17 Sep 2019 . News
Malaysia upbeat on enhancing its global supply chain

KUALA LUMPUR: Malaysia needs to halt the pre-mature deindustrialisation and reindustrialise in an effort to become an industrialised economy and join the ranks of the high-income economy.

Finance Minister Lim Guan Eng said the government clearly has a role to play to boost Malaysia’s investment numbers, while enhancing the country’s position in the global supply chain.

“State interventions are required to improve national competitiveness, raise productivity, prioritise investment in strategic sectors, re-energise export-led industrialisation and structure market incentives around political goals of encouraging entrepreneurship,” he said at the 2020 Budget focus group discussion with technology industry players in Kulim, Perak today.

Lim said the government did not forsake the free market and disavow trade liberalisation, provided that poorer countries were protected with favourable trade status, allowing them to compete.

“Deregulated finance must also protect minority shareholders and members of the public from predatory speculators and opportunists.

“Safeguard must be there to protect the losers of liberalisation, as we cannot live in a zero-sum game world,” he added.

Lim said the ongoing trade war between China and the United States cannot be ignored.

The global upheaval provides Malaysia with an extra impetus to raise its competitiveness while ensuring its manufacturing bases, particularly the electrical & electronics (E&E) as it remains crucial to the reorienting global supply chain.

“We must understand Malaysia is not the only country looking to capitalise on the reorientation. Economies like Thailand and Vietnam are eager to grab the opportunities to embed their economy deeper in the global supply chain.

“We are in a race that could determine the trajectory of our individual national growth for decades to come, just as the industrialisation of the past had boosted our growth for about four decades,” he said.

Lim said Malaysia’s comparative and competitive advantage will enable it to benefit from business relocation as well as trade and investment diversion, despite the ongoing competitions.

“We have superior infrastructure, multilingual population with widespread use of English, skilled workers, strong rule of law particularly in terms of intellectual property rights, and strong links to the world’s markets.

“Our institutional reforms have also made our institutions more trustworthy and transparent. And Malaysia is already the 15th easiest place to do business out of 190 economies according to the World Bank,” he said.

He said the country is a safe haven amid the trade war, as companies seek to create new supply chain to avoid the trade war.

“We have been making good progress too. In the first half of 2019, approved foreign investment across all sectors rose 97.2 per cent to RM49.5 billion from RM25.1 billion last year.

“Out of the RM49.5 billion approved foreign investment, RM25.1 billion were in manufacturing. This is after approved foreign investment reached record high in 2018, hitting RM80.1 billion last year with RM58.0 billion went into the manufacturing sector,” he said.

Lim said the RM21.6 billion National Fiberisation and Connectivity Plan (NFCP) was among the strategies to reindustrialise the country through public private collaboration in the age of Industry 4.0.

Malaysia, he said, would be ready for the implementation of 5G technology for wider coverage of faster and higher quality connection, and more affordable broadband internet.

As the seventh largest E&E exporter in the world, Lim said the sector has been the backbone of the Malaysian manufacturing sector, and the economy as a whole

From 2016 to 2018, RM30.0 billion worth of E&E investment was made. Out of that, 44.4 per cent came from the Northern Corridor Economic Region (NCER).

He said Penang as the principal E&E hub in Malaysia contributed RM9.93 billion of the total investments, with Kedah attaining RM1.85 billion while Perak RM1.58 billion.

“Penang recorded RM9.2 billion investment for the first half of 2019. These benefits from trade and investment diversion as a result of trade war are not bound to last forever,” he said.

The E&E industry contributed 38 per cent of the total Malaysian exports, yielding the country with a goods trade surplus worth RM120.3 billion.

Source: New Straits Times