Don't jump on bio-diesel bandwagon

Source:http://business-times.asia1.com.sg/sub/news/story/0,4574,191191,00.html

Published April 5, 2006

Don’t jump on bio-diesel bandwagon

Companies should understand the business first, cautions Rafidah

By PAULINE NG
IN KUALA LUMPUR

THE frenzied attempt by many companies to jump on the bio-diesel bandwagon without adequately understanding the business is troubling Malaysia’s Minister of International Trade & Industry (Miti), Rafidah Aziz.

Already, 17 companies have been awarded manufacturing licences for bio-diesel plants, while another 33 applications are pending. Although there are no plans to curb the further award of such licences, Ms Rafidah cautioned companies against moving into an industry merely because others are doing so.

She pointed out the same trend had emerged during the era of rubber gloves production in the 90s when numerous companies thought it was a sure-fire sector to get into, given the strong demand for latex gloves and the fact that Malaysia was a rubber-producing nation. Then, Ms Rafidah said Miti stopped handing out licences as it felt the sector was already too crowded, but resumed doing so after it was accused of bias.

‘These weren’t even surgical gloves, mind you, but normal household gloves. And some (applicants) couldn’t even differentiate between rubber gloves and condoms,’ she said, albeit half in jest, at a national seminar organised by her ministry and its agencies with local investors. Ms Rafidah had been asked about a rumour that the ministry would halt the issue of bio-diesel manufacturing licences.

In any event, her point was that many manufacturers did not have sufficient knowledge, could not compete and went bust soon after. Malaysia is now the world’s largest producer of latex gloves, and boasts some of the world’s biggest rubber glove producers such as Top Glove Corporation and Suremax Corporation, but only after a consolidation of the sector. Other glove makers such as Kossan Rubber Industries have created a niche for themselves by making surgical and fire-retardant gloves.

Currently, soaring global fuel prices have made bio-diesel the buzz word for the plantations sector with promoters maintaining that each metric tonne can sell for at least US$700. One of the top two countries in palm oil production, Malaysia is aiming to be the biggest producer of bio-diesel. It wants 5 per cent processed palm oil to be blended with 95 per cent fossil fuel by 2008 and plans to produce up to 500,000 tonnes of bio-diesel to reduce its dependence on fossil fuel.

On another issue, Ms Rafidah was asked whether free trade agreements (FTAs) diluted the significance of Asean as a trading bloc. Member countries such as Singapore have 10 such FTAs, a participant noted.

‘No, no. There are things which we should do collectively,’ she said, but added Asean’s 10 member countries have very different economic profiles with developed Singapore at one end of the spectrum, and impoverished Myanmar at the other end.

Last month, Malaysia announced it would begin ‘fast-track’ negotiations with the US towards an FTA by year end.