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a) Building Materials
Within construction, the use of Green building materials has
the potential to provide numerous benefits to commercial
developers and contractors. These could come in the form of
cost savings (decreasing building operating costs through
more efficient energy use - by 9%), an increase in building
value given increased vacancy and more economical use of
space (by 7%) and hence, an overall increase in a building’s
Return On Investment (ROI) (by 6%)64. Domestic and regional
trends indicate increased awareness of these benefits; with
upward trends observed among Green Building Index (GBI)
certified buildings in Malaysia (Figure 5.34) and Leadership in
Energy and Environmental Design (LEED) certified buildings in
Thailand (Figure 5.35) – certifications which help determine the
characteristics a building must have to merit the word “Green”
6566.
Figure 5.34: GBI Certified Projects in Malaysia (2009-2014)
Figure 5.35: LEED Certified Buildings in Thailand (2007-2013)
Given these trends, development in Lembah Chuping will
focus on Green building applications such as internal insulation
boards, piping, internal flooring and roofing. Neighboring parks
will be evaluated based on their ability to complement the
manufacturing of these products.
64 http://www.greenbuildingindex.org/why-green-buildings.html
65 http://www.greenbuildingindex.org/how-GBI-works2.html
66 http://www.archdaily.com/227934/where-is-leed-leading-us-and-should-we-follow/
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The presence of contractors and developers within
surrounding industrial estates can provide downstream
support…
Figure 5.36: Value Chain Support provided by Bukit Kayu Hitam, Prai, Bayan
Lepas and Kuala Ketil Industrial Estates - Green Building Materials
The majority of firms associated with Green Building Materials
within surrounding industrial parks support the industry’s
downstream operations, particularly in ‘Sales, Marketing &
Distribution’ and ‘After Sale Services’ (Figure 5.36). These
players (suppliers of construction materials, hardware
providers and contractors) represent the appropriate target
market for building material manufacturers, being involved in
the sale of construction materials in addition to the actual
assembling of property-based infrastructure. Their presence in
the Northern Corridor implies the presence of a client base and
existing distribution channels. Furthermore, the presence of
just two (2) firms at the ‘Manufacturing and Assembly' stage
implies a lack of competition from surrounding industrial
estates. However, there is a lack of support at the upstream
stage with only one (1) firm involved in the ‘Procurement of
Raw Materials’.
b) Automotive Components
As automotive designers and manufacturers try to produce
cars more economically and less polluting, the materials that
cars are made out of and their environmental credentials both
in manufacture and disposal are becoming increasingly
important. One of the advantages of Green automotive
components are lighter, more cost-effective vehicles; with the
rule-of-thumb being that 5% less weight equates to average
fuel savings of 3%67. In addition, the materials used in
production may not be as affected by petrol prices as
petroleum-based products, having been manufactured from
67 http://www.plasticsnews.com/article/20120731/NEWS/307319980/automotive-giants-turn-to-bioplastics-
worldwide
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renewable products. In fact, prominent auto companies are
already using Green materials in component manufacturing; 3
of which have been ranked in the top 10 biggest auto
companies in 201468 (Table 5.4). The size and reach of these
companies could indicate the presence of a global market for
Green automotive components. Products with existing
commercial success include Green automotive mats and
carpets, door panels, and seat cushions.
Table 5.4: Use of Green Materials among Prominent Auto Companies
(2012)
Company Materials Used Application
Soy-foam Seat Cushions
Ford Door Bolsters
Kenaf
Fiat Soy-Polylol Seat Cushions
Toyota Sugar-Case based PET Vehicle Liners
(Polyethylene Terephthalate)
Mazda Bio-fabric Seat Covers
Mercedes Wood Fibres, Bio-plastics Door Panels
Daimler Kenaf, Flax, Sisal Door Linings
Source: Forbes
Automotive service providers could act as end-markets
for Green materials produced in Lembah Chuping …
Figure 5.37: Value Chain Support provided by Bukit Kayu Hitam, Prai, Kuala
Ketil and Sungai Petani Industrial Estates – Green Automotive Components
68 http://www.forbes.com/pictures/eimi45eilh/no-10-saic-motor/
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The majority of surrounding industrial estates could provide
downstream support for Green auto components
manufacturers in Lembah Chuping (Figure 5.37). This support
will come in the form of auto-service providers and suppliers of
spare parts; with interior maintenance and repair serving as
the main industrial application for kenaf-based products. In line
with this, the integration of Green components (front and back
bumpers, door panels, seat backs, package trays and
dashboards) is currently being promoted by the Malaysia
Automotive Institute (MAI); with MAI believing that the
programme is of national importance – being part of a
roadmap to support Malaysia becoming an ASEAN hub for
Green automotive applications69.
Conclusion – Green Building Materials & Automotive
Components
Potential investors should focus on establishing
relationships with suppliers of raw materials …
Figure 5.38: Proposed Green Materials Investor Functions
Overall, the support provided by surrounding estates for both
building materials and automotive components at the
downstream stage focuses on ‘Sales, Marketing and
Distribution’ and ‘After-Sales Services’ functions (Figure 5.38).
As investors into Lembah Chuping will primarily be involved in
activities associated with ‘Material Processing’ and
‘Manufacturing and Assembly’, the critical areas of value chain
support will be among upstream operations (more specifically
‘Procurement of Raw Materials’). Potential investors will have
to establish sufficient relationships with kenaf
harvesters/vegetable oil producers to ensure a sustainable
supply of necessary raw materials.
69 Malaysian Automotive Institute
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5.3.2 Electrical & Electronics (E&E)
For E&E, the focus will be placed on sectors that are in line
with existing government initiatives; Entry Point Programs
(EPPs) outlined in the Economic Transformation Programme
(ETP)70 defined as follows (Figure 5.39):
i) Semiconductor Manufacturing
EPP 3: Developing Integrated Circuit Design Firms
EPP 4: Supporting the Growth of Substrate
Manufacturers and Related Industries
ii) Solar Component Manufacturing
EPP 6: Growing Wafer and Cell Producers
EPP 7: Increasing Solar Module Producers
iii) Advanced LED Manufacturing Functions
EPP 8: Developing LED Front-End Operations
EPP 9: Expanding LED Packaging and Equipment
Source: PEMANDU
Figure 5.39: Snapshot of Malaysia's E&E Industry
70 http://etp.pemandu.gov.my/Electrical_-%E2%97%98-_Electronics-@-Electrical_-%E2%97%98-
_Electronics.aspx
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a) Semiconductor Manufacturing
Figure 5.40: Semiconductor Manufacturing Value Chain
Integrated Circuit Design and Substrate Manufacturing involve
the design and creation of essential electronic components
such as transistors, resistors, capacitors in addition to the
joining of these components onto a semiconductor wafer;
intermediate functions of electronic manufacturing that require
highly skilled employees and the use of intellectual property71.
The government is currently trying to encourage a Malaysian
presence in both sectors, therefore their development in
Lembah Chuping could facilitate the provision of higher value
added services within the domestic industry (Figure 5.40).
Therefore, in this Chapter, surrounding industrial parks will be
assessed based on their ability to complement these proposed
functions; where wafer fabrication and substrate
manufacturing will be the areas of focus for development
within ‘Intermediate Component Production’ (Figure 5.40). The
semiconductor value chain is defined as follows (Table 5.5):
Table 5.5: Value Chain Definition – Semiconductor Manufacturing
Stage of Value Chain Description
R&D Provision of Device/Integrated Circuit
Design Services
Intermediate Component Supply of Machinery/Manufacturing of
Production Wafers, Substrates, Diodes, Transistors,
Sensors, Printed Circuit Boards, Wire
Components, Diodes, Transistors,
Switchboards, Plastic Components
Testing/Packaging Provision of Injection Moulding/ Product
Testing Machinery and Services
Final Testing/Assembly Provision of Product Testing
Services/Machinery, in addition to final
component assembly services/ machinery
Distribution Physical Packaging/Wholesale of E&E
Components
End Product Wholesale/Retail Distribution/Repair and
Assembly/Distribution Maintenance of Semiconductors or E&E
Components
Source: DISCO – Kiru, Kezuru, Migaku Technologies
71 http://etp.pemandu.gov.my/upload/etp_handbook_chapter_11_electronics_and_electrical.pdf
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Sungai Petani & Kuala Ketil
Firms within Sungai Petani and Kuala Ketil could serve as
end-markets for intermediate components
Figure 5.41: Value Chain Support Provided by Sungai Petani and Kuala
Ketil – E&E72
Support for intermediate component production among firms in
Sungai Petani and Kuala Ketil is primarily focused on
downstream operations; the majority of relevant firms are
involved in the ‘Distribution and ‘End Product
Assembly/Distribution’ stages of the value chain (Figure 5.41).
Among downstream operations, business activities generally
deal with E&E component supply; with service offerings
including the distribution and repair of semi-conductor related
products (printed circuit boards, electrolytic capacitors, cable
connectors). These firms could potentially serve as end-
markets for intermediate semi-conductor components (wafers)
produced in Lembah Chuping.
Kulim Hi-Tech Park
Despite the presence of competing firms in KHTP, Lembah
Chuping can leverage the lack of firms at this stage of the
value chain on a national level…
Figure 5.42: Value Chain Support provided by Kulim Hi-Tech Park -
Solar Component Manufacturing
72 Support firms may perform activities related to one or more stages of the value chain, hence the total
number of firms may not correspond to the number of firms indicated in this figure
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Within Kulim Hi-Tech Park, there are two (2) firms that deal
specifically with wafer fabrication; Infineon Technologies and
SilTerra. Among the other tenants, three (3) other players are
involved in the other aspects of semiconductor production;
wafer purification and the supply of machinery and the
manufacturing of components for semiconductor testing and
assembly (Figure 5.42). Traditionally, Malaysia’s focus in E&E
has been on assembly, relatively lower value-added activities,
while countries like Taiwan, South Korea and Singapore are
involved in higher value-added activities in research and
development (R&D), design and manufacturing. In addition,
Integrated Circuit (IC) trade statistics point towards a need to
develop IC component manufacturing domestically; as
Malaysia’s contribution was valued at just 3.65% of the total
global market in 2014, ranking 9th behind Taiwan, South Korea,
China, the US, Japan and Singapore (Figure 5.42). Therefore,
despite some competition from firms in KHTP, the
development of semiconductor manufacturing in Lembah
Chuping could contribute further to the overall
development of wafer fabrication activities in Malaysia
towards higher value-added products.
Source: Observatory of Economic Complexity - Massachusetts Institute of
Technology
Figure 5.43: Integrated Circuit Export Contributions by Country (2014)
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Prai Industrial Estate & Bayan Lepas FTZ (Free Trade
Zone)
Despite the presence of wafer fabrication facilities,
Penang’s abundance of midstream and downstream firms
could decrease E&E component lead times…
Figure 5.44: Value Chain Support Provided by Prai & Bayan Lepas E&E
Given that Penang is an established E&E hub, firms within Prai
and Bayan Lepas are able to provide support across the value
chain; with a large proportion facilitating the testing and
assembly of semiconductor-related products; about 37% of the
total firms in Bayan Lepas and 27% in Prai (Figure 5.44)
respectively. Of note, among the firms involved in
‘Intermediate Component Supply’, only 12% of firms deal
with wafer fabrication and substrate manufacturing; 4
firms in Bayan Lepas and none in Prai (Figure 5.45).
Despite the potential for these firms to compete with substrate
and wafer related activities in Lembah Chuping, the lack of
these facilities at a national level (there are currently only five
(5) wafer fabrication facilities in the whole of Malaysia), and the
alignment of these developments with government initiatives
(Figure 5.46) point to the feasibility of further developing these
capabilities within the Northern Corridor. Overall, the presence
of midstream and downstream support from Penang could
assist with component testing and assembly procedures.
Figure 5.45: Composition of Intermediate Component Firms - Penang
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Conclusion
Overall, there is no lack of midstream and downstream
support for the semiconductor sector in Lembah Chuping
Figure 5.46: Proposed Semiconductor Investor Functions
Value chain support provided for Lembah Chuping’s proposed
semiconductor sector is primarily focused on the industry’s
midstream and downstream operations; with an abundance of
firms providing testing, product assembly and end-product
distribution services. Given the lack of upstream support,
investors into Lembah Chuping may want to consider ‘R&D’
(integrated circuit design) in addition to ‘Intermediate
Component Production’ should they have the capability or
capacity.
b) Solar Component Manufacturing
Figure 5.47: Solar Component Manufacturing Value Chain
Solar component manufacturing encompasses the production
and testing of all necessary parts (cells, modules and wafers)
to produce solar panels (Figure 5.47). Currently, there are only
five (5) companies who produce solar components in Malaysia;
with a combined production capacity73 of 2.3 GW. Globally,
demand for panels is on the rise; a result of a decrease in price
(Figure 5.48), and from a local perspective, an embargo on
Chinese manufactured solar components has contributed to
increasing the sales of Malaysian produced panels
internationally74.
73 The cells and wafers produced have the capacity to generate a certain amount of energy
74 http://nyti.ms/12AhpER
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Source: Clean Technical
Figure 5.48: Price of Solar Panels per Watt
In line with this, PEMANDU has a goal of making Malaysia the
second largest producer of solar components globally75, hoping
to increase domestic production capacity by 10 times (to 23
GW) by 2020. The solar value chain is defined as the following
(Table 5.6):
Table 5.6: Value Chain Definition - Solar Component Manufacturing
Stage of Value Chain Description
R&D/Design Product Design, Development, Evaluation
Component Supply and Testing of Materials
Construction/Installation
End Product Supply Manufacture/Supply of Solar Wafers, Cells,
After Sale Service/Maintenance Modules and Panels
Source: First Solar
Construction of Required Infrastructure/
Installation of Solar Panels
Generation of Solar Power
Maintenance/Repair of Panels, Recycling of
Panels at the end of their useful life
75 http://etp.pemandu.gov.my/electronics_and_electrical
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Kulim Hi-Tech Park & Bayan Lepas FTZ (Free Trade Zone)
Despite the limited number of solar firms in KHTP,
company size and the range of services offered could
compete with solar component infrastructure in Lembah
Chuping
Figure 5.49: Support provided by KHTP and Bayan Lepas FTZ – Solar
Component Manufacturing
Despite the fact that there are a limited number of firms
undertaking solar component manufacturing in the area
surrounding Lembah Chuping (Figure 5.49), the size of these
players points towards their status as global competitors. First
Solar alone reached a cumulative production of 3,000MW
(more than 38,000 solar panels output)76 and were ranked in
the top 10 biggest listed solar companies in 201477. Within
KHTP, First Solar offer extensive design, installation,
operations and maintenance services in addition to component
supply, while Panasonic Energy’s competency is solely
focused on component supply. Furthermore, within Bayan
Lepas, TT Vision Technologies provides machinery and
solutions for solar wafer and cell inspection. Despite the fact
that TT Vision Technologies’ offerings could complement
operations (being used to test panels), the production
capacities of First Solar and Panasonic Energy could compete
with operations in Lembah Chuping.
Conclusion – Solar Component Manufacturing
Given the competition and the lack of solar service
providers in the Northern Corridor, potential investors
should possess capabilities across the value chain
76http://seda.gov.my/gohome.php?omaneg=00010100000001010101000100001000000000000000000000
&y=45&s=1035
77 http://www.solarplaza.com/top10-stock-listed-companies-market-capitalization2/
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Figure 5.50: Proposed Solar Component Manufacturing Investor Function
Despite the production capacities of both Panasonic Energy
and First Solar Sdn Bhd, the Malaysian solar industry is still in
its infancy; there are only 5 companies present domestically,
all of whom offer services across the value chain78.
Furthermore, a lack of solar service providers79 in the Northern
Corridor could hinder the actual installation and distribution of
panels; the total number of providers in Kedah and Penang
make up only 10% of the total in Malaysia, with no service
providers residing in Perlis (Figure 5.50). As a result, potential
solar component investors considering investing in
Lembah Chuping should offer services across the value
chain to ensure a stable supply of support for their
services, and to compete with existing players in the
Northern Corridor.
Northern Corridor Service Providers: 10%
of Total
Figure 5.51: PV Service Providers in Malaysia (2015)
78 Websites of SEDA, First Solar, Q-Cells Solar, AUO SunPower, Panasonic Energy Sdn Bhd and EQ
Solar
79 Provide design and installation services in addition to supplying solar components (modules and
inverters)
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c) LED Manufacturing
$0.76
Figure 5.52: LED Manufacturing Value Chain
Currently, Malaysia’s LED market is worth USD 40 billion,
employing over 200,000 workers80. Despite the size of this
sector, the majority of domestic Solid State Lighting (SSL)81
companies are involved in the industry’s downstream
operations; contract manufacturing of heating and optical
components, assembly, packaging, testing and distribution
services. The present state of the industry is such that there is
currently a market for specific LED component manufacturers
(Figure 5.51); various semiconductor and television
manufacturers have vertically integrated as a mode of market
entry and are now offering these components82. In line with
this, the focus of Lembah Chuping will be on developing
niche LED component sectors (Substrate/OLED
manufacturing and the introduction of epitaxy-based
companies) in line with the government’s E&E focus (Figure
5.52). For the purpose of this Chapter, the LED Manufacturing
value chain will be defined as follows:
Table 5.7: Value Chain Definition - LED Manufacturing
Stage of Value Chain Description
K Research, Design and Testing to Improve Product
u R&D Efficacy and to Simplify Package Design
l
Ciomponent Production Manufacture/Supply/Testing of Optical, Electrical
m and Mechanical LED Components – Wafers,
Semiconductors, Resistors, Transistors, Modules,
H Chips, Arrays
i Lamp Production
- Testing/Final Assembly of all Components into an
T LED/OLED Light Bulb (Plastic Injection Moulding
Leuminaire Production Services Included)
c
h Lighting Design Manufacture/Supply of Light Fixtures
PInstallation Services Service Providers: LED Design for
a Industrial/Commercial/Residential Applications
Service Providers: LED Installation and
Replacement for Commercial/Residential Properties
Source: AT&Kearney
80 http://www.businesscircle.com.my/malaysian-led-consortium-targets-rm100m-sales/
81 A type of lighting that uses semiconductor LEDs, organic LED (OLEDs), and polymer LEDs (PLEDs) as
sources of illumination
82 http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/how-led-is-revolutionizing-
the-lighting-sector/10192
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Kulim Hi-Tech Park
Large players in KHTP could pose a competitive threat to
front-end LED operators in Lembah Chuping
Figure 5.53: Value Chain Support Provided by KHTP - LED Manufacturing
Within KHTP, three (3) companies have the potential to
compete with other front-end LED operations in Lembah
Chuping (Figure 5.53). These are Silterra, Infineon and
Entegris Malaysia Sdn Bhd. Though they largely focus on
semiconductor component manufacturing, these players have
leveraged their proximity to Penang’s E&E sector to delve into
LED component and lamp production; offering wafers
(classified as an aspect of ‘Component Production’ that will be
undertaken by Lembah Chuping) in addition to strips, light
engines, drivers, and lamps (classified under ‘Lamp
Production’). Given the varied industrial applications of these
products, they could pose a threat to new front-end LED
entrants in Lembah Chuping.
Prai Industrial Estate & Bayan Lepas FTZ (Free Trade
Zone)
Despite the presence of large vertically integrated LED
component manufacturers in Penang, the scope of
products offered is fairly limited
Figure 5.54: Value Chain Support Provided by Prai Industrial Estate & Bayan
Lepas FTZ - LED Manufacturing
Given Malaysia’s role as a producer of LED products, Penang
as an E&E hub has firms along multiple stages of the LED
manufacturing value chain (Figure 5.54). As with players in
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KHTP, the majority of component manufacturers are vertically-
integrated semiconductor firms. However, their range of
components offered is quite limited; with the majority of firms in
Bayan Lepas producing LED drivers, and only one (1)
substrate manufacturer present – in Prai Industrial Estate
(Figure 5.55). This point to the feasibility of developing other
government-promoted front-end LED operations83 in Lembah
Chuping. Furthermore, midstream and downstream firms, (in
‘Lamp Production’, ‘Luminaire Production’ and ‘Lighting
Design’) represent end-markets for front-end components
produced in Lembah Chuping.
Figure 5.55: Composition of LED Component Manufacturers - Bayan
Lepas FTZ & Prai Industrial Estate
Conclusion – LED Manufacturing
Potential investors should focus on niche component
manufacturing while also possessing some midstream
capabilities
Figure 5.56: Proposed LED Investor Functions
From a local perspective, domestic manufacturers are gearing
up for an increase in regional demand; with China expected to
account for 45% of the global general lighting market by
83 Substrate (sapphire and carrier), epitaxy, mirror and phosphor manufacturing
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202084, and Thailand’s LED market expected to grow by 30%
per annum over the next 5 years85. In line with this demand
and the increasing global development of niche component
sectors, potential investors into Lembah Chuping should align
themselves with government promoted aspects of LED
‘Component Production’ – Materials and Substrate
manufacturing, Epitaxy manufacturing, and LED wafer
fabrication. Although there are only two (2) firms undertaking
the above activities within the Northern Corridor, there is a
concentration of other vertically-integrated component firms
with both upstream (‘Component Production’) and midstream
(‘Lamp Production’’) capabilities within Lembah Chuping’s
surrounding vicinity. Hence, investors into Lembah Chuping
should still specialise in niche86 ‘Component Production’
but also look to attract somewhat vertically-integrated
firms (with ‘R&D’ and ‘Lamp Production’ capabilities), to
compete with existing players in the region.
5.3.3 Halal Industries
Figure 5.57: Halal Industry Value Chain
Malaysia’s profile as a halal exporter has changed over the
past 10 years; with the focus shifting from F&B (farm to table87)
to include higher value added goods such as cosmetics and
body care products. Support for the local halal industry
continues to be provided in the form of increased funding, with
the SME Bank announcing another RM200 million to its Halal
Industry Fund in 2013 for SMEs to add value or improve their
halal products88. This focus is consistent with Phase 2 (2010-
2015 of HDC’s (Halal Development Corporation) Halal Industry
Master Plan; aiming to establish Malaysia as a preferred
84 http://www.chinapost.com.tw/life/science-and-technology/2012/06/05/343310/Malaysia-LED.htm
85 http://www.matrade.gov.my/en/archive/archive-press-release-2013/2727-thailand-led-lighting-market-on-
the-rise-15-february-2013
86 Refers to the manufacturing of one or more of the components outlined under ‘Component Production’ –
Table 6
87 refers to the stages of the production of food: harvesting, storage, processing, packaging, sales,
and consumption
88 http://www.freemalaysiatoday.com/category/business/2013/03/22/halal-industry-fund-for-smes-to-
improve-halal-products/
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location for halal-related businesses (Figure 5.57). For the
purpose of this Chapter, activities along the halal industry
value chain will be defined as follows (Table 5.8):
Table 5.8: Value Chain Definition - Halal Industries
Stage of Value Chain Description
F&B Pharmaceuticals
R&D Development of new Clinical development &
products/ more efficient testing of new therapeutic
production processes products for regulatory
approval & patient delivery
Procurement of Raw Sourcing/Purchasing of Raw Materials for Manufacturing
Materials
Inbound Logistics Receiving, warehousing of raw materials, distribution of
materials to manufacturing facilities
Material Processing Testing and Processing (Filtration, Purification, etc) of Raw
Materials to make them adequate for Manufacturing
Manufacturing and Production and Testing of End Products
Assembly
Outbound Logistics Warehousing and distribution of finished goods
Distribution, Sales & Wholesale/Retail Distribution of end products
Marketing
a) F&B Manufacturing
Halal food and beverage manufacturing encompasses the
production of fast-moving consumer goods, primary meat
products and non-alcoholic beverages for domestic
consumption and international export. Within Malaysia, this
sector is already established; with Halal F&B manufacturers
making up approximately 60% of all Halal certified companies
2009 and 2012 (Figure 5.56). Trade statistics also point
towards the export potential of these goods; halal F&B exports
increased from 37.3% to 40.8% of all halal exports between
2012 and 2013. Given this, another aspect of Lembah
Chuping’s focus will be on Halal F&B manufacturing.
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Source: Halal Industry Development Corporation (HDC) via JAKIM
Figure 5.58: Total Number of Halal Certified Companies in Malaysia (2009-
2012)
Despite potential competition from surrounding estates,
the range of existing products and the availability of
downstream support could facilitate the entry of additional
F&B manufacturers into Lembah Chuping
Figure 5.59: Value Chain Support provided by Bayan Lepas, Bukit Kayu
Hitam, Prai, Kuala Ketil & Sungai Petani Industrial Estates - Halal F&B
manufacturing
Leveraging their product export potential and the extensive
logistics infrastructure available, the strongest F&B presence is
observed in Penang; with 65% of all relevant firms undertaking
F&B ‘Manufacturing and Assembly’ residing in Prai and Bayan
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Lepas (Figure 5.58). Despite being involved in similar
operations, these firms may not compete with halal F&B
activities in Lembah Chuping given that the range of products
offered is fairly limited. Existing players from surrounding
estates are involved in sauces, different food powders, coffee
and confectionary products, hence F&B manufacturers of other
products to may consider locating its operations in Lembah
Chuping With regards to the industry’s downstream operations,
Lembah Chuping’s proximity to the Thai border (15 km) could
facilitate international exports, while firms in surrounding
industrial estates could aid domestic product distribution; given
the presence of wholesalers, restaurants and convenience
stores.
Conclusion – F&B Manufacturing
As with the case of halal pharmaceuticals, potential
investors should have some degree of control over their
ingredients and manufacturing processes to ensure
regulatory compliance
Figure 5.60: Proposed Halal F&B Investor Functions
As with the case of pharmaceutical manufacturing, potential
investor focus on the ‘Material Processing’ and ‘Manufacturing
and Assembly’ stages must be accompanied with some control
over the ‘R&D’ and ‘Procurement of Raw Materials’ stages of
the value chain; to ensure that ingredients and processes are
JAKIM certified. Furthermore, potential investors may have to
outsource certain testing procedures at the ‘Material
Processing’ and ‘Manufacturing and Assembly’ stages; to
ensure that products are halal (Figure 5.60). This implies a
need to establish relationships with facilities that can perform
these services. The scope of F&B distributors also implies that
the supply of end-products could have a regional reach; with
facilities in Singapore and Thailand.
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b) Pharmaceutical Manufacturing
Halal pharmaceutical and cosmetic manufacturing is a
potentially lucrative sector; occupying 37% of the 2.3 trillion
USD global halal market in 2013 (Figure 5.61). This sector is
already on the rise domestically, with Malaysia exporting $615
million USD worth of halal cosmetics and personal care
products in 2013 – a 19% increase from 2012. Furthermore,
this type of manufacturing requires a highly skilled labour
force; with the majority of pharmaceutical science jobs
requiring masters or doctorate qualifications89. The
development of this sector will not just cater to international
product demand, but will also be consistent with Perlis’ goal of
creating skilled jobs in Lembah Chuping.
Source: Halal Industry Development Corporation (HDC) via Euromonitor
Figure 5.61: Global Halal Market Size in 2013 (USD)
Kulim Hi-Tech Park
KHTP could provide R&D support to Halal pharmaceutical
manufacturers in Lembah Chuping…
Figure 5.62: Value Chain Support provided by Kulim Hi-Tech Park –
Halal Pharmaceutical Manufacturing
89
http://educationportal.com/articles/Pharmaceutical_Science_Professions_Job_Duties_and_Info_About_Car
eers_in_P
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Upstream support from KHTP could be provided in the form of
R&D capabilities (bio-processing, compounding, synthesis,
filtration and purification of relevant chemicals), in addition to
active ingredient/ excipient supply; these services are
consistent with pharmaceutical requirements at the ‘R&D’,
‘Procurement of Materials’ and ‘Material Processing’ stages of
the value chain (Figure 5.62). Domestic trends show that the
majority of Malaysian pharmaceutical players have the ability
to manufacture generic and OTC (over-the-counter) drugs, but
lack the necessary R&D capabilities to develop high-value
added prescription products; up to 70% of pharmaceutical
demand for contemporary diseases (high cholesterol, diabetes,
cardiovascular ailments and cancer) is satisfied by
international sources90. Given this, the proximity of these
services could facilitate the development of higher-value added
halal pharmaceutical products in Lembah Chuping.
Kuala Ketil
The presence of midstream component- support firms in
Kuala Ketil could increase the efficiency of
pharmaceutical operations
Figure 5.63: Value Chain Support provided by Kuala Ketil - Halal
Pharmaceutical Manufacturing
Despite Kuala Ketil’s small size, there are firms present that
are able to provide midstream support to Lembah Chuping’s
halal pharmaceutical sector. Relevant players focus on
medical equipment sterilisation, goods packaging and rubber
glove manufacturing; products and services that can be used
in both the ‘Material Processing’ and ‘Manufacturing and
Assembly’ stages specifically when combining relevant raw
materials, and preparing finished products for distribution
(Figure 5.63). It is important to note that these organisations
are not involved in the actual manufacturing of
90 PhAMA Industry Factbook
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pharmaceuticals, but that they manufacture components
that can be used in the pharmaceutical manufacturing
process. Therefore, the presence of these firms within
close proximity could facilitate more efficient operations;
given that the quick sourcing of these components could
decrease pharmaceutical product lead times.
Prai and Bayan Lepas FTZ (Free Trade Zone)
Despite the presence of large pharmaceutical
manufacturers, the availability of downstream support
from Bayan Lepas could facilitate the regional distribution
of halal pharmaceutical products
Figure 5.64: Value Chain Support provided by Prai & Bayan Lepas FTZ – Halal
Pharmaceutical Manufacturing
Within Penang, downstream support is available from logistics
providers (freight forwarding, warehousing and customs
brokerage services) and pharmaceutical distributors
(wholesalers and retailers) from Bayan Lepas (Figure 5.64).
The presence of these services within close proximity to
Lembah Chuping could facilitate the distribution of halal
pharmaceuticals, while also aiding the transport of raw
materials and finished goods to and from Lembah Chuping.
However, the presence of two (2) pharmaceutical
manufacturers, both of which possess a diverse range of
products, could create a difficult environment for potential
pharmaceutical entrants into Lembah Chuping. Despite not
being explicitly labelled as halal certified, these players’
regional reach (given the presence of multiple offices around
South East Asia) and product range could compete with that of
a new pharmaceutical player in Lembah Chuping.
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Conclusion – Pharmaceutical Manufacturing
Potential investors should have some control over their
upstream processes and raw materials, while also establishing
relationships with additional distributors to enable increased
market penetration…
Figure 5.65: Proposed Halal Pharmaceutical Investor Functions
Given that drug companies in surrounding estates could
compete with pharmaceutical operations in Lembah Chuping,
potential investors could use halal pharmaceutical
manufacturing as a form of competitive advantage. Despite the
availability of downstream support, it is limited (only 6 firms
across all relevant industrial estates involved in ‘Distribution,
Sales & Marketing’) (Figure 5.65). Therefore, despite their
focus being on ‘Material Processing’ and ‘Manufacturing
and Assembly’, potential investors should look into
having sufficient control over their upstream processes
and raw materials (to make certain that they are JAKIM
certified), while also establishing relationships with
distributors outside of the surrounding area to facilitate
more widespread domestic and international product
penetration.
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5.3.4 General Support
There are certain surrounding industrial parks that provide
products and services which may complement all proposed
industries. This Chapter will detail the specifics of these
offerings, and the methods by which they are able to
complement operations in Lembah Chuping.
An abundance of logistics firms in surrounding estates
could facilitate the import and export of goods to and from
Lembah Chuping...
Figure 5.66: Logistics Support for All Proposed Industries
Firms in surrounding parks undertake logistics efforts for a
variety of industries. The services offered range from
transportation and distribution (traditional, open box and
refrigerated – domestic and cross border), container haulage
(to both domestic and international destinations), warehousing,
and material transfer. For the majority of these players, their
locations are strategic given their proximity to international
borders; with storage and warehousing facilities in various
cities in Thailand, Vietnam, China and Singapore. This range
of capabilities has the potential to cater to the inbound and
outbound logistics needs of all proposed industries –
facilitating the extensive distribution of raw materials,
intermediate goods and end-products (Figure 5.66).
Sungai Petani Industrial Estate
...While industrial construction firms within other parks in
Sungai Petani could aid facility renovation efforts
Figure 5.67: Composition of Plant/Facility Related Firms - Sungai Petani
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In addition to firms in Sungai Petani Industrial Estate providing
value chain support to some of the proposed industries, there
are also 23 firms offering products and services related to
large-scale facility manufacturing located within other industrial
estates in the town of Sungai Petani (Figure 5.65). Stainless
steel, metal fabrication, flooring and welding organisations
(56% of firms) can be used for facility construction or
renovation, while machine and control system supply, material
handling, and electrical engineering services (44% of firms)
can be applied to industrial processes across all proposed
industries. The presence of these firms within close proximity
to Lembah Chuping is something that can be leveraged on for
firms seeking to undertake maintenance/expansion of facilities
in the future.
5.4 Key Salient Points
The development of a sustainable business ecosystem requires the
co-existence of the proposed industries, relevant supporting functions,
surrounding industrial estates, and Institutions of Higher Learning
(IHLs). To provide adequate support for prospective investors in
Lembah Chuping, new developments should be established within the
park (Industrial Park Supporting Functions), while relationships
should also be established with complementary surrounding
institutions (Value Chain Support and Competition). This sub-
Chapter aims to summarise relevant findings and recommendations
from Chapter 2.
Industrial Park Supporting Functions
Figure 5.68: Summary of Proposed Industrial Park Supporting Functions
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Chuping Valley Development Plan
The proposed initiatives under Industrial Park Supporting Functions is
summarised based on four (4) categories:
i) Lifestyle Infrastructure
An inflow of human talent as a result of job creation may require
support in the form of:
Housing: To be available within an adequate distance from
the park
Lifestyle services: (e.g. healthcare and F&B outlets) To
be available within adequate distances, within a 4km radius
(accessibility) and in adequate numbers (availability) within
centrally located areas of the park
Kangar could be a source for the above, however its distance
from Lembah Chuping might limit its accessibility for park
employees. As such, having new developments in the Lembah
Chuping area may serve to attract and retain human talent in the
state. Transport Infrastructure and Services
In line with the Green theme of Lembah Chuping, and the
promotion of park accessibility, a shuttle service should be
offered internally within the park Connection between the park
and other transport networks is also important (connection to
major road highways, interstate/inner-city rail and bus services).
Currently, state transport infrastructure to support this is limited;
however there is potential to further develop the interstate KTMB
service that runs along the electrified double track railway91. As
the park develops, an area to consider would be extending this
service to other areas of the state (more than 2 stops). This
could further enhance the well-being of employees of the park,
by making the park more accessible.
ii) Human Capital Development and Requirements
A park service could assist in meeting the demand for human
talent with the supply of human talent (IHLs); given the need for
coordination between firms and IHLs. An internship programme
could also be part of this industry-academia collaboration, as
both firms and IHLs benefit; firms can train and scout potential
human talent, and IHLs boost student employability.
An institute to provide semi-skilled training could also be set up
in Lembah Chuping to:
Further assist in providing for human talent demand
Improve skill levels for new and existing labour in the state
The institute should focus on semi-skilled (vocational) training;
courses can be tailored to include Green themes (such as
environmental sustainability) to cater for proposed industries.
iii) Other Supporting Functions
To assist in the overall development of the state, a park business
matching and advisory unit could link potential collaborators
(value chain suppliers) together; potentially increasing firm
income through the creation of new business opportunities.
Furthermore, adequate utilities to support industry operations in
91 Gamuda website
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the state should be an area to consider enhancing with the
growth of the park. Providing a stable electricity supply is key for
industry operations, while water and waste treatment should also
be considered. As the industrial park grows, a waste-to-resource
solution for water and waste output would be in line with the
Green theme; limiting the environmental impact of the park,
while also providing economic benefits.
Value Chain Support and Competition
To summarise the support offered by each industrial estate, each park
is evaluated with three (3) distinct criteria. These are:
The Park’s Relevance to Each Proposed Industry
Number of firms (in each park) Providing Value Chain
Support92
Number of firms (in each park) Competing93 with Lembah
Chuping’s Proposed Activities
Based on these criteria, the following scale has been developed.
Figure 5.69: Complementary Industrial Estate Scoring System
Bayan Lepas Prai Industrial Bukit Kayu Kulim High Sungai Petani Kuala Ketil
Free Trade Estate Hitam Tech Park Industrial Industrial
Zone Estate
Estate
Green M aterials
Building 44 - - -4
Materials - 44
Automotive -44
Components 244
E& E 2- -
Semi-conductor 2- -
LED 44 -
Solar 4-4
22 - - 24
Components 45 -
4- - 14 15 20
Pharmaceutical
F&B Halal
General Support 42 -
TOTAL
222
445
24 22 11
Figure 5.70: Summary of Complementary Industrial Estates
92 Defined based on the activities outlined in Figures 11, 18, 25, 29 and 34
93 If industrial park operations overlap with Lembah Chuping’s focus; given definitions in Figures 11, 18, 25,
29 and 34
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Scores given take into account the net complementary effect of each
estate (Figure 5.70); only firm capabilities (product and service
offerings), and the number of complementary and competing firms at
each value chain stage are considered when calculating each estate’s
score. Full methodology can be referred to in the Appendix 4.
From the table above, it can be seen that despite the fact that Penang
may pose competition to Lembah Chuping, by virtue of it being an
established E&E hub, the industrial parks in Penang actually offer the
most value chain support (on a net basis) to Lembah Chuping (in
terms of the number of firms). As such, the presence of Penang
should not be viewed as a deterrent to having an E&E industry in
Lembah Chuping, rather, it may offer an advantage that can be
leveraged on.
Availability of Midstream and Downstream Support
Composition of Green Materials Value Composition of E&E Value Chain
Chain Support (Number of firms) Support (Number of firms)
1
(6%) 1
(6%)
Upstream 56 73 Upstream
Midstream (27%) (35%) Midstream
Downstream Downstream
15 78
(88%) (38%)
Composition of Halal Value Chain
Support (Number of firms)
17 6 Upstream
(35%) (13%) Midstream
Downstream
25
(52%)
Figure 5.71: Composition of Value Chain Support - Surrounding
Industrial Estates
Overall, value chain support from surrounding industrial estates is
mainly concentrated in the midstream and downstream segments,
except for the E&E industry where the proportion of firms that can
potentially provide upstream, midstream and downstream support are
more equally distributed.
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i) Assembly, Packaging & Testing Services
For E&E in particular, the composition of firms in surrounding
industrial estates is indicative of Malaysia’s position on the
value chain; serving as a location for the contract outsourcing
of testing, assembly and packaging services in addition to
original equipment manufacturing. In addition to service
providers, these processes are also undertaken by
organisations involved in the provision of intermediate
components and machine supply. The presence of these
companies in Lembah Chuping’s surrounding vicinity could
result in a decrease in lead times94 for the production of E&E
components and end-products (Figure 81).
ii) Distribution Support
Distribution support is provided by several types of institutions.
Green Materials manufacturers have access to contractors,
developers and auto-service providers; supplying materials
while also providing installation and maintenance services. For
E&E, products are distributed by electronics component
wholesalers; with the majority supplying components and end-
products and only a select few providing repair and
maintenance services. The distribution of halal goods is also
primarily undertaken by wholesalers – within both F&B and
pharmaceuticals. The provision of maintenance and repair
services could facilitate the entry of new Green products to
replace traditional materials, while the presence of distributors
(for E&E and halal industries) within close proximity to the Thai
border points to potential for regional exports and/or a foreign
client base.
Relationships with ‘R&D’ and ‘Raw Material Supply’ Functions
Despite the availability of midstream and downstream support, in
general upstream support is limited for the industries proposed for
Lembah Chuping. The majority of surrounding parks do not include
R&D or raw material supply functions; prospective investors would be
responsible for procuring these services elsewhere. Within E&E,
relationships with an R&D function (internal or external) is important in
ensuring constant product innovation95, while a stable supply of raw
materials is essential for firms in Green materials manufacturing to
provide an uninterrupted stock of end-products. For firms in Halal
industries, most need to have a degree of control over their methods
of sourcing and production to ensure regulatory compliance. The
above points is the significance of prospective investors establishing
(or having established) relationships with firms performing these
upstream functions.
94 the time between the initiation and completion of a production process
95 http://www.mddionline.com/article/using-rd-outsourcing-competitive-tool
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SUMMARY
i) Currently, Lembah Chuping is isolated from available lifestyle infrastructure
such as education, healthcare, sports and recreation and entertainment.
Therefore, the state government should develop additional lifestyle
infrastructure in the areas surrounding Lembah Chuping
ii) The provision of shuttle services by the state government will increase
accessibility within the park and connectivity to surrounding areas
iii) The setting up of a talent matching service, internship programmes and a
vocational training institute would help to meet the various skill
requirements of potential investors
iv) It is important for park management to liaise with nearby IHLs and the
NCIA to tailor make courses for producing talent to meet the needs of the
proposed industries
v) As Lembah Chuping develops, the state government may need to invest in
additional utilities infrastructure to accommodate further developments and
an influx of workers
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6.0 GOVERNANCE
MODEL
Chuping Valley Development Plan
6.0 GOVERNANCE MODEL
Selecting a suitable governance structure for an industrial park is
essential, as it constitutes an authority for decision-making supported
by a set of business protocol to administer and manage the industrial
park1. The choice of governance structure for an industrial park could
impact aspects covering:
• Level of authority and control – the decision making power might
be concentrated at the top level or delegated to those at the next
level
• Funding – the stakeholder(s) responsible to request and source for
park operating and development funds
• Park administration – the administrative model to manage the day-
to-day park operations and its tenants
6.1 Formation of the Governance Structure for Lembah Chuping
There are two (2) steps which could be considered in setting up the
governance structure for Lembah Chuping:
6.1.1 Step 1: Setting up of a Delivery Management Office
The Perlis state government could establish a dedicated unit
in the form of a Delivery Management Office ("DMO”) as a
project management consultant to manage and monitor the
initial development of the project. The DMO would report to the
Timbalan Setiausaha Kerajaan (Pembangunan) of Perlis
(“TSUK Pembangunan Perlis”) on all matters relating to
Lembah Chuping and would consist of the following
stakeholders:
Northern Corridor Implementation Authority (NCIA):
secures funding from the federal government for the initial
development of infrastructure in Lembah Chuping.
State Economic Planning Unit of Perlis (UPEN Perlis):
to provide input and feedback to the DMO on areas for
improvement in Lembah Chuping.
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1 http://www.cognizant.com/InsightsWhitepapers/Governance-Model-Defined.pdf
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Figure 6.1: Governance Structure of DMO
The DMO would play a crucial role in Lembah Chuping by:-
• Coordinate closely with all stakeholders to ensure the delivery of
planned initiatives
• To report to TSUK Pembangunan Perlis on any major and/or
potential issues or obstacles for Lembah Chuping
• To manage the technical issues on the development of Lembah
Chuping
As a start, the DMO would be led by a Project Manager who would be
assisted by 6 personnel in charge of the following aspects for Lembah
Chuping:-
Figure 6.2: Delivery Management Office (DMO) Structure
It should be noted that the DMO team size and roles might change as
deemed necessary when it is required. These additional team
members would be sourced externally or from other government
agencies. On the contrary, excess team members could be allocated
to other development projects when the initial phase of the project is
near completion.
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6.1.2 Step 2: Setting up of a Separate Legal Entity as a Park
Operator
A legal entity will be formed to assume the responsibilities as a
park operator in Lembah Chuping. Similar to the model
adopted by KHTP and other states in Malaysia, this legal entity
would operate under the custody of State Economic
Development Corporation of Perlis (“SEDC”), which in turn
would report to the Perlis State Government pertaining to the
latest development of Lembah Chuping. SEDC Perlis would
also be the responsible party to appeal for funding from the
Federal Government to support the operations of Lembah
Chuping.
The Board of Directors would be chaired by the Menteri Besar.
The other previous key stakeholders in DMO (i.e. UPEN and
NCIA) would sit in the board with the addition of other relevant
government agencies such as the Town and Urban Planning
Department of Perlis (JPBD Perlis) and Malaysian
Investment Development Authority (MIDA) to deliberate on
issues that may arises from the development of Lembah
Chuping. The composition of directors in the board might be
extended in the future to cater to the expansion of the park’s
operations.
Figure 6.3: Structure of Legal Entity as a Park Operator Model
In contrast to KHTP, the establishment of a local authority
("pihak berkuasa tempatan”) in Lembah Chuping might not be
necessary as it involves the requirement for an enactment of
law governing the local authority to gazette Lembah Chuping,
which could be time consuming. In this case, Lembah Chuping
could remain under the jurisdiction of Majlis Perbandaran
Kangar as the local authority. In addition, it was recommended
that a one-stop centre is set-up under the Majlis Perbandaran
Kangar reduce bureaucracy in the procedure and process of
business administrative matters.
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Model Park on Park Operator Governance Model Structure
– Kulim Hi-Tech Park
Federal Government
Kedah State Government * The Central Communicator
* Requests for soft loans and grants
Kedah State Economic Development from the Federal Government
Corporation
* The developer and Kulim Technology Park Corporation Sdn Pihak Berkuasa Tempatan * The local authority
manager of KHTP Bhd (KTPC)
5 Subsidiariesunder KTPC:
KTPC InformationTechnologies Sdn Bhd
Park Governance ModelKedahBioResourcesCorporationSdnBhd
KTPC Resort Development Bhd
Kulim Technology Management Sdn Bhd
Kulim Golf and Country Resort Sdn Bhd
1. Deals directly with TNB, JKR, TM on park
infrastructure issues
Assessing the Park Operating Model of KHTP 2. Not under jurisdiction of MP Kulim
Board of Directors:
•Menteri Besar (Chairman) 3. To help speed up licensing and other
•State Exco compliance matters
•Government agencies
Consultant: M IGHT
Figure 6.4: Governance Structure of the Kulim Hi-Tech Park
Looking at the governance model of Kulim Hi-Tech Park
(KHTP) as depicted in the figure above, the Kedah State
Economic Development Corporation (SEDC) plays a vital
role in ensuring smooth operations in the park by serving
as the central communicator between the Kedah State
Government, the Federal Government, the Kulim Technology
Park Corporation and the local authority of KHTP.
The Kedah SEDC reports directly to the Kedah State
Government on the latest developments in the park. As
such, both parties would be able to work hand-in-hand to carry
out necessary strategic planning initiatives for the future
development of KHTP. Apart from that, the Kedah SEDC also
has direct access to the Federal Government in requesting
for soft loans and grants to fund the development of
KHTP. Such a structure has allowed KHTP to obtain funds
directly from the Federal Government instead of having to go
through the Kedah State Government, which has helped to
expedite the process of acquiring funds.
There are two (2) parties reporting directly to the Kedah
SEDC on the overall development of KHTP i.e.:
i) Kulim Technology Park Corporation Sdn Bhd (KTPC),
which is the developer and manager of KHTP; and
ii) An independent local authority (or "Pihak Berkuasa
Tempatan”) established solely to handle infrastructure,
licensing and compliance matters/issues related to KHTP.
KTPC would serve the following roles under this structure:
a) Investment Vehicle for Stakeholders
KTPC exists solely to own assets, which include the
shares, real estates, patents, and trademarks
copyrights of the five (5) subsidiaries. All proceeds
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Chuping Valley Development Plan
including dividends, rent or interest attained from these
five (5) subsidiaries will be transferred directly to KTPC
for the park’s reinvestment purpose.
b) Risk Management Tools
The holding company structure of KTPC could protect
its company assets by limiting the risk of liabilities
exposed to KTPC. In the event of any damage and
losses occur in any of these subsidiaries, the liability
would only be imposed on the affected subsidiaries.
The holding company in contrast, would be sheltered
from the damages and losses incurred on the affected
subsidiaries provided if it does not co-sign a liability
agreement with the affected subsidiary.
c) Decision Maker in the Operations of KHTP
With a 100% ownership in each of the subsidiaries,
KTPC has the absolute authority to make decisions
relating to policy and management matters of these
subsidiaries. KTPC has the right to decide on the
composition, appointment and removal of the
management team members involved in the park
operations.
The principal business activities of the 5 wholly-owned
subsidiaries under KTPC are mentioned below:-
KTPC Information Technologies Sdn Bhd
provides software solution and consultations
(software solution, development, integration,
implementation and system training),
telecommunication services (one stop agent for the
State of Kedah, safety audit and developing
telecommunication tower), and acts as the one stop
agency (OSA) on ICT for the State of Kedah
(Implementing and monitoring of ICT blueprint
programs 2011-2015)2.
Kedah BioResources Corporation Sdn Bhd
helps to develop the national economy by providing
Biotechnology services and facilities in the Northern
Region of Malaysia3.
KTPC Resort Development Bhd focuses on
property development and the management of the
Kulim Golf and Country Resort4.
Kulim Technology Management Sdn Bhd
provides products and services related to
Information Technology (IT) infrastructure, network
2 KTPC Information Technologies Sdn Bhd – About Us; http://kedah-it.com.my/About.html
3 KBioCorp – About Us; http://www.kbiocorp.com.my/KBIO/
4 KTPC Resort Development Berhad - http://www.khtp.com.my/86-subsidiaries/170-kedah-resort-
development-sdn-bhd-krdb
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Chuping Valley Development Plan
and system integration, advanced engineering,
project management and consultancy5.
Kulim Golf and Country Resort Sdn Bhd
facilitates the overall maintenance and development
of the Kulim Golf and Country Resort6.
In addition, the Kedah Menteri Besar, Dato’ Seri Mukhriz
Mahathir is the Chairman of KHTP. The Board of Directors
consists of representatives from the Kedah State Exco and
government agencies such as the Malaysian Investment
Development Authority (MIDA) and the Malaysian Industry-
Government Group for High Technology (MIGHT).
Besides the KTPC, an independent local authority has been
established to handle the infrastructure matters/issues in
KHTP. The independent local authority has its own fund
collected from the KHTP tenants to manage, maintain and
upgrade the infrastructures in the park. It does not fall under
the jurisdiction of the Kulim’s Members of Parliament but
instead, the independent local authority reports directly to the
Kedah SEDC on matters/issues related to the infrastructures in
the park. Additionally, this independent local authority could
also help to speed up the licensing and other compliance
requirements for the park tenants.
6.2 Recommendation on the Administrative Structure for Lembah
Chuping
As a separate state government-owned legal entity has been
established to manage and operate Lembah Chuping, a Management
Committee would be formed internally in spearheading the legal
entity to execute its stipulated functions.
The Management Committee is accountable to the Menteri Besar
(who chairs the Board) and the Board Members, is responsible in
setting the overall strategic direction for Lembah Chuping, making
sure that the park is well run and delivering its preset goals. The figure
below depicts the proposed structure of the Management Committee:
Figure 6.5: Divisions to be incorporated under the Management Committee
The Management Committee would comprise of representatives
from the Performance Management Division, Risk Management
Division, Administrative Division and Industrial Support Division.
The suggested stakeholders would be addressed in the next section.
5 Kulim Technology Management Sdn Bhd - http://www.ktmsb.com.my/
6 Kulim Golf and Country Resort - http://www.kulimgolf.com.my/
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Chuping Valley Development Plan
The rationale behind the election of representatives from each division
is to promote a check and balance where no party has the
absolute control over strategic and operational decisions related
to Lembah Chuping. As such, the Management Committee would be
in-charge to address and resolve any issue/difficulty raised by any of
these divisions. If required, the Management Committee would
escalate the issue/difficulty to the Board of Directors’ level.
Conversely, electing representatives from each division to be part of
the Management Committee would also help to promote
transparency for the operations in Lembah Chuping by clearly
defining the assigned duties for these representatives.
The roles and responsibilities of each of the proposed 4 divisions
sitting under the Management Committee are spelled out below:
i. Performance Management Division
M anagement Committee
Performance M anagement Division
Figure 6.6: Performance Management Division
The fundamental role of the Performance Management Division is to
preserve the identity of Lembah Chuping as a successful green
industrial park through on-going assessment, monitoring and
improvement of its performance. Based on the overall objective and
strategic direction set by the Management Committee, this division
shall assist in developing the relevant work plans. It would also decide
on the performance goals and appropriate key performance indicators
to meet the established goals (for instance, minimum number of new
tenants annually, investment value per year and percentage of gross
domestic product for the park). Also, it would identify underlying issues
which have affected the park’s performance and highlight them to the
Management Committee.
ii. Risk Management Division
M anagement Committee
Risk M anagement Division
Figure 6.7: Risk Management Division
Risk management involves identifying, managing and where required,
mitigating potential risks and issues that might impact Lembah
Chuping.
This division is responsible in setting risk management policies and
strategies, implementing risk response processes developed for
managing risk on a day-to-day basis; promoting risk awareness
culture within Lembah Chuping via initiatives such as education to
tenants and park employees; and making sure that risk management
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Chuping Valley Development Plan
is incorporated throughout the operations of Lembah Chuping. This
approach can help to minimise financial loses, service disruption,
adverse publicity, and threats to public health or compensation claims.
iii. Administrative Division
M anagement Committee
Administrative Division
Figure 6.8: Administrative Division
The objective of the Administrative Division is to provide administrative
support to the park management of Lembah Chuping. Such
administrative support would cover the following:-
Finance and accounts bookkeeping for the park management
Payroll and other human resources matters of the park employees
Tenancy related matters including rental collection from the
tenants on behalf of the park management
Legal contracts/documentation (e.g. rental/lease agreements with
the tenants)
Sourcing of vendors and procurement of goods and services for
park operation and maintenance
iv. Industrial Support Division
Figure 6.9: Industrial Support Division
The Industrial Support Division would play a pivotal role to the
industries in Lembah Chuping in facilitating their growth through
business advisory and networking opportunities, talent sourcing and
cultivating as well as complementing their day-to-day business
operations via adequate infrastructure support.
6.3 Proposed Stakeholders for the Management Committee and
Divisions
These stakeholders have the decision-making authority that could
affect the park. It is vital to select stakeholders with the relevant
background, experience and understanding of the state that could
help to spearhead the development of Lembah Chuping.
Simultaneously, it is also essential to understand the respective roles
and responsibilities of these stakeholders.
Four (4) relevant stakeholders have been shortlisted for the proposed
Management Committee as shown in the diagram below:
June 2015
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Chuping Valley Development Plan
Figure 6.10: Proposed Stakeholders
The four (4) shortlisted stakeholders are the Malaysian Investment
Development Authority (MIDA), Economic Planning Unit of Perlis
(UPEN Perlis), Northern Corridor Implementation Authority (NCIA),
and the Town and Urban Planning Department of Perlis (JPBD). The
selection of these stakeholders is based on their current functions and
job scope which might be relevant for the development and
management of Lembah Chuping. Broadly, NCIA and UPEN Perlis
would be covering aspects such as socio-economic and policy
planning, budget management, projects and investors
evaluation, stakeholders engagement and management. Whilst
JPBD would play a part in land usage and infrastructure planning
for the park, the facilitation of businesses growth and incentivising
of investors in Lembah Chuping would be handled by MIDA.
Below are the detailed roles and responsibilities to be undertaken by
each stakeholder for the development of Lembah Chuping. It is
noteworthy that this is a preliminary recommended job scope for the
stakeholders and they may be extended/ revised in the future to cater
for the park operation expansion.
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Chuping Valley Development Plan
Table 6.1: Possible Roles and Responsibilities of the Four (4)
Stakeholders
Roles and Responsibilities M IDA UPEN NCIA JPBD
Perlis
i. To promote foreign and local investments in the manufacturing and services sector
√ √ √by providing prospects w it h informat ion on the opportunities for investment in
Lembah Chuping.
ii. To undertake planning for industrial development by assisting companies w hich
intend to invest in Lembah Chuping to establish operations, as w ell as facilitates
√ √ √ √the implementation of their projects through direct consultation and co-operation
w ith the relevant authorities at both the federal and state levels.
iii. To facilitate the exchange of information and co-ordination among institutions
√ √ √engaged in or connect ed w ith industrial development, as w ell as facilitating
interested companies to look for joint venture partners in Lembah Chuping.
iv. To recommend policies and strategies on industrial promotion in Lembah Chuping
√ √ √ √by advising investors on government policies and procedures.
v. To evaluate applications from interested applicants for manufacturing licences and √
expatriate posts; tax incentives for industries, R&D, training institutions and
softw are development; duty exemptions on raw materials and components, and
machinery and equipment.
vi. To provide strategic directions and to devise policies and strategies in relation t o √√
socio-economic development in Lembah Chuping and Perlis as a w hole.
vii. To promote and accelerate the development of Lembah Chuping as part of the
√aspirations to develop the northern region of M alaysia into a w orld-class economic √ √ √
region and a choice destination for investment, w ork and living.
viii. To establish a performance management system to monitor the performance of √ √√
the tenants of Lembah Chuping.
Source: Consultant Analysis
6.4 Key Salient Points
An effective and comprehensive governance structure encompasses
critical elements such as risk and financial management, strategic
planning, level of authority and administrative model.
At the initial development stage of Lembah Chuping, a Delivery
Management Office (“DMO”) under the purview of the Timbalan
Setiausaha Kerajaan (Pembangunan) will be formed to operate as the
park manager. The role of the DMO model is to:-
• Ensure the infrastructure development are carried out as planned
• To facilitate and coordinate among stakeholders to resolve issues
and challenges faced
The table below summarises the key details of the DMO:-
Table 6.2: First Step – Setting up of a Delivery Management Office (“DMO”)
Key Stakeholders Northern Corridor Implementation Authority (“NCIA”)
State Economic Planning Unit of Perlis (“UPEN Perlis’)
Roles and To plan and coordinate the development of the
Responsibilities industrial park
To engage with key stakeholders in ensuring the
planned initiatives are adhered to the timeline
To assess and track the progress of the industrial park
June 2015
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Chuping Valley Development Plan
A separate state government-owned legal entity under the custody of
SEDC Perlis will subsequently take over the role of park manager
from the DMO. The SEDC Perlis would be the central communicator
between the federal and the state government to seek funding to
support the development of Lembah Chuping. The table below
summarises the key details of this proposed legal entity:-
Table 6.3: Second Step - Setting up of a State Government-owned Legal
Entity
Key Stakeholders Menteri Besar of Perlis (as the Chairman)
SEDC Perlis (as the entity’s custodian)
Board members consisting of the State Exco and
selected government agencies
*The composition of directors in the board might be extended in the
future to cater to the expansion of the park’s operations.
Roles and To perform as the role park manager and operator for
Responsibilities Lembah Chuping
Recommendation of the Administrative Structure for Lembah Chuping
A Management Committee would be formed internally to spearhead
the legal entity in executing its functions. It would be assisted by the
following divisions:-
1) Performance Management Division – to assess, monitor and
improve the performance of Lembah Chuping
2) Risk Management Division – to identify, measure and manage
potential risks that would impact the development of Lembah
Chuping
3) Administrative Division - to provide effective administrative support
for the park management of Lembah Chuping
4) Industrial Support Division – to execute a pivotal role to the
industries in Lembah Chuping in facilitating the growth of tenants
in the industrial park
Proposed Stakeholders for the Management Committee and
Divisions
The selection of stakeholders is based on their current functions and
job scope relevant to the development and management of Lembah
Chuping. For now, the shortlisted stakeholders are:-
UPEN Perlis
NCIA
Malaysian Investment Development Authority (MIDA)
Town and Urban Planning Department of Perlis (JPBD Perlis)
June 2015
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Chuping Valley Development Plan
The list of stakeholders and their respective job scope may be
extended/ revised in the future to cater for the expansion of park
operation.
SUMMARY
There are two (2) key steps for developing the governance structure
for Lembah Chuping:
Step 1: Delivery Management Office
i) A Delivery Management Office (DMO) would need to be set up as
a temporary measure since there are no resources currently
dedicated to the project.
ii) The DMO will monitor the planning and design of Lembah
Chuping, and ensure that developments are executed as planned.
In addition, the DMO could also need to work with the NCIA to
obtain funding from the federal government
Step 2: Setting up a Park Operator
i) Eventually it is advisable to form a separate legal entity to manage
the park once basic infrastructure has been developed
• The Central Communicator
• Requests for soft loans and
grants from the Federal
Government
• The developer and manager of
Lembah Chuping
ii) The Perlis SEDC would be the central communicator to seek
funding for the development of Lembah Chuping.
iii) The board of director for this entity could include representatives
from:
June 2015
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Chuping Valley Development Plan
iv) A one-stop centre should be set up under the Majlis Perbandaran
Kangar to expedite business administration processes on-site.
v) The proposed administrative structure for the park is illustrated as
follows:
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Chuping Valley Development Plan
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Chuping Valley Development Plan
7.0 INVESTOR ANALYSIS
Chuping Valley Development Plan
7.0 INVESTOR ANALYSIS
7.1 Introduction
Three industries have been selected for further analysis based on
Perlis’ state development goals and initial investigations into Lembah
Chuping’s resources. These industries are:
• Green Energy Generation
• Green Manufacturing (Materials and E&E)
• Halal Industries Manufacturing
The viability of the above industries for Lembah Chuping has been
determined by analysing the advantages and disadvantages of each
industry using the Porter Diamond Model. To determine the viability of
proposed industries should they be located in Lembah Chuping, the
factors assessed are (see section 4.2 for more details):
i) Government;
ii) Market Structure and Rivalry;
iii) Demand Conditions;
iv) Supporting Industries;
v) Factor Conditions; and
vi) Chance
An overview of the elements considered in our analysis for each
industry is presented below:
i) Solar Energy Generation
Solar energy generation is proposed as one of the industries,
leveraging on the physical characteristics of Perlis. Perlis receives
among the highest levels of solar radiation in Malaysia. Furthermore,
the 10th Malaysia plan highlights the plan to reduce the country’s
dependence on fossil fuels by shifting to renewable energy
alternatives1.
ii) Green Manufacturing
a) Green materials: Automotive components and building
materials
b) Electricals and electronics (E&E): Semi-conductors, light-
emitting diodes (LEDs) and solar components
Green material firms use renewable resources for value added
manufacturing activities; while Green E&E firms have resource
efficient processes to limit harm to the environment. In terms of
government incentives, green technologies are promoted under the
10th Malaysia Plan2; in addition to a range of entry point projects
(EPPs) promoting the E&E3 sector.
1 Oil, Gas and Energy: Building Up Renewable Energy and Solar Power Capacity, Entry Point Project
(EPP) 10, (10th Malaysia Plan)
2 Business Services: Jump-starting a Vibrant Green Technology Industry, EPP 4 (10th Malaysia Plan)
3 Electrical and Electronics: Developing Integrated Circuit Design Firms (EPP3); Supporting the Growth of
Substrate Manufacturers and Related Industries (EPP4); Growing Wafer and Cell Producers (EPP6);
Developing LED Front-end Operations (EPP8); Expanding LED Packaging and Equipment (EPP9) (10th
Malaysia Plan)
June 2015
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Chuping Valley Development Plan
iii) Halal Industries
a) Pharmaceutical product manufacturing
b) Food and beverages (F&B) product manufacturing
The halal industry is a developing market, with strong global demand
across a range of products. Domestically, the halal industry is being
promoted through the Halal Industry Master Plan (HIMP). Although
halal industries may not be explicitly defined as being Green, a study
done by UUM (Universiti Utara Malaysia) has found that certain
criteria used by JAKIM to audit halal companies are environmentally
focused. This implies that proposed halal industries could be in line
with the Green criteria.
A summary of the relevant points relating to each industry’s viability
can be summed up in the following diagram:
Porter Diamond Model Forces
Market Structure Demand Supporting Factor Overall Industry
Conditions Industries Conditions Viability
Government and Rivalry Chance
Demand for Limited availability of Physical Government support, demand
Policies Investments into renewable energy service providers in Characteristics Upcoming conditions and market structure are
seem to be the solar sector from is present the Northern Corridor There is currently foreign labour favourable for developing a green
effective – both domestic and a lack of adequate restrictions may energy sector, however the
Green Energy there has been foreign sources However, fossil supporting affect profitability in possible lack of market maturity
Generation an increase in increasing fuel subsidies are electrical the manufacturing and supporting electrical
solar hindering the Infrastructure in sector infrastructure may hamper industry
investment Despite solar adoption of Lembah Chuping viability in Lembah Chuping
over time component alternative Low quality of
manufacturing energy sources Availability of domestic Green Materials: Although
growth increased Human Capital education system favourable government policies,
production is in line Surrounding may hinder demand conditions and physical
with government institutions of graduate conditions support the development
initiatives higher education involvement in of green manufacturing, a lack of
and Perlis’ existing high-value added design services may be hindering
Green Policies Green Materials: Green Materials: Green Materials: workforce could sectors demand for green building
Manufacturing have been A large domestic Green building Lack of Malaysian supply talent materials
(Green Materials less effective supply of raw trends indicate companies offering However, skilled The trend in
because of the materials may help domestic and green building labour may lack government E&E: Despite the presence of
& E&E) risk associated to attract investors regional consulting/design industry-specific initiatives over the promoted sectors in Penang,
with green demand services expertise/training past 15 years favourable government policies and
technology E&E: indicates a further demand conditions support the
Sector has high E&E: Production E&E: Penang offers Logistics increase in development of these activities in
growth potential trends of energy support services for Infrastructure sophisticated Chuping Valley.
Penang’s close efficient appliances E&E (midstream and Existing and initiatives and
proximity could deter and LED lighting downstream) upcoming incentives Although demand conditions are
potential investors indicate transport favourable, the lack of supporting
from investing in opportunities infrastructure The appeal of industries and infrastructure in the
Lembah Chuping domestic and could facilitate the products from form of logistics support, R&D
regional markets flow of human established capabilities could hinder industry
capital and goods industries development.
Qualification Market Global halal trends Lack of domestic to and from (construction
for a halal penetration may be and domestic R&D capabilities Lembah Chuping materials, E&E and
certification limited; illegal to indicators indicate despite increased pharmaceuticals)
Halal may increase place halal logo on demand collaboration with may hinder the
Manufacturing costs prescription drugs large MNCs mass adoption of
(compliance) (pharmaceuticals) new offerings
Growing number Lack of Halal
of halal F&B Logistics companies in
companies, Malaysia
indicating demand
Figure 7.1: Viability of Proposed Industries in the Lembah Chuping
7.1.1 Proposed Criteria for “Green”
The development plans for Lembah Chuping focus on Green
manufacturing and Green energy generation. For the
development of Lembah Chuping, the State of Perlis wants to
attract potential investors who share this vision.
The term “Green” manufacturing can be interpreted in two
ways: either the manufacturing of “Green” products, or the
“Greening” of the manufacturing process itself, e.g. reducing
pollution and waste and reducing emissions. For Lembah
Chuping, the focus will be on the latter: a Green manufacturing
process. Hence, all investors who are interested in investing in
Lembah Chuping should meet the criteria of “green
manufacturing”. In order to select potential investors for
Lembah Chuping, a set of criteria for what is understood as
“Green” has been be compiled.
June 2015
Page 7-2
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