Required Report - public distribution

**Date:** 10/8/2004

**GAIN Report Number:** MY4056

MY4056

**Malaysia**

**Exporter Guide**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

U.S. Embassy, Kuala Lumpur

**Prepared by:**

Jacelyn Chang

**Report Highlights:**

With per capita income of over \$4,600, a middle and upper class making
up 61 percent of the population, and 6-7 percent GDP growth forecast for
2004-2005, Malaysia shows good potential for growth as a market for
consumer high value products. The Malaysian food and beverage market is
becoming increasingly sophisticated and tariffs are low for most
imported products. New retail outlets, which are good venues for
imported products, are continuing to open, thereby providing better
access to consumers. Best product prospects include fresh fruits and
vegetables, pet foods, halal poultry meat, nuts, frozen potatoes and
wine.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Kuala Lumpur \[MY1\]

\[MY\]

Table of Contents

[**SECTION I. MARKET OVERVIEW 3**](#section-i.-market-overview)

[SECTION II. EXPORTER BUSINESS TIPS
4](#section-ii.-exporter-business-tips)

[SECTION III. MARKET SECTOR STRUCTURE AND TRENDS
6](#section-iii.-market-sector-structure-and-trends)

[SECTION IV. BEST HIGH-VALUE PRODUCTS PROSPECTS
12](#section-iv.-best-high-value-products-prospects)

[SECTION V. KEY CONTACTS AND FURTHER INFORMATION
15](#section-v.-key-contacts-and-further-information)

[APPENDIX I. STATISTICS 16](#appendix-i.-statistics)

[A. KEY TRADE & DEMOGRAPHIC INFORMATION
16](#a.-key-trade-demographic-information)

[TABLE B. Consumer Food & Edible Fishery Products
17](#table-b.-consumer-food-edible-fishery-products)

[TABLE C. Top 15 Suppliers of Consumers Foods & Edible Fishery Products
18](#table-c.-top-15-suppliers-of-consumers-foods-edible-fishery-products)

# SECTION I. MARKET OVERVIEW

Malaysia with a population of around 25 million people, is one of the
most developed nations in Southeast Asia. About 61% of its population
makes up the middle to upper income group of consumers. Its economy has
a firm foundation in a mixed economy that comprises strong,
manufacturing, service and agricultural sectors. The Malaysian economy
was unscathed by SARS and the Iraq war, with gross domestic product
(GDP) growing at 5.3% in 2003, exceeding the official forecast of 4.5%.
GDP for 2004 is estimated at 7% and the IMF projects 6.3% growth in
2005. Per capita GDP is estimated at \$4,616 in 2004**.**

The Malaysian government has instituted many price stabilization
programs including controlling the prices of essential food items to
curb inflation. Inflation in 2003 was at 1.7 percent. The currency is
fixed at RM3.8 to \$1.00. Malaysia is politically and economically
stable and open to foreign trade. Transportation, communications,
banking and health services are modern and efficient.

The Malaysian food and beverage market is becoming increasingly
sophisticated and is supplied by both local and imported products. The
strong economic growth in the late 80\'s and early 90\'s contributed to
major changes in consumer purchases and consumption patterns. Malaysians
living in urban areas are relatively brand conscious, and they prefer to
shop in stores, which offer them convenience and good product
selections. Traditional markets are losing ground, but are still
important outlets for fresh fruits and vegetables.

Total retail sales in 2003 is estimated at \$12.6 billion (Source:
Euromonitor). Malaysia's retail sales growth for 2004 is estimated at
7.5%, with total retail transaction projected to reach \$13.5 billion.

[Advantages and Challenges for U.S. Suppliers]{.underline}

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  GDP for 2005 is projected at 6%-7%. The Muslim population does not
  This anticipated growth will        consume non-halal products. This
  further spur consumer's spending.   inhibits the country's demand for
                                      non-halal products from foreign
                                      sources.

  More than 36% of the population is  Malaysian consumers are
  less than 15 years of age. The      price-sensitive. US products are
  majority is expected to participate not always price-competitive when
  in tomorrow's consumer market, or   compared to local products and
  is already participating today.     imports from neighboring countries.
  ----------------------------------- -----------------------------------

  ----------------------------------- -----------------------------------
  The Malaysian market for imported   US products face strong competition
  food and beverages continues to be  from Australia, New Zealand and
  liberalized. Tariffs are low for    China.
  most products, ranging from 0-20%.  

  ----------------------------------- -----------------------------------

  ----------------------------------- -----------------------------------
  New retail outlets are continuing   Strong local brands that have
  to open, providing better access to foreign origins, e.g., Nestle,
  consumers on a nationwide basis.    Walls ice cream, Coca-Cola command
  These businesses are looking for    strong positions in their market
  new imported products for their     segments.
  retail outlets.                     

  ----------------------------------- -----------------------------------

  ----------------------------------- -----------------------------------
  The food processing sector's active Dominance of domestic suppliers in
  involvement in R&D activities and   edible oil, poultry, pineapple and
  constant new product introductions  cocoa.
  create new demands for new          
  ingredient types.                   

  ----------------------------------- -----------------------------------

  ----------------------------------- -----------------------------------
  New concept food service outlets    Price sensitivity of consumers
  such as modern café and lifestyle   directly affects the sector's
  restaurants attract the younger     buyers and their suppliers, e.g.
  urban dwellers from the middle to   importers and distributors.
  higher income group.                

  ----------------------------------- -----------------------------------

# SECTION II. EXPORTER BUSINESS TIPS

**Business CustomsBusiness Customs**

Malaysians are accustomed to doing business with foreigners and readily
accommodate foreign business manners. Younger businessmen are prepared
to start new business relationships with foreign companies without the
advantage of a personal meeting. These businessmen also prefer to
communicate with foreign suppliers electronically.

Prior to initiating any export sales to Malaysia, it would be
advantageous to conduct a market survey with particular reference to the
competitive environment. It is common for foreign exporters to appoint a
local sales agent / importer to distribute their goods, expedite
clearance of goods from ports and draw on existing networks of
wholesalers and retailers. Regular visits by U.S. exporters to the
market are also critical to enhance business relationships.

**General Consumer Tastes and PreferencesGeneral Consumer Tastes and
Preferences**

Malaysia is a multiracial society consisting of three major races. The
Malays account for 60% of the population, with Islam as the official
religion; slightly more than 30% of Malaysians are Chinese who may be
Buddhist or Christian. Indians form the remaining 10% of the population
and they are largely Hindus.

Lunch and dinner meals consist mainly of rice together with two or three
meats/fish and vegetable dishes that are prepared according to the
styles and traditions of various ethnic communities. The Malays and
Indians prepare their dishes with hot spices while Chinese prefer to
stir-fry. Religious affiliation affects food consumption in Malaysia.
Muslims do not eat pork, and only eat meat products that have been
certified halal, and many Buddhists and Hindus do not eat beef. Thus,
halal chicken meat is popular among all consumers.

With rising affluence and education levels, consumers' shopping and
eating lifestyles have changed drastically over the years. Malaysians,
especially in urban and cosmopolitan areas, prefer to shop in modern
retail outlets, which offer them one-stop shopping options. However,
traditional stores such as provision and grocery shops, which are
conveniently located in residential and workplaces are still popular.

Malaysians are adventurous in their eating habits. Eating out is common
and is relatively inexpensive. Open air, street-stalls food is popular.
Fine dining restaurants and foodservice outlets incorporating
international cuisines are found in Klang Valley and other major cities
where spending power and population concentration are higher. Most
consumers frequent this type of restaurants to dine in style and comfort
and to experience the best and most sophisticated culinary standards in
the country.

**Food Standards and Regulations**

Malaysian health and food labeling requirements are fairly liberal. The
labeling requirements specify that imported and domestically produced
processed food items must be labeled in English or Bahasa Malaysia.
Labels must contain the following information:

\_ An appropriate description of the product;

\_ A list of ingredients in descending order of proportion by weight;

\_ if the item contains any animal product, a statement as to the
presence of such animal products (beef, pork, lard, gelatins, etc.,)

\_ if the item contains any alcohol, a statement as to the presence of
alcohol;

\_ the minimum net weight of the product; in the case of a product
packed in liquid, the minimum drained weight of the food;

\_ the name and address of the manufacturer;

\_ the name and address of the importer (this can be affixed at the time
of import);

\_ a statement of shelf life or expiry dates.

Certain food additives, preservatives, and artificial colorings approved
for use in the United States may not be permitted in Malaysia (See
Malaysian Food Quality Control website at
<http://www.moh.gov.my/fqc/index.htm> ). In addition, products with
labels that include phrases such as "Contains No Palm Oil" or "Contains
No Tropical Oils" will not be allowed for import. (Malaysia is a palm
oil producing country and is a strong advocate of this commodity. Please
see FAIRS Report MY4038 for more detailed information on Malaysian food
standard and requirements).

**General Import and Inspection Procedures**

All food consignments are subject to random checking and sampling at the
28 entry points around the country to ensure food items imported into
the country are safe and comply with the prescribed standards and
regulations. All meat, poultry and dairy product shipments must be
accompanied by appropriate USDA documentation. All beef and poultry
products must be certified halal and the products must originate from
slaughterhouses that have been inspected and approved by the Malaysian
veterinary and religious authorities. (It is important to know that U.S.
plants must list and show the products they intend to export to Malaysia
during the inspection visits by the Malaysian veterinary and religious
authorities; as only products that are certified halal during the
inspection visits are allowed to be imported into Malaysia). Other food
items that contain any animal products must be clearly marked.

International freight forwarders normally handle documentation and other
formalities with authorities at entry points. Provided all necessary
documents are in order, no problems or delays should occur in clearance
of goods.

# SECTION III. MARKET SECTOR STRUCTURE AND TRENDS

In 2003, the total imports of consumer-oriented products to Malaysia
were estimated at \$1.6 billion. Total imports from the United States
were \*\$118 million, representing 7% market share. China was the major
supplier of this category with imports at \$280 million and is projected
to maintain its position for 2004. Australia and New Zealand both held
14% and 15% market shares respectively.

China exported \$110 million worth of vegetables to Malaysia in 2003.
Turnip, cabbage, carrot, potato and garlic were among the major items.
China is the market leader for mandarin oranges (\$10 million), apples
(\$6 million) and pears (\$8 million). Since the US and China are both
in the northern hemisphere with similar seasons, US exporters have to
compete aggressively with Chinese exporters who can sell their produce
at lower prices. US oranges and grapes are popular is the Malaysian
market. Imports for 2003 were at \$10 million and \$5.3 million
respectively. Competition is less intense with supplies from Australia
since they have the opposite seasons.

By tradition, New Zealand is the most favored for dairy products
followed by Australia. The latter in turn is the preferred source of
meat products. In 2003, imports of dairy products from New Zealand were
at \$116 million while imports of from Australia were estimated at \$89
million. However, with the strengthening of Australian and New Zealand
currencies, traders are looking for alternate supplies of dairy products
such as cheese.

India is the leading supplier of red meat market with total imports of
\$84 million (77,000 metric tons) in 2003. Indian beef caters to the
mass market. In the foodservice sector, competition for US beef comes
from Australia, with total imports amounted to \$13.6 million (9,400
metric tons) and New Zealand at \$13.9 million (7,800 metric tons) in
the same year. Imports from US were at \$2 million. US beef is
considered premium and is found only in high-end foodservice outlets and
restaurants serving Japanese, Korean and Western cuisines. (The
Malaysian Veterinary authority imposed a ban on US beef since December
2003 due to the detection of BSE in the US).

Malaysia is self-sufficient in pork and poultry (broiler/eggs)
production. Chicken parts and chicken wings are imported periodically to
meet the demand from the local processing industry. In 2003, major
suppliers of chicken parts and chicken wings were Thailand (\$18
million) and Denmark (\$12 million). US exported \$1.3 million. Since
there is no commercial production of turkey in Malaysia, all turkey meat
is imported. US is the leading supplier with imports of frozen whole
turkey and turkey parts at 488 metric tons with CIF value of US\$1
million in 2003.

Malaysia is a net importer of seafood products with an annual import
estimated at US\$350 million in 2003. While some supply of fresh and
frozen fish comes the East Coast of Peninsular Malaysia, Malaysia
imports a substantial amount of fish and seafood products from Thailand
(\$100 million) and Indonesia (\$68 million).

\* Note:

This data, obtained from the UN Trade Database, reflected a lower import
value compared to the statistics published by the US Trade Data. US data
showed that the total exports of consumer-oriented products from US were
\$161 million in 2003. Exports of fresh fruits were \$79 million but
were reflected at \$21 million in the UN Trade Data.

An increasing number of middle to high income consumers in Malaysia
demand high quality imported exotic fish and seafood, especially live,
and the bulk of these will be consumed in middle to high-end Chinese
seafood restaurants. Lobsters (Boston, Rock), abalone, oysters,
scallops, clams (Razor, Blood, Sea, Jacknife), green mussels, crabs
(Snow, King, Blue Swimmer, Dungeness), prawns (Mantis), geoduck, farmed
sturgeon, razor fish, turbot, grouper, sea bass, bamboo fish, coral
trout and carp are popular.

High-end western restaurants and high-end hotels have a demand for
premium fresh, chilled or frozen products, such as salmon, cod, Dover
sole, halibut as well as oysters, scallops, clams, lobsters, crabs and
alike. Most salmon imports (fresh/chilled, frozen and smoked) are
distributed to these types of food service outlets.

Supermarkets and hypermarkets are good for fresh chilled or frozen
lobsters, crabs, large prawns, mackerel, cod, salmon (included smoked),
Hoki, Dori, mackerel, crab meat, mussels, scallops and clams.

Opportunities exist for US fish and seafood exporters to develop their
market presence in Malaysia by supplying to these major businesses.

**Distribution for consumer-ready food products*Distribution for
consumer‑ready food products***

Private companies are the major entities in the food distribution
system. Food importers and commissioned agents place orders with foreign
suppliers and distribute to supermarkets/grocery stores and hotels in
the cities and to sundry shops in the rural areas. Several of the larger
supermarket chains are beginning to import directly from overseas.

Most products from the United States enter through the ports of Klang,
Penang and Johor. Transshipment of food products through Singapore has
declined with improvement in shipping facilities offered by major ports
in Malaysia. Westport, situated in Port Klang and the newly developed
Port of Tanjung Pelepas (in Johor) have further enhanced Malaysia as a
shipping hub.

Malaysia has 7 international airports, including the newly opened Kuala
Lumpur International Airport (KLIA), one of the biggest and most modern
airports in the region. Malaysia's highway network is the backbone of
the country's transport system as 90% of passenger and cargo movements
are by roads. Roads link almost every town in Malaysia, and products
move efficiently between cities and rural areas. Railway lines which
connect the north, south, west and east coasts of Peninsular Malaysia
complements the road system.

**Food Retail Sector**

The retail sector in Malaysia remains highly fragmented with a large
number of small to medium sized players in the market. No official
statistics are available on the current structure of the retail sector.
There are approximately 140,000 retailers and wholesalers in Malaysia,
comprising shopping complexes, supermarkets, wet-markets, specialised
outlets and traditional retail shops. Trade sources estimate that there
are around 40 hypermarkets, 1,500 supermarkets and minimarkets, 300
convenience stores, 2,300 petrol station stores and over 90,000
traditional food stores nationwide.

Supermarkets and hypermarkets command around 28% of the total retail
sales. These stores are mainly located in the major urban centers and
are continuing to grow in numbers. Foreign-owned retailers operating
locally include Tesco, Carrefour, Makro, Dairy Farms International (owns
Giant), and Jaya Jusco. Supermarkets and hypermarkets will continue to
see the fastest growth over the next three years. These retail stores
provide good venues for imported products and access to the middle and
high-income sophisticated consumers.

Competition among the retailers, especially hypermarkets, is intense
with large international retailers like Carrefour, Tesco and Giant
frequently engaging in price wars to establish their presence as major
players in the market. The pressure is mounting for local retailers such
as The Store to maintain competitive prices and carry a good variety of
products in order to keep up with the international players.

Late last year, the Government announced a five-year freeze on issuance
of licenses for new hypermarkets in Klang Valley, Penang and Johor Bahru
to control the growth of hypermarkets. These are major retail growth
areas and are believed to be already crowded with too many players. In
order to protect small retailers from going out of business,
hypermarkets are no longer allowed to operate in towns with less than
350,000 people.

**Entry strategy**

At first sight, supermarkets and hypermarkets appear to be the easiest
entry target for new-to-market US exporters as they already sell a wide
range of imported food and beverage products which are targeted at the
sophisticated middle to high income urban customers. However, US
exporters should carefully select major retailers that are best
positioned to sell imported US food and beverage products. The US
exporters should consider the following when selecting major retailers:

-   The financial strength of the company

-   The number and location of retail outlets

-   The marketing and promotional strategy and programme of the store.

-   The target customers of the store.

-   The level of interest by the retailer in selling imported US
    products.

-   The store's purchasing policy, i.e. whether they purchase directly
    from overseas suppliers or via local importers/distributors. It is
    important to note that some supermarkets and hypermarkets buy
    directly from overseas suppliers as well as from local importers and
    distributors. All other types of retailers buy from local importers
    and distributors

-   The retail management's policy towards:

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-   new imported products and brands.

-   premium and basic lines and niche products.

-   volume of sales expected.

-   promotional support expected of US exporters.

-   pricing.

-   listing fees and other costs, if any.

**Food Service Sector**

The food service sector in Malaysia is highly fragmented with a large
number of small to medium sized players in the market. According to
trade sources, over 80% of the food service establishments are made up
of small family-owned businesses or individual proprietors. This sector
is expected to grow from 5%-15% in the next three years.

The Table below provides trade estimates of the structure of the food
service market today.

+-------------------------------------------+--------------------------+
| **Structure of Food Service Market**      |                          |
|                                           |                          |
| (Estimated Sales of US\$ 3,813 Million)   |                          |
+-------------------------------------------+--------------------------+
| Full service family style restaurants     | 25%                      |
+-------------------------------------------+--------------------------+
| Food and drinks hawker stalls             | 25%                      |
+-------------------------------------------+--------------------------+
| Fast food restaurant chains               | 15%                      |
+-------------------------------------------+--------------------------+
| Coffee shops                              | 15%                      |
+-------------------------------------------+--------------------------+
| Hotel and resorts                         | 15%                      |
+-------------------------------------------+--------------------------+
| Catering services                         | 5%                       |
+-------------------------------------------+--------------------------+
| Total                                     | 100%                     |
+-------------------------------------------+--------------------------+
| Source: Trade estimates (Stantons, Emms & |                          |
| Sia)                                      |                          |
+-------------------------------------------+--------------------------+

1\. Hawkers provide the very foundation of the Malaysian food industry.
Small food and drinks stalls serving a very limited range of local
dishes at inexpensive prices, operated by proprietors or family
businesses. This sector has around 25% of the total food service market.
A large number of these businesses operate from temporary roadside
stalls while some are located within coffee shops. Increasingly, more
stalls are located in food halls in the modern shopping complexes. The
majority of this sector's customers are low to middle income workers,
families and students who have their breakfast, lunch or snack at food
stalls on a daily basis during the working week.

2\. Full service family style restaurants, operated by individual
proprietors, companies or large corporations, which are estimated to
have around 25% of the total food service market. They are made up of
low end to high end, air-conditioned restaurant chains with waiter
services included. A large number of these full service restaurants
serve Chinese cuisine although an increasing number specialise in
serving exotic cuisine from Europe, Africa and America, particularly
those located in the major cities where expatriates live. The majority
of the customers consist of families from middle to high-income groups,
businesspersons, tourists and affluent younger Malaysians.

3\. Local coffee shops and modern concept café that are estimated to
have around 15% share of the total food service market. Coffee shops are
generally low to middle end restaurants without air-conditioning or
waiter services, owned by proprietors or small companies. Culinary and
sometimes health standards are generally low to average with the
majority offering simple local dishes for breakfast and lunch. Their
menu prices are usually inexpensive, which attract the majority of the
low to middle income consumers in Malaysia.

> An increasing number of franchised branded cafés, such as Starbucks
> and Coffee Bean & Tea Leaf, have entered the sector in recent years.
> They are usually located in the high-end shopping centres in major
> cities. These cafés are very popular with the young adults as well as
> teenage students from the middle to high-income groups. Their
> customers link being seen in such a branded café to the trendy
> lifestyle that they lead.

4\. Fast food chain of restaurants, operated by companies or large
corporations, which is estimated to have around 15% share of the total
food service market. KFC today dominates the sector. Other major fast
food restaurants include McDonald's, A&W, Burger Kings, Pizza Huts, etc
are located strategically in large shopping malls all over Malaysia.
Local franchised chains such as Marrybrown, Sugar Bun and Dave's Deli,
which offer similar menus as the KFC and McDonald outlets, are also
expanding rapidly. Competition among these quick service restaurants
(QSRs) is intense with seventy percent of customers who patronize quick
service restaurants are students in the \"teen\" market.

> Hotels and resorts, which comprise about 1,700 hotels and other
> lodging houses, form a relatively small segment in Malaysia's food
> service market. Its share of the total market is estimated by trade
> sources at about 15% today, worth around US\$ 570 million.
> Importantly, the 3 to 5 star rated hotels, numbering less than 250
> nationwide, operate restaurants that are key users of imported food
> and beverages. These 3 to 5 star hotels normally have more than three
> food and beverage outlets, e.g. a coffee house, a local Asian
> restaurant and a foreign restaurant, i.e. Western food or, in some
> cases, Japanese food, as well as at least one bar that is licensed to
> sell alcoholic drinks.
>
> The Malaysian Tourism Board has been actively promoting Malaysia as a
> holiday destination. In 2003, total earnings from tourism were at
> \$5.6 billion with food and beverage as the third largest contribution
> at 16.4% after accommodation (39.4%) and shopping (20.7%). The growth
> in tourism is expected to fuel the growth of restaurants offering
> international cuisines such as Middle Eastern and Latin American food.

**Food Processing Sector**

Malaysia has a sizeable food manufacturing industry. Trade sources
estimate the industry's total output in excess of US\$ 9 billion.
Malaysia exported \$1.46 billion worth of processed food in 2003. Major
processed food items for exports included bakery products, baked beans,
canned curry chicken and beef, canned tuna fish, sardines, instant
noodles, canned tropical fruits, fruit juices, milk drinks, soya
products, chilli and tomato sauces, biscuits, breakfast cereals,
chocolate products, snack foods such as chips and candies, and gourmet
foods. These products are produced in conformation with *halal*
requirements that are acceptable by Muslim consumers worldwide.

The Malaysian food and beverage manufacturing industry has a broader
base than many of Southeast Asia\'s food and beverage processing
industries. Most of the major food processing companies are also
involved in exporting their products to overseas markets. The following
factors have contributed to the production diversity found in the
industry today:

1\. The presence of a wide range of high quality imported processed food
and beverages because of the relatively low import duties on most of
these products. This has stimulated the introduction of new foods to
local production by local businesses seeking to benchmark imported
products which have become popular with local consumers, e.g. biscuits,
confectionery and snack products.

2\. Malaysia\'s open trading environment has stimulated the extensive
use of imported ingredients by its local food processing industry. This
has enabled the industry to experiment and introduce a wide range of new
processed.

3\. Malaysia aims to be the international centre for *\"halal\"* food
production. Malaysia\'s accreditation on *halal* (the product can be
consumed by Muslims) products is highly respected and recognised by most
Islamic nations. This allows Malaysian based companies to penetrate
these markets with ease with their *halal* certified food and beverage
products. This has created an opportunity for the food industry to
produce *halal* certified foods and beverages targeted at the Muslim
markets worldwide. Today, Malaysia has one of the widest ranges of
processed *halal* foods in the world.

4\. The government's campaign for consumers to "Buy Malaysian" products
has encouraged the retail sector to carry more Malaysian produced food
and beverage products. This has stimulated confidence in the industry
with increased investment in R&D activities, increased introduction of
new product range, expansion of the domestic market into both the retail
and HRI sectors and entry into new overseas markets.

5\. In addition, the Asian economic crisis has forced a large number of
the companies to become more efficient in their operation. With
increased competition for market shares, these companies have
implemented cost saving exercises and consolidated their operations to
be more competitive in the market. This included sourcing of ingredients
from lower cost suppliers and, where possible, from domestic suppliers.

Various trade organizations such as the Federation of Malaysian
Manufactures and the government agency, Malaysia External Trade
Development Corporation (MATRADE) is aggressive in promoting, assisting
and developing Malaysia's food industry for the export markets.
Marketing seminars, workshops and training programs are routinely
organized to improve international marketing skills and assist food
processors in finding new markets overseas. The Malaysian Government has
extended certain facilities such as the Export Credit Refinancing to
marketing and exporting entities including trading houses to assist
these small and medium enterprises to market and distribute their
products overseas.

Participation in international food shows by Malaysian food processors
has also brought about universal recognition of Malaysian ethnic foods
such as "satay" (barbecue meat and sauce) and \"roti canai\" (pancakes).
Local companies are encouraged to use franchising as a tool to expand
their business.

END OF REPORT

# SECTION IV. BEST HIGH-VALUE PRODUCTS PROSPECTS

<table>
<colgroup>
<col style="width: 14%" />
<col style="width: 0%" />
<col style="width: 11%" />
<col style="width: 11%" />
<col style="width: 0%" />
<col style="width: 12%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 17%" />
<col style="width: 18%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Product Category</strong></td>
<td><p><strong>2003</strong></p>
<p><strong>Market</strong></p>
<p><strong>Size</strong></p></td>
<td><p><strong>2003</strong></p>
<p><strong>Imports</strong></p></td>
<td colspan="2"><p><strong>3Yr.</strong></p>
<p><strong>Avg.</strong></p>
<p><strong>Annual</strong></p>
<p><strong>Import</strong></p>
<p><strong>Growth</strong></p></td>
<td colspan="2"><p><strong>Import</strong></p>
<p><strong>Tariff</strong></p>
<p><strong>Rate</strong></p></td>
<td><p><strong>Key</strong></p>
<p><strong>Constraints</strong></p>
<p><strong>Over Market</strong></p>
<p><strong>Development</strong></p></td>
<td><p><strong>Market</strong></p>
<p><strong>Attractiveness</strong></p>
<p><strong>For USA</strong></p></td>
</tr>
<tr class="even">
<td colspan="2">Poultry, mainly frozen</td>
<td>875,063 tons</td>
<td><p>40,063 tons</p>
<p>($48 million)</p></td>
<td colspan="2">Decline, due to strong local supply (chicken meat)</td>
<td colspan="2">No import duties are levied on poultry imports.</td>
<td><p>The local poultry industry is very strong.</p>
<p>Malaysians generally prefer fresh poultry, which is widely
available.</p></td>
<td>Niche retail demand exists for frozen turkey.</td>
</tr>
<tr class="odd">
<td colspan="2">Breakfast cereals</td>
<td>N/A</td>
<td><p>5229</p>
<p>tons</p>
<p>($9 million)</p></td>
<td colspan="2">4%</td>
<td colspan="2">5% duty charged except on products containing cocoa,
which incur 10% duty.</td>
<td>Nestlé and Kelloggs breakfast cereals and their strengths in the
market.</td>
<td>An attractive market for long term development based on higher
disposable incomes and related changing eating habits.</td>
</tr>
<tr class="even">
<td colspan="2">Infant food, including dairy products</td>
<td>N/A</td>
<td><p>18,708</p>
<p>tons</p>
<p>($63 million)</p></td>
<td colspan="2">Marginal growth</td>
<td colspan="2">No import duties are levied on infant milk/food.</td>
<td><p>Food cultural barriers exist. Malaysian mothers appear to prefer
cereal based infant foods.</p>
<p>Locally prepared and packed dairy products of Nestlé, Dumex and Dutch
Baby have a strong hold on the market.</p></td>
<td>The USA is already the major supplier for bottled infant food and
the market is upgrading on the back of higher disposable incomes.</td>
</tr>
<tr class="odd">
<td colspan="2">Fruit juices</td>
<td>N/A</td>
<td><p>11,712</p>
<p>tons ($13 million)</p></td>
<td colspan="2">Decline</td>
<td colspan="2">20% except for pineapple juice which incurs 30%.</td>
<td>The retail market for fruit juices is growing, the market is
upgrading from cordials on the back of higher disposable incomes.</td>
<td>This market is likely to become more dynamic in future as Malaysians
start to understand these products. Opportunities will exist for
development by the U.S. pure juice suppliers.</td>
</tr>
<tr class="even">
<td colspan="2"><p>Fresh</p>
<p>Vegetables,</p>
<p>Temperate</p></td>
<td>312,038 tons</td>
<td><p>307,038</p>
<p>tons</p>
<p>($124 million)</p></td>
<td colspan="2">Growth of about 3%</td>
<td colspan="2">No import duty is charged</td>
<td><p>Competition from key established suppliers from Australia,
Indonesia and China.</p>
<p>Competition also comes in the form of products from Malaysia’s own
highlands and some Asian countries.</p></td>
<td>Demand for temperate vegetables will continue to rise on the back of
rising disposable incomes. This will provide opportunities for U.S.
suppliers able to compete with Australia, Indonesia and China.</td>
</tr>
<tr class="odd">
<td colspan="2">Frozen vegetables</td>
<td><p>28,766</p>
<p>tons</p></td>
<td><p>28,766</p>
<p>tons</p>
<p>($21 million)</p></td>
<td colspan="2">Decline</td>
<td colspan="2">Nil except sweet corn which incurs 10%</td>
<td>Demand is not very varied and revolves around potatoes, peas, sweet
corn and mixed vegetables.</td>
<td><p>Good prospects exist for certain frozen vegetables supplied by
the USA that are in demand from Malaysian consumers.</p>
<p>Note: Food service demand is also important.</p></td>
</tr>
<tr class="even">
<td colspan="2">Fresh fruits, temperate</td>
<td>366, 495 tons</td>
<td><p>360,495</p>
<p>tons</p>
<p>($80 million)</p></td>
<td colspan="2">5% growth</td>
<td colspan="2">5% for strawberry, raspberry and gooseberry and 10% for
other fruits except kiwi fruit which incur 30% import duty.</td>
<td>Few barriers exist for popular products such as apples, pears,
oranges and grapes.</td>
<td>This is one of the most attractive market segments for the USA to
develop. Demand for temperate fruits will rise on the back of rising
disposable incomes.</td>
</tr>
<tr class="odd">
<td colspan="2">Dried fruits</td>
<td><p>17,226</p>
<p>tons</p></td>
<td><p>17,226 tons</p>
<p>($5 million)</p></td>
<td colspan="2">3% growth</td>
<td colspan="2">10% except for Dates, which incur no import duty.</td>
<td>Mature traditional demand exists except for dates which are growing
rapidly on the back of rising disposable incomes.</td>
<td>Attractive to U.S. suppliers with market driven approach to business
with Malaysia.</td>
</tr>
<tr class="even">
<td colspan="2">Edible nuts</td>
<td>6,764 tons</td>
<td><p>6,764 tons</p>
<p>($7 million)</p></td>
<td colspan="2">15% growth</td>
<td colspan="2">Nil, except for roasted groundnuts which incurs 20%
import duty.</td>
<td>Major demand growth is from the food industry.</td>
<td>This market should not be ignored. The USA is already the major
supplier and the market is upgrading on the back of higher disposable
incomes.</td>
</tr>
<tr class="odd">
<td>Pet foods</td>
<td colspan="2">8,078 tons</td>
<td colspan="2"><p>8,078 tons</p>
<p>($12 million)</p></td>
<td colspan="2">Decline, due mainly to impact of recent economic
slowdown.</td>
<td>No import duties are levied on dog or cat food.</td>
<td>Few constraints/ barriers exist under conditions where disposable
incomes are growing.</td>
<td>Attractive for committed suppliers wishing to actively develop
markets on a long term basis.</td>
</tr>
<tr class="even">
<td>Wine</td>
<td colspan="2">16 million liters</td>
<td colspan="2"><p>16 million liters</p>
<p>($20 million)</p></td>
<td colspan="2">Growing market</td>
<td><p>RM 120.00 (about US$ 32) per Decalitre for still wines. Sparkling
wines incur RM 425.00 (about US$ 112) per Decalitre.</p>
<p>Sales tax is levied at 20%.</p></td>
<td><p>Duties on alcoholic drinks moderate consumption.</p>
<p>Wine may have benefited from a switch from use of spirits, e.g.
brandy, at celebrations, e.g. ethnic Chinese weddings.</p></td>
<td>This is an attractive market for U.S. exporters underpinned by
increasing disposable incomes as well as the apparent switch away from
spirits.</td>
</tr>
</tbody>
</table>

# SECTION V. KEY CONTACTS AND FURTHER INFORMATION

If you have any questions or comments regarding this report or need
assistance exporting high value products to Malaysia, please contact the
Office of Agricultural Affairs at the U.S. Embassy in Kuala Lumpur at
the following address:

Office of the Agricultural Affairs

> U.S. Embassy - Kuala Lumpur

APO AP 96535-8152

Tel : (011-60-3) 2168-4985/2168-4884

Fax : (011-60-3) 2168-5023

email: agkualalumpur@fas.usda.gov

For more information on exporting U.S. agricultural products to other
countries, please visit the Foreign Agricultural Service homepage:
http://www.fas.usda.gov.

Malaysian Regulatory Agencies / Other Trade Contacts

Director

Veterinary Public Health

Dept of Veterinary Services,

8th Floor, Block A, Wisma Chase Perdana,

Off Jalan Semantan, Bukit Damansara,

50630 Kuala Lumpur

Tel : (011-60-3) 2094‑0077/252‑1854

Fax : (011-60-3) 2093‑5804

http://agrolink.moa.my/jph

Director

Food Quality Control Division

Ministry of Health Malaysia

3^rd^ Floor, Block B, Komplek Pejabat Kesihatan

Jalan Cenderasari

50590 Kuala Lumpur

Tel : (011-60-3) 2694 6601

Fax : (011-60-3) 2694 6517 / Http://dph.gov.my

Director General of Customs

Royal Customs and Excise Headquarters Malaysia

Ground Floor ‑ 7th Floor, Block 11

Kompleks Pejabat Kerajaan

Jalan Duta, 50596 Kuala Lumpur

Tel : (011-60-3) 6551‑6088

Fax : (011-60-3) 6551‑2605

http://www.customs.gov.my

# APPENDIX I. STATISTICS

# A. KEY TRADE & DEMOGRAPHIC INFORMATION

  ------------------------------------------------------------ ----------
  Agricultural Imports From All Countries (US\$Mil) / U.S.     4,553/ 9%
  Market Share (%)                                             

  Consumer Food Imports From All Countries (US\$Mil) / U.S.    1,596 / 7%
  Market Share (%)                                             

  Edible Fishery Imports From All Countries (US\$Mil) / U.S.   350 / 1%
  Market Share (%)                                             

  Total Population (Millions) / Annual Growth Rate (%)         25.0/ 2.4%

  Urban Population (Millions) / Annual Growth Rate (%)         *16.0 /
                                                               4.5%*

  Number of Major Metropolitan Areas                           9

  Size of Middle Class (Millions) / Growth Rate (%) (estimate) 15 / 2.5%

  Per Capita Gross Domestic Product (US Dollars)               \$4,149

  Unemployment Rate (%)                                        3.4%

  Per Capita Food Expenditures (U.S. Dollars)                  1000

  Percent of Female Population Employed                        45.5%

  Exchange rate (US\$1 = X.X local currency)                   US\$ =
                                                               3.8RM
  ------------------------------------------------------------ ----------

# TABLE B. Consumer Food & Edible Fishery Products

# 

<table>
<colgroup>
<col style="width: 41%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td><h1 id="malaysia-imports">Malaysia Imports</h1></td>
<td colspan="3">Imports from the World</td>
<td colspan="3">Imports from the U.S.</td>
<td colspan="3">U.S. Market Share</td>
</tr>
<tr class="even">
<td><strong>(In Millions of Dollars)</strong></td>
<td>2001</td>
<td>2002</td>
<td>2003</td>
<td>2001</td>
<td>2002</td>
<td>2003</td>
<td>2001</td>
<td>2002</td>
<td>2003</td>
</tr>
<tr class="odd">
<td><h6 id="consumer-oriented-agricultural-total">CONSUMER-ORIENTED
AGRICULTURAL TOTAL</h6></td>
<td>1572</td>
<td>1575</td>
<td>NA</td>
<td>148</td>
<td>120</td>
<td>NA</td>
<td>9</td>
<td>8</td>
<td>0</td>
</tr>
<tr class="even">
<td>Snack Foods (Excl. Nuts)</td>
<td>55</td>
<td>64</td>
<td>NA</td>
<td>5</td>
<td>4</td>
<td>NA</td>
<td>8</td>
<td>7</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Breakfast Cereals &amp; Pancake Mix</td>
<td>10</td>
<td>9</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>12</td>
<td>12</td>
<td>0</td>
</tr>
<tr class="even">
<td>Red Meats, Fresh/Chilled/Frozen</td>
<td>163</td>
<td>160</td>
<td>NA</td>
<td>3</td>
<td>2</td>
<td>NA</td>
<td>2</td>
<td>2</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Red Meats, Prepared/Preserved</td>
<td>9</td>
<td>9</td>
<td>NA</td>
<td>2</td>
<td>2</td>
<td>NA</td>
<td>21</td>
<td>19</td>
<td>0</td>
</tr>
<tr class="even">
<td>Poultry Meat</td>
<td>49</td>
<td>65</td>
<td>NA</td>
<td>2</td>
<td>3</td>
<td>NA</td>
<td>5</td>
<td>4</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Dairy Products (Excl. Cheese)</td>
<td>370</td>
<td>309</td>
<td>NA</td>
<td>21</td>
<td>8</td>
<td>NA</td>
<td>6</td>
<td>2</td>
<td>0</td>
</tr>
<tr class="even">
<td>Cheese</td>
<td>14</td>
<td>15</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>5</td>
<td>2</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Eggs &amp; Products</td>
<td>2</td>
<td>3</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>13</td>
<td>11</td>
<td>0</td>
</tr>
<tr class="even">
<td>Fresh Fruit</td>
<td>101</td>
<td>108</td>
<td>NA</td>
<td>19</td>
<td>19</td>
<td>NA</td>
<td>19</td>
<td>18</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Fresh Vegetables</td>
<td>199</td>
<td>217</td>
<td>NA</td>
<td>4</td>
<td>4</td>
<td>NA</td>
<td>2</td>
<td>2</td>
<td>0</td>
</tr>
<tr class="even">
<td>Processed Fruit &amp; Vegetables</td>
<td>105</td>
<td>108</td>
<td>NA</td>
<td>23</td>
<td>21</td>
<td>NA</td>
<td>22</td>
<td>19</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Fruit &amp; Vegetable Juices</td>
<td>14</td>
<td>12</td>
<td>NA</td>
<td>3</td>
<td>2</td>
<td>NA</td>
<td>20</td>
<td>17</td>
<td>0</td>
</tr>
<tr class="even">
<td>Tree Nuts</td>
<td>9</td>
<td>12</td>
<td>NA</td>
<td>4</td>
<td>4</td>
<td>NA</td>
<td>40</td>
<td>36</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Wine &amp; Beer</td>
<td>19</td>
<td>28</td>
<td>NA</td>
<td>2</td>
<td>1</td>
<td>NA</td>
<td>10</td>
<td>5</td>
<td>0</td>
</tr>
<tr class="even">
<td>Nursery Products &amp; Cut Flowers</td>
<td>3</td>
<td>7</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>2</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Pet Foods (Dog &amp; Cat Food)</td>
<td>12</td>
<td>13</td>
<td>NA</td>
<td>3</td>
<td>3</td>
<td>NA</td>
<td>27</td>
<td>24</td>
<td>0</td>
</tr>
<tr class="even">
<td>Other Consumer-Oriented Products</td>
<td>437</td>
<td>437</td>
<td>NA</td>
<td>56</td>
<td>45</td>
<td>NA</td>
<td>13</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="odd">
<td></td>
<td> </td>
<td></td>
<td> </td>
<td></td>
<td></td>
<td> </td>
<td></td>
<td></td>
<td> </td>
</tr>
<tr class="even">
<td><h6 id="fish-seafood-products">FISH &amp; SEAFOOD PRODUCTS</h6></td>
<td>319</td>
<td>326</td>
<td>NA</td>
<td>3</td>
<td>3</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Salmon</td>
<td>9</td>
<td>14</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>7</td>
<td>5</td>
<td>0</td>
</tr>
<tr class="even">
<td>Surimi</td>
<td>6</td>
<td>8</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>2</td>
<td>2</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Crustaceans</td>
<td>74</td>
<td>68</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Groundfish &amp; Flatfish</td>
<td>39</td>
<td>41</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>2</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Molluscs</td>
<td>10</td>
<td>11</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>NA</td>
<td>4</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="even">
<td>Other Fishery Products</td>
<td>180</td>
<td>184</td>
<td>NA</td>
<td>2</td>
<td>1</td>
<td>NA</td>
<td>1</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>AGRICULTURAL PRODUCTS TOTAL</td>
<td>4025</td>
<td>4255</td>
<td>NA</td>
<td>424</td>
<td>427</td>
<td>NA</td>
<td>11</td>
<td>10</td>
<td>0</td>
</tr>
<tr class="odd">
<td>AGRICULTURAL, FISH &amp; FORESTRY TOTAL</td>
<td>4611</td>
<td>4842</td>
<td>NA</td>
<td>459</td>
<td>466</td>
<td>NA</td>
<td>10</td>
<td>10</td>
<td>0</td>
</tr>
</tbody>
</table>

#  

# Source: FAS\' Global Agricultural Trade System using data from the United Nations Statistical Office. 

# TABLE C. Top 15 Suppliers of Consumers Foods & Edible Fishery Products

**Malaysia -- Imports**

  ------------------- --------- --------- ------ -- ---------------- -------- -------- ------
  CONSUMER-ORIENTED                                 FISH & SEAFOOD                     
  AGRICULTURAL TOTAL                                PRODUCTS --                        
  -- (\$1000)                                       (\$1000)                           

                      2001      2002      2003                       2001     2002     2003

  China (Peoples      194371    227256    0         Thailand         92810    101162   NA
  Republic of)                                                                         

  Australia           239469    226905    0         Free Zones       0        67799    NA

  New Zealand         235020    209361    0         China (Peoples   16221    20849    NA
                                                    Republic of)                       

  Thailand            109207    166149    0         Burma            15860    17010    NA

  India               132670    137114    0         India            15179    14372    NA

  United States       148062    120324    0         Vietnam          10001    10942    NA

  Netherlands         83703     87017     0         Taiwan           12874    10368    NA
                                                    (Estimated)                        

  Singapore           51305     64286     0         New Zealand      9220     8821     NA

  Free Zones          0         53748     0         United Kingdom   8465     7431     NA

  Philippines         37943     38194     0         Bangladesh       7533     6313     NA

  Denmark             33345     31130     0         Australia        4467     5537     NA

  France              21308     21129     0         Pakistan         3982     5389     NA

  United Kingdom      17897     16175     0         Mexico           4855     5301     NA

  Germany             29042     15864     0         South Africa     7073     5265     NA

  Ireland             23497     14188     0         Norway           4128     4800     NA

  Other               215296    146355    0         Other            105990   34605    0

  World               1572164   1575224   0         World            318659   325977   0
  ------------------- --------- --------- ------ -- ---------------- -------- -------- ------

Source: United Nations Statistics Division.