Malaysian FTZ generates prospects for Chinese firms

Re-export and halal enterprises to benefit from mutual cooperation

Editor's note: China Daily continues its reports from neighboring countries to provide insight into topics relevant to China. In the first installment of our four-part series, we report on Chinese-Malaysian economic cooperation in the food and medical industries.

Halal industries between China and Malaysia should collaborate more closely to tap into the global Muslim market, a top manager of Malaysia's state-level free trade zone said.

"Entrepot trade (trade in which imported goods are re-exported) and the halal industry are the two economic pillars for the Southeast Asian country," said Xia Baowen, chairman of SM International Wholesale (China) Center, the sole lease facilitator of the Port Klang Free Zone in Malaysia.

"'Halal' not only refers to food, but also includes medicine, apparel and Islamic finance in a broad sense," Xia said.

Covering an area of about 260 hectares, the zone is 40 km south of Kuala Lumpur along the world's busiest seaway - the Strait of Malacca. Xia's company has been conducting trial operations of the commercial section of the zone since August under a 20-year contract with the local government.

Xia, who is from Heilongjiang province, said cooperation with China has been consistent through every phase of the zone's development, and a considerable number of Chinese investors who are eager to establish business abroad are attracted by Malaysia's favorable location and potential access to a vast market.

Despite its limited territory compared with China, Malaysia is the intersection of three markets - ASEAN, the Muslim world and the Commonwealth - so its re-export volume is enormous, Xia said.

"In terms of both the economy and the driving force of the market, Malaysia is no doubt one of the leaders among Southeast Asian economies," he said. "Its halal certification is among the top in the Islamic world. It also enjoys preferential policies and market share within the Commonwealth system."

In recent years, China's halal industries have developed rapidly and the country has made notable efforts to enter the global Muslim market, which has a population of 1.9 billion and an estimated value of $2.1 trillion.

"In terms of advantages, China has raw materials. For example, plenty of land for livestock, advanced technology and relatively cheap labor," Xia said.

"Meanwhile, Malaysia is recognized for its accreditation procedures in relation to the production of halal goods, which is crucial to convince Muslims that their food has been produced according to Islamic principles," he said.

The China Council for the Promotion of Nationalities Trade is among the various Chinese enterprises and organizations trying to boost cooperation with Malaysia in the halal area.

'Settling down'

Niu Bingbing, director of the council's Islamic Food and Products Trade Working Committee, said many of China's halal producers are expected to move to Malaysia and "settle down" as a result of the cooperation channel with the free zone.

"The Port Klang Free Zone has access to a vast global market, and Chinese halal enterprises based there can be guided to manufacture products that meet world-recognized standards in order to guarantee halal standards," Niu said.

The committee, established in 2010, helps China's Muslim enterprises gain international recognition for their products. The organization has more than 200 corporate members.

"There are 10 Muslim ethnic groups in China, with a population of about 30 million, that traditionally believe in Islam, so the domestic market for the Chinese halal industry is quite limited," Niu said. Chinese halal products have only 0.2 percent of the global market share, she said.

Every April, the organization leads a delegation to the annual Malaysia International Halal Showcase in Kuala Lumpur.

However, there are still some factors undermining the progress of Chinese halal industries, she said. Entrepreneurs do not always show enough interest in entering the global Islamic market and make little effort to acquire certification.

Yet the opportunities are there.

"It is a golden time to boost Sino-Malaysian business exchanges now that economic structural adjustments from both countries are providing new development opportunities," Xia said.

In October, President Xi Jinping visited Kuala Lumpur. The two countries inked a five-year plan for economic and trade cooperation, announcing that annual bilateral trade will expand to $160 billion by 2017.

Total trade volume between Malaysia and China recorded a 12.1 percent increase year-on-year to $86 billion in the first 10 months of 2013, comprising nearly a quarter of the total trade between China and ASEAN.

As a major project supported by the Department of Trade and Industry of Malaysia, the free zone encompasses two areas: industry and commerce.

"The industrial area contains 512 factories, 514 square meters each, and the commercial area includes supporting facilities such as an exhibition center and a four-star hotel," said Wong Siay Patt, director of the SM International Wholesale (China) Center.

"It offers various incentives to investors, such as tax exemptions, subsidies, policies allowing wholly foreign-owned enterprises, free repatriation of capital and profits, and incentives for research and development," Wong said. The zone is expected to provide more than 10,000 jobs.

puzhendong@chinadaily.com.cn

(China Daily 02/11/2014 page11)