Chemical Attraction: Malaysia builds a regional, global leader

And the companies on the leading edge of manufacturing the complex compounds that keep the wheels of industry turning are increasingly looking to Malaysia as the hub that meets their needs.

With an established supply chain, a large pool of talented labor, comprehensive and secure infrastructure, a reputation for facilitating research and development, abundant energy and natural resources and experience in the chemicals sector, the fundamentals are in place.

Just as important is the unswerving support of a government that not only recognizes the growing importance of the chemicals sector but also actively promotes sustainability and innovation. Malaysia’s government is nurturing a vibrant ecosystem for Research, Development and Innovation (RDCI), while advancing green chemistry, renewable energy solutions and circular economy initiatives. These efforts are strategically aligned with Malaysia’s ambition to achieve net zero emissions by 2050.

To further drive progress, the Malaysian government has crafted the Chemical Industry Roadmap 2030 to guide and propel the sector until the end of the decade, focusing on 11 priority segments. These include specialty chemicals such as agrochemicals, as well as chemicals in the care, nutrition, electronics and construction sectors.

This roadmap offers assistance to investors who share the nation’s vision for the future. That policy is complemented by the New Industrial Master Plan 2030, which identifies emerging areas of potential in the chemical and advanced materials value chain, including green hydrogen, batteries for electric vehicles and the production of rare-earth elements.

And multinational companies that have already partnered with Malaysia are making plans to grow their presence and to expand into the wider region and beyond.

When Toray Industries was looking for an overseas base to expand its production of plastics in 1992, the industry giant settled on Malaysia. More than three decades later, the Japanese company’s achievements have more than justified that decision.

“Malaysia was an ideal choice due to its excellent infrastructure, political stability and skilled workforce,” said Michiyoshi Matsumoto, managing director of Toray Plastics (Malaysia).

The country’s “overall advantages” have helped Toray’s plant for acrylonitrile butadiene styrene (ABS) and methyl methacrylate ABS (MABS) resins to evolve into its largest in South-East Asia. The resins are used in everything from home appliances to electronics, toys, automobiles and the IT sector.

Today, the facility in Penang produces approximately 425,000 metric tons of ABS resin annually, accounting for around 90% of Toray’s total global output of ABS and MABS resins.

The Malaysian government’s ongoing support, notably in business facilitation, compliance and policy advocacy, have “greatly influenced our long-term commitment” to the country, Matsumoto said, in addition to the nation’s support for green energy and sustainability initiatives.

This initiative has not only strengthened Malaysia’s position as a hub for sustainable industrial practices but also contributes meaningfully to the nation’s 2050 net-zero emission target.

Looking ahead, Toray is exploring opportunities to expand its operations in Malaysia. “The country’s strategic positioning in the global economy, coupled with investment-friendly policies and robust governance, creates a conducive environment for growth,” Matsumoto emphasized.

“Additionally, the strong integration of Malaysia into the global supply chain enhances local demand, making further expansion attractive.”

Malaysia has emerged as a key partner for Kaneka Corp., another Japanese company striving to expand its market share in the region.

After initially expanding into Europe and North America in the 1970s and 1980s, Osaka-based Kaneka started its operations in Malaysia in 1996 with the express aim of growing its business in South-East Asia, said Syed Ahmad, director and plant general manager of the company’s facility in Pahang.

“There were many reasons for our investments in Malaysia, including the readiness of the infrastructure, the strategic geographical location in South-East Asia and the proximity to China and the Indian sub-continent, as well as the abundant availability of resources,” he said.

The company manufactures a wide range of specialty products, including performance polymers, polyimide film for electronics products and synthetic fibers for hair products.

The company is presently manufacturing around 140,000 tons of plastics-based items, accounting for fully 16% of the company’s global output in this business segment.

That success is largely attributed to the substantial support of the government, Syed Ahmad said.

“To date, Kaneka's operations in Malaysia represent Kaneka Corp.’s largest investment outside of Japan,” he said. “With robust mid-term plans and dynamic local expertise driving the company’s vision - particularly in the realms of digitalization and environmentally sustainable practices - Kaneka Malaysia is poised for further expansion.”

With Malaysia’s chemicals and chemical products sector going from strength to strength, the government is keen to explore opportunities in niche new sub-segments, or specialty chemicals.

“This strategic progression positions the nation to serve emerging sectors crucial to the energy transition, including electric vehicles, agriculture, electronics and engineered plastics,” he said.

“To facilitate the participation of Malaysian manufacturers in this niche booming segment, the government encourages manufacturers to adopt innovative technologies to improve product quality and align with market needs,” he added.

Malaysia sees great potential in a number of specific areas, such as crude oil to chemicals technology and specialty electronic chemicals, to meet growing demand from the electrical and electronics sector. Demand is predicted to climb 5% in this area and for the market to have grown to $1.61 billion by 2027, with the Asia-Pacific region leading the world due to the rapid development of electronics and EV battery manufacturing in China, Japan and India.

But Malaysia is also keen to go beyond simply being a location for manufacturers and is expanding into high-value-added service activities in order to make the nation both a regional and global services hub.

“Manufacturing-based companies can explore the consolidation of their supply chain management functions that support global and regional operations,” said Datuk Sikh Shamsul. “This can be, for instance, in the area of sourcing and procurement, including the selection of suppliers, managing of terms and pricing of contracts, product capacity planning and centralized distribution of products right up to the consolidation of shared services functions.”

Multinational corporations that have an extensive network of subsidiaries, branches, sales offices or production facilities across the region, have greater potential for integration, he said.

This would make Malaysia an ideal location as a central hub to oversee, control and support key service functions for their network companies across the Asia Pacific region and beyond.

Increasingly, traditional hubs are also embracing digital solutions and advanced technologies, evolving into Digital Tech Hubs.

“Hubs that apply digital advances such as robotic process automation and AI, which make new types of automated activities possible, are able to eliminate a large portion of the work these business units perform,” said Datuk Sikh Shamsul. “They can do this by simplifying fast work processes, utilizing robust tools and technology and adopting flexibility and collaboration, all of which allow new generations of talent to be able to work anywhere.”

Malaysia has a track record in the global chemicals industry and a well-earned reputation as an investor-friendly destination. Its forward-looking policies are designed to further enhance its appeal as the place for chemicals firms to put down roots and build on their successes.