Integration key to Malaysia’s petchem growth

29 May 2008 12:33  [Source: ICIS news]

SINGAPORE (ICIS news)--Malaysia's petrochemical industry has high growth potential due to the easy access to raw materials and downstream manufacturers, as well as sound support and operational infrastructure, the Malaysian Petrochemicals Association said.

Investment in the petrochemical industry at ringgits (M$)13.8m ($4.28bn) in 2007 ranked second only to the nation’s electronic sector, it added in a report during the Asia Petrochemical Industry Conference.

Factors such as the availability of hydrocarbon feedstock, cost competitiveness, advantages from the ASEAN free trade agreement (FTA) and its strategic location within the region’s major downstream and consumer markets were the key drivers to the country’s growth, it added.

The recent tax incentives and the long-term presence of petroleum giants like Shell and Exxon Mobil would help Malaysian firms achieve economies of scale and produce a wide range of petrochemicals to support various downstream players and manufacturers.

The US is currently the largest investor in the nation’s petrochemical sector, followed by Japan, the UK and Taiwan, with the US and Japan accounting for some 37.4% of the total investment.

Moving forward, Malaysia would face issues such as shortage of skilled manpower and the country foresaw challenges from the continued expansion of Middle East capacities.

The nation also expected competition from China and India as petrochemical players continue to be lured by their large domestic markets and strong demand.

In response to these external pressures, Malaysia intended to remain competitive through its "Third Industrial Master Plan (IMP3): 2006-2020" which highlighted strategies like the development of integrated petrochemical zones, enhancement of linkage with downstream players and diversification into manufacturing-related services and support industries.

($1 = M$3.24)

By: Serene Cheong
+65 6780 4359

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