roadshow 2015 insights of the plastics industry current profile of the malaysian plastics industry

Roadshow 2015

Insights of the Plastics Industry

CURRENT PROFILE OF THE MALAYSIAN

PLASTICS INDUSTRY

Contents

Minimum Wage Issues

Labour and Foreign Workers Issues

Energy cost

Caring for the Environment

Key Data for the Malaysian Plastics Industry

2010 2011 2012 2013 2014Malaysia’s gross domestic product (GDP) growth

7.2% 5.1% 5.6% 4.7% 6.0%

Number of plastics manufacturers

1,400 1,400 1,350 1,350 1,300

Employment 71,500 74,000 74,000 76,000 82,000

TurnoverRM15.8b(+8%)

RM16.25b(+2.1%)

RM17.16b(+6.5%)

RM17.94b(+4.5%)

RM19.37(+7.3%)

ExportRM9.4b(+14%)

RM10.15b(+6%)

RM10.05b(-1%)

RM10.69b(+6.4%)

RM11.94b(+11.5%)

% of export against turnover 59% 62% 59% 60% 62%

Resin consumption1.89m MT(+11%)

1.98m MT(+5%)

2.04m MT(+3%)

2.10m MT(+3%)

2.15m MT(2.5%)

Per capita consumption of resin

67kg 68kg 69kg 70kg 70kg

Export/Sales Turnover Ratio

TurnoverRM billion

E/TRatio

Minimum Wage Issues

Minimum Wage Policy and Shortage of Workers Malaysia is technically having “full employment”

as the unemployment rate is only 2.7%

Shortage of workers …. both skilled and unskilled. High dependency on foreign workers is due to circumstances, rather than choice.

However, employment of foreign workers is increasingly difficult to employ due to arbitrary government policies.

Minimum Wage Policy and Shortage of Workers The implementation of MW in 2014 has

resulted in a 30% to 40% wage hike for general workers, mainly foreign workers.Total cost impact depends on type of production processes, size of company and the dependency on foreign labour.

Minimum wage rates are subjected to review at least once every two years. The rates are currently being reviewed.

Chronology of Events on Minimum WageDates Description

21 May 2014 Participated in the Consultative Panel Discussion on "Review on Minimum Wage Order 2012", organised by SERC Sdn Bhd, a research arm of the Associated Chinese Chamber of commerce & Industry Malaysia (ACCCIM). Mr Lim Kok Boon presented a paper on "A Study on the Impact of the Various Costs Increase on the Malaysian Plastics Industry".


29 May 2014 Submitted the 10-point proposals on Minimum Wage Order and other related issues to National Wage Consultation Council NWCC). The main proposals in the submission were:

The minimum wage (MW) of RM900 for Peninsular Malaysia and RM800 for Sabah/Sarawak be maintained

The existing 2-tier MW policy, is a too simplistic “a one size fits all” approach. The MW must be broadened into more regions and identified into different key industries.


29 May 2014 The composition of the MW of RM900 MUST be reviewed to accommodate Attendance and Shift Allowances.

Employers should be allowed to deduct the levy and cost of accommodation for foreign workers without having to obtain prior approval from the authority.


2 June 2014 MPMA issued a press release on the 10-point proposals. It was widely published in the major local newspapers on the following day.


20 August 2014 MPMA attended a Focus Group Discussion with the Technical Committee at NWCC. MPMA presented its views and proposals on MW.


15 Dec 2014 The Malaysian Employers Federation (MEF) called for a meeting to discuss the latest developments and issues relating to the MW in Malaysia. It was reported that there were discussions at NWCC that the revised MW is expected to be raised to RM1,200 and possibly implemented in 2015/2016.

MEF had called for the meeting to 'brainstorm' on inputs to refute the proposal as well as to have evidence that MEF consulted many associations/chambers, etc, to have the necessary feedback to NWCC.


Dates Description

18 July 2014 MITI called a consultation session with the industry sectors to discuss the proposed amendments on policies on foreign workers for the manufacturing sector and minimum wage.

23 July 2014 MPMA was invited for a joint meeting organised by ACCCIM.

24 July 2014 MPMA Central Committee called a brainstorming session to identify possible solutions on these issues.


Description

MPMA’s suggestions are summarised as follows:

MITI’s Proposals, based on Frost & Sullivan's Recommendations

MPMA’s Suggestions

1. Increase the levy to RM1,750 in 2015, additional 40% in 2017 (RM2,450), 2019 (RM3,450) and 2020 (RM5,000).

The increases should not be more than 5% per annum: 2015: RM1,3002017: RM1,4002019: RM1,5502020: RM1,650


Description

MITI’s Proposals, based on Frost & Sullivan's Recommendations


2. Cap the number of foreign workers to 20% of workforce by 2020. For the four worst affected sectors (wood & furniture, rubber, plastics and textile) it will be 2025.

Should not have the restriction as the increase in levy will deterrent employers from taking in more foreign workers.

Government extends the RA claimable period by allowing manufacturing companies to claim on RA on their reinvestment expenditure with no time limit. More financial assistance in the form of grants and soft loans are required.

Government provides more assistance in terms of foreign expertise, syllabus development and financing to develop higher skilled workers for the industry.


DescriptionMITI’s Proposals, based on Frost & Sullivan's Recommendations


3. Reduce the eligibility ratio to 4:1 (4 LWs for one FW) by 2020 and 2025 for the four worst affected sectors.

Maintain the existing ratio, review it once every three years.

4. Increase the minimum wage to RM1,500 by 2020.

Increase by RM100 in every two years:

2014: maintain at RM900

2016: RM1,000

2018: RM1,100

2020: RM1,200

Levy collected should be channeled back to the industry as incentive for automation and technology upgrading including training and development that could reduce dependence on FW.

Labour and Foreign Workers IssuesDates Description

1 August 2014 The above proposals were sent to MITI and copied to other relevant authorities including MOHR, PEMANDU, EPU and NWCC.

8 October 2014 MPMA participated a joint meeting organised by the Federation of Malaysian Manufacturers (FMM) to discuss a Market Based Levy Mechanism for Foreign Workers. The discussion focused on the four proposals made by Frost & Sullivan to MITI.


10 November 2014

FMM sent the Joint Business Sector Position on Foreign Workers Levy, Minimum Wage and Employment Insurance to MITI. The Joint Position Letter was represented by 13 trade associations, including MPMA. Summary of the Joint Position Letter is as follows:

FW - Employment of FWs should be market driven, transparent and with certainty.

Levy - Levy should be ploughed back to help industry automate and upgrade using the HRDF model.

MW - MW rate should be maintained at RM900 with a further review of its definition.

Employment Insurance (EL) Scheme - Instead of introducing the EL scheme, amend the Companies Act to give priority of payments to workers over all creditors.


12 Dec 2014 A meeting with YB Dato’ Lee Chee Leong, Deputy Minister of MITI was held. Also present at the meeting were senior officers from MITI, MIDA, Ministry of Labour, Immigration Department and other relevant agencies. MPMA rebutted on the findings and proposals by Frost & Sullivan on foreign labour, associations being inactive, etc. MITI responded that the relevant Ministries and Committee would study MPMA's proposal in detail.


21 Jan 2015 The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) has invited about 30 trade and industry associations, including MPMA, for a joint meeting to discuss on foreign workers and human resources issues, including the review of minimum wage.

Summary of the meeting is as follows:

All present at the meeting were against the purported increase in MW to RM1,200 per month.

All supported the call to the Government to maintain the MW status quo, since SMEs had just implemented MW only a year ago.

New Mandatory Online Renewal Of Foreign Workers Permit Through MyEGDates Description

5 January 2015 The Immigration Department implemented the following:

New Mandatory Online Renewal of Foreign Workers’ Work permits (PLKS) solely through MyEG only.

MyEG will impose an Online Service Charge of RM38 per online renewal of PLKS on top of the RM125 processing fee per worker payable to the Home Ministry of Home Affairs (KDN) for the renewal of PLKS.

Closure of public counter service at the Immigration Department for the renewal of PLKS.

New Mandatory Online Renewal Of Foreign Workers Permit Through MyEG

Dates Description

9 January 2015 ACCCIM called for a meeting with trade associations to deliberate on the issues.

12 January 2015 A Joint Media Conference was organised to present the views and proposals of the business community across all industries in a Joint Memorandum summarised per below:

The business sector is not against online renewal of PLKS but the online service must not be made mandatory.

Government should give options to employers to either choose online renewal or over-the-counter renewal service as:

i. Some employers may not be computer illiterate and needed over-the-counter-service to help them with the PLKS renewal.

ii. Multiple renewal over-the counter are processed as consolidated application process en bloc whereas online renewal requires individual keying-in one by one.


12 Jan 2015 The requirement to pay additional RM38 for online renewal to MyEG is unfair as the processing fees was increased from RM50 to RM125 in April 2014, representing a massive increase of 150%. Since KDN (Kementerian Dalam Negeri) has effectively “outsourced” the renewal to MyEG, it is only equitable that KDN should pay the RM38 to MyEG for this service from the RM125 it has collected.

In 2010, the Government introduced the Competition Act 2010 to prevent a person and/or a group of persons from dominating in any trade or business. Ironically, the Government now allows MyEG to monopolise the renewal of PLKS online by making it mandatory. This has created a bad precedent whereby other services may similarly be made mandatory with high charges being imposed to the disadvantage of the public/business community.

Joint Media Conference at ACCCIM on 12 January 2015


17 January 2015 YB Datuk Ir Dr Wee, a Minister in the Prime Minister's Department, announced to the press that the Cabinet would discuss the matter on 21 January 2015.

26 January 2015 The various Associations felt the response from the Government on the issue is not being addressed expeditiously. A meeting was arranged to meet with Datuk Paul Low, Minister in the PM's Department, responsible for promoting Governance and Integrity. Mr Lim Kok Boon and a few leaders from ACCCIM/FMM and the SMI Association attended the meeting. It was conveyed to Datuk Paul Low that:


26 Jan 2015 Renewal of Foreign Workers Permit (PLKS) using MyEG Online System and the Foreign Workers Centralized Management System (FWCMS) by Bestinet Sdn Bhd must not be mandatory.

The two systems are still under the "Proof of Concept" stage. In this regard, it is not equitable to have these systems being made mandatory without the public being given the option of using the over-the-counter service provided by the KDN.


26 Jan 2015 The Associations/Chambers are supportive of migrating to e-government for greater efficiency, transparency and accountability. E-government would also lead to a reduction in cost and an improvement in productivity. However, whilst the government agencies may outsource their respective functions to external specialised entities, the cost arising therefrom must not be passed onto the consumer/public.

All matters relating to the employment of foreign workers, whether online or over-the-counter, to be managed by the Ministry of Human Resources.


28 Jan 2015 A press conference was held in ACCCIM to express the above. A joint press statement from 32 trade associations/chambers was issued in conjunction with the press conference.

26 Feb 2015 Another press conference was held in ACCCIM, calling on the Government to continue keeping Immigration Department counters open for foreign worker permit renewals after the 28 Feb deadline. Representatives from 34 major business groups urged the authorities to allow them the option of doing the renewals at counters or online.

Joint Media Conference at ACCCIM on 28 January 2015

Joint Media Conference at ACCCIM on 26 February 2015


26 Feb 2015 Transport Minister Datuk Seri Liow Tiong Lai announced that the Cabinet has decided to allow the Immigration Department counters for foreign workers’ permits to be opened beyond 28 February 2015. The counters will remain open until a more comprehensive plan to resolve the issue is achieved.

Energy Issue

Rising Energy Cost

Revisions of TNB Average Electricity Tariff

Source: Energy Commission of Malaysia

Rates are subjected to further increases due to the Government’s subsidy rationalisation programme

Increasing Energy Costs

15% increase in electricity tariff beginning January 2014 (electricity being a major cost component). Despite the 5.8% reduction effective March 2015, the new tariff is still about 8% higher than the 2013 tariff rates.


In addition, Energy Commission (EC) informed that the Special Industrial Tariff (SIT) would be phased out gradually. In fact, in January 2014, the discount rate of 5% had been reduced to 3% and by January 2017, SIT will be phased out completely.


The ruling that Tariff D users who wish to apply for incentives/discounts must employ an Approved Energy Manager as consultant to monitor usage. The cost of employing an Energy Manager would outweigh the incentives/discount received.


EC also announced that Enhanced Time of Use (ETOU) Tariff Scheme, a modification to the existing Time of Use Scheme, would be introduced in 2015.

Under the Scheme, the off-peak rates would be further divided into off-peak (more discount) and mid off-peak (lesser discount), but it is limited to Tariff C (Commercial) and Tariff E (medium to large industrial users).


Currently, the Time of Use Scheme with peak and off-peak tariffs does not cover Tariff D users. In the ETOU, again, EC has left out the Tariff D users.

The fact that 90% of MPMA members being SMEs and classified as Tariff D users, they will not be eligible for the ETOU discount.

Energy Commission – Electricity Tariff IssuesIssue MPMA’s Proposal

9 Oct 2014 Attended the meeting/seminar with the stakeholders on 9 October 2014, organised by the Energy Commission (EC). Below are the highlights of the meeting:

Tariff rates: The rates would increase further in view of the Government’s subsidy rational programme. The average rate across all the industrial and commercial sectors is expected to increase from the current rate of 38.53 cents in 2014 to 43.77 cents in July 2017.


9 Oct 2014 Special Industrial Tariff (SIT) for those who qualify: The SIT would be phased out gradually. In fact, in January 2014, the discount rate of 5% had been reduced to 3%. By January 2015, more stringent application and approval process would be introduced. One of the requirements is that applicants must engage an Approved Energy Manager as consultant. The new requirements would discourage more qualified companies from applying for the SIT because additional cost and time would be incurred for engaging the Energy Manager. The 3% SIT discount may not even be justifiable for the cost of engaging an Energy Manager. All applications must be forwarded to EC for evaluation and approval. This means that the approval process would take an even longer time and more cumbersome.


9 Oct 2014 The Enhanced Time of Use (ETOU) Tariff Scheme would be introduced in 2015. Under the Scheme, the off-peak rates would be further divided into off-peak (more discount) and mid off-peak (lesser discount), but it is limited to Tariff C (Commercial) and Tariff E (medium to large industrial users). Again, EC had left out the Tariff D users. MPMA had done an analysis on this and was of the view that if ETOU is extended to Tariff D users, it would provide a saving of approximately 30% to the users because of the low tariff rates for off-peak and mid off-peak.


19 Dec 2014 Submitted a letter to the Prime Minister, proposing the following:

The Enhanced Time of Use (ETOU) Tariff Scheme be extended to Tariff D users so that they are eligible for off-peak an id off-peak rates.

Off peak time should also be extended to cover Saturdays, Sundays and Public Holidays for all categories of users (to be compatible with Thailand’s energy incentives to manufacturers).

The requirement for an Approved Energy Manager for Special Industrial Tariff application be waived.


9 Jan 2015 An acknowledgement from the Prime Minister’s Office was received informing that the letter had been forwarded to the Ministry of Energy, Green Technology and Water.

11 Feb 2015 TNB announced that the average electricity tariff rates would be reduced by about 5.8% from 38.53 cents/kWh to 36.28 cents/kWh effective 1 March 2015. However, compared to the previous 15% increase in January 2014, the new tariff is still about 8% higher than the 2013 tariff rates, averaging 33.54 cents/kWh.


16 Feb 2015 At the meeting with Bank Negara Malaysia, MPMA requested the tariff rates be reduced further in the next review in June 2015 through the fuel cost pass-through (FCPT) mechanism.

17 March 2015 EPU informed that:

The Enhanced Time of Use (ETOU) Tariff Scheme be extended to Tariff D users including Saturdays, Sundays and Public Holidays effective from 1 January 2017.

The gradual phasing out of the Special Industrial Tariff (SIT) by 2017, has been extended to 2020.

Caring for the Environment

Thank You

roadshow 2015 insights of the plastics industry current profile of the malaysian plastics industry

Documents

minimum wage datesdescription

minimum wage policy

minimum wage order

minimum wage rates

minimum wage mw of rm900

wage hike

environment slide

employment of foreign