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Market Plans

Malaysia Environmental Export Market Plan
Executive Summary

Before being caught in the economic turmoil that spread throughout Asia, Malaysia had undertaken an ambitious plan to become a fully developed economic powerhouse by 2020. The country planned to achieve this development through a rapid transformation from an agricultural and commodity-based economy to a competitive manufacturing economy. Having experienced phenomenal success during the past 10 years, Malaysia pushed ahead with large, privatized infrastructure projects to achieve its goal.

Signs of an overheated economy became noticeable in 1995 and persisted over the next two years. In July 1997, Thailand's financial crisis, which led to the devaluation of the Thai baht, triggered currency devaluations across Southeast Asia. The Malaysian ringgit was no exception: By December 1997, the ringgit had depreciated 33 percent against the U.S. dollar. The sharp financial deterioration in the region, in addition to Malaysia's budgetary cutbacks, will probably have a significant impact on government funding and foreign direct investment.

In Southeast Asia, Malaysia was among the first countries to give priority to the environment in its long-range economic plans, beginning with addressing the quality of the country's significantly deteriorated water supply. Priority was also given to air pollution control. Air pollution drew particular attention throughout the region in late 1997 due to the severe haze from Indonesian fires. As a result of the fires, air pollution in Malaysia was the worst ever in 1997. The Malaysian economic plan also made the management of hazardous and solid wastes a priority because Malaysia's waste management infrastructure and related regulatory framework had failed to keep pace with the demands of rapid urbanization and industrialization.

How these plans will be carried out amid the current economic turmoil is unclear. Authorities appear to be forging ahead with environmental improvements in the water-wastewater and waste management sectors, especially those that have the advantage of being labeled essential. However, many of Malaysia's more showy infrastructure projects will probably be shelved or delayed.

Since the early 1990s, enforcement has gradually intensified, and priority has been placed on developing environmental quality monitoring. Newly tightened regulations and procedures have raised the level of enforcement in recent months, although the Department of Environment (DOE) has been under pressure from budgetary cutbacks and economic uncertainties. Decentralization has helped to ensure that industries in all regions are subject to similar enforcement. But even government officials acknowledge that much more work remains to be done in updating environmental protection laws. In addition, increasing concerns over the impact of stricter environmental laws on the economy appear to be softening the government's commitment to environmental protection.

Generally, foreign environmental consultants have more technical expertise than local ones, particularly for specialized services such as environmental audits and environmental management systems (EMS) work. As a result, local firms have partnered with foreign consultants. Local executives believe that foreign manufacturers would be better positioned in this market segment if they developed technology transfer agreements with Malaysian partners. These agreements could serve not only the Malaysian market but also regional Asian markets. Typically, the price of technology is more important than quality and best practices.

The need for cleaner processes, waste minimization, and other pollution prevention technologies will be a contributing driver in the long term, but consultants will have to take a proactive approach in developing market opportunities. The Malaysian Government will probably continue its policy of actively seeking partners in the private sector to embrace and promote environmentally responsible practices and processes, such as environmental auditing. Malaysia's proven commitment to private sector involvement in infrastructure development and environmental management has led to successful privatization of most major environmental services sectors, with a primary focus on the water and wastewater treatment sector.

Malaysia's aggressive privatization campaign has been touted as a showcase for environmental infrastructure programs in the region. Privatization will probably continue to underpin Malaysia's economic development in the long term, as well as the growth of the environmental industry in general.

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