US-AEP COUNTRY ASSESSMENT:
Malaysia

ACRONYMS

  1. ASEAN: Association of Southeast Asian Nations
  2. DOE: Department of the Environment
  3. EIA: Environmental impact assessment
  4. EQA: Environmental Quality Act
  5. GDP: Gross domestic product
  6. ISO: International Organization for Standardization
  7. MICCI: Malaysian International Chamber of Commerce and Industry
  8. MIDA: Malaysian Industrial Development Authority
  9. MITI: Ministry of International Trade and Industry
  10. MOSTE: Ministry of Science, Technology, and Environment
  11. NGO: Nongovernmental organization
  12. SIRIM: Standards and Industrial Research Institute of Malaysia
  13. US-AEP: United States-Asia Environmental Partnership

 

1. ECONOMIC PROFILE

Demographic Conditions and Trends

Malaysia's current population of 19,723,587 is concentrated on Peninsular Malaysia, which has approximately 15 million inhabitants. Fifty-four percent of all Malaysians live in urban areas; population density is approximately 56 persons per square kilometer.1 Malay and indigenous populations (Bumiputra) make up 59 percent of the population; ethnic Chinese and Indian minorities account for 32 percent and 9 percent respectively.2

Economic Conditions and Trends

After more than a decade of promoting public sector growth (1970 into the early 1980s), Malaysia began to push privatization; rapid growth caused the per capita gross national product to rise from $2,424* in 1990 to $4,698 today.3 Malaysia is ranked fourth in competitiveness among countries that do not belong to the Organisation of Economic Cooperation and Development and seventeenth in the world, ahead of Taiwan. The Association of Southeast Asian Nations (ASEAN) is its largest partner, of which Singapore is by far the largest.4 Malaysia primarily exports to Singapore (21 percent) and the United States (21 percent), followed by Japan (12 percent); Malaysia primarily imports from Japan (27 percent), followed by the United States (17 percent) and Singapore (14 percent). Malaysia's highest export growth has been in textiles, followed by electronics (25 percent and 21 percent respectively); electronics dominates manufacturing in output, export earnings, employment, and investment.5

Malaysia has been a phenomenal economic development success story.6 In 1994, its eighth year of growth in gross domestic product (GDP) of more than 8 percent,7 the nation was the fastest growing economy in Asia after China. During the past twenty years, the country has moved steadily from having an economy based on agriculture and commodities to one based on manufacturing. It quickly diversified into resource processing, high technology, and export industries with the active participation of the private and public sectors.8 Malaysia's major industries are rubber and palm oil processing, manufacturing and light manufacturing, electronics, tin mining and smelting, logging and processing of timber, and petroleum production and refining. Malaysia's trade with ASEAN countries shifted from mineral fuel exports in the early 1990s to machinery and transport equipment. Imports from the European Union have increased.9

Malaysia's economic growth has put an enormous strain on its basic infrastructure. In 1991 Prime Minister Mahatir implemented Vision 2020, a thirty-year plan to make Malaysia a fully developed country.10 Vision 2020's ambitious goals have created fears about Malaysia's ability to maintain high-growth levels in the long term. Ultimately, the problem is rapid economic growth itself. The government projected at least 8 percent growth for 1996,11 but, within the last two years, Malaysia has experienced growing labor shortages that may, among other causes, affect future growth.12 Malaysia recognizes that it is no longer in a competitive location for labor-intense industries.13

2. ENVIRONMENTAL PROFILE

Industrial and Environmental Development Background

Malaysia's economic growth has evolved through roughly four stages during the last four decades: in the 1960s, import substitution; in the 1970s, an export push; in the 1980s, resource development and trade; and, in the 1990s, high technology and creative innovation.14 Growth of manufacturing tells Malaysia's economic story dramatically. In 1996 manufacturing will make up much more than one-third of GDP, a 60 percent increase in only ten years. Although the economy grew at 8.7 percent for 1994 overall, the industrial production growth rate was 12 percent. Agriculture now accounts for only 16 percent of GDP. Manufactured goods make up roughly 55 percent of Malaysian exports. For the most part, investment in manufacturing has come from private sources.

To keep pace with growth, the government has initiated an aggressive campaign to privatize many government functions. A Seventh Malaysia Five-Year Plan (1996_2000)15 continues the government's major privatization initiatives in public sector areas, including energy, transportation, and communications. The new economic plan is reported to recommend support for seven key high-tech industries, including aerospace, biotechnology, and electronics.16

Environmental Conditions

Although Malaysia has its share of environmental problems from mining and timbering,17 industrial pollution receives increasing attention. Rising levels of air pollution from increases in total suspended particulates are one problem18; overall deterioration of river water quality is another.19 Although sewage and animal wastes are the largest contributors of organic water pollution,20 the Government of Malaysia estimates the following breakdown of industrial polluters: food processing (40 percent), rubber and palm oil industries (35 percent), industrial chemicals and electronics (12 percent), and textiles (9 percent). The major industrial sources of water pollution are concentrated on the west coast of Peninsular Malaysia, with nearly 50 percent of the major sources found in the states of Selangor, Johor, and Penang.21

Environmental Trends and Issues

Malaysia's major environmental problems have grown as well. Those that are most critical are:

� Vehicular and industrial air pollution

� Water pollution discharges into Malaysia's rivers and coastal areas

� Hazardous waste, including toxic discharges of all types

� Deforestation.

Trends in manufacturing in Malaysia strongly suggest that hazardous waste will become the principal industrial pollution problem in coming years.22

Conservative estimates of Malaysia's environmental goods and services market totaled $610 million for 1994. Of this, water treatment and supply equaled roughly one-third of the total, followed by wastewater treatment (municipal and industrial) at 25 percent and environmental services at 25 percent; solid waste management at 6 percent; hazardous waste management at 7 percent; monitoring and analytical equipment at 3 percent; and air pollution at 1 percent.23

3. GOVERNMENT

Since independence in 1957, Malaysia has been a model developing country; political stability has been a key asset. Malaysia has worked ceaselessly toward economic development24 and social integration.25 Environmental factors became part of government policy with the Environmental Quality Act of 1974, but significant environmental regulatory and management changes only occurred by the mid-1980s. Today, however, environment is recognized as a key factor in attracting industry as well as providing for its citizens.26

As a federal system, the government has jurisdiction over most business issues, but land and water matters,27 which relate to local government, come under the constitutional list of state functions.28 Federal ministries exercise the significant policy, budgetary, and regulatory powers, but devolution of environmental authorities for enforcemnt and management of environmental laws to the states is proceeding.29

Key Ministries

The Department of Environment (DOE) in the Ministry of Science, Technology, and Environment (MOSTE) is primarily responsible for standard setting, monitoring, and, with the states, enforcing pollution regulations. Air pollution is one of DOE's major concerns; river, coastal, and marine water quality is next, although DOE's jurisdiction over these matters is limited in the federal-state system. The government takes samples from selected rivers to monitor heavy metal contaminants, including arsenic, cadmium, mercury, and lead. MOSTE also supervises the environmental impact assessment (EIA) process, which is required for listed projects and is receiving increasing emphasis.30 Because DOE's staff numbers 572, of whom 200 are inspectors,31 business does not perceive DOE regulations and enforcement to be strong.32 But DOE has an improving record of enforcement33 as well as industry compliance,34 although DOE must rely increasingly on strong state cooperation and competence.35 Cooperation between industrial associations and government in environmental matters has generally been effective; it helped, for example, to reduce pollution from the rubber and palm oil industries beginning in the mid-1980s.36

The Standards and Industrial Research Institute of Malaysia (SIRIM), which was recently privatized, has operated under MOSTE. It is the Malaysian parastatal institution for the ASEAN Consultative Council on Standards and Quality and the office charged with ISO (International Organization for Standardization) 9000 certification.37 Soon, SIRIM will be the certification body for ISO 14000 as well. To prepare for this role, it has more than thirty companies on a pilot scheme for ISO 14000 certification and has been doing auditing since December 1995.38 A SIRIM program on small- and medium-sized enterprises is funded by Denmark concerning clean technology for the electroplating, food, and textile industries.39 A problem for SIRIM is that multinational corporations that come to establish a clean plant may subcontract the dirty parts of their operations, for example, for electroplating, to small- and medium-sized enterprises. SIRIM plans to identify these problems and look into subcontractor arrangements and ways that multinational corporations can influence their subcontractors under ISO 14000 standards through contractual measures.

The Ministry of International Trade and Industry (MITI) plays the key role in industrial development and international trade for Malaysia; it operates throughout the country and has offices in eleven countries, including the United States. Among MITI's duties is preparation of an extensive annual report40 and its industrial master plan (see section 4 on policies and laws). Small- and medium-sized enterprises, of which 25,000 are registered,41 are major subcontractors to multinational corporations and are of particular interest to MITI in its effort to reduce the materials that multinational corporations must now import. Currently, small- and medium-sized enterprises rely largely on technology from abroad; the smallest depend on Japan, Taiwan, and China.42 MITI's Industrial Technology Assistance Fund is available for small- and medium-sized enterprises with revenues of less than $1 million a year to obtain funds for ISO 9000 certification,43 but the fund is not as yet available for ISO 14000 certification.

MITI recognizes environment as a major policy concern and pollution minimization as an economic as well as environmental benefit. The ministry is telling industry that pollution will cost them and that, if exports are to grow, they must adopt ISO 14000. MITI expects SIRIM to lead this effort. The ministry is also anxious to have the integrated hazardous waste facility completed quickly, because these wastes are increasing and on-site storage and lack of a treatment facility could be a barrier to industry. MITI offers special tax allowances for pollution control for all industries seeking to establish waste treatment facilities, but few have taken advantage of the offer. As a signatory to the Montreal Protocol on Ozone-Depleting Substances, MITI encourages Malaysia's active program to pursue chlorofluorocarbon substitutes and phase out ozone-depleting substances by 2000, ten years before it is required.44

The Malaysian Industrial Development Authority (MIDA) is a key agency within MITI that is responsible for promoting and coordinating industrial development. It has fifteen overseas offices, including three in the United States. Under the Promotion of Investments Act (1986), MIDA gives tax holidays and allowances to encourage proper storage, treatment, and disposal of hazardous waste.45 MIDA also extends import duty and sales tax exemptions for machinery, equipment, raw materials, and components for the storage, treatment, and disposal of hazardous waste.46 Interaction between DOE and MIDA is also effective and backed by EIA requirements and DOE certification, as illustrated by the active engagement of a senior DOE official in MIDA's offices.47

Other Institutions

Research and development agencies. The government has placed considerable emphasis on improving Malaysia's research and development capacity.48 Research is conducted by the Malaysian Institute of Microelectronic Systems, Malaysian Agriculture Research and Development Institute, SIRIM (see above), Palm Oil Research and Development Board, and Forestry Research Institute of Malaysia. The government lists key sectors for research as agriculture, industry, medical, strategic, and social science. In agriculture, the focus is on land use research, postharvest management, and environmental research (including afforestation and agricultural waste management). In industry, efforts related to the environment include microbial metal recovery from industrial and agricultural waste. Medical research activities include toxicology issues.

4. POLICIES AND LAWS

Environmental Policies and Laws

Malaysia's environmental regime was established under the Environmental Quality Act (EQA) of 1974, which contains enabling provisions for air, noise, and water pollution; degradation of land; and oil pollution.49 Fifteen regulations have been enacted under EQA, the latest intended to address growing environmental threats from hazardous waste.50 Several amendments proposed for EQA were implemented in 1995 to empower enforcement activities, including an increase in prison terms and fines, stricter emission standards, auditing requirements, and power to close down polluting factories.51 The government also recently completed guidelines for the management and disposal of petroleum wastes, zoning and site regulations, and burning of timber. DOE continues to seek ways to improve its monitoring of compliance with its ambient air and water quality and effluent and emissions control standards.52

Malaysia's Parliament passed important new amendments to EQA in June 1996. They establish substantially higher penalties for pollution violations, authorize DOE to order polluting firms to engage a third party to conduct environmental audits, allow DOE to close plants if they appear to cause risks to public health, and authorize DOE to collect a tax from industries for waste they generate for an environmental fund for research, conservation, and pollution prevention.53 The Environmental Quality Council formed under EQA is the body responsible for recommending environmental policy for legislation. The council includes members of the federal and state governments, academia, the private sector, and nongovernmental organizations (NGOs). As a regular monitor and influence on the environmental management regime, however, the council is not highly effective.54

EIAs have become a key part of Malaysia's efforts to prevent or minimize pollution and other environmental costs before projects are approved. Malaysia requires EIAs for more than thirty-five different activities, including energy, transportation, infrastructure, agro-industries, waste treatment, and disposal projects.55 The number of EIA reports submitted to DOE56 has increased every year, whereas the average time for review has steadily decreased.57 Illustrating the procedural if not substantive importance of EIAs, a recent decision by Malaysia's Supreme Court held up approval of the controversial Bakun Dam, pending compliance with EIA requirements by the federal, not simply the state, government.58

Although the environmental regime has become increasingly strong, continued progress with command and control approaches entails several problems. The most immediate is the government's devolution policy. Serious enforcement of environmental regulations will require substantially increased training of staff at the state and local levels.59

The command and control approach also raises budgetary concerns. Although the government reported a modest budget increase for DOE from 1994 to 1995 of 12 percent,60 interest in more cost-effective techniques is strong.

Industrial Policies and Laws

Malaysia's integration of environment and clean technology into industrial economic development policies is progressing but at an early stage. The pursuit of a clean technology policy and environmentally linked economic policy has not yet shaped MITI's policy and programs; MITI reflects concern about environment far more as a problem than an economic and social opportunity. MITI's industrial master plan for 1996_2005, soon to be completed, has several elements that might but do not yet incorporate clean technology policy approaches. First, the plan promotes value-added knowledge and technology-intensive industries within the manufacturing sector; industrial strategy will promote specific competitive and efficient industries. Second, given high employment and a serious shortage of technically skilled labor, MITI emphasizes the need to increase these skills.61 Third, MITI is promoting the development of what are called "growth triangles" with: Indonesia, Malaysia, and Thailand; Indonesia, Malaysia, and Singapore; and Indonesia, Malaysia, and the Philippines. Each set of three countries is seeking to foster growth in locations subject to industrial development plans in which joint ventures will foster trinational goals and industry can have access to local labor. Fourth, the Action Plan for Industrial Technology Development identifies six priority technologies for development62 to overcome the lack of indigenous technology capabilities and reliance on multinational corporations, the slow rate of technology transfer to Malaysia, and its low research and development investment to date.63

Recently, Malaysia has implemented a number of market-based incentives, including fees, tax reductions, and deposit-refund systems.64 An intergovernmental committee on economic instruments, established in 1996, is working with the assistance of a foreign consultant to examine ways to apply market-based instruments based on the experiences of other countries; a program for implementation is anticipated in late 1996.65

Public Information Policies and Laws

Malaysia follows its British heritage in maintaining laws and policies that restrict the free flow of government-held information. Although some efforts have been made to establish an American-style Freedom of Information Act, the Official Secrets Act of 1972 and other laws restrict information66; however, detailed EIAs, of which some ten to twenty are prepared each year, involve an extensive dialogue during preparation with representatives of affected communities, among others. The committee that reviews detailed EIAs also includes representatives of NGOs. Detailed as well as the more numerous (200 or more per year) preliminary EIAs are available to the public.67 All are submitted to agencies for a maximum two-week review.

5. URBAN ENVIRONMENT AND INFRASTRUCTURE

Malaysia's privatization program is one of the most ambitious and successful in the world and results from calculated government policies to (a) reduce financial and administrative costs to government, (b) increase competition, efficiency, and productivity, (c) accelerate economic growth, and (d) reduce the size of the public sector. Privatization has concentrated on roads, electric power, water, wastewater, solid and hazardous waste, seaports, and rail. Although the process has been successful for implementing privatization projects quickly, some have criticized the procurement system for favoring large and politically connected companies. The government does not encourage open competition; it prefers to judge privatization awards based on the economic viability of the project and usually "invites" short lists of companies or consortia to present detailed project proposals.

Water

The privatization of drinking water began in 1989; total then for this sector reach $1.3 billion. On water matters, state authorities continue to take precedence over the centralized government. Individual contracts for build-own-transfer water supply and treatment facilities have been awarded in most states; most of the concessions have gone to French and British firms.

Wastewater

Between 1974 and 1988, a number of different master plans were developed for wastewater services. Progress was stalled by inadequate financing or lack of skilled manpower, including plant operators and managers. In 1993, however, the Sewerage Services Act was passed, allowing the federal government to assume responsibility for sewerage systems and services, licensing charges, and regulation for the whole country. That same year, a 28-year, $2.25 billion concession for a national sewerage system was awarded to Indah Water Konsortium, a British-Malaysian joint venture.68 This project is Malaysia's costliest contract awarded to date (although the Bakun dam will be costlier) and will be the world's largest single sewerage project.69

Solid Waste

The National Solid Waste Management Plan divides the country into four zones or regions and includes privatization of comprehensive services, including storage, collection transfer stations, recycling facilities, green waste composting, waste to energy, and sanitary landfills. Types of waste handled will include residential, commercial, institutional, and some industrial. Four joint ventures have been short-listed out of the original forty groups who bid for the project.70

Hazardous Waste Management

Of all environmental projects to date, the $150 million National Toxic Waste Treatment and Disposal Center�Malaysia's first integrated hazardous waste management plant to be built at Bukit Manans near Port Dickson�has had the most difficulty. Physical work on the project finally began in July 1995.71

6. PRIVATE SECTOR AND ACADEMIA

Industry/Trade Associations

Private sector constituencies are well established for all of Malaysia's major industries, which are represented by a number of trade associations. The most active are fully aware of or in varying degrees engaged in environmental management improvement or clean technology application efforts; they work closely with government agencies, including DOE.72 Environmental management awareness and action within the industrial sector is led by the large companies.73 Driving the responses of large companies are several factors: (a) rising standards for clean air that are even higher than in the West, (b) concern for corporate image by managers both as a matter of policy and responding to media attention on polluters and the fear of adverse publicity, and (c) rising tariff rates for electric power that have increased substantially and are expected to increase more.74 Enforcement has not been as significant a motivator for large companies, whereas below-market-price water consumption rates (M$1.3* per cubic meter) are no incentive for water or wastewater reduction.75

The Malaysian International Chamber of Commerce and Industry (MICCI), now 59 years old and located in Kuala Lumpur has branches in four other cities, is a member of the National Chamber of Commerce and Industry of Malaysia, and has close links with the Singapore Chamber of Commerce. Its large corporate members are interested in ISO 14000, motivated in part by concerns that, if they are not serious about it and competition is, they will be left behind. On the other hand, members recognize that government support of ISO 14000 can help keep competitors from taking advantage of environmental noncompliance. MICCI has initiated an active ISO 14000 program for chief executive officers and managers in conjunction with the upcoming requirement for environmental audits.76 Informal agreements among competitors on supplier requirements are seen as useful, although they have not yet developed. Some initiatives have occurred, however, such as a paper recycling agreement among members. Responsible care is incorporated in Malaysia; thirty companies have signed up to embrace a code of conduct for MICCI membership. Some multinational corporation members are looking forward to upcoming occupational safety and health standards (ISO 2000), on which a workshop has been scheduled in the fall of 1996.77 Among the key industrial associations concerned with environmental management are the following78:

The Federation of Malaysian Manufacturers has many more than a thousand members, of whom half are small- and medium-sized enterprises and most are locally based. The federation's environmental program is not active but does have large multinational corporations such as Nestle and Motorola. They, like other multinational corporations, subcontract with small- and medium-sized enterprises as suppliers and have active programs for environmental improvement.79

The Business Council for Sustainable Development has seventy corporate members, including large multinational corporations, and was established in 1992 as an NGO. Small- and medium-sized enterprises are welcome to join, but they have not been highly responsive. The council is a member of the Environmental Quality Council. Members are BP, Shell, Guthries, Nestle, and other multinational corporations. The council is not affiliated with the World Business Council for Sustainable Development, because fees are expensive and its goals are not necessarily Malaysian oriented. Malaysia's concerns are with ISO 14000 and how to counter its costs and be competitive. The Business Council for Sustainable Development is interested in clean technology that enhances competitiveness and efficiency and in the effective use of EIAs. It is engaged in developing environmental management awards for multinational corporations and small- and medium-sized enterprises.80

The Malaysian Industrial Group on High Technology, whose creation was sparked by the Malaysian Business Council headed by the prime minister, is a high-level policy group representing large industries (now open to multinational corporations) and government (including the Economic Planning Unit, MITI, and DOE). The group, whose patron is the prime minister's science advisor, has not yet become active in the environmental arena, but its actions in framing government telecommunications and policy and tax incentives have led to government action. The group's task force on reuse and recycling may lead to action.81

Other associations represent specific industry sectors, including the Malaysia Iron and Steel Industry Federation, which is active in environmental matters,82 and those concerned with electronics, textiles, and other key manufacturing interests.83

Private Research/Academic Institutions

Environmental Management & Research Association of Malaysia is a national environmental research and management association dedicated to protecting and improving environmental quality. It includes engineers, scientists, managers, and members of the public to (a) identify environmental problems, (b) mobilize professional opinion, (c) hold technical and scientific meetings and exhibitions, (d) identify areas of research, and (e) assist in technology transfer.

The Institute of Strategic and International Studies is the secretariat to the Malaysian Business Council, which represents NGOs, large businesses, and labor and is headed by the prime minister. The institute was involved in preparing the Industrial Technology Action Plan of MITI that on completion in 1990 did not include energy and environment, both topics to be included in the next plan. It has worked with DOE on environmental policy development and encouraged public participation in the policy development process.84

The Institute for Environment and Development, known as LESTARI, which means sustainable development, was established in 1994 by the Ministry of Education as a research institute. It focuses on urban environment and natural resource, land use, and community issues, but its director is engaged with environment, industry, and trade as well. As a new entity located at a suburban campus of the University of Malaysia with multidisciplinary support from various departments, it intends in the near term to focus on sustainable development research more than policy analysis; state governments have applied to it for assistance.85

Academic institutions. Malaysia has a well-established higher education system. The University of Malaya (1962), the University of Science (Sains) Malaysia (1969), Universiti Kebangsaan Malaysia (1970), and the University of Technology Malaysia (1972) are the largest and oldest of the thirteen major academic institutions.86

Banking institutions. Malaysia's banking system is dynamic and highly developed. It is comprised of the Bank Negara (the Central Bank), commercial banks, merchant banks, finance companies, the National Savings Bank, the Islamic Bank, development finance institutions, and other financial intermediaries such as unit trusts and the provident fund.87 U.S. banks currently operating in Malaysia are Citibank, Chase Manhattan Bank, Bank of America, and Security Pacific Bank. A growing number of private infrastructure projects are being financed exclusively by Malaysian banks. In addition, Malaysian banks are aggressively seeking regional investment opportunities.88

Key insurance institutions. Foreign direct insurers cannot establish branches or subsidiaries in Malaysia. Moreover, no new insurance companies are being licensed. Equity participation by foreign companies in existing insurance companies is limited to a minority share, normally 30 percent, although Bank Negara sometimes grants exceptions.89

7. ENVIRONMENTAL AWARENESS AND PUBLIC INVOLVEMENT

General Public Awareness

The development of Malaysia's middle class has led to vastly increased public concern for the environment. Press and other media coverage has been increasingly active and thorough on controversial issues, to which the government has responded. The Seventh Malaysian Five-Year Plan emphasizes environmental awareness as a high priority; DOE is increasingly engaged in environmental education and awareness and includes education and awareness activities in yearly planning. Environmental education is required in Malaysian public schools.90

Nongovernmental Organizations

Leading environmental NGOs are primarily engaged in "green" issues. They include Sahabat Alam Malaysia, Friends of the Earth-Malaysia, the Environmental Protection Society of Malaysia (whose president currently sits on DOE's Environmental Quality Council), and the Consumers' Association of Penang, an environmental consumer advocacy group that educates the public about environmental issues through its nationally circulated publication Utusan Konsumer. The Consumers' Association of Penang also responds to environmental complaints on behalf of community members through its legal center.91

Media/News Organizations

Both the media and environmental NGOs are active participants in environmental awareness activities and policy debates. For example, the New Straits Times has reported on a number of sensitive issues critical of government enforcement activities.92

8. U.S. GOVERNMENT ACTIVITIES

United States Agency for International Development. The agency undertakes no activities in Malaysia.

United States-Asia Environmental Partnership (US-AEP). US-AEP has had an active partnership program in Malaysia. U.S.-Malaysian engagement in the environmental goods and services business has also been active.

9. OTHER BILATERAL AND MULTILATERAL ORGANIZATION ACTIVITIES

Prime Minister Mahatir pursues strong relations with other Islamic countries and Malaysia's Asian neighbors, promoting a "Look East" policy, which envisions Japan and South Korea as models for economic development. In addition to strong relations with other Muslim nations, Malaysia maintains strong business and government ties to the United Kingdom and the European Union generally.

ASEAN & Asia-Pacific Economic Cooperation. Malaysia is a founding member of ASEAN, established in 1967, and is active in ASEAN affairs including as chair of the ASEAN Institute of Forest Management. Malaysia has been a less active member of the Asia-Pacific Economic Cooperation.

World Bank. No activities have been conducted recently in Malaysia by the World Bank.

Asian Development Bank. In addition to support for infrastructure development and land use planning, the Asian Development Bank has supported EIA guidelines for specific types of development.

United Nations. The United Nations Development Programme has also supported EIA guideline development in Malaysia.

The Japanese International Cooperation Agency reports that yen loans financed 50 percent of the costs of constructing Malaysia's power generation capacity, 19 percent of highway costs, 43 percent of new railway costs, and 16 percent of cargo-handling facilities. Unlike Thailand, the Japanese International Cooperation Agency did not report financing numbers for telecommunications, waterworks, irrigation, or industrial parks, implying that they are not financially active in these sectors.93

European donors. The Danish and German governments have been active in a variety of clean technology projects, including support for SIRIM's clean technology and ISO 14000 programs.

10. OPPORTUNITIES TO SUPPORT CLEAN PRODUCTION AND ENVIRONMENTAL MANAGEMENT

Malaysia has entered a key stage in its development; it sees critical needs for incorporating environment into its industrial development program but is increasingly concerned about the costs. It aspires to the high technology, value-added industrial development of Singapore but has not adopted the strong regulatory and incentive systems Singapore has applied to achieve "clean and green" results. Demands for devolution have also complicated Malaysia's pursuit of that approach. But conditions are highly favorable in Malaysia for a policy shift to integrate environment and development.

Policy Framework

Interest in new environmental management techniques. Malaysian government, business, and academic leaders are intellectually and politically open and anxious to learn about new approaches to environmental management that come from any quarter, but they are particularly interested in engaging in regional workshops, seminars, and other activities that can draw on East Asian and Southeast Asian country experiences with market-based incentives, environmental funds for financing environmental management, and development and application of information on economic valuation of environmental costs and benefits.

Environmental information gathering and sharing. Growing public and media attention on environment in Malaysia offers opportunities to effect change by engaging nongovernmental opinion leaders in opportunities for cleaner production and better environmental management that new information and technology offer. Although business reporting and government sharing of environmental information has been hampered by legal restrictions in Malaysia, interest in more government and business accountability for environmental management is growing. With its new legislation requiring businesses to conduct environmental audits, opportunities have increased for better ways to measure and disclose information on industrial environmental performance. The government is also placing steady pressure on improving the quality of EIAs, whereas interest in toxic release inventories is also evident.

Industrial Environmental Management

Industrial estate location, design, and management. Industrial estates number 165 and occupy 16,000 hectares; industrial growth is projected at an additional 25,490 hectares by 2000, of which 11,000 hectares are to be developed under the Seventh Malaysia Five-Year Plan.94 Interest in technology parks by MITI is keen; several are under construction. Required EIAs can help in planning these industrial areas by focusing on clean technology opportunities, appropriate industrial combinations for cost-effective waste management, programs for toxic release inventories, and risk management approaches.

Environmental Infrastructure

Malaysia's privatization efforts provide for a government corporation to generate its own revenue. Privatization has occurred in the electricity, telecommunications, railways, and postal service sectors. After privatization, the company is listed on the local stock exchange, but the government only sells 25 percent of the company's equity. In addressing environmental infrastructure, the central government is open to privatization but relies on the private sector to initiate proposals and furnish the appropriate capital. Federalism is still a major issue between the central government and the states; each state wants to control its own domain.

Because Malaysia lacks expertise in the water supply arena, foreign investors are allowed in this area at the federal and state level. A newly established water fund, Lyonnaise Asia Water, will have $125 million in paid-up capital to help channel equity investments into water infrastructure projects. Partners include: Australia's Lend-Lease Corporation, the United States' Allstate Insurance Company, and Malaysia's Employee Provident Fund.

Malaysia's first toxic waste treatment center was announced in 1992. The United States has an excellent opportunity to pursue business in the hazardous waste sector in Malaysia, in which $230 million in projects are under way. Most waste is stored, and space is running out. The United States and Malaysia have a bilateral agreement to ship hazardous waste from Malaysia to countries that can reprocess and recycle it. The World Resource Center in Arizona does this for the electronics waste recycling. The U.S. Environmental Protection Agency is offering assistance to DOE to review a technical proposal for the country's first hazardous waste landfill.

REFERENCES

Clifford, M. 1996. "Can Malaysia Take that Next Step?" Business Week (February 26).

Environmental Business International (EBI). 1996. Regional Environmental Market Overview. San Diego, Calif.

Fernandez, C. 1996. "Indah Water Answers Its Critics." Asian Water & Sewage (March).

Makendya, N. and A. Shibli. 1995. "Industrial Pollution Control Policies in Asia: How Successful Are the Strategies?" Asian Journal of Environmental Management 3(2) (November).

Malaysia. 1994. Environmental Quality Report 1994. Department of Environment; Ministry of Science, Technology, and Environment. Kuala Lumpur.

���. 1995. International Trade and Industry Report. Ministry of International Trade and Industry. Kuala Lumpur.

���. 1996. Malaysia Investment in the Manufacturing Sector, Policies, Incentives, and Facilities. Malaysian Industrial Development Authority. Kuala Lumpur

Pillai, P., A. Pharmy, K. Neoh, and K. Thiruchelvam, eds. 1995. Managing Trust, Transparency, Accountability, and Ethics in Malaysia. Kuala Lumpur: Goethe Institut.

Price Waterhouse. 1996. A Review of the 1996 Budget of the Government of Malaysia. New York City.

Rainforest Information Centre of Australia. 1995. Sarawak: The Struggle Continues. Sydney.

Schaper, L. T., 1996. "Privatization of Environmental Services in Malaysia." Presentation at "Gaining a Competitive Edge in the Asian Environmental Infrastructure Market." La Jolla, Calif.

U.S.-Asia Environmental Partnership (US-AEP). 1996. "US-AEP/USCS Environmental Infrastructure Strategy: Malaysia." Draft. Washington, D.C. (August).

U.S. Central Intelligence Agency (CIA). 1995. CIA World Fact Book 1995. Washington, D.C.

U.S. Department of Commerce. 1993. Country Marketing Plan: Malaysia. Washington, D.C.

U.S. Department of State. 1992. Malaysia Background Notes. Washington, D.C.

ENDNOTES

1. The birth rate is 27.95 births per thousand. The population growth rate is 2.24 percent. Fifty-nine percent of the population is between 15 and 64 years of age; 37 percent are under 15. The infant mortality rate is 24.7 deaths per thousand live births. Life expectancy for males and females is 66.6 and 72.6 years respectively. The literacy rate (male/female) is 78 percent (86 percent/70 percent). The labor force comprises roughly 8 million (CIA 1995).

2. Malaysia is also religiously diverse. Islam is the primary religion, although Buddhism, Hinduism, Christianity, and indigenous religions are also widely practiced. Bahasa Malaysia is the official language, even though English is the acknowledged language of business and a common language of instruction at the tertiary level. (Malaysia is a former British colony [independence gained in 1957] and a British Commonwealth country.) Mandarin and other Chinese dialects, Tamil, and tribal languages are widely spoken, especially in the island states of Sabah and Sarawak.

* Unless otherwise indicated, all dollar amounts are U.S. dollars.

3. 1995 report by the Bank Negara (Cathy Fuselier, US-AEP director, Technology Cooperation [September 4, 1996]).

4. Malaysia (1995, 55).

5. Malaysia (1995,148).

6. U.S. Department of State (1992).

7. US-AEP (1996).

8. Under Prime Minister Mahathir, Malaysia's annual economic growth has been strong. In 1995 real GDP growth was 9.5 percent. This remarkable growth has substantially reduced poverty and raised real wages. But, as a Financial Times survey notes, "[a]t Malaysia's current stage of development, South Korea and Taiwan were nurturing a brace of innovative high technology companies, which later broke into world markets. The titans of technology in Malaysia tend to be foreign-owned companies, which have not transferred their know-how to local partners as quickly as the government would want" ("Malaysia, Signs of Cracks in Mahathir's Edifice," Financial Times [June 19, 1996], 1).

9. From 11.6 percent in 1993 to 13.5 percent in 1994. The U.S. share showed a decline (Malaysia 1995, 60).

10. Vision 2020 currently guides Malaysia's ambitious development goals well into the next century. At the core of the plan are a series of infrastructure privatization projects estimated to cost $18 billion during the next three years alone. As part of this effort, the country is pursuing some of the largest infrastructure projects in the region; it has nearly completed the world's tallest buildings�the Petronas Towers�and Asia's largest hydroelectric dam, among other massive infrastructure projects (see section 3 on government). Many of these projects are designed to be showcased at the Commonwealth Games, scheduled for Kuala Lumpur in 1998.

11. Historically, Malaysia has relied on foreign investment to finance its rapid growth. Foreign investment in the last four years has totaled more than $17 billion. But as China, Indonesia, and Vietnam continue to expand the market, many wonder if Malaysia will receive the same levels of foreign capital. According to estimates, approved foreign investment in the electronic sector fell by 51 percent in 1995 (Clifford 1996).

12. It is estimated that the labor shortage contributed to a 19 percent drop in foreign investment approvals in 1995 and has caused a 20 percent increase in labor costs in 1995 alone, fueling inflation pressures. As a matter of policy, Malaysia is less interested in maintaining low-end manufacturing, because it hopes to pursue more "high-tech" industrial production along the Korean model; however, the workforce it does have is comparatively underskilled. The government has acknowledged this as a threat to future development. In the short term, it will continue to rely on migrant workers to meet labor demand. In the long term, the government plans to invest heavily in education at all levels through targeted manpower development policies that emphasize technical competency, research and development, science and mathematics, and information technology (Price Waterhouse 1996).

13. See discussion of "Investment Outlook in 1995" in Malaysia (1995, 136_37).

14. These decades are displayed graphically in the front foyer of the Malaysian Industrial Development Authority.

15. See "Malaysia Sets $216 Billion Growth Plan" in International Herald Tribune (May 7, 1996).

16. In addition to manufactured goods, Malaysia continues to be an important commodity producer of rubber, tin, palm oil, tropical hardwoods, cocoa, and pepper, and a producer of textiles. It also exports petroleum and liquefied natural gas.

17. Malaysia is the world's largest exporter of tropical timber. The rain forests of Malaysia, renowned for their genetic diversity, are experiencing one of the fastest rates of deforestation in the world. Peninsular Malaysia now imports timber from East Malaysia where logging continues at a rapid pace. Up to two-thirds of Sarawak's total forested area has been licensed for future logging. Production from Sarawak alone currently accounts for 35 percent of the world's total raw log exports (Rainforest Information Centre of Australia 1995).

18. Haze from forest fires in Sumatra and Kalimantan and open burning in Peninsular Malaysia are among the key causes (Malaysia 1994, 12).

19. The Department of Environment has monitored river quality since the mid-1970s for pollution from palm oil and rubber manufacturing. It has been monitoring 116 major rivers under its Annual River Water Quality Monitoring Program. The numbers of both clean and dirty rivers increased in 1994 with increasingly heavy metal pollution from industrial discharges (Malaysia 1994, 18).

20. Malaysia (1994, 66).

21. The type of industrial pollution for each is outlined as follows:

Rubber products processing. Issues include contaminants such as hydrogen sulfide in wastewater, odor control, and stack emissions.

Palm oil industries. Anaerobic ponds are the common means of wastewater treatment. Enhanced wastewater treatment is needed near municipalities and catchment areas as well as noise control technologies, sludge treatment, air pollution (stack) control systems, and waste recycling technologies to convert fiber and trunk wastes into value-added products.

Oil, gas, and petrochemicals. The main pollution problems include radioactive sludge disposal, recovery of used oils, and ship-based sludge treatment and disposal.

Electronics/electroplating. The majority of electroplating and metal-finishing industries are small- to medium-sized enterprises. Wastewater effluent with heavy metal contaminants are routinely disposed of in domestic sewage systems without prior treatment. Cost-effective wastewater systems, technology to recover heavy metals for wastewater effluent, and toxic sludge treatment and recycling technologies are needed.

Food and beverage processing. A large percentage of the country's total wastewater effluent is emitted from food processing companies. Noncompliance is a direct result of the lack of appropriate treatment technology, overutilized capacity, and poor maintenance of the treatment systems. The wastewater stream has high levels of biological oxygen demand, chemical oxygen demand, oil and grease, and suspended solids.

Other target industries include animal husbandry (swine farming), wood-based manufacturing, textile and dye mills, chemicals and chemical-based products, and semiconductor and sago processing.

This information was excerpted from US-AEP (1996).

22. Rising public, government, and business awareness of the problem is one reason. A new chemical act is expected to handle chemicals that are now unregulated. At present, no adequate toxic waste storage facility exists for multinational corporations (Hajaii Rosnani Ibrahim, deputy director, DOE, Kuala Lumpur, [June 18, 1996]). MITI states that Malaysia generated more than 417,400 metric tons of toxic and hazardous wastes in 1994 and that amounts will continue to increase (Malaysia 1995, 196).

23. Environmental Business International (1996).

24. The transition from an agriculture- and commodities-based economy to one based on manufacturing has been the deliberate design of government policies. Following racial disturbances in 1969, the government adopted a New Economic Policy to eliminate poverty and economic segregation by race. Implemented in 1970_90, the policy promoted the radical restructuring of the economy and a redistribution of capital ownership (Bumiputras to 30 percent, other Malaysians to 40 percent, and foreigners to 30 percent.) After a 1985 recession, the New Economic Policy's stated numerical goals were suspended. In 1991, however, the government renewed its commitment to economic equity in a successor policy, the National Development Policy (U.S. Department of Commerce 1993).

25. Social and economic equity is an underlying theme of Malaysia's economic success and may be one reason that Malaysia is less open to foreign investment than Hong Kong or Singapore. The government is sensitive to financial control issues and must balance the interests of ethnic Chinese, who control 60 percent of the economy, and the politically dominant Bumiputras (Clifford 1996).

26. A telling example of rising government attention to environment as a factor in Malaysia's economic growth strategy is its interest in environmental economic indicators. (See banner headline, "Environment as economic indicator," New Straits Times [November 20, 1997], 1).

27. The Government of Malaysia is a constitutional monarchy. The chief of state or "Paramount Leader" (Yang Di Pertuan Agong) is elected every five years from among the nine Malay hereditary sultans. The current Paramount Ruler is JA'AFAR ibni Abdul Rahman (1994) (surnames are capped here for the reader's reference). The Malaysian Parliament is based on the British Commonwealth system and consists of a Senate and House of Representatives in part named by the Paramount Ruler and in part elected from each of the thirteen states. The Cabinet is appointed by the Paramount Ruler from members of parliament and is responsible for legislative issues and headed by the prime minister. The current prime minister is Dr. MAHATHIR bin Mohamad (1981), the deputy prime minister and likely successor is Finance Minister ANWAR bin Ibrahim (1993). MAHATHIR is the country's longest serving prime minister and heads the ruling coalition, National Front, a confederation of thirteen political parties dominated by the United Malays National Organization. The Malaysian legal system is based on British common law.

28. Land tenure, municipal corporations, and other local administration issues are left with Malaysia's thirteen state assemblies. In Peninsular Malaysia, however, state law gives way if a conflict with federal law exists or if the Federal Parliament seeks to ensure uniformity in laws of two or more states (articles 76[4] and 75 respectively of the Federal Constitution; Pillai and others 1995, 12, 13).

29. Assessment team interviews, Kuala Lumpur (June 17_21, 1996).

30. EIA requirements have been enforced under the EIA Order since 1988. They are prepared by project proponents for projects specifically listed. Numbers of documents have increased steadily each year with a total of 843 reports received since 1988. In 1994 DOE received new EIAs on 300 projects (289 preliminary EIAs and 11 risk analyses on hazardous installations), which were up 11 percent over 1993. Of these, 23 percent were for resorts and recreational development, 17 percent for quarries, 11 percent for housing, and 10 percent for industry and infrastructure activities. Of the total, DOE rejected 30 and accepted 176, whereas 12 were dropped by proponents and the rest held for decision in 1995. Efforts to improve EIAs, endorsed by the Cabinet in 1992, include development of specific guidelines for industrial estates, resorts, and petrochemical industries. Guidelines for water and energy projects have been developed with assistance from the Asian Development Bank and for quarrying and mining by the United Nations Development Programme. DOE has been actively engaged in improving EIA quality through registration of consultants, professional training abroad (the United Kingdom), and workshops and seminars. See chapter on environmental assessment in Malaysia (1994, 44_49).

31. Hajaii Rosnani Ibrahim, deputy director, Department of Environment, Kuala Lumpur (June 18, 1996).

32. Representatives of the Malaysian International Chamber of Commerce, Kuala Lumpur (June 20, 1996).

33. For example, 162 cases were brought against violators of the 1974 Environmental Quality Act in 1994, more than half filed in Malaysia's most heavily industrialized areas. The vast majority of these violations concerned water pollution (Malaysia 1994, 38).

34. DOE's record of environmental compliance shows, for example, that the electrical and electronic sectors achieved a 90 percent compliance rate, whereas metal finishing had the lowest compliance rate of 42 percent (Malaysia 1994, 24, 25). Environmental compliance is determined on the basis of whether standards are met. Compliance by 90 percent of industry means that 90 percent of the industries were inspected. Because DOE picks high pollution stretches of rivers and looks at complaints, it essentially focuses on the "hot spots," which are also identified by states (Hajjah Hanili Ghazali, DOE representative at the Malaysian Industrial Development Authority, Kuala Lumpur [June 20, 1996]).

35. At present, for example, if two inspectors are in a state with 800 manufacturing entities, they can do perhaps six inspections a week given the mileage and budgets available for expenses. But, even though DOE does not believe it has enough inspectors, especially to address the pollution issues of small- and medium-sized enterprises, a significant increase in its staff and budget appears unlikely. Currently, a freeze has been imposed on new civil servant hiring. The Economic Planning Unit in the Prime Minister's Office wants to shift pollution control responsibilities to the states, making DOE responsible for environmental planning. The Economic Planning Unit wants environment to be everyone's concern and to have a planning unit in every agency and every state, where all resources are controlled (Freddie Cho Chen Seng, director, and Hasnoi Zam Zam Ahmad, assistant director, Environmental Planning Unit, Prime Minister's Office, Kuala Lumpur [June 19, 1996]).

36. The NGO Environmental Management & Research Association of Malaysia (ENSEARCH) worked with the Department of the Environment, Rubber Research Institute, and Palm Oil Research Institute to agree on pollution standards and an environmental management and enforcement program that gradually but steadily have reduced waste levels (C. K. John, executive director, and Jenny Tan, ENSEARCH, Kuala Lumpur [June 17, 1996]). In the future, DOE is expected to focus on food and beverage and electroplating industries for pollution control.

37. SIRIM issued some 700 ISO 9000 certificates to Malaysian firms by late 1995 under its accreditation by the Malaysian Accreditation Council, which was created in 1995 under MOSTE as the government agency for accreditation (assessment team interviews in Malaysia [June 1996]).

38. A wide range of companies have applied, including electronics, rubber, petroleum, and general manufacturing; 80 to 90 percent are multinational corporations, mostly Japanese and Malaysian companies, no Taiwanese or Korean companies, and apparently only one U.S. company (Texas Instruments) (Lu Sim Hoay, research manager, Energy and Environmental Technology Group, and Norafiza Saim, research officer, Standards and Certification Unit, SIRIM, Kuala Lumpur [June 18, 1996]).

39. The Danes will be funding a specialist for each sector with one long-term, seven-month advisor to provide services as needed.

40. It is an unusually comprehensive and analytical report concerned with international trade and investment trends and replete with analyses and statistics on industrial sector performance in Malaysia, including discussion of environmental requirements (see Malaysia 1995).

41. Companies with more than a million dollars revenue must register with MITI. Those with less register with local government.

42. Malaysia (1995, 232).

43. The Industrial Technology Assistance Fund was launched in 1990 with a fund of M$50 million (M$1 equals approximately US$0.40). According to MITI, small- and medium-sized enterprises (SMEs) must upgrade operations and produce new products to remain competitive, but ". . . the number of SMEs which received grants from the ITAF scheme has not been very encouraging" (Malaysia 1995, 237).

44. Azizan Ahmad, principal assistant director, and Ruzain Idris, assistant director, Industrial Policy Division, MITI, Kuala Lumpur (June 20, 1996).

45. Waste generators establishing storage, treatment, or disposal facilities may receive an initial 40 percent and annual 20 percent allowance for all capital expenditures during five years. Companies directly engaged in hazardous waste management are eligible for "pioneer" status, which means taxes of only 30 percent of income (or 15 percent in specified locations) for five years (see Malaysia 1996, 16).

46. Malaysia (1996).

47. An environmental services center in MIDA includes representatives from DOE, Customs, Immigration, Human Resources, Treasury, Electricity Board, Water Board, and Department of Safety and Health. It constitutes a kind of one-stop agency that helps investors understand environmental requirements. Applications are screened and, if an EIA is needed, MIDA's action committee on industries is alerted. If an EIA is required, an approved EIA is a condition for getting a license; otherwise no license to manufacture and no import of toxics will be allowed. If standards appear to be capable of being complied with, the application goes to the State Development Corporation for approval. After construction, DOE examines samples from the operation and, if an EIA has been prepared, a monitoring requirement is imposed. The DOE representative feels that she is listened to; the action committee on industries will not overrule her determination. She is also on the action committee, whose chairman is the head of MIDA (Hajjah Hanili Ghazali, Kuala Lumpur [June 20, 1996]).

48. Under the Fifth and Sixth Malaysian Plans, 31 institutions, including 8 universities, 6 "statutory" research institutions, and 17 governmental research institutions and departments received funding.

49. Malaysia's stated environmental policy objectives are to maintain a clean and healthy environment, minimize the environmental impact of a growing population and human activities, balance the benefits of socioeconomic development against the need for sound environmental conditions, emphasize prevention and conservation measures to preserve the country's unique and diverse cultural and natural heritage, incorporate environmental concerns into project planning through EIA studies, and promote greater cooperation among federal and state authorities as well as ASEAN governments (Malaysia 1995). Malaysia is party to the conventions on biodiversity, climate change, endangered species, hazardous wastes, marine life conservation, nuclear test ban, ozone layer protection, and tropical timber. Malaysia has also signed but not ratified the Law of the Sea Treaty.

50. Key environmental regulations under EQA include the "Control of Lead Concentrations in Motor Gasoline" (1985), "Sewage and Industrial Effluents" (1979), "Control of Smoke and Gas Emissions" (1977), "Clean Air" (1979), and "Schedule of Wastes for Treatment and Disposal Facilities" (1989) (see the List of Regulations and Orders Enforced Under the Environmental Quality Act (1974) by the Department of Environment, appendix B in Malaysia [1994]).

51. US-AEP (1996).

52. Air and water standards are within international guidelines and are consistent with most countries in the region; however, Malaysia's water standards are not as stringent as neighboring Indonesia, especially for rubber and palm oil manufacturing.

53. Penalties for air, soil, inland water and noise pollution increased from M$4,000 to M$40,000 (M$1 equals approximately US$0.403) and/or jail sentences from two to five years. Oil and waste discharge penalties increased from M$10,000 to M$200,000 and/or jail for five years. Passage of the new amendments occurred since the assessment team visit in June 1996; the new act has been enforced since August 1, 1996 (unclassified cable, U.S. Embassy, Malaysia [September 4, 1996]).

54. Assessment team interviews in Malaysia (June 17_21, 1996). The Environmental Quality Council meets approximately once a year. Recent policy issues deliberated by the council include (a) enforcement issues and strengthening of existing environmental legislation, (b) expansion of EIA requirements and development of special sectoral guidelines for EIA-prescribed activities, (c) privatization programs, including monitoring and surveillance programs, (d) growing environmental problems of toxic and hazardous waste, (e) Sarawak state's Natural Resources and Environment Ordinance requiring EIAs for timber, (f) policies to improve environmental awareness and public education (see chapter 1, "Environmental Quality Council" in Malaysia [1994]). (State representation on the Council consists of ministers for Sarawak and Sabah.)

55. See "List of Prescribed Activities," in appendix C of Malaysia (1994).

56. EIA report processing by DOE has been decentralized to its regional offices, so that only the states of Perlis and Kedah and the federal territories remain under DOE headquarters' control (Malaysia 1994, 44).

57. See chapter 5, "Environmental Assessment," in Malaysia (1994).

58. The decision received extensive front page coverage with a thorough explanation of the issues in Malaysia New Straits Times [June 19, 1996], 1).

59. Health officers at the local level are among those needing training. Some 5,000 to 6,000 from the 140 local governments need to be retrained (Freddie Cho Chen Seng, director, and Hasnoi Zam Zam Ahmad, assistant director, Economic Planning Unit, Prime Minister's Office, Kuala Lumpur [June 19, 1996]).

60. Malaysia (1994).

61. Malaysia has only 7,000 full-time research scientists or 400 per million population, compared to 6,500 for Japan, 3,200 for the United Kingdom, and 1,300 for Korea. MITI believes this low ratio has inhibited the country's ability to acquire and adapt foreign technology to its needs (Malaysia 1995, 194).

62. They are automated manufacturing technology, biotechnology, information technology, electronics and telecommunications, advanced materials, and aerospace (a new area the government has marked for promotion) (Malaysia 1995, 193).

63. The electrical and electronics industry is cited by MITI as an example of the problem. Developed by multinational corporations in the 1970s, it depends on foreign technology and development. Research and development expenditures in the private sector are below 1 percent of GDP, versus 2.7 percent in the United States, 2.9 percent in Japan, 1.9 percent in Korea, and 1.1 percent in Singapore. To foster technology transfer, Technology Transfer Agreements are the favored mechanism between local and foreign companies; these are regulated by the government to ensure protection of local companies and the national interest under the Industrial Coordination of 1975. In 1994, 128 of these were signed, down from 185 in 1993 (Malaysia 1995, 192, 193).

64. Makendya and Shibli (1995).

65. Economic Planning Unit and DOE, Kuala Lumpur (June 19_20, 1996).

66. See Pillai (1995, 37).

67. Augustine Koh, program coordinator (environmental and urban ), National Institute for Public Administration, Government of Malaysia, Washington, D.C. (September 19, 1996).

68. See R. Pura, "Asian Infrastructure: The $4.2 Billion Sewer," in Asian Wall Street Journal (April 18, 1994).

69. By 2021, Indah Water Konsortium will have built, upgraded, operated, and maintained every existing sewage plant throughout the country. The consortium has already issued the first capital works tender for the Labuan island territory (and proposed banking center) and is preparing solicitations for Penang, Langkawi, Port Dickson, Sungei Besi, and Ipoh (Fernandez 1996).

70. Some state governments such as Johor Baru had already awarded contracts for solid waste collection and disposal at the state level creating a conflict between regional and state concessions. For example, in Selangor, a municipal landfill was being completed by the French group, Sita, but was not a part of the national plan. State authorities managed to push ahead with the project anyway, illustrating the dynamic tension between state and federal authorities.

71. The Danish-Malaysian consortium, Kualiti Alam Sdn Bhd, won the badly needed concession in 1992. Medical waste management has also been contracted as part of the overall privatization of hospital support services. The country has been divided into three regions, in each of which one consortium provides waste disposal. US-AEP has assisted two companies involved, Radicare and Faber-Medlux, in obtaining source disposal systems in the United States.

72. Various boards, committees, and councils (the Environmental Quality Council, for example), on which industry associations serve, review reports and legislative proposals.

73. Few incentives exist to encourage congregation of small- and medium-sized enterprises; although they cause most of the toxic pollution problem, they are far behind multinational corporations in environmental awareness and capabilities to respond with environmental management.

74. The Nestle Corporation, for example, with ten plants employing 4,000 people in Malaysia, expects an increase of 23 percent or more in 1997 (Federation of Malaysian Manufacturers, Kuala Lumpur [June 19, 1996]).

* In January 1997, M$1 equaled approximately US$0.403.

75. A consensus existed among interviewees that enforcement will get weaker as it goes to local and state governments, and that small- and medium-sized enterprises, although they are significant polluters, are not adequately motivated to comply with regulations. Malaysia does not encourage the import of old and dirty equipment; there is no exemption of duty for old equipment. Malaysia imports nearly all of its capital goods and most of this equipment, perhaps 95 percent, is new (Federation of Malaysian Manufacturers, Kuala Lumpur [June 19, 1996]).

76. It is clear that industry wants to control the environmental audit system required by the EQA amendments; industry wanted a voluntary audit. Now, MICCI will help organize half-day ISO 14000 road shows for chief executive officers and three-day sessions for managers in late 1996.

77. MICCI members and Sanjay Tiwari, chairman, Kuala Lumpur (June 19, 1996).

78. The American-Malaysian Chamber of Commerce has been active in Malaysia for more than two decades and is a valuable source of information for U.S. companies wishing to do business there.

79. Nestle has 200 suppliers and has an annual meeting to acquaint them with what it expects in the way of environmental performance. Its environmental program encourages subcontractors to solve chlorofluorocarbon problems and work toward cleaner systems, but Nestle has no contract requirements on these topics. It expects these issues to be of increasing importance. Worldwide, Nestle has an environmental management system similar to ISO 14000; the company expects the ISO certification transition to be easy. During this past year in Malaysia, supplier requirements of ISO 14000 were explained to the suppliers, who responded positively. Nestle provides no technical advice but expects incorporation of environmental requirements into subcontracts. (Federation of Malaysian Manufacturers, Kuala Lumpur [June 19, 1996]).

80. Shiela Aikanathan, executive director, Business Council for Sustainable Development, Kuala Lumpur (June 20, 1996).

81. Wan Portiah, senior analyst, and Norahayati Mustapha, senior analyst, Institute of Strategic and International Studies of Malaysia, Kuala Lumpur (June 18, 1996).

82. Chew Swee Leng, chief executive officer, Malaysian Iron and Steel Industry Federation, Kuala Lumpur (June 20, 1996).

83. The Malaysian Textile Manufacturers Association has formed a pollution control technical committee to advise companies on environmental compliance. The Metal Finishing Society and Electroplating Association of Malaysia is interested in helping members adopt appropriate pollution treatment technologies.

84. Wan Portiah, senior analyst, and Norahayati Mustapha, senior analyst, Institute of Strategic and International Studies of Malaysia, Kuala Lumpur (June 18, 1996).

85. Staff of the Institute for Environment and Development, Kuala Lumpur (June 21, 1996).

86. At least two of these, The University of Technology and the University of Malaysia at Sarawak offer post-graduate degrees in environmental sciences. Sarawak offers a doctorate and lists the research areas for which funding is available in: sago research, including bioconversion of sago pith residue to useful products; the screening and bioassay of active compounds from local plants; study of endangered flora and fauna of Borneo; remote sensing and GIS for plant and wildlife resource management; physiochemical study of Sarawak riverine and coastal environments; and characterization of industrialization effluents and process parameters.

87. Historically, foreign banks operating in Malaysia have been heavily regulated by Bank Negara. These regulations have restricted growth and limited foreign banks' ability to compete with domestic Malaysian banks. Bank Negara also requires multinational corporations to obtain at least 60 percent of their credit requirements from domestic banks. Bank Negara also requires foreign banks to incorporate locally and divest part of their equity.

88. Sakura Merchant Bank and the Arab-Malaysian Merchant Bank recently financed a M$500 million waterworks project in Selangor.

89. U.S. Department of Commerce (1993).

90. The upper primary grades have used an environmental education curriculum since the 1980s. Also, to enlist public support and build consumer pressure on polluters, DOE publishes the names of polluters in the newspapers (Schaper 1996)

91. In one case that received international attention, the Consumers' Association of Penang represented the community of Bukit Merah, which was affected by radioactive wastes from an earth-processing plant co-owned by Mitsubishi Chemicals. The association initially won the case in the lower courts, although it lost in Malaysia's Supreme Court. The joint venture did close down operations as a result of local and international pressures. The Consumers' Association of Penang is currently representing communities threatened by the proposed Bakun Dam in Sarawak among other activities.

92. See "Logging Companies Ignoring Law on EIA" (September 29 1993), "States Logging List Vital to Nab Culprits" (September 30, 1993), " Penan Fund Rip-Off" (November 1, 1993), "Government Probe Into Groups Involved in Penan Rip-Off" (November 2, 1993), "Loggers Get Six Months to Prepare EIA Reports" (July 12 1995), all in New Straits Times.

93. Recent development projects initiated by the Japanese International Cooperation Agency include the Sabah Reforestation Technical Development and Training Project, Effective Wood Utilization Research Project in Sarawak, and Evaluation and Analysis of Hazardous Chemical Substances and their Biological Treatments.

94. Malaysia (1995, 200).

 

 

HOME | ABOUT | SERVICES | NEWS & PUBS | CONTACTS | CONFERENCES | SITEMAP | SEARCH | LINKS | INSIDE US-AEP
United States-Asia Environmental Partnership, 1819 H Street NW, 7th Floor, Washington, D.C. 20006
Tel: 202-835-0333 Fax: 202-835-0366 E-mail: