Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Malaysia Environmental Export Market Plan

Chapter 8 - Consulting and Engineering Services

Overview

Malaysia's environmental consulting and engineering (C&E) services segment is in its infancy as a stand-alone business, and with the economic slowdown, many environmental services are being deferred or shelved. The currency devaluation that caught some projects in midstream has also added to the financial burden of many contractors and importers.

The estimated $30-million C&E market is dominated by large firms that are not exclusively environmental players but are units of large contractors or of industrial conglomerates that are diversifying their environmental services and equipment. Environmental equipment suppliers also tend to bundle services as part of turnkey packages. Environmental C&E has been predominantly associated with compliance-related environmental impact assessment (EIA), urban planning and environmental studies, geological information systems (GIS), and end-of-pipe solutions. To a lesser degree, C&E has concerned itself with environmental audits or risk assessments, environmental management systems (EMS), and soil and groundwater remediation.

These fields are highly competitive, with a few independent C&E firms (domestic and foreign-based) competing with the larger, more established contractors. The foreign-based companies, estimated to have roughly a third of the total C&E market, typically have joint venture partners or hire Malaysian staffs. These specialized firms traditionally serve foreign and regional multinational clients, with much less business coming from public agencies or Malaysian industry. The majority of the multinational clients are in the oil and gas, petrochemical, and electronics businesses.

As a market driver, EIA enforcement is perhaps strongest in the C&E sector. EIAs have been mandated since 1988, when the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order (1987) was enacted. Under this law, DOE can impose special provisions for more controversial or potentially high-impact projects, such as the Integrated Waste Management Centre for hazardous waste treatment. This project had to meet more than 60 EIA approval conditions, whereas projects are usually required to meet 30 conditions. In addition, according to the 1996 amendments to the EQA, the DOE director general can mandate environmental audits for industry.

The U.S. Department of Commerce estimated the Malaysian EIA market at roughly a third of the total environmental C&E market. Growth has been substantial over the past few years because of stricter guidelines and enforcement. Approximately $33 million was spent on EIA from 1988 through 1995.

DOE reviewed 1,825 EIA reports in 1996. Of these, 1,745 were preliminary and 12 were detailed reports. The bulk of the EIA reports were related to either housing or resorts and recreational development, followed by infrastructure, quarries, industry, and waste disposal and petroleum projects. In 1996, DOE received 370 reports, of which 102 were rejected and 12 were withdrawn.

DOE has begun more effective measures, such as site inspections for all projects requiring EIA reports or approval. In 1996, DOE conducted 467 EIA enforcement visits, resulting in 133 noncompliance notices. During that year, 10 project proponents were taken to court for noncompliance. Development in highland areas is also monitored much more closely than in the past for EIA compliance. Some 27 hillside (or highland) projects involving hill components were inspected. As a result of these enforcement visits, seven developers were taken to court for noncompliance.

The geological information systems services market is valued at $150 million, according to U.S. Commerce Department figures. Malaysia has begun using remote sensing and GIS for land cover mapping in the past four or five years and, more recently, for land use planning. Natural disasters such as flash floods and landslides, caused by overdevelopment, have focused attention on the lack of environmental control and planning during project design. As a result, state economic planning units have formed GIS teams to assist in development planning.

DOE has also increasingly imposed self-monitoring. For instance, it has approved several projects with air monitoring provisions. Other self-regulatory processes, such as the ISO 14000 EMS certification standards, are vigorously promoted among Malaysian industries, with varying success. DOE efforts to encourage pollution prevention, waste minimization and recovery technologies, and measures such as environmental label and environmental management systems continue. Their effectiveness can only be measured in the longer term.

Competitive Situation

There are varying estimates of the number of environmental technology and services companies operating in Malaysia. DOE conducted a survey of such companies in 1997 as part of efforts to develop a pollution control technology database. About 100 firms responded. The Association of Environmental Consultants and Contractors of Malaysia (AECCOM) has an estimated 30 to 40 members representing a cross section of the industry. Only a few are strictly environmental consulting and engineering firms, and most are of small to medium size. About 300 to 400 companies are registered with the Department of Energy to conduct work related to environmental quality. However, their work too is spread across various environmental segments.

Foreign-based firms typically have more technical expertise than Malaysian environmental consultant firms, particularly for environmental audits and environmental management systems work. As a result, local firms have partnered with foreign consultants. Typically, price is the primary competitive factor, much more than quality and best practices. The extremely aggressive pricing strategies of smaller Malaysian consulting companies often lead to poor quality work.

For a C&E firm to set up an environmental consulting practice with a “greenfield” approach is extremely difficult without access to influential political figures and decision-makers. Thus, having a Malay partner with sound professional capabilities and powerful connections is a key factor for success (see table 14). Having a local presence and a local partner will allow the C&E firm a better chance of being competitive in a crowded but very fragmented market. Developing long-term relationships and showing corporate commitment at a high level is also essential.

U.S. firms in Malaysia include Environmental Resources Management, which focuses on both public and private sector environmental services, including EIAs, audits, site assessments, policy studies and environmental management services. CH2M Hill and ENSR also operate there. European companies, especially British and German firms, have a relatively strong presence. Lurgi of Germany has a local office, as does Jebsen & Jessen Engineering. Two firms, DNV and SGS, offer a range of services, including certification in Malaysia for ISO 9000 and BD 7750 standards.

Table 14: Top Malaysian C&E Firms

Company	Staff
HSS Integrated Sdn. Bhd.	728
Ranhill Bersekutu Sdn. Bhd.	650
Sepakat Setia Perunding	588
KTA Tenaga Sdn. Bhd.	410
Minconsult Sdn. Bhd.	387
Syed Mohamad, Hool & Binnie	350
Salcon Engineering	250
Engineering & Environmental Consultants Sdn. Bhd.	206
Zaidun-Leeng Sdn. Bhd.	205
Lankhorst Environmental	N/A
KTA (Sarawak) Sdn. Bhd.	190

Source: Association of Consulting Engineers, Malaysia

A few Canadian firms have also entered the market with long-term strategies. A joint venture partnership between the Canadian firms Gartner Lee and Keir Consultants formed Gartner Lee Keir Asia Inc. and sought a Malaysian presence through another joint venture with the Malaysian conglomerate HICOM Holdings Bhd. The resulting joint venture, HICOM Environmental Sdn. Bhd., formed in 1994, has since been involved in waste management, GIS for property and facility management, radioactive waste disposal, environmental management planning, and EIAs. Its most significant activity has been its role in privatizing of the country's nationwide solid waste management infrastructure.

Bovar Environmental of Calgary, Alberta, has a joint venture with a Malaysian company that holds a 20-year concession for a nationwide air and water quality monitoring system. EVS Environment Consultants of North Vancouver, B.C., has teamed up with a local firm, Johuzil Sdn. Bhd., to form a consulting joint venture firm, Canamal EVS Corp. (M.) Sdn. Bhd.

Increasingly, foreign groups have used Malaysia as a base of operations for breaking into the region's environmental markets. The Dutch/Swiss group Hagemeyer-Cosa Liebermann (HCL) created an infrastructure, energy, and environmental business unit under HCL’s technology division in 1995 to develop regional business from offices in Kuala Lumpur. Among others, the group is focusing on environmentally-related infrastructure projects and on providing strategic consulting, financing, project management, and industry services.

Apart from private sector companies, a number of institutions have supporting C&E activities in Malaysia and elsewhere in the region. The Regional Institute of Environmental Technology (RIET), a joint venture between the European Union and Singapore, promotes European environmental expertise in Asia and conducts numerous workshops and courses on auditing. The U.S. consulting specialist Battelle Memorial Institute assisted a local research center in conducting the first strategic environmental management program of its kind in Malaysia.

Market Opportunities

Given the current economic troubles and uneven enforcement, new C&E entrants will probably find the environmental market tougher than ever to penetrate, even in niche areas. The postponement of several infrastructure projects and the uncertain investment picture point toward shrinking demand for the broad array of consulting and engineering work in the near to mid-term.

There are opportunities in resource management studies and urban management planning. Several Malaysian and other regional initiatives are expected to stimulate natural resource management, especially policy implementation in land, water, and forest resources; soil conservation; and biological diversity. For example, the government is updating the 1982 National Water Resources Study to inform its preparation of water resource master plans, water catchment zoning plans, a database on water resource management, and its efforts to meet efficiency requirements.

Prominent C&E Companies

Syed Muhammad, Hool & Binnie is one of the largest environmental C&E firms, with more than 350 employees and estimated annual sales of over $10 million It is entirely Malaysian-owned. SMH&B tries to distinguish itself by emphasizing its many years of experience, particularly in the gas, river control, and pollution sectors. Among public sector clients are DOE, MOSTE, and the Water Supplies Division of the Public Works Department. It has also done sedimentation work, cleaning, and pollution monitoring for the Drainage and Irrigation Department. Private sector customers include Esso, Petronas, Shell, Indah Water Group, and the Kuala Lumpur Airport Group. Typically, these services include design, impact statements, pollution prevention, project management, risk analysis, site assessment, construction supervision, and financial studies.
Salcon Engineering Sdn. Bhd. was established in 1974 and is one of the country's leading construction, operations, and maintenance C&E firms, with annual revenues of over $30 million and more than 250 employees. It specializes in mechanical, electrical, instrumentation, and process engineering services. Nonconstruction services include compliance, design, O&M, pollution prevention, project management and site assessment. Its strengths are in water-wastewater treatment for municipal clients. Salcon owns about 66 percent of a municipal water-wastewater concession in Greater Ipoh. In 1996, the company completed Malaysia's first sludge treatment plant for a potable water treatment facility for Singapore's Public Utilities Board. About 10 percent of business is related to industrial effluent discharges, one of the company's growth areas.
Envitech was established by three Malaysian engineers in 1984. It now has revenues of $4-$5 million. Its main product lines are design, O&M, pollution prevention, and project management.
Dames & Moore (M) Sdn. Bhd. was established in 1978, although its environmental business took off only in the mid-1980s. Approximately 60 to 70 percent of its estimated $2-$3 million annual revenues are environmentally related. Nonconstruction services include audits, compliance, EIAs, project management, and site assessment. Most of its business is with multinationals, particularly its global roster of oil and petrochemical giants. Projects have included an EIA for Eastman Chemical and checking for radioactive substances at a decommissioned plant site owned by Mitsubishi Chemicals.

Opportunities are emerging in the use of GIS technology as a tool for environmental monitoring and natural resource management. Currently, there is very limited understanding of the technology's full potential. GIS is beginning to be adopted in EIA reports, primarily for geotechnical problems, such as soil erosion. In Malaysia, the U.S. ArcInfo technology has become exceedingly popular (about 80 percent of the market). It has superseded earlier GIS software from other foreign sources that were introduced with development assistance grants from Canada, Australia, and Denmark. The more advanced GIS users are in the Departments of Environment, Forestry, and Public Works. With the tremendous need to digitize maps and data, GIS users are constantly seeking high-speed data conversion technologies required for detailed mapping and assessment. Malaysian firms’ inability to design GIS applications and provide program consulting opens that potential market to foreign providers. Any domestic local competition comes from universities and other technical institutions, which usually win contracts because of lower pricing. However, most are capable of only low-end GIS applications. Opportunities lie in the private sector, for example, in construction and infrastructure development.

As the economy slowly gets back on track toward its industrialization objectives, there will be more opportunities for environmental management systems and associated environmental audits. Apart from economic factors, ISO 14000 and related sectors (labeling, packaging, recycling, etc.) are expected to be strong market drivers. ISO certification is consistently in high demand in most Asian export-based economies.

Malaysia is a prominent advocate in development of ISO 14000 standards and is a participating member of the ISO/TC207 and its subcommittees. Malaysia's manufacturing sector, accounting for roughly a third of the GDP, is intensely competitive both regionally and globally. Manufacturing sectors, assisted by government and nongovernment institutions, have shown great interest in the ISO 14000 standards. About 18 Malaysian corporations have received ISO 14002 certification. Small to medium-sized industries also offer a potentially significant market, because most are suppliers of parts and equipment to multinational manufacturers.

Several institutions are involved in ISO 14000 programs. The Standards & Industrial Research Institution of Malaysia (SIRIM) is the national organization for ISO 14000 certification. Called SIRIM Bhd. after it was incorporatized in 1996, it is a catalyst for industrial research and technological development. The Malaysian Accreditation Council, created in 1995, is the government body that accredits Malaysian organizations for ISO 9000 and ISO 14000 certification.

Several export-oriented and high-growth industries require training in environmental quality issues--industry associations offering opportunities include the Federation of Malaysian Manufacturers (FMM), the Malaysian International Chamber of Commerce and Industry (MICCI), the Malaysian Textile Manufacturers Association (MTMA), the Malaysian Iron and Steel Industry Federation (MSIF), and the Malaysian Plastics Manufacturers Association (MPMA). The need for cleaner processes, waste minimization, and other pollution prevention technologies will create opportunities for C&E services in the long term, but consultants will have to take a proactive approach to developing opportunities. The government's policy is to seek partners in the private sector to adopt and promote environmentally responsible practices and processes, such as environmental auditing.

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