Business BIA (Sept Oct... · PT Musim Mas Many AOMG members are also in the process of obtaining...

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KDN NO: PP 16730/08/2012 (030376)

@FMMBusiness Sept/Oct 2013

VOL 5/2013

in ActionSelangor Branch Annual Dinner

AOMG Benchmarks Outside the Industry for Best Practice

Participation in 12th APEC Chemical Dialogue

FMM - MIER Business Conditions Survey

2 BIA @FMM I Sept - Oct 2013

FEDERATION OFMALAYSIAN MANUFACTURERS

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Federation of Malaysian Manufacturers Wisma FMM No 3, Persiaran Dagang PJU 9 Bandar Sri Damansara 52200 Kuala Lumpur Tel : 03-62867200 Fax : 03-62741266 / 7288 Email : [email protected] Website : www.fmm.org.my

FMM has eight branches and two representative offices located in Kedah, Penang, Perak, Selangor, Negeri Sembilan, Malacca, Johor, Eastern, Sabah and Sarawak.

Any material extracted from Business in Action @ FMM to be quoted or reprinted should contain an acknowledgement to FMM or its acknowledged sources.

Editorial

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Dr Yeoh Oon Tean Chief Executive Officer

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Madeline Loh General Manager (Trade)

Ng Lee Lee Senior ManagerInternational Business Division

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contents

cover Story

3 Selangor Branch Annual Dinner

News Highlights

4 AOMG Benchmarks Outside the Industry for Best practice

Joint Meeting of the Malaysia-Singapore Business council

5 Supply of Oleochemicals Made from RSpO certified Sustainable palm Oil

tapping on Business and Investment Opportunities in east Asia

6 east Asia Business exchange portal

Beauty eurasia 2013, turkey

8 FMM Focus Asean Series: cambodia and Vietnam

employees provident Fund (Amendment of third Schedule) Order 2013

10 concessions and Grey Areas in the Sales tax Regime

Great Demand for Malaysian products in taiwan

12 participation in 12th Apec chemical Dialogue

14 Finding of the FMM - MIeR Business conditions Survey

16 events in pictures

Updates

18 Is Your Business competition Law compliant?

FMM press Release

22 Importance of FtAs and the early conslusion of the tpp

ceramic producers Support the tpp

23 Assistance to Members

Market Alerts

24 Moving Up the Value chain in the Rubber and Latex Medical products Industry

termination of the Generalised System of preferences (GSp)

Happening at Branches

26 Kedah / perlis eastern

27 penang Selangor

28 perak Johor

New Definition for Small and Medium enterprises (SMes)

30 Sabah Sarawak Rep. Office New Members

BIA @FMM I Sept - Oct 2013 3

cover Story

Selangor Branch Annual Dinner

The Selangor Branch Annual Dinner was held on June 27, 2013 and attended by over 500 members and guests. YAB Tan Sri Dato’ Seri Abdul Khalid bin Ibrahim, Menteri Besar of Selangor was the Guest of Honour.

In his speech, Branch Committee Chairman Dato’ Soh Thian Lai congratulated the state administration for drawing the highest amount of investment in Malaysia of about RM48.53 billion from 2008 to October 2012 and amassing a reserve of RM2.6 billion in January 2013. He thanked the State Government for implementing the Industrial Park Management Committee in all local councils and urged the State to allocate sufficient funds to maintain and upgrade infrastructure in the industrial estates.

Tan Sri Datuk Yong Poh Kon, FMM President highlighted the close working relationship between the Branch and the State Government and thanked the Menteri Besar and eight state executive councilors for their presence at the Dinner. Tan Sri Yong added that the continuing support of the State Government was essential to FMM as about 50% of the membership were based in Selangor. He noted that Selangor continues to be one of the most important states in Malaysia as it contributes about 30% of the country’s total manufacturing output.

The Menteri Besar Selangor in his speech, assured industries that the business-friendly environment would be maintained and that he had advised his team of executive councilors to provide the necessary assistance to the business community. He also shared that for businesses to grow, they must make profits. He assured that the State Government would work together with the Federal Government to address the infrastructure problems in industrial areas. He also announced that the Selangor State Government received positive feedback on the water issue in Selangor. He informed that the Federal Government would co-operate in the water industry restructuring exercise. One of the highlights of the Dinner was the presentation of Long Service Awards to Branch Committee Members who have been working tirelessly while attending to the needs of industries and resolving key issues on behalf of members in Selangor. To commemorate the Branch Dinner’s theme ‘Towards Green Technology & Environmental Sustenance’, the Branch Committee Chairman presented a Bonsai tree to the Menteri Besar Selangor. The Bonsai tree symbolises the good working relationship between the Selangor State Government and the Selangor manufacturing community.


News Highlights

AOMG Benchmarks Outside the Industry for Best practiceThe 3rd ASEAN Oleochemical Manufacturers Group (AOMG) Technical Workshop 2013 was held from June 17 - 18, 2013 with the theme of “Waste Minimization and Safe Handling of Hydrogen Gas”. Unlike previous workshops, the first day of this Workshop included a field trip to visit ‘best in class companies’. The Workshop was attended by 20 participants from Indonesia and Malaysia including production managers & engineers, maintenance engineers, safety and loss prevention leaders, Safety,

Participants after the visit to BASF-PETRONAS Chemicals

Health & Environment managers & superintendents, process engineers, manufacturing directors, general managers and chief operating officers.

The participants visited BASF Petronas Chemicals in Gebeng, Pahang and Air Products Malaysia. Both Companies shared their experience in managing resources such as water and waste.

Joint Meeting of the Malaysia- Singapore Business councilThe 10th Joint Meeting of the Malaysia-Singapore Business Council was held in Johor on July 1, 2013. Co-chaired with Dato’ Lim Say Chong from Malaysia and Cheng Wai Keung from Singapore, the meeting was attended by over 38 Council members and invited guests from both countries. In his welcome remarks, Dato’ Lim informed that the Malaysian MITI Minister had been updated on issues discussed at the Joint Council meeting and had agreed to help resolve some of the outstanding issues such as the difference in the toll rates at the Causeway and Second Link.

Dato’ Lim also urged the Services Sub-committee to explore ways to tap on the business opportunities given the gradual liberalization of the services sectors in Malaysia for the benefit of both countries. Some of the key issues discussed at the Joint Council meeting included possible measures to resolve the congestion problem at the The Joint Meeting of the Malaysia-Singapore Business Council

in progress

Causeway and collaboration between the two countries in the services and tourism sectors. A visit to Iskandar Malaysia was also organised for the Council to view the latest developments in the economic corridor.


News Highlights

Supply of Oleochemicals Made from RSpO certified Sustainable palm OilThe GreenPalm has been hailed as entry level initiative in supporting Roundtable on Sustainable Palm Oil (RSPO). In November 2011 the RSPO Rules for Home and Personal Care Derivatives for Book & Claim was approved by its Executive Board extending the scope of GreenPalm into Oleochemicals and its derivatives.

The ASEAN Oleochemical Manufacturers Group (AOMG) felt that a higher commitment to RSPO was needed and that is to physically take RSPO certified oils into the supply chain as quickly as possible. In March 2012 AOMG approached the Chairman of the RSPO Rules for Home and Personal Care Derivatives and offered to draft the physical transition rules for Segregated and Mass Balance. With his agreement, AOMG members worked on and submitted the first draft at the end of May 2012. The final version was approved by the RSPO Standing Committee Trade and Traceablity in June 2013 and this was finally approved by the RSPO Executive Board in July 2013.

Whilst an important milestone has been reached, there is still more work to be done for physically certified Oleochemicals and its derivatives to reach the end consumer. Many members of AOMG who have joined RSPO are now Supply Chain Certification System (SCCS) certified which means they are ready to supply oleochemicals made from RSPO certified sustainable palm oil. The member companies are:1. Ecogreen Oleochemicals Group 2. Emery Oleochemicals (M) Sdn Bhd 3. FPG Oleochemicals Sdn Bhd 4. IOI Oleochemicals Group 5. KLK OLEO Group of Companies 6. PT Musim Mas

Many AOMG members are also in the process of obtaining the SCCS certification and expect to be certified by the end of this year. There is still a lot of work to be done by RSPO in educating the entire supply chain and the certifying bodies.

The products of AOMG members are mainly midstream with some downstream which means that the products will be used by one or more players along the supply chain before it reaches the end consumer. Members who would like their products to be RSPO-certified need to take the following steps:(i) register as a member with RSPO (ii) be SCCS certified (iii) ensure that at least 95% of all palm-derived components in their product is RSPO-certified (iv) apply for a license to use the appropriate RSPO Trademark

As the manufacture of Oleochemicals and its derivatives is highly versatile, the processes appear to be complicated and some Certifying Bodies (CB) find that difficult to understand. AOMG can assist RSPO in educating CBs in its area of expertise namely midstream of the supply chain.

AOMG members are ready to supply products that are RSPO-certified for sustainable palm oil and those who wish to take such products should familiarise themselves with the requirements of RSPO.

tapping on Business and Investment Opportunities in east AsiaThe East Asia Business Council (EABC) Malaysia Secretariat with the support from the Ministry of International Trade and Industry Malaysia, Ministry of Finance and Institute of Strategic International Studies (ISIS) Malaysia successfully organised the East Asia Business Forum: Tapping on Business Opportunities in East Asia on May 29, 2013. A total of 130 attended this forum to promote economic integration in the East Asia region and create awareness among businesses on the growing opportunities in the region.

Tan Sri Azman Hashim, Chairman, Ambank Group / EABC Advisor presented the opening remarks while J. Jayasiri, Senior Director, Ministry of International Trade and Industry officiated the ceremony. The East Asia Business and Investment Forum lined up speakers from among the policy makers of the international trade sector, established researchers as well as business leaders, to educate businesses on how to leverage on the growing opportunities in the region and share experiences of businessmen who have invested in the region.


Beauty eurasia 2013, turkeyFour Malaysian companies participated for the first time in Beauty Euraisa 2013 which was held from June 13-15, 2013 in Istanbul, Turkey. The companies exhibited their products ranging from hair treatment, skin care, nail arts & accessories and body care during the exhibition.

A total of 475 exhibitors from 46 different countries such as Italy, France, Bulgaria, Korea, China, Taiwan, Poland, Germany, Spain, Greece, Slovakia, Switzerland, Jordan, Egypt, India and USA participated in the exhibition. The exhibition attracted 26,116 professional visitors from 99 countries such as the Balkans, CIS countries, the Caucasian region, Central Asia, Middle East and Africa.

Group photograph of some of the participants with Mohd Noor Azhab (2nd from left), Trade Commissioner, MATRADE Istanbul.

News Highlights

east Asia Business exchange portal

Launch of the EABEX Portal on June 18, 2013

The East Asia Business Council (EABC) officially launched the East Asia Business Exchange (EABEX) Portal in Tianjin, China, on June 18, 2013 during the 5th East Asia Business Forum. The event was hosted by the China Council for the Promotion of International Trade. The Launch was officiated by Zong Guoying, Vice Mayor of Tianjin Municipal Government in the presence of over 400 delegates comprising leaders of business associations and Chambers, government officials and academic circles from ASEAN, China, Korea and Japan.

EABEX is the first regional initiative of its kind to enable businesses who are the members of the 13 National Business Chambers in ASEAN, China, Japan and South Korea to seamlessly connect with each other more securely, trade and utilise trade resources such as Free Trade Agreements (FTA) to be more competitive. EABEX will not be just an e-commerce site, but will provide essential trading tools and services for the businesses.

In Malaysia, only FMM members are privileged to register for a free EABEX account to access the vast opportunities and promote products and services across ASEAN, China, Japan and South Korea and expand potential growth.

FMM members need to register an account on EABEX to be able to promote up to 30 products for free on the portal, receive trade enquiries directly via this business matching portal and access free tariff and FTA data to enjoy lower tariffs.

For enquiries, please contact Maygelah Siva of the FMM Secretariat at tel 03-62867320 or fax: 03-62741266/7288 or e-mail: [email protected].


News Highlights

FMM Focus Asean Series: cambodia and VietnamFMM Focus ASEAN Series is a series of business forum organised by FMM in collaboration with CIMB and ZICOlaw. The Forum brings market leaders and industry experts from the region to share first-hand information on how to take advantage of the ASEAN Trade in Goods Agreement and tap on the growing markets of ASEAN countries.

The first of the series which was on Cambodia and Vietnam was successfully organised on June 18, 2013. Key speakers from ZICOlaw such as Dr Sok Siphana from the Phnom Penh office and David Lim from Ho Chi Minh Office shared with the participants on the business opportunities in Cambodia and legal aspects of doing business in Vietnam. Bun Yin from CIMB Phnom Penh and Martin Chai from the Kuala Lumpur office briefed on the financial aspects of doing business including financing options available. Theng Bee Han, President of Malaysia Business Chamber, Vietnam shared his experiences on overcoming challenges in running an operation in Vietnam.

From left: Bun Yin, Deputy General Manager and Head, Commercial Banking, CIMB Cambodia, FMM Council Member John Lee and

Dr Sok Siphana, Partner, ZICOlaw

The Forum will also be organised to cover other ASEAN economies like Myanmar, Philippines, Thailand and Laos in the next few months.

Part Category of Contributors Contribution Rate (% of monthly wages)

A • Employees who are Malaysian citizens • Employee = 11% • Permanent residents • Employer • Non-Malaysians elected to contribute - 12% for monthly wage above RM5,000 before August 1, 1998 - 13% for monthly wage RM5,000 & below B Non-Malaysian employees electing to contributte: • Employee = 11% • On or after August 1, 1998 • Employer = RM5.00 • Paragraph 3 First Schedule on or after August 1, 1988 • Paragraph 6 First Schedule on or after August 1, 2001 C • Employees who are Malaysian citizens • Employee = 5.5% of monthly wage • Permanent residents • Employer • Non-Malaysians who elected to contribute - 6% for monthly wage above RM5,000 before August 1, 1998 - 6.5% for monthly wage RM5,000 & below and attained age 60 D Non-Malaysian employees electing to contribute: • Employee = 5.5% • On or after 1 August 1998 • Employer = RM5.00 • Under Paragraph 3 First Schedule on or after August 1, 1998 • Under Paragraph 6 First Schedule on or after August 1, 2001 and attained age 60

employees provident Fund (Amendment of third Schedule) Order 2013


Group photograph of Malaysian exhibitors with Jamaliah Jamaludin, Director of Trade, MATRADE

(standing 4th from left) at Food Taipei 2013

Great Demand for Malaysian products in taiwanFMM coordinated the participation of 11 companies in Food Taipei 2013 held from June 26 - 29, 2013 in Taiwan. The Malaysian exhibitors promoted local coffee, tea, frozen seafood, bird’s nest, biscuits, snacks, chocolates and even fresh durians during the fair.

Exhibitors are expected to receive a total of RM2.6 million sales from the exhibition. Over 200 enquiries were received during the exhibition including buyers from Taiwan, Macau, Hong Kong, USA, China, Canada, Thailand, Europe and Australia. One of the exhibitors received an enquiry from a US company to undertake Original Equipment Manufacturer for one of their product range for “Hello Kitty” brand for the US Disneyland.

Food Taipei 2013, recorded around 1,557 exhibitors occupying 3,637 booths with a record breaking of 65,123 visitors including 6,588 international visitors from China, Japan, South Korea, Mexico, Kuwait, Bangladesh, Malaysia, Singapore, Hong Kong, Indonesia, USA and the African countries.

News Highlights

Members who are keen to participate in Food Taipei 2014 are requested to contact Koh Wee Leng of the Secretariat at email [email protected].

concessions and Grey Areas in the Sales tax RegimeWhilst sales tax is not new, the requirements under the laws are not well understood by many businesses resulting in non-compliance, fines and penalties incurred. Concessions and facilities provided in the laws have not been beneficial to qualifying businesses.

In an attempt to bridge the knowledge gap, FMM and the Royal Malaysian Customs Department jointly organised the Seminar on Sales Tax: Licensing, Offences, Facilities & GST Transitional Rules. The Seminar held on June 26, 2013 attracted 62 participants from various industries.

Speakers from the Customs Department provided the participants with a better understanding on the fundamental concepts and practical application of the sales

tax laws and regulations. The Customs officers provided clarification and insight on grey areas of the sales tax. As part of recognising the Malaysian government’s intention to introduce the Goods and Service Tax as a component of the overall tax regime in Malaysia, the Seminar also covered possible issues that businesses would face in the transition from the Sales and Service Tax regime to the Goods and Service Tax regime.

For enquiries on Customs related seminars, please contact Maygelah Siva of the FMM Secretariat at [email protected].

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News Highlights

participation in 12th Apec chemical DialogueThe Chemical Industries Council of Malaysia (CICM) together with representatives from PETRONAS, Ministry of International Trade and Industry (MITI) and Department of Occupational Safety and Health (DOSH) participated in the 12th APEC Chemical Dialogue held on June 24, 2013 in Medan, Indonesia.

Co-chaired by US (for the Government) and Japan (for the Industry), the Dialogue session saw the participation of more than 10 APEC economies namely from Australia, People’s Republic of China, Indonesia, Japan, Republic of Korea, Peru, The Philippines, Russia, Singapore, Chinese Taipei, US, Vietnam including Malaysia.

Held annually, the Dialogue Session provides a platform to discuss trade and regulatory issues affecting the competitiveness and sustainable development of the industry in the Asia Pacific region between the private sector industry and the relevant government officials.

This year’s Dialogue focused on the various activities facilitating Globally Harmonised System of Classification and Labelling of Chemical (GHS) implementation, issues in complying with the EU REACh regulation, the APEC Chemical Dialogue’s proposed strategic framework for 2014 – 2016, on-going and proposed future projects such as surveys on approaches to metal risk assessments and confidential business information practices by APEC

Group photograph of the delegates who attended the 12th APEC Chemical Dialogue in Medan, Indonesia

economies, the compilation of emergency response and preparedness information of APEC economies, identification of best approaches for consistent classification of chemicals, etc.

Malaysia also presented a new project proposal to identify and document best approaches to facilitate consistent GHS classification (including accompanying case studies) of UVCBs (Unknown and Variable Composition, Complex Reaction and Biological Materials); starting off with petroleum products. It was agreed that APEC economies be given till end of July 2013 to consult their respective stakeholders and revert with their comments, as well as agreement to the proposal. It was also suggested that Malaysia should also work with other petroleum companies in the region on how this proposal should be carried out and to verify whether this project may duplicate the on-going works undertaken by the UN-GHS Sub-Committee.

APEC economies also shared updates on their Responsible Care implementation, regulatory status on nanomaterials, while Indonesia as host country also presented the current status and future goals of the chemical industry in Indonesia.

The next APEC Chemical Dialogue in 2014 will be hosted by the People’s Republic of China.


News Highlights

There is a growing optimism amongst Malaysian manufacturers on improvements in business conditions. Despite the uncertainties in the global economy, exports sales are picking up. Cost of production however continues to rise.

Stronger Business Conditions Business conditions in the manufacturing sector are looking up lately. After staying persistently below the 100-point demarcation level that denotes unfavourable or negative outlook for two consecutive bi-annual surveys, the FMM-MIER Business Conditions Index finally surpassed this level to reach 108 points in the first half of 2013. This represents an encouraging 19.1-point improvement over 2H2012 and an 11.2-point jump ahead of 1H2012.

Most current indicators performed better than in 2H2012, especially production volume, local sales and capacity utilization. The production volume index, at 106, rose 12.5 points from 2H2012. 34% of the respondents indicated that their volume of production has grown in 1H2013 (2H2012: 29%). Almost one-third (30%) of the respondents beefed up their capacity utilization rates in recent months, up from 26% in 2H2012.

Although the local sales index remained below 100 points at 99, it towers 12 points over 2H2012, suggesting that manufacturing sales were better in 1H2013 than in 2H2012. A total of 28% of the respondents reported higher sales in 1H2013, up from 21% and 23% in 2H2012 and 1H2012, respectively.

Exports Picked Up, Albeit Slower PaceThe export sales index is the only other index that scored below 100 points. Notwithstanding this, it increased from 2H2012’s 87 points to 99 points in 1H2013, a sign that manufacturing exports has picked up recently, albeit at a slower pace. Compared to 2H2012 and 1H2012, the index for number of employees rose slightly to 109, indicating that hiring increased at a moderate pace in recent months.

Cost of Production Continues to RiseWhile the capital investment index remained somewhat flat, the cost of production index surged to 153 points from 147.6 in 2H2012 and 151.8 in 1H2012. A majority of 62% of the manufacturers put up with higher production cost in 1H2013, up from 55% and 58% in 2H2012 and 1H2012, respectively.

Growing Optimism About Business Conditions in Next Six Months Indexes for the short-term outlook gained further momentum and this portends manufacturers’ growing optimism about conditions in the next six months.

The biggest increase comes from the business conditions index which soared 31.9 points from 101.1 in 2H2012 to 133 in 1H2013, with 44% of the respondents looking forward to a higher level of business activity in the coming months.

Finding of the FMM - MIeR Business conditions Survey

FMM – MIER Business Conditions Index values Indicators Current Looking Forward (Compared to 6 months ago) (Next 6 months) 1H2012 2H2012 1H2013 1H2012 2H2012 1H2013 Business conditions 96.8 88.9 108 120.2 101.1 133 Local sales 93.7 87.0 99 113.7 99.4 122 Export sales 99.4 91.5 97 118.8 99.7 124 Production volume 105.2 93.5 106 122.3 100.0 136 Capacity utilisation 100.3 93.0 105 119.7 100.9 131 Capital investment 105.4 105.5 105 118.0 111.8 120 Number of employees 108.5 105.9 109 118.2 105.7 117 Cost of production 151.8 147.6 153 155.4 151.3 148

Local and Export Sales on the RiseThe local and export sales indexes are also higher this time. At 122 and 124, respectively, these indexes are substantially higher than their scores of 99.4 and 99.7 in 2H2012, respectively. Manufacturers are clearly more optimistic about the business environment in 2H2013 than they are now.

The indexes for both expected volume of production and capacity utilization also posted hefty gains relative to 2H2012, suggesting that production and capacity utilization are expected to increase at a rapid pace in the next six months. Capital investment and number of employees indexes made good headway as well.

A total of 34% and 26% of the respondents are planning to expand their production volume and capacity utilization, respectively, in 2H2013.

At 148, the expected production cost index, though a shade paler than 2H2012’s 151.3, remains high. Most (55%) respondents are anticipating a hike in production cost as the year unfolds.

Impact of External EnvironmentThe external environment, with sluggish US growth and the still fragile Eurozone, remains a major concern for Malaysia’s economy and businesses. Respondents were asked again in the latest survey to indicate the positive or negative impacts of a suggested list of external developments on their companies. The results pointed to a slight moderation of views compared to 2H2012, namely those pertaining to Europe, the U.S., China and India.

Eurozone Remains a Major ConcernThe 17-nation Eurozone, which has been in recession for six consecutive quarters, remained a major concern. Most (69%) of the respondents continued to say that Europe’s economic performance has a negative impact on their organizations, down from 77% in 2H2012.

Improved Sentiments toward US, China and IndiaThe proportion of respondents who opined that their companies were negatively affected by the economic performances of the U.S., China and India are lower compared to the prior survey, with 50%, 53% and 49% being polled, respectively, down from 69%, 59% and 57% in 2H2012, respectively.


Myanmar, Laos and Cambodia Offer OpportunitiesThe Philippines posted stronger-than-expected growth in 1Q2013, supported by robust domestic consumption and government spending, knocking China from pole position in Asia. When asked about the impact of competition from the Philippines on their companies, eight in ten respondents (83.3%) said “negative”.

In addition to Myanmar, respondents were asked, in the latest survey, the impact of the opening up of Laos and Cambodia on their companies. Three in five (60%) respondents were of the view that such a development has a positive impact on their companies.

Effective 1 January 2014, Malaysia will no longer be a beneficiary under the EU’s new GSP. But it can still benefit from GSP until 31st December 2015, if negotiation for an FTA with the EU is concluded before 1 January 2014. As to how Malaysia’s graduation from the EU GSP affects their companies, a majority of 62 per cent responded negatively.

Business Strategies in Next 12 MonthsThe top five strategies that respondents will undertake in the next twelve months are: increase productivity, reduce operating costs, manage pricing, enter new markets and introduce new products and services to gain higher market share. The total proportions of respondents who voted for them range between 57%-77%.

The next five popular strategies voted by 18% - 49% of the respondents include: increasing production, hiring more talent, executing planned investments, investing in automation and downsizing workforce.

Implementation of the Minimum Retirement AgeThe retirement age for workers in the private sector is raised from age 55 to 60 with effect from 1 July 2013.

When asked on the impact of this new ruling on companies, 40% did not think there is any. Another 35% said it does but only slightly, while the impact is moderate for 20% and 5% rated the impact as “high”. The number of employees retiring in the next twelve months totaled 649 for 59 per cent of the respondents, while 65 per cent will see a total of 1,591 employees retiring in three years’ time.

Skills Retention and Higher Wage Cost Top List of Impact to CompaniesOn the effect of this new ruling, the retention of skills and experience topped the list, followed by higher wage costs, higher medical and insurance costs, burden of having non-performers, stability in workforce and lower productivity

Access to CreditRespondents generally experienced little or no problem with credit accessibility. In the last six months, 69% and 56% did not have any problem with local and foreign banks, respectively. Based on a list of problems with local banks suggested in the questionnaire, the rejection of new credit applications received the highest (5%) proportion of complainants. Credit limit cutback was next, followed by non-extension of credit period, recall of existing credit lines and credit period cutback.

The issue of credit accessibility with foreign banks is almost negligible. Most of those who did have their new applications rejected (1.8%), credit period not extended (1.5%) or credit limit cut back (1.2%).

Competition Act Awareness and ComplianceThe Competition Act 2010 had been in force since 1 January 2012. A year on now, in terms of awareness, 44% of the manufacturers surveyed claimed to be moderately aware, while 25% and 19% described their awareness as “high” and “low”, respectively. 12% are, however, not aware at all.

More Implementing Internal Audits and Code of ConductIn a similar set of questions, previously posted in the inaugural survey (1H2012), respondents were asked to select from a list of actions taken by them to ensure compliance of this Act. The latest results generally show that compliance is progressing at snail’s pace. Only three of the seven actions listed received higher proportions of respondents this time: internal audit on risk and compliance (41%:39% previously), policy on code of conduct for competition (30%:24% previously) and no action taken (26%:17% previously).

The question of whether or not respondents’ business operation is in breach of an anti-competitive behavior generally does not arise as most of them did not think so. Only 6% noted they are in breach of “limit/control on production”, while limit/control on market access/ outlets and limit/control on technical development were next, followed by price fixing, limit/control on investment, resale price mechanism and bid rigging.

Higher Proportion Seen as VictimsThose who saw themselves as “victims” of anti-competitive behavior are higher in proportion than those in breach. Price fixing was disclosed by a majority of 18% of respondents, limit/control on market access/outlets 14%, limit/control on technical development and bid rigging 8%, limit/control on production 7%, and limit/control on investment and resale price mechanism 6%.

Graduation from EU GSP - 62% indicated negative impact

Competition from Philippines- 83.3% indicated negative impact

Opening up of Myanmar, Laos and Cambodia markets - 60% believe it has positive impact

Negative impact of economic performance - slight moderationEuro – 69%China – 53%US – 50%India – 49%

News Highlights

The FMM-MIER Business Conditions Index (FMM-MIER BCI) is a collaborative effort between FMM and the Malaysian Institute of Economic Research (MIER).Business conditions can be defined as the general state of an economy as it affects the viability of individual businesses. The FMM-MIER BCI uses the current level of business activity as a proxy for current business conditions, compared to six months ago.Index values range from 0 to 200 points. A value above the growth-neutral threshold level of 100 points indicates an improvement or positive outlook, while that below the threshold indicates a worsening or negative outlook.The FMM – MIER Business Conditions Survey 1H2013 received 335 responses.


events in pictures

Selangor Branch’s factory visit to Italian Baker Sdn Bhd, May 30, 2013

Food Taipei 2013, Taiwan, June 26 - 29, 2013Joint Meeting of the Malaysia Singapore Business Council,

July 1, 2013

East Asia Business Forum: Tapping on Business Opportunities in East Asia, May 29, 2013


events in pictures

Visit of the delegation from the Federation of Korean Industrial Complexes Employers Association, June 25, 2013

Fertilizer Industry Association of Malaysia’s Annual Golf Tournament, July 3, 2013

Africa Big 7 and SAITEX, June 30 - July 2, 2013 Beauty Eurasia, Turkey, June 13 - 15, 2013

Updates

Update on competition Law (Part 3)

Part Two of this article was published in the July/August 2013 issue

Is Your Business competition Law compliant?STEP 3: MANAGING THE RISKS Now that you have identified current areas of concern and decided how you will deal with them, you need to ensure that risks are properly managed going forward. The best way to do this is to put in place an ongoing compliance programme.

The ongoing compliance programme should include:

• A statement of your business’s policy regarding competition law compliance. The statement must show that senior management is fully supportive of the compliance programme. A compliance culture must exist within the business from the ‘top down’.

• Training for all staff that could expose the business to competition law risks. Sales and procurement staff are key, as well as senior management and staff members who regularly meet with your competitors (such as at trade association meetings). This training needs to be conducted on a regular basis (ideally every 12 months) to ensure that knowledge is up to date. Face to face training is recommended initially, but follow up training could be conducted using an online training tool.

In some jurisdictions, businesses require their staff members to sign a form confirming that they have attended competition law training and that they understand what their obligations are in relation to the relevant competition legislation. You may wish to consider using this approach with your own staff.

• A compliance manual which your staff can refer to on an ongoing basis. The manual should explain the law in a clear and concise way and give examples relevant to your business. You may also wish to consider preparing a simple list of ‘dos and don’ts’ that could be distributed to all staff as a handy reminder of the main points to remember.

• A nominated competition law committee or ‘champion’ available to answer any questions that arise.

• Ongoing audits to ensure the programme is working and to identify any further risk areas;

• regular reporting to senior management.

The level of detail required for the ongoing compliance programme will differ from one business to another. There is no ‘one size fits all’ and care will need to be taken to ensure YOUR compliance programme works for YOUR BUSINESS and YOUR INDUSTRY.

WHAT ARE THE BENEFITS OF A COMPETITION LAW COMPLIANCE PROGRAMME?The MyCC has publicly stated that it will be imposing penalties on businesses found to have infringed the CA 2010 after 1 January 2013. In addition to the risk of financial penalties (which could be up to 10% of your worldwide turnover), a business that is investigated under the CA 2010 will face:

• Significant bad press. A 2007 study by the Office of Fair Trading (the UK competition regulator) found that businesses considered the adverse publicity arising out of a competition law infringement to be a greater deterrent than financial penalties.

• The burden of the substantial time and cost involved in defending your business in the face of an investigation by the MyCC.

However, businesses that put in place a competition law compliance programme will benefit from:

• Identifying risk areas early (and preferably before the MyCC). This will give your business an opportunity to act either by ending the agreement or conduct and applying for leniency or taking such other steps as are appropriate;

• In other jurisdictions, the existence of a competition law compliance programme can result in the reduction of the financial penalty to be imposed. The MyCC has not yet stated what its approach to penalties will be.

CONCLUDING THOUGHTS There is no doubt that the introduction of the CA 2010 will bring significant challenges for your business as you seek to determine what the law means, and how it applies to your activities.

A competition law compliance programme will provide you with an excellent opportunity to review your existing legal arrangements, identify any areas of concern and take appropriate steps to deal with them.

Depending on the complexity of your business and its legal arrangements, you may need to seek external assistance.

By Rachel Burgess

“Published with permission of The Malaysian Current Law Journal Sdn Bhd and CLJ Legal Network Sdn Bhd.”

This is the final part of a three part article.

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Competitiveness and competition are important. FTAs are important towards enhancing competitiveness and increasing trade activities. Malaysia has already implemented six bilateral FTAs with Japan, Pakistan, India, New Zealand, Chile and Australia. Together with ASEAN, apart from ASEAN Trade in Goods Agreement (ATIGA), Malaysia has implemented five regional FTAs with Korea, China, Japan, India, and Australia-New Zealand. Malaysia’s trade with these FTA partners comprises 62 per cent of Malaysia’s global trade in 2012.

We are now negotiating five new FTAs including the Trans Pacific Partnership (TPP) and the Malaysia – EU Free Trade Agreement. The successful conclusion of the various FTAs will form an unprecedented market of 793 million people, with a combined GDP of USD27.5 trillion. This far surpasses the limited domestic market of 29.5 million people and a GDP of USD 300 billion in Malaysia.

FMM’sViewsontheTPP:

FMM is of the view that the new FTAs such as the TPP would open up new market opportunities and horizons for Malaysians to go on the offensive and take advantage of the international market place.

• Consultations with FMM members have revealed an increasing need by our companies for more open markets and trade facilitative measures. While import duties of TPP member countries are general low for manufactured goods, there are products of interest to Malaysian manufacturers that have high import duty such as footwear (up to 48%), textile/ fabric (cotton fabric is between 6.5%-14.7%), apparel (1.1%-28.6%) and ceramic tableware (up to 25%). Any preferential advantage in the form of lower or zero tariffs will enhance our price competitiveness in these products;

• Malaysian products have met world standards and are able to compete at the global level. Malaysian companies are also increasingly becoming global investors and they require a level of transparency and predictability that can only be guaranteed effectively through binding agreements like the TPP; • Malaysian companies that export to the US and Canada are increasingly interested to see the TPP negotiations concluded, especially since the graduation of Malaysia from the list of countries that enjoy from the General System of Preferences (GSP);

• The TPP currently consist of 11 trading nations. We do not have any structured framework, such as trade agreements, with four important trading partners namely US, Canada, Mexico and Peru. The TPP has been identified as one of the pathways for the Free Trade Agreement for the Asia Pacific. Hence the TPP will allow Malaysia to continue to be an integral part of the deepening economic integration taking place within the Asia Pacific region and enable us to participate as an important link in the whole regional supply chain; and

• The TPP is envision as the 21st century agreement with expectations for full liberalisation of duties of goods and services once the agreement comes into force. We believe that such a move will be highly beneficial to manufacturers similar to what we enjoy with Australia following the recent implementation of the Malaysia – Australia FTA. Malaysia now benefits from duty free access into the Australian market from the day the FTA entered into force. This is a huge benefit for Malaysian companies that are already exporting but also provides opportunity for Malaysian companies that have yet to do so.

We recognise that there are challenges in implementing such a broad and high level agreement across different parties. However we believe the costs does not outweigh the benefits and Malaysia’s interest would still persevere in this important negotiations. We should embrace the positive proposals in the negotiations while finding ways to address the difficult issues in a manner that brings about benefit for Malaysia and its people.

In this regard, it is important for a flexible timeframe be given to implement the commitments made in the TPP agreement. Early harvest schemes especially for certain chapters in the agreement such as government procurement and intellectual property should be considered by the TPP negotiators to allow countries adequate time to implement the TPP.

We strongly believe that the growth of our country which a successful TPP will help foster is top priority for Malaysian businesses. The sooner the TPP can be agreed upon and implemented, the earlier those benefits can be realized. We urge the government to redouble its efforts to expeditious and successfully conclude the negotiations of the TPP by this year.

The above was released to the press on June 25, 2013.

Importance of FtAs and the early conclusion of the tpp

FMM Press Release

News Highlights


perakPreventing Dengue Outbreak at Tyre Recycling IndustriesThe Branch organised a briefing cum dialogue session on July 9, 2013 for 11 companies in the tyre-recycling business to discuss the issue of suspected mosquito breeding in the used tyres. The dialogue session was held with the State Health Department, led by its Assistant Director Dr. Rizawati Mahpot.

Arising from the dialogue session, the Health Department agreed to work closely with the industries by offering them training, site inspections and advice on the prevention of mosquitoes breeding.

Issues at IGB Industrial Park and Silibin Industrial Estate• Poor road conditions and drainage system at IGB Park Datuk Bandar Ipoh, Dato Haji Roshidi bin Hashim organised a site visit on June 27, 2013 to assess the seriousness of the problem and instructed his officers to clear the clogged drains and to carry out road repair works as an interim measure.

• Acute flooding and strong odour problem at Silibin Industrial Estate The Deputy State Secretary (Administration) Dato’ Abu Bakar bin Said initiated a site meeting on June 11, 2013 and traced the problems to poor drainage system and to a factory processing fertilizer from chicken feathers. Dato’ Abu Bakar advised Dewan Bandaraya Ipoh to upgrade the drainage system and to issue stop work order to the said factory if it does not take any action to eliminate the bad odour emitting from its premises.

The Malaysian ceramic industry supports the Government’s initiatives to spur the growth of exports through the Trans-Pacific Partnership (TPP) Free Trade Agreement.

The FMM Malaysian Ceramic Industry Group (MCIG)1 chaired by YM Raja Dato’ Abd Aziz bin Raja Muda Musa, who is also the Vice President of the FMM, views Malaysia’s participation in the TPP as positive, particularly if the following conditions are met:

a. The TPP would open wider access into the US market. Currently, Malaysian exports of ceramic products to the US were only RM14 million in 2012. For example, import duty for ceramic products in the USA could be as high as 26% for ceramic tableware. The TPP proposes to gradually reduce the tariff rate, which should allow ceramics producers better access into the larger US market, in particular government procurement. Reduction of import duties under the TPP should however be consistent with the ASEAN China FTA, i.e. 5% by 2018.

b. The TPP proposes to adopt Rules of Origin (ROO) at the two digit level of Customs Tariff Heading. This is in line with the Malaysian ceramic products producers’ view that ROO at the two digit level would help to ensure a more level playing field and minimize abuse through illegal transshipment.

c. The TPP would facilitate and expedite dialogue on standards conformance between partners, in particular mutual recognition of standards and test results, which would further reduce costs for Malaysian manufacturers and exporters and enhance competitiveness.

The FMM MCIG would therefore urge the Malaysian Government to pursue the above items diligently during its negotiations on the TPP Agreement.

The above was released to the press on July 10, 2013

ceramic producers Support the tpp

FMM Press Release Assistance to Members

News Highlights


Market Alert

Moving Up the Value chain in the Rubber and Latex Medical products IndustryMalaysia is a dominant player worldwide in the rubber products industry targeted at the healthcare sector. Primarily known for rubber gloves and prophylactics, this industry also includes firms producing such items as disposable hospital kits, including hemodialysis, gynecology and blood transfusion tubing and other rubber and plastics extrusion products. Among the local disposable medical device manufacturers, several firms achieved compliance with internationally accepted quality system management in Malaysia.

In addition, there are also firms producing innovative kits for blood collection, which design and manufacture innovative medical devices and procedure packs for global healthcare markets. These products are sold in more than

35 countries and, initially focusing on infection control, they now are prominent in safety and innovation.

While some of the companies in Malaysia’s rubber product industries are already ‘top of the line’ multinationals they nevertheless could, and undoubtedly will, improve their position in the value chain if they make further efforts to develop a ‘Malaysian brand’ for some of their products; and expand research and development (R&D) programmes so as to create new state-of the-art products, such as new generations of specialized latex and rubber gloves and the creation of disposable, ready-for-use plastic products kits for hospitals and operating rooms.

Source: World Bank (2011b)

1. Effective January 1, 2014, Malaysia will no longer enjoy the GSP schemes offered by the EU and TURKEY. Malaysia will graduate from the scheme in light of the country achieving upper middle income status (according to the World Bank). Therefore, MITI will no longer issue FORM A to EU, TURKEY and ASEAN countries. [TURKEY is part of EU Custom Union].

2. MITI has informed that some Custom Authorities will reject the FORM A of goods that arrive on January 1, 2014. Manufacturers and exporters are thus advised to apply for FORM A early and to ensure that their goods arrive at the destination before January 1, 2014.

3. Information on the GSP rate can be obtained at: http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.j sp?Lang=en&SimDate=20121129

4. Exports to Norway, Switzerland, Russia, Belarus & Japan will not be affected.

Source: Ministry of International Trade & Industry Malaysia

termination of the Generalised System of preferences (GSp), January 1, 2014

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Happenings at Branches

Kedah / perlisThe Branch’s activities included the following:

• A Kedah Industrial and Investment Committee meeting on May 23, 2013. The meeting was chaired by YB Dato’ Dr Ku Abd Rahman Ku Ismail, Exco Industry, Investment, Domestic Trade, Cooperative and Consumer Affairs and was attended by the Branch Committee Chairman Dr Haminuddin Abd Hamid. • MIDA Networking and Dialogue Session on Procedures for Post Licensing & Incentives on June 11, 2013. The Event was organised in collaboration with MIDA HQ and MIDA Kedah/Perlis to brief participants on the process of obtaining license and incentives from MIDA. The event was attended by 30 participants.• A Workshop on Chemical Safety Management & Chemical Spillage from June 13 - 14, 2013 where over 30 participants from various industries attended this 2-day Workshop.• 2nd Safe Motorcycle Riding Campaign organised is collaboration with Kulim Industrial Tenants Association on June 20, 2013. • Signing of Memorandum of Understanding (MoU) between FMM Institute and Kedah Industrial Skills and Management Development Centre (KISMEC) on collaboration in training on June 25, 2013. Branch Committee Chairman Dr Haminnuddin Abd Hamid represented FMM in the signing of the MoU, while Dato’ PK Ang, KISMEC Chairman represented KISMEC.

Branch Vice Chairman Tahirudin Hamdan (right) handing a token of appreciation to the Director of SOCSO Kedah

Othman Mohd Nordin

Signing of MoU ceremony between FMM Institute and KISMEC on June 25, 2013

easternThe Branch’s activities included the following:

• 1st FMM-Customs Round Table Talk 2013 held on June 13, 2013. Co-chaired by the new Director of Customs Pahang, Dato’ Haji Sarip bin Ismail and Branch Committee Chairman, Dato’ Haji Mas’ut bin A. Samah. Over 22 members and nine non-members attended the meeting.

• A Seminar was organised in collaboration with Jabatan Tenaga Kerja Kuantan, Pahang on Practical Aspects of Implementing Minimum Wage and Update on the New Minimum Retirement Age Act 2012 on May 28, 2013.

The 1st FMM-Customs Round Table Talk 2013 on June 13, 2013 in progress.

Participants at the Seminar on Practical Aspects of Implementing Minimum Wage and Update on the New

Minimum Retirement Age Act 2012



penangThe Branch organised the following:

• Presentations by member companies, Suzuki Assemblers Malaysia Sdn Bhd and Barkath Foods Sdn Bhd on June 11, 2013.• Penang Invitational Golf Tournament on May 18, 2013 which attracted a total of 86 golfers comprising

Group photo before tee-off at the Penang Invitational Golf Tournament

representatives from government agencies and the business community in Penang participated in this event.• A Briefing on Manufacturing Opportunities by Sembcorp Park Management Pte. Ltd on June 13, 2013.

SelangorThe Branch organised the following activities:• A 2-day programme on Crime Prevention for Industries 2013, jointly organised with Ibu Pejabat Polis Kontijen Selangor, Selangor State Investment Center from May 21 - 22, 2013. • A half-day briefing on Electronic Preferential Certificate of Origin (e-PCO) on May 28, 2013.• A factory visit to Italian Baker Sdn Bhd on May 30, 2013 which was participated by 40 members. The FMM delegation were led by Chairman of FMM Selangor SMI Working Sub-Committee, Dr Neoh Vee Heng.• A Business Opportunities Networking Session on June 4, 2013 which was attended by 25 participants.• A two-day Safety Programme on Safe Handling of Chemicals jointly organised with SOCSO from June 5 - 6, 2013.

Dato’ Kevin Lai, Chairman of FMM Selangor Security Manage-ment Working Sub-Committee delivering his opening remarks

Ahmad Fathi Kamil of Dagang Net Technologies Sdn Bhd presenting his paper at the briefing

• A briefing organised in collaboration with MIDA Selangor on Incentives for the Manufacturing Sector on June 12, 2013. Members were introduced to the functions and services of MIDA Selangor as well as the numerous incentives and funds for the manufacturing sector that are under-utilised.• A half-day briefing on Green Technology on June 18, 2013. Invited speakers from Malaysian Green Technology Corporation spoke on Introduction of Green Technology, National Green Technology Policy, Green Technology Financing Scheme and the MyHijau Programme.• The 11th Selangor Investment Invitational Golf Tournament 2013 jointly organised with Selangor State Investment Center Berhad on June 25, 2013. The event was officiated by YAB Tan Sri Dato’ Seri Abdul Khalid Bin Ibrahim, Dato’ Menteri Besar Selangor.



perakThe Branch organised the following activities:

• A briefing cum dialogue session on Natural Gas Distribution System for the Kinta Valley on June 26, 2013 which was jointly organised with Gas Malaysia. Managing Director of Gas Malaysia Berhad, Datuk Muhammad Noor Hamid, together with the Branch Committee Chairman, Dato’ Gan Tack Kong facilitated the meeting. • A Science & Technology and Industry Linkage Focus Group Discussion in collaboration with Universiti Tunku Abdul Rahman (UTAR) Kampar on July 8, 2013. The discussion was held to look at possible collaboration between UTAR and FMM members.

Datuk Muhammad Noor Hamid, Managing Director of Gas Malaysia Berhad answering questions from members.

JohorThe Branch organised the following activities:

• A cross border Business Opportunity Networking (BON) Session with members of the Singapore Manufacturing Federation on May 28. 2013 which was attended by a total of 95 delegates from Malaysia & Singapore.• Courtesy call on Aida Syukrena, Director of MITI Johor on June 27, 2013. The FMM delegation was led by Logistics & Customs Liaison Sub-Committee Chairman, Mohd Lasim Bin Mahmud.

The following meetings were also held:

• Pasir Gudang Industrial Park Management Committee Meeting on June 26, 2013 co-chaired by the Yang di- Pertua of Majlis Perbandaran Pasir Gudang, Tuan Hj On bin Jabar @ Jaafar and the Branch Committee Chairman Capt (R) Hj Abdullah Shariff.

Group photograph of the BON Session with Singapore Manufacturing Federation

• Meeting with Tuan Hj Abdul Jalil Tasliman, Assistant Director of Planning Department, Majlis Bandaraya Johor Baru on June 27, 2013. The Branch was represented by its Vice Chairman Eiap Eng Khoon.

New Definition for Small and Medium enterprises (SMes)Effective January 1, 2014Firms with sales turnover not exceeding RM50 million (an increase from RM25 million) OR employment not exceeding 200 workers (an increase from 150 workers) CATEGORY CRITERIA MICRO SMALL MEDIUM Manufacturing Sales turnover Less than RM300,000 to less RM15 million to not RM300,000 than RM15 million exceeding RM50 million OR Employees Less than 5 5 to less than 75 75 to not exceeding 200

Services and Sales turnover Less than RM300,000 to less RM3 million to not other sectors RM300,000 than RM3 million exceeding RM20 million OR Employees Less than 5 5 to less than 30 30 to not exceeding 75



Sabah Representative OfficeThe Representative Office organised the following:

• A Green Technology Briefing, organised in collaboration with Green Technology Malaysia on June 20, 2013. Over 61 participants from various private companies, NGOs, local higher learning institutions as well as government agencies and departments attended the event.

Sarawak Representative OfficeThe Representative Office organised the following activities:

• FMM Sarawak Bintulu Regional Committee’s first committee meeting on June 20, 2013 where Paul Shannon from PTT Corporation Sdn Bhd was elected as the Chairman of the Committee.• Green Technology Roadshow on June 19, 2013 which was attended by 50 participants from various industries. Papers were presented by Malaysian Green Technology Corporation, Credit Guarantee Corporation and ESONA Technologies Sdn Bhd.

Participants who attended the briefing session on June 20, 2013

Tuan Syed Ahmad Syed Mustafa, Acting Chief Strategic Officer of Green Technology Corporation Malaysia

delivering his paper.

NEW MEMBERS (July - Aug 2013)The FMM welcomes the following 29 new members into the organisation, 26 Ordinary Members

and 3 Affiliate Members. The majority or 65% are from Selangor, 21% from Johor and 10% from Penang, while the rest is from other states

• AL Asia Chemical Industry Sdn Bhd• Armcrest Industries Sdn Bhd• Benelli Keeway Motorcycles Sdn Bhd• Blue Ocean Food Industries Sdn Bhd• CRC-Evans Pipeline International Sdn Bhd• CTIM Sdn Bhd• De-Luxe Food Services Sdn Bhd• DES Building Innovate Sdn Bhd• Embun Persona Sdn Bhd• Euro Nature Green Sdn Bhd• H-Treatment (M) Sdn Bhd• IFC Plus Sdn Bhd• Jadi Imaging Technologies Sdn Bhd

• Kawahara Engineering Works Sdn Bhd• Linde Gas Products Malaysia Sdn Bhd• Novaplast Plastik Sdn Bhd• Phywon System Ingredient Sdn Bhd• Respack Manufacturing Sdn Bhd• Sage Promaster Sdn Bhd• Samtec Asia Pacific (M) Sdn Bhd• Smiths Detection Malaysia Sdn Bhd• Swift Energy Sdn Bhd• TJ-TYT Pharmaceuticals (M) Sdn Bhd• Trinity Harmony Sdn Bhd• Tufbond Technologies Sdn Bhd• UMW M&E Sdn Bhd

Affiliate Member • HTB Logistics & Trading Sdn Bhd • Mine Logistics Sdn Bhd • Monash University Sunway Campus Malaysia Sdn Bhd

Ordinary Members

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