ECONOMIC OUTLOOK. Editorial

Transcription

1 ECONOMIC OUTLOOK Malaysia s economy grew at a slightly faster than expected rate of 5.6% in the first quarter of 2015, as investment in the private sector picked up pace. Though it beat forecast, economic growth for the January March quarter slowed from 5.7% in the fourth quarter of 2014, partly due to weak exports at the beginning of the year. For the rest of the year, Bank Negara Malaysia (BNM) expects private consumption to moderate as households adjust to the new goods and services tax (GST), but overall consumption will be supported by the rise in income and employment. The 11th Malaysia Plan (11MP) was announced by Prime Minister Datuk Seri Najib Tun Abdul Razak in May 2015 and outlined five government philosophies namely pro-growth, pro-people, pro-business, environmental friendly and emphasis on nation building. Under the 11MP, real gross domestic product (GDP) is expected to expand between 5% and 6% per annum from based on sustained domestic demand and increasing contribution from the external sector. Growth will be driven mainly by private consumption and investment, resulting in a 7.9% per annum rise in gross national income (GNI) per capita. During the 11MP, strategies will continue to ensure a conducive and competitive environment with stable prices, supportive levels of interest rates and foreign exchange rates. Four strategies have been identified to boost economic fundamentals 1) unlocking the potential of productivity to ensure sustainable and inclusive growth; 2) promoting investment to spearhead economic growth; 3) increasing exports to improve trade balance and 4) enhancing fiscal flexibility to ensure sustainable fiscal position. Meanwhile, public investment will grow 2.7% per annum, or an annual average of RM131 billion in current prices, driven by the Federal Government s development expenditure and capital spending of non-financial public enterprises. Inflation during the period is expected to remain low, averaging between 2.5% and 3% per annum, with accommodative monetary policy and administrative measures to ensure price stability. The economy is projected to have an estimated unemployment rate of 2.8% by Employment is expected to grow at a slower rate of 2.1% per annum to reach 15.3 million by 2020, creating 1.5 million new jobs. Expected slower growth in the services and manufacturing sectors will reflect labour productivity and the shift from a labour-intensive economy to a capital, technology and knowledge-based economy. The Agriculture Industry Demand for agriculture products are expected to continue at a steady pace this year. In 2013, the contribution of agriculture food sub-sectors (fisheries, livestock and other agriculture) to national GDP rose to 3.22% from 3.17% in The total contribution of the agriculture industry (including palm oil) to GDP was 7.1% in 2013, a slight decrease from 7.3% in On the global front, agricultural production is projected to grow at an average rate of 1.5% annually until 2022, slower than the 2.1% average annual growth recorded in the previous decade. This lower growth will be exhibited by all crop sectors and livestock production due to rising costs, limited expansion of agricultural land, growing resource constraints and increasing environmental pressures which are anticipated to inhibit supply. Nonetheless, higher growth in production is expected from emerging economies which have invested in their agricultural sector and where existing technologies offer good potential for closing the yield gap with advanced economies. Emerging countries share of agriculture output is also expected to increase over the medium to long term (five to 10 years), while consumption of agriculture products is expected to 2

2 MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016 increase largely in developing countries, with demand driven by growing populations, higher incomes, increase in urbanization and also changing diets. Edible Bird s Nest (EBN) The export of edible bird s nest (EBN) to China last year reached 145 metric tonnes (estimated to worth around RM2 billion), according to Agriculture and Agro-based Industry Minister Datuk Seri Ismail Sabri Yaakob. The export of bird s nest to China is expected to grow further this year with the increase in the number of approved processing plants as well as those that are pending approval by the Chinese authorities. The bird s nest industry is a high impact entry point project (EPP) under the Agriculture National Key Economic Area (NKEA). To date, the Department of Veterinary Services has successfully registered some 10,330 bird s nest premises and is expected to register at least 25,000 premises towards As of March 2015, eight approved local exporters have exported a total of 8,000kg of bird s nest worth some RM62 million to China. The Chinese Agriculture Ministry has also promised to expedite the approval for another 11 bird s nest exporters by this year, which would further boost the exports of EBN to China. Malaysia is also set to further expand its EBN market in Singapore as the Department of Veterinary Services (under the purview of the Agriculture and Agro-based Industry Ministry) is undertaking aggressive efforts to promote EBN to the neighbour country. Currently, most of the bird s nest exported to Singapore is in the form of ready-to-drink bottled goods and the department would like to focus on promoting raw EBN and other downstream products. Efforts to promote Malaysian bird s nest are also targeted at markets such as Milan, Japan and Hong Kong under the Agriculture and Agro-based Industry Ministry s Food and Agriculture Council for Export (FACE) programme. Aquaculture & Fisheries Market research firm Global Industry Analysts Inc says demand for seafood has been growing worldwide, resulting in over-exploitation of natural resources and production stagnation from captured fisheries. This leads to an increasing need for sustainable fishing methods and provides opportunities for developing countries such as Malaysia to bank on aquaculture. According to published reports, due to surging consumption of seafood in both developed and developing regions, the global market for aquaculture and fisheries is projected to reach 188 million tonnes within the next five years. 3

3 According to experts, aquaculture is one way to help Malaysia ensure the sustainability of its fishes as the country has lost about 92% of its fishery resources due to overfishing. Malaysians are one of the world s largest consumers of seafood at 52kg per capita and with a population of more than 27 million, we consume more than 1.4 million tonnes of fish annually while producing 1.5 million tonnes. Since 2011, 14 anchor companies under EPP 6 (Replicating Integrated Zone for Aquaculture Model to Tap Market for Premium Shrimp) have developed 5,713 hectares of land for shrimp farming, committing RM2.6 billion in investment and generating 8,040 job opportunities by In 2014, existing anchor companies produced 30,081 tonnes of shrimp and the greatest demand for premium shrimp was from Malaysia, with the price per kg of shrimp higher in Malaysia than in export markets. Sabah is expected to produce RM3 billion worth of white shrimp when its four main prawn farms are fully operational by Sabah Agriculture and Food Industries Assistant Minister Datuk Sairin Karno said the farms are expected to produce 110,870 metric tonnes of white shrimp by 2020, contributing RM1.5 billion to GNI. The farms are owned by four companies approved under the NKEA Sunlight Inno Seafood Sdn Bhd (Pitas), KB Aquaculture Sdn Bhd (Kota Belud), Pegagau Aquaculture Sdn Bhd (Tawau) and QL Aquamarine Sdn Bhd (Kudat). Last year, Sabah s white shrimp production was worth RM million (up 38% from 2013) while this year s production is expected to reach 30,000 metric tonnes. Sabah s Integrated Lobster Aquaculture Park, better known as ilap, recently became the envy of many as it recorded the world s first commercially hatched ornate spiny lobsters. The milestone has brought Malaysia one step closer to the global market for lobsters, currently valued at over $4 billion a year. The RM3 billion project located within a 9,300-hectare park is a joint venture between Darden Aquascience Sdn Bhd, Nexus Sustainable Seafood Sdn Bhd and Inno Fisheries Sdn bhd and is expected to produce up to 40 million pounds of hatchery-based tropical spiny lobsters when it reaches maximum capacity in Under the Agriculture NKEA EPP 4 (Integrated Cage Farming), 9,336 tonnes of fish were produced in 2014, exceeding the targeted 6,500 tonnes. Existing players are expected to reach maximum capacity in 2016, with this trajectory projected to continue until Aquagrow Corporation Sdn Bhd operates two world-class, fully integrated marine finfish aquaculture facilities in Langkawi (Kedah) and Pulau Perhentian (Terengganu). Under the cooperation between the Fisheries Department and the Norway government, Aquagrow is applying the same cage farming techniques as Norway. Fish cages made from high-density polyethylene (HDPE) are brought in from Norway and there are currently 18 cages used to breed Crimson Snapper (ikan merah), Barramundi (siakap) and two types of groupers Tiger Grouper (Kerapu Harimau) and Grouper Spp (Kerapu Kertang). Before the fishes are released into cages placed in the open sea, the fish eggs are hatched at the incubator nursery centre in Bukit Malut. The Integrated Aquaculture Intelligent Solution (IAIS) currently being used in Norway and Scotland is also applied here. The IAIS technology measures multiple parameters (oxygen content in the water, sea current strength, ph value and temperature) and helps maintain the right environment during initial stages to allow fish fries to grow faster. When the fries are one month old, they will 4

4 MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016 be transferred to a nursery and fed with food pellets for two months until they reach 4cm. Thereafter, they will be transferred to the HDPE cages in the open sea until they reach the required size to be marketed locally and overseas. The fishes are exported to Singapore, Hong Kong and China while processed fish fillets are exported to Australia, Europe and the US. Premium Fruits & Vegetables Led by the Department of Agriculture (DoA), EPP 7 aims to export local premium fruits and vegetables to the Middle East and Europe, which import more than 50% of the global production of higher quality local fruits and vegetables that comply with food safety standards. Six high value non-seasonal tropical fruits (rock melon, starfruit, papaya, banana, pineapple and jackfruit) and three high value highland vegetables (lettuce, tomato and capsicum) have been identified as target produce. Rompin Integrated Pineapple Industries Sdn Bhd achieved the first planting of the MD2 pineapple in a project that involves the participation of local Orang Asli as contract farmers. The company has 2,000 hectares of land split into two phases: Phase hectares (current) and Phase 2 1,400 hectares (ready by 2017) in the east coast region of Malaysia. These will eventually yield 130,000 tonnes of pineapples per year. The two-phase expansion was motivated by the fact that demand is currently higher than supply in its most important export markets: Japan and South Korea. The fruit is also shipped to Europe and the Middle East and may soon be on its way to China. Overall, around 70% of its production is exported, with the remaining going to the domestic market. The year also saw the first harvest of produce under the 21st Century Village project, a collaboration between the DoA and the Ministry of Rural and Regional Development, with 224 tonnes of papaya harvested in May. As of 5

5 October 2014, 85 acres of land have been planted at the project site in Chemomoi (Pahang) by anchor company Exotic Star Sdn Bhd. EPP 7 also leverages existing Permanent Food Production Zones (TKPM) to boost the production of identified fruits and vegetables. To date, 6,105 hectares of land have been established as TKPM, involving 453 farmers, of which 171 have increased their income to above RM3,000 monthly. According to the Performance Management Delivery Unit (PEMANDU), the total production of premium fresh fruits and vegetables from TKPM and anchor companies for 2014 is as follows: TKPM 33,517 tonnes Exotic Star 3,015 tonnes Far-East 4,688 tonnes Kia Shing 1,861 tonnes KC Kwang 1,464 tonnes Fresh Momentum 682 tonnes Ergobumi 177 tonnes Rice Malaysia currently produces around 70% of rice required for domestic consumption and imports the remaining, mostly from Vietnam and Thailand. Specialty rice varieties that are not produced locally such as basmati and fragrant rice are also imported to cater to the various culinary tastes of our multi-racial society. The Malaysian government is embarking on efforts to boost domestic rice production sufficiently to help end rice imports by For example, EPP 9 focuses on planting fragrant rice on rain-fed areas to increase the average national paddy yield, reducing the country s dependence on imports for specialty rice. Initiatives under this EPP also seek to produce premium organic rice, with anchor companies appointed to undertake the planting and commercialization of fragrant rice varieties developed by the Malaysia Agricultural Research and Development Institute (MARDI). To date, 2,118 hectares of land have been amalgamated, against a target of 18,000 hectares by 2020 while 2,026 metric tonnes of fragrant rice was produced in Production during the year was achieved despite a long drought season and inability to obtain land as well as major floods at the end of However, industrial development is limited as the industry is still at infancy stage and requires guidance and strong support from the government. Additionally, the industry is fragmented with small players which have not established dedicated mills for fragrant rice. Led by Muda Agricultural Development Authority (MADA), EPP 10 (Strengthening Productivity of Paddy Farming in MADA) aims to establish Malaysia s long-term food security and increase the income of paddy farmers. This is achieved by adopting an estate farming approach under a single management in the Muda vicinity in Kedah. An additional 5,000 hectares of land was amalgamated in 2014, bringing total land area amalgamated to date to 20,186 hectares against a target of 50,000 hectares by Meanwhile, land amalgamated in the Muda area spanning Kedah and Perlis has produced 243,200 tonnes of paddy last year. 6

6 MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016 Food Exports Malaysian food products are quickly gaining traction in the US and are expected to make greater inroads into the market based on encouraging response to the Malaysia Kitchen USA programme. According to the Malaysian External Trade Corporation (MATRADE), Malaysian cuisine was listed amongst the top five trending flavours in the US last year and is expected to maintain the spot in 2015 as well. This is based on the survey by the National Restaurant Association, the largest restaurant and food service trade association in the US. Currently, there are around 500 Malaysian products sold all over the US, including instant pastes, sauces, seasonings and marinades, instant noodles, frozen foods, pastries, flat breads as well as ready-to-eat meals. These products are sold at retail outlets such as ethnic supermarkets and Asian grocers in major US cities. By using various strategies, projects and campaigns under the Malaysia Kitchen USA programme, MATRADE is aiming to achieve the goal of doubling this number to 1,000 product lines in the market by MATRADE will continue its efforts to promote more products to the US market, targeting institutional buyers, mainstream supermarkets, restaurateurs and the hospitality industry. In 2014, Malaysia s exports of processed foods to the US surged 34.3% to RM770.7 million, up from RM574 million in 2013; while exports in the first four months of 2015 stood at RM229.7 million. Beginning end of last year, Malaysia s famous Musang King frozen durians are made available to the Chinese consumers via World Good Farming Development Co Ltd s high-end grocery stores in Beijing. The move was aimed at enhancing public awareness about Malaysian frozen durians, which are still considered new products for the Chinese. While Thailand s durians have been dominating the Chinese market for over 30 years, Malaysia only began exporting frozen durians to China in In 2013, the export of durians to China was valued at $1.6 million and this figure is expected to be on the uptrend. Balik Pulau 77 Durian Hill Sdn Bhd, a Penang durian orchard owner, aims to achieve RM1 million in turnover once its frozen durians are exported to China next year. At the time of writing, the company is working closely with the Forestry Department and other government agencies to secure a 7

7 license to export durians to China. According to company director Tang Boon Ley, Musang King, Ang Heah, Hor Lor, 604 and D11 durians are highly sought-after in China, especially in Xiamen (the capital of Fujian province). According to the Ministry of Agriculture and Agro-based Industry, Malaysia exported durians worth $1.7 million (RM6.12 million) to China from January to March this year, with Xiamen accounting for $700,000 (RM2.52 million) of the amount. Meanwhile, Malaysia s MD2 variety of pineapple is a success overseas, garnering sales in the Middle East and Asia. The fruit also landed successfully on Japanese soil earlier this year, apart from receiving requests from Oman, Australia and Russia. The fruit is planted by subsidiaries of Kulim (Malaysia) Bhd JTP Trading Sdn Bhd, Renown Value Sdn Bhd and Kulim Pineapple Farm. The company markets agricultural produce and has 300 hectares of MD2 pineapple plantations in Ulu Tiram, Johor Bahru and Kluang. Last year, the company produced 1,100 metric tonnes of pineapples under the Melita brand with 47% being exported and the rest sold in local markets. Shipments of pineapples to China was supposed to take place early last year but could not proceed as no approval was given by the Chinese authorities. In 2013, Malaysia and China had signed an agreement for Malaysia to export foot containers of pineapples monthly beginning early The issue is similar to the ban imposed on Malaysia s bird s nest exports to China but has already been resolved. It is hoped that the export of fresh pineapples to China can commence by end of this year. China is expected to surpass Singapore and the Middle East as Malaysia s biggest importer of pineapple. The Coffee Industry The global coffee industry has undergone a significant transformation over the past five decades. Up until 1989, the coffee market was regulated by a series of international coffee agreements which were intended to manage supply and maintain price stability. This system subsequently collapsed and since 1990, the coffee market has been subject to the free market forces of supply and demand. According to the International Coffee Organization (ICO), over the last 50 years, there has been steady growth in global production. The average growth rate since 1963 was 2.4%, with 2.8% annual growth during the market-controlled period and 2% since 1990; with Asia and Oceania picking up in production since Global consumption grew at an average 1.9% per annum from 57.9 million bags in 1964 to 142 million bags in This growth rate accelerated since 1990 to 2.1% and to 2.4% since Traditional importing markets such as Japan, US and the European Union have historically accounted for the majority of global coffee demand. However, demand in coffee-producing countries and emerging markets have expanded significantly in recent years, providing much of the impetus behind recent demand growth. Source: International Coffee Organization, The Three Waves of Coffee The term third wave coffee was first coined by Trish Rothgeb of Wrecking Ball Coffee Roasters back in 2002 when she wrote about it in an article for the Flamekeeper 8

8 MALAYSIA FOOD BUSINESS DIRECTORY 2015/2016 (the newsletter of the Roasters Guild). Rothgeb broke down the modern spread of coffee preparation and consumption into three overlapping but distinct phases. The first wave consisted of mass marketers whose mission was to increase consumption of coffee and put it into every kitchen. These marketers were largely profit-driven and most of their innovations included revolutions in packaging that made it easier to distribute coffee to consumers. First wavers such as Folgers, Nescafé and Maxwell House were responsible for turning coffee into a commodity and marketing coffee as a flavour. The second wave of coffee was artisan-driven which focused on coffee beans origins and roasting styles to achieve different flavour profiles. The big names of second wave include Peet s Coffee & Tea, Starbucks and The Coffee Bean & Tea Leaf all of which started as small specialty coffee shops in their home countries and have grown into successful global enterprises. The second wave was also responsible for the introduction of espresso beverages, the elevation of Arabica and the emphasis on overall coffee quality. This wave contributed to the popularity of capsule-based coffee machines that provide individuals with a variety of flavours in singular pods. Along the way, the need for consistency, scale and branding led to homogeneity. Rothgeb was of the opinion that it was this homogeneity or rather, a desire to break free from homogeneity that gave birth to the third wave. (as opposed to blends), lighter roasts and latte arts. The third wave moves away from machine-based systems to alternative preparation methods such as pour-over cones, Aeropress, Chemex and siphons. The Local Scene Malaysians have traditionally been tea-drinking folks but the coffee culture has caught on like wildfire among the locals in recent years. With the arrival of global coffee chains such as Starbucks, The Coffee Bean & Tea Leaf, San Francisco Coffee and Gloria Jean s, Malaysians began to develop a stronger interest in coffee and enjoy the lifestyle that came along with it. Interestingly, the local coffee scene is a blend of all three waves. However, the younger and professional generations tend to demonstrate an affinity towards second and third waves coffee. As more Malaysians travel and live abroad, they are exposed to the changes in coffee culture and return home with a better appreciation for a good cup. In Malaysia, there is still plenty of room for coffee as the household penetration rate is currently around 65%, compared to beverages like carbonated soft drinks and Milo with much higher penetration. Nescafe, a household brand, has been in Malaysia since 1948 and has grown steadily over the decades. In 2013, it was reported that Malaysians consumed some six million cups of Nescafe a day, making it one of the largest coffee player in Malaysia. The third wave refers to a current movement to produce high quality coffee and considers coffee as an artisanal foodstuff like wine, as opposed to a commodity. The third wave is in the throes of achieving the same level of detail and understanding from bean-to-cup and went deeper than the second wave in terms of quality control. It involves improvements at all stages of production from improving coffee plant growing, harvesting and processing; to building stronger relationships between coffee growers, traders and roasters; to higher quality roasting and skilled brewing. Distinctive features of the third wave include direct trade coffee, high quality beans, single-origin coffee Up until the early 2000s, coffee was mainly consumed at home (3-in-1 preparations) but the rapid growth in the number of coffee outlets recently has increased out-of-home consumption tremendously, opening another segment of growth for the coffee market. As reported by Business Insider in February 2014, Southeast Asian countries like Malaysia, Singapore and Indonesia are seeing more coffee shops at a growth of 7% per annum. The potential of the out-of-home segment is huge as established chains such as Starbucks and The Coffee Bean & Tea Leaf as well as a multitude of other artisan coffee houses are mushrooming everywhere. The coffee culture also fuelled 9

9 the growth of coffee machines in households and offices as more Malaysians desire to consume better coffee anytime, anywhere. Popular brands include Nescafe Dolce Gusto, Breville, Delonghi, Krups and JURA. and second waves are here to stay as many Malaysians continue to enjoy their kopi-o at regular kopitiams and takeaway lattes from coffee chains around the corner. Growth Potential According to ICO, the current consumption growth in Asian countries is driven primarily by demand for Robusta coffee, which is used in soluble coffee and ready-to-drink products. More developed markets tend to exhibit a higher percentage of Arabica consumption and specialty coffee industry. Analysts foresee that the Asian region as a whole has significant potential for growth in coffee consumption, both in terms of volume and value. Based on ICO estimates, the average per capita consumption in Malaysia is around 0.8kg, whereas the European Union averages nearly 5kg and North America 4.4kg. As Malaysia progresses towards a developed nation status, coffee consumption will increase as income level rises and more Malaysians will move to the third wave. However, the first Source: International Coffee Organization,