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THE COMPETITION IN 1997
U.S. and
Competitor Expenditures on Export Promotion and
Export Subsidies for Agricultural, Forestry and Fishery Products
Malaysia
Malaysia’s climate is uniquely suited for tree crops. Consequently, about three quarters of the country’s crop area is planted to tree crops and nearly all of its agricultural exports are derived from this sector: palm oil, palm kernel oil, forest products, rubber, cocoa, coffee and spices. Since palm oil and timber dominate this production, the government places much of its emphasis on export support programs for these two sectors. Market promotion activities are carried out by quasi-governmental organizations which are funded by export taxes. In 1996 about $45 million was spent to support palm oil and forest product exports. In addition, the government provided export credits of more than $1.6 billion for export from of these products.
Export Promotion Activities:
Export promotion for palm oil is conducted by the Malaysian Palm Oil Promotion Council (MPOPC) and the Palm Oil Research Institute of Malaysia (PORIM).
MPOPC is a quasi-governmental organization that was incorporated in January 1990 assuming the responsibilities and activities previously undertaken by the Palm Oil Promotion Funds Committee. Its sole objective is to promote the marketing of Malaysian palm oil. It is made up of representatives of the palm oil industry, the Ministry of Primary Industries, PORIM and the Palm-Oil Registration and Licensing Authority. It has a world wide staff of 50 people with an office in Chicago and market representatives in Cairo, Caracas, Pakistan, Bangladesh, India and China. Its target markets are in Africa, Latin America, Central Asia and Eastern Europe. It is funded by a tax on palm oil exports and had a 1996 budget of $6.6 million. Its activities included printing and distributing brochures, carrying out market missions and market intelligence visits, advisory services and involvement in trade fairs. It also works with the government on trade policy issues. For example, it worked to support the government’s efforts this past year to reduce China’s import duty on palm oil.
PORIM was established by the Palm Oil Research and Development Act of 1979 to organize and manage research pertaining to oil palm cultivation and palm oil production. It provides technical support to complement MPOPC’s market promotion activities. This support is instrumental in developing new markets and consolidating established ones. Its services include technical assistance, collaborative research, trouble- shooting and technical seminars and exhibitions on the importation, handling, processing and usage of palm oil in various products. PORIM also works closely with the Ministry of Primary Industries and Malaysian plantation companies to develop oil palm production overseas. It currently has a staff of 560 officers and a budget, supported by export taxes, of $16.7 million.
Export Promotion for forest products is conducted by the Malaysian Timber Industry Board (MTIB) and the Malaysian Timber Council (MTC).
MTIB is a statutory body accredited by the Ministry of Primary Industries. Established in 1973 by an Act of Parliament, it exercises overall control of timber trade and coordinates development within the different market sectors of the timber and timber products industry. The MTIB total budget in 1996 amounted to $2.4 million. There is a marketing division within MTIB that is responsible for trade development, market research, promotion and marketing advisory services. However, of late, the marketing and promotion function has overlapped with the activities carried out by MTC.
MTC was established in January 1992 with the main purpose of responding to the worldwide anti-tropical timber campaign. Currently, it is involved in all major aspects of market promotion. Its mission is to promote the development of the timber-based industry as well as the marketing of timber products. Its budget in 1996 amounted $29.6 million. Other regional forest product promotion organizations include the Sarawak Timber Industry Development Corporation and the Timber Association of Sabah.
Both MTIB and MTC are funded through an export levy on timber and timber products, which varies depending on the tree species.
MTC carries out programs such as printing and distributing printed materials (including calendars) and participating in trade fairs, excursions and trade missions. In 1996/97 MTIB/MTC participated in various exhibitions in Dubai, Budapest, Zagreb, Cologne, Tokyo and in the United States. They also organize the annual Malaysian International Furniture Fair, most recently held in Kuala Lumpur in March, 1997. Long term promotion targets for the Malaysian industry are Asia-Pacific markets as well as the emerging markets in the Indian Subcontinent, Eastern Europe and the Central Arab Republics.
Credit Programs:
There are two primary credit programs to facilitate Malaysia’s agricultural exports, the Export Credit Refinancing (ECR) Scheme and the Palm Oil Credit and Payment Arrangement (POCPA).
ECR is a short-term credit program administered by the Central Bank for eligible manufactured goods and selected primary commodities. Loans are extended by commercial banks at rates lower than commercial rates, currently 6.7 percent compared to the Commercial Base Lending Rate of 9.45 percent. Credit for 80 percent of value is covered pre-shipment or 100 percent post-shipment. Pre-shipment credits are available for a maximum term of four months, while post-shipment credits are available for six months. Total loans to the agricultural sector in 1996 included $1.25 billion for palm oil, $359 million for forest products and 69 million for the livestock and vegetables sectors.
POCPA was established in January 1990 to promote palm oil exports to developing countries. Interest rates are based on the London Interbank Offered Rate with a repayment period of two years. To date, about $180 million has been disbursed under this arrangement. It has helped to encourage palm oil exports to Algeria, Iran , Iraq, Myanmar, Pakistan, China and Kazakhstan. Targeted potential markets include Kyrgystan, Sudan, Bangladesh and Zimbabwe.
Competitor Activity:
Competitor promotion expenditures are estimated to be slightly more than $1.1 million, mainly in for fresh fruits and for meat. However, expenditure information is not available for dairy products, wine, processed fruits and vegetables or tree nuts.
Australia and New Zealand are the main competitors in the fruit sector. The Australian Horticultural Corporation and the Australian Apple and Pear Growers Association spend about $380,000 annually to promote apples, pears and oranges under the "Australia Fresh" umbrella brand. Promotion activities include print and television advertisements, retail promotions and competitions and school nutrition programs. New Zealand heavily promotes apples and kiwifruit. About $150,000 is spent on kiwifruit promotion in the ASEAN region and $300,000 on apples. Zespri International, the marketing board for kiwifruit, has an aggressive in-store promotion program with retail stores, paying them to display its point-of-sale material. This presence is reinforced with television advertising during kiwifruit season. Apples are promoted in a similar manner. France also promotes apples in Malaysia, although most of its campaign is directed at importers. There is little export promotion for canned fruits and vegetables, although South Africa has organized trade missions and conducted exhibitions in leading hotels to introduce their products to the Malaysian market.
The main nuts imported into Malaysia are almonds and pistachios. California is the main supplier of both, although Iran is aggressively promoting its pistachios. The Rafsanjan Pistachio Producers Cooperation has recently set up a regional office in Kuala Lumpur and has stepped up its promotional activities by participating in trade exhibitions and in-store promotions.
Wine and other alcoholic beverages are not allowed to be advertised in Malaysia. However, wine promotions in the form of wine tasting receptions and menu promotions in leading hotels and western-type restaurants are conducted by foreign missions such as the French and Australian Embassies.
Meat promotions are conducted by Australia, New Zealand and Argentina. The biggest campaign is run by the Australian Meat and Livestock Corporation, which spent $100,000 in Malaysia during 1996. In addition to food shows and in-store and hotel menu promotions, Australia conducts trade service programs such as butchery training and a contest for butchers and chefs and incentive programs for importers and supermarket and food and beverage managers. It also produces and distributes educational material such as a cooking video and recipes. New Zealand and Argentina each spent about $50,000 on Malaysian promotion activities for their meat products. The New Zealand Meat Producers Board regularly conducts menu promotions with leading hotels and restaurants and organizes trade tours in New Zealand for importers, retailers and food and beverage managers. Argentina has recently started promoting its beef in Malaysia following an exchange of visits between Argentine exporters and Malaysian importers. This program was kicked off with a meat and wine promotion at the residence of the Argentine Ambassador. Argentine Angus beef is now regularly featured in menu promotions with leading hotels and steakhouses and in retail stores.
Milk products are locally produced in Malaysia, mainly by reconstituting imported ingredients from Australia and New Zealand. There is keen competition among companies to develop and market products to keep up with the changing demands of consumers, particularly for fluid milk and milk drinks. Promotional programs are not carried out extensively for imported dairy products such as cheese, butter and ice cream, although Kraft has been active in promoting its cheese products from Australia.
The Australian and Canadian Wheat Boards dominate the Malaysian market. The Australian Board is known to have focused exceptional attention on this market and makes regular trade servicing trips. It also sponsors Malaysians on orientation trips and hand-on training in flour-milling in Australia. The Canadian Wheat Board also conducts occasional trade servicing trips to Malaysia. With the long term contracts and aggressive pricing that are available to export monopolies, these two boards have effectively reduced U.S. wheat shipments to Malaysia to a marginal level.
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