Appendix B Data on Best Prospects For Industry and Agricultural Sector Exports INDUSTRY SECTORS (1) A. Rank: 1 B. Name of Sector: Electronic Components C. ITA or PS&D Code: ELC 1993 1994 1995 (US $ millions) D. Total Market Size 8,553 11,122 13,900 E. Total Local Production 8,270 10,752 13,440 F. Total Exports 7,594 9,870 12,340 G. Total Imports 7,877 10,240 12,800 H. Total Imports from U.S. 2,323 3,020 3,775 I. Exchange Rate (per US$) 2.60 2.58 2.55 Comments: Malaysia is the world's third largest producer of semiconductor devices, after the US and Japan, and the world's largest exporter. Practically all electronic components imported into Malaysia, about 30 per cent of which are from the US, are for the export-oriented industry. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) diodes, transistors, and similar semi-conductor devices, US$ 2,120 million; (ii) electronic integrated circuits and microassemblies, US $6,100 million. (2) A. Rank: 2 B. Name of Sector: Aircraft and Parts C. ITA or PS&D Code: AIR 1993 1994 1995 (US $ millions) D. Total Market size 835 500 550 E. Total local production 15 20 50 F. Total exports 855 900 1,050 G. Total imports 1,675 1,480 1,550 H. Total imports from US 1,619 1,200 1,200 I. Exchange rate 2.60 2.58 2.55 Comments: Malaysia is in the process of developing a second national airline, Air Asia which will be acquiring new aircraft of varying sizes. Malaysia Airlines currently operates a large fleet of U.S. aircraft, and will continue to procure new medium range passenger aircraft and to sell off old aircraft. It is, however, likely that purchase patterns will be lumpy rather than following a smooth curve. The figures for 1993 are official Malaysian trade statistics. Note that figures on Malaysian exports include reexports. Note also that these figures on aircraft imports include imports of military aircraft, which are also included in the figures for defense equipment, Sector 5 below. In 1993 Malaysia purchased US $ 600 million worth of U.S. fighter aircraft (that is spread over a three year period). The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) commercial airplanes, $500 million; (ii) military aircraft. (3) A. Rank: 3 B. Name of Sector: Computer Software C. ITA or PS&D Code: CSF 1993 1994 1995 (US $ millions) D. Total market size 232 284 352 E. Total local production 15 18 22 F. Total exports 3 4 5 G. Total imports 220 270 335 H. Total imports from US 195 240 300 I. Exchange rate 2.60 2.58 2.55 Comments: Malaysia's software industry has always been a potentially good market for US suppliers. Malaysia joined the Berne Convention on copyrights on Oct. 1, 1990. Despite having a lion's share of the market, American software companies face increased competition from Canada, the UK, Singapore and Australia. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) financial software, $18 million; (ii) inventory software, $10 million; (iii) PC software, $58 million. (4) A. Rank: 4 B. Name of Sector: Oil & Gas Field Machinery C. ITA or PS&D Code: OGM 1993 1994 1995 (US $ millions) D. Total market size 2,175 2,341 2,454 E. Total local production 85 93 103 F. Total exports 10 12 14 G. Total imports 2,100 2,260 2,370 F. Total imports from US 960 975 1,020 I. Exchange rate 2.60 2.58 2.55 Comments: Prospects for Malaysia's oil and gas industry are bright; it is expected to see healthy growth rates despite a downturn in international crude oil prices. It is estimated that US$12 billion will be invested in upstream activities between 1994 and 1998 by Petronas (the national oil corporation) and other oil and gas companies. Petronas has also recently embarked on the Peninsular Gas Utilization (PGU) III project, involving 528 km. of pipeline construction. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) drilling equipment, $330 million; (ii) pipeline systems and equipment, $270 million. (5) A. Rank: 5 B. Name of Sector: Defense Equipment C. ITA or PS&D Code: DFN 1993 1994 1995 (US $ millions) D. Total market size 1000 800 800 E. Total local production 57 73 82 F. Total exports 5 8 10 G. Total imports 948 735 728 H. Total imports from US 600 150 200 I. Exchange rate 2.60 2.58 2.55 Comments: Malaysian defense purchases of major equipment items are inherently subject to wide fluctuations from year-to-year, as particular contracts are signed. Thus, the estimated future sales do not attempt to project a straight growth line. The U.S., however, is doing well in the Malaysian defense market, based both on the high quality of U.S. equipment and friendly relations between our two countries. In 1993 Malaysia purchased 8 US F/A-18 fighter attack aircraft worth some $600 million. In 1994 they purchased 18 MIG-29 fighter aircraft. (Both aircraft purchases are being made over a number of years.) It is assumed that Malaysia will purchase additional aircraft from the US and other sources in coming years, as it shifts the focus of its military to defense of the national territory and its offshore economic zone. The most promising subsectors within the sector, along with the estimated 1995 total market size of each subsector, are as follows; (i) fighter aircraft, $250 million; (ii) offshore patrol vessels, $100 million; (iii) defense communications equipment, $50 million. (6) A. Rank: 6 B. Name of Sector: Computers and Peripherals C. ITA or PS&D Code: CPP 1993 1994 1995 (US $ millions) D. Total market size 700 805 960 E. Total local production 2,735 2,965 3,270 F. Total exports 3,050 3,355 3,690 G. Total imports 1,015 1,195 1,380 H. Total imports from US 220 260 360 I. Exchange Rate 2.60 2.58 2.55 Comments: Malaysia's computer market has evolved into one which demands the most up-to-date and sophisticated technology. US companies are already aggressively present in the market. Continued eight percent growth in the economy has increased pressure for higher productivity in all sectors, driving demand for computer applications. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) mainframe, $300 million; (ii) minicomputers, $300 million; (iii) Peripherals, $75 million. (7) A. Rank: 7 B. Name of sector: Telecommunications Equipment C. Ita or PS&D Code: TEL 1993 1994 1995 (US $ millions) D. Total market size 3,016 3,460 3,975 E. Total local production 2,903 3,151 3,419 F. Total exports 2,175 2,390 2,630 G. Total imports 2,288 2,699 3,186 H. Total imports from US 289 344 409 I. Exchange rate 2.60 2.58 2.55 Comments: Telecommunications is one of the fastest growing industries in Malaysia. The privatization of Telecom Malaysia, and the success of other telecommunications companies have created numerous opportunities in the sector, ranging from cellular to satellites to basic switching and cabling equipment. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) cellular telephone equipment, $250 million; (ii) digital communication interface equipment, $90 million; (iii) central office switches, $190 million. (8) A. Rank: 8 B. Name of Sector: Electronics Industry Production/Test Equipment C. ITA or PS&D Code: EIP 1993 1994 1995 (US $ millions) D. Total Market size 180 210 243 E. Total local production - - - F. Total exports - - - G. Total imports 180 210 243 H. Total imports from US 72 86 100 I. Exchange rate 2.60 2.58 2.55 Comments: There is no local production of EIP equipment. Major companies in the industry indicate that they regularly spend between $10 and $20 million annually apiece on upgrading semiconductor assembly and test equipment, apart from major expansion programs. Wafer fabrication is not yet a significant factor in the Malaysian semiconductor industry, but is likely to become so in the next several years. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) semiconductor test equipment, $30 million; (ii) integrated circuit test equipment, $15 million. (9) A. Rank: 9 B. Name of Sector: Electrical Power System C. ITA or PS&D Code: ELP 1993 1994 1995 (US $ millions) D. Total market size 2,440 3,110 3,639 E. Total local production 468 572 663 F. Total exports 102 112 124 G. Total imports 2,074 2,650 3,100 H. Total imports from US 235 295 346 I. Exchange rate 2.60 2.58 2.55 Comments: From 1993 to 1997, a total of 3,688 MW of additional generating capacity will be installed by Tenaga Nasional Berhad (TNB). This does not include about 4,070 MW of generating capacity designated for Independent Power Producers. TNB is planning for an introduction of a $1.5 billion new transmission network of 500 KV in peninsular Malaysia. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) boilers, $300 million; (ii) turbines, $1,500 million. (10) A. Rank: 10 B. Name of Sector: Industrial Chemicals C. ITA or PS&D code: ICH 1993 1994 1995 (US $ millions) D. Total market size 1,280 1,530 1,840 E. Total local production 627 716 829 F. Total exports 306 337 370 G. Total imports 959 1,151 1,381 H. Total imports from US 205 246 295 I. Exchange rate 2.60 2.58 2.55 Comments: The Malaysian market in industrial chemicals is expanding in step with the rapid growth of the manufacturing sector. US products have 21 per cent of the import market, topped only by Japan. US industrial chemicals are respected for their high quality and are in demand in the Malaysian market. The most promising subsectors within the sector, along with estimated 1995 total market size of each sector, are as follows: (i) industrial organic chemicals, $684 million; (ii) industrial inorganic chemicals, $1,156 million. (11) A. Rank: 11 B. Name of sector: Laboratory Scientific Instruments C. ITA or PS&D Code: LAB 1993 1994 1995 (US $ millions) D. Total market size 590 680 780 E. Total local production 160 189 220 F. Total exports 107 127 150 G. TotaL imports 537 618 710 H. Total imports from US 179 206 236 I. Exchange rate 2.60 2.58 2.55 Comments: Given the favorable growth prospects of the Malaysian economy and the higher emphasis on research and development in various industries, sales of laboratory scientific instruments are projects to increase more than 15 per cent per annum for the next few years. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) chromatographic and spectroscopical equipment, $40 million; (ii) microscopes, $13 million; (iii) instruments and apparatus for measuring or checking the flow, level, pressure or other variables of liquids or gasses, $100 million. (12) A. Rank: 12 B. Name of sector: Pollution Control Equipment C. ITA or PS&D Code: POL 1993 1994 1995 (US $ millions) D. Total market size 74 92 107 E. Total local production 3 4 5 F. Total exports 5 6 8 G. Total imports 76 94 110 H. Total Imports from US 15 18 21 I. Exchange rate 2.60 2.58 2.55 Comments: As the Malaysian government tightens enforcement of pollution control regulations, the market for pollution control equipment and related products and services will grow rapidly. Currently, pollution control equipment and services center on air and water pollution as well as the disposal of solid and hazardous waste. This industry is heavily dependent on imported component parts. Some imports are re-exported. The most promising subsectors within this sector, along with estimated 1995 total market size of each subsector, are as follows: (i) air pollution control equipment, $38 million; (ii) water pollution control equipment, $35 million; (iii) solid waste control equipment, $15 million). (13) A. Rank: 13 B. Name of sector: Pumps, Valves & Compressors C. ITA or PS&D Code: PVC 1993 1994 1995 (US $ millions) D. Total market size 767 831 1,011 E. Total local production 120 132 146 F. Total exports 100 110 122 G. Total imports 747 809 987 H. Total imports from US 120 138 159 I. Exchange rate 2.60 2.58 2.55 Comments: About 35-40 per cent of the total exports are actually re-exports. The Malaysian oil and gas sector, which is one of the most robust sectors in the Malaysian economy, is the biggest end-user of pumps, valves and compressors. The most promising subsectors within the sector, along with 1995 total market size of each subsector, are as follows: (i) taps, cocks, and valves, $335 million; (88) pumps for air, gas compressors, $415 million; (iii) pumps for liquid, $148 million. (14) A. Rank: 14 B. Name of sector: Medical Equipment C. ITA or PS&D Code: MED 1993 1994 1995 (US $ millions) D. Total market size 110 132 158 E. Total local production 152 171 191 F. Total exports 135 149 163 G. Total imports 93 110 130 H. Total imports from US 22 26 29 I. Exchange rate 2.60 2.58 2.55 Comments: Malaysia is a large producer of catheters (exports per annum now more than US$100 million). Malaysia is dependent on imports for about 85% of its requirements for medical equipment. The existing private hospitals are all doing very well and most are expanding. Several new private hospitals are now being planned or built. Eight new district hospitals will be in operation soon. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) cardiology equipment, $15 million; (ii) diagnostic equipment, $17 million. (15) A. Rank: 15 B. Name of Sector: Machine Tools and Metalworking Equipment C. ITA or PS&D code: MTL 1993 1994 1995 (US $ millions) D. Total market size 778 870 956 E. Total local production 110 140 178 F. Total exports 48 58 89 H. Total imports 716 788 867 H. Total imports from US 60 68 77 I. Exchange Rate 2.60 2.58 2.55 Comments: Japan is the dominant machine tool supplier to Malaysia, accounting for more than 40 percent of the market in the last few years. The other major suppliers are Taiwan, the US and Germany. Local production of MTL equipment is modest, and mainly consists of low- tech machines. The development of the machine tool and related sectors is a government priority. However, the vast majority of machine tool requirements will still be met by imports within the next ten years. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) machine tools working by removing metal or other material, $345 million; (ii) Machine tools for working metal, without removing material, $275 million; (iii) metal working machinery, excluding machine tools, $250 million. (16) A. Rank: 16 B. Name of Sector: Drugs and Pharmaceuticals C. ITA or PS&D Code: DRG 1993 1994 1995 (US $ millions) D. Total market size 340 380 426 E. Total local production 160 179 206 F. Total exports 50 52 58 G. Total imports 230 253 278 H. Total imports from US 27 30 33 I. Exchange rate 2.60 2.58 2.55 Comments: The major countries exporting pharmaceuticals to Malaysia are Germany, Switzerland, the UK and the US. There are no import duties levied on most pharmaceuticals. There are few restrictions other than those imposed on the import of scheduled poisons and dangerous drugs which require special permits. However, all pharmaceuticals, drugs and vitamins sold, whether manufactured in the country or imported, must be registered with the Drug Central Authority of the Ministry of Health. Applications for registration of imported pharmaceuticals must be made by the individuals or companies wishing to import the products. The most promising subsectors and the estimated 1995 total market size of each are as follows: (i) vitamins, $14 million; (ii) antibiotics, $20 million. (17) A. Rank: 17 B. Name of sector: Construction Equipment C. ITA or PS&D code: CON 1993 1994 1995 (US $ millions) D. Total market size 660 766 888 E. Total local production 60 69 79 F. Total exports 115 125 136 g. Total imports 715 822 945 H. Total imports from US 180 207 239 I. Exchange Rate 2.60 2.58 2.55 Comments: About 75-80 percent of the total exports are re-exports. The construction industry in Malaysia is undergoing a boom. The fast pace of development in this industry is expected to continue over the next several years. The government has placed emphasis on the development and completion of major infrastructure projects. 1993 saw the commencement of several major projects, including the new Kuala Lumpur International Airport (KLIA), Independent Power Plants, and the Light Rail Transit system for Kuala Lumpur. Other projects in the pipeline are the Shah Alam Expressway, the KLIA Expressway, the Second Link Causeway to Singapore, and sports facilities for the 1998 Commonwealth Games. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) wheel leaders, $135 million; (ii) excavator, $180 million; (iii) tractors, $120 million. (18) A. Rank: 18 B. Name of Sector: Sporting Goods and Recreational Equipment C. ITA or PS&D Code: SPT 1993 1994 1995 (US $ millions) D. Total market size 91 105 122 E. Total local production 184 205 227 F. Total exports 161 179 198 G. Total imports 68 79 93 H. Total imports from US 13 15 18 I. Exchange rate 2.60 2.58 2.55 Comments: The continuing rise in the standard of living in Malaysia has meant an increase in the number of condominiums equipped with swimming pools and other sports facilities. The mushrooming of more than one hundred golf courses with club houses during the last few years has also resulted in increased demand for sporting equipment and goods. The demand for sporting equipment for golf, tennis, squash and gymnasiums is rapidly expanding. Golf equipment and supplies is the most promising subsector. Its estimated 1995 market size is US $ 16 million. (19) A. Rank: 19 B. Name of Sector: Non Ferrous Metals C. ITA or PS&D Code: NFM 1993 1994 1995 (US $ millions) D. Total market size 1,058 1,164 1,280 E. Total local production 550 545 542 F. Total Exports 448 470 494 G. Total Imports 956 1,089 1,232 H. Total imports from US 60 68 77 I. Exchange rate 2.60 2.58 2.55 Comments: The booming construction sector in the country has produced a high demand for construction materials and products, many of which are manufactured locally from non-ferrous metals, including copper, aluminum, and zinc. The manufacturing sector also has a high demand for non-ferrous metals. The most promising subsectors within this sector, along with estimated 1995 total market size of each subsector, are as follows: (i) copper, $510 million; (ii) aluminum, $295 million; (iii) zinc, $85 million. (20) A. Rank: 20 B. Name of sector: Cosmetics and Toiletries C. ITA or PS&D code: COS 1993 1994 1995 (US $ millions) D. Total market size 156 176 199 E. Total local production 70 80 92 F. Total exports 40 42 44 G. Total imports 126 138 151 H. Total imports from US 20 24 29 I. Exchange Rate 2.60 2.58 2.55 Comments: The perfume and cosmetics business has great potential in Malaysia as most of the consumers prefer imported products. As the living standard has increased rapidly, consumption of perfumes and cosmetics has increased in parallel. The most promising subsectors within the sector, along with estimated 1995 total market size of each subsector, are as follows: (i) cosmetics, $120 million; (ii) perfumes and toilet waters, $26 million. AGRICULTURE SECTORS A. Rank: N/A B. Name of Sector: Oilseeds (Soybean) C: ITA or PS&D Code: 2222000 1993 1994 1995 (1000 Metric Tons) D. Total market size 516 615 655 E. Total local production 0 0 0 F. Total exports 10 15 10 G. Total imports 526 630 665 H. Total imports from U.S. 303 80 100 I. Exchange rate n/a n/a n/a Comments: Imports of U.S. soybeans reached a record in 1993 and captured 58% of the Malaysian market. With the recent addition of a new soybean facility, soybean imports should grow by 100,000 MT in 1994. Although the U.S. share of the market is expected to fall back to more historical levels as U.S. bean prices are not currently competitive, the U.S. should be able to capture a major share over the next 3-5 years. China is expected to have fewer beans available for export and the construction of a new port facility of handling Panamax sized vessels will also add to the competitiveness of U.S. soybeans. A. Rank: N/A B. Name of Sector: Temperate Hardwood Lumber C: ITA or PS&D Code: 2483020 1993 1994 1995 (1,000 cubic meters) D. Total market size: 21 25 30 E. Total local production 0 0 0 F. Total exports 0 0 0 G. Total imports 21 25 30 H. Total imports from U.S. 13 20 26 I. Exchange rate n/a n/a n/a Comments: There are tremendous opportunities for U.S. wood products, especially in the rapidly expanding, export-oriented furniture market. Malaysia did not import any temperate hardwood lumber until after 1981. Imports have grown since then and reached 21,000 cum in 1993. The construction boom in the country has resulted in a surge in demand for furniture as well as more creative interior designs. In 1993, a total of 26 condominium projects comprising 5,000 apartment units and a total of 13 major office buildings with a total area of 259,155 square meters were completed in Kuala Lumpur alone. In addition, 47 new hotels with 6,700 rooms were completed in Malaysia during the year. Imports are expected to continue to grow to meet the increase in domestic demand for American wooden furniture and interiors as well as from the furniture manufacturers making products for the American and third country markets. A. Rank: N/A B. Name of Sector: Fresh Fruits (oranges/apples/grapes) C: ITA or PS&D Code: 1993 1994 1995 (US$ millions) D. Total market size: 59.5 62.0 65.0 E. Total local production 0 0 0 F. Total exports 0 0 0 G. Total imports 59.5 62.0 65.0 H. Total imports from U.S. 24.1 26.0 29.0 I. Exchange rate 2.57 2.57 2.57 Comments: The market for fresh fruits has been growing at a rate of about 10 percent annually in volume terms in the past five years. Growth rates for the future are forecast at 5-10 percent per year, with rising affluence, expanding population growth, reduction in tariffs and increasing health consciousness contributing to the favorable outlook. There are growing opportunities for sales of U.S. "exotic" fruits (plums, nectarines, peaches and pears), but best prospects are for sales of U.S. oranges, apples and grapes. A. Rank: N/A B. Name of Sector: Frozen French Fries C: ITA or PS&D Code: 1993 1994 1995 (U.S. $ millions) D. Total market size: 6.5 7.0 8.0 E. Total local production * * * F. Total exports * * * G. Total imports 6.5 7.0 8.0 H. Total imports from U.S. 5.3 6.0 6.5 I. Exchange rate 2.57 2.57 * insignificant Comments: The U.S. is the major supplier of frozen french fries to Malaysia capturing more than 80 percent of the market. Almost all major fast food restaurants use U.S. frozen fries. The expanding Malaysian fast food industry augurs well for increased exports of U.S. frozen fries. However, since Malaysia has a large Muslim population, fast food operators will only purchase fries which have been certified "halal", a religious requirement. The fries have to be processed in facilities which have been inspected and approved by the Islamic authorities for halal exports to Malaysia. Appendix C