Expenditures and Activities of
Cairns Group Countries
Malaysia’s hot, humid climate and reliable year-round rainfall make it uniquely suited for tree crops. Consequently, about three-quarters of the country’s crop area is planted to tree crops. Nearly all of its agricultural exports are derived from this sector, such as palm oil, palm kernel oil, forest products, rubber, cocoa, coffee and spices. Export levies, paid by the industry, fund most of the export promotions. Marketing expenditures go mainly to palm oil and forest products, the two main commodities competing with U.S. agricultural products. There are no direct export or transportation subsidies for agricultural exports.
Export Promotion Activities
The Malaysian Palm Oil Promotion Council (MPOPC) and the Palm Oil Research Institute of Malaysia (PORIM) conduct export promotions for palm oil sector.
Incorporated in January 1990, MPOPC, a quasi-governmental organization, assumed the responsibilities and activities previously undertaken by the Palm Oil Promotion Funds Committee. Its 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 34 people, with offices in the United States, Egypt, Pakistan, Brazil, China, Bangladesh, India, South Africa, and Austria. Target markets are Africa, Latin America, Central Asia, and Eastern Europe. It is funded by a tax on palm oil exports and had a 1998 budget of about $4.4 million. Its activities include printing and distributing brochures, carrying out market missions and market intelligence visits, providing advisory services and facilitating trade fairs. It also works with the Malaysian government on trade policy issues.
PORIM was established by the Palm Oil Research and Development Act of 1979. It organizes and manages research pertaining to palm oil cultivation and production. It complements MPOPC’s market promotion activities with technical support. Its services include technical assistance, collaborative research, trouble shooting, and technical seminars. It also conducts exhibitions on the importing, handling, processing, and using of palm oil in various products. PORIM works closely with the Ministry of Primary Industries and Malaysian plantation companies to develop overseas palm oil production. Given the ongoing expansion of Malaysia’s palm oil production, budgets for both MPOPC and PORIM should continue to expand. Combined, these two organizations, with their tight links to the government, provide an effective, world-class promotion industry.
The Malaysian Timber Industry Board (MTIB) and the Malaysian Timber Council (MTC) conduct export promotion for forest products. MTIB is a statutory body accredited by the Ministry of Primary Industries, established by an Act of Parliament in 1973. It exercises overall control of timber trade and coordinates development of the timber industry. The MTIB total budget in 1998 amounted to $1.1 million. A marketing division within MTIB is responsible for trade development, market research, promotion, and marketing advisory services. Recently, the marketing and promotion function has overlapped with the activities carried out by the Malaysian Timber Council.
The MTC was established in January 1992, in response to the worldwide anti-tropical timber campaign. Currently, it is involved in all major aspects of market promotion. It promotes the timber industry and its products. MPC’s budget in 1998 amounted $13 million. Both MTIB and MTC are funded through an export levy on timber and timber products, which vary by species. Other regional forest product promoters include the Sarawak Timber Industry Development Corporation and the Timber Association of Sabah.
MTC prints and distributes materials, and participates in trade fairs and missions. It organizes the annual Malaysian International Furniture Fair. In 1998/99, MTIB and MTC participated in various exhibitions in Shanghai, Dubai, Melbourne, Paris, Cologne, and the United States. Long-term promotion targets are Asia-Pacific markets as well as the Indian Subcontinent, Eastern Europe, and the Central Arab Republics.
Malaysia is also strengthening its marketing efforts in the Far East and the Middle East by setting up regional marketing offices in Shanghai and Dubai. The strategically located Shanghai office will cover Korea, Japan, Taiwan, and China. The Dubai office will cover Kuwait, Yemen, Saudi Arabia and the United Arab Emirates, and serves as a gateway to markets in East and South Africa and Central Asia.
Malaysia facilitates agricultural exports with two credit programs: 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 base lending rate. 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 were $1.25 billion for palm oil, $359 million for forest products and 69 million for the livestock and vegetable 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 two-year repayment period. To date, about $180 million has been disbursed to encourage palm oil exports to Algeria, Iran , Iraq, Myanmar, Pakistan, China, and Kazakhstan. Targeted potential markets include Kyrgystan, Sudan, Bangladesh, and Zimbabwe.
Australia and New Zealand promote primarily dried milk products for reconstitution. Companies compete to develop and market products to meet consumers’ demand for fluid milk and milk drinks. Promotional programs are not extensive for imported dairy products such as cheese, butter, and ice cream; although Kraft has been active in promoting its cheese products from Australia.
Australia and New Zealand are the United States’ main competitors in the fruit sector. The Australian Horticultural Corporation and the Australian Apple and Pear Growers Association spend about $330,000 annually to promote apples, pears and oranges under the Australia Fresh umbrella brand. They promote products through print and television advertisements, retail promotions, competitions, and school nutrition programs. New Zealand promotes apples and kiwifruit heavily. About $300,000 is spent on apple promotion in the Association of Southeast Asian Nations (ASEAN) region. Zespri International, the New Zealand marketing board for kiwifruit, conducts in-store promotions during the fruit season. Apples are promoted in a similar manner. France promotes apples in Malaysian retail stores and wet markets, emphasizing that they are grown using minimal pesticides. 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.
Both Australia and New Zealand Meat conduct meat promotions. The Australian Meat and Livestock Corporation (AMLC) runs the biggest campaign, with and annual budget estimated at $100,000. In addition to food shows and in-store and hotel menu promotions, Australia conducts butchery training for importers and retailers. Incentive programs allow importers, and supermarket and food and beverage managers to visit Australian meat packing houses. AMLC develops recipes, that are distributed at various promotion locations. The New Zealand Meat Producers Board spent around $50,000 on promotional activities in 1998. It conducts menu promotions with leading hotels and restaurants and organizes trade tours in New Zealand for importers, retailers, and food and beverage managers.
Malaysia does not allow advertisement of wine and other alcoholic beverages. However, wine tasting receptions and menu promotions in leading hotels and western-type restaurants are permitted and conducted by foreign missions, such as the French and Australian embassies.
The Australian and Canadian wheat boards dominate the Malaysian market. The Australian Wheat Board focuses exceptional attention on this market and makes regular trade servicing trips. It also sponsors orientation trips and hands-on training in flour-milling in Australia. The Canadian Wheat Board also conducts occasional trips to Malaysia. With the long-term contracts and aggressive pricing available to export monopolies, these two boards have effectively reduced U.S. wheat shipments to Malaysia to a marginal level.