Canadian Plastics

Opening the door to Malaysia’s resins industry

By Gordon Feller   

One of the best-kept secrets in the global plastics industry may be that Malaysia is hungry for plastics resins. In 2005, the country's total resin consumption increased by eight per cent, from 1.6 mi...

One of the best-kept secrets in the global plastics industry may be that Malaysia is hungry for plastics resins. In 2005, the country’s total resin consumption increased by eight per cent, from 1.6 million metric tons in 2004 to 1.72 million metric tons. But despite — or perhaps because of — this need, Malaysia remains a net resins importer.

There are signs that, early on, the Government of Malaysia hoped the country could produce enough of its own resins. The establishment of two polyvinyl chloride (PVC) resins plants in the 1970s, with a total production capacity of 22,000 metric tons per year, marked Malaysia’s first involvement with producing resins locally. Subsequently, two polystyrene (PS) plants began operating in 1974 and 1984, each having a capacity of 6,000 metric tons per year.

Such efforts have not been enough, however, and this has created a hotly competitive arena for resins manufacturers and importers. Imports from the U.S. were nine per cent of the total in both 2004 and 2005. But U.S. resins face severe competition from Singapore, Japan and other Asian countries. In recent years, Malaysia’s import of plastics resins from Asian and Association of Southeast Asian Nations (ASEAN) countries have increased dramatically due to highly competitive prices offered by these countries, in addition to the privilege of low tariff rates enjoyed when trading within the ASEAN region under the ASEAN Free Trade Area (AFTA) agreement.

How can foreign companies secure better access into the Malaysia marketplace for resins? First, understand the market. For example, engineering resins, which account for approximately 55 per cent of resins imports, remain the best prospect sector for foreign suppliers because they have gained a good reputation for product quality and advanced technology.


Second, understand the country’s trade structure. Within the Government of Malaysia, the powerful Ministry of International Trade and Industry (MITI) is primarily responsible for the formulation and implementation of trade regulations and policies. Malaysia follows the Harmonized Tariff System (HTS) for the classification of goods.

Since the petrochemical industry in Malaysia was in its infancy during the early 1990s, the Government of Malaysia implemented both tariff and non-tariff barriers to protect the interests of the domestic plastic resins industry. In December 1993, tariffs were increased for a five-year period from its original 2 per cent to 30 per cent for non-ASEAN countries, and from 1 per cent to 15 per cent for ASEAN countries on plastics resins. In 1994, when tariff protection alone did not provide the amount of protection desired, the Government of Malaysia instituted quantitative import restrictions through a licensing system for commodity plastics resins to give protection to the domestic industry for a five-year period. Effective January 1, 2003, import duties on polyethylene (PE), polypropylene (PP) and PVC resins from ASEAN countries were reduced to 5 per cent, while it remained at 30 per cent for resins imported from non-ASEAN countries.

Third, understand the various buying and selling networks. Both commodity and engineering resins are mainly sold in Malaysia through trading companies. However, some end users that consume enormous quantities of resins purchase directly from the resins producers. There are many trading companies in Malaysia, resulting in a highly competitive environment.

A number of large trading companies have Japanese partners and these trading companies usually supply resins to Japanese electrical and electronic manufacturers. Distribution channels to the electrical and electronics sector, which is dominated by the Japanese manufacturers, are firmly established. It is essential to have Japanese contacts in order to supply to this market segment. Material specifications are determined by their headquarters in Japan, as are most of their R&D centres.

Gordon Feller is a freelance writer based in San Rafael, Calif.


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