Agri-Food Trade Service

Agri-Food
Past, Present & Future Report
Malaysia

February 2010

The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information. This report is intended as a concise overview of the market for those interested in its potential and is not intended to provide in-depth analysis which may be required by the individual exporter. Although every effort has been made to ensure that the information is correct, Agriculture and Agri-Food Canada assumes no responsibility for its accuracy, reliability, or for any decisions arising from the information contained herein.

Please address any comments or suggestions you have on this report to: Ben Berry – ben.berry@agr.gc.ca

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Table of Contents

Overview
Canada - Malaysia Relations
Agricultural Trade
Economy
Consumer Market
Competitors
Access Issues
Agriculture Sector & Policies
Contact Information
References

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Overview

As one of the strongest developing economies in the Southeast Asian region, Malaysia has become one of the world's leading producers of electronic and electrical products. Having transformed itself from a commodity-based economy to a high middle-income economy in only 30 years, Malaysia's GDP has grew to a robust $236.2 billion in 2008, but slipped to US$207 billion in 2009 due to the global financial crisis. Despite this slip a return to healthy economic growth in projected for 2010. As a multicultural and ethnically diverse nation, Malaysia has been able to reduce poverty and inequality, recover from economic downturns, and continue to be a strong and stable country with an ever-expanding economy and population.

After its independence from Britain in 1957, Malaysia became a founding member of the Association of Southeast Asian Nations (ASEAN), which would expand to include ten other neighbouring countries. Malaysia's strategic location in the heart of Southeast Asia provides a perfect gateway to emerging Southeast Asian markets. The country borders Brunei, Indonesia, and Thailand, and is comprised of 13 states and three federal territories.

Several demographic and cultural shifts are taking place in the consumer market, leading to increased market opportunities for Canadian agri-food exporters. Increasing urbanization, growing education and incomes, busier lifestyles, and organized retail are all evolving food and beverages trends in the marketplace. Canadian exporters will continue to see greater opportunities in the areas of packaged and processed food, fresh fruit, fresh and frozen vegetables, fruit juices, wine, and fish and seafood in the Malaysian market. Increased awareness of healthy lifestyles and eating habits is also driving demand for healthier food and beverage choices in the marketplace. A large Muslim population and growing halal food processing industry also provides raw material sourcing opportunities.

Canada - Malaysia Relations

As one of the first countries to recognize Malaysia's independence and establish diplomatic relations, Canada benefits from a positive bilateral relationship with Malaysia that encompasses political, economic, social and cultural relations. Both countries are co-members of the Asia-Pacific Economic Cooperation (APEC), an organization with which Canada has benefited from a long trade and investment partnership and in which Malaysia is an active member. In addition, 2007 marked Canada's 30th anniversary as an important dialogue partner in the Regional Forum of the ASEAN. Canada hosted the inaugural Canada-ASEAN Business Forum and Senior Economic Officials' Meeting in 2005 to expand commercial prospects as the region experiences increased political stability, economic growth and trade liberalization. In fact, Malaysia is Canada's largest trading partner within ASEAN, accounting for 47.5% of bilateral trade in 2008. Canada and Malaysia share similar goals, values and perspectives on international issues and cooperate in international organizations, such as the Commonwealth, United Nations, Human Rights Council, and World Trade Organization (WTO). Malaysia is also frequently involved in peacekeeping and stabilization missions to other countries.

Governed primarily by WTO, APEC and ASEAN Free Trade Area (AFTA) agreements, trade and investment between Malaysia and Canada continues to grow. As a strong emerging market in Southeast Asia, Malaysia has become an attractive market for Canadian investment. Total Canadian Foreign Direct Investment (FDI) in Malaysia totalled more than $1.1 billion in 2008; considerable growth from $505 million in 2000. Malaysian FDI in Canada was valued at $68 million in 2008. From a regional perspective, Canada's FDI in APEC in 2008 was $353.7 billion, while APEC's FDI in Canada totalled $315.4 million. Canada and Malaysia's relationship continues to be strengthened through tourism, immigration, and educational exchanges; in fact, over 70,000 Malaysians have graduated from Canadian educational institutions.

Canada-Malaysia Bilateral Trade

Malaysia Total Trade (2008) $378.1 billion
Exports	$211.7 billion
Imports	$166.4 billion
Trade balance	$45.3 billion
Canada-Malaysia Trade (2008) $3.7 billion
Exports	$0.8 billion
Imports	$2.9 billion
Trade balance	($2.1 billion)
Canada-Malaysia Ag Trade (2009) $247.4 million
Exports	$114.4 million
Imports	$133.0 million
Trade balance	($11.4 million)

• Canada is Malaysia's 23rd largest export market and 26th largest source for imports.
• Malaysia is one of the largest exporters of semiconductor devices, electrical goods, and information and communication technology in the world.
• From Canada's perspective, Malaysia is Canada's 29th largest export market and 15th largest import source.
• Canada's exports to Malaysia in 2008 accounted for 0.2% of Canada's total exports.
• Canada-Malaysia bilateral trade totalled $3.7 billion in 2008; up from $3.5 billion in 2006.
• While Canada's imports from Malaysia are more than double the amount of exports to the country, bilateral trade growth is due to a 60.5% increase in exports to Malaysia, and a 0.5% decrease in imports from Malaysia.
• In 2008, Canada's top exports to Malaysia included: fertilizers (28.1% of total exports); cereals (14.1%); electrical machinery (7.8%); machinery, reactors and boilers (7.3%); and miscellaneous grain and seed (7%).
• In 2008, Canada's top imports from Malaysia included: electrical machinery (47.2% of total imports); machinery; reactors and boilers (28.6%); rubber (4.3%); furniture and bedding (3.9%); and fats and oils (3.5%).

Agricultural Trade

Malaysia's total agri-food imports from all countries grew 57.2% over the past three years, from $7.4 billion in 2006 to $11.7 billion in 2008 (Global Trade Atlas). Despite a healthy agricultural export trade, the country remains a net importer of food products. Over the past few years, food imports have experienced an annual average growth rate of 20% which is expected to continue throughout the next five years. The country is also a net importer of fish and seafood products.

Malaysia possesses a rapidly growing food processing industry, which exports to 80 countries and accounts for two-thirds of Malaysia's total food exports. Large increases in bulk good imports into Malaysia are a result of this growing food processing industry, particularly in soya beans, oilseeds, grains (particularly wheat), and tobacco. Demand for food flavourings is also increasing along with the food processing industry, thus products such as seasonings, flavours, sweeteners, and additives based on palm oil are promising prospects for Canadian exporters looking to target the food ingredients sector.

Malaysia's main agri-food imports, 2008:

• Cereals (17.4% of total agri-food imports)
• Animal or vegetable fats and oils (14.3%)
• Cocoa and cocoa preparations (11.7%)
• Dairy produce, birds' eggs, and natural honey (6.9%)
• Residues and waste (6.4%)

Agri-Food import categories with considerable growth, 2007 to 2008:

• Carded or combed cotton (increasing 738%)
• Lac, gums, resins and other vegetable saps (537%)
• Raw hides and skins of bovine or equine animals (114%)
• Finishing agents, dye carriers and dressing used (113%)
• Animal or vegetable fats and oils (73%).

Canada's agri-food exports to Malaysia experienced declines from 2003 to 2005, but they showed a tremendous recovery in 2006 totalling $129.6 million, a 199% increase from $65.1 million in 2005. From this remarkable increase, Canada's agri-food exports to Malaysia have decreased slightly (11.8% from 2006), but remain considerable totalling $114.4 million in 2009. Malaysia's agri-food imports from Canada accounts for roughly 1.9% of its total agri-food imports, ranking Canada as Malaysia's 12th largest agri-food import source.

Canada's Top 5 Agricultural Exports to Malaysia (2009)

Soya beans	$56.7 million
Wheat	$34.8 million
Prepared/preserved frozen potatoes	$4.5 million
Crude Canola or colza oil	$4.2 million
Ice cream	$2.6 million

• Total Canadian-Malaysian agricultural trade represents about 7% ($247.4 million) of total trade between the two countries.
• In 2009, soya beans overtook wheat to become Canada's most important export to Malaysia, representing 50% of total agri-food exports to the country. Wheat moved to second place, comprising 30.4% of exports, followed by prepared/preserved frozen potatoes at 3.9%, crude canola or colza oil representing 3.7%, and ice cream at 2.2%.
• Of these top five products, exports of prepared/preserved frozen potatoes experienced the most growth in 2009, increasing 29.6%, while ice cream increased 6.8%.
• With regards to categories of Canadian agri-food exports to Malaysia, preparations of vegetables, fruit & nuts was the largest category that experienced growth in 2009; an increase of 31.2% to total $4.7 million. Meat and edible meat offal was the second largest category with growth of 51.1% to reach $3.4 million, followed by food industry residues & waste which grew 48.4% and totaled nearly $0.9 million.
• Other Canadian agri-food export categories with considerable growth included: grains products, malt, starches; dairy products, eggs & honey; and coffee, tea, maté and spices.
• Top Canadian agri-food imports from Malaysia in 2009 included palm oil accounting for 41.7% ($55.5 million) of total agri-food imports, followed by vegetable fats and oils at 16.8% ($22.3 million), cocoa butter, fat and oil comprising 9.0% ($12.0 million), palm kernel or babassu oil at 7.4% ($9.8 million), and edible mixtures of or preparations of animal or vegetable fats and oils accounting for 6.5% ($8.7 million).

Complete statistical summary available at: www.ats-sea.agr.gc.ca/stats/5084x-eng.pdf

Canada – Malaysia bulk, intermediate and consumer exports:

Bulk agri-food exports have decreased to $91.7 million in 2009, down from $175.8 million in 2008. However, bulk imports consistently make-up by far the largest portion of Canada agri-food exports to Malaysia. The most prominent export categories of grains, bulk or cereals (comprising 38.5% of bulk exports), and oilseeds, seeds for sowing, fodder (61.9%), decreased in 2009. The largest drop, from $117.5 million in 2008 to $35 million in 2009, was seen in was in grains, bulk or cereals. However, coffee, tea, maté and spice exports grew from nothing in 2008 to total $28,699, while sugars decreased slightly to $4,486

Exports of intermediate Canadian agri-food products to Malaysia traditionally have been the second largest export category, but were surpassed in 2009 by consumer agri-food exports. Intermediate agri-food exports more than doubled in 2008 to reach $46.6 million, but in 2009 declined to $6.7 million. The largest intermediate exports in 2009 were represented by animal/vegetable fats and oils (69% of intermediate exports), followed by edible vegetables, roots and tubers (14.5%) and gums, resins and other vegetable saps (3.8%). However, the categories with the highest growth in 2009 included: grains; oilseeds and seeds for sowing; gums, resins and other vegetable saps; and products of animal origin.

Consumer agri-food was the second largest export-type in 2009, totaling $16 million. While this was a slight decrease from 2008, consumer exports have increased a notable 59.2% from 2006. The largest categories were preparations of vegetables, fruits and nuts (29.3%), miscellaneous edible preparations (27.5%), and meat and edible meat offal (21.5%). Consumer exports with the highest growth in 2009 included: dairy products, eggs and honey; fruits and nuts; and coffee, tea, maté and spices.

With regards to Canada's bulk, intermediate and consumer imports from Malaysia, intermediate imports are by far the largest category, totalling $114.8 million in 2009, and steadily increasing since 2006. Consumer imports come in second, valued at $18 million, while bulk imports are the smallest category with imports of nearly $0.3 million.

Economy

Transformed from raw materials production, to a multi-sector economy focused on services and manufacturing, Malaysia's middle-income population has expanded considerably over the last three decades. Malaysia's strong infrastructure, proficient administration and knowledgeable workforce provide a strong foundation for investment inflows and continued economic success. The country's GDP has increased by an average 6.5% annually from 1957 to 2005, reaching peak growth in the early 1980's to mid-90's. High FDI has further fuelled the modernization and growth of Malaysia's economy, which has been making impressive strides in the past few years with strong private consumption, recovering private investment, and a significantly reduced fiscal deficit. However, during the financial crisis of 1997-1998, the economy entered a steep recession and also faced challenges when the dot-com bubble burst in 2001.

While the worldwide recession of 2007-2008 impacted Malaysia's economic growth and the economy entered recession in 2009, negative 2.8% growth in 2009, this was the first economic contraction for Malaysia in the past decade. The global drop in demand was challenging for Malaysia's manufacturing industry and exports, as the country is fairly export dependent. The government has been trying to increase domestic demand to ease export-reliance. The country's financial system also weathered the financial crisis quite well. By the end of 2009, the country was emerging from the recession and is expected to begin to recover in 2010 with moderately high growth. The country's exports of oil and gas have also benefited from rising energy prices around the world and regional demand has begun to rise, increasing industrial production and exports. After Malaysia's currency, the ringgit, was unpegged from the US dollar in 2005, the ringgit appreciated a notable 6% annually from 2006 to 2008, which has aided in keeping import prices low.

According to the World Bank Group, in order to achieve developed nation status, Malaysia will need to focus on further specialization of the economy, improving the skills of its workforce, inclusive growth, and strengthening public finances. Another key challenge for Malaysia will be evolving from an upper-middle economy to a high income economy. This offers the possibility of what could be a very promising consumer market, if Malaysia is able to achieve this income development.

Since 1991, the Malaysian government has been working towards its Vision 2020, a broad plan through which to achieve a developed economy status by 2020. Through five-year agendas, this framework combines both privatization and increased FDI initiatives to increase industrialization and development. Key sources of FDI, particularly in the manufacturing and service sectors, include the United States, China and Japan. However, Malaysia must also compete with other emerging markets in the region for investment, particularly China. To move the economy up the value-added production chain, the government is particularly focusing on Malaysia's high technology, medical technology, and pharmaceutical industries to drive investment.

Government has also increased spending on development projects, particularly in rural areas to decrease income inequalities between urban and rural population. A considerable amount of spending is toward a new metropolitan area for the southern part of the country in Iskandar. This area will have a population of three million, and be located only a half-hour drive from Singapore's business district. In 2009, Malaysia's government also allotted one of the largest fiscal stimulus packages in the region. However, to meet fiscal goals, government consumption is expected to slow, but still continue to grow in the future.

Gross Domestic Product (2009)

GDP	207 billion (est.)
GDP real growth	(2008) (2009) (2010) 4.6% -2.8% 3.5%
GDP/capita	$8,654
GDP/capita (PPP)	$18,614* (est.)
*Bank of Canada Nominal Exchange Rate: December 31, 2008

Current

• GDP in 2009 was estimated to have decreased 2.8%.
• GDP (PPP) was estimated at $471.7 billion* in 2008, ranking the country 31st in the world.
• Fiscal deficit 2008: 3.1% of GDP. Expected to reach 7.6% in 2009 due to large stimulus.
• Public consumption growth in 2009: 3.7%.
• Appreciation of the ringgit in 2007 caused inflation to reach nearly 6% in 2008, up from 2% in 2007. Inflation rate in 2009 was down to 3.7%.
• Credit growth decreased in 2009, but continues to exceed GDP growth.
• Private consumption: $338.7 billion*
• The services and industry sectors comprised 46.3% and 43.7% of GDP respectively in 2008, while agriculture comprised 10.1%.
• Service sector growth has been slowing rapidly.
• Manufacturing output fell in the first quarter of 2009 and increased slightly in the second quarter; but still below 2008 levels. While domestic-oriented production continues, export-oriented production remains weak.
• Agricultural output has been increasing approximately 4% a year.
• Key resources include oil and natural gas. While Malaysia has proven oil reserves of 5.5 million barrels, the country may become a net oil importer in the future. However, 84.3 trillion cubic feet of natural gas reserves also exist, and production is increasing.
• Unemployment rate: 3.3%. A slight increase from 3.2% in 2007, and ranking the country 38th lowest in the world.
• Labour force: 11.09 million, with 51% employed in services and 36% employed in the industry.
• Exports of goods and services declined 11.2% in 2009, while imports of goods and services declined 13.3%.

*Bank of Canada Nominal Exchange Rate: December 31, 2008.

Forecast:

• Modest economic recovery expected in 2010, with GDP growth of 3.5% and 3.9% forecast for 2010 and 2011.
• Stronger economic growth globally is forecast to support Malaysia's exports, with demand from foreign markets increasing gradually over time.
• Exports of goods and services are forecast to recover with growth of 4.8% in 2010 and 6.2% in 2011.
• Imports of goods and services are forecast to also recover, increasing 10.1% in 2010 and slowing to 7.0% growth in 2011.
• Services sector is expected to remain the largest and most dynamic of Malaysia's sectors, while the industrial sector will remain behind overall economic growth.
• Private consumption growth is forecast to increase from 0.8% in 2009, to 4.3% and 5.2% in 2010 and 2011.
• Public consumption growth is forecast to grow 3.1% and 2% in 2010 and 2011.
• As a member of APEC and ASEAN, Malaysia's economy is expected to continue to thrive as the country signs an increasing number of bilateral trade agreements with other nations.

Consumer Market

As one of the top developing nations in the region, Malaysia is expected to be one of the crucial product development and marketing engines in Southeast Asia over the coming decade. GDP per capita is $6,000 and disposable incomes are rising, with 61% of the population belonging to the middle-to-upper income group. However, approximately 5.1% of Malaysia's population is estimated to be below the poverty line. Ethnic Malay's which comprise approximately half of the country's population, but account for only 19% of Malaysia's economy. Poverty reduction is being addressed and education levels are rising.

Malaysia's population of approximately 27.3 million is growing at a rate of 2%, and comprises 6.2 million households. Malaysia's population is currently relatively young, but is ageing. In 2015, 18% of the total population is expected to be over 50 and the population median age is expected to be 26.5 years. However, notable younger consumer market segments will continue to exist. Those under 30 years are still expected to equal more than half of the total population in 2015, while consumers in their thirties are also considered a prime consumer target segment, accounting for approximately 14% of the population in 2015. The young population has a significant impact on consumer tastes and trends. They are the core consumers of western-style products and are driving demand for fast, packaged and convenience foods, and European restaurants. As these consumers pass their tastes on to their children, Malaysia will become an increasingly promising market. The fewer children this population is choosing to have will also drive demand for high quality baby food and dining out.

Single-person households, totalling over 470,000 in 2007, have grown the most of all household types and are expected to increase another 16% by 2015. This growth has been fuelled by younger generations waiting longer for marriage and children, higher disposable incomes, and urban migration, where these households are more accepted and prevalent. With busy lifestyles and careers, dining out and convenience and time-saving products are particularly popular.

With the number of single person households and young people on the rise, the demand for food outside the home has intensified and Malaysian consumer tastes and trends are evolving. Fast-paced lifestyles have led to a growth in convenience foods, such as snack food, packaged food and takeout. Greater concerns over health and wellness have led to growing demand for health foods, organic and light products, and natural and minimally processed fresh foods. Popular health foods include low calorie, fibre/nutrient enriched, and herbal products, as well as fruit juices. Expenditure on products perceived as less healthy, such as sugar and confectionery, are expected to decline. Malaysian consumers' increasing exposure to western-style diets, through trips and studying abroad, further fuels evolving food preferences and demand for western food in the domestic market.

Eating is an important part of Malaysian culture and social life. Malaysian cuisine is adventurous, innovative and open to new flavours. As a result, international dishes are gaining popularity and the demand for Westernized specialities continues to grow. The Malaysian diet is expected to evolve in the future to resemble diets of consumers in further developed countries in Asia, such as Japan and Taiwan. The typical Malaysian diet consists of breakfast, lunch, tea, dinner and a late supper, or many small meals throughout the day. The main meals of lunch and dinner usually consist of rice, vegetable dishes, and meat or fish dishes, prepared according to one of Malaysia's many religious backgrounds and ethnicities. Older consumers tend to cook traditional dishes and oriental-style rice, while younger consumers prepare a more diverse array of foods that are simpler and easy to prepare, such as pasta, soup and fried rice.

It is important to remember that Malaysia is a multi-racial and cultural society with many ethnicities and religions; therefore, different tastes and trends exist, and a wide variety of food choices are available in the market. The country's main ethnic groups include Malay, which represents 53.3% of the population and are predominantly Muslim; Chinese descendants, who represent 26.0% of the population and are mainly Buddhist or Christian; Indigenous descendents accounting for 11.8%; and Indian descendants, who represent 7.7% of the population and are mainly Hindu. The largest religions in Malaysia are: Islam (60.4%), Buddhism (19.2%), Christianity (9.1%), Hinduism (6.3%), Confucianism, Taoism, other traditional Chinese religions (2.6%), and others/none (2.4%). Malaysia's Indian and Chinese minorities coexist harmoniously in the country together, however not much interaction takes place between the communities.

Religious orientation impacts food consumption in Malaysia. The large Muslim population can only eat halal meat (prepared according to Islamic law) and does not consume pork or alcohol. As a result, halal chicken meat is quite popular. Halal certification is quickly becoming a benchmark for quality, hygiene and safety in food products, providing added-value to food products. Many Buddhists and Hindus do not consume beef, and those of Indian descent are often vegetarians. Those with a Chinese background prefer pork, herbal ingredients and stir fries, while the Malay community prefers beef and hot spices.

The majority of Malaysians shop for food once a week, or once every two weeks. The retail industry in Malaysia has been evolving into organized retail formats. As supermarkets and hypermarkets increase in presence, offering convenience a variety of products, more consumers are beginning to shop at these locations. In urban areas, 45 to 60% of households use these formats as their main grocery purchasing outlet. As new supermarkets are established throughout Malaysia, there will be increased opportunity for Canadian exporters in the area of packaged and processed foods, particularly chilled and frozen. However, traditional wet or morning markets remain important for produce purchases, where food is less expensive and perceived to be fresher. Freshness is particularly important for vegetable, fish and poultry products.

Food and Beverage Expenditure

• Malaysians' food and non-alcoholic beverage expenditure represented roughly 14.6% of total consumer expenditure in 2007, while per capita food expenditure totalled $395*. *Bank of Canada Nominal Exchange Rate: December 31, 2008
• Food and beverage retail sales were estimated to be $11.5 billion* in 2009, with 24% of household income going toward retail food purchases. **Bank of Canada Nominal Exchange Rate: December 31, 2009
• As disposable income increases, the amount of money spent on food and non-alcoholic beverages is expected to increase 14.5% from 2007 to 2015.
• Consumer expenditure solely on food increased 17.3% from 1995 to 2007, partly due to more spending on meat, and fish and seafood products.
• Both of these product categories grew a considerable 47.7% from 1995 to 2007, while expenditure on bread and cereal products decreased by 29.4%.

Market/Distribution Areas

• With a unique geography, Malaysia consists of two separated landmasses: West or Peninsular Malaysia (comprising 11 states and borders Thailand and Singapore); and East Malaysia, consisting of the northern third of the island of Borneo, bordering Indonesia and Brunei.
• Approximately 20 million people live in West or Peninsular Malaysia, 7 million in East Malaysia.
• Kuala Lumpur, located in Peninsular Malaysia, is the capital of the country. Other cities include: Penang, Ipoh, Malacca, Johor Baru, Shah Alam, Klang, Kuching, Kota Kinabalu, Kota Baru, Kuala Terengganu, Miri, and Petaling Jaya.
• Malaysia's consumer market is quite urbanized, with 70% of the total population living in urban settings. The rate of urbanization from 2005 to 2010 has been estimated at 3% annually.
• Second- and third-tier cities are also projected to increase their populations significantly in the coming years, allowing organized retail formats and distribution channels to expand to more rural areas. Cities such as Alor Setar, Kota Bahru, and Kuantan will have products available to them in the future that were previously only available in more prominent urban centres.
• Urban consumers have distinct demographics and consumer behaviour from those in rural areas. Generally younger and comprising a large amount of university students, young workers, and single and smaller households with higher disposable incomes, these consumers are looking for convenient products even if they cost more.

Trends in High Growth Product Areas

• Alcoholic Beverages: Although high tariffs and taxes are discouraging the consumption of alcohol in Malaysia, wine saw an increase in expenditure of more than 568% from 1995 to 2007. Only consumed by the Chinese, Indian and non-Muslim populations, wine has grown in popularity due to increasing income levels and affluence, greater tourism and perceived health benefits. Icewine exports from Canada to Malaysia grew 4.7% in 2008 to total $207,659.
• Non-Alcoholic Beverages: Spending on soft drinks has been outpacing hot drinks, growing nearly 600% from 1995 to 2007. New flavours and varieties continue to appear, and health trends are increasing demand for juices, healthier ingredients, and functional and Asian specialty drinks. There is considerable competition in the market from both local and international players.
• Packaged and Processed Food: With their short preparation time, long storage life and high degree of convenience, packaged food allows consumers to accommodate their hectic lifestyles. Frozen, processed food is increasingly being seen as a healthy alternative to fresh food, due to younger generations' changing perceptions. Asian-style convenience foods are increasingly popular and appearing in a variety of forms: chilled, frozen, pre-cooked, and pouches.
• Health Foods: Obesity has been increasing due to increasingly busy, but sedentary, urban lifestyles. However, urbanization and westernization have caused the population to consume new products that are sugar-reduced/-free and contain fewer additives, and there is growing awareness of the importance of health and nutrition. This presents growing opportunities, particularly in palm-oil based, value-added, and specialty products. Organic food is currently, an underdeveloped, niche market, but is a growing trend as prosperity and health and wellness also increase.

Foodservice Industry

As it continues to develop and grow in popularity, the Malaysian foodservice industry offers great potential for Canadian exporters. The market is estimated at approximately $5.1-5.8* billion and has been growing rapidly at an average of 7-19% annually. *Bank of Canada Exchange Rate: December 31, 2009. Eating out is an important social activity, and families commonly consume at least one meal outside the home a week. Increasingly convenient and affordable, eating out is even more frequent among Malaysia's young urban consumers, particularly take-away foods, delivery and buffet-style. Street stalls and shops (‘Mamaks' or ‘Kopitiams') are the most common locations for food, are often open at all hours and are affordable, and serve a wide variety of international foods. However, fast food and informal foodservice outlets have been increasing in presence in urban areas, and include McDonald's, KFC and Pizza Hut.

Formats with more expensive offerings, such as hotels, resorts, restaurants, and institutions, represent the best foodservice opportunities for Canadian exporters. Middle- to high-end Chinese seafood restaurants are driving imports of high quality, exotic fish and seafood. High-end western restaurants and hotels desire premium fresh, chilled and frozen fish and seafood products, particularly salmon. Restaurants in large urban cities are increasingly serving international cuisines. Expenditure on hotels and catering has grown significantly in past years, and is expected to increase 14.3% from 2007 to 2015. Currently, hotels and catering account for 10.8% of consumer expenditure (2007).

Competitors

APEC and ASEAN member countries have an advantage due to fewer trade barriers and geographic proximity (lower freight costs and faster delivery times), making the country a more challenging market for Canadian exporters to penetrate. However, some strained bilateral relations and disputes do exist between Malaysia and some of its closest countries: Philippines, Indonesia and Thailand. Malaysia is also increasingly making its presence known on the international trade stage, with main regional import sources being Asia Pacific, Europe, North America, Africa and the Middle East, and Australasia.

Canada has consistently remained one of the top 15 import sources for Malaysia, and is currently in 12th place, representing 1.9% of total agri-food imports to the country. In 2007, Canada held a 2.1% share of Malaysia's agri-food imports. Malaysia's principal agri-food import sources, and Canada's export competition, come from Indonesia (20.1%), Thailand (10.4%), India (9%), Australia (8.1%), and China (6.5%). These five countries all increased their agri-food exports to Malaysia from 2006 to 2008, growing 98%, 90.9%, 157.8%, 10.3%, and 13.1% respectively. However, while Indonesia, Thailand, and India's share of Malaysia's agri-food imports increased, Australia and China's have decreased slightly.

Of Malaysia's consumer-oriented and edible fishery product imports in 2008, the United States sourced 10% of imports, followed by New Zealand with 16%, China at 15%, and India at 11%. China's geographic location in the northern hemisphere, similar growing seasons, and ability to provide lower produce prices, presents a challenge to Canadian agri-food exporters. Malaysia's main imports from China are: vegetables, such as turnip, cabbage, carrot, potatoes, and garlic, and fruits such as mandarin oranges, apples, and pears. In the southern hemisphere, New Zealand is a favoured source for dairy products, Australia is preferred for meat products, and India for red meat.

Opportunities for Canadian agri-food exporters in the Malaysian marketplace include products such as packaged/frozen food (snack/health bars, ready meals), wine (red, sparkling, Icewine), fish and seafood (lobster, mussels, salmon, halibut), halal processed meat, fruit juices, fresh temperate fruits and vegetables, frozen vegetables (especially potatoes), dried fruits, nuts, pet food, baby food (particularly dairy products), pasta, and breakfast cereal.

Access Issues

Malaysia offers an excellent entry point for Canadian firms wanting to penetrate emerging Southeast Asian markets. As consumer demand for variety and quality foods increases, Malaysia's food and beverage market is increasingly being supplied by imported products. For successful market entry, strategies should include working with a local sales agent/importer and distributor to develop a presence, gaining valuable market research and business practice advice, and positioning a product to meet local tastes, laws and pricing. Generally, commissioned agents and food importers generally distribute foreign goods to supermarkets and grocery stores, but some larger supermarket/hypermarket chains import directly.

As a member of the WTO, AFTA, and APEC, Malaysia implements international accords and policies from these bodies. The majority of Malaysia's requirements governing its imports correspond to WTO or APEC regulations, while others are specific to the country. Of particular importance are The Food Act 1983 and The Food Regulations 1985, which are valid for both imported and locally manufactured food. Although Malaysia remains a free-market economy, it does hold several import regulations, with high tariffs and import licensing requirements for some products, which Canadian exporters should be aware of before entering the market:

• An import licence is required for agricultural products including meat, eggs, all dairy products, wine, plants, cereal flours, and seafood. Import licences are issued by the Department of Veterinary Services Malaysia, or from the Fisheries Development Authority of Malaysia for seafood. For plant and plant products, the Department of Agriculture issues import permits.
• All meat and livestock products (except pork) imported into Malaysia must be certified halal by a Malaysian approved Islamic organization (according to the Malaysian Islamic Development Department (JAKIM)). The Import license, Veterinary Health Certificate, and Halal Certificate must accompany each shipment and be properly labelled.
• Halal certification is also suggested for other non-meat based products such as snacks, confectionery, dairy and bakery products, to provide added marketing value. It is recommended that the halal logo of the approved Islamic organization be visible on the packaging.
• At Malaysia's 34 entry points around the country, all imported foodstuffs are subject to random checking, testing and sampling. If all documentation is present and in order, no delays should occur.
• Transportation, communication, and infrastructure in Malaysia are modern and efficient. Malaysia is increasingly becoming a shipping hub; with the majority of products entering through three main ports: Klang, Penang and Johor. Malaysia also has seven international airports and Kuala Lampur International Airport one of the largest in the region. A modern highway network, roadways linking towns, and railway lines further complement the transportation system.
• Malaysia has many specific packaging and labelling requirements. Labelling of imported food must be labelled in either English or Bahasa Malaysia. It is worthwhile to note that products with labelling such as “Contains No Palm Oil” or “Contains No Tropical Oils” can not be imported to the country, as Malaysia is a strong supporter of its palm oil producing industry.
• Health claim use on labels is quite strict, as are labelling requirements for products that contain pork and alcohol (due to the large Muslim population). Nutritional labelling is mandatory for a number of imported foods, ranging from various milk products, to canned meat, fish, vegetables and fruits, dressings, and drinks. Approval of new food additives can also be lengthy. For more information visit the USDA's Malaysia Exporter Guide Annual: http://gain.fas.usda.gov/Recent%20GAIN%20Publications...pdf
• Imports from non-ASEAN countries are subject to customs and tariffs. Although most import duties range from 0% to 30%, they can go as high as 200% for luxury goods, tobacco, alcohol, processed and high-value food products. The Royal Customs and Excise Department of Malaysia is responsible for the administration of taxes. Visit www.customs.gov.my for more information.
• In order to ensure the success of export ventures, Canadian exporters are encouraged to refer to the following websites for further information regarding tariff, customs and import regulations:  The Canadian Trade Commissioner Service - www.infoexport.gc.ca / DFAIT website - www.dfait-maeci.gc.ca.

For foods which are seen as substitutable, importers and distributors tend to purchase from exporters based on the lowest price. However, importers and distributors will be more country specific in their sourcing for products that are not easily substitutable (such as with beef and lamb), where a higher quality level is needed.

Business Travel Tips

• Typical business hours run the standard Monday to Friday work week, 9:00 to 17:00, and Saturday from 9:00 to 12:30.
• English is widely spoken in Malaysia, although it is recommended to have a translator present if necessary.
• Personal relationships must be established before business relationships can prosper; generally over a meal. However, younger businessmen may be willing to start a relationship with a foreign company without having a personal meeting and instead communicating electronically.
• Keep in mind that Malaysia is religiously and ethnically diverse, both of which can affect diet. There are also many festivals and fasts of which to be mindful.
• Undertaking regular visits to the country will further establish and maintain business relationships.
• Business cards are widely used and should be presented to the other person with both hands, as a sign of respect. One should study the card before putting it down.
• Whenever possible, avoid using the left hand to pass things, as it is considered unclean. Also, avoid pointing and touching, as it is considered disrespectful.
• When shaking hands, do so gently, or greet with a traditional “salam”, which is simply a palm to palm touch, followed by the hand touching the heart. Malay women may not shake hands as a form of greeting.
• Titles (such as “Tan Sri”, “Dato”, “Encik” or Mr., “Cik” or Ms., and “Puan” or Mrs.) are also widely used in Malaysia and attention should be paid to hierarchy.

Agriculture Sector & Policies

With a rising GDP per capita at the forefront of nations in Southeast Asia, Malaysia has an open and developing modern economy. Malaysia focuses mainly on its industry and service sectors; its agricultural sector accounts for 10.1% of GDP. The agricultural sector employs 13% of the Malaysian labour force, or approximately 1.4 million people. However, the sector continues to grow, with agricultural output increasing nearly 4% annually; largely due to growth in livestock, fisheries, and palm oil. Agriculture's contribution to Malaysia's economy is also expected to play an important role in 2010 in raising rural incomes and consumption. Palm oil production, in particular, will play a significant role. Consolidation of the industry may occur, which would create the largest palm oil plantation in the world.

With the Ninth Malaysia Plan of Vision 2020, the Malaysian government hoped to reinvigorate the agriculture sector with policies to enhance the value chain by focusing on high value-added products and large-scale commercial farming, as well as technology, research and innovation, accreditation standards, and infrastructure. Similarly to a number of other countries in the world, such as China and Indonesia, Malaysia has been focusing on domestic production and a national policy goal of “food self-sufficiency”. In order to sustain low inflation rates and maintain affordable food prices, the government also involves itself in the industry through pricing regulations.

Malaysia's main agricultural products include rubber, palm oil, cocoa, rice, timber, coconuts, pepper and subsistence crops. A movement toward organic farming is also occurring in the country. Much of Malaysia's interior landscape is mountainous, stretching out to coastal plains where plant life is plentiful and diverse; thus, 3,650 sq. km of irrigated land exists. Arable land accounts for approximately 5.5% of total agricultural land, and permanent crops make up roughly 17.5% of this land. However, Malaysia depends on imports for 70% of its raw food materials, and imports products such as temperate fruits and vegetables, beef, lamb, cheese, butter, and pasta.

The Government of Malaysia is looking to position itself as a leading halal supplier, and global centre for halal production, marketing, and certification. Malaysia's halal standards are already well-recognized throughout the world, and the government is supporting food manufacturers to export their halal products. However, the domestic agriculture industry is not capable of providing sufficient raw materials, providing opportunities for Canadian suppliers of raw materials.

Malaysia's developing food processing industry accounts for approximately 10% of the country's manufacturing output and has increased demand for bulk imports. In the last ten years, the industry's export capabilities have doubled, making food processing an increasingly important component of Malaysia's agri-food trade. Approximately 3,200 manufacturers are present in the industry, which includes both domestic and international players. Large companies such as Hwa Thai, Yeo Hiap Seng, Nestle, Unilever, and Campbell Soup are present but comprise a minor portion of the businesses operating in Malaysia. Challenges facing the industry include a shortage of raw materials, limited research and development, and thus a lack of technology.

For those interested in targeting food product manufacturers, a list of the main manufacturers present in Malaysia can be found in the Report Agriculture, Food & Beverage Sector Profile – Kuala Lumpur, Malaysia, available from the Canadian Trade Commissioner Service. *You must join in order to access the report www.tradecommissioner.gc.ca/eng/market-report-access.jsp

Contact Information

The High Commission of Canada to Malaysia in Kuala Lampur
Street Address:
17th Floor, Menara Tan & Tan
207 Jalan Tun Razak
50400 Kuala Lumpur, Malaysia
Mailing Address:
P.O. Box 10990
50732 Kuala Lumpur, Malaysia
Tel: (011-603) 2718-3333
Fax: (011-603) 2718-3391
E-mail: klmpr-td@international.gc.ca
URL: www.international.gc.ca/kualalumpur
Hours: Mon-Thru: 0800-1630 ; Fri : 0800-1330
Time Difference: E.S.T.: +13

Mr. John Nojey
Trade Commissioner
Agricultural Technology and Equipment, Agriculture, Food and Beverages, Bio-Industries, Chemicals, Fish and Seafood Products, Information and Communications Technologies, Plastics, Service Industries and Capital Projects
Email: John.Nojey@international.gc.ca

References

Australian Department of Foreign Affairs and Trade – Malaysia Country Brief – 2007
http://www.dfat.gov.au/geo/malaysia/malaysia_brief.html

Australian Trade Commission – Malaysia Profile
http://www.austrade.gov.au/default.aspx?ArticleID=4503

Australian Trade Commission – Processed Food to Malaysia
http://www.austrade.gov.au/Processed-food-to-Malaysia/default.aspx

Canadian Agri-Food Trade System (Data from Statistics Canada)

Canadian Exports and Imports - Industry Canada - 2006
http://strategis.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag

CIA – The World Factbook – Malaysia
https://www.cia.gov/library/publications/the-world-factbook/geos/my.html

Euromonitor – Malaysia: Country Factfile – 2009
http://www.gmid.euromonitor.com

Euromonitor – Consumer Foodservice – Malaysia – 2007
http://www.gmid.euromonitor.com

Euromonitor – Consumer Lifestyles – Malaysia – 2006
http://www.gmid.euromonitor.com

Euromonitor – Consumer Lifestyles – Malaysia – 2009
http://www.gmid.euromonitor.com

Euromonitor – Sweet and Savory Snacks - Malaysia – 2007
http://www.gmid.euromonitor.com

Export Development Canada Economics – Malaysia Country Overview – 2006
http://www.edc.ca/english/docs/gmalaysia_e.pdf

Foreign Affairs and International Trade Canada – Agriculture, Food & Beverage Sector Profile – Kuala Lampur, Malaysia – 2008
http://www.tradecommissioner.gc.ca/eng/market-repor...

Foreign Affairs and International Trade Canada – Asia Pacific – Canada-Malaysia at a Glance
http://www.dfait-maeci.gc.ca/world/embassies/factsheets/Malaysia-FS-en.pdf

Foreign Affairs and International Trade Canada – Merchandise Trade
http://www.dfait-maeci.gc.ca/economist-economiste/statistics-statistiques...

Foreign Affairs and International Trade Canada – Foreign Direct Investment Statistics
http://www.dfait-maeci.gc.ca/economist-economiste/statistics-statistiques...

Foreign Affairs and International Trade Canada – High Commission of Canada to Malaysia – Our Team, Market Prospects, Economic Profile, Import Regulations, Visit Information
http://www.infoexport.gc.ca/ie-en/Office.jsp?oid=79

Foreign Affairs and International Trade Canada – Opening Doors to the World: Canada's International Market Access Priorities – 2006
http://www.international.gc.ca/trade%2Dagreements%2Daccords%2Dcommerciaux/cimar%2Drcami/2006/

Global Trade Atlas – Malaysia Imports and Exports – 2010
www.gtis.com/gta

Government of Canada – Canada-Malaysia Bilateral Relations
http://www.canadainternational.gc.ca/malaysia-malaisie/bilateral_relations_bilaterales...

High Commission of Canada in Kuala Lumpur – Canada-Malaysia Bilateral Relations
http://www.international.gc.ca/kualalumpur/canmalaysia-relations-en.asp

High Commission of Canada in Kuala Lumpur – Doing Business in Malaysia
http://www.international.gc.ca/kualalumpur/page16-en.asp

New Zealand Trade and Enterprise – Malaysia Country Brief – 2006
http://www.nzte.govt.nz/explore-export-markets/South-and-Southeast-Asia/Doing-business-in-Malaysia...pdf

The Economist – Malaysia Country Profile – 2007
http://www.economist.com/countries/Malaysia/index.cfm

The Economist – Malaysia Country Report – 2010
http://www.economist.com/countries/Malaysia/index.cfm

The Economist Newspaper and the Economist Group – Surprise Stimulus – 2009
http://www.economist.com/displayStory.cfm?story_id=13271348

The World Bank Group – World Bank Says Malaysia Emerging From Economic Slump – 2009
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/MALAYSIAEXTN...

USDA Foreign Agricultural Service – Malaysia Exporter Guide Annual 2006 - GAIN Report #MY6042
http://gain.fas.usda.gov/Pages/Default.aspx

USDA Foreign Agricultural Service – Malaysia Exporter Guide Annual 2009 - GAIN Report #MY9033
http://gain.fas.usda.gov/Pages/Default.aspx

USDA Foreign Agricultural Service – Malaysia Food and Agricultural Import Regulations and Standards – Narrative – FAIRS Country Report – GAIN Report #MY9029
http://gain.fas.usda.gov/Pages/Default.aspx

U.S. Department of State – Background Note: Malaysia – 2009
http://www.state.gov/r/pa/ei/bgn/2777.htm

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Images

Canada's Exports fo Bulk, Intermediate and Consumer Foods to Malaysia

PRODUCT	2006	2007	2008	2009	4-YR Total
Bulk	98,500,502	95,702,085	175,763,994	91,736,419	461,703,000
Intermediate	21,143,841	17,828,709	46,560,731	6,696,785	92,230,066
Consumer	10,057,667	16,094,426	17,053,318	16,014,311	59,219,722