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On behalf of the Board of Directors, I am pleased to present to you the Annual Report and the Audited Accounts of Thong Guan Industries Berhad and its subsidiary companies (the Group) for the financial year ended 31 December 2007.

Economic Review

The Malaysian economy continued to grow steadily at 6.3% in 2007 (2006: 5.9%). The growth was driven primarily by the largest sector in the economy, the services sector which grew 9.7% (2006: 6.5%) to command a 53.4% (2006: 51.8%) share of the total Malaysian Gross Domestic Product (GDP). The global economy grew at a strong rate of 4.7% in 2007 (2006: 4.9%) led by the BRIC economies of Brazil, Russia, India (8.7%) and China (11.4%) and persistent strong expansion in East Asia (8.4%). Record high commodity prices also buoyed growth in many commodity producing countries. Growth in Europe (2.6%) and Japan (2.0%) moderated slightly while that of the United States (US) (2.2%) slowed due to the emergence of the subprime mortgage problem and downturn in the housing sector. Foreign direct investment into Malaysia increased significantly to RM 46.1 billion in 2007 (2006: RM 37.3 billion). The MalaysianRinggitedgedup6%againsttheUSDollar(USD)in2007toclosetheyearatRM3.31againsttheUSD.

The stronger economic performance was achieved in an environment of relative low inflation of 2% (2006: 3.6%).The Bank Negara Malaysia (BNM)’s Overnight Policy Rate was maintained at a conducive rate

of 3.5%. The labour market continued to be stable with unemployment rate remaining at below 3.5%.

Industry Trends & Development

The manufacturing sector chalked up a slower growth of 3.1% in 2007 (2006: 7.1%) as the expansion in local commodity based industries cushioned the effects of the slow down of the electronics and electrical sector. The manufacturing sector’s share of the overall GDP declined slightly to 30.2% (2006: 31.1%).

The total turnover of the Malaysian Plastic industry registered a moderate growth of 3% (2006: 8.4%) to RM 15.5 billion employing a total workforce of approximately 96,000 people.This represented a 3% slice of the GDP and 0.8% of total employment.Total export of Malaysian plastic products grew by 8% (2006: 16%) to RM 8.4 billion.Total consumption of plastic resin in Malaysia was estimated at 1.65 million tons representing a per capita consumption of 62kg (2006: 68 kg)

The raw material price of polyethylene, film grade closed the year at USD 1,500 per metric ton a jump of 17% compared to the price at end 2006.The packaging sub-sector (both flexible and rigid including bags,films,bottles and containers) which grew an estimated 11% (2006:15%) continued its dominance contributing a slice of 41% or RM 6.3 billion of the total pie of the Malaysian plastic industry. Total export of the packaging sub-sector increased by 13.4% to RM 3.39 billion. The bulk of the increase was from plastic bags following the decision of the European Commission not to impose anti-dumping duty on certain plastic bags imported from Malaysia and imposed anti-dumping duties that ranges from 4.8% to 28.8% for imports from China and between 5.1% to 14.3% for imports from Thailand effective 1 October 2006. Export of Malaysian plastic bags into the European Union market increased by 15% in 2007.



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