Malaysia to Reinvent Economy?

According to the Global Competitiveness Report (2019), the Malaysian economy is the 27^th most competitive in the world. Nominal GDP in 2019 was USD 365.3 billion or USD 1.1 trillion in PPP terms. And GDP per capita (nominal) is USD 11,137. There is no fixed definition on the developed status of a country. Nonetheless, according to the Central Intelligence Agency the developed status requirement is USD$15,000. Growth has been tepid in recent years at 4-5% annually. For 2020, it is likely to the negative 2% (or more!).

The top 5 sectors in terms of share of GDP were as follows:

                                                                                                          %GDP

   Agriculture                                                                                        8.1

   Mining                                                                                              8.4

   Manufacturing                                                                                 23.0

   Construction                                                                                     4.6

   Services                                                                                          54.5 (now 51%)

                                                                                                          100%

Note: Total may not add up due to rounding and exclusion of import duties.

Source: Economic Report 2017/2018, Ministry of Finance Malaysia and Department of Statistics

Manufacturing is major component of Malaysia’s economy and contributes 23% to its GDP. It has remained stagnant at 23% since 2013 and dropped from 32.3% in 2000. Up to 98% of companies in manufacturing sector are SMEs. The sector employs 17% of the workforce. (Services sector employs 62% of total workforce).

The New Economic Model was to propel Malaysia from a middle-income economy to a high-income economy based on innovation, creativity and high value-add. New growth was to come from:

-          Education and training services;

-          Health tourism;

-          Eco-tourism;

-          Remarkable energy;

-          Financial services;

-          Creative industries (whatever that means);

-          ICT;

-          Waste management;

-          R&D; and

-          Regional operations / offices

With Covid-19 MCO and oil price slump, these plans have been scuttled. Job losses, businesses shut, will mean the Government needs a new sector by sector plan for recovery. That plan is to stabilise manufacturing, services and mining sectors for the next 12-18 months.

Beyond that, it is an opportunity to reform the economy, focus on new initiatives like renewables, R&D and implement the blueprint for 4WRD.

4WRD is Malaysia’s answer to the Industry 4.0 revolution. The Industry4WRD : National Policy on Industry 4.0 was launched in 2018, to lead the digital transformation of the manufacturing and services industries in Malaysia. The policy includes a framework in driving the nation forward. Amongst its goals includes labour productivity growth, manufacturing contribution to the economy, innovation capacity increase and offering high-skilled jobs.

The following are the set of technologies involved and an example in Industry 4.0 that would impact the manufacturing industry in Malaysia.

• Additive Manufacturing: 3D printing for medical uses.
• Artificial Intelligence: Using neural networks to integrate data from supply chains, quality control, design teams and production lines. The move from smart factories to networked factories.
• Big Data Analytics: Using data from multiple different sources to direct decisions that can predict product failure.
• Advanced Materials: Nano structure development for material improvement. Can be combined with Additive Manufacturing for the customisation and development of products that were not possible until now.
• Cybersecurity: As the manufacturing and services industry becomes increasingly technologically driven, digital security will become a priority.
• Simulation: Simulations for manufacturing process improvement and product testing of various materials.
• Cloud Computing: Cloud computing mitigates the need for large amounts of capital to start manufacturing. Instead, coupled with AI and Big Data, it improves production processes and product quality.
• Augmented Reality: Used in the delivery of part replacement instructions to maintenance staff on site.
• Internet of Things (IoT): Combined with Internet of Things and Big Data it can revolutionise manufacturing such that it is completely autonomous.
• Autonomous Robots: Can contribute to company’s competitiveness by increasing efficiency due to system’s autonomy.
• System Integration: Digital integration for system’s entire value chain.

The thorough explanation of each technology can be viewed in the diagram below.

Malaysia’s Digital Economy Corporation has partnered with Coursera to offer up to 3800 courses for free. This includes the certification program and is valid from 1 May to 30 September 2020. This initiative can be one of many offered by the Malaysian government to upskill the Malaysian workforce. Other methods may include, part time studying incentives for the labour force in these two industries.

The current government has been given many lemons this year, it is time to make lemonade.

References

1.     Econ 4.0: I Manufacturing the Mantra? Raju Chellam, The Edge Malaysia, August 15, 2019.

2.     Chapter 3: Economic Performance and Prospects, Economic Report (2017/2018), Ministry of Finance.

3.     Cover Story: No Consensus on definition of ‘developed nation’.

4.     MDA, Boosting the Services Sector, February 2017.

5.     Malay Mail, 11 May 2020.

6.     Industry 4WRD, National Policy on Industry 4.0, Ministry of International Trade & Industry, 2018.

7.     Let’s Learn Digital, Malaysian Digital Economy, MDEC. (Link: https://mdec.my/digital-economy-initiatives/for-the-people/talent-development/lets-learn-digital/)