Carotech MD: Incentives for biotech a good start

Seems like all the rage and venting of Carotech MD, David Ho Sue San has brought him some good news. StarBiz reported government announced incentive for Biotechnology industry as below.

THE incentives given for biotechnology are an encouraging start, but more can be done to “fast-track” the industry's development, said Carotech Bhd managing director David Ho Sue San.

“Biotechnology is a high investment and risky business.

“Locally, there are many individuals with bright ideas in the biotech industry but are afraid to take their ideas further due to financial constraints and lack of support,” he said.

He said the Government had been proactive in creating a biotech centre or resource base.

However, he added, more could be done to attract individuals as well as companies, both foreign and local, to set up their bases here.

Ho welcomed as “positive and encouraging” the incentives for Bionexus-status companies that merge with or acquire biotechnology companies within the next five years. These companies will be given stamp duty and real property gains tax exemptions.

“It is also good that the Government has given more incentives for biotech companies to set up bases here,” Ho said.

He noted that many developed countries like the US had provided attractive packages and incentives to entice more industry players and experts in specific fields of biotechnology from around the world to do pioneering work in their countries.

“Our Government should consider providing grants to biotech companies that show encouraging work in research and development that potentially could be commercialised,” he said.

Ho said the Government might want to look at providing specific and customised packages to attract individuals or companies to work here.

Malaysian American Electronics Industry chairman Datuk S.H. Wong said the RM210mil allocation for developing the biotechnology sector was consistent with the Penang state government's effort to build a biotech hub.

Malaysia has advantage as big producer of palm oil

Carotech Bhd is the first bio-diesel company in Malaysia to ship their product to Germany as they have the world-first bio-diesel that can withstand the cold of the winter in Europe.

StarBiz reporter interviewed David Ho, the Managing Director of Carotech Bhd and reported his rage and uneasiness towards the lack of governmental support for local bio-diesel industry.

StarBiz: Does Malaysia have a comparative advantage in the bio-diesel industry?

David Ho: Yes. Malaysia is the largest producer of palm oil (Indonesia might have crept past us) in the world. Palm oil is also cheaper as raw material for bio-diesel compared with soybean and rapeseed and is the most abundantly produced vegetable oil in the world.

StarBiz: Will bio-diesel be the future source of alternative energy transport?

David Ho: Definitely. We see the future transport mode to be based on bio-diesel hybrid vehicles (bio-diesel/batteries or bio-diesel/hydrogen) depending on whether such technologies can be made available to the masses at economical prices.

Also, diesel and bio-diesel are cheaper, providing 30% more mileage per liter compared with gasoline. Diesel and bio-diesel cannot be replaced, based on current technologies, as many heavy-duty vehicles like trucks, buses and tractors require the “pulling power/torque” to haul such heavy loads and petrol/ ethanol cannot provide such power as cheap as diesel/bio-diesel.

Ultra Low Sulfur Diesels (ULSD) is more environmentally friendly than petrol and works better blended with bio-diesel.

Currently bio-diesel and ULSD blend are the most favored fuel in Europe. Today, over 70% of new vehicles registered in Europe are diesel powered.

StarBiz: Carotech has expanded successfully abroad. Is it easy for local players to emulate Carotech’s success?

David Ho: The key to success in this industry is technology and quality. We have the first integrated bio-diesel plant in the world able to produce bio-diesel and phyto-nutrients from crude palm oil (CPO). Our patented technology allows us to achieve stronger revenue from the two divisions and at lower operating cost.

Bio-diesel is a risky business as the selling price is not correlated to prices of CPO or refined, bleached, deodorized palm olein - the raw material used. If the selling price, which is at present pegged to crude petroleum prices, falls and CPO prices continue to rise, then typical bio-diesel plants would find it hard to stay afloat as the margins are squeezed.

Based on current petroleum prices and rising trend in CPO prices, many bio-diesel players would be re-evaluating their plans to enter the industry.

Carotech’s technology allows us to be more resilient and able to cope with higher prices of CPO or lower prices of petroleum.

A successful bio-diesel producer must not only adopt good technology to maximize revenue and reduce costs. He must also produce high quality products consistently.

StarBiz: What are the current benefits given by the Government to the industry?

David Ho: The Government has announced it will accord the pioneer status or high technology status to bio-diesel companies, which provides a 70% and 100% tax waiver for five years. I am not aware of any company that has obtained these incentives. Besides the normal existing incentives, the Government has not given any special incentives for bio-diesel producers.

StarBiz: What additional policies or Government support are required for local players to go global?

David Ho: To compete globally, local players need to produce high quality cost-competitive products. To have cost competitiveness a producer must achieve economies of scale in operations and this can only be achieved with a large market.

Ironically, the authorities are not promoting the use of bio-diesel, as defined internationally with a chemical name of methyl ester, in Malaysia. Without a local market, our local players would have less demand for their products and need to rely heavily on the European market, which favors its local rapeseed bio-diesel.

The Malaysian Envo oil is not the equivalent of the internationally accepted biodiesel (methyl ester). Envo oil is a blend of 95% fossil diesel and 5% palm olein.

Many markets like South Korea, the United States and European Union (EU) do not allow the use of direct vegetable oil into diesel engines. For instance, the EU standard on bio-diesel (EN 14214) requires a minimum content of 96.5% methyl ester and no more than 0.2% triglycerides.

As such, we are adding 5% oil into diesel to call it bio-diesel. This brings a new definition of bio-diesel only seen in Malaysia!

If diesel engines can consume vegetable oil directly, why would the existing world standards on bio-diesel require at least 96.5% methyl ester for it to be deemed bio-diesel? We need to critically re-look at the existing policies.

Also, diesel is now being subsidized by the Government. But there is no such subsidy for bio-diesel, which mean local producers will have difficulty selling their products in the local market.

StarBiz: What can local players do to help themselves?

David Ho: The local players coming into the industry will need to be extremely careful in choosing their technology and critically look into the quality of their products. In the long run, only the high quality, cost-competitive products will survive in the global arena.

Malaysian Plantation Stocks Surge On Biofuel News

Plantation stocks topped Bursa Malaysia's gainers list yesterday, buoyed by the announcement on Thursday of a joint initiative by the Malaysian and Indonesian governments to set aside six million tonnes of crude palm oil (CPO) annually for biodiesel (120,500 barrels per day). Previously, we reported that palm oil is a true GDP-booster for both Malaysia and Indonesia, the oil being the second biggest export earner for both countries, and that in 2005 the 'Plantation Index' outperformed all other indexes, including the tech and oil indexes.

The biofuels committment pushes this trend up even further. The rising prices of CPO, which breached RM1,500 (€321/$407) per tonne after stagnating at RM1,400 (€300/$380) in the first six months of this year, have also led to expectation of potentially higher earnings for plantation companies by year-end. Plantation players generally welcomed both governments' initiative to allocate six million tonnes, or 40% of their total annual production, for biofuel and biodiesel production effective this year.

Malaysia's CPO production is estimated at 15 million tonnes this year, with new annual capacity of about 600,000 tonnes. The country's palm oil stockpile stands at 1.6 million tonnes.