Harnessing Herbal

Malaysia

Economic News

22 Jul 2010
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Malaysia is in an ideal position to capture a greater share of the global market for herb-based products that include cosmetics, fragrances, medicines, and supplements.



International and domestic demand for these products is on the rise, and how Malaysia capitalises will depend on its ability to attract private-sector investment in value-added herbal industries, as well as the increase of the legitimacy and sophistication of the industry in the country.



Malaysia can boast an impressive level of biodiversity, and possesses many of the herbs and plants most commonly sought in world herbal markets. According to the Forest Research Institute of Malaysia, species of plants and herbs that exist in Malaysia number some 12,000, and the institute's online medicinal plant database lists over 300 with medicinal properties.



Malaysian enterprises tend to only engage in low-value added activities within the sector, such as processing dried plant material into powders. Consequently, Malaysia finds itself in the inefficient and costly business of exporting raw commodities for processing elsewhere, and then repatriating the finished product into the Malaysian market.



This could change, as there is a conscious effort afoot, to bring a greater share of the industry value chain - and thus the market - to Malaysia.



The herbal industry has been identified as an emergent industry under the third national agriculture policy and Malaysia intends to be a major producer in the international herbal industry by 2010. The government has identified the herbal pharmaceutical and nutraceutical industries as growth areas for small and medium enterprises (SMEs), and funding will be provided for companies seeking to enter higher value-added activities.



These prospects bode well for the industry in Malaysia, but government support and initiatives such as these have to be met by private sector interest and investment.



The herbal industry, particularly in medicines, has several virtues as an investment proposition. It is clear that market demand is there. In the medical field alone, according to the World Health Organization (WHO), over 50% of the population in Europe and North America have used complementary or alternative herbal medicines. The WHO also notes that traditional herbal preparations account for 30-50% of the total medicinal consumption in China. This does not include herbal health supplements or cosmetics, which will allow even greater penetration into these markets.



There are also indications of a demand for a more sophisticated, standardised industry offering products with proven results. Traditional and complementary medicines (TCM) may not only be seen as a value proposition for a consumer. As the 'voodoo' perception that has sometimes surrounded the popularity of herbal products abates, consumers want concrete evidence that herbal products are effective. As Iskandar Mizal Mahmood, CEO of the Malaysia Biotechnology Corporation told OBG, "When you talk about TCM, it is all about the confidence a consumer has in a certain product. Today's consumers need solid scientific evidence to choose herbal products."



To create such a sophisticated industry in Malaysia would require even more commitment from investors.



According to Iskandar the sector is currently challenged, he said "There are a lot of people out there trying to get into the herbal industry, but they want to take a plant and hammer it into capsules." There is no scientific extraction process, and no guarantee that [the manufacturer] will get the active ingredient that he is after." With more money for research and more industry standards, the sector would become more mature and customers would be more likely turn to herbal products and remedies.



As Iskander noted, "If you spend a little bit of money on getting the correct standards in place, and on having a product certified as a bioequivalent of a conventional drug out there on the market, then that could change the entire landscape of the herbal market. If these equivalencies are there, then the market will grow."



More investment from the private sector in value-added activity in line with more structured rules governing the production of herbal products may mean a new era of expansion for the market.

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