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SEMINAR ON OLEOCHEMICAL INDUSTRY IN MALAYSIA: Downstream Expansion & Sustainability C H E M I C A L A N D A D V A N C E D M A T E R I A L I N D U S T R I E S D I V I S I O N 1

CONTENT OUTLINE:  About MIDA  Malaysian Investment Performance  Chemical & Advanced Material Industries Division  A Global Scenario of Oleochemical Industry  Oleochemical Industry In Malaysia  Oleochemical Projects Approved by MIDA  Oleochemical Value Chain in Malaysia  Current Policy  Challenges 2 2 Invest in Malaysia > Your Profit Centre in Asia

SERVICES PROVIDED by MIDA Services (Initial Stage) • Meetings with State Authorities • Business matching with Malaysian companies • Visit to companies/suppliers • Visit to potential locations Evaluating & Granting Approval Project Implementation Stage • Manufacturing License • Handhold and assist investor until • Tax Incentives project is implemented • Expatriate Posts • Import Duty Exemptions 3 3 Invest in Malaysia > Your Profit Centre in Asia

MIDA WORLDWIDE NETWORK Stoc ockholm holm London London Frank Fr ankfur furt Muni unich ch Chica Chi cago go Pari aris San an Jos Jose Seoul oul Bos Boston on Milan an Tok okyo yo Shanghai hanghai New w Los Los Ang Angeles Osak Os aka Guangzhou uangzhou York ork Houston Hous on Duba ubai Taipei aipei Mum umba bai Singapore ngapore Sydney ydney 22 Overseas Centres 4 Invest in Malaysia > Your Profit Centre in Asia 4

MIDA’S STATE OFFICES ALOR SETAR KOTA BHARU KOTA KINABALU KUALA TERENGGANU PENANG IPOH KUANTAN MIDA HEADQUARTERS SEREMBAN MELAKA JOHOR BAHRU KUCHING 5 Invest in Malaysia > Your Profit Centre in Asia 5

ESTABLISHMENT OF 12 NATIONAL KEY ECONOMIC AREAS (NKEAs) Wholesale Tourism and retail Financial Business services services Oil, gas NKEAs Greater KL & energy selected which can materially impact Electrical & economic Agriculture electronics growth Comms Content Education Infrastructure Palm oil Healthcare 6

FDI INFLOWS TO MALAYSIA BY SECTOR the largest rgest contributor contributor Manufac nufacturing turing secto tor con onti tinues nues to to b be th to to FDI inflo lows 2012 2013 Percentage of Growth Sector (%) US$ million Agriculture, Forestry and 215.7 104 328 Fishing Mining and Quarrying 3,146 3,643 15.8 Manufacturing 4,282 4,762 11.2 Construction 328.8 68 292 Services 42.0 2,568 3,647 TOTAL 24.6 10,169 1,2671 Source: DOSM 7 7 Invest in Malaysia > Your Profit Centre in Asia

TOTAL INVESTMENTS APPROVED IN 2013 USD 66 billion 2013: USD 66 billion Approved investments A new record for Increased by approved investments 29% 192,000 2012: USD 54 billion Jobs Created 72.5 : 27.5 5,669 Domestic-to-Foreign investment ratio Projects Approved 8 8 Invest in Malaysia > Your Profit Centre in Asia

MANUFACTURING SECTOR on ’ s share E&E, Transp ansport, ort, Petr trol oleum eum & Chemica mical l Industr stries ies con ontri tribu bute te th the lion are of of approve oved d invest vestments ents in 2013 USD Billion Scientific & Measuring Fabricate Equip. Others d Metal Others Plastic Transport E&E Machinery Fabricated 0.9 & Equip. 1.3 0.4 Metals 3.0 0.4 2.6 Non- 0.4 0.6 Rubber Metalli 0.4 0.7 c 0.4 Machinery & Equip. 2013 2012 0.6 1.1 Rubber 2.0 1.1 2.1 USD 15 bil. USD 13 bil. Transport Food 1.3 Chemical Food 1.2 1.9 1.7 Basic 2.0 1.3 1.8 Metals Petroleum Basic Metal Petroleum Chemical E&E 9 9 Invest in Malaysia > Your Profit Centre in Asia

CHEMICAL AND ADVANCED MATERIALS INDUSTRIES DIVISION 10 10 Invest in Malaysia > Your Profit Centre in Asia

Subsectors under the Purview of the Division CHEMICAL & CHEMICAL PRODUCTS PETROLEUM PRODUCT OLEOCHEMICAL INCLUDING PETROCHEMICAL CHEMICAL & ADVANCED MATERIALS ADVANCED PLASTICS MATERIALS 11 11 Invest in Malaysia > Your Profit Centre in Asia

12 12 Invest in Malaysia > Your Profit Centre in Asia

Major World Producers of Palm Oil (2013) Million tonnes 30.00 24.62 25.00 Total global crude palm oil production in 2013 : 50.47 19.22 20.00 million tonnes 15.00 10.00 5.00 1.66 1.6 0.9 0.91 0.53 0.52 0.00 Indonesia Malaysia Thailand Colombia Nigeria PNG Ecuador Others Source: MPOB website, 2013 Statistics, Oil World Statistic Update (March 2013) 13

Opportunities Rising cost of doing business & raw materials in Europe Natural/plant based Palm oil is proven to products, greener be healthy and trans alternatives to fats free petrochemical Commitments towards the High demand for Responsible Care sustainable & bio Initiative with gradable products regulations under REACH Programme 14

Global Scenario  Significant expansion in production of fatty acid and fatty alcohol capacities in the Asia region.  Asia has the highest capacity in the world of which 65% comes from SEA region (Malaysia & Indonesia)  Major oleochemical producers in the world market : KLK, Oleon, Musim Mas, Croda, Emery, IOI, Wilmar. 15

Major Producers of Basic Oleochemical in the world 16

Oleochemical Industry in Asia  Asia creates large market for Oleo Industry major consumer & producer of oleochemical products. 68% of the world consumption and 60% of world production.  Vertical Integration Large plantations have started to invest in downstream feedstock processing 17

Plantation companies who have ventured into downstream oleochemical activities through Joint Ventures 18

OLEOCHEMICAL INDUSTRY IN MALAYSIA…. 19

SUCCESS STORY – PALM BASED OLEOCHEMICAL INDUSTRY By 2020 Innovation, R&D Driven Started Specialty Oleo Today producing basic Chemical Oleo Derivatives One of the largest basic oleo chemical 1980s producers with 20% Resource-Based of global production Food Industries 1970s Source : Economic Reports/Bank Negara Annual Report, Malaysia 11/12 20

Oleochemical Industry In Malaysia  Comprises of the basic oleo chemical and oleochemical derivatives subsector.  Malaysia is the largest producer of oleochemicals in the world : 20% of global capacity.  Almost 16 oleochemical plants are established in Malaysia.  Major Home Grown Players : IOI, KLK, Emery, Natural Oleochemical, Oleon, FGV .  Malaysia has the raw material but still lack on the technology innovation.  Related supporting regulation bodies;  MPIC  MPOB  MPOC 21

Oleochemical Projects Approved by MIDA 22

Approved Oleochemical Projects in 2013 4 Projects RM482 Million Domestic 283 Job Investment : Opportunities RM333 Million Foreign Investment : RM149 Million 23

Approved Oleochemical Projects From January- May 2014 8 Projects RM 13.8 billion Domestic 2,791 Job Investment : Opportunities RM6.2 billion Foreign Investment : RM7.6 billion 24

OLEOCHEMICAL VALUE CHAIN IN MALAYSIA 25

Oleochemical Value Chain FEEDSTOCK CONSUMER BASIC DERIVATIVE SPECIALTY PRODUCTS MAJOR OPERATING COMPANIES IN MALAYSIA Plantation /Millers ME,Fatty Acid, Sulfo Fatty Acid Food Industry, Toiletries EGMS, Methyl Ester Ester, Alkyl Confectionary, Pharmaceutical Fatty Ester, Sulphonate (MES) Chlorides, Fatty Oil & Gas, Dairy Products Glycerine Methyl Ester Acid Ethoxylates 26

Food Surfactants * Emulsifiers Bio lubricants Cosmetics Existing and Agro Emerging Chemicals Soaps and Applications Detergents Glycerol Additives Surfactants Biopolyols EXISTING EMERGING * better improved performance

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Investment Tax Allowance (ITA) Second Round of Incentive for 60 % or 100 % on resource based qualifying capital industry expenditure for 5 or 10 years Pioneer Status (PS) production > 100 MT per day, Income Tax comply to the EIA Exemption (Environmental Impact 70 % or 100 % for 5 or TAX Assessment) 10 years INCENTIVE CATEGORY: A. General List  IV Manufacture of Palm Oil Products and their Derivatives; Oleochemical or oleochemical derivatives or preparations. B. Small Scale Companies List  V. Manufacture of Oil Palm products and their derivatives; processed products from palm oil / processed products from palm from biomass/waste/by product 29

Challenges 35 30

Thank you

PROMOTED INDUSTRY

Global Oleochemical capacity by Region from 2005- 2013 (000’ tonnes) 33

MALAYSIA HAS SIGNED SEVEN (7) BILATERAL FTAs 34

HUMAN CAPITAL • 20 Public And 21 Private Universities :- (6 Chemical Engineering & UKM has a specific course on Oleochemicals) • 400 Colleges, Polytechnics, Industrial Training Institutes and Private Colleges • 7 reputable foreign University branch campuses in Malaysia  University of Nottingham Malaysia  Curtin University Sarawak  University of Southampton Malaysia  Newcastle University Medicine Malaysia  Heriot-Watt University Malaysia  Swinburne University Of Technology, Sarawak  Monash University Malaysia (source: MOHE 2013) 35 35 Invest in Malaysia > Your Profit Centre in Asia