Condoms are arranged on a conveyor system for packaging at the Karex
Industries Sdn. Bhd. condom factory in Pontian Besar, Johor, Malaysia.
Karex Industries' line of business includes the manufacturing of
industrial rubber goods, rubberized fabrics, and miscellaneous rubber
specialties.
By Liau Y-Sing -
Nov 19, 2012 3:10 PM GMT+0700
Karex Industries Sdn., the world’s
biggest condom manufacturer, will expand capacity after selling
shares next year, boosting Malaysia’s bid to rejuvenate its
rubber industry amid competition from Thailand and Vietnam.
“Demand for condoms is continuously growing,” said Goh
Miah Kiat, whose great-grandfather started the company as a
grocery store on a Malaysian rubber plantation almost a century
ago. “It’s a very good time. With the company going public,
additional funds could be raised for it to expand further.”
From trading rubber, the Gohs’ business evolved into
exporting contraceptives. Their move up the value chain mirrors
Malaysia’s as it seeks to shift from an agricultural base into
more lucrative industries, ranging from latex medical gloves to
petrochemicals, as part of a strategic move to escape what
economists call the middle-income trap.
“When we got into condoms, it was pretty much a dirty
word,” Goh, executive director at Karex, said in a Nov. 12
interview. “Today, things have changed. Asia is going to create
a lot of demand because our population is very young.”
The Selangor-based company, which supplies the United
Nations and markets including Brazil, the U.S. and China, is
seeking funds through a share sale to double annual production
capacity to 6 billion pieces, Goh said. The Southeast Asian
country is the world’s biggest condom producer, according to the
Malaysian Rubber Board.
Rubber Revolution
The contraceptives business is helping Malaysia revive an
industry it once dominated as rival rubber producers Thailand,
Indonesia and Vietnam gain ground. The government is looking for
ways to increase yields and commercialize new rubber products to
rejuvenate a sector that accounted for about 6 percent of
exports last year, according to rubber board data.
“We have to revolutionize the industry,” Salmiah Ahmad,
the board’s director-general, said in a Nov. 12 interview. “In
two to five years’ time, we may fall behind India and Vietnam in
terms of production.”
Malaysia natural rubber output may fall 4.6 percent to
950,000 metric tons this year, the Association of Natural Rubber
Producing Countries said in a Nov. 9 report. That’s less than a
third of top producers Thailand and Indonesia.
Vietnam could also overtake Malaysia this year to become the
world’s third-largest grower, with production expected to surge
18 percent to 955,000 tons, the association said. India is not
far behind with output forecast to rise 3.1 percent to 920,000
tons in 2012, it said.
Global Crash
Once a pillar of the economy, natural rubber has been
eclipsed by palm oil in Malaysia after a global crash in prices
in the late 1990s prompted many planters to abandon the
commodity. As well as increasing production, some Southeast
Asian neighbors have the advantage of lower labor costs,
according to the International Rubber Study Group.
Automated rubber tapping would address Malaysia’s labor
challenges, though may not be an economically viable for small
planters, according to the group. Smallholders, or those with
less than 40 hectares (99 acres), account for 95 percent of
Malaysia’s production, rubber board figures show.
“On the plantation side, there is more investment going
into the Mekong region in Cambodia and Laos,” Lekshmi Nair,
Singapore-based senior economist with the International Rubber
Study Group, said in a Nov. 12 interview. “More downstream
investments are going to Vietnam and Indonesia. Malaysia has to
compete with these countries. That’s a great challenge.”
Transformation Plan
Rubber for delivery in April gained as much as 2 percent to
253.4 yen a kilogram ($3,120 a metric ton) on the Tokyo
Commodity Exchange, the highest level since Nov. 5, before
trading at 252.6 yen at 5:0.8 p.m. Thailand, Indonesia and
Malaysia, which account for about 70 percent of global supply,
will meet next month to discuss ways to stabilize prices, Yium
Tavarolit, chief secretary of the International Rubber
Consortium Ltd., said last week.
Prime Minister Najib Razak unveiled a so-called Economic
Transformation Program two years ago aimed at helping the
country achieve its long-held target of achieving developed
nation status by 2020. Malaysia risks being caught in a middle-
income trap, no longer able to compete as a low-cost nation, nor
having moved sufficiently up the value chain to take on high-
income nations, Najib said at the time.
The middle-income trap describes economies that remain
stuck when the factors that contributed to strong early growth,
such as low-cost labor, reach their limits and momentum slows.
To help regain its edge, there are plans to commercialize
specialty rubber materials such as ekoprena and pureprena for
use in products such as eco-friendly tires, according to an
April report by the government’s Performance Management and
Delivery Unit, or Pemandu.
Latex Gloves
The government also wants to encourage more value-added
industries like condoms. The country is forecast to export 12
million kilograms of condoms valued at 320 million ringgit ($104
million) this year, compared with 10.9 million kilograms worth
277 million ringgit in 2011, government data show.
Companies including Top Glove Corp. (TOPG) and Supermax Corp. (SUCB) have
already established Malaysia as the world’s biggest supplier of
rubber and latex gloves. The government wants to increase the
country’s global market share in this sub-sector to 65 percent
by 2020 from 62 percent under its economic plan.
To help keep manufacturers like Top Glove and Karex
supplied with sufficient raw material to grow, the authorities
are handing out grants to smallholders to replant 40,000
hectares annually and plant 18,000 hectares of new rubber areas
over the next five years, Pemandu said.
“We’re constantly looking at new markets,” Karex’s Goh
said. This includes “developing countries such as the
Commonwealth of Independent States, Eastern Europe and Latin
America where we have less presence. We’ve embarked on a program
to automate our processes.”
To contact the reporter on this story:
Liau Y-Sing in Kuala Lumpur at
yliau@bloomberg.net
To contact the editor responsible for this story:
Barry Porter in Kuala Lumpur at
bporter10@bloomberg.net
Source
No comments:
Post a Comment