Eye on Sarawak’s export hurdles

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Cassandra Havelock sits across the table, taking in sips of tea as she regales her problems in exporting Sarawak-made goods overseas.

The founder of Cassandra Havelock Creations Sdn Bhd, which produces handmade Sarawak soaps and personal care products, tells BizHive Weekly of obstacles faced in her quest to get her products ready for export in markets with high demand of Sarawakian goods.

Cassandra Havelock

Among some of these hurdles, she said, were the various certifications and tests required extensively, such as in the European region. Despite Malaysia’s efforts to liberalise its import and export regulations, complex goods-specific rules still exist in today’s ecosystem. Not all goods imported or exported require a license.

To import or export goods that do require a license, traders must first register with the Companies Commission of Malaysia. Once registered, a company must then apply for an import license from the Ministry of International Trade and Industry (MITI).

This is why entrepreneurs face difficulties exporting. Havelock, who has joined her fair share of international trade shows, noted that for example, in order for local products to enter the European Union (EU) market, ecological and organic certifications are required.

“One of our new customers in Amsterdam took me and a representative from the Sarawak Multimedia Authority to the World of Private Label Trade Show (PLTA) in Amsterdam.

“They brought us to personally meet with a few high end organic shops and supermarket owners to discuss marketing our handmade Sarawak soaps and personal care products,” Havelock told BizHive Weekly.

She had also participated in the Vietnam Trade Fair in Hanoi the month before.

Havelock was grateful to the Ministry of International Trade and eCommerce of Sarawak (MITEC) as well as the Sarawak Multimedia Authority (SMA) for all their help in taking part for being her Sarawak-based trade show sponsors to Hanoi and Amsterdam.

“We told them what food products Sarawak could offer, like our unique Sarawak Laksa paste, gula apong, and even dehydrated fruits (like Dabai, Terung Assam, Pineapple and Banana), gluten-free Sago ‘Tebaloi’ biscuits, tuak rice wine, our interesting ‘Kek Lapis’ and rich steamed cakes and lots more exotic Sarawak products.

“We also talked about organising a Sarawak Food Fair in their supermarket and shops where we will cook our Sarawak Laksa, together with all the unique Sarawak dishes – pansoh ayam, red ginger chicken, ayam masak merah, daging masak hitam, rendand and lui cha – they were even more impressed and interested.”

The problem was in getting these eco and organic certifications, she said. In her efforts to get her products certified, she has approached several associations, both government and non-government, but to no avail.

“They keep referring me to this department or to that agency, who also do nothing to assist. They just keep pushing the responsibility around,” she lamented.

 

An example of one of Havelock’s products, the Sarawak Jawa rice grain brown rice soap with lemongrass essential oil.

One of many cases

Havelock is not the only entrepreneur facing this problem. At the recent Sarawak Domestic Investment Seminar, certification issues were once again under the spotlight as an audience member explained his woes when exporting to neighbouring countries.

Kuala Lumpur-based Vincent during a question and answer session at the seminar acknowledged that standards are required by countries for the purpose of export recognition.

“But the only problem is when you’ve got the standards, you want to try to export to another country, we have problem of exporting,” he said to the floor.

“In the many bilateral meetings we went to – for meetings with Thailand and Indonesia and other Asean countries – they agree with our standards. However, when we tried to export our things to Thailand, they got many other regulations that will hinder us to go into Thailand’s market.

“But Malaysia will accept Thai products very easily into Malaysia because it recognises Thai’s standards. These are some of the implementation problems right at the field whereby countries, even though they say they agree with your standards and you agree with their standards, but when it comes to implementation, there are some unseen trade barriers whereby you can’t penetrate into.”

“That’s why MITI and others must emphasise on them, (during) bilateral meetings. When they agree, we must be able to export to them.

“One very good example which we encountered was chicken products,” he gave as an example. “Chicken from Thailand — anytime they can come into Malaysia, but our products cannot enter the Thai market, they have a lot of unseen trade barriers which become very tedious.”

 

Financial challenges

Meanwhile in Sabah, Vincent noted that they also encounter hiccups when exporting birds nest products overseas.

“It is another unique problem because I’ve got (birds nest) farms in Sabah. This is the same situation faced by Sarawakians also. When we want to export birds’ nest, we have got all the standards, but we must go through Kuala Lumpur.”

According to Vincent, they have to waste a lot of time and expenses on additional transportation fees because they are required to use Kuala Lumpur companies to transport these birds nest from Kuala Lumpur to China.

This was not financially viable, he opined, as it would be easier to directly send the birds nest products from Sabah or Sarawak directly to markets such as China.

He went on to lament that when this was brought up for discussion, the reason the goods need to be transported through Kuala Lumpur is because China only recognises Kuala Lumpur and not Sabah or Sarawak — East Malaysaian states are being viewed as a separate entity.

“This is a big problem we face because I’ve got a birds nest farm and products in Sabah and this is a problem which we are facing. This has been brought up many times but has not been resolved yet.”

 

Not just food products

This exporting issue is not confined to just food and beverage.

Aside from exporting food products, Havelock also wishes to promote the Iban Pua Kumbu in the European region. Cassandra Havelock Creations is currently collaborating with the Pua Kumbu Community Project that goes under the trademark RhGareh (Borneo Natural) to bring the pua kumbu to another level and share this precious fabric to the world.

However, Havelock highlighted that even these textiles – which contain vegetable or plant based natural dyes sans chemical substances – require extensive testing and textile certification prior to export.

“The pua kumbu has great potential in the eco-fashion industry because its creation emphasises on plant based dyes and fixer to the thread. Although the threads are not indigenous to Sarawak, the selection of the threads are particular to the threads’ suitability to plant dyes used for colourings.

“Since the fashion industry is the second largest polluter in the world, the first being oil, the need for alternative environment-friendly textile which are also biodegradable, eco-friendly, non-toxic, sustainable and fair price are necessary towards a responsible and sustainable fashion industry.

“We all have the vision of having our (Sarawakian) products reaching international stardom to make fellow East Malaysians overseas proud to see our products in these markets.

“But the fact of the matter is, there are too many hurdles to overcome with no real solution seen on the horizon. We are hoping our Sarawak government agencies could work with us to make this a success.”

 

Recap of Sarawak’s export figures

Sarawak’s export performance remained steady last year, with Assistant Minister of E-Commerce Datuk Mohd Naroden Majais revealing in May that exports grew by 10.6 per cent year on year (y-o-y) from RM15.7 billion to RM17.4 billion in 2018.

According to Mohd Naroden, who is also Assistant Minister of Entrepreneur and SME Development, export receipts from LNG remained the biggest contributor at 48.3 per cent, followed by crude petroleum and palm oil at 11.1 per cent and 7.8 per cent, respectively.

“Our major export partners also remained the same, namely Japan (27.4 per cent), Peninsular Malaysia (14 per cent) and China (12.4 per cent). These three markets contributed 53.8 per cent to the total trade value,” he said.

Meanwhile, imports increased slightly by 5.5 per cent y-o-y from RM6.7 billion to RM7.1 billion in 2018.

Sarawak’s total trade value had amounted to RM143.7 billion last year compared to RM137.6 billion in 2017.

 

Push to go global still ongoing

Havelock’s plight is one example of the hurdles faced by Sarawakian entrepreneurs in their effort to go global, as encouraged by the local government.

Sarawak businesses, particularly small and medium enterprises (SMEs), have been encouraged by the state government to go regional and global to ensure the long term sustainability of their respective businesses.

In a recent remark by Sarawak Deputy Chief Minister Datuk Amar Awang Tengah Ali Hassan in his speech text at the Sarawak Domestic Investment Seminar, it was highlighted that the state has been conducting many outreach programmes, especially towards building the capabilities of our local industry players which consists mainly of SMEs.

“Despite all our continuous efforts, there is still a lack of awareness among the local business community on the various facilities and support provided by the State and Federal Governments,” he noted.

“The government can only facilitate, but the private sector as engine of growth must grab the opportunities created by government initiatives. In this globalised world, competition is more intense, coming not just from developed economies but also from the developing countries. Therefore, the government needs to make every effort to ensure the readiness of our local industry players in enhancing and sustaining their competitiveness.

“I look forward to more local SMEs going into high tech and high value-added ventures. We cannot continue to rely on low cost, low tech and labour-intensive strategies to grow our industries. Together, let us build a business landscape that is innovative, creative and sustainable, focusing on the future.”

Awang Tengah went on to highlight that it is timely for Sarawak small and medium enterprises (SMEs) to tap into a bigger customer base through e-commerce and digital platforms.

“Sarawak has a relatively small market, therefore going regional and global is necessary to ensure the long term sustainability of your businesses. It is timely for Sarawak SMEs to spread your wings and tap into a bigger customer base through e-commerce and digital platforms.

“Towards this goal, Sarawak Government together with the Federal Government through various agencies such as Malaysian Investment Development Authority (MIDA), Malaysia External Trade Development Corporation (Matrade), SME Corp, Ministry of Industrial & Entrepreneur Development Sarawak (MIED), Malaysia International Trade and Exhibition Centre (MiTEC) and others are committed in assisting and facilitating our SMEs to grow big and become global players through adoption of modern technologies, creativity and innovation.”

 

Matrade optimistic of RM1 tillion exports for 2019

The Malaysia External Trade Development Corporation (Matrade) is optimistic that Malaysia’s total exports projection of more than RM1 trillion set by the Ministry of International Trade and Industry can be achieved due positive catalysts and economic outlook moving forward.

Chief executive officer Datuk Wan Latiff Wan Musa said for January-May this year, Malaysia recorded total exports of RM405.36 billion, an increase of 0.3 per cent when compared with the same period last year.

“We managed to achieve 0.3 per cent growth in exports in the first six months, and we just need 0.2 per cent increase this year to exceed the RM1 trillion threshold,” he told a media briefing on the bilateral relations between Malaysia and Europe.

He said with the current uptrend in export, as well an increase in foreign direct investments (FDIs) inflows, exports were most likely to perform better in the second half of this year.

“As we all know, export is always better in the second half of the year as compared with the first half.

“September and October are usually good months for Malaysia (in term of exports) and I hope the current trade negotiations between the US and China would find common ground soon,” he added.

 

Wide range of trade programmes available

For 2019, Matrade had outlined a total of 477 programmes, some of which, the corporation has successfully organised and with more to come for the rest of the year.

“For exporters development, we have eTRADE, Go-Ex, we have programmes for Bumiputera exporters, women exporters, as well as youth exporters (BWYEDP). Apart from that, we have Mid-Tier (programmes) for mid-tier companies.

“We do not just cater to SMEs. We do provide services for mid-tier companies as well,” Matrade Sarawak director Leany Mokhtar revealed in her presentation at the seminar.

“(We also have) seminars and exporters advisory. For export promotion programmes this year 2019, we have outlined 40 programmes covering trade fairs, Export Acceleration Mission (EAM) and International Sourcing Programme (INSP).”

Of the 40 events, these are spread out over various sectors, five cover food and beverage (F&B), five for oil and gas (O&G), four for aerospace and maritime, two for machinery and equipment, two for building materials, two for chemical and chemicals products, two for services (ICT), two for lifestyle, two for electrical and electronics, two for medical and pharmaceutical, two for automotive and transport and nine for mixed sectors.

“Most of our programs are being held within the Asean region. For Asean, we have about 14 (programmes) because we believe that since we are in Malaysia, sometimes to go abroad, even to go into the Europe or US market is quite a challenge.

“But Asean is just nearby to us, and why not just cater for Asean at the moment and later on you can see how you can expand? In Asean, we have the representative of Matrade office in each Asean countries.”

Under its export promotion acitivities, Matrade organises trade fairs throughout the year, both locally and globally. With EAM, Leany noted that these are small scale trade missions that is organised on a yearly basis.

With INSP, she explained that this caters to exporters, companies and entrepreneurs which do not have the financial resources to travel abroad.

“We cater for programs being held in Malaysia whereby we get a group of buyers, importers from certain countries to come over to Malaysia and meet up with our exporters. So you don’t need to spend a lot, perhaps (entrepreneurs) from Sarawak, just need to spend to go to Kuala Lumpur.

“At least, there is a solution, especially to issues whereby we always hear that going abroad nowadays is really expensive in terms of accomodation, flight tickets, for example.

“With the INSP programme, basically, we fly in the potential importers, buyers from overseas and we meet up, have business meetings with our local companies here in Malaysia. But these programmes, we normally have it in Kuala Lumpur.”

With exporters development activities, Leany highlighted on the Market Development Grant (MDG) which has been designed assist SMEs, professional services providers, trade and industry associations, chambers of commerce and professional bodies in undertaking eligible export promotional activities, such as participating in trade fairs or trade missions.

“This grant can be used for those activities. It’s a reimbursable grant, the maximum that we cater for each company is RM200,000. The maximum for each exhibition I think is about RM15,000. You can plan within that RM200,000 (allocation) how many trade fairs you wish to go to, how many trade missions you can go to.

“In terms of MDG, there’s no quota for Sarawak, there’s no quota for state. But we could see that over the years, the number of utilisation from Sarawak is quite low. We wish to increase the number for companies (utilising) the MDG. Perhaps, moving forward, I hope that some companies who (have not utilised) our grant, please do.”

Aside from the grant, for service providers companies, Matrade has the Services Export Fund (SEF) which is in the form of grant and soft loan, depending on the activities.

“The amount for the grant is RM5 million and for the duration of 2015 to 2020. But it’s not long till 2020, so for those who are interested, let us know.”

Eligible sectors are O&G, business services, MRO, construction, healthcare, aerospace, logistics, legal, franchise, education, maritime, legal, ICT and accounting. Exclusions are financial and tourism.

“As for eTRADE, it is basically an assistance for our online entrepreneurs who wish to go or register or have their products in international online platforms such as eBay, Amazon and others.

“We have our incentive offering to companies amounting to a maximum of RM5,000. Whichever (of these platforms) you wish to list your products on, you can plan (for this), it’s either you go for B2C or B2B, depending on your preference and the suitability of your products.”

 

Hanizawati (left) is seen during a panel session during the recent Sarawak Domestic Investment Seminar.

Standards Malaysia: Tax incentives and benefits from standardisation and accreditation

According to Standards Malaysia’s senior assistant director of Strategic Planning Hanizawati Abd Shukor, opportunities for investors who cooperate with Standards Malaysia include the availability of more than 5,000 Malaysian Standards (MS) in 25 sectors that are easily available.

“Other opportunities include tax incentive for participating in international standards development and also you can get better market access, about 60 per cent of the Malaysian standards that has been developed are aligned with international standards,” Hanizawati said.

“Basically, all Malaysian standards developed by us is for voluntary use by industries or customers. However, it can be made mandatory if there is a regulator, supported by relevant acts of Parliament, and referred or inserted the Malaysian standards in their technical regulation where compliance is compulsory.”

“For example, MS1 for helmet specifications. The first Malaysian standard was developed by us, this MS has been referred in Road Transport Department Malaysia in their technical regulation. All manufacturers of helmets need to comply with this Malaysia standard. If they do not comply, there will be a penalty.”

On the list of regulators, as of October 30, 2018, there are 15 regulators including KKM, FAMA, CIDB and others. In total, there are 504 mandatory standards as of October 30, 2018.

“There are 25 existing industry sectors or fields which includes agriculture, petroleum and gas, halal standards, medical devices and facilities for healthcare, electrical and electronics equipments and accessories, food and food products, timber, timber structure and timber products, environmental management and so on.”

As for the benefits of accreditation, Hanizawati explained it reduces risk for business and its customers by assuring them that accredited bodies are competent to carry out the work they undertake.

“Standards Malaysia accreditation provides benefits such as tax deduction by the Inland Revenue Board of Malaysia for each accreditation program that the conformity assessment body is accredited for. We also have double tax deduction for the organisations or companies to obtain the certification. Also, we have a grant for SMEs for obtaining accredited certification provided by Perbadanan Pembangunan Industri Kecil dan Sederhana (SMIDEC).

“The tax deduction is applicable for all programmes operated by Standards Malaysia. You can always check out our website on the various accreditation schemes.”

On accreditation schemes, there are five accreditation scopes and programmes including Skim Akreditasi Makmal Malaysia (SAMM), Accreditation of Certification Bodies (ACB), Malaysia Inspection Bodies Accreditation Scheme (MIBAS), Goal Laboratory Practice Compliance Programme (GLP CP) and Malaysia Proficiency Testing Provider Accreditation Scheme (MyPTP).

“Going forward, I want to highlight on halal-strengthening exports and managing imports to improve trade balance. We support SMEs, especially those that want to grow or boost their business. We assist by helping them to get their certification.”