Monday, August 13, 2007

Silver Lining in 'Golden Crop'

Silver Lining in 'Golden Crop'

If you ask anyone on the street where Malaysia stands as a producer of quality information and communications technology (ICT), or which company comes to mind when they think of ICT and Malaysia, chances are they will draw a blank. It'd be the same thing if you did this with the subject of biotechnology even though there are 25 listed ICT companies on the Main and Second Boards on Bursa Malaysia, and 100 more on the Mesdaq Board.

To put this into perspective however, ICT and biotech were not on the national agenda till 1984 when Tan Sri Dr Omar Abdul Rahman was appointed science adviser in the Prime Minister's Department.

It was only then that the government slowly started emphasising on ICT but even then, things moved at a snail's pace as heavy industry and industrialisation dominated the development agenda. Any focus on ICT then was strictly about getting the Intels and Motorolas of the world to Malaysia to build their large factories and employ locals.

The few times Malaysia tried to fast track its ICT agenda by hiring foreign scientists to help spur local innovations, proved unsuccessful.

Many will remember the InventQjaya case where a Libyan-born US scientist, Dr Sadeg Mustaffa Faris, was wooed to Malaysia in 2003. Faris promised revolutionary breakthroughs but two years later and with little to show for it, the cost to taxpayers was an estimated RM300 million.

It was only in 1996 with the July groundbreaking of the Multimedia Super Corridor (MSC) initiative that the domestic ICT agenda started gaining a toehold in the national consciousness.

The MSC is located in what used to be a vast oil palm plantation. It was an apt place to launch the catalyst for the nation's drive to become a technology developer, for it was in palm oil that Malaysia first gained global recognition for its efforts in research and development.

Even then the story of how Malaysia ventured down that path was almost accidental, recalled Tan Sri Dr Augustine Ong, former Palm Oil Research Institute of Malaysia director-general. "The first vice-chancellor of Universiti Sains Malaysia, Tan Sri Hamzah Sendut, told me in the early 70s to do something useful for the country and go into basic research, and so I said I would look into palm oil.

"Indonesia was starting to go into oil palm planting in a big way and Malaysia did not have any research institutes yet. Mardi (Malaysian Agricultural Research and Development Institute) was doing some research but it had only a small oil and fats laboratory then."

As Ong had no special knowledge of the palm oil industry, he started by taking his family for a holiday to Singapore and along the way, visited oil palm estates and spoke to managers about the problems they faced.

"That is the best way to start. You ask the industry about the problems they face and conduct research to solve that problem," said Ong in an interview. The immediate problem then was an informal trade barrier by Japan and the US which barred entry of palm oil that had been separated using detergent.

Ong felt a technique to separate palm oil from the fruit using liquid could be developed and told Hamzah, who rightly asked, "If it is so simple, how come it has not been discovered?" A gleeful Ong recalled replying, "Your question presupposes that all simple ideas have been discovered!"

This proved to be quite a landmark in Ong's illustrious career as he went on to develop a technique which received a patent in the UK. "We did not have a patent office back in the 1970s and it had to be done in the UK, although [it was] very expensive."

The patent was for a Gradient Density Centrifugation method; the discovery was made in 1974 and the patent received a year later. But it was only in 1979 that the Palm Oil Research Institute of Malaysia (Porim) was formed with the late Tan Sri B.C. Shekar as first chairman of the board.

Today, research in palm oil is labelled under the sexy heading of biotechnology but it used to be all about beakers, test tubes and centrifuges in the old days, powered by sweat and tears.

"I remember we used to devote our time and passion to palm oil research. Those were challenging times," said Ong, recalling that the private sector was initially sceptical that a government-funded research centre could offer any help. "They used to say, 'What can those eggheads do that we cannot?' but after a few years, we managed to convince them that we could offer solutions to their problems," he said.

One of Porim's strengths was that it adopted the right strategy for its research from the start. "We introduced a multi-disciplinary approach to research where we staffed the institute with people who had effluent treatment skills, who were microbiologists, chemists and even engineers. We were not brilliant. We just had the right strategy for conducting our research."

Another highlight for Ong was being part of the Malaysian delegation to the US in 1987 to help counter the aggressive anti-palm oil campaign waged by the soya bean industry. "It was just a scam! They claimed that palm oil acted like saturated fats and could harden the arteries. Before going on the tour, I actually wrote a will as I was quite scared for my life!" he recalled.

The team went on an eight-city tour to counter the claims. The trip culminated in an appearance at the US Congress which held a hearing on the matter.

The delegation had at first wanted a Westerner to represent the case but he was not available. This thrust Ong into the limelight. "We had only five minutes to present our case but there was no limit to the question time," he said.

Malaysia came out looking good as it also had the US Food and Drug Administration data that showed palm oil did not behave like saturated fat.

The lesson from Ong's experience over the years has led him to advise Malaysians to learn to think for themselves and not be influenced by foreign lobbyists, the latest being that virgin forest and peat swamps are being cut to grow oil palms.

"Palm oil is the golden crop of Malaysia. There is much more we can do to extract value from it," he noted.

Source: Karamjit Singh, TheSun, Monday, August 2007

Master of Our Own Destiny

Master of Our Own Destiny

The year 1974 was a landmark year for the oil and gas industry. Seventeen years after Merdeka, through the passing of the Petroleum Development Act (PDA) and later the initiation of a production sharing contract (PSC), Malaysia finally got its chance to manage its own hydrocarbon resources and participate directly in the industry.

Prior to the PDA, the country's hydrocarbon resources, in this case oil, which it had been producing in Miri, Sarawak since 1910, was managed through the concession system that was practised and accepted worldwide.

Lack of expertise and financial resources among many host nations in the developing world had allowed major oil multinationals like Shell, ExxonMobil and British Petroleum to dictate better business terms for themselves. They were normally granted long-term concessions and large tracts of areas to explore.

In the case of Sarawak, Shell's concessions there had been granted by the then colonial government for "as long as the moon, sun and stars are in the sky." In short, the concession was in perpetuity.

And once oil was discovered, the multinationals became the owner of the commodity. Without active participation by the host nations, the respective governments only benefited through royalty payments and corporate taxes, a meagre sum compared to the returns the oil companies got.

For Malaysia, the PDA was a political mechanism that fulfilled the aspirations of an independent nation. But foreign critics likened it to "nationalisation" via the back door. The PDA paved the way for the establishment of a national oil corporation - Petronas, which became the sole custodian and owner of the nation's hydrocarbon resources.

Under the PSC, first signed in 1976, oil and gas discovered in any exploration areas would belong to Petronas, and the multinationals - now serving as investors and contractors and not as owners Ð would only be entitled to a percentage of what was discovered. On top of this, they had to pay income tax to the government.

The PDA was one of then Prime Minister Tun Abdul Razak's aggressive efforts to broaden the country's economic base and lessen its dependence on agriculture and commodities like rubber, tin and timber, and ensure that national assets like oil, gas and plantations remained in the hands of locals.

It also coincided with the early years of the introduction of the New Economic Policy (NEP), under which the government's priority was to redistribute national income fairly among the different races in an environment of an expanding economic cake and corporate sector.

To reap maximum return from the oil and gas sector, Petronas, the custodian, also became an active commercial participant. In 1975, it marketed its own crude oil to the Japanese and two years later, started airport refuelling activities at the Senai Airport and bunkering services at Pasir Gudang Port in Johor.

The year 1978 was a momentous year as Petronas set up its own exploration and production arm Carigali and a gas joint venture company MLNG - which in later years would become major revenue components of its domestic and international businesses. In 1981, it opened its first service station in Taman Tun Dr Ismail, Kuala Lumpur.

Getting into the industry, learning the trade and participating in the upstream and downstream sectors like its multinational counterparts was a farsighted move on the part of the government (the shareholder) and the pioneering managers of Petronas. The dedication shown by the pioneers and subsequently, those who worked with the company during its expansion years must be commended.

As the nation celebrates its 50th anniversary, Petronas' success in growing from a domestic company into a full-fledged oil and gas multinational should rank as one of the country's greatest achievements.

The success story is there for us to see. The company set up in 1974 with shareholders' funds of RM10 million had by 2007 grown by 17,000 times. This feat was achieved without Petronas going back to the government to ask for a single ringgit more to be added to its shareholders' funds.

When Petronas announced its financial results for the year ended March 31, 2007 on June 28, the RM10 million investment had turned into the following staggering figures: shareholders' funds (RM170 billion), assets (RM295 billion), revenue (RM184 billion) and net profit (RM46.4 billion). During the same financial year, it contributed RM48.3 billion to the government's coffers in terms of taxes, dividends, royalties and export duties. Since its inception, RM366 billion has been returned to the government.

Today, Petronas contributes about 35% to federal government revenue. The company has operations and investments in more than 30 countries and was ranked by Fortune as the 120th largest company in the world last year.

Certainly the government would not have earned this much if the PDA was not put in place and the concession system had remained. The attractive returns were also made possible by the excellent civil servants and professionals who have managed and served Petronas with a high level of integrity.

Source: Azam Aris, TheSun, Monday, August 13, 2007

A Gold Mine in Tin

A Gold Mine in Tin

Head on over to the heart of Kuala Lumpur, and you'll find yourself immersed in a metropolitan hub, pulsing with energy and life. Rewind back 150 years earlier, however, and you'll find that Kuala Lumpur once lived up to its name as being the "muddy river mouth".

In 1857, a member of the Selangor royal family, Raja Abdullah, brought in prospectors to the Klang river in search of alluvial tin deposits. It was right here in Ampang, where the Gombak and Klang rivers meet, that the prospectors struck what was to be the land's proverbial gold.

Once a swampy site prone to incidence of malaria, it would have been hard to imagine that this very place would grow exponentially over the years to become present-day KL. The city's growth was a result of being the production hub for tin Ð especially at the Langat, Klang and Selangor river valleys. The tin industry's epicentre, however, lay in the Kinta and Perak river valleys near the city of Ipoh.

With the discovery of large tin deposits in the states of Perak and Selangor, a large influx of migrants from the southern provinces of China came to then-Malaya to seek their fortunes.

Tin was used chiefly to produce tinplate (steel coated with tin) for food products, as it could preserve food in the absence of air. The most common and effective way of mining tin was with the use of gravel pumps, introduced in the late 1800s by the Chinese, who used this method in their native country. Gravel pumping involved spraying high-pressure streams of water onto tin-bearing rocks to break them up.

The end product would then be pumped into a plant for recovery of tin and other materials. Gravel pumps were advantageous as they were inexpensive, and required low capital cost to set up.

In the heyday of tin, dredge operations were a common sight Ð the first was installed in the Kinta Valley in 1913. Seven years later, 30 units were installed, and by 1940, 123 dredges were in operation. Dredges had a floating, flat-bottomed platform, which was where the digging, washing and processing of the ore was performed.

The towns surrounding these tin mines benefited both socially and economically from this lucrative industry. Ipoh, for example, transformed into a more structured and planned town with wide streets, and brick and stucco shophouses. Many of its buildings had neo-classical designs, and the streets were lined with stylish and well designed two- and three-storey buildings.

Not only did these mining hubs profit from the tin industry's boom in the 70s - the workers did, too.

Leong Yoke Soo, 78, a former dredge master with the Malaysian Mining Corporation Bhd at Tronoh, Perak, recalled this period of time: "It was the peak of tin mining production, and dredges were building up like nobody's business." What made him stay in the industry for 35 years, he said in an interview, was the treatment and the benefits he was given.

"I was paid very well, about RM5,000 to RM6,000 a month. A teacher, in comparison, would earn RM1,000 a month - but we really worked very hard.

"My family and I stayed in the mines, and there was transportation for our children to go to school. I was even sent for seminars and management training courses - we were all very well looked after."

Historically, the Malay Peninsula became synonymous with tin, and grew rapidly in 1883, when Malaya overtook Britain to become the largest tin producer in the world. According to the Malaysia Smelting Corporation Bhd (MSC), in the late 1970s, Malaysia had ,ore than 1,000 tin mines, producing an average of over 70,000 tonnes a year.

In 1990, following the collapse of the industry in 1985, yearly production was recorded at 20,700 tonnes - with Malaysia being the world's fourth largest tin producer. Just eight years later, Malaysia's tin industry took a sharp decline, producing only 5,800 tonnes of tin per year. China, in comparison, churned out a whopping 79,000 tonnes of tin, and was ranked the No. 1 tin producer worldwide.

Why did the industry decline? First, the International Tin Council collapsed in 1985, leaving gross debts of almost US$1.5 billion (RM5.19 billion), and causing world tin prices to fall by almost 57%.

Malaysia was greatly affected, and coupled with the 1985 economic crisis, tin prices tumbled from RM32,000 per tonne in the late 1970s to less than RM17,000 per tonne in 1985. Newer mines in both Indonesia and China were also able to produce the metal at a lower cost, and soon, Malaysia was unable to compete.

Today, according to MSC, Malaysia produces only 5,000 tonnes a year - 1.8% of the global output of 270,000 tonnes.

Source: Joyce Au-Yong, TheSun, Monday, August 13, 2007

The Nation That Rubber Built

The Nation That Rubber Built

When British botanist Sir Henry Wickham brought Brazilian wild rubber tree seeds to Malaya in 1877, he started what would become an economically and socially significant industry for the country.

Talk about rubber and some people might remember the tappers who were visible only by dynamo-powered torchlights and the crunching of dried leaves on the estate floor as they cycled between rows of rubber trees before dawn.

In the late 1950s, the country produced almost 40% of the world's natural rubber. It was a lucrative industry.

Celine Thomas, now a Penang resident, said that in 1957, she lived in a house smack in the middle of a Bangsar estate, which was then handled by her sectional manager father.

While Bangsar today is a fast-paced, urban nightspot, in those days, there was nothing but hectares of rubber trees, staff quarters, and a lone concrete bungalow with high ceilings where Celine lived.

"(The family home) doesn't exist anymore. Our house was the only house in the estate and it was scary at night to be alone. I always said, when I grow up, I'd never live on an estate because it's so far from anywhere.

"I always wanted to live in town. But my memories of estate life are really fantastic," she reminisced in an interview. "School was 15 miles away, so we used to take a school bus for the estate staff's children - it was quite fun."

While life for some as a result of the local rubber industry may just be an obscure and distant memory now, it has definitely left the nation with tangible, but sometimes forgotten, achievements.

Malaysia became the largest supplier of natural rubber to the US auto industry when the demand for the commodity to make tyres soared as the result of Henry Ford's mass manufactured Model T car in 1908.

Then in 1919, Peninsular Malaya exported nearly 200,000 tonnes of rubber, which added up to half of the world's exports. It was the top producer of natural rubber when demand reached an all-time high as a result of the AIDS epidemic which led to an upsurge in the use of rubber products like latex gloves and condoms in the 1980s. Malaysia continued to blaze the trail as the world's top producer up until 1999, when the industry crashed due to prices plummeting to a 30-year low.

And because Malaysia contributed much of the world's rubber supply, it helped modernise the industry through innovation. The Rubber Research Institute of Malaysia (RRIM) carried out extensive research on raising the yield of trees, which led to the development of new varieties or clones, including disease-resistant trees and those with higher yield.

RRIM also introduced the Standard Malaysian Scheme in 1965, a quality control method that revolutionised the presentation, standards and marketing of natural rubber, to compete with the synthetic rubber market. Under the scheme, rubber is graded technically instead of using the appearance of flaws on sheets.

But most importantly, the rubber industry had a role in building the nation, Malaysian Rubber Board director-general Datuk Kamarul Baharain said.

"The development of the rubber industry in the early days was very much connected to the development of the road and railway systems in the peninsula, which provided easy access to the various ports for exporting rubber," he said. "Over the years, the industry has provided employment to thousands of estate workers and an income source for thousands of smallholders as well as workers in downstream industries."

Furthermore, Kamarul said, aside from tin, rubber was the other economic pillar contributing towards the growth of the country's exports earnings. Malaysia reached record production of natural rubber - some 1,612,480 tonnes - in 1976. The rubber economy, however, declined when the manufacturing and service industries emerged.

Still, there were other ways for rubber to be sold and marketed, Kamarul said. "This period also saw the emergence of increased rubber products for manufacturing activities, which later was further developed under the two industrial master plans. Malaysia became the world leader in the production of gloves, condoms and catheters," he said.

According to the Malaysian Rubber Export Promotion Council, Malaysia supplies 49% of the world's demand for examination gloves, which totalled up to more than RM4 billion in 2005. The country exported some RM647 million of catheters, RM574 million of rubber thread, tubing of up to RM216 million and RM115.7 million worth of condoms.

Today, the Malaysian Rubber Board says there are only 1.2 million hectares grown with rubber - a 40% drop from the 1966 peak of 2.05 million hectares.

Most of Malaysia's natural rubber production currently comes from thousands of smallholdings, which are privately-owned 2ha plots. Gone are most of the vast estates as only 5% of all natural rubber comes from the large estates of old.

But just as Bangsar's rubber estates have been transformed into a wine-and-dine haven for the affluent, the rubber industry may have declined, but what has emerged instead, are the fruits of its economic contribution.

Ooi Ying Nee, The Sun, Monday, August 13, 2007