Heading down south: Lee and Man Paper expands into Malaysia

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Hong Kong’s biggest paper maker is opening a new HK$5.1-billion production plant in Malaysia, as it looks to build on its growing presence in Southeast Asia and meet China’s increasing demand for paper.  

The new factory in Sepang, also the site of the Malaysian Formula One Grand Prix, will allow Lee and Man Paper to expand its capabilities in high-grade packaging paper. At full production, the plant will be able to churn out 700,000 tons of paper and 550,000 tons of pulp.

“Lee and Man Paper has been looking to boost our developmental scale and diversify the paper and pulp business overseas. We see Malaysia as a competitive location for export to China,” said Lee and Man’s chief executive Edmond Lee.

In line with the company’s support for environmental conservation, the factory will be equipped with facilities like wastewater and solid waste treatment systems, which will reduce emissions. It will also only produce recycled pulp, which is the raw material used to manufacture paper.

When complete, the factory is expected to create about 1,200 jobs, generate an annual trade surplus of HK$2.1-billion and contribute a tax revenue of HK$143 million.

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This is Lee and Man Paper’s second foray outside of China, having also built a production plant in Vietnam in 2007. Both builds are part of the company’s plan to globalise and spread its advocacy for an environmentally sustainable industry.

“We plan to build a green environmental protection enterprise, by relying on our decades of experience in paper production management and advanced environmental control technology,” explained Mr Lee.

He added that expansion into Southeast Asia will also allow the company to keep up with the growing domestic demand in China for packaging paper and corrugated boards, which has increased due to the boom of the e-commerce industry. It is estimated that China will consume 331 million tons of paper by 2035, up from 97 million tons in 2010.

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Demand in the pulp and paper sector is expected to grow at an annual rate of 3 per cent in the next five years.  

The pulp and paper industry has also been identified by the Malaysian government as one of the key priority areas for investment, as it aims to reinvigorate its small but growing industry. In August, Malaysia’s Prime Minister Mahathir Mohamad welcomed investment in the paper industry, as he encouraged Chinese businesses to expand into the country.

Indeed, Chinese investment into Malaysia has been increasing in recent years, rising from HK$2.7-billion in 2010 to HK$6.2-billion last year.

China was also the country’s largest source of foreign direct investment (FDI) last year (according to a Bloomberg report) making up 7 per cent of total FDIs into the country.

The move comes despite Malaysia changing its government for the first time in its 61-year history in May and Mr Lee said that Lee and Man Paper maintains the outlook for its Malaysian venture remains positive.

“We remain confident in Malaysia’s economic environment and stability and believe that all challenges can be addressed,” he remarked.