Singapore, May 11, 2010: From a growth perspective, Malaysia has identified medical devices as a segment with significant potential in an effort to attract high-value investment to the manufacturing sector. With a steady increase in investments and targeted incentives, the government’s efforts to boost the country’s profile as a manufacturing and research base look set for success amidst competition from China and neighboring ASEAN countries.

Malaysia is the world’s largest producer and exporter of medical gloves and catheters, supplying 80 percent of the world market for catheters, and 60 percent for rubber gloves. Malaysian companies also make non-rubber based products made from plastics, silicone and metal alloys, which together accounted for around 56 percent of the export. “Malaysia offers a low cost and high quality environment to medical devices companies to grow their businesses in the region,” says Mr Wulff of Sentinext.

The Malaysian government has attempted in recent years to encourage domestic manufacturers to expand production into more technologically advanced products and develop services such as Information and Communications Technology and other support related services. This has been detailed in the Third Industrial Master Plan 2006—2020.

The production of medical gloves has moved up the value chain, with higher quality and specialty gloves such as low protein, powder-free medical gloves, safety gloves and clean room gloves, being manufactured. Other medical device products manufactured in Malaysia include syringes, surgical equipment, blood transfusion sets, blood pressure transducers, dialysis solutions, medical gases, hypodermic/spinal/AV fistula needles, medical tubes and bags, diagnostic radiographic equipment, orthopedic products and procedural kits.

According to Malaysia Medical Device Association (MMDA), there are about 300—400 companies operating in the country. MMDA is a local trade body of local manufacturers, importers, manufacturing representative, suppliers, tendering agents involved in the distribution, sales and services of medical devices and related healthcare products & equipment within Malaysia, Of these, about 200 Malaysian owned companies are involved in the production of surgical and examination gloves, while the major foreign-owned companies make other products such as catheters, safety intravenous cannulae and needles, orthopedic products, medical electrodes, dialyzers and contact lenses. Malaysia’s Third Industrial Master Plan (2006-2020) is focused on moving the entire manufacturing sector up the value chain as a pre-requisite to attaining developed nation status by 2020. Malaysia is now seeking international investment in non-rubber based medical device research and manufacturing such as electro-medical, cardiovascular, orthopedic and in vitro devices. Under this plan, the Malaysian government has placed greater emphasis on the development of the medical device industry to enable it to advance and sustain its global competitiveness.

Foreign medical device companies are being encouraged to undertake outsourcing of components and sub-assemblies for medical devices in Malaysia, as well as establish manufacturing facilities with design and development activities. In tandem with global trends in demand, the following growth areas are being actively promoted:

1. Combination products

2. Home-care and self care products

3. In-vitro diagnostic devices

4. Cardiovascular devices

5. Orthopaedic devices and

6 Medical and surgical equipment and instruments

In a recent statement to Oxford Business Group, the Malaysian Industrial Development Authority (MIDA) claimed that Malaysia cannot compete with labor-abundant, low-cost countries and need to target manufacturing industries that are of both high growth and high value. Medical devices are a growing industry and those listed above are at the higher end of the value chain, hence where strong potential for FDI is

greatly anticipated. While labor cost is an important consideration for investors, the medical devices industry, more than other manufactured products, requires advanced human capital and sound infrastructure; two areas where Malaysian officials say the country has a competitive advantage over less developed nations in the region.

The government has recognized the contribution of the medical device industry to the economic growth and actively facilitates local manufacturers to position themselves in the global arena. One of the identified strategies is the adoption of a harmonized system for the placement of medical devices into the global market. In this respect, Malaysia plays the lead role in the ASEAN as well as Asian regions to spearhead the development of a harmonized system for the placement of medical devices into the ASEAN and Asian markets.

In addition to MMDA, another association named Association of Malaysia Medical Industries (AMMI) is also working to promote the medical devices industry in the country. According to Espicom Business Intelligence the medical equipment market in Malaysia will increase from estimated $585 million in 2008 to $717 million by 2011.

From 2003 to 2007 imports have nearly doubled, growing at an attractive CAGR of 15.4 percent. Imports are expected to continue growing at a strong rate, in line with rising health expenditure growth, and the country’s

heavy reliance on imports to meet its healthcare needs. The Malaysian Cabinet has approved the development

and implementation of medical device regulatory program which will address public health and safety issues as well issues related to medical device trade and industry. The regulatory program will ensure timely access to safe and effective medical device and prevent unsafe and defective medical devices from reaching the market. In the context of trade and industry, the regulatory program will provide a favorable environment for the growth of the industry with the existence of mechanisms for fair and rules-based trade competition.

The medical devices sector is expanding its manufacturing value chain by moving from basic processes and conventional assembly to product and process research and development, design and prototyping, distribution and logistics. Most medical products manufactured in Malaysia are self-regulated and conform to internationally recognized quality standards such as the Food and Drug Administration (US), Department Of Health (UK) and Bundesgesundheitsamt (Germany).

Regulatory support

The Ministry of Health, Malaysia has implemented the medical devices regulatory system in stages. The government is keen on putting in place a mandatory registration and full enforcement of the regulation. A new department within the Ministry of Health’s Engineering Division, the Medical Devices Bureau has been established to oversee the development of the medical devices regulatory system. It has been agreed in principle that the regulations would be aligned to the guidelines drawn up by the ASEAN Harmonization Working Party (AHWP) and the Global Harmonization Work Force (GHTF).

The medical devices sector is one of the priority sectors identified for promotion and further development, given the growing demand for medical products. There is a strong presence of established supporting industries ranging from sterilization services, sterile medical packaging, precision engineering and tool and die-making to contract molding and assembly and machinery fabrication in Malaysia.

The availability of the supporting industries, low cost labor, the ability to produce high quality and extensive range of products all make Malaysia an ideal location for the manufacture of medical devices with the potential to be developed into a medical device hub in Asia. Amid all the changes happening in Malaysia’s medical devices industry, more than 90 percent of the local demand for high-end medical equipments is still being satisfied by imports mainly for the US, Japan, Germany, and Australia.

The Malaysian government has encouraged the local production of advanced devices amongst local manufacturers in the following areas; cardiovascular products, wound care products, ophthalmic products,electro-medical equipment.

IP Scenario

Malaysia has strong laws to protect Intellectual Property (IP) rights. Laws conform to global standards and provide adequate protection to both local and foreign investors. The Intellectual Property Corporation of Malaysia (IPCM) looks after all IP related issues in Malaysia. Malaysia is committed to providing a more conducive environment for better implementation of IP rights. Malaysia is also a signatory to the Trade Related

Aspects of Intellectual Property Rights (TRIPS) and has acceded to the Patent Cooperation Treaty (PCT). However, the IP environment is considered lacking in pharmaceuticals space. In addition, free trade agreement

(FTA) negotiations with the US have recently run into difficulties over various issues, including the compulsory licensing. But rise in healthcare awareness and spending will support the fast growing pharmaceutical industry in Malaysia.

Government Support

The government has taken various initiatives to develop the pharmaceutical industry including financing schemes for R&D, The Industrial Master Plan 3 (IMP3, 2006—2020), the PICS, and IP protection. General incentives include allowances for industrial building, infrastructure and import duty exemptions for raw materials/components equipment and machinery. The manufacturers of pharmaceuticals and related products (which include pharmaceutical goods, clinical diagnostic reagents, gelatin or gelatin products, intravenous, dialysis or irrigating solutions, vaccines, medicaments) are eligible for normal Pioneer Status or Investments Tax Allowance incentives.

Research, Development, Regulation

A significant development in the industry over the last decade is the strong emphasis placed by local manufacturers on research and development, particularly in areas of product innovation and improvement as well as in bio-pharmaceutics and natural products with resultant patents. The manufacture and marketing of pharmaceutical products in Malaysia are as heavily regulated as in most developed countries.