Malaysia has come a long way since independence in 1957. From what was once a mainly agriculture and commodities-based economy, the nation has been transformed into one of the most advanced – not just in Southeast Asia – but even in the Asia-Pacific. A country that was once famous for supplying rubber and tin to the world is now making waves in knowledge-based industries such as electronics, aerospace, photovoltaics, finance, ICT, and many more. Malaysia’s transformation over the past 60 years can be attributed to many factors, and one of the most important has been a strong and progressive industrial, investment and trade policy. This a testament to the work and achievements of the Ministry of International Trade and Industry (MITI) through the years.
MITI team has dedicated their best efforts to making Malaysia a more technologically advanced nation and towards creating a conducive business landscape in the country, ultimately strengthening Malaysia’s footprint around the world. And the numbers do not lie.
The figures in the World Trade Statistical Review 2019 reflect this – 25th in the world in terms of value and exports by that year alone, the 26th largest importer in the world and 40th in the world in terms of foreign direct investments (FDIs) attracted. This is further evidenced by a media statement released by MITI on Malaysia’s official status in the top 20 best economies for the ease of doing business (The World Bank Doing Business 2019 Report). Additionally, Malaysia was ranked 25th among 140 countries for its competitiveness, according to the Global Competitiveness Report 2019-2020 released by the World Economic Forum.
Indeed, Malaysia has come a long way from solely exporting rubber and tin, and is now a nation of industry and innovation. The credit has to go where it is due – to MITI’s strong and effective leadership through the years. It has generated domestic and international confidence in Malaysia’s long-term future. This is vital, now more than ever in the post-Pandemic reality, as Malaysia seeks to move beyond recovery, towards becoming the region’s leading trade and investment destination.
While MITI’s functions may be plentiful, its core goals are quite straightforward – which is to help Malaysia generate sustainable economic growth through attracting quality investments, promoting beneficial trade, and strengthening industries.
MITI also focuses on up-skilling workers and enhancing national productivity. These are all necessary factors to the development of a conducive business ecosystem that can facilitate trade and investment. It is the final required step before focusing their efforts on stronger regional and multilateral trade relations and cooperation.
In pursuit of these goals, MITI aims to make our national industries more competitive. It has currently set its sights on strengthening
our domestic capabilities in a number of areas, namely the adoption of Industry 4.0, the automotive sector, aerospace and aeronautical engineering, and e-commerce.
In the past, Malaysia’s attraction as an investment destination for manufacturing industries has been based on affordable labour. As our nation is moving up the value chain, cheap labour can no longer be a selling point, especially when neighbouring countries can offer that at lower costs.
The focus therefore is on being smarter, not cheaper. By adopting Industry 4.0 related advanced technologies, manufacturers can increase productivity, efficiency and faster delivery to market while reducing cost of production. MITI envisions Malaysia to be a strategic partner for all smart manufacturing and related services in the Asia Pacific region, as well as becoming a primary destination for high-technology industries.
Thus, the Industry4WRD policy was born, and launched into the light of the sun in late 2018 to drive digital transformation in the manufacturing and related services sector for more productive gains. MITI has spearheaded the development of the Industry4WRD policy together with several key ministries such as the Ministry of Finance (MOF), Ministry of Multimedia and Communications (KKMM), Ministry of Education (MOE), Ministry of Human Resources (MOHR) and the Ministry of Science, Technology and Innovation (MOSTI).
Collaboration across all sectors of Government has been an effective enabler in the overall digital transformation of manufacturing companies. The heart of this policy can be seen in the acronym F.I.R.S.T – Funding for outcome-based incentives, efficient digital Infrastructures, ensuring industries adopt the adequate Regulatory framework, improving the Skills & Talent of existing and future talents and finally providing access to smart Technologies.
Enhancing the Automotive Sector
Malaysia’s domestic automotive industry is a strategic sector to the national economy. It is the second largest market in ASEAN for the passenger-vehicle segment and has further potential through the adoption of new technological trends. The world is consistently demanding for more advanced technology in cars, such as electric cars that run on sustainable resources.
Aligning with this trend, Malaysia must be able to build the capability of the of the local automotive industry in order to attract quality investments that could make it more globally competitive. Driving this is the National Automotive Policy (NAP) 2020, which follows on from NAP 2014, which showcased the government’s aspiration to make Malaysia not only as an Energy Efficient Vehicle (EEV) hub, but also able to produce and market Next Generation Vehicle (NxGV) in the region.
In 2019, the EEV penetration rate increased to 87.6 percent, with a steady a year-on-year increase since 2014. In the same year, the automotive industry saw a total of 53 approved projects with investments worth RM5.50 billion. Domestic Direct Investment (DDI) made up slightly more than half of all investments, totalling RM4.18 billion, with Foreign Direct Investment (FDI) being worth RM1.32 billion, or 24 per cent. The approved projects are expected to result in 3,467 jobs. Of the total projects approved, there were 18 new projects worth RM2.22 billion or 40.4 percent of the total investments, with 35 expansion/diversification projects that brought in RM3.28 billion, or 59.6 per cent of the total.
Strengthening Aerospace Excellence
Under the Malaysian Aerospace Industry Blueprint 2030, Malaysia aims to be the leading nation in Southeast Asia for aerospace parts and component sourcing, as well as to capture at least 5 percent of the global market share of the MRO sector.
Malaysia has become one of the critical suppliers of aircraft structure components, and there is a strong market demand coupled with quality investments that have powered the local supply chain, attracting quality global investors like Boeing, Airbus, Honeywell, Safran and GE Aviation. These milestones would not be possible without the National Aerospace Industry Coordinating Office (NAICO), which was established by MITI specifically to coordinate the implementation of the aerospace blueprint until 2030 in partnership with other agencies such as MIDA, MATRADE, SME Corporation Malaysia, Aerospace Malaysia Innovation Centre (AMIC) and Department of Skills Development (DSD). Their three main focal points are industry development, market development and up-skilling both industry & market intelligence.
Moving forward, Malaysia will be focusing its attention on the possibilities of becoming a raw material supplier and producer of high value added aerospace products, through implementation of industry-led Research & Technology (R&T) activities, adaptation of advanced technologies and eco-system development.
This drive to become more globally competitive is constantly on the minds of those who work at NAICO. This drive also focuses on the human element of the aerospace industry, underscored by their recent collaboration in the Malaysia Board of Technologists (MBOT) to promote the development of Professional Technologists and Certified Technicians as well as skills talent development with the DSD. The aerospace industry employed more than 27,500 high-skilled workers last year.
In 2019 alone, 7 new aerospace projects with investments of RM2.07 billion were approved, predicted to generate 582 new high income jobs within the industry. In that year alone, the aerospace industry recorded revenue of RM16.2billion where the manufacturing of aero-structure and engine component made up 47 percent of market activities while maintenance, repair and overhaul (MRO)services accounted for 49 percent.
The government is committed to harnessing the potential of digital transformation in Malaysia, towards achieving greater economic prosperity and societal well-being. It is with this objective that the government is embarking on focused policy interventions, particularly in the context of e-commerce, so as to ensure that it becomes an influential catalyst for the industrial, commercial and social development.
Towards those ends, the National e-Commerce Council (NECC) which was established in December 2015, continues to be the governance mechanism overseeing the cohesive efforts of 37 Ministries and government agencies in Malaysia to develop a sound e-commerce ecosystem in the country. Spearheaded by MITI and the Malaysia Digital Economy Corporation, the NECC administers the implementation of the National e-Commerce Strategic Roadmap (NeSR), 2016-2020 to accelerate sustainable e-commerce ecosystem development and growth in Malaysia.
For over four years of its implementation, the Roadmap had indeed bare fruition particularly in establishing e-commerce supporting infrastructure and policies, as well as making entrepreneurs more e-commerce ready. These include providing training to over 322,000 small and medium enterprises and retailers in using e-commerce platforms to market and export Malaysian products since 2016. Additionally, from 2017 to 2019, RM681.3 million was invested to create advanced logistics infrastructure and systems to develop Malaysia as a regional e-commerce distribution hub.
This initiative has been effectively coupled with the implementation of the Digital Free Trade Zone (DFTZ) pilot project. The DFTZ has shown a positive impact in realising the national objective of increasing SMEs participation in cross-border e-commerce transactions. Now, over 17,000 Malaysian SMEs have registered for the opportunity to conduct their businesses and services online, and have even begun exporting through the Alibaba.com platform.
Amid the Fourth Industrial Revolution, artificial intelligence, automation and robotics are becoming the backbone of logistics, and digitally enabled manufacturing, distribution and warehousing platforms. These allow us to analyse trends and spot opportunities, including optimal handling, accurate forecasts and enhanced geographical initiatives.
To harness the potential of those technologies for the manufacturing and the manufacturing related services sectors, Malaysia, through MITI is currently implementing the Industry4wrd Policy Framework with other key Ministries and agencies. The Industry4wrd Policy has led to the creation of homegrown industrial solutions based on those current technologies. These include the Smart Manufacturing Intelligent Service Platform: a cloud service platform that offers technology solutions to industrial activities andBiz4WRDxChange: a platform that help connect companies intending to adopt Industry 4.0 solutions to the services and products providers of Industry 4.0 technologies.
In moving up the e-Commerce to the next frontier, MITI is promoting that technology solutions and facilitation under the Industry4wrd Policy Framework be utilised by businesses in e-commerce activities
Business without Borders
With Malaysia strategically located at the heart of the ASEAN region, it is ideally placed to be the entry into one of the fastest growing, most dynamic markets in the world. The region has a population of more than 650 million people, and all member states have a combined GDP of approximately US$3 trillion and total trade value of US$3.4 trillion.
MITI has been at the forefront of this essential market, poised to capture its potential through cooperation and facilitation of trade. In 2020, it took on the role of the APEC (Asia-Pacific Economic Cooperation) National Secretariat and has been hosting the conference through physical events (pre-Movement Control Order) and digital platforms (during Movement Control Order). This is the second time Malaysia has hosted APEC since 1998 and epitomises the nation’s commitment to our Vision 2020 principles of economic prosperity
as a catalyst for social development.
On 25 July 2020, MITI organised the first ever Virtual APEC Ministers Responsible for Trade (VMRT) meeting chaired by Datuk Seri Mohamed Azmin Ali. This was the first time in the history of APEC that the MRT met in a fully virtual format and was indeed a remarkable feat for Malaysia as the host of APEC 2020. The convening of the VMRT meeting demonstrated Malaysia’s leadership in spearheading APEC’s new normal by providing its chairmanship in fully digital hosting format to the 21 APEC Economies. In addition, the meeting also saw the participation of the APEC Business Advisory Council (ABAC), as well as observers from the ASEAN Secretariat and the Pacific Economic Cooperation Council (PECC).
The VMRT also articulated the progress being made in key initiatives by APEC in response to the COVID-19 pandemic such as facilitation efforts for the movement of people, a digital platform for information exchange as well as the proposal to create an APEC sub-fund for combatting COVID-19 and facilitating economic recovery.
As the national secretariat of APEC 2020, MITI is spearheading Malaysia’s efforts to develop APEC’s Post-2020 Vision statement, also known as ‘Draft O’. The Post-2020 Vision was also in preparation of meeting APEC’s Bogor Goals, which will mature by the end of 2020, towards reduced barriers to trade and investment. The Post-2020 Vision which will serve as the guiding document for APEC in the coming years and is most important deliverable for Malaysia hosting of APEC 2020.
In terms of trade facilitation, MITI has been endorsing the revival of the ASEAN Trade Facilitation-Joint Consultative Committee (ATF-JCC) in order to strengthen cooperation between ASEAN Member States by reducing trade transaction costs.
Efforts to expedite cargo clearance are an important aspect to promoting ASEAN economic integration, by enabling the electronic exchange of cross-border documents. This was put into action with the implementation of ASEAN Single Window (ASW), a regional initiative that connects and integrates the National Single Windows of clearance between Member States.
In order to achieve the nation’s potential and fully capitalise on the power of their neighbouring countries, MITI has – over the past 15 years – spearheaded the implementation of reforms that would liberalise the economy and make the country more attractive to high-quality domestic and foreign investments. This is part of the government’s Strategic Reform Initiatives. At the same time, measures have also been taken to reduce red tape, increase efficiency and strengthen good corporate governance.
MITI’s trade promotion, industrialisation and investment activities have brought about massive improvements in the Malaysian socio-economic landscape. The figures according to Bank Negara bear this out. Including the yearly inflation rate, Malaysia risen from a nominal GDP of RM 5.87 billion in 1960, to RM1.51 trillion by 2019. Similarly, GDP per capita has also increased from RM723 in 1960 to RM 46,367 in 2019.
Looking Up, Always
But as impressive as this might be, MITI knows that it cannot let up on its focus. Rapid industrialisation and the opening up of neighbouring markets mean that Malaysia is facing more competition than ever before for trade and investments. That is why the Ministry has not stopped looking forward in their efforts to both secure and enhance Malaysia’s economic potential.
Soon, MITI will be unveiling their fourth industrial master plan (IMP4) in line with the challenges and goals that we hope to achieve in Industry 4.0. This, coupled together with the National Economic Recovery Plan (PENJANA) could spell great news for a boost in Malaysia’s economy,. Within this RM35 billion stimulus are 40 total initiatives which could be a profitable solution to SMEs and start-ups who must cope with the business slowdown owing to the Covid-19 pandemic.
The next five years would be crucial. Definitely, the events at the start of 2020 – namely the global pandemic – would not have helped, as the worldwide economic fallout is expected to hold back the Malaysian economy for a certain period of time. However, MITI has faced major challenges before – global recessions, currency crises, foreign exchange shocks – and has always managed to navigate the choppy waters and help Malaysia come out stronger than before. Thanks to the experience gathered from its past and the calibre of its leaders, this time will be no different.