MALAYSIAN PLASTIC CIRCULARITY SERIES Report #1 Introduction to the Malaysian Plastic Circularity Series Administ r d b © 2025 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), members of the World Bank Group, with external contributors. The “World Bank Group” refers to the legally separate organizations of the IBRD, IFC, the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA). 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The World Bank Group therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, the World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Cover design: Sarah Jene Hollis Contents 4 Acknowledgements 4 Abbreviations and acronyms used throughout this report series 6 6 1. Objectives of the Malaysian Plastic Circularity Series 7 7 2. Approach and methodology 8 8 3. Current global situation 10 10 4. Current situation in Malaysia 17 17 5. Overview of opportunities 21 21 Acknowledgements This report is a component of the Malaysian Plastic Circularity Series, a market assessment conducted in 2023 and 2024 with the objective of offering comprehensive insights into the Malaysian plastic recycling economy. It covers topics along the value chain, including feedstock collection, infrastructure, policies, and initiatives aimed at addressing plastic waste challenges, with an in-depth analysis of the electrical and electronics (E&E), automotive, construction, and healthcare sectors. The study was conducted by a team from Roland Berger, including Dieter Billen, Elena Goh, Poh Lyn Low, Pei Xuen Chin, Timothy Wong, Zamir Zulkefli, Wei Loong Lee, and a team from Lasaju, comprised of Tobias Mangelmann, Nickson Tan, and Akhilan Manivannan. The work was managed by a World Bank Group team consisting of Antonio Della Pelle, Kate Almora Philp, Arina Kungeibayeva, Julio Alejandro Flores Salvatierra, Premesh Sharma, and Jessica Anne Stallings, under the leadership and guidance of Henri Rachid Sfeir, Marc Sadler, and Veronica Navas. A. S. Harinath, Mei Ling Tan, and Samu Salo provided peer reviews. Copyediting was done by Patricia Ann Shadforth, and the cover and report design was undertaken by Sarah Jene Hollis. Funding for this study was provided by PROBLUE, a World Bank umbrella multi-donor trust fund that supports the sustainable and integrated development of marine and coastal resources in healthy oceans. Contributing organizations We are grateful for the contributions and detailed insights provided by the following private sector organizations and government departments throughout this study. Private sector organizations Value chain Company Waste management service providers Alam Flora Environmental Services Sdn Bhd Alam Flora Sdn Bhd KPT Recycle Sdn Bhd Malakoff Corporation OCK Recycle Sdn Bhd Shan Poornam Metals Sdn Bhd Sri Pushpam Recycling Sdn Bhd Plastic recyclers and converters Chong Wah Plastics GF Manufacturing Sdn Bhd ALBA Group Asia Dialog Eseco Sdn Bhd EPD Plastic Industries Sdn Bhd Heng Hiap Industries Hiroyuki Industries (M) Sdn Bhd Malaysia Plastics Manufacturers Association Malaysia Plastics Recyclers Association Intco Recycling MBA Polymers Scientex Great Wall Sdn Bhd 4 Value chain Company Sipro Plastics Sdn Bhd Thong Guan Industries Bhd Recycling technology providers Axens Group Plastic Energy Brands and equipment manufacturers/ industrial Federation of Malaysian Manufacturers waste generators Malaysian Automotive Component Parts Manufacturers Asian Resinated Felt Technology Proton Holdings Sime Darby Motors Dura-Mine Sdn Bhd Gamuda Bhd IOI Properties Group Bhd Sunway Group 99 Speed Mart Retail Holdings Bhd Coca-Cola Bottlers Malaysia Etika Sdn Bhd FFM Bhd Nestlé (Malaysia) Bhd Various foodcourts E.S.H Electrical Sdn Bhd Asia OneHealthcare Sdn Bhd Duopharma Biotech Bhd KPJ Healthcare Bhd Ohana Hospital Pharmaniaga Bhd Virgin resin producers Malaysian Petrochemicals Association Petronas Chemicals Group Bhd Other industry participants Asia Business School Business Council for Sustainable Development Malaysia Malaysian Recycling Alliance N-Strategy Consulting Services Sunway University Government departments & other stakeholders Malaysia Green Technology Corporation Malaysia Investment Development Authority Malaysia Productivity Corporation Ministry of International Trade and Industry (Malaysia) Ministry of Local Government Development (Malaysia) Ministry of Natural Resources, and Environmental Sustainability (Malaysia) Ministry of Science, Technology, and Innovation (Malaysia) 5 Abbreviations and acronyms used throughout this report series ABS Acrylonitrile butadiene styrene AP Approved permit CAGR Compound annual growth rate CFR Collected-for-recycling C&D Construction & demolition DOE Department of Environment, Malaysia EOL End-of-life ELV End-of-life vehicle EPR Extended producer responsibility E&E Electrical and electronics EV Electric vehicle FMCG Fast-moving consumer goods HDPE High-density polyethylene HS Harmonized system ICI Industrial, commercial and institutional JPSPN National Solid Waste Management Department, Malaysia IWMF Integrated waste management facilities KPKT Ministry of Housing and Local Government, Malaysia KTPA Kilotonnes per annum LDPE Low-density polyethylene MAREA Malaysia Plastic Recyclers Association MRF Material recovery facilities MSW Municipal solid waste OEM Original equipment manufacturer PAYT Pay as You Throw PE Polyethylene PET Polyethylene terephthalate PP Polypropylene PRO Producer responsibility organizations PS Polystyrene PVC Polyvinyl chloride rPET Recycled polyethylene terephthalate SAS Separation at source SUP Single-use plastics 6 1. Objectives of the Malaysian Plastic Circularity Series Malaysia is a significant contributor to marine plastic debris, with the fifth highest amount of mismanaged plastic waste entering the ocean per capita per year.1 Mismanaged plastic waste from land-based sources, especially packaging, generates significant economic costs globally by reducing the productivity of vital natural systems and clogging urban infrastructure.2 Malaysia’s annual per capita plastic packaging consumption is the highest among all Southeast Asian countries at 16.8 kg/person.3 Based on revenue, packaging accounted for 45 percent of plastic consumption in 2023. The E&E sector is the next largest end user (28 percent in 2023), primarily for electrical components/parts and home appliances such as casings for television sets, refrigerators, and parts for air conditioning units. The automotive and construction sectors are the next largest consumers (12 percent and 6 percent, respectively). While the healthcare sector accounts for less than 3 percent of all plastic consumption in Malaysia (Figure 9), there have been numerous global plastic circularity initiatives that make the healthcare sector compelling for deeper exploration. The Malaysian Plastic Circularity Series follows this introduction and is a collection of five studies that aims to support a more sustainable and self-sufficient plastic economy through two objectives: accelerate the collection and enhance the quality of domestic feedstock (plastic consumed and recycled via either mechanical or chemical recycling for reuse) and unlock plastic circularity opportunities in sectors that have previously received less attention than the packaging sector. Objective 1: Accelerate the collection and enhance the quality of domestic feedstock for recycling Given Malaysia’s underutilization of its potential domestic feedstock, a key goal of this report series is to explore opportunities to increase its supply and quality. The second study report, Exploring feedstock opportunities to advance domestic circularity in Malaysia’s plastic recycling, evaluates the current state of Malaysia’s recycling sector, aiming to identify key insights and opportunities to enhance recyclability and improve circularity and feedstock availability within the country. It focuses on household waste, which mainly comprises single-use packaging plastic waste, the largest end-use sector. Objective 2: Unlock plastic circularity opportunities in previously overlooked sectors A crucial objective of the series is to uncover plastic circularity opportunities in sectors that have typically received less attention, although they rely heavily on plastic and have high levels of plastic consumption. These sectors are the E&E, automotive, construction, and healthcare, especially post-COVID-19. Following a review of feedstock in Malaysia, the four study reports in this series provide sector-specific analyses, including an overview of plastic waste management, key barriers to plastic circularity, global initiatives, and opportunities for plastic circularity in Malaysia: • Exploring plastic circularity opportunities in the electrical and electronics sector • Exploring plastic circularity opportunities in the automotive sector • Exploring plastic circularity opportunities in the construction sector • Exploring plastic circularity opportunities in the healthcare sector 1 Longley, James. “Plastic Polluters.” Utility Bidder. September 5, 2023. https://www.utilitybidder.co.uk/blog/plastic-polluters/ 2 World Bank Group. 2021. Market Study for Malaysia: Plastics Circularity Opportunities and Barriers. Marine Plastics Series, East Asia and Pacific Region. Washington DC., https://documents1.worldbank.org/curated/en/272471616512761862/pdf/Market-Study-for-Malaysia-Plastics- Circularity-Opportunities-and-Barriers.pdf 3 WWF, 2020. “WWF releases report proposing effective solution to mitigate plastic pollution in Malaysia.” Press release. September; 21, 2020, https://wwfmy.awsassets.panda.org/downloads/press_release_launch_of_epr_my_report.pdf?28886/Study-on-Extended-Producer- Responsibility-EPR-Scheme-Assessment-for-Packaging-Waste-in-Malaysia 7 2. Approach and methodology The approach and methodology employed in this study were designed to enable the collection of primary data, which helped to substantiate and validate the findings and recommendations presented. This comprehensive approach involved several components. 1. Stakeholder engagement: Insights were gathered from diverse stakeholders along the Malaysian plastic waste value chain (Figure 1). i. Engagement with the formal sector: Formal stakeholders were government departments, industry leaders, and sector associations. Around 60 interviews were conducted to facilitate open dialogue and gather insights on the current state of recycling practices, challenges, and opportunities, including in reducing plastic usage in Malaysia. ii. Engagement with the informal and semi-formal sectors: Recognizing the significant role of these sectors in recycling, 10 interviews were conducted with representatives from this segment to ensure a holistic view of the recycling landscape in Malaysia. This engagement aimed to understand practices, challenges, and potential ways to contribute to the formal recycling system. Figure 1: Malaysian plastic waste value chain Collection & Recycling Industry aggregation application Plastic recyclers Waste management & converters service providers Recycling technology Brands & equipment providers manufacturers/ industrial waste generators Virgin plastic producers Governance Government Others Other industry participants 8 2. Workshops for collaborative input: Two roundtable workshops, with participation from around 45 representatives across the recycling value chain, fostered collaborative discussions among stakeholders. The sessions encouraged participants to share their knowledge and expertise, leading to a deeper understanding of the barriers faced and opportunities in the recycling sector. The collaborative nature of the workshops facilitated the identification of the challenges and strategies unique to Malaysia’s context from varying perspectives. 3. Data incorporation from post-consumer recycling projects: The study incorporated data from major post-consumer recycling projects across Malaysia, such as Nestlé’s KitaR Program. This quantitative data provided insights into the effectiveness and outcomes of these initiatives, helping to identify successful models that could be replicated or scaled. 4. Data incorporation from existing published reports: Quantitative data and qualitative insights from reports published by government bodies, private sector companies, non-governmental organizations (NGOs), and previous World Bank studies of Malaysia were analyzed. This enabled a comprehensive baseline of the country and provided context and validation to the primary data gathered via stakeholder engagements. 5. Consolidation and validation of data: Given that the raw data originated from multiple sources, the study implemented a rigorous data validation process. The information was first consolidated before being analyzed to identify and rectify any inconsistencies or errors. This involved cross-referencing data points from different sources to ensure coherence and accuracy. This validation process ensured the study’s subsequent analysis was based on high-quality, reliable data. 6. Modelling and calculations: In instances where data was unavailable or incomplete, the study employed estimation techniques and modeling to fill the gaps and forecast various scenarios. This used data points based on historical data, which were aligned with industry benchmarks and stakeholder interviews. 7. Analysis and synthesis of findings: Following the data collection phase, the gathered information was analyzed to synthesize key findings and identify potential gaps and best practice examples that can be employed. This analysis was guided by the overarching objective of enhancing recyclability and promoting circularity in Malaysia. By employing this multifaceted approach and methodology, this report series provides a comprehensive understanding of the current state of the plastic recycling sector in Malaysia and formulates well-informed recommendations for bolstering the country’s plastic circularity. 9 3. Current global situation As the world grapples with the mounting challenge of plastic waste, innovative recycling methods and increasingly stringent regulations are shaping the future of waste management. This section explores trends in plastic waste and recycling, highlighting the primary methods, emerging opportunities, regulatory impacts, and sustainable practices being adopted worldwide. Increasingly stringent laws on plastic scrap trade are reshaping the global landscape Global plastic trade policies are becoming progressively more stringent amid heightened global scrutiny of the resulting environmental, economic, and social costs. Around 85 percent of marine litter consists of plastic, with an estimated 75 tonnes to 199 million tonnes currently in the oceans.4 Furthermore, increased plastic trade has led to increased cases of illegal recycling, dumping, and burning of waste in destination countries, with local marginalized communities facing adverse health risks from their proximity to dumpsites and recycling facilities. As countries tackle the adverse effects of plastic pollution, including those caused by the trade of plastic waste (Figure 2), global trade policies such as the European Union’s Waste Shipment Act 2024/1157 (Box 1) and China’s 2018 National Sword Policy (Figure 2) have become more stringent and restrictive. Figure 2: Social, environmental, and economic consequences of plastic waste trade 1. Marine plastic pollution 3. Global South pollution 5. Health & safety risks About 80% of marine debris consists of China’s 2018 National Sword Policy Local communities, o ten marginalized, plastic, some of which originates from redirected plastic waste to new destination face health risks from toxic chemicals at plastic waste shipped for recycling. countries, primarily in Southeast Asia such dumpsites and fire emitting greenhouse Increasing ship tra c disrupts habitats as Malaysia and Thailand. gases, dioxin, furan, and polychlorinated and causes pollution. There are increased cases of illegal biphenyls (PCBs). recycling, dumping, and burning of waste Workers in recycling facilities lack proper at destination countries. protection from hazards. Communities rely on hazardous waste jobs. 2. Encourages continued plastic 4. Corruption & illegality 6. Undermines domestic waste consumption There was a rise in illegal waste shipping management Almost half of all plastic waste is from 2018 to 2020, rerouted to Southeast Foreign plastic waste is diverted to Global currently generated in OECD countries. Asia via transit nations. South nations with limited waste The export of such waste facilitates Illegal waste involves organized crime, processing capacity and weak regulations. developed nations in mitigating the financial fraud, and corruption and fosters This trade exacerbates waste environmental impacts associated with illicit networks, including brokers, mismanagement by undercutting local their significant plastic consumption. recyclers, and corrupt o cials. collection and recycling e orts. Source: Wong, 20225 4 United Nations Environment Programme (UNEP) 2021. From Pollution to Solution: A global assessment of marine litter and plastic pollution. Nairobi, https://www.unep.org/resources/pollution-solution-global-assessment-marine-litter-and-plastic-pollution 5 Wong, Pui Yi. 2022. “Elephant in the Room: Plastic Waste Trade in Asia Pacific.” Break Free from Plastic. https://www.breakfreefromplastic.org/ wp-content/uploads/2022/09/Plastic-Waste-Trade-Briefing-Paper.pdf 10 Box 1. EUROPEAN UNION WASTE SHIPMENTS ACT 2024/1157 Status: In force since 20 May 2024, phased implementation Intended effect • Ensure that European Union countries do not export their waste challenges to non-OECD countries • Strengthen enforcement to prevent illegal waste shipments • Increase traceability and facilitate the shipments of waste for recycling in the European Union and beyond Scope of plastic waste controls relevant to Malaysia Specific rules for non-OECD countries: • Export ban of all types of plastic waste from 21 November 2026 until 21 May 2029 • From 21 May 2029, countries still willing to import plastic waste from the European Union may notify the European Commission of their willingness and demonstrate their ability to treat this waste in an environmentally sound manner • The request to import plastic waste from the European Union can only cover non-hazardous plastic waste (B3011)6 Mechanical recycling continues to be the cornerstone of plastic recycling technologies Mechanical recycling – the process of transforming plastic waste into secondary raw materials or products without significantly altering the chemical structure of the polymer – is expected to remain the primary plastic recycling technology, covering approximately 70 percent of global recycling capacities by 2050.7 Chemical recycling, the process of breaking plastic waste down into petrochemical feedstock, is expected to gain traction and account for approximately 24 percent of plastic recycling capacities globally by 2050. Malaysia has recently begun the construction of its first chemical recycling facility, with PETRONAS Chemicals Group (PCG) building its first chemical recycling plant with a capacity of 33 kilotonnes per annum (ktpa); the plant will be located in Pengerang, Johor, and will be Southeast Asia’s largest advanced chemical recycling plant when it is operational in 2026. Chemical recycling focuses on plastics that cannot be mechanically recycled. However, mechanical recycling will remain critical for plastic recycling, as it has the advantages of more mature and commercially viable technology, lower energy consumption, and a smaller carbon footprint (Figure 3), as well as greater cost-efficiency. 6 For more information about the European Union’s rules on the shipment of waste, see https://environment.ec.europa.eu/topics/waste-and- recycling/waste-shipments_en 7 Roland Berger. 2024. “Plastic waste (r)evolution – Dynamic sector with growth opportunities.” https://www.rolandberger.com/en/Insights/ Publications/Plastic-waste-%28r%29evolution-Dynamic-sector-with-growth-opportunities.html 11 Figure 3: Comparison of the climate impact of different plastics, low-density polyethylene (LDPE), production options8 2 kg of CO2e/kg of mixed plastic waste treated 1.9 1.5 1 0.9 0.5 0 -0.5 -0.5 Virgin (fossil) Chemically Mechanically LDPE recycled LDPE recycled LDPE Source: Quantis, 20209 Open-loop recycling can unlock cross-sector recycling opportunities Box 2. OPEN-LOOP VS CLOSED-LOOP RECYCLING Open-loop recycling is when plastic waste is reprocessed and the recyclates produced are used to make new products in a different application or sector. Conversely, closed-loop recycling is when plastic waste is reprocessed and the recyclates produced are used to make new products in the same application or sector.10 The working definition for closed-loop recycling used in this study is that plastic waste from one sector is recycled for use in the same sector. The working definition for open-loop recycling in this study is that plastic waste from a given sector is recycled for use in other sectors, or plastic waste from other sectors is recycled for use in the given sector. 8 Chemically and mechanically recycled LDPE both have environmental credits by avoiding impacts related to the waste treatment of plastic waste (incineration and landfilling). Mechanical recycling has a lower climate change impact compared to chemical recycling, with moderately high environmental credits, resulting in a net negative CO2 emission. 9 Quantis. 2020. “Life Cycle Assessment of Plastic Energy Technology for The Chemical Recycling of Mixed Plastic Waste.” https://pedev0.outfly. cloud/wp-content/uploads/2020/10/Plastic-Energy-LCA-Executive-Summary.pdf 10 BPF (British Plastics Federation). “Closed and Open Loop Plastic Recycling.” June 10, 2021. https://www.bpf.co.uk/press/closed-and-open-loop- plastic-recycling.aspx 12 Although open-loop recycling can sometimes be ‘downcycling’, where materials are repurposed for lower-grade uses, it can also help to increase feedstock quantities by enabling cross-sector recycling. Due to the overlap of resin usage across different sectors (Figure 4), open-loop or cross-sector recycling is feasible. Mechanical recycling typically sorts plastics into single polymer streams, where the same type of polymers can be processed within the same lines.11 As such, the same polymer from multiple industries can be mechanically recycled together. For instance, polypropylene (PP) from the packaging industry can be recycled together with PP from other industries. As shown in Figure 4, there are substantial overlaps in resin usage across different sectors, facilitating cross- sector recycling. Figure 4: Plastic usage across sectors by resin type, 2022 Relative volume of plastic usage Packaging Building & construction Sectors Automotive Electrical & electronics Others PET LDPE HDPE PP PVC ABS Others Resin type Source: Plastics Europe, 202212 Note: PET=Polyethylene terephthalate; LDPE=Low-density polyethylene; HDPE=High-density polyethylene; PP=Polypropylene; PVC=Polyvinyl chloride; ABS=Acrylonitrile butadiene styrene 11 RSC (Royal Society of Chemistry). n.d. “Mechanical recycling.” https://www.rsc.org/getContentAsset/23f298b0-228b-4f60-b11f-8193ae77c68c/ f4c91d86-ac3e-4675-bdf3-f8325ded9710/rsc-explainer-5-mechanical-recycling.pdf?language=en 12 Plastics Europe. 2022. “Plastics - the Facts 2022.” https://plasticseurope.org/wp-content/uploads/2022/10/PE-PLASTICS-THE-FACTS_V7- Tue_19-10-1.pdf 13 Countries are in the early stages of implementing reduce and reuse principles to mitigate plastic waste generation Globally, countries have been embracing reduce and reuse principles in three waves: design improvements in plastic packaging, substitutes and alternatives for plastics, and reuse and refill solutions (Figure 5). As the first wave of a plastic reduction strategy, design improvement focuses on minimizing the use and improving the recyclability of virgin plastic, with strategies such as lightweighting (Box 3) and the complete removal of plastic elements (Box 4). In the second wave, many brands are enhancing their sustainability practices by substituting plastic with non-plastic recyclable materials such as paperboard, metal, and glass. In Malaysia, one such alternative approach involves using rice straw to produce biodegradable packaging (Box 5). Finally, implementing reuse and refill solutions represents a transformative approach to plastic reduction (Figure 6). The second and third waves are in the early stages of implementation, with plastic recycling remaining a critical part of the waste solution. Figure 5: Overview of plastic reduction strategies Design Virgin plastic reduction Recyclability improvement • Reduction of the plastic film thickness • Improve recyclability design and materials in plastic (‘lightweighting’ or ‘downgauging’) in packaging, e.g., replacing multi-layer packaging • Removal of unnecessary packaging structures to mono-layer materials • Incorporation of post-consumer recycled material Substitutes & Plastic substitute Plastic alternative alternatives • Substitute plastic with non-plastic • Use plastic alternatives such as recyclable materials, e.g., glass, metal bioplastics and biodegradable plastics Reusability Reuse & • Packaging being refilled or reused for the same purpose for which it was conceived refill • May require auxiliary services e.g., collection, sorting, sanitization, logistics, refilling, reloading 14 Box 3. LIGHTWEIGHTING ON COCA-COLA PRODUCTS The Coca-Cola Company has successfully implemented lightweighting in its packaging, reducing the weight of PET bottles from 21 grams to 18.5 grams over the last 10 years. In 2024, Coca-Cola and its bottling partners began introducing lighter bottles across the United States and Canada. This transition is expected to reduce the use of virgin plastic by an amount equivalent to approximately 800 million bottles by 2025. Furthermore, the change is projected to lower carbon emissions in 2025, demonstrating how design changes can have a profound impact on sustainability. Lightweight bottles can be too flimsy for automated recycling systems, causing jams or being misclassified as waste. The recycling industry is actively addressing the processing issues of lightweight plastic bottles by upgrading sorting technologies with optical sorters and adding pre-process lightweight and flexible plastics process units. Sources: The Coca-Cola Company 202213 and the study’s assessment Box 4. LABEL-FREE DRINK BY MASTER KONG Chinese beverage brand Master Kong launched label-free packaging for its highly recognizable sugar-free iced black tea and lemon-flavored iced black tea products. The drinks are sold in boxes. Brand and expiration dates are laser-printed on the respective bottles to avoid damage during ink printing. The change is expected to reduce the use of virgin PET resin by 3.4 ktpa. Label-free packaging not only reduces the use of plastic but also enables easier sorting and recycling processes. Sources: Rong, 202214 Box 5. FREE THE SEED – BIODEGRADABLE PACKAGING FROM RICE STRAW IN MALAYSIA Free The Seed employs a proprietary biotechnology process that includes the use of protease serine enzymes, delignified cellulose fibers, and enzymatic methods to create packaging products that organically compost within six months. The initiative began late in 2024 and has engaged 618 farmers, with participation projected to grow to 3,700 farmers by the end of 2025 as operations expand. By enabling farmers to sell rice straw—an agricultural byproduct that would otherwise be burned—the project is expected to generate an additional annual income of 3 million Malaysian ringgit for participating farmers and contribute to Malaysia’s climate targets. It also aims to achieve an annual output of 120 million units of biodegradable packaging, serving the medical, food, industrial, and electronics sectors. Source: Bioeconomy Corporation, 202415 13 The Coca-Cola Company. 2022. “The Coca‑Cola Company Announces Industry-Leading Target for Reusable Packaging.” Press Release. February 11, 2022. https://www.coca-colacompany.com/media-center/coca-cola-announces-industry-leading-target-for-reusable-packaging 14 Rong. “国内首款无标签饮料上线, “撕标”后怎么看产品信息?”(The first label-free beverage in China has been launched. How can consumers view product information after ‘removing the label). The Paper. March 3, 2022. https://www.thepaper.cn/newsDetail_forward_16943545 15 Bioeconomy corporation, “Rice Straw Waste Producing Sustainable Products For The Global Industry”, Press Release, December 5, 2024, https://www.bioeconomycorporation.my/press-release/rice-straw-waste-producing-sustainable-products-for-the-global-industry/ 15 Figure 6: Example of initiatives in reuse and refill systems L’Occitane Ozarka ReCup/ReBowl CLUBZERØ Refill Fountain concept in 60 Deposit system for its returnable Returnable packaging system for Reusable containers for delivery boutiques across 27 countries; services allow customers to order packaging model, where customers takeaway and delivery, Consumers can bring an empty via the app and drop o used pay a deposit when purchasing partnering with restaurants, bottle for sterilization and refilling, containers at any location or return these items, which is refundable cafes, o ces, and universities or buy an aluminum ‘Forever Bottle’ to the driver on their next delivery upon return to participating outlets Milk & More/ Coca-Cola Refill system mandates Mehrweg system Bottle return system where Home delivery, collection, and Legislation mandates all retailers consumers pay a deposit (Pfand) reuse of Coca-Cola Zero Sugar exceeding 400m2 must dedicate on certain containers; Deposit is glass bottles; Customers leave 20% of their floor space to refill received upon returning the empty empty bottles on their doorstep systems by 2030 container, and the bottles are for collection either recycled or reused Unilever Products from Rexona, Persil, and Alberto Balsam in reusable packaging at various supermarkets, while OMO and Cif now provide concentrated detergents and cleaners to reduce waste OZZI Reuse Reusable container token system allows customers to pay a one-time fee for an “O2GO” container and return it for a token that can be exchanged for a clean container Algramo Partnered with Unilever and Nestlé; reCIRCLE Nestlé Users can order and pay via an app, Containers can be purchased or Self-service refill vending then refill their containers from an borrowed for free from app machines for its Koko Krunch electric tricycle at home or at an partners, with deposits refunded and Milo cereal brands in-store vending machine or charged to the app upon return Muuse Partner cafes and delivery services across Singapore, Hong Kong and Toronto where users can borrow Meu Copo Eco TURN systems containers and return them Reusable container token system Consumers buy a drink in a TURN allows customers to pay a one- ‘smart cup’ and earn points for time fee for an “O2GO” container discounts and prizes by returning it and return it for a token that can to a ‘smart collection bin,’ tracked be exchanged for a clean container by an app Sources: Horrox, 2023; Dabo, 2023; UK Circular Plastics Network, 2023; Nichol, 202116 16 Horrox, James. “The return of returnable packaging: New takes on an old idea are reducing plastic waste.” Frontier Group. February 9, 2023. https://frontiergroup.org/resources/the-return-of-returnable-packaging-new-takes-on-an-old-idea-are-reducing-plastic-waste/; Dabo, Mohamed. “Brands embrace refillable packaging to reduce ocean plastic.” Packaging Gateway. July 25, 2023. https://www.packaging-gateway. com/comment/brands-refillable-packaging-reduce-ocean-plastic/; UK Circular Plastics Network. 2023. “Reusable Packaging Study.” https:// ukcpn.co.uk/wp-content/uploads/2023/09/Reuse-Report-280823.pdf; Nichol, Katie. “L’Occitane on being “an actor for change” in bulk beauty.” Formes De Luxe. April 29, 2021. https://www.formesdeluxe.com/article/l-occitane-s-packaging-design-director-on-being-an-actor-for-change- in-bulk-beauty.58554 16 4. Current situation in Malaysia The plastic waste management market in Malaysia is currently characterized by a fragmented waste management framework and low enforcement of existing policies, underutilization of local feedstock, and dependence on imported plastic waste, as well as recycling efforts that focus on the consumer goods and packaging industries. Additionally, mandatory Extended Producer Responsibility (EPR) has yet to be enacted, and the earliest implementation expected is in 2030.17 EPR is anticipated to play a crucial role in driving recycling activities with a focus on packaging, which will place significant responsibility on producers to manage their products at the end of their lives. Malaysia’s formal waste management framework is fragmented, with varying enforcement of existing policies Malaysia adopts a decentralized approach to waste management across its states and territories. Under the Solid Waste and Public Cleansing Management Act 2007 (Act 672 or the Act), the Solid Waste Management and Public Cleansing Corporation (SWCorp) oversees solid waste at the national level for only six states and two federal territories.18 The state of Selangor is currently in the process of adopting the Act.19 In contrast, waste management in the other states and federal territories20 is administered by their respective local-level governments. This decentralized approach has resulted in each state (or even each municipality) having its own policies and systems for waste management, hindering efforts to achieve national waste management goals. Enforcement of existing laws, particularly those concerning source segregation of recyclables from general waste, has also been limited due to a lack of prioritization as well as enforcement capacity from the Ministry of Housing and Local Government (KPKT). For instance, under Act 672, property owners who violate these regulations may face fines of up to 1,000 Malaysian ringgit. However, interviews with market participants reveal that enforcement through imposing penalties has been limited, resulting in low levels of adherence by households and businesses, and low waste recovery and recycling rates. Local feedstock is underutilized, with Malaysia depending on imported plastic waste Despite its long-established recycling industry, Malaysia’s facilities are underutilized and heavily reliant on imported waste. As of 2023, Malaysia’s total capacity for mechanical recycling was 1,064 ktpa,21 indicating a strong infrastructure for processing plastic waste once collected. However, this is a fraction of Asia Pacific’s total installed capacity of over 18,000 ktpa.22 Malaysia has an estimated 55 to 60 licensed plastic recycling plants,23 which translates to an average capacity of 15 ktpa to 20 ktpa per plant. However, this makes the average mechanical recycling facility in Malaysia sub-scale, as the minimum size of a recycling plant to benefit from economies of scale is around 30 ktpa.24 17 KPKT (Kementerian Perumahan dan Kerajaan Tempatan). 2024. “Blueprint ekonomi kitaran bagi sisa pepejal di Malaysia 2023 - 2035.” KPKT (Kementerian Perumahan dan Kerajaan Tempatan) 18 The six states with nationally administered waste management are Johor, Kedah, Malacca, Negeri Sembilan, Pahang, Perlis; and the two federal territories are Kuala Lumpur and Putrajaya. 19 Lee, Benjamin. “Selangor waste management to undergo due diligence inspection for Act 672 plan, says minister.” The Star Malaysia. May 15, 2024. https://www.thestar.com.my/news/nation/2024/05/15/selangor-waste-management-to-undergo-due-diligence-inspection-for-act-672- plan-says-minister 20 Waste is locally managed in Perak, Pulau Pinang, Kelantan, Terengganu, Sabah, and Sarawak and the federal territory of Labuan. 21 World Bank, 2021, Market Study for Malaysia reported 984 ktpa of operational and planned capacity additions for PET packaging, PP, LDPE, linear low-density polyethylene (LLDPE), and HDPE resin types; an additional 80 ktpa was estimated for food-grade recycled PET (rPET) and PET polyester capacities based on the recycling capacities of INTCO Recycling (https://www.intco-recycling.com/introduce.html) and Hiroyuki Industries (https://www.hiroyuki-ind.com.my/); both accessed in 2023. 22 Independent Commodity Intelligence Services (ICIS), n.d. “Unlocking the potential of recycling in Asia.” https://www.icis.com/explore/ resources/asia-pacific-recycling-potential/#group-section-Current-capacity-FX36wExKr0 23 Estimation based on data from ENF Plastic, a plastic recycling business directory (https://www.enfplastic.com/directory/plant/Malaysia) reporting 62 plastic recycling plants based in Malaysia and the Malaysia Investment Development Authority (MIDA) (https://www.mida.gov.my/ de/plastic-recycling-malaysias-perspective/) reporting 55 plastic recycling projects as of December 2018; both accessed in 2024. 24 Based on the assessment validated through interviews with technology providers. 17 Malaysia has consistently ranked amongst the world’s top six importers of plastic waste and scrap (Table 1). In 2023, Malaysia imported 406 kilotonnes of plastic waste categorized under Harmonized System (HS) Code 3915,25 which includes waste, parings, and scrap of plastics.26 Imports are mostly from the United States, Germany, Belgium, Japan, the Netherlands, and Australia, with these countries accounting for 63 percent of all plastic waste and scrap imported into Malaysia in 2023 (Figure 8). Table 1: Top importers of HS 3915 plastic waste globally, 2019 to 2023 Imported quantity, kilotonnes Countries 2018 2019 2020 2021 2022 2023 Netherlands 555 582 619 761 811 796 Türkiye 437 547 757 682 687 623 Vietnam 191 280 329 379 304 473 Germany 490 498 488 516 549 452 United States 442 398 418 468 432 447 Malaysia 873 334 478 405 351 406 Source: ITC, 2024 Figure 8: Top exporters of HS 3915 to Malaysia, 2019 to 2023 500 478 Others Australia 405 403 Netherlands 400 33% Japan 351 Belgium 334 25% 37% Germany 300 7% The United States 7% 34% kilotonnes 35% 6% 9% 16% 6% 6% 6% 200 10% 7% 8% 6% 13% 6% 5% 8% 9% 10% 12% 5% 5% 12% 6% 100 9% 14% 28% 33% 25% 23% 18% 0 2019 2020 2021 2022 2023 Source: ITC, 2024 25 In scrap plastic trade, the types of HS 3915 plastic traded globally include ethylene polymers (HS 391510), polyethylene terephthalate and polypropylene (HS 391590), styrene polymers (HS 391520), and vinyl chloride polymers (HS 391530). These plastics come in the forms of bales, flakes, and sheets. 26 For the latest trade statistics, see the International Trade Centre (ITC) database: https://www.trademap.org 18 Malaysia’s plastic circularity efforts have been focused on the consumer goods and packaging industries With the packaging sector identified as the highest end-user of plastic (Figure 9), efforts have been concentrated on ensuring plastic sustainability and circularity in this sector. Malaysia’s Plastics Sustainability Roadmap 2021- 2030 has set targets that are also focused on the packaging sector, as seen in Figure 10. Malaysia aims to have an average of 15 percent recycled content in packaging by 2030, including plastic bottles. This is a more conservative target compared to other countries. For example, the European Union aims to have 30 percent recycled content in plastic bottles by 2030.27 While the roadmap acknowledges the importance of investigating other sectors, such as the E&E and automotive sectors (the next two largest users of plastic), it lacks concrete initiatives and goals. Figure 9: Breakdown of plastic consumption by revenue and sector in Malaysia, 2023 70 1.8 61.4 1.8 60 1.8 3% 3.7 3% 3% 7.4 6% 50 12% 17.2 Malaysian ringgit, billions 28% 40 30 27.6 45% 20 10 0 Packaging E&E Automotive Construction Others Household Agriculture Total Source: Source: MPMA, 202428 27 For more information about the European Union’s plastic waste recycling, see https://www.europarl.europa.eu/topics/en/ article/20181212STO21610/plastic-waste-and-recycling-in-the-eu-facts-and-figures 28 MPMA (Malaysia Plastics Manufacturers Association). 2024. “2024 Roadshow.” https://mpma.org.my/upload/Industry_Outlook_2024_Roadshow.pdf 19 Figure 10: National targets for plastics sustainability in Malaysia 25% 100% 15% of post-consumer average recycled plastic packaging of recyclability of content in to be recycled plastic packaging packaging by 2025 by 2030 by 2030 Source: Ministry of Environment and Water, 202129 Delay in mandatory EPR and challenges in regulatory enforcement in separation at source (SAS)29 Implementation of mandatory EPR in Malaysia is only expected in 2030, at the earliest.30 Adoption of EPR schemes in Malaysia has so far been limited to voluntary private sector initiatives, primarily focusing on packaging. Currently, the Malaysian Recycling Alliance (MAREA), a voluntary Producer Responsibility Organization (PRO) established by ten fast-moving consumer goods (FMCG) companies in January 2021,31 leads voluntary EPR schemes for plastic packaging. There are also other FMCG-led programs. For example, Nestlé Malaysia has independently undertaken significant initiatives to meet its own plastic neutrality target.32 29 Ministry of Environment and Water (KASA). 2021. “Malaysia Plastics Sustainability Roadmap 2021 – 2030.” https://faolex.fao.org/docs/pdf/ mal220769E.pdf 30 KPKT, 2024 31 FMCG companies include Coca-Cola Malaysia, Colgate-Palmolive Malaysia, Dutch Lady Milk Industries, Etika Group of Companies, Fraser & Neave Malaysia, Mondelēz International (Malaysia), Nestlé Malaysia, Spritzer, Tetra Pak Malaysia, and Unilever Malaysia. 32 For more information, see Malaysian Plastic Circularity Series - Exploring Feedstock Opportunities to Advance Domestic Circularity in Malaysia’s Plastic Recycling. 20 5. Overview of opportunities Based on the analysis in the Malaysian Plastic Circularity Series, sector-specific recycling outside the packaging sector does not yield enough feedstock for mechanical recyclers in Malaysia to benefit from economies of scale. This includes the E&E, automotive, construction, and healthcare sectors highlighted in the respective reports in the series and in Figure 9. The inadequate supply of plastic waste from the individual industries highlights the importance of cross-industry recycling initiatives, or open-loop recycling. Three key initiatives have been identified to build coordination across value chains and sectors to promote cross-sector recycling in Malaysia. 1. Malaysia’s lack of cross-sector collection and aggregation systems presents opportunities for developing integrated collection and sorting infrastructure. Due to limited formalized infrastructure and weak enforcement of waste SAS, the collection and aggregation of recyclable materials are primarily facilitated by informal and semi-formal channels.33 These informal and semi-informal channels, including informal collectors and junkyards, play a pivotal role in the recovery of recyclables. Over 90 percent of household plastic waste in Malaysia is estimated to be collected through informal channels.34 In the collection stage, few cross-sector synergies are realized. Individual informal collectors focus on specific sectors, as summarized in Figure 11. For example, apartment cleaners collect packaging waste within apartments but do not collect waste from other sectors. Similarly, formal collectors operate within sector-specific collection frameworks, including construction and demolition waste collectors handling construction waste, scheduled waste collectors managing healthcare industry waste, and household recycling collectors focusing on packaging waste. However, semi-formal waste aggregators like junkyards can sort and aggregate general waste from various sectors within the same facility. This makes them ideal for recyclers seeking to procure waste materials. The lack of cohesion across all sectors highlights investment opportunities in developing collection and aggregation systems, such as waste collection trucks and material recycling facilities. 2. Designing and standardizing plastic specifications for recycling across sectors will help facilitate cross- sector partnerships. The decisions made in the design stage of a plastic product play a critical role in determining its recyclability. When designing plastics for recycling, designers should look towards the best practices shown in Table 2. Factors such as the selection of materials, color, usage of additives, and ease of disassembly all influence the recyclability of the product.35 For example, black plastics commonly used in packaging due to their ability to mask imperfections are not recyclable because optical machines that sort plastics in recycling facilities are unable to detect the black carbon pigments.36 33 Based on on-the-ground observations and interviews with industry stakeholders in Malaysia. 34 Informal collectors refer to non-formalized individual collectors such as material pickers from streets, cleaners from apartments, and municipal waste collectors who engage in tailgate sorting. They also include NGO collectors like Tzu-Chi, which has recycling drop-off points concentrated around Central Peninsular Malaysia, as well as industry-led collection initiatives led by private companies such as Nestle’s KitaR Program, a formal voluntary effort to collect plastic waste. 35 IVL Swedish Environmental Research Institute. 2024. “Design for recycling of products containing plastics.” https://ivl.diva-portal.org/smash/ get/diva2:1845203/FULLTEXT01.pdf 36 Tabrizi, Shanar. 2021. “Designing for real recycling, not plastic lock-in.” Zero Waste Europe. https://zerowasteeurope.eu/wp-content/ uploads/2021/08/Design-for-Recycling-Position-Paper_Final.pdf 21 Figure 11: Selected examples of collection and aggregation channels by sector in Malaysia, 2023 Collection Channels Aggregators Informal NGO Industry- Formal Construction Scheduled Junkyards collectors collection led household & demolition waste collection recycling waste collectors collectors collectors Packaging      Construction    Healthcare   E&E   Automotive  Source: Local observations and interviews with industry stakeholders Table 2: Selected examples of best practices in designing plastic products for recycling (non-exhaustive) Design criteria Design-for-recycling best practices Additives • Reducing the use of additives (pigments and plasticizers) Different combinations of polymers • Avoid combinations of polymers that are difficult to separate (PP and PE) Labels and adhesives • Use easy-to-remove or water-soluble labels • Use labels made from the same polymer material as the substrate • Eliminate use of labels by using direct printing or marking on plastic surfaces where possible Source: IVL, 2024 Most existing design-for-recycling best practices and initiatives are sector-specific, with the majority of design guidelines focused on the packaging industry (Table 3). However, the knowledge on designing for recycling varies significantly between sectors. For instance, there are no existing design-for-recycling guidelines for plastic components in products from the automotive and E&E industries.37 A unified set of design criteria applicable to all sectors would be beneficial for encouraging cross-sector recycling. Table 3: Selected examples of initiatives or organizations for design-for-recycling guidelines Sector Design-for-recycling guidelines Packaging • Cotrep • European PET Bottle Platform Initiative (EPBP) • RecyClass • Nestlé Design for Recycling Construction • CEN (European Committee for Standardization) Source: IVL, 2024 37 IVL, 2024 22 3. Chemical recycling’s ability to process mixed plastics can provide supplementary support for cross-sector recycling. Chemical recycling is typically used as a complementary technology to mechanical recycling, as it can process mixed and multi-layer plastics, which mechanical recycling cannot. Mixed plastics from different sectors are therefore a prime feedstock option for chemical recycling, creating an avenue for cross-sector recycling. Waste that can be chemically recycled should be diverted from landfills and collected to increase opportunities for cross-sector recycling. This will require improved SAS by product users (households as well as industrial, commercial, or institutional (ICI) customers) and effective collection of recyclable materials by the concessionaires (private companies appointed by the federal government to manage and operate solid waste collection, recycling, and public cleansing services). Communication, education, and public awareness efforts are critical to increasing SAS. For example, familiarizing users with the different grades of plastic and materials, particularly those previously deemed non-recyclable, will be crucial. As Malaysia prepares for the introduction of mandatory EPR, several interim actions can be taken to strengthen waste management’s governance and institutional framework. This can include mandating waste segregation with stronger enforcement, incentivizing waste concessionaires to improve the efficiency of waste aggregation and collection systems, increasing landfill costs to encourage recycling initiatives, integrating willing informal and semi-formal aggregators into the waste management system, creating a central entity to monitor and drive durable plastics circularity, developing a consumer-focused collection system, and monitoring and reporting of plastic use and plastic waste generation. The second report in this series, Exploring Feedstock Opportunities to Advance Domestic Circularity in Malaysia’s Plastic Recycling, delves into these actions in more detail. Subsequent sector reports in the series elaborate on sector-specific opportunities, which include promoting private-led initiatives and platforms, emphasizing reduction and reuse where possible, and encouraging the use of recycled materials in end applications. A high-level summary of all opportunities identified in the study is in Table 4. Table 4: Summary of opportunities in the Malaysian Plastic Circularity Series Sectors: Packaging E&E Automotive Construction Healthcare Areas for Opportunity Sectors Applicable Immediate Expected action Pack. E&E Auto Con. Heal. value or improvement chain medium- segment term timeline Build synergies Developing Applicable for all sectors Collection Medium Collection rate across value an integrated Recycling rate chains and collection sectors to and sorting promote cross- infrastructure sector recycling Designing and Applicable for all sectors Industry Immediate Recycling rate standardizing application plastic specifications for recycling across sectors Exploring chemical Applicable for all sectors Recycling Immediate Recycling rate recycling as a new recycling technology 23 Areas for Opportunity Sectors Applicable Immediate Expected action Pack. E&E Auto Con. Heal. value or improvement chain medium- segment term timeline Strengthen Implementation ⦁ ⦁ ⦁ Industry Medium Collection rate waste of EPR application Recycling rate management governance and Mandating waste ⦁ ⦁ ⦁ Industry Medium Collection rate institutional segregation application Recycling rate framework Incentivizing waste Applicable for all sectors Collection Medium Collection rate concessionaires Recycling rate Increasing landfill Applicable for all sectors Industry Medium Collection rate costs application Recycling rate Integrating ⦁ ⦁ ⦁ Aggregation Medium Collection rate informal/semi- Recycling rate formal aggregators Data transparency into the waste management system Creating a central ⦁ ⦁ Governance Medium Collection rate entity to monitor Recycling rate and drive durable Data transparency plastics circularity Developing a ⦁ ⦁ Collection Medium Collection rate consumer-focused Recycling rate collection system Data transparency Monitoring and ⦁ ⦁ ⦁ ⦁ Governance Medium Data transparency reporting of plastic waste Promote Expanding ⦁ ⦁ Recycling Immediate Collection rate private-led private sector-led Recycling rate initiatives and recycling systems platforms Emphasize Reduction and ⦁ ⦁ Industry Immediate Plastic reduction and reuse initiatives application consumption reuse where possible Encourage Establishing ⦁ Industry Immediate Demand for recycled sector-specific application recycled plastics materials quality and usage in end- recycled content applications standards for end- use applications Implementation ⦁ ⦁ Industry Medium Demand for of minimum application recycled plastics recycled plastic content policies in respective end-use applications 24 June 2025 Administ r d b