and strengthening the three major ecosystems of semiconductors, solar and LED technologies

Source: MITI, MARTRADE

Industry Production Index (base year 2010) Investment and Exports

The electrical and electronics (E&E) industry is a key driver of Malaysia's industrial development and contributes

significantly to GDP growth, export earnings, investment and employment

Malaysia is a key player in the fast expanding E&E market, its major export destinations include China, US, Singapore,

Hong Kong and Japan

The E&E industry is targeted under the National Key Economic Areas (NKEA) to gear the nation towards high-income

economy by focusing on high-value and high-growth manufacturing activities

The growth of semiconductor will continue to spearhead the growth of the E&E industry in Malaysia and has benefited

from the global demand in the usage of mobile devices (smartphones, tablets), storage devices (cloud computing, data

centres), optoelectronics (photonics, fibre optics, LEDs) and embedded technology (integrated circuits, PCBs, LEDs)

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014

Ind

us

try P

rod

uc

tio

n I

nd

ex

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

2010 2011 2012 2013 2014

Inv

es

tme

nt

(US

D b

illio

n)

Ex

po

rts

(U

SD

bil

lio

n)

Exports Total Investments

Electronics

Coatings Market Snapshot

Coatings market situation

Malaysia’s coating market is dominated by decorative, protective and automotive

OEM segments

Malaysia Coatings Market: Top Three Key Segments

25


Malaysian Coatings Market

Decorative Coatings

~ 53-55%

Protective Coatings

~ 12-15%

Automotive-OEM Coatings

~ 7-8%

driven by growing

urbanization - expected to

be ~ 78% by 2020

1

2

3

• Driven by growing population and

construction of new residential and

commercial projects

• Expected to be the key growth

segment over next 3-5 years

• Investments in developing

transport infrastructure - such as

roads and railways as well as energy

& utilities infrastructure such as

refineries and petrochemical

complexes drives the protective

coatings segment

• Growth will come from product

innovation that can help OEMs

increase their productivity

• E.g. Axalta’s wet-on-wet 2 tone

process for Ford, BASF’s Integrated

Process II

Coatings Market

NOTE: % mentioned above indicate approximate share of coating segment in overall market as of 2015

Environmental Implications: Green agenda and regulations are key as companies

strive to comply with lower volatile organic chemical (VOC) requirements via

technology innovations

Programs / Regulations

Registration, Evaluation,

Authorization and Restrictions of

Chemicals (REACH)

International Maritime Organization

(IMO)

Regional Environmentally Sustainable

Cities in ASEAN Program (RESCP)

Other Local Country Policies and

Standards (Singapore’s Green

Labelling Scheme)

Source: Singapore Environment Council; Frost & Sullivan

26

• Increasingly, companies are looking at water-based coatings as a replacement for solvent-based coatings; especially in

the decorative coatings segment

• Consumers in Malaysia and Thailand are showing increasing inclination towards eco-friendly coatings due to increased

environmental awareness

Particulars

• Chemicals can be used in coatings only if they are registered • Aims to restrict the production of solvent-based coatings

• Regulations are focused on environment protection • Encourages coatings with higher solid content and abrasion-resistant

characteristics, reduction in CO2 emissions and fuel consumption, and

limiting VOC emissions

• Focuses on environmental management in urban areas ~ clean air and emissions from stationary and mobile sources

• Addresses the effects of a product on the environment and fixes limits for compliance

Total Coatings Market: Environmental Regulations, SE Asia

Paint Manufacturers in Malaysia and overall South East Asia are increasingly looking

towards green and sustainable coatings to replace their high VOC counterparts

27


Low-VOC, water-based coatings are the most popular sustainable coatings option among

manufacturers

However, manufacturers are facing challenges in achieving an optimum balance for water-based coatings, in terms of film

formation, hardness, and block resistance

Renewable raw materials are the second-most popular option

Manufacturers are always looking for less-expensive alternatives to produce paints

A popular renewable raw material among manufacturers is unsaturated vegetable oil due to its flexibility and availability

100% solid coatings, which mainly include powder coatings and UV/EB (ultra-violet/electron

beam) curable coatings, are the third most popular option

These require low storage space than solvent and water based coatings

Other options include anti-viral paints with the health and wellness theme. And anti-reflective paints with cooling agents to ensure energy efficient homes

Coatings Market

Conclusion

Key takeaways for coating manufacturers – Malaysia and other SE Asia

29


Conclusions and way forward

Product technology

related

Product portfolio

diversification

Geographic

expansion Channel related

• Driving shifts in technology from solvent borne to water borne/ solvent less, will be crucial for market development and differentiation in long term

• E.g. Concrete flooring, wood & metal construction

• Leading coating

manufacturers are

leveraging their

brand to capture

business

adjacencies, by

entering into related

areas

• E.g. waterproofing

chemicals, other

façade products

• Market leaders are expanding their geographic footprint to tap into booming markets, outside Malaysia

• E.g. Vietnam, Philippines

• Manufacturers with strong presence in project sales channel are expected to benefit with growth in infrastructure segment

• For other players, building capabilities in this channel will be crucial

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