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FACS Newsletter 1/2000
CHEMICAL INDUSTRY IN MALAYSIA WITH SPECIAL
REFERENCE TO PALM-BASED INDUSTRY
Choo Yuen May
Palm Oil Research Institute of Malaysia (PORIM)
P. O. Box 10620, 50720 Kuala Lumpur, Malaysia¡¡
ABSTRACT
Introduction
Malaysian has transformed from a commodity-based economy into a manufacturing-based economy in the past two decades. This transformation can be attributed
to macroeconomic and structural adjustment policies and strategies undertaken by the
Government in the mid-eighties, which significantly contributed to major inflow of foreign
direct investments (FDIs) and the rapid growth of the manufacturing sector. The first
Industrial Master Plan (IMP), 1986-1995 has laid the foundation for the growth of the
manufacturing sector. Such rapid growth of the manufacturing sector will have to be
sustained in the next decade in order to attain the objective of becoming a fully developed
industrialised nation by the year 2020.
The successful growth and transformation of the economy requires the nation to
address the challenge of efficient and optimal utilisation of existing resources in order to
address the challenge of efficient and optimal utilisation of existing resources in order to
sustain and further improve the national competitiveness. The rapid changes in the global
trading and investment environment necessitates the enhancement of the competitiveness and
resilience of the manufacturing sector. The second Industrial Master Plan (IMP2), 1996-2005
thus focuses on increasing competitiveness through strengthening industrial linkages, both
forward and backward, enhancing value-added activities, and increasing the productivity of
the manufacturing sector (1).
The Manufacturing Sector
The growth of the manufacturing sector began in the sixties and accelerated with the
introduction of the Investment Incentives Act, 1968 and the promotion of free zones (FZs) in
1971. Since the industrialisation drive in the 19670s, the manufacturing sector has overtaken
the agriculture sector as the engine of growth of the economy. In view of its size and strong
links with the other sectors of the economy, the manufacturing sector is and will continue to
be the major engine of growth for the Malaysian economy. Thus the manufacturing sector,
considered to be the backbone of the Malaysian economy, contributed 34% towards the gross
domestic product (GDP), 27% of the total employment and 83% of total export earnings in
1998 (Table 1). It will have a significant bearing on macroeconomic performance of the
economy.
Table 1: Major Indicators of the Manufacturing Sector, 1995-1998
|
Indicator
|
1995
|
1996
|
1997
|
1998
|
|
Manufacturing Value Added (RM million, in 1978
prices)
|
39,790
|
44,684
|
50,270
|
45,155
|
|
Annual
Growth Rate(%)
|
14.2
|
12.3
|
12.5
|
-10.2
|
|
Share
to GDP(%)
|
33.1
|
34.2
|
35.7
|
34.4
|
|
Share
to Total Exports(%)
|
79.6
|
80.5
|
81.0
|
82.9
|
|
Share
to Total Employment(%)
|
25.7
|
26.4
|
27.1
|
27.0
|
|
Employment
Growth(%)
|
8.5
|
7.7
|
7.6
|
-3.6
|
Source£ºEconomic Planning Unit Prime Minister's Department.
Mid-Term Review of the Seventh Malaysia Plan 1996-2000
Broadly speaking, the manufacturing sector can be classified into resource and
non-resource-based industries. Being part of the manufacturing sector, the resource-based
chemical industry plays an important role in revitalising and sustaining the long-term growth
of the economy. In 1998, the resource-based contributed about 51% of the total
manufacturing output. The resource-based industries include chemical and chemical products,
food manufacturing, wood and wood based products, rubber products, non-metallic mineral
products and non-ferrous metal industries (Figure 1). However, resource-based industries
expanded 6.1% compared to only 2.6% for the non-resource-based industries in 1998. Among
the resource-based industries the growth is uneven, for example, the output of the non-ferrous
metal at 11% per year, the chemical and chemical products at 10% per year and the rubber
products at 8% per year are significantly higher than the others (Table 2).
Figure 1: Share of Manufacturing Output by Industries 1998
Source: Economic Planning Unit, Prime Minister's Department, Malaysia.
Mid-Term Review of the Severth Malaysia Plam 1996-2000
Table 2 : Manufacturing Output, 1995 and 1998
|
Industry
|
RM¡¯Mil
1995
|
RM¡¯Mil
1998
|
AverageAnnual
GrowthRate
1996-1998
(%)
|
Resource-Based
|
19,168
|
22,906
|
6.1
|
|
Food
Manufacturing
|
3,400
|
3,842
|
4.2
|
|
Buverages
Industries
|
488
|
497
|
0.6
|
|
Tobacco
Manufacturing
|
447
|
529
|
5.8
|
|
Wood
& Wood Products
|
2,200
|
2,210
|
0.2
|
|
Chemical
& Other Chemicals
|
5,666
|
7,591
|
10.2
|
|
Petroleum
Refineries
|
597
|
673
|
4.1
|
|
Rubber
Products
|
3,192
|
4,021
|
8.0
|
|
Non-Metalie
Mineral Products
|
2,911
|
3,176
|
2.9
|
|
Non-Ferrous
Metal
|
267
|
367
|
11.2
|
|
|
|
|
|
Non-Resource-Based
|
20,622
|
22,249
|
2.6
|
|
Testiles
& Clothing
|
2,557
|
2,639
|
1.1
|
|
Iron
& Steel Basic Industries
|
1,377
|
1,156
|
(5.7)
|
|
Fabricated
Metal Products
|
2,863
|
3,275
|
4.6
|
|
Electrical
& Electronic Products
|
11,992
|
13,889
|
5.0
|
|
Transport
Equipment
|
1,674
|
1,120
|
(12.5)
|
|
Others
|
159
|
170
|
2.2
|
|
Total
|
39,790
|
45,155
|
4.3
|
Source: Economic Planning Unit, Prime Minister's Department, Malaysia.
Mid-Term Review of the Severth Malaysia Plam 1996-2000
Of the resource-based industries, the wood and wood-based products, plastic
fabricated products and rubber products (mainly gloves) are export-oriented industries. The
contribution of these to the share of gross manufactured exports is still relatively small at
14% compared with the non-resource-based sector. However, there is a clear trend of notable
increase in the exports of chemical and chemical products, rubber gloves and condoms, wood
and wood-products in the past four years. Overall the manufacturing sector taken as a whole
is the leading source of foreign earnings for the country. The share of the manufactured
exports to total exports was high and continued to increase from 80% in 1995 to 83% in 1998.
This reflects the success of the export-driven industrialisation strategy prusued by the
Malaysian government.
Chemical Industry In Malaysia
This can broadly be classified into the following categories:
1.Petroleum products and natural gas
2.Chemicals and chemical products
- petrochemical
- agricultural chemetic : pesticides, fertilisers
- soap, detergent, cosmetic and toiletry preparations
- inorganic chemicals
- pharmaceutical
- industrial gases
- paint and paint products
- oleochemicals
3.Plastics products
4.Rubber products
Resource-Based Chemical Industry With Special Reference To Palm-Based Industry
The oil palm fruit produces two types of oil, palm oil from the mesocarp and palm kernel oil from the nut, the endosperm. They are chemically different and have between them practically the entire range of long, medium and short chain fatty acids.
The Malaysia production of crude palm oil in 1998 was about 8.3 million tonnes, together with 1.1 million tonnes of crude palm kernel oil. About 80% of the palm oil found its way into food products, leaving about 20% for non-food applications. The two main non-food uses are in the manufacture of oleochemicals and soaps.
Oleochemicals
Oleochemicals refer to chemicals obtained from palm oil and palm kernel oil; they can be divided into two groups of products, i.e. basic oleochemicals and oleochemical derivatives.
Basic oleochemicals are fatty acids, methyl esters, fatty alcohols, fatty amines and glycerol. They are essentially the building blocks of the oleochemicals industry. From these basic oleochemicals, a very wide range of oleochemical derivatives can be produced. Figure 2 is a flow chart leading from palm oil to basic oleochemicals and their derivatives (2). Since palm oil and palm kermel oil contain between them almost the entire range ot ratty acids, practically all the oleochemicals can be produced from them.
Figure 2. Oleochemicals from palm oil and palm kernel oil
Due to the similarity of the fatty acid composions with palm oil and palm stearin (the soild fraction) resemble that of tallow, while palm kernel oil resembles that of coconut oil (Tables 3 & 4), there is a great possibility for inter-substitution among these fats and oils. Technically, therefore, palm oil and palm stearin could to a large extent replace tallow, and similarly palm kernel oil and coconut oil are inerchangeable materials in oleochemicals manufacturing. In fact, plam oil and plam kernel oil offer the following advatntages:
- They are renewable resources and their products are more environmentally friendly.
- They are recognised as vegetable oils and thus their deivatives and applications are fully
acceptable to people for whom animal fats may be subjected to religious taboos.
Table 3. Fatty Acid Composition (%) of Palm Oil and Palm Stearin Compared to Tallow
|
Fatty Acid
|
Palm Oil
|
Palm Stearin
|
Tallow
|
|
Dodecanoic
C12:0
|
0.1-1.0
|
0.1-0.6
|
0-0.2
|
|
Tetradecanoic
C14:0
|
0.9-1.5
|
1.1-1.9
|
2-8
|
|
Hexadecanoic
C16:0
|
41.8-46.8
|
47.2-73.8
|
24-30
|
|
Hexadecenoic
C16:1
|
0.1-0.3
|
0.05-0.2
|
2-3
|
|
Octadecanoic
C18:0
|
4.2-5.1
|
4.4-5.6
|
1425
|
|
Octadecenoic
C18:1
|
37.3-40.8
|
15.6-37.0
|
40-49
|
|
Octadeedienoic
C18:2
|
9.1-11.0
|
3.2-9.8
|
1-5
|
|
Others
|
0-1
|
0-1
|
0-1
|
Table 4. Fatty Acid Composition (%) of Palm Kernel Oil Compared to Coconut Oil
|
Fatty Acid
|
Palm Kernel Oil
|
Coconut Oil
|
|
Hexanoic
C6:0
|
0.1-0.5
|
0-0.8
|
|
Octanoic
C8:0
|
3.4-5.9
|
2-6
|
|
Decanoic
C10:0
|
3.3-4.4
|
6-10
|
|
Dodecanoic
C12:0
|
46.3-51.1
|
44-52
|
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