Required Report - public distribution

**Date:** 10/14/2005

**GAIN Report Number:** MY5041

MY5041

**Malaysia**

**Exporter Guide**

**Annual**

**2005**

**Approved by:**

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

U.S. Embassy, Kuala Lumpur

**Prepared by:**

Jacelyn Chang

**Report Highlights:**

With per capita income of over \$4,700, a middle and upper class making
up 61 percent of the population, and 5-6 percent GDP growth for
2005-2006, Malaysia shows good potential for growth as a market for
consumer high value products. According to US Bureau of the Census Trade
Data, exports of consumer-oriented products to Malaysia increased from
\$74 million in 1999 to \$205 million in 2004. 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
11](#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 26 million 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. Malaysia is expected to chart
commendable gross domestic product (GDP) growth of 5% in 2005, with per
capita income estimated at \$ \$4,705. Real GDP growth is forecast to
expand by 5.5% in 2006 while per capita income is expected to reach
\$5,038.

The rise in global oil prices in January through August this year has
triggered higher inflation in Malaysia. While the inflation rate had
remained below 2% since 2000, the Consumer Price Index (CPI) increased
2.8 per cent in 2005 compared with a 1.2 percent in the same period a
year ago, primarily because transportation costs have become more
expensive. Fuel prices have gone-up three times this year. The
government announced measures to ease the burden of rising domestic
prices and to cushion the effect of soaring global oil prices. In
addition to the on-going price control of essential food items; other
steps taken include delay in toll rate increases, reduction in road tax
for commercial and private vehicles and freeze in fuel price increases
for the rest of the year.

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 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. According to a
study by AC Nielsen, hypermarkets/large format stores are now the
dominant format in urban/metropolitan areas in Malaysia with about 45 to
60 percent of urban household shoppers using them as the main outlet for
the majority of their packaged groceries. Traditional markets are losing
ground, but are still important outlets for fresh fruits and vegetables.

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

+-----------------------------------+-----------------------------------+
| **Advantages**                    | **Challenges**                    |
+-----------------------------------+-----------------------------------+
| Malaysia's economy will continue  | Though consumers are demanding    |
| to grow resulting in an           | greater variety and quality in    |
| increasing number of consumers in | the foods consumed, they are      |
| the middle-income group demanding | generally price sensitive towards |
| greater variety and quality of    | purchases. Thus retailers often   |
| foods consumed.                   | purchase food items that are more |
|                                   | affordable to the majority of the |
|                                   | consumers.                        |
+-----------------------------------+-----------------------------------+
| Shopping for foods at             | Countries that are close to       |
| supermarkets and hypermarkets is  | Malaysia have a faster delivery   |
| becoming increasingly popular.    | time and lower freight cost to    |
| Furthermore, new supermarkets and | Malaysia compared to US exports.  |
| hypermarkets are being            | Other countries are able to       |
| established throughout Malaysia   | supply foods at lower prices than |
| where there is a significant      | imports from the US.              |
| population of middle to           |                                   |
| high-income consumers.            | For example, imports from China,  |
|                                   | Thailand, Indonesia, and India    |
| Thus supermarkets and             | are known for their relatively    |
| hypermarkets are providing        | low prices. While Australia is    |
| greater market access for         | able to take advance of quick     |
| imported foods including chilled  | delivery times and familiarity of |
| and frozen foods since these      | many Malaysians with their        |
| retail outlets have cold storage  | products.                         |
| facilities.                       |                                   |
+-----------------------------------+-----------------------------------+

+-----------------------------------+-----------------------------------+
| Malaysia does not produce or      | 56% of Malaysia's population is   |
| produces in insufficient          | Muslims. Thus only *halal* meats  |
| quantities certain food items     | (beef, lamb, and poultry) are     |
| which therefore have to be        | allowed to be imported into       |
| imported. These include beef,     | Malaysia from plants approved by  |
| lamb, cheese, butter, pasta, and  | the Malaysian Islamic Development |
| temperate fruits and vegetables.  | Council and certified by a        |
|                                   | recognized Islamic institution in |
|                                   | the country of export.            |
+-----------------------------------+-----------------------------------+
| Malaysians are becoming more      | Importers and distributors        |
| familiar with western foods from  | supplying mid to high-end         |
| their trips abroad as students,   | establishments will purchase at   |
| on business, or holiday. The US,  | the lowest price from any         |
| Britain, Australia, and New       | exporter or country food items    |
| Zealand are major destinations    | that are perceived as             |
| for many Malaysians.              | substitutable or commodities.     |
|                                   |                                   |
| Nearly all F&B outlets in 4-5     | For example, importers consider   |
| star hotels and resorts serve     | broccoli from China and the US as |
| western menus and there are many  | substitutable and will source     |
| mid to high-end restaurants       | imports offered at the lowest     |
| across Malaysia serving such      | price. Beef and lamb from         |
| menus. US food service franchise  | Australia, New Zealand, and the   |
| operations dominate the Malaysian | US are known for their quality    |
| market and include fast food      | and considered not substitutable  |
| restaurants and cafés and are     | with lower price imports. (US     |
| located across Malaysia.          | beef is temporarily banned in     |
|                                   | Malaysia because of the detection |
|                                   | of bovine spongiform              |
|                                   | encephalopathy in the US).        |
+-----------------------------------+-----------------------------------+

  ----------------------------------- -----------------------------------
  The government is encouraging local Though Malaysia is dependent on
  food manufacturers to expand their  imports for 70% of the raw food
  exports and take opportunity of the materials, US exporters face
  US\$560 billion global *halal*      competition from locally produced
  foods market. Malaysia's halal      raw food materials that are in
  standards are widely recognized in  sufficient supply (e.g. poultry)
  the Muslim world. Domestic          including substitute products (e.g.
  agricultre cannot supply sufficient palm oil that is substitutable with
  raw materials.                      soybean oil).

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

# 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. There is also a sizeable expatriate
population and Malaysia is a popular tourist destination for Asia, the
Middle East and Europe.

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 and Malaysia has one
of the world's highest per capita consumption rates at 35 kg.

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.

With a Muslim population of 60%, the demand for halal foods by Malaysian
consumers has increased over the years. The expectation of halal
standard in food products have extended from meat and meat products to
non meat-based products such snacks, confectionery, dairy, bakery, etc.
Halal is fast becoming recognized as a new benchmark for quality,
hygiene and safety. Food products and ingredients that have halal
certificates have added marketing value in Malaysia. Hence, most
retailers, foodservice operators and food manufacturers are inclined to
ask for halal certificates for non-meat based food products and
ingredients.

#### 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 Safety and 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 MY5034 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 note 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

Malaysia continues to be a net importer of food products with annual
imports of more than \$3.2 billion.

In 2004, the total imports of consumer-oriented products to Malaysia
were estimated at \$1.9 billion. Total imports from the United States
were \$150 million\*, representing 8% market share. China was the major
supplier of this category with imports at \$275 million, an increase of
27% from 2003. China is projected to maintain its position for 2005. New
Zealand and Australia both held 13% and 12% market shares respectively.

China exported \$146 million worth of vegetables to Malaysia in 2004.
Turnip, cabbage, carrot, potato and garlic were among the major items.
China is the market leader for mandarin oranges (\$7 million), apples
(\$8 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 Valencia oranges and grapes are popular is the
Malaysian market. Imports for 2004 were at \$8 million and \$5.3 million
respectively. Competition is less intense with supplies from Australia
and South Africa 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 full cream milk powder, skim milk
powder, butter and cheeses from New Zealand were at \$154 million while
imports of from Australia were estimated at \$84 million.

India is the leading supplier of red meat market with total imports of
\$148 million (98,000 metric tons) in 2004. Indian beef caters to the
mass market. In the foodservice sector, competition for US beef comes
from Australia and New Zealand, with total imports amounted to \$8.8
million and \$7.4 million respectively in the same year. 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. With the recent delisting of all but one
beef processor in Australia and New Zealand respectively, the
foodservice industry will face shortage of quality beef in the next two
months.

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 2004, major
suppliers of chicken parts and chicken wings were Denmark (\$9 million)
and the Netherlands (\$8 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
5,000 metric tons with CIF value of \$0.5 million

Malaysia is a net importer of fish and seafood products with an annual
import at \$514 million in 2004. Of this, an estimated \$250 million is
for imports of fish, whether live, fresh/chilled or frozen. While some
supply of fresh and frozen fish comes the East Coast of Peninsular
Malaysia, Thailand is the major supplier of fish (and other seafood)
with \$123 million, followed by China (\$72 million) and Indonesia (69
million).

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.

\* This data, obtained from the UN Trade Database, reflected a lower
import value compared to the statistics published by the US Bureau of
the Census Trade Data. US data showed that the total imports of
consumer-oriented products from US were \$205 million in 2004. Exports
of fresh fruits were \$93 million but were reflected at \$16 million in
the UN Trade Data.

**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 importing 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

Malaysian households spend an average 24% of their household income on
retail purchase of foods. Purchase of foods from the retail outlets is
estimated at \$9.8 billion in 2004 compared to \$7.6 billion in 1999.

The retail food sector includes the supermarkets and hypermarkets,
convenience stores, and traditional markets. The traditional markets
include the independent grocery stores ("mom and pop" stores) and wet
markets. Traditional markets account for 54.0% of the total retail food
sales in 2004, followed by the supermarkets and hypermarkets (33.9%) and
convenience stores (2.4%).

Independent grocery stores and wet markets are found in the residential
areas of both urban and rural towns across Malaysia. Most of the food
items sold by grocery stores are canned foods, dried foods, snack foods,
ice cream, and soft drinks. Fresh produces such as fruits and vegetables
are seldom sold and usually do not sell frozen or chilled foods other
than ice cream. However, grocery stores known as mini-markets, which are
larger and more modern than the traditional grocery stores, would sell
these food items. However, they are relatively fewer in numbers compared
to the traditional grocery stores.

Wet markets include daily wet markets operating in permanent buildings
and weekly morning and night markets operating in non-permanent
locations. Food items sold are generally fresh fruits, vegetable, meat
and fish. Imports are usually apples, oranges, grapes, carrots,
potatoes, onions, cabbages, and broccoli.

Supermarkets and hypermarkets 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.

The Government proposes to lift the five-year freeze on issuance of
licenses for new hypermarkets in Klang Valley, Penang and Johor Bahru.
The licensing freeze, meant to control the growth of hypermarkets, was
implemented in 2004. However, there are additional conditions that
hypermarkets need to adhere to such as having 30 percent local
shareholders and investing at least \$2.65 million in every new outlet.

A recent study conducted by a retail consultant in Malaysia showed that
Malaysians are shopping more at convenience stores and petrol marts.
Increasing competition has resulted in a need for convenience stores to
become more professional. Customers are now expecting more sophisticated
offers like a wider range of better quality ready-to-eat snacks and
hot-and-chilled beverages.

Key Entry Strategies for US Exporters

1.  Market, distribute, and promote through the supermarkets and
    hypermarkets.

2.  Promote food products to create consumer awareness and loyalty.

3.  Appoint importers or agents that best meets the needs of the
    exporter.

4.  Ensure that processed foods are acceptable to local taste and have
    appropriate packaging.

5.  Acquire *halal* certification from recognized Islamic institution in
    the US.

### Food Service Sector

Malaysians frequently eat away from home at various low to high-end food
service establishments across the country. It is common for families to
treat themselves at least once a week eating away from home. From 1999
to 2004, total consumer spending in the food service sector increased by
39.0% from US\$3.09 billion to an estimated US\$4.6 billion.

Hotels and resorts, restaurants, and the institutional sub-sectors
represent the best potential for US exporters. The restaurant sub-sector
accounted for 67.3% of the total food service sales in 2004. This is
followed by the hotels and resorts (7.6%) and catering services to
institutions (4.3%). Other sub-sectors include food stalls but are not a
potential market for US exporters since they mainly serve relatively
cheap local dishes.

Malaysia's tourism industry has also led towards the growth of the food
service industry in Malaysia. Tourist arrivals to Malaysia were 15.7
million in 2004 up from 10.6 million in 2003. The total tourism earnings
are expected to increase to \$9.3 billion in 2005 from \$7.82 billion in
2004. Of this, food and beverage is 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.

Key Entry Strategies for US Exporters

1.  Conduct promotional activities to create awareness among importers
    and the food service establishments.

2.  Appoint local importers specialized in the food service industry to
    import and market the exporter's food products to the food service
    establishments.

3.  Target the mid to high-end food service establishments.

4.  Acquire *halal* certification from recognized Islamic institutions
    in the US.

5.  Maintain a product positioning strategy for the food products.

# Food Processing Sector

There are nearly 3,200 manufacturers involved in the food manufacturing
industry in Malaysia and the industry accounts for nearly 10% of
Malaysia's manufacturing output. Processed foods are exported to 80
countries, with an annual export value of more than \$1.32 billion.
Output from the food processing industry increased 7.5% from \$3.12
billion in 1999 to an estimated \$3.43 billion in 2004. Food
manufacturers operating in Malaysia include both Malaysian and
multinational companies such as Nestle, Unilever, Cerebos, and Campbell
Soup.

Changes in consumer lifestyle and government emphasis encouraging
exports of processed foods from Malaysia are the market drivers of the
country's food processing industry.

-   Malaysia's rising per capita income and increasing urban population
    has encouraged consumers to lead a more modern but busy lifestyle.
    Thus there is a trend towards meals that are convenient to prepare
    or ready to eat. Consumers are also demanding more variety in their
    foods, becoming accustomed to international cuisines including
    western foods, and also healthier foods, providing new opportunities
    for food manufacturers.

-   An important trend affecting the local food processing industry is
    the establishment of new supermarkets and hypermarkets throughout
    Malaysia. Shopping at these retails outlets is becoming increasingly
    popular among consumers. These supermarkets and hypermarkets have
    cold storage facilities to stock and display chilled and frozen
    foods. This provides opportunities for food manufacturers to develop
    and market frozen and chilled processed foods.

The Malaysian government has identified the food processing industry as
a priority sector for industrial development and increase exports.
Malaysia's Ministry of International Trade and Industries (MITI)
estimates the global market for *halal* foods (foods suitable for Muslim
consumption) at US\$560 billion annually and a potential for exports of
processed foods from Malaysia. Already one-third of the foods produced
in Malaysia are exported.

Key Entry Strategies for US Exporters

1.  Ensure quality of the raw food materials to instill manufacturers'
    confidence.

2.  Acquire *halal* certification to cater to the Muslim consumer
    market.

3.  Emphasize on the competitive advantage of the exporter's products to
    the food manufacturers.

4.  Market and promote to increase awareness among food manufacturers.

5.  Establish an efficient distribution network to maximize market
    penetration.

# SECTION IV. BEST HIGH-VALUE PRODUCTS PROSPECTS

<table>
<colgroup>
<col style="width: 15%" />
<col style="width: 0%" />
<col style="width: 11%" />
<col style="width: 11%" />
<col style="width: 0%" />
<col style="width: 12%" />
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</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"><strong>Product Category</strong></td>
<td><p><strong>2004</strong></p>
<p><strong>Market</strong></p>
<p><strong>Size</strong></p></td>
<td><p><strong>2004</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="3"><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 colspan="2"><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 turkey.</td>
<td>871,701 tons</td>
<td><p>21,701 tons</p>
<p>($24 million)</p></td>
<td colspan="3">Decline, due to temporary suspension on poultry
imports.</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 colspan="2">Niche retail demand exists for frozen turkey.</td>
</tr>
<tr class="odd">
<td colspan="2">Breakfast cereals</td>
<td>N/A</td>
<td><p>17,444</p>
<p>tons</p>
<p>($25 million)</p></td>
<td colspan="3">7%.</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 colspan="2">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>16,163</p>
<p>tons</p>
<p>($52 million)</p></td>
<td colspan="3">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 colspan="2">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>14,916</p>
<p>tons ($18 million)</p></td>
<td colspan="3">7% growth</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 colspan="2">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>398,287 tons</td>
<td><p>393,287</p>
<p>tons</p>
<p>($204 million)</p></td>
<td colspan="3">Growth of about 12%</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 colspan="2">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>37,762</p>
<p>tons</p></td>
<td><p>37,762</p>
<p>tons ($28 million)</p></td>
<td colspan="3">7% growth</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 colspan="2"><p>Frozen vegetables, especially potatoes from US 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>388,889 tons</td>
<td><p>382,889</p>
<p>tons</p>
<p>($71 million)</p></td>
<td colspan="3">3% 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 colspan="2">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>20,862</p>
<p>tons</p></td>
<td><p>20,862 tons</p>
<p>($8.5 million)</p></td>
<td colspan="3">5% 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 colspan="2">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>8,468 tons</td>
<td><p>8,468 tons</p>
<p>($14.2 million)</p></td>
<td colspan="3">8% 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 colspan="2">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">14,765 tons</td>
<td colspan="2"><p>14,765 tons</p>
<p>($19 million)</p></td>
<td colspan="3">25%</td>
<td>No import duties are levied on dog or cat food.</td>
<td colspan="2">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">47 million liters</td>
<td colspan="2"><p>47 million liters</p>
<p>($29 million)</p></td>
<td colspan="3">Growing market</td>
<td><p>Excise:15% of CIF value,</p>
<p>Duty: RM19 per litre,</p>
<p>Sales tax: 5%</p></td>
<td colspan="2"><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

Food Safety and Quality Division

Ministry of Health Malaysia

Level 3, Block E7, Parcel E

Federal Government Administration Center

Putrajaya 62518

Tel: +6-03-8883\--3888

Fax: +6-03-8889-4971

Http://dph.gov.my

Director General of Customs

Royal Customs and Excise Headquarters Malaysia

Ministry of Finance Complex

Precinct 2, Federal Government Administration Center

62596 Putrajaya.

Tel : +(6-03) 8882 2100

Fax : +(6-03) 8889 5899

http://www.customs.gov.my

Director

Veterinary Public Health

Department of Veterinary Services,

Wisma Tani, Podium Block,

Lot 4G1, Prescinct 4, Putrajaya.

Tel: +60-3 8870 2000

Fax: +60-3 88882685

http://agrolink.moa.my/jph

# APPENDIX I. STATISTICS

## A. KEY TRADE & DEMOGRAPHIC INFORMATION

  ------------------------------------------------------------ ----------
  Agricultural Imports From All Countries (US\$Mil) / U.S.     5590/ 7%
  Market Share (%)                                             

  Consumer Food Imports From All Countries (US\$Mil) / U.S.    1,991 / 8%
  Market Share (%)                                             

  Edible Fishery Imports From All Countries (US\$Mil) / U.S.   514 / 1.7%
  Market Share (%)                                             

  Total Population (Millions) / Annual Growth Rate (%)         26.13/
                                                               2.4%

  Urban Population (Millions) / Annual Growth Rate (%)         *17.0 /
                                                               2.5%*

  Number of Major Metropolitan Areas                           9

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

  Per Capita Gross Domestic Product (US Dollars)               \$4,708

  Unemployment Rate (%)                                        3.5%

  Per Capita Food Expenditures (U.S. Dollars)                  \$1,200

  Percent of Female Population Employed                        45.8%

  Exchange rate (US\$1 = X.X local currency)                   US\$ =
                                                               3.77RM
  ------------------------------------------------------------ ----------

# TABLE B. Consumer Food & Edible Fishery Products

<table style="width:100%;">
<colgroup>
<col style="width: 48%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 6%" />
<col style="width: 5%" />
<col style="width: 5%" />
<col style="width: 5%" />
</colgroup>
<tbody>
<tr class="odd">
<td><h6 id="malaysia-imports">Malaysia Imports</h6></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>2002</td>
<td>2003</td>
<td>2004</td>
<td>2002</td>
<td>2003</td>
<td>2004</td>
<td>2002</td>
<td>2003</td>
<td>2004</td>
</tr>
<tr class="odd">
<td><strong>CONSUMER-ORIENTED AGRICULTURAL TOTAL</strong></td>
<td>1575</td>
<td>1520</td>
<td>1991</td>
<td>120</td>
<td>103</td>
<td>149</td>
<td>8</td>
<td>7</td>
<td>8</td>
</tr>
<tr class="even">
<td>Snack Foods (Excl. Nuts)</td>
<td>64</td>
<td>63</td>
<td>74</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>7</td>
<td>7</td>
<td>6</td>
</tr>
<tr class="odd">
<td>Breakfast Cereals &amp; Pancake Mix</td>
<td>9</td>
<td>10</td>
<td>11</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>12</td>
<td>5</td>
<td>8</td>
</tr>
<tr class="even">
<td>Red Meats, Fresh/Chilled/Frozen</td>
<td>160</td>
<td>156</td>
<td>224</td>
<td>2</td>
<td>2</td>
<td>1</td>
<td>2</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Red Meats, Prepared/Preserved</td>
<td>9</td>
<td>8</td>
<td>8</td>
<td>2</td>
<td>1</td>
<td>1</td>
<td>19</td>
<td>8</td>
<td>5</td>
</tr>
<tr class="even">
<td>Poultry Meat</td>
<td>65</td>
<td>48</td>
<td>24</td>
<td>3</td>
<td>2</td>
<td>1</td>
<td>4</td>
<td>5</td>
<td>4</td>
</tr>
<tr class="odd">
<td>Dairy Products (Excl. Cheese)</td>
<td>309</td>
<td>306</td>
<td>401</td>
<td>8</td>
<td>5</td>
<td>27</td>
<td>2</td>
<td>1</td>
<td>7</td>
</tr>
<tr class="even">
<td>Cheese</td>
<td>15</td>
<td>13</td>
<td>20</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>4</td>
<td>2</td>
</tr>
<tr class="odd">
<td>Eggs &amp; Products</td>
<td>3</td>
<td>3</td>
<td>4</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>11</td>
<td>14</td>
<td>2</td>
</tr>
<tr class="even">
<td>Fresh Fruit</td>
<td>108</td>
<td>98</td>
<td>101</td>
<td>19</td>
<td>18</td>
<td>16</td>
<td>18</td>
<td>18</td>
<td>15</td>
</tr>
<tr class="odd">
<td>Fresh Vegetables</td>
<td>217</td>
<td>216</td>
<td>283</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>2</td>
<td>2</td>
<td>1</td>
</tr>
<tr class="even">
<td>Processed Fruit &amp; Vegetables</td>
<td>108</td>
<td>100</td>
<td>119</td>
<td>21</td>
<td>16</td>
<td>26</td>
<td>19</td>
<td>16</td>
<td>22</td>
</tr>
<tr class="odd">
<td>Fruit &amp; Vegetable Juices</td>
<td>12</td>
<td>14</td>
<td>18</td>
<td>2</td>
<td>2</td>
<td>2</td>
<td>17</td>
<td>14</td>
<td>14</td>
</tr>
<tr class="even">
<td>Tree Nuts</td>
<td>12</td>
<td>12</td>
<td>16</td>
<td>4</td>
<td>5</td>
<td>6</td>
<td>36</td>
<td>39</td>
<td>37</td>
</tr>
<tr class="odd">
<td>Wine &amp; Beer</td>
<td>28</td>
<td>39</td>
<td>64</td>
<td>1</td>
<td>2</td>
<td>2</td>
<td>5</td>
<td>4</td>
<td>4</td>
</tr>
<tr class="even">
<td>Nursery Products &amp; Cut Flowers</td>
<td>7</td>
<td>4</td>
<td>6</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Pet Foods (Dog &amp; Cat Food)</td>
<td>13</td>
<td>13</td>
<td>19</td>
<td>3</td>
<td>3</td>
<td>4</td>
<td>24</td>
<td>20</td>
<td>20</td>
</tr>
<tr class="even">
<td>Other Consumer-Oriented Products</td>
<td>437</td>
<td>417</td>
<td>601</td>
<td>45</td>
<td>38</td>
<td>55</td>
<td>10</td>
<td>9</td>
<td>9</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><strong>FISH &amp; SEAFOOD PRODUCTS</strong></td>
<td>326</td>
<td>355</td>
<td>514</td>
<td>3</td>
<td>3</td>
<td>9</td>
<td>1</td>
<td>1</td>
<td>2</td>
</tr>
<tr class="odd">
<td>Salmon</td>
<td>14</td>
<td>13</td>
<td>16</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>5</td>
<td>5</td>
<td>2</td>
</tr>
<tr class="even">
<td>Surimi</td>
<td>8</td>
<td>9</td>
<td>10</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>1</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Crustaceans</td>
<td>68</td>
<td>90</td>
<td>197</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Groundfish &amp; Flatfish</td>
<td>41</td>
<td>46</td>
<td>61</td>
<td>1</td>
<td>1</td>
<td>6</td>
<td>1</td>
<td>1</td>
<td>9</td>
</tr>
<tr class="odd">
<td>Molluscs</td>
<td>11</td>
<td>12</td>
<td>15</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>5</td>
</tr>
<tr class="even">
<td>Other Fishery Products</td>
<td>184</td>
<td>185</td>
<td>213</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</td>
<td>1</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>4255</td>
<td>4125</td>
<td>5590</td>
<td>427</td>
<td>294</td>
<td>367</td>
<td>10</td>
<td>7</td>
<td>7</td>
</tr>
<tr class="odd">
<td>AGRICULTURAL, FISH &amp; FORESTRY TOTAL</td>
<td>4842</td>
<td>4721</td>
<td>6479</td>
<td>466</td>
<td>323</td>
<td>422</td>
<td>10</td>
<td>7</td>
<td>7</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)                          

                      2002      2003      2004                          2002     2003     2004

  China (Peoples Rep. 227256    216054    275447        Thailand        101162   108356   123237
  of)                                                                                     

  New Zealand         209361    187677    250653        China (Peoples  20849    46956    72302
                                                        Rep. of)                          

  Australia           226905    203046    246642        Indonesia       0        63473    68859

  Thailand            166149    182423    223785        Singapore       2955     3929     43296

  India               137114    143997    217006        Vietnam         10942    7362     39601

  United States       120324    102705    149428        India           14372    14239    30522

  Netherlands         87017     82600     111572        Burma           17010    18729    22519

  Singapore           64286     67238     84854         Pakistan        5389     6736     13793

  Indonesia           0         58085     73232         Taiwan          10368    9052     10247
                                                        (Estimated)                       

  Philippines         38194     31152     46712         Bangladesh      6313     6643     9314

  France              21129     27459     33618         South Africa    5265     7541     9303

  Denmark             31130     32878     31300         United States   3039     2894     8577

  United Kingdom      16175     18849     23774         United Kingdom  7431     4538     6696

  Germany             15864     17625     21849         Japan           4451     3861     5945

  Ireland             14188     11138     20108         Chile           2572     3465     4752

  Other               200103    137527    180975        Other           113846   46998    45162

  World               1575195   1520453   1990955       World           325964   354772   514125
  ------------------- --------- --------- --------- --- --------------- -------- -------- --------

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

END OF REPORT