SETIA ALAM: Malaysian industries should localise recycled material sourcing and reduce dependence on imported industrial feedstock as the conflict in the Middle East war continues disrupting global freight flows and reshaping supply chains, Deputy Investment, Trade and Industry Minister Sim Tze Tzin (pic) urged.
Sim said the closure of the Strait of Hormuz had fundamentally changed how Malaysia must think about industrial resilience, supply-chain security and resource management.
“Malaysia could no longer afford to rely heavily on imported materials while continuing to export large volumes of recyclable waste overseas,” he said at the opening of MYWARE and MYLOG Expo and the launch of MIBIE 2026 yesterday.
Sim said global freight disruptions and surging petrochemical prices due to the escalating Middle East tensions had triggered immediate cost pressures across manufacturing industries worldwide.
He pointed out that the Strait of Hormuz, which carries about 20% of global petroleum and 25% of global LNG trade, had become a major chokepoint during the crisis, causing shipping disruptions, soaring freight costs and supply shortages that affected Malaysian factories.
“For Malaysia, the impact was immediate. Beyond soaring fuel prices, petrochemical feedstock costs surged by 48%.
“These are the critical building blocks for the polymers used in nearly every manufacturing sector. Overnight, local production costs spiked by 15%, while global freight rates quadrupled.”
He said many Malaysian manufacturers faced production disruptions because imported materials and industrial inputs could not arrive on time due to supply-chain bottlenecks and naval blockades.
The crisis, Sim said, exposed structural weaknesses within Malaysia’s industrial ecosystem, particularly the disconnect between local recyclers and domestic manufacturers.
For years, he said, Malaysian recyclers had been exporting recycled plastics and other materials overseas for higher margins, while multinational producers operating in Malaysia continued importing cheaper recycled feedstock from China and other regional markets instead of sourcing locally.
“Coca-Cola, Nestlé and industry players that need recycling plastic products were happily buying cheaper feedstock from China and the rest of Asia. On the other side, recyclers in Malaysia were happily recycling plastics and selling to Europe for very big margins. So they never met because there was no need.”
However, Sim said, the Middle East crisis forced both sides to re-evaluate their dependence on global supply chains.
“For the first time, they’re sitting down together to discuss a win-win solution. This is what the world has changed after the 28th of February, meaning we have to look at the resilience of our industry locally.”
Sim said the government had recently facilitated meetings between major beverage producers and Malaysian recyclers to encourage long-term domestic supply partnerships aimed at strengthening Malaysia’s circular economy and reducing reliance on imported industrial materials.
“These collaborations must go beyond temporary crisis responses. It cannot be because of these few months, and then if the crisis has been resolved, they go back to the old way of doing things. It has to be a long-term commitment.”
Sim said Malaysia already possesses significant recyclable resources that could be channelled back into local manufacturing if stronger industry coordination and investment frameworks are established.
According to government data, Malaysia generated 15.38 million tonnes of solid waste in 2025, while about 39,000 tonnes of waste are sent to landfills daily. Of this amount, roughly 40%, or about 15,000 tonnes, consists of recyclable plastics, paper and metals.
“In the context of global supply disruptions, these are not just scraps, they are stranded assets. When we bury a plastic bottle, we are burying the raw materials for our electronics factories that are currently struggling to import.”
He added that Malaysia was effectively throwing away approximately RM500 million worth of recyclable value annually by sending reusable materials into landfills instead of reintegrating them into industrial supply chains.
Sim said the government has already begun tightening policy frameworks to accelerate circular economy adoption, including the implementation of Extended Producer Responsibility (EPR) mechanisms and the Circular Economy Blueprint introduced earlier this year.
Under the new framework, producers that manufacture products deemed less recycling-friendly face higher regulatory costs and greater compliance obligations.
At the same time, the deputy minister said global export markets are also increasingly imposing sustainability-linked requirements on imported products.
He pointed to the European Union’s Eco-Design for Sustainable Products Regulation (ESPR), which requires products entering European markets to contain certified recycled material content and meet stricter sustainability standards.
“If your product lacks a certified percentage of recycled material, it will not be allowed on the shelf.
“Circularity is no longer a choice, it is a market demand and mandate.”
Sim said Malaysia’s industrial policy is now increasingly linking sustainability performance with investment incentives and competitiveness.
Through the National Investment Aspirations framework and ESG-linked scorecards, companies incorporating recycling, ESG compliance and green technologies into operations may qualify for preferential tax rates, investment tax allowances and green financing incentives.
Depending on ESG-related scorecard performance, eligible companies may receive special tax rates ranging from 0% to 15%, alongside investment tax allowances of up to 100% on qualifying capital expenditure.
Additional incentives remain available under the Green Investment Tax Allowance and Green Income Tax Exemption schemes.
The deputy minister also said financing support is available through agencies such as the Malaysian Industrial Development Finance Bhd (MIDF), including sustainable business financing facilities offering rates as low as 2% to support ESG-related upgrades and green technology adoption.
He stressed that sustainability should no longer be viewed merely as a compliance burden.
“Sustainability is no longer a cost centre, it is a profit centre.
“The more circular your business becomes, the more the government will support your growth as we build a resilient, responsible and remarkably profitable Malaysia.”