Malaysia feels heat as its solar industry soars (dpa German Press Agency)

Less than 10 years after it began manufacturing solar cells, Malaysia
has become the world’s fourth-largest producer, but some competitors
see underhanded tactics in the country’s rapid success.

Kuala Lumpur (dpa) – Malaysia’s rapid ascent as a solar energy
equipment manufacturer has triggered allegations of underhanded
strategies.

The country, which did not have a solar industry before 2007, was the
world’s fourth-largest producer of solar cells last year behind
China, Taiwan and Japan.

Its fast growth is mainly attributed to the influx of multinational
corporations, including the US First Solar, Taiwan’s AUO Sunpower,
Germany’s Hanwa Q Cells and Japan’s Panasonic Energy.

In the past two years, the government has granted five other foreign
companies permission to set up their own production plants, the
Malaysian Investment Development Agency (MIDA) said.

But competitors cast are leery of Malaysia’s solar sector.

The Ministry of International Trade and Industry said it is working
with the European Union on allegations that Chinese manufacturers
have re-labelled their products “Made in Malaysia” to circumvent EU
requirements imposed on Chinese solar products.

The Office of the US Trade Representative has also expressed concern
about generous tax breaks granted to foreign investors, including
solar energy manufacturers.

It asked Malaysia to provide details of how it works so that other
countries can assess whether the tax breaks violate a World Trade
Organization ban on export subsidies.

The government says solar companies are attracted to Malaysia because
of the country’s vibrant semi-conductor manufacturing sector, a
process similar to that of making solar cells.

“This makes Malaysia a perfect fit for the solar industry to build
upon,” MIDA said.

Other factors contributing to Malaysia’s rise are a combination of
low-cost labour with the availability of skilled engineers, according
to Song Eng Eng, an analyst at EXIM Bank Malaysia.

A 100-per-cent income tax break for 10 years, along with a
100-per-cent investment tax allowance for capital expenditures, has
persuaded solar manufacturers to relocate to Malaysia, Song said.

The subsidies provided to attract foreign investments are within
international trade rules, the government said.

“Just like in other promoted sectors, Malaysia provides incentives in
the form of corporate tax exemptions to all eligible enterprises
engaging in solar industry on a non-discriminatory basis,” MIDA said.

Malaysia’s solar industry has also benefited from a trade war between
the US and China in the solar manufacturing sector, it said.

When the US government imposed higher tariffs on solar manufacturers
from China and Taiwan a year ago, there should have been “no
surprise” that these manufacturers would seek new sites for their
export markets, MIDA said.

Chinese energy giant Jinko Solar has set up a factory in Penang,
Malaysia this year in its efforts to diversify its manufacturing
facilities, said company spokesman Sebastian Liu.

“We like the overall business environment there,” Liu said.

The key to continued success in Malaysia’s solar industry would be
to go beyond manufacturing and exporting cells, and focus on the
installation and use of solar energy in the country, said Wei-Nee
Chen, chief corporate officer of Sustainable Energy Development
Authority of Malaysia.

Expanding the use of solar energy in Malaysia would ensure
sustainable growth of the local solar industry and insulate it from
the vagaries of the global trade environment, Chen said.

The country’s internal targets for renewable energy usage are
attainable, Chen said, because of cheap production costs and
Malaysia’s favourable location.

“Malaysia lies in the sun belt, so everywhere you go in Malaysia
there is always the sun. You can put PV [solar cells] throughout the
country,” she said.