Miami's Malaysia Connection

by Claudio Mendonca
WorldCity Business Magazine

Most of the road from Kuala Lumpur International Airport is lined with oil palm trees, a visual reminder of one of Malaysia’s important trade commodities. Oil from these trees is shipped around the globe for use in both food and in the production of soap and other products.

The palm oil joins computers, cell phone transmission apparatus, color televisions, rubber gloves, wood furniture and other products leaving the country in growing quantities and, increasingly, making their way to the United States. In 2005, Malaysia was the United States’ tenth most important trading partner – the first time it slipped into the Top 10 – as the commercial exchange between the two grew nearly 13 percent to exceed $44 billion.

Now Malaysia is on track to boost that trade even more. And South Florida is poised to play a role.
More than three dozen business leaders – representing 30 South Florida companies – headed off on a trade mission to Malaysia in 2005, a year that saw South Florida’s trade with the Southeast Asian nation leap more than 30 percent to $221.8 million. In April 2006, Malaysia opened a trade office in Miami, only the third in the United States after New York and Los Angeles. Nova Southeastern University has begun offering doctorate courses in Kuala Lumpur. And even the IFE Americas Food and Beverage show in Miami Beach in early November had displays of Malaysian food products.

“People don’t realize that Malaysia is a carbon copy of South Florida in Southeast Asia,” says Bernhard Schutte, CEO of Digital Media Network in Fort Lauderdale and a member of the trade mission. Like Miami, he explains, Malaysia is a spot where multiple nationalities congregate. And just as South Florida provides a gateway to Latin America, with major cities in the region an average of four hours away by plane, Malaysia is a four hour jet trip from many of Southeast Asia’s key cities.

Just as Miami is filling with skyscrapers, Malaysia’s symbol has become the towering Petronas twin towers, housing the government oil industry offices and a collection of multinationals. (The towers are the second tallest buildings in the world after the Taipei 101 in Taiwan.) Even Malaysia’s hot and humid weather is similar to that of South Florida.

Trade results for the first three quarters of 2006 show Malaysia’s exchange with South Florida totaling $162 million, down 1.5 percent from the same period a year earlier. Imports dipped 0.5 percent to $143.1 million while Malaysia-bound exports from the Miami Customs District fell 8.7 percent to $18.9 million.

But Malaysian trade officials are unfazed by the slip, explaining that their interest in Miami is not only as a final destination for products but also as a transshipment point to the Caribbean, Colombia and Venezuela. Colombia is Malaysia’s eighth most important trading partner in Latin America, while Venezuela is its tenth.
“Miami is the ideal place to showcase products and warehouse inventories for smaller importers in the Caribbean and Latin America,” says Islahuddin Hassan, director of the Miami office of the Malaysia Trade Center, or Matrade.

The Dominican Republic and Jamaica are top buyers of Malaysian-made electrical machinery while Haiti imports palm oil. Hassan says electrical and electronic machinery are shipped in volume to South America. Colombia is a market for Malaysian-made apparel, machinery, appliances, rubber products and chemicals. Venezuela, meanwhile, imports electrical equipment, shoes, clothing and plastics.
Matrade Miami is not the only office for the region. The entity has branches in São Paulo, Santiago and Mexico City. For the first nine months of 2006, Malaysia’s exports to Latin America grew by almost 40 percent, according to Matrade. By the same token, shipments from Latin countries to Malaysia grew 25 percent.

Putting on the gloves

Malaysia is a hot country, with temperatures in the 80s, but it is hotter still in the rubber glove factory operated by Supermax in the city of Sungai Buloh, 12 miles northwest of Kuala Lumpur. Men and women in blue uniforms and masks sit along conveyor belts where white gloves rhythmically pass by. The gloves are for medical use, for the food preparation industry and for workers at computer chipmaker Intel.
At some work stations, the gloves are inflated with air to test for punctures, just one of the quality-control procedures designed to ensure the rubber gloves meet U.S. Food and Drug Administration standards. “If they don’t meet Food and Drug Administration requirements, gloves can’t enter the country,” says Dato’ Seri Stanley Thai, group managing director at the rubber company. Supermax ships 66 percent of its exports to the Americas, with the United States accounting for 40 percent of that total. Eight percent of those shipments pass through Miami en route to Central America.
In total, the Miami Customs District imported $5.1 million-worth of rubber products, principally gloves, from Malaysia last year. That was nearly double the value of the same imports in 2004.
While Miami is a destination for rubber gloves, it’s just as likely to be a transshipment point for Malaysian wood and wood furniture. Furniture alone makes up more than a quarter of Malaysia’s exports and 37 percent of those shipments goes to the United States. In 2005, U.S. furniture imports from Malaysia rose 24 percent to close the year at nearly $544 million.

Hassan at Matrade says some of the furniture passing through the Miami Customs District continues on the Caribbean. Still, he adds, there is room for more goods to stay in South Florida. He says Malaysian timber could feed the demand from Miami’s construction sector, adding that Malaysian building material suppliers need to begin forging ties with South Florida construction companies.
Expanding trade ties

Because of its geographical proximity, the Miami Customs District has long relied on trading partners in the Caribbean and Latin America. In the past two years, however, the origin of container vessels arriving at South Florida ports has shifted slightly and commerce with Asia has been on the rise. Although trade between Miami and Malaysia grew 30 percent in 2005, the Southeast Asian nation remains Miami’s forty-third trading partner, far behind China, Taiwan and South Korea and just ahead of neighboring Thailand.
That said, the proposed widening of the Panama Canal to accommodate large post Panamax vessels will likely boost Florida and U.S. East Coast trade with Asia. Malaysia is positioning itself to take advantage of that.

Just as Malaysia understands what Miami can offer it as both a market for goods and as a transshipment point, South Florida may do well by diluting its dependency on Latin American markets. For one thing, if – as economists assert – the future is a knowledge economy – then Malaysia is certainly positioned to take advantage of that. Cyberjaya is evidence of that.

Cyberjaya – part of a so-called “multimedia super corridor” – resembles a U.S. college campus, with wide, low-rise buildings separated by lush landscaping and walkways. Inside the air-conditioned buildings, Intel has its global design center and employees of companies such as DHL develop scanners.

Opened in the late 1990s, Cyberjaya was promoted as a “fresh place to think.” Malaysian government and business leaders decided the country should create an information technology hub to attract leading companies. They implemented fiscal incentives to persuade the multinationals to use Cyberjaya as the place to develop cutting edge products and technologies for export. Those incentives include a 10-year exemption from Malaysian corporate taxes, which average 28 percent a year.

“We want Malaysia to start moving from a production to a knowledge-based economy,” says Bill Chin, program director at Multimedia Development Corp., the company that manages Cyberjaya. “We see Cyberjaya as a playground for companies, and we want them to stay and continue to play here.”

Boosting Florida exports

Enterprise Florida says Malaysia’s trade with the state as a whole is on the rise, with Florida imports from the Asian nation doubling to $391.5 million in 2005. Exports rose 55 percent last year to $50.3 million.
Florida’s major exports to Malaysia include computer hardware, medical devices and aircraft parts.
John Diep, Enterprise Florida’s director of the Asia-Pacific region, says commerce between the state and Malaysia has good growth potential in coming years. In particular, he says there are opportunities for Florida exporters.

“There is a tremendous amount of interest on their side in doing business. Their economy is growing and politically the country is very stable,” says Diep, indicating that there was a possibility of another trade mission to Malaysia in 2007. “I wish we had more money to promote Florida even more in Southeast Asia.”
A U.S. Malaysia Free Trade Agreement under negotiation could also boost future trade. In October, the two nations concluded a third round of trade talks but did not report headway on the sensitive issue of government procurement. Malaysian government contracts are awarded to the country’s majority ethnic Malays. The United States wants a trade pact that eliminates that favoritism.

At Matrade in Miami, meanwhile, Hassan is also optimistic about the future – although he cautions that South Florida’s trade growth with Malaysia will also be affected by economic conditions in Latin America.