MALAYSIA: Glove makers want government to extend tax break

He estimated the full year's performance to approximate that of 2012's RM10.56 billion.

Margma comprises 52 ordinary members representing 90 % of local glove manufacturers, and 92 associate members made up of suppliers and service providers.

Among its members that are publicly traded on the stock exchange are Top Glove Corp Bhd, Supermax Corp Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd and Careplus Group Bhd.

Many Margma members will see their reinvestment allowance incentive expiring from this year.

Glove-making is considered high technology and knowledged-based because it's an integral part of the medical device sector.

Lim confirmed that Margma members have been investing a lot of money, time and effort in mechanisation and semi-automation at their productions lines.

"We are talking about structural transformation that is having a positive impact on the economy," he said. "We're not asking for handouts. What we want are the due incentives from the government. With the right support, the rubber glove industry can boost the country's gross national income.

"Our members have been hiring more engineers and chemists to improve their manufacturing processes and medical glove development," he said.

"If the government allows reinvestment allowance to continue, it would help our members speed up the transformation to be more research- and product-development driven," he added.

Lim said the glove-making sector is an important contributor to the country's economy because the multiplier effect will also benefit ancillary services, such as freight forwarding, packaging and currency exchange.

Since 2010, the industry's automation drive has helped members reduce their dependency on low-skilled foreign workers. But as the global demand for gloves continues to mount, Lim said an additional 20,000 skilled and semi-skilled foreign workers are needed to operate the machinery to produce gloves.

Currently, there are more than 48,000 foreign workers employed by the glove manufacturers as their factories expand in a bid to secure a tighther grip on the global market share.

"In the past, we needed about 15 workers to produce one million gloves but with progressive automation now, we can eventually reduce the headcount by two thirds," he added.

He also said the glove sector spends RM1.6 billion per year on capacity upgrade. Of this amount, about RM500 million goes towards factory automation.

In the last few years, Lim said world demand for rubber gloves amounted to about 160 billion pieces annually.

This year, the figure is projected to grow five to 10 % to 170 billion pieces. Of the total, two-thirds are from Malaysia.

"The expenditure for healthcare in emerging markets is growing. The food handling sector also uses a big amount of gloves, whereas the electronic sector requires niche variants like clean room gloves," he added.

Currently, natural rubber latex is averaging at RM5.50 per kg while nitrile latex cost has settled at around USD 1.10 (RM3.59) per kg. As feedstock prices come down, so have glove prices. Cheaper nitrile latex has prompted many rubber glove makers to churn out more of the synthetic variant.

"Many of our members have taken up more nitrile glove production. As of last year, the export ratio of nitrile to natural rubber was 55:45. This year, we foresee demand for nitrile to surpass that of natural rubber," he said.

Malaysia ships some 30 % of its rubber gloves to the European Union (EU).

Lim noted that since the start of this year, Malaysia has graduated from the EU's Generalised Scheme of Preferences (GSP) status with regards to rubber gloves.

This means shipments from Malaysia are slapped with import tariffs of two per cent for surgical gloves and 2.7 % for other gloves. Rubber glove shipments from Indonesia and Thailand, however, continue to enjoy tax-free status.

When asked on the outlook for this year, Kim replied that it remains uncertain. "We'll have to focus on factors within our control like productivity at our factories. The extension of government tax breaks for the glove sector will go a long way in helping our members to better innovate for a sustained growth."

Source: Daily "Business Times", Kuala Lumpur; 15 Jan 2014(Syed Rashid Ali, Karachi, Pakistan)