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15. Rubber Products Innovation Draft-SEEN

15. Rubber Products Innovation Draft-SEEN

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1.

Introduction

The rubber products industry is dominated by the rubber gloves industry; up to 70% of all rubber exports are gloves. The other rubber products include rubber threads, hoses, engine mountings, dock fenders, and seismic bearings. With the exception of seismic bearings, all other products are deemed low tech and barriers to entry are relatively low. Malaysia is currently the number 1 exporter of disposable gloves in the world, supplying close to 60% of world consumption. The gloves sector generated export revenues of RM8.9 billion in 2010, with total rubber product exports of RM12.9 billion. This is a resource based industry, and perhaps the only truly Malaysia World Number One we can make claim to. To stay ahead of the competition, which comes mainly from Indonesia, Thailand, China, India, and lately, Vietnam, Malaysia will have to increase her innovations. We lack some of the natural advantages enjoyed by the competition, namely, availability of labour and latex supply; Malaysia imports 90% of all latex used in gloves production from her neighbours. We need to have policies that will encourage the industry to invest in R&D and we need institutional support in areas of R&D that are beyond the ability of private industry to explore. In its innovations, the industry has generated some impressive support industries such as chemical supply, engineering fabricators, printing and the like. With regard to the above, this paper will take a pragmatic look at the state of innovation in the rubber product industry of Malaysia and determine the existing shortcomings. The necessary changes to bring about stronger growth in the industry will be examined. The aim is to make recommendations to the government on measures that will encourage innovation in the rubber product industry and consequently enhance its competitiveness in the world market.

2.

Rubber Product Industry in Malaysia

There were 338 manufacturers in the rubber product industry in 2009. The industry comprises two main sectors, one of which is the latex goods sector (125 manufacturers) and the other being the dry rubber goods sector (223 manufacturers). The majority of the latex based companies are either medium or large sized companies out of which at least 4 companies have market capitalisation of between RM 1.5-2 billion. On the other hand, the dry rubber goods sector is predominantly made up of SMEs and these companies form approximately 85% of the rubber product manufacturing sector. Although smaller in number, in terms of exports the dominance of the latex sub-sector is very marked. Approximately 35% of the industry contributes 75% of the exports and this is mainly through glove exports. Exports from dry rubber products are low in comparison.
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The normal problems associated with SMEs in other sectors are also very much prevalent in the rubber product industry. The majority of the companies are family-owned and capital is limited. R&D is almost non-existent and what little that is being carried out is small scale using in-house facilities. Companies lack market intelligence and this is compounded by their lack of funds to undertake continuous market research. The technologies in the manufacturing process are low while the range and volume of products manufactured is rather limited. Malaysian rubber and rubber products are exported to more than 180 countries. Approximately 56% of the exports go to the E.U. and U.S. There is limited penetration to the rest of the world. Malaysia is currently the world’s number 1 exporter of natural rubber latex gloves, nitrile gloves, latex threads and rubber catheters. The country is also the world’s largest consumer of NR latex.

Table 1.
Export Rubber & Rubber Products Total Malaysia % Share

Malaysian exports of rubber and rubber products
2003 10.1 397.9 2.50% 2004 13.5 480.7 2.80% 2005 14.4 533.8 2.60% 2006 19.1 589 3.20% 2007 19.7 605.1 3.25% 2008 22 663.5 3.30% 2009 17.9 553.3 3.20% 2010 26.3 639.4 4.11%

Rubber Raw  Rubber

12,863,288,442 13,461,421,845 26,324,710,287

Source:  MRB  

The export share of rubber and rubber products compared to overall Malaysian exports has been gradually increasing. In 2010, the export share stood at 4.11% as against 2.5% in 2003. This indicates the growing importance of the rubber industry as a major contributor to national revenue.

2    

496.124 27.595 441.685 Tyres 243.778.278 471.238.240 310.696.362 438.160 7.378 277.329 501.646.552 6.533.766.834 Latex Goods 4.112. Exports of Rubber Products Table 2.193 334.361.193 Total 5.985.713.864 10.450.409.213.723 474.614 25.529 841.740 829.685.638 8.417 566.326.152.409.900 10.997.456.631 12.481.889.229 5.927.863.436.064 529. 3     .587.459 4.474.731.604 8.620.829 573.189.824.097.682.2.312.444 396.195.395 284.732.217.347 978.774 155.327.309 682.625.909 950.021.502 32.940.445 15.092 914.282 Inner Tubes 13.513.092 303.302.998 4.821.507.189 23.469.050 9.908.530.404.416 15.578.238.7 billion in 2000 rose to RM 12.058.951. The 2010 export figure is the highest ever attained by the industry.764 YEAR Footwear 313. This represented a percentage change of 126%.9 billion in 2009. Exports which stood at RM 5.417 713.246 466. Malaysian rubber product exports by year MALAYSIA'S EXPORT OF RUBBER PRODUCTS FOR YEAR (AMOUNT IN RM) Rubber Products General Rubber Goods 477.630. Malaysia's export of rubber products has witnessed phenomenal growth.251 5.207.293.624 261.365 8.161.322 653.053 288.434 26.531 558.241.630 860.855 4.524.458.522 458.638 139.311.053.533 8.973.832 40.442 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 As reflected in the table above.731 586.368 17.288.841.715 5.017.504.160.834 568.752.049.214.317 368.570.832.272.147 420.270.585 6.298.417.861 546.884 625.427.245 7.632 460.121.480.446 249.078.975.259.164.178.401.338.744.098 11.684 Industrial Rubber Goods 153.334 10.757.938.219.656.353.656.578 24.447.574 149.269.223.024.178 642.432.

Exports by product sector (2010) 2010 Product Sector Amount ( RM) Footwear General Rubber Goods Industrial Rubber Goods Inner Tubes 653.458.3 billion or 80.Table 3.11 3.764 24.834 % 5.302. General rubber goods was second in terms of importance.214.193 12.3% of total exports in 2010.685 Tyres Total 546.288.08 7.08 0.1% of total exports.1% of exports respectively (Table 3).409.927.29 4.327. 4     . Next in importance were industrial rubber goods taking up 3.282 914.863.442 Exports from latex goods amounted to RM 10.1% and 5.684 396.19 80. followed by footwear contributing 7.975.25 100 Latex Goods 10.

87 6.58 4.442 % SHARE 27.080.529 296.35 2.91 2. REPUBLIC OF ITALY AUSTRALIA BELGIUM Others Total: VALUE (RM) 3.391 524.07 3.947.68 5.116.569 718.138 367. Leading export destinations MALAYSIA'S EXPORT OF RUBBER PRODUCTS FOR YEAR 2010 (AMOUNT IN RM) NO 1 2 3 4 5 6 7 8 9 10 COUNTRY UNITED STATES OF AMERICA GERMANY.669.Table 4.863. PEOPLES REPUBLIC OF SINGAPORE.701. taking up almost 28% of Malaysia's exports in 2010.024.195 373.3 4. The other major markets are Germany.203.31 36 100 The USA is by far the single most important market for Malaysia. Brazil and the UK.935 553.354.647 572.563. FEDERAL REPUBLIC OF JAPAN BRAZIL UNITED KINGDOM CHINA.201 431.531 859.584.288.977.521 4.785 12. 5     . Japan.45 4.581.86 2.649.

139 0.000.215.620.348.09 10.47 44.034.524.755 0.821 0.574 0.233.22 653.566 69.63 80.02 2.07 9.626.041 1.478.1 11.191.99 314.32 36.111.662.197 0.302.820.841 0.481 0.863.03 3.308 0.032 2.207 0. Leading export items (2010) Leading  Export  Items NO   1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 PRODUCT  CLASSIFICATION   Gloves   Latex  Thread   Footwear   New  Pneumatic  Tyres   Tubes.458.8 229.390 0.440.228.360.04 4.267.867.488 0.34 41.834.24 25.738.369 0.620 0.11 12.27 31.613 0.265 0.08 513.834 0.  Cable  And  Other  Electric  Conductors   Inner  Tubes   Transmission  Belts  Or  Belting   Part  And  Accesories  of  Automotive   Swimming  Caps   Erasers   Teats  And  Soothers   Rubberised  Textile  Fabric   Other  Tyres   Retreaded  Tyres   Used  Pneumatic  Tyres   Finger  Stalls   Solid  Tyres   Products  And  Articles  Of  Hard  Rubber   Hot  Water  Bottles   Rail  Pad   Structural  Bearings   Rubber  Rollers   Adhesive  Tapes   Parts  And  Accesories  Of  Rotochutes  And  Parachutes   Total:   VALUE  (RM)   %  SHARE   8.44 282.  sheets  and  strip  of  non-­‐cellular  rubber   Catheters   Sports  Goods  Item   Plates.003 6.  sheets  and  strip  of  cellular  rubber   Foam  Products   Seals  And  Gaskets   Articles  Of  Apparel  And  Clothing  Accessories   Rubber  Band   Floor  Coverings  And  Mats   Other  Hygienic  And  Pharmaceutical  Rubber  Articles   Conveyor  Belts  Or  Belting   Fenders   Insulated  Wire.238 0.Table 5.31 800.544 0.02 139.55 60.07 4.544 2.2 231.  Pipes  And  Hoses   Condoms   Other  Articles  Of  Unhardened  V ulcanised  Rubber   Plates.080 0.841 3.2 24.551.867 0 12.641 0.770.211 1.065.28 35.816 0.135.09 106.17 20.696.498.347 0.03 2.83 80.637.08 9.445.073 0.950 0.02 2.463 0.915.780 0.03 4.911 0.078.78 140.758.442 100 6     .1 12.288.078.16 14.291.135 0 10.63 70.018.279 0.896 1.282 5.485.260.19 21.

908.3 million or 5.648 379.318 365.481.505.171.796 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 7     .310 YEAR Footwear 162.289.969 414.210 2.623.876.147 2.451.6 million or 6. gloves.378 1.845 2.318 243.623 159. Table 6.342 133.373 341.237.085.266.008.925.435 402.811.074.628 5.091.293.424.349 1.397 542.206.337 42.325.787 1.657 646.372.433 317.333.704 686.409 2.4 billion in 2010. Other major export items include tyres.307.688.545 Inner Tubes 9.1 billion of exports or 78.768. Malaysian rubber product imports by year MALAYSIA'S IMPORT OF RUBBER PRODUCTS FOR YEAR (AMOUNT IN RM) Rubber Products General Rubber Goods 441.966 269.889.066.682 359.064.299 451. This was followed by latex thread (RM 800.105 788.577 567.176.494.807 31.351 Total 1.477. a growth of 183% (Table 8).283 296.291.9 billion or 69.267 217. i.558.173.083.888 546.412.2 billion in 2000 rose to RM 3.546 Latex Goods 139.190 423.707 1.536. tubes.799.917.e.304.527.689 321.969 416.484.761.Gloves was the most important export item with exports amounting to RM 8.137 245.054.497.800.820.162.605 304.563 Tyres 189.216 530.745 22.304 198.559 416.376 356.654 380.596 619.892.562.213.773.613 2.158 208.422.804.376.366 624. total RM 10.579. latex thread.557.331 504.578 505.542 2.726.481 Industrial Rubber Goods 254.078 439.319.117.205.890.814. condoms and catheters are amongst the top ten export items and together.266.344.916.355. The 2010 figure is the highest recorded over the period.581.756 561.058.640.495.016 566. i.8% .461.575 915.430 36.366 245.363 31.846.216.465.854.177.3% of total exports.510 170.1%). Import of Rubber Products Imports which stood at RM 1.2%) and footwear (RM 653.e.951 446.413.615.371 7.137 416.502 6.345.394.485 441.207 853.097. It is to be noted that the exports of the latex sector.818.203.   3.674.049 8.340 3.471.240 11.416. condoms and catheters.939 406.491 240.882 165.196.566.876 770.

glove manufacturers made use of glove production lines that were mainly imported from Taiwan.000 gloves/hour 1997: Malaysian Built Lines produce 12. local engineering companies started building “Made in Malaysia” lines.000 gloves/hour 2002: Major Innovation using double formers resulting in production of 20. the traditional approach was to undertake manual layering. the country has become the leading supplier of dipping line technology to other countries – from Thailand to as far away as Mexico. Apart from the time saved. In the late 1980s. State of Innovation in the Rubber Product Industry Latex Gloves Industry The biggest factor contributing to the success of the glove industry in Malaysia has been the ability of the entrepreneurs to innovate. one local company now uses injection molding under very high pressure to create a homogeneous block of rubber. To improve efficiency.000 gloves/hour 1992: Malaysian Built Lines produce 6. Glove manufacturers working with engineering companies improved the lines in several stages and today. Malaysian entrepreneurs have proven to be very innovative in the production processes as well as in developing engineering hardware. quality.000 gloves/hour 2007: Further improvement resulting in 30. industrial rubber goods (RM 568 million) and Footwear (RM 543 million). Japanese companies that have seen this invention have been quite amazed. Quite a number of innovations have been introduced and one that stands out is in the area of layering. the new process also limits if not eliminates delaminating which was often a problem using the traditional manual method. This was followed by general rubber goods with imports of RM 788 Million. They have effectively contributed to production line design. Previously. Soon after. What the local company has developed is unique and no other manufacturers have been able to replicate this method. In this. they have been strongly supported by local SME engineering firms. A number of the bigger firms amongst the dry rubber product manufacturers have undertaken this. and stability of the production.The most important import were tyres at RM 1 billion in 2010.000 gloves/hour There have also been efforts in the dry rubber goods sector to innovate and to bring about greater efficiency. An example to illustrate how innovation has contributed to the industry is well reflected in the sharp increase in the speed of the production lines. The contribution of these engineering firms cannot be underestimated. See below: 1988: Imported lines from Taiwan produce about 3.000 gloves/hour 2010: Improved this to 36. improvement on speed of production. 8     . to produce blocks of rubber (intended for example to manufacture dock fenders and other products). 4.

It is in areas such as this that the industry looks to the Government for leadership. it was certainly a step in the right direction. while having creative abilities. keeping it two steps ahead of other competing countries. that the initial push to produce gloves came from RRIM. Industry has improved existing oven designs with better heat insulation and the like. it would have improved efficiency by a huge margin. 9     . it would be a boost to the industry in Malaysia. the industry seems to be ahead of the research institutes. It must be recognized. Patented and licensed for use by Malaysian glove manufacturers. or anything that is commercially viable. and provided a huge advantage to any manufacturer using this technology. lack sufficient funds for R&D. Had it been successful. were identified as deserving government support. Although this was a failure. Unfortunately. The relevant institutions should spearhead R&D efforts in new areas that would bring about benefits to the industry.The company which developed this method has adequate resources and is willing to channel funds to R&D. however. etc. This sort of R&D is beyond the present capabilities of the industry. It would have resulted in smaller lines using smaller space and materials. R&D to improve processes. An example of this is in the design of more efficient ovens. The Koreans have tried to introduce Far Infra-Heating Technology in ovens. On the contrary. improved production speeds. saved cost in energy consumption.. RRIM or other research institutes such as SIRIM have not been able to provide further assistance. which provided technical assistance. R&D and marketing were industry driven with limited assistance from government institutions. but these are very minor improvements. this is not true for the majority of firms in the dry rubber goods sector who. It must be realized that industry is unable to undertake R&D in certain areas without assistance from public institutes such as RRIM or the Universities. The natural gas subsidy came into effect only after the 1997 economic crisis when resource-based Malaysian export industries such as rubber and furniture. material developments. Almost all innovations to the production process. and MITI. One suggestion would be in the area of Microwave technology for ovens. After about 3 years. It would be tremendous advantage if a completely new and revolutionary oven or a revolution curing process is developed. In general. which provided the initial encouragement by obtaining subsidies for electricity etc. After the initial technical assistance given to the industry. the industry is disappointed with RRIM in that it has not been able to lead the industry in innovations. this was withdrawn.

However. products. What is needed is a review of existing laws and a review of the working attitude of officers in the Labour Dept. officers would advise employers to settle the matter even in instances where it is blatantly unfair to the employers. In this regard. Rubber companies that have introduced innovation are also concerned about protection of their intellectual property. 6. Companies are of the view that the regulations must be effective and there ought to be sufficient enforcement to see that there is no patent infringement. which could be initially unrewarding. Technology. Challenges to Innovation A small number of companies continue to innovate and seek further improvements on the quality of their products in order to enhance market access. The industry must realize that R&D efforts. A number of government agencies such as the Ministry of Science. and MATRADE have put in place a variety of initiatives towards enhancing R&D efforts. MIDA. Incentives are mainly in the form of Pioneer status and Investment Tax Allowance. or processes”. Companies would need to change. MOSTI has the TechnoFund which provides funding for pre-commercialization activities and IP acquisition. devices. What government incentives are in place to encourage innovation and R&D efforts? There are a wide range of incentives currently provided by the Government to boost R&D efforts. Another concern often voiced by the industry is that decisions of the industrial courts tend to favour the worker. 10     .5. and Innovation (MOSTI). More often than not. will in the long-run yield tangible results. The outcome of R&D is never certain and the rewards may not necessarily be commensurate to the investments made. produce. This partially explains the reluctance of companies to plough capital into R&D. incentives are provided for companies to undertake in-house R&D and those engaging in the commercialization of public sector R&D. While it is recognized that workers should be given basic rights. Companies can collaborate with Government research institutes and institutes of higher learning. MIDA under the Promotion of Investments Act 1986 defines research and development (R&D) as “any systematic or intensive study carried out in the field of science or technology with the objective of using the results of the study for the production or improvement of materials. the majority do not invest sufficiently in innovation. industry cannot be held ransom to unjustified demands.

Incentives for researchers to commercialize research findings and Double Deduction for the promotion of Malaysian brand names. Indonesia. 11     .The IRB provides Double Deduction for R&D. MATRADE provides the brand promotion grant. With regard to the aforesaid. Vietnam and Myanmar. 7. Hence. a number of issues will be discussed below. A wide range of products are being manufactured and exported. Arising from the discussions. domestic users should look to Malaysian manufacturers as a supply source. The industry has become a major contributor to the national economy. The current dependence on imported labour can also be addressed. Growth in imports Malaysia has witnessed a very strong growth in imports in recent years and the trend appears to be continuing. a. The industry is in dire need of innovation that will boost stronger growth and propel the industry to the next level. R&D Direction. This may include products under the category of Footwear and Inner Tubes. Innovation could also further extend the product range besides creating new markets for both traditional products and the new products. Institutional Support. This becomes imperative especially in the wake of strong competition from the lower-cost countries like Thailand. Instead of importing such rubber products. These are matters that have a direct bearing on the future of the rubber product industry in Malaysia. This grant is divided into a 100% reimbursement grant for the development and promotion of a brand subject to a maximum grant of RM 1 million for SMEs. Close scrutiny of the current range of imports would indicate tremendous potential for import substitution. Policies. India. Discussion with a number of rubber product manufacturers reveal their confidence in being able to actually manufacture in Malaysia a good range of dry rubber products currently being imported. a number of recommendations will be made. The production process could be improved while the labour cost can be substantially reduced. the foundation for further growth is well in place. Perhaps it makes sense for the country to import goods in which the country is no longer cost-competitive. The nation is the number one exporter of both latex and nitrile gloves. Non-SMEs are eligible for 50% reimbursement of the grant subject to a maximum grant of RM 2 million. and Assistance that will encourage companies to pursue innovation with vigour The rubber product industry has displayed remarkable performance over the years. Innovation ought to bring about an improvement to the quality of the product manufactured in the country.

36 billion Industrial and General Rubber Goods. Conveyor Belts. There is nothing to innovate if there is no business. Most of these companies are technologically competent as they are owned by individuals from the industry or who have had research experience with RRIM previously. Hoses. cars. Japan. Local companies would obviously lose out if the specifications are couched in such a way that they are skewed to imports. Of equal importance. This has translated into new and better products. Even policies such as Buy Malaysia First. Railway Stoppers. Often enough. In 2010. but having no testimony from their home country automatically results in their credibility being questioned. The industry has always been able to source the funds it needs if there are profits to be made. especially in government-linked projects. The problem is not whether they are innovative but rather. specifications should favour local companies. Taiwan. In time. Local manufacturers. It is not in the form of subsidies or grants that assistance is needed but in imposing a “Buy Malaysia First” policy seriously. These products are simple products easily made to international quality standards such as Dock Fenders. though not in line with international trade rules may be considered and implemented discreetly. so grants or subsidies are not of major importance. but this does not translate into any tangible effort by the relevant agencies in implementation. Local manufacturers may have all the certifications and meet all the quality standards/specifications. is the fact that if Malaysia does not support her own industry. computers. What is required is a delivery system within the control of government agencies to support the industry so that it can grow to a certain size. RM 1 billion worth of the imported products is not too optimistic a figure to be substituted by Malaysian companies. It would be difficult to find a Japanese company operating in Malaysia using any equipment that is not Japanese – be it testing equipment. the role of consultants becomes critical in major tenders. If we are to reach the next level – to be a high value-added industry – this has to change immediately. Government agencies have to shoulder the major part of the blame. the industry is unable to obtain the credibility it desperately needs to secure business overseas. and Korea have intentionally fostered the growth of the industry. or even printers. On the contrary. There is a government policy to buy Made in Malaysia first. whether they are given the opportunity to be innovative. So certain deliberate policies are demanded. Malaysia imported RM 1. It is not without justification that the industry feels the government agencies do not care or are simply taking the easy way out. if not more so. This has been highlighted in numerous meetings with different Ministries and their relevant agencies but the situation remains unchanged. if given the opportunity can produce 90% of these imported products.Almost all manufacturers in the Dry Rubber Products sector are small players with only a few exceptions. This alone would be a tremendous boost to the industry. and the job should be given to local companies if there is assurance of quality from local suppliers and the prices kept 12     . the industry was strong enough to embark on greater R&D. etc.

Perhaps something needs to be done to remove this perception. it would be remain in the hands of established suppliers in developed countries who had a head start. 13     . for example. it is imperative that significant efforts are made to develop Malaysian brands. have all the technical expertise and capacity to manufacture dock fenders at a competitive cost. So far. Discussions with the companies also reveal a perception. process. One of the barriers to entry is the long and expensive certification process. for example. such as hoses used in the Oil & Gas industry. and most companies do not have the funds to do this when they have no business in the first place. Should the dry rubber sector become successful in the domestic market. This means that brand owners can move their orders from manufacturer to manufacturer and from country to country. Manufacturers of dock fenders. that they do not get greater support from the Government because of this very factor. their performance in the domestic market is lacklustre. this has not happened because Malaysian manufacturers seem to be a few steps ahead in innovation on technology. The dry rubber goods sector can become a major contributor to the industry and this in itself represents a major innovation. Indonesia. Should Thailand. Even with their own brands. Demand for dry rubber products will lead to enhanced capacity calling for additional investments and naturally creating more employment opportunities in the country. Malaysia may lose out when competing against them because of lower costs. the contribution of the rubber product industry will become increasingly significant. This will take a combined effort from both private as well as government resources. Products that has high value-added. A strong and vibrant dry rubber goods sector would mean a greater balance in the structure of the rubber product industry which is currently so much tilted towards the latex goods sector. Yet. Policy must be formulated to assist in this direction.competitive. are something that Malaysian companies cannot break into without government assistance of some kind. b. all are heavily reliant on the OEM market for business. This is the typical chicken and egg situation. Policies must be enacted to assist in the certification/testing process to provide Malaysian manufacturers with the opportunity to make their first foray into the business. and markets. France. Otherwise. rightly or wrongly. To ensure Malaysia remains as the leading supplier of gloves. Well over 90% of rubber product manufacturers are Chinese-owned companies. moving on to capture the overseas market will not pose much of a problem. all Malaysian glove manufacturers are OEM suppliers and do not own any sizable brand of their own. Naturally. The OEM Market With very few exceptions. China improve on their technology and match Malaysian producers in quality.

Grants to assist the associations would go a long way to rectify this situation. there should be a concerted effort to encourage companies to utilise Government grants. Successful companies generally do not have the culture of making use of grants. many of which. the Government may want to reach out to the bosses themselves. In this respect. A well-run association means the right sort of information will be regularly sourced and promptly disseminated to the industry. There is a perception that the R&D findings of companies that utilise such grants are not well-protected. While this does not reflect well on the companies. only MREPC has initiated some action to assist in this development. It will be good if direct contact is established with the decision-makers and the necessary information disseminated to them. and other fiscal policies must be implemented to encourage this. perhaps the various trade associations can play a major role in assisting. This is insufficient to spur this development.So far. there is a wide range of such grants. could greatly benefit the companies. Companies have also commented of the voluminous amount of paperwork and red tape involved in the application process. c. It is likely that this sort of approach will yield better results. Despite all these factors. the uptake within the rubber product industry has not been satisfactory. most associations are not financially strong and hence unable to employ professionals. However. iii. It has started to research markets and provide the industry with market information on the various countries deemed a good start point to develop Malaysian brands. ii. Grants for R&D Despite the availability of a variety of grants. especially when the findings are to be given or shared with Government departments. Often enough. they will need to be manned by professional staff. In order for the associations to be effective. 14     . Such companies would not hesitate to raise the funds on their own if the R&D would bring about substantial benefits. iv. if utilised. Company representatives who attend seminars about incentives are several layers removed from the top and information may not be conveyed above. Companies fear that their work could be commercially exploited by others. This could be due to the following reasons: i. As discussed earlier. information regarding the incentives does not reach the actual decision-makers of companies.

R&D amongst the majority of companies is carried out on an ad hoc basis. it is recommended that a certain percentage of profits should be set aside purely for R&D. companies can also adapt R&D work carried out by other industries and introduce it to the rubber product sector. This will enable the company to easily establish a proper R&D department manned by high-calibre professionals. Labour requirements are lowered and the company becomes more productive. R&D work will no longer be undertaken on an ad-hoc basis. In other words. Some companies have grown 10 fold in 5 – 10 years! Some R & D has been done to reduce manual labour such as automatic stripping of gloves from the lines. then it might be better to scrap it. especially in making funds readily available. To this end. a formalised budget must be allocated for R&D which could vary between 0. Most companies do not sufficiently emphasise this important area. While there is a higher labour requirement by companies.6 million a year) and 800 less potential social problems. it must be remembered that the capacity of the companies have grown tremendously over the last 10 years.5–1.000 workers implies that 800 workers (20% savings in labour) could be dispensed with. depending on the particular company. This in turn translates into savings of +RM0. At present. Companies should formalise R&D as an integral component of the company’s operating system. This can easily be done by simply 15     .The industry feels that grants are useful for start-up companies.5% of profits. Consequently. If statistics show that grants have not been effective in producing the desired results.   d. Red tape should be eliminated. These companies also require assistance. As an example. Benchmarks can be established to enable this to be done. a company with 4.8 million per month (RM9. In its place a system of rewards can be given to companies that have been effective in their R & D efforts. while a few companies have taken concerted steps to make R&D an integral part of the company’s activities. Labour and R&D The industry. Agencies should get to know the rubber product manufacturers and the industry. and the Government should continue to support such companies. R & D into auto packing of gloves if successful would result in estimated savings of 20% of workers in a factory. There is a need to assist such companies. Apart from original R&D work. there is also a large pool of companies which are technically sound and effectively managed. especially the glove industry. The staff will be forced to undertake R&D directed towards bringing gain to the company. It would also help if individuals with commercial exposure be included in the evaluation process of these grants. clamours for foreign labour but also realizes that this goes against the Government’s declared intention to reduce dependence on foreign labour. To illustrate this. However.

by manpower which has been sufficiently trained and motivated towards effectively contributing to the well-being of the company. identifying training and skill enhancement needs and other such matters. Production can be sustained. This in turn has made it difficult for companies to actively engage in in-house R&D. 16     . For example. An active R&D department should also initiate contact with the Universities and collaborate in joint efforts. it should immerse itself in a total development of human resources within the company. Most HR departments are involved in payroll. There are not many around who possess the requisite qualifications. At present. f. Companies cite this inability to get qualified professional staff as a major impediment to growth. Lack of Rubber Technologists Interviews with several companies reveal that there is an acute shortage of rubber technologists in the country. Setting up a Department of Human Resources Development It has been noted that very few companies have a properly functioning HR department. leave. A happy and well-trained workforce coupled with an informed and strong management would go a long way to ensure high productivity in the company. A good HR department should do more than merely routine matters. Job offers asking for specific qualifications in polymer science have received limited applications. this would include instilling a culture of loyalty and pride in the company. MREPC has now started a scholarship scheme where the graduates are expected to work in the rubber industry. A more productive workforce will eventually lead to a reduction of the manpower requirements of the company. For management staff. Companies have expressed their willingness to collaborate with Universities to develop a pool of polymer scientists. e. Scholarships may be considered. catering specifically for undergraduate studies in rubber technology. adequate exposure to current techniques like SCADA should become essential. The MRB/MREPC together with TARRC can initiate action on this matter and put in place a specific program. Very limited resources are allocated to the HR department. A similar program could be initiated. which in turn could reduce labour requirements of the company. and other such routine matters. claims. if not increased.trawling the internet for ideas. there is very limited consultation between the industry and universities. The R&D could be directed towards areas such as the application of new machinery.

This has been well received by the industry. MREPC’s initiative to boost sale of gloves under Malaysian brand names to the CIS countries for example would be welcomed by the private sector.g. which has found the information very useful. MREPC’s initiatives in trade exhibitions and trade missions have more often favoured the established markets. There should also be detailed information on the regulations that must be adhered to. mainly the U. In recent years. There has been little of this for the rubber products manufacturing sector. a wider spread of exports will also serve us well.S and the E. Using the cess collected from the industry and subsequently giving it back to them does not make sense. These are the types of information that the industry is clamouring for and which would assist them in penetrating the overseas market. and the list of major importers. however. penetration and diversification into new and non-traditional markets will itself be considered as something innovative. both the tariff and the non-tariff barriers. which incur a higher cost. there are many in the industry who feel that this may not be the right approach to develop the industry. the barriers to trade.e. Similar efforts should also be directed to assist the rubber goods sector. Thoughts should be given to see what can be done in markets where our presence is insignificant. Even if substantial funds are required to undertake more research. In fact. 17     . While there is nothing wrong about this. it is felt that the private sector has the competence to undertake marketing without external help. It is noted that the RRI is mainly engaged in upstream R&D and very limited resources are allocated to the downstream sector. MREPC could play a pivotal role in this area. they are forced to use private laboratories. Such institutions should orientate R&D to areas that are actually commercially viable. Generally. generating a good number of reports on market potential in a number of countries and regions. Hence. Then again. MREPC has been providing financial assistance to companies to participate in international trade exhibitions. Companies feel the test results from Government laboratories have a certain level of credibility but because of the delay. This could include. the industry generally does not feel that there is much R&D which has benefited the industry. What they require is for MREPC to complement the efforts of the industry by providing adequate market intelligence. While the laboratory equipment is adequate and of high quality. the channel of distribution in the country. Companies which are recipients of such assistance have of course welcomed such support. As discussed earlier. It is better not to have collected the cess at all. i. there has been undue delay in delivering test results to the companies. MREPC has intensified research work. for example. Since its inception. Research should be directed to such matters. Institutional Support The industry notes that Government institutions such the RRI and SIRIM have received large financial allocations. the industry will not object to such expenditure. the bulk of the exports from the rubber products sector goes into the developed markets.U. RRI has been found wanting even in the area of product testing.

Transport. The world market for disposable vinyl examination gloves grew from 7. The industry would be better served if this was so. an obvious development has been the rapid penetration of vinyl gloves in major markets. MREPC should operate as a private sector company. A national policy on this must be introduced to make it mandatory that locally manufactured rubber products be utilised in Government projects. opportunities in the domestic market. more appropriately. The industry feels that the policies and work approach within MREPC should not become a mirror image of a government agency. 18     . No progress has been made and this is clearly reflected in the continued growth of imported rubber products. Import substitution – given the high volume of imports and taking into account that local manufacturers have the ability to manufacture a high proportion of the imported products. It is not a question of coming out with more circulars as the industry has seen enough circulars. mount a campaign against vinyl gloves highlighting their negative features. the Government should adopt import substitution measures. In this regard. in collaboration with RRIM. by the most discreet of means. representatives from the private sector. This could include: • Buy Malaysia First policy. As mentioned earlier. MREPC should then. There is a general consensus in the industry that MREPC should have within its top leadership. especially those manufacturing dry rubber products. this trend would impact negatively on the exports of Malaysianmade latex and nitrile gloves. led by an individual with industry experience. the Government should play a key role in this and emulate what has been done in Taiwan. It is recommended that MREPC. and the State Economic Development Corporations should be approached. Recommendations The following specific recommendations are proposed: a. the MRB. 8. Works. From this. There should be some concerted action to address this development. The industry itself has often raised this with various government authorities.S market alone took up 4.3 billion pairs in 2008 to about 7. Key Ministries like the Ministry of Finance. in collaboration with MREPC.3 billion pairs. the U.Over the last few years. Korea and Japan. Comments have already been made earlier about the strong growth in imports of rubber products. engage in a detailed study of vinyl gloves. Obviously. What is required is effective enforcement of the policy which would translate into results in the domestic market. the CEO ought to come from the private sector and preferably from the rubber product industry itself. should spearhead efforts to provide manufacturers. Either the chairman or. It is well known that vinyl gloves have inferior attributes compared to latex and nitrile gloves and are environmentally disastrous.8 billion pairs in 2010.

RRI which regularly receive large financial allocations should orientate R&D to areas that are commercially viable. MREPC should intensify research work to provide comprehensive market intelligence to the private sector.• • Specifications for public sector projects should be skewed to favour local companies. c. g. Malaysia supplied a mere US $ 4. The world’s import of rubber products in 2010 amounted to US $ 227 billion. comparatively speaking. j. Either the Chairman or CEO of MREPC should come from the private sector and preferably from the rubber product industry. Malaysian brands – adopt policies and provide financial support directed towards creating a Malaysian brand(s) for gloves. Steps should be taken to increase the pool of rubber technologists in the country. h. Grants – eliminate red-tape in the application process. RRI should make improvements in the area of product testing. Total exports in 2010 came up to almost RM 13 billion. k. Policies of a reward scheme provided by the Government should be implemented to encourage this. while this is a respectable figure. Companies should set up a properly functioning Department of Human Resources Development. Hence the potential to further grow and move to the next level is definitely there. Grants – improve information flow about grants to the company’s decision makers. MRB & MREPC should lend support to the efforts on import substitution. f. Companies should be recompensed for doing this via tax or other benefits.5%-1.5% of their profits to establish a formalized budget for R&D. Companies should put aside 0. e. i. This has been attempted many times but does not seem to be effective. 9. However. Government to provide financial assistance to enable companies to acquire the relevant certification to facilitate access to the overseas market. a very small value. it counts for very little when measured against the world’s total trade in rubber products. Conclusion The Malaysian rubber product industry has experienced steady growth and is now an important contributor to the nation’s GDP. d. b. Indeed. 19     .12 billion to the world market in that same year.

We need not go overboard in introducing extraordinary innovations. These are simple recommendations often discussed and highlighted in many forums. In due course. Malaysian rubber products will no longer be dependent on the developed markets as the industry’s main markets. certain weaknesses currently faced by the industry will be quickly overcome. But certain innovations are necessary. The industry is ready to move forward. particularly gloves for its source of revenue. Further.Malaysia should not rest on its laurels if it wants to attain a higher level and become a prominent player in the world trade for rubber products. Exports will be more diversified with market penetration in a wider number of countries. This is not impossible to achieve given our strong foundations. If implemented through strict enforcement. the industry will no longer be overly dependent on latex goods. What is required is for the Government to provide the leadership in specific areas to effect progress. Mere implementation of recommendations that have been made will go a long way to generate substantial growth of the rubber product industry. 20     .

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