Glove makers: Extend reinvestment allowance [New Straits Time (Malaysia)]
(New Straits Time (Malaysia) Via Acquire Media NewsEdge) PETALING JAYA: RUBBER glove makers want the government to extend the reinvestment allowance for a further 15 years, despite the International Trade and Industry Ministry rejecting their appeal a year ago.
In stressing the importance of tax breaks for the rubber glove industry, Malaysian Rubber Glove Manufacturers Association (Margma) president Lim Kwee Shyan said this will help the sector meet its RM30 billion export earnings target by 2020.
Last year, rubber glove exports amounted to only RM10.56 billion a year.
Margma comprises 45 ordinary members representing 90 per cent of local glove manufacturers and 85 associate members who are suppliers and service providers to the industry.
Many Margma members will see their reinvestment allowance incentive expiring from this year onwards.
Lim said a longer time frame is needed in order for Margma members to reach full automation, which will allow them to make gloves faster to meet world demand and reduce dependency on foreign labour.
"We are talking about structural transformation that will have a positive impact on the economy. If the government allows reinvestment allowance to continue, it will help the industry hasten its transformation to be more research- and product development- driven," he told Business Times.
Lim said annual global demand for rubber gloves was about 150 billion pieces two years ago and is projected to grow to 160 billion this year. Out of the total, close to two thirds are shipped out from Malaysia.
While initial automation has helped the glove sector reduce its dependency on low-skilled foreign workers, Lim said an additional 20,000 skilled and semi-skilled foreign workers are still needed to operate the machinery. There are currently over 30,000 foreign workers employed by glove producers.
Lim said the glove sector spends RM1.6 billion a year on capacity upgrade. Of this, between RM300 million and RM500 million a year go towards factory automation.
For 2013, Lim expects the sector to continue last year's earnings momentum, driven by strong world demand, particularly in the healthcare, food and electronics sectors.
"The expenditure for healthcare is growing. The food-handling sector also uses a big amount of gloves while the electronics sector requires niche variants like cleanroom gloves.
"The industry generally did well last year despite acute labour shortage and somewhat unfriendly investing environment. As far as production of gloves is concerned, the volume continues to rise," he added.
Natural rubber latex price currently averages RM5.30 per kg while nitrile latex costs around US$1.10 (RM3.47) per kg.
In tandem with trade norms, rubber glove makers had also lowered the price of gloves despite having to contend with higher production cost following the government's implementation of minimum wages.
The next scheduled price hike for natural gas and electricity in January next year may also be a cause for concern. Currently, rubber glove manufacturers using less than 2mmscfd of natural gas are paying RM16.07 per mmBt.
Lim also highlighted that since the rubber glove industry is export-oriented, it is exposed to the United States debt ceiling crisis and expiry of the European Union's Generalised Scheme of Preferences (EU GSP) at the end of this year.
"The US crisis is curbing glove orders and the expiry of the EU GSP will see Malaysian glove shipments being slapped with import tariffs of 2 per cent for surgical gloves and 2.7 per cent for other gloves," he said.
"We're not asking for handouts. What we want is due incentives from the government. With the right support, the rubber glove industry can help boost the country's gross national income further," he added.
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