Energy and Environment Trade Mission to Malaysia, Thailand and the Philippines
September 15-21, 2013
The United States Department of Commerce, International Trade Administration, U.S. and Foreign Commercial Service (CS), is organizing an Energy and Environment Trade Mission to Malaysia, Thailand, and the Philippines. This Mission will directly support the "U.S.-ASEAN Expanded Economic Engagement” or E3 Initiative announced by President Obama at the 2012 U.S.-ASEAN Summit.
The "E3” Initiative focuses on enhancing ASEAN members' capacity for advancing issues that will open up trade and opportunities for U.S. companies and among ASEAN member states in the region. The E-3 Initiative is a new framework for economic cooperation designed to expand trade and investment ties between the United States and ASEAN, creating new business opportunities and jobs in all eleven countries. The E3 Initiative builds upon the U.S.-Asia Pacific Comprehensive Energy Partnership designed to expand energy and environmental cooperation to advance efforts to ensure affordable, secure, and cleaner energy.
To support these efforts, the mission will expose U.S. companies to promising market potentials in Energy and Environmental Technologies markets in Malaysia, Thailand, and the Philippines. Led by a senior Commerce Department official, during the week of September 15, the mission will include representatives from a cross-section of U.S. firms operating in energy and environmental technologies.
Participating in an official U.S. industry delegation, rather than traveling to Malaysia, Thailand, and the Philippines independently, will enhance the companies’ ability to secure meetings with potential customers, partners, and relevant government officials. The delegation will visit Kuala Lumpur, Bangkok, and Manila. Through the Commercial Service office at the Asian Development Bank (CS ADB) in Manila, mission participants will also have the opportunity to schedule meetings with Asian Development Bank officials to explore business opportunities in Malaysia, Thailand, and the Philippines, in addition to the 42 additional ADB developing member countries. At each mission stop, the program will include briefings, networking receptions, and one-on-one business meetings with potential customers, partners and local representatives.
COMMERCIAL SETTING: Malaysia
Malaysia's economy, the third largest in South-East Asia behind Indonesia and Thailand, has grown steadily since recovering from the 1997-98 Asian financial crisis. GDP declined by 1.5 per cent in 2009, due to the global economic crisis, before recovering to 7.2 percent growth in 2010 and 5.1 percent growth in 2011. Economic growth for 2012 was around 4.4 percent with 2013 predicted to also be in the 4.5 percent range. Malaysia has one of the highest living standards in South-East Asia and a very low unemployment rate. Budgetary deficits are slowly increasing due to the need to compensate for weak private investment which is driving public debt. A "New Economic Model" (NEM) intended to promote innovation and to increase production profits, was launched together with the Tenth Malaysia Plan (2011-2015). The objective is to bring the budget deficit to three percent of GDP by 2015 (currently 5.2 percent) and double per capita income by 2020. The oil and gas sector provides almost 40 percent of government revenue.
Bilateral U.S.-Malaysia trade totaled around US $40 billion in 2012, about the same as 2011. China has displaced the United States as Malaysia’s largest trading partner and is a key destination for Malaysian inputs into goods assembled there and then re-exported (often to the United States). The United States is Malaysia’s largest foreign investor.
According to key development indicators, Malaysia is now a high middle-income, export-oriented economy, with per capita GDP (in current prices) of US$10,085 (and $16,900 using PPP per capita) in 2012, life expectancy of 74 years and gross primary school enrolment of 100 per cent of the school-age population. The Tenth Malaysia Plan (2011-2015) - the Malaysian Government's economic blueprint for the next five years - places an emphasis on becoming a high-income nation, inclusiveness and sustainability.
Malaysia is expected to experience a large increase in overall energy demand. Sustainable development of the energy sector, particularly in the industrial, transportation and commercial sectors, contributes to the economic competitiveness of Malaysia and will continue to be a high priority of the Government of Malaysia (GOM). The GOM will continue to encourage development of both fossil and renewable energy resources to cater to the demands of a rapidly growing economy. The main thrust will be to ensure adequate, secure, cost-effective energy, and minimize the negative impact on the environment.
Oil and Gas: The GOM has placed a high priority on expanding oil and gas production, and has enacted tax and other incentives to encourage development of marginal fields, enhance recovery from existing, depleted fields, and expand deepwater offshore production. Oil field services and equipment suppliers are also finding new opportunities in Malaysia. Use of oil products, natural gas and coal are increasing to meet increasing demands in all sectors, particularly manufacturing, service & commercial, and transportation. Electricity’s share of final energy demand is expected to increase from 18 percent in 2009 to 21 percent in 2020. The fuel mix contribution from renewable energy is expected to grow from 8.3 percent in 2012 to over 12 percent by 2020. The demand for oil and gas will likely continue to grow.
Current opportunities include partnerships and supply agreements with larger U.S. companies. Exxon/Mobil produces almost half of Malaysia’s present hydrocarbon output. Triton, Amerada Hess, and Murphy are likely to be joining existing producers Exxon/Mobil and Shell in the next few years as large hydrocarbon producers.
Renewables: Malaysia is also encouraging the development of renewable energy, especially solar, hydro and biomass, and recently implemented a feed-in tariff regime. The government wants to maximize potential gains from increasing energy efficiency, an area with significant potential for U.S. firms. In addition to creating a Sustainable Energy Development Authority, GOM is also emphasizing biofuels and has taken steps to boost development by mandating a feed-in tariff program and the mandatory blending of biofuels for transport sector which was approved by the Malaysian Parliament in 2011.
The government hopes that, by 2015, that environmental friendly energy would satisfy about 5.5 percent or 985MW. Solar energy will play a key role as Malaysia expects to have installed more than 3,000 MW of new renewable of which about one-third (1,250 MW) will be from solar PV by 2015. Additional areas include biomass energy (1,065 MW) satisfying about 11 percent of Malaysia’s estimated energy consumption. The Energy Commission of Malaysia estimated that US$23 billion worth of business could potentially be generated from these projects from now through 2020.
Electricity Generation and Distribution: Foreign investors are permitted to own up to 49 percent of an Independent Power Producer (IPP) or power plant in Malaysia. Tenaga Nasional Berhad (TNB) is a state-owned electricity utility company that has a monopoly on electricity distribution in Malaysia. TNB generates its own electricity and purchases electricity from IPPs with power generation plants located in Malaysia. Peninsular Malaysia is connected to an electricity grid with Singapore and Thailand.
Energy Efficiency: Malaysia has been making strides to improve the energy efficiency of its facilities. The country’s Institute of Architects (PAM) and Association of Consulting Engineers Malaysia (ACEM) has recently developed the Green Building Index, which incorporates recognized practices in designing and constructing environmentally friendly operations in Malaysia. These organizations and others have been advocating for higher energy efficiency and sustainable townships with houses that will be equipped with eco-friendly features such as solar power heating and photovoltaic generators. Tax exemptions on capital expenditure for the development of green technology have been introduced. The Ministry of Green Technology and Water to companies are issuing soft loans for these projects as well.
Sub-Sector Best Prospects
Environmental technologies are becoming a growth sector in Malaysia. However, this sector is still somewhat undeveloped as the environment was not a key priority until the Malaysian Prime Minister’s announcement at the Copenhagen Climate Summit that Malaysia would adopt a voluntary reduction of up to 40 percent in terms of emissions intensity of GDP by 2020.
Malaysia has experienced problems with the discharge of untreated sewage, particularly along the west coast. Malaysia's water pollution problem also extends to its rivers, of which 40 percent are polluted. The nation has 580 cubic kilometers of water with 76 percent used for farming and 13 percent used for industrial activity. Malaysia's cities produce an average of 1.5 million tons of solid waste per year.
Clean-air legislation limiting industrial and automobile emissions was adopted in 1978. However, air pollution from both of these sources is still a problem. In the mid-1990s, Malaysia ranked among 50 nations with the world's highest industrial carbon dioxide emissions, which totaled 70.5 million metric tons per year, a per capita level of 3.74 metric tons per year. Discharge of oil by vessels in Malaysian waters is prohibited. (Source: Encyclopedia of the Nations website)
Considering Malaysia’s recent emphasis on environmental clean-up, potential opportunities exist for U.S. firms with expertise in environmental cleanup, especially areas focused on the cleanup of energy projects such as soil remediation.
Sub-Sector Best Prospects
COMMERCIAL SETTING: Thailand
Thailand is Southeast Asia's second largest economy (behind Indonesia), and the fourth richest nation, according to per capita GDP, after Singapore, Brunei and Malaysia. It also functions as an anchor economy for neighboring developing countries (Laos, Myanmar, and Cambodia). The economy can be described as “newly industrialized,” and heavily export-dependent economy, with exports accounting for more than two thirds of its gross domestic product (GDP).
Thailand recovered well from the global financial crisis with rapid implementation of fiscal stimulus and monetary easing packages, but its economy suffered in the wake of the Japanese tsunami. However, after a strong recovery in 2010, the country suffered the worst floods in the last fifty years in the fall of 2011 which adversely impacted the industrial core of the country's economy and stalled growth. In spite of the impact of the crisis on the country, its unemployment rate has remained low (1.4 percent).
The Thai Government has introduced a number of economic stimulus measures, including raising the minimum wage, buying rice from farmers at a price above market, offering preferential credit to farmers and improving the quality of free healthcare in the provinces. Programs to support businesses and homes affected by flooding and to improve infrastructure for water supply have also been launched. The Central Bank will also lower interest rates to support the economy.
The Thai Government has also announced a series of large-scale infrastructure projects and spending plans to support private consumption and stimulate domestic demand. The policies are designed to launch the Thai economy to a higher level of growth that relies less on exports. However, the additional spending raises the risk of more rapid inflation, which the Bank of Thailand is closely monitoring.
Over the past two decades, energy demand in Thailand has increased continuously at an annual average rate of 4.4 percent, corresponding with the annual economic growth rate of 4.5 percent. The country spends approximately $32 billion on energy imports, which account for 60 percent of total energy consumption. Thailand imports over 80 percent of crude oil from the Middle East whereas the majority of natural gas supply comes from domestic production. Industry (37 percent) and transport (35 percent) are the leading energy-consuming sectors.
Electricity generation in Thailand is highly dependent on natural gas. As electricity demand grows, the Thai economy could become more vulnerable from high gas dependence in its power sector. Between 2007 and 2021, electricity demand is expected to increase at 5.7 percent per year.
To cope with energy security issue and retain the country’s competitiveness, Thailand has launched a 20-year Energy Efficiency Development Plan (EEDP) to reduce energy intensity by 25 percent in 2030 or about 30,000 thousand tons of crude oil equivalent (ktoe). According to the EEDP, renewable energy would account for 25 percent of Thailand’s total energy consumption. The best opportunities for renewable energy in Thailand include biomass, biogas, solar and waste-to-energy. To promote renewable energy, Thailand offers subsidies to energy providers. In addition, the country plans to spend about $13 billion over the next fifteen years to build a smart grid system.
Current projects in Thailand include an upcoming oil and gas exploration bid round, upstream and downstream development, natural gas pipeline construction, and expansion of an existing LNG terminal. The Director General of Thailand’s Department of Mineral Fuels announced a new round of bidding for 22 onshore and offshore exploration licenses, which is expected to be held mid 2013. PTT, the Thai state-owned oil and gas company, has set an aggressive investment plan over the next 20 years, focusing on upstream and downstream sectors, alternative energy and petrochemical industry. PTT is going to construct a 100 km onshore gas transmission pipeline to Nakhon Sawan province in order to serve the increasing demand of domestic energy consumption. PTT also won its bid for two Myanmar onshore oil blocks and the 47 company is proceeding with a $2 billion plan to develop a gas production facility and a 300 km gas pipeline in the Gulf of Martaban. Finally, PTT may expand its Liquefied natural gas (LNG) receiving terminal to cope with the country's growth in natural gas demand.
Sub-Sector Best Prospects
Thailand’s total annual market for environmental technologies is estimated at US$2 billion, with construction and engineering services representing 85% of that market. Water treatment and water resources equipment shared over half of the market. Since the wastewater segment still relies heavily on imported products, U.S. products are well-received by local market. The other half of the market is for solid waste treatment equipment and air pollution control equipment which represent 30 percent and 20 percent, respectively. There are no restrictions on the importation of environmental equipment and tariff rates imposed on equipment range from 0-5 percent.
Sub-Sector Best Prospects
COMMERCIAL SETTING: the Philippines
The Philippine economy is the fifth largest in ASEAN (after Indonesia, Thailand, Malaysia, and Singapore). The economy has recovered from the global financial crisis and last year recorded a GDP growth rate of 6.7 percent, the second highest in Asia.
As a newly industrialized country, the Philippine economy has been transitioning from one based on agriculture to one based more on services and manufacturing. The macroeconomic fundamentals for the Philippine economy remain strong. Inflation and interest rates are low, and the currency is stable and is maintaining strength against the U.S. dollar. Under the Aquino administration, governance has improved with a significant effort to combat corruption in the government ranks.
Overseas Filipinos' remittance income, which accounts for more than 10 percent of the Philippine economy, remains remarkably resilient and continues to support domestic consumption. Business Process Outsourcing, an increasingly important driver of the economy, has grown tremendously in recent years. The Philippines has surpassed India in “voice” call centers. The Government has shown a commitment to economic reform which has the potential to open up other areas for economic cooperation in both trade and investment.
Goldman Sachs estimates that by the year 2050, it will be the 14th largest economy in the world and includes the Philippines in its list of the Next Eleven economies. HSBC projects the Philippine economy to become the 16th largest economy in the world, fifth largest economy in Asia, and the largest economy in the South East Asian region by 2050.
The country’s major trading partners include the United States, Japan, China, Singapore, South Korea, the Netherlands, Hong Kong, Germany, Taiwan, and Thailand. Bilateral trade in 2012 in goods between the U.S. and the Philippines amounted to over $17.6 billion. U.S. exports have risen by 40 percent since 2009.
The Philippines is highly dependent on oil imports to, and is sensitive and vulnerable to world price increases and oil disruptions having no sufficient indigenous fossil energy resources. This has prompted the government to develop a more comprehensive energy management policy toward the more judicious and efficient utilization of energy across sectors. The public would like to see a dynamic government action plan that will address the high prices of energy, the development of non-polluting energy resources (renewable energy), and potentially nuclear energy.
The Philippine Government seeks to ensure "Energy Access for More," an effort to expand reliable and affordable access to energy to the larger populace. The new Aquino Government has outlined the following three (3) major pillars as its overall guidepost and direction for the energy sector:
(a) Ensure energy security;
(b) Achieve optimal energy pricing; and,
(c) Develop a sustainable energy plan.
The programs that will lead to the attainment of the pillars have been phased into medium- (2011-2013) and long-term (2013-2016) timelines. The implementation of the Electric Power Industry Reform Act (EPIRA- Republic Act No. 9136), which provides a framework for the restructuring of the electric power industry, has gained momentum, as noted by recent successes in privatization of assets previously owned by the National Power Corporation (NPC). This restructuring scheme seeks to ensure quality, reliable, secure and affordable electric power supply, encourage the free and fair competition, enhance the inflow of private capital, and broaden the ownership base of power generation, transmission and distribution.
Meanwhile, demand for power infrastructure continues to surge, and that will require additional capacity in the main grid areas (i.e., Luzon, Visayas, and Mindanao). Older power plants are being retired or decommissioned. According to the Philippine Department of Energy’s (DOE) Philippine Energy Plan (2009 – 2030), demand for electricity will grow annually at an average of 4-7 percent. The expected increase in energy use is fueled by increased economic activity, notably in the, business process outsourcing, transportation, and building and construction industries (chiefly in the public infrastructure, commercial and residential segments).
Sub-Sector Best Prospects
Most of the imported electrical power systems are supplied by China, Japan, Taiwan and Singapore. Industry insiders note increasing demand for various electrical power systems and related products and technology, which include:
The Philippine market for water resource equipment and services is expected to grow by at least five percent yearly in view of the current impending projects that address increasing water scarcity, and sanitation and wastewater-related problems. The country’s water supply requirement is escalating.
The Philippines has a population of over 90 million, growing at an average annual rate of two percent. Approximately 20-50 percent of the population does not have access to safe drinking water. Sixteen national rivers and lakes are already biologically dead and only one-third of river systems are suitable as water supply sources. Depletion of groundwater resources has been an increasing problem in some areas of the country.
Wastewater management is also a major concern as indiscriminate discharging of untreated wastewater over the years, particularly from domestic sources, has caused major pollution problems, especially in extremely urbanized areas. The Philippines is highly dependent on imported water and wastewater treatment products and services. Japan, the United States, and Singapore are the major sources of water and wastewater treatment products and equipment of the Philippines.
Government entities fund its water-related projects through a mixture of national/local government budgets and foreign (governments, multilateral and bilateral agencies) loans/grants. Water districts use internally-generated funds, loans and grants. Private entities finance water and wastewater treatment projects through internal funds or loans.
Current opportunities include the expansion and improvement of water and sewerage services. The Government sponsored New Water Supply Source Project, will augment the supply of potable water in Metro Manila. Costing about US$581 million, this project involves the construction of a dam, water treatment plant, and associated main pipeline.
Sub-Sector Best Prospects
Asian Development Bank
The Asian Development Bank (ADB) and World Bank are among the financial agencies that support water projects in the Philippines. Sustainable development is at the heart of the Asian Development Bank’s core mission. Consistent with the bank’s energy policy, ADB programs, projects and policies support investments in energy efficiency, clean energy and environmental sustainability.
ADB’s investment target for clean energy is $2 billion yearly targeted towards helping its developing member countries reduce their dependence on imported energy sources, and develop indigenous renewable energy resources such as solar, hydropower or geothermal. In the Philippines, $336 million in projects for energy efficient vehicles, climate change mitigation through energy efficiency and clean energy, wind farm projects in Luzon, and a renewable energy project for a rural community in Mindanao are already in various stages of implementation. ADB’s lending to Thailand and Malaysia are limited, given that these countries are graduating into developed country status. However, public sector projects for energy efficient municipalities in Thailand and a power transmission project in Sarawak, Malaysia $110 million) are planned. Both countries can also continue to access funding from ADB’s Private Sector Department.
For the environment sector, ADB’s current portfolio through 2014 is at $7 billion. This includes $190 million in water supply and sanitation and solid waste management projects in the Philippines.
Other Products and Services
The foregoing analysis of infrastructure export opportunities in Malaysia, Thailand and the Philippines is not intended to be exhaustive, but illustrative of the many opportunities available to U.S. businesses. Applications from companies selling products or services within the scope of this mission, but not specifically identified, will be considered and evaluated by the U.S. Department of Commerce. Companies whose products or services do not fit the scope of the mission may contact their local U.S. Export Assistance Center (USEAC) to learn about other business development missions and services that may provide more targeted export opportunities. Companies may call 1-800-872-8723, or go to http://help.export.gov/ to obtain such information. This information also may be found on the website: http://www.export.gov.
The mission will expose U.S. companies to growing markets in Malaysia, Thailand, and the Philippines, and provide them an opportunity to supply products and services to energy efficiency and environmental products and services in these markets. The mission will help U.S. companies obtain actionable market intelligence, establish business and government contacts, solidify business strategies, and/or advance specific projects.
The mission’s goals include:
● Facilitating first-hand market exposure and access to U.S. and host country government decision makers.
● Helping companies gain valuable international business experience and market intelligence in the energy efficiency and environmental technologies sectors in Malaysia, Thailand, the Philippines, and other Asian Development Bank member countries;
● Arranging high-quality, targeted one-on-one business-to-business (B2B) matchmaking appointments;
● Providing access to key local and American private-sector industry contacts, including potential trading partners; and
● Helping U.S. companies strengthen their engagement in these growing ASEAN markets, leading to increased exports and, in turn, job creation.
Participants will attend country briefings, seminars, one-on-one business meetings and networking receptions. The precise agenda will depend upon the availability of local government and private sector officials, as well as on the specific goals and makeup of the mission participants. The U.S Commercial Service and its partners in Malaysia, Thailand, the Philippines and the Asian Development Bank (ADB) stand by to assist the Trade Mission participants.
September 15, 2013
September 16, 2013
September 17, 2013
September 18, 2013
September 19, 2013
September 20, 2013
September 21, 2013
All parties interested in participating in the trade mission must complete and submit an application package for consideration by the Department of Commerce. All applicants will be evaluated, on a rolling basis, on their ability to meet certain conditions and best satisfy the selection criteria as outlined below. A minimum of 10 and maximum of 20 companies will be selected to participate in the mission from the applicant pool.
FEES AND EXPENSES
After a company or organization has been selected to participate on the mission, a payment to the Department of Commerce in the form of a participation fee is required. The participation fee for the Trade Mission is $4,023 for a small or medium-sized firm (SME), and $5,210 for large firms. The fee for each additional firm representative (large firm or SME/trade organization) $1,500. Expenses for travel, lodging, meals, and incidentals will be the responsibility of each mission participant. Delegation members will be able to take advantage of U.S. Embassy rates for hotel rooms.
The mission fee does not include any personal travel expenses such as lodging, most meals, local ground transportation, except as stated in the proposed timetable, and air transportation from the U.S. to the mission sites and return to the United States. Business visas may be required. Government fees and processing expenses to obtain such visas are also not included in the mission costs. However, the U.S. Department of Commerce will provide instructions to each participant on the procedures required to obtain necessary business visas.
CONDITIONS OF PARTICIPATION
Targeted mission participants are U.S. companies actively engaged in the energy efficiency, clean energy, and environmental sectors. Primary emphasis will be placed on export-ready companies that are seeking to do business actively in these markets for the first time.
Certification of products and/or services being manufactured or produced in the United States or if manufactured/produced outside of the United States, the product/service is marketed under the name of a U.S. firm and have U.S. content representing at least 51 percent of the value of the finished good or service.
The following criteria will be evaluated in selecting participants:
● Relevance of the company’s business to the mission goals;
● Market potential for business in the Malaysia, Thailand, Philippines, and ADB markets;
● Provision of adequate information on the company’s products and/or services, and communication of the company’s primary objectives;
● Timeliness of the company’s completed application and participation agreement signed by a company officer;
Diversity of company size and location may also be considered during the review process.
Referrals from political organizations and any documents containing references to partisan political activities (including political contributions) will be removed from an applicant’s submission and not considered during the selection process.
TIMELINE FOR RECRUITMENT AND APPLICATIONS
Mission recruitment will be conducted in an open and public manner, including publication in the Federal Register, posting on the Commerce Department trade mission calendar (http://export.gov/trademissions) and other Internet web sites, press releases to general and trade media, direct mail, notices by industry trade associations and other multiplier groups, and publicity at industry meetings, symposia, conferences, and trade shows. Recruitment for the mission will begin immediately and conclude no later than July 26, 2013. The U.S. Department of Commerce will review applications and make selection decisions on a rolling basis beginning March 12, 2013. Applications received after July 26, 2013 will be considered only if space and scheduling constraints permit.
Michael McGee, Senior Commercial Officer
CS Washington DC:
David McCormack, International Trade Specialist
 An SME is defined as a firm with 500 or fewer employees or that otherwise qualifies as a small business under SBA regulations (see http://www.sba.gov/services/contracting opportunities/sizestandardstopics/index.html). Parent companies, affiliates, and subsidiaries will be considered when determining business size. The dual pricing reflects the Commercial Service’s user fee schedule that became effective May 1, 2008 (see http://www.export.gov/newsletter/march2008/initiatives.html for additional information).