Malaysia has been pursuing an export-oriented industrial development strategy since the early 1970s and is not likely to deviate from this strategy in the foreseeable future. Since Malaysia’s high-tech manufacturing industry contributes over 36% to the total merchandise exported in 2018, it’s relevance to the Malaysian economy is paramount. However, the growth trend of Malaysia’s high-tech exports in the past 7 years has been sluggish. With the cessation of most E&E-NKEA projects in 2018 and the ending of the third industrial masterplan (IMP3) in 2020, the need to put in place new plans and policies to reinvigorate the existing high-tech sectors, as well as seeking out new and emerging sectors is ever more urgent.
Malaysia embarked on an export-oriented industrialization strategy in the early 1970s. The strategy entailed the reliance on foreign direct investments to achieve high economic growth. Through the establishment of industrial free-trade-zone, export incentives, and generous investment incentives for foreign manufacturers to offshore their manufacturing facilities to Malaysia, the strategy resulted in a significant inflow of foreign direct investments (FDI) into the manufacturing sector. Since then, Malaysia’s export-oriented industrialization strategies, guided by various industrial development policies (such as IMP1, 2 and 3), has resulted in significant economic growth throughout the 1980s and 1990s. To further strengthen exports, especially in high technology related industries, Malaysia’s has embarked on a Knowledge-Based Economy the 1990s, with the establishment of the multimedia super corridor and the creation of Vision 2020. Today, Malaysia exports USD247.32 billion (2018) worth of merchandises to the world, of which, 36.54% or USD90.36 billion are high-tech merchandises. This is testament to the success of Malaysia’s export-oriented industrialization strategy and reflects the importance of high-tech export performances for Malaysia.
Malaysia’s high-tech export performance for 2018 is commendable, with a total high-tech merchandise export value of USD90.36 billion, and a year-on-year growth of 22.0%. From a global perspective, Malaysia commands 2.90% of the world’s total high-tech merchandise exports in 2017, up by 0.27% from 2016. In 2017, Malaysia is ranked the eleventh (11th) largest exporter of high-tech merchandises in the world (in terms of export values), up by 1 ranking position from 2016. Despite two consecutive years of declines in high-tech exports during 2015 and 2016, Malaysia has since recovered with two consecutive years of positive, double digit year-on-year growth of 17.2% in 2017 and 22.0% in 2018.
Figure 1 Overview of Malaysia’s high-tech merchandise export performance. (Note: The World Ranking and % of World Exports data reported herein are for year 2017, due to the absence of China’s export data at the time of writing this report.)
Despite the uncertain growth path over the last 7 years, Malaysia’s overall compounded annual growth rate CAGR (2010-2017) in high-tech exports remains positive at 1.73%. However, when benchmarked against the rest of the world, the growth of Malaysia’s high-tech exports is much slower than the world’s growth of 2.67% (CAGR 2010-2017). This could be an indication that Malaysia’s high-tech industry is struggling to keep-up with the rapid expansion of the world’s market for high-tech merchandises.
Malaysia’s high-tech merchandises was exported globally, reaching a total of 190 countries in 2018. Most of Malaysia’s high-tech exports were destined for East and South Asian destinations, specifically Singapore, Hong Kong, China, Thailand, Japan, Taiwan, Korea, Vietnam, and India. Collectively, these 9 destinations imported 70.39% of Malaysia’s high-tech export merchandises worth USD63.60 billion. Among them, the largest importer of Malaysia’s high-tech exports in 2018 was Singapore, followed by Hong Kong, amounting to USD15.52 billion and USD15.42 billion, respectively. Other major importers of Malaysia’s high-tech exports include the U.S.A, Germany, the Netherlands, Mexico, Australia, and France, totalling USD20.80 billion or 23.02% of total exports.
Malaysia’s high-tech merchandises consist mostly of electronics integrated circuits, telecommunication devices, and computer office machines, which account for 87.64% (or USD79.19 billion) of total high-tech merchandise exported in 2018. They include microprocessors (or CPUs), other integrated circuits (ICs), light-emitting diodes (LEDs), computers, semiconductor medias (such as SSDs), and storage units (such as HDDs). However, most of these top exporting merchandises are intermediate products (parts and components) that need to be further value-added to produce the intended final products.
From a global perspective, China is leading the global export of high-tech merchandises (2017). With a total export value of USD654 billion, China is way ahead of her nearest rival Germany, followed at a distance by South Korea, the U.S.A, and Taiwan.
Figure 2 World ranking of high-tech merchandise exports, in terms of export values.
In 2017, Malaysia’s world ranking in high-tech exports is at position 11, an improvement by one position from 2016. However, this transition from position 12 to 11 should be seen as a recovery, as oppose to an improvement, since Malaysia was consistently ranked at position 11 over the last 7 years, with the exception of 2016. Overall, countries that appear to be on the uptrend on the ranking board are Taiwan, Vietnam, France and South Korea. Among those on the down trend are Japan, the U.K., and Switzerland.
The most notable change in 2017’s ranking is Vietnam, which leapfrogged 4 positions from position 14 in 2016 to position 10 in 2017, surpassing the U.K., Malaysia, Switzerland, and Mexico. Together with Mexico, these are stellar examples of developing countries pursuing aggressive high-tech export strategies and appear to be moving much faster than Malaysia. Vietnam for instance, experienced a phenomenal growth in high-tech exports with a CAGR (2010-2017) of 42.97%. Its high-tech exports grew from USD6 billion in 2010 to USD74 billion in 2017, a 12-fold increase within a 7-year period. In 2017, Vietnam finally overtook Malaysia in terms of high-tech exports by a slight margin. Majority of Vietnam’s high-tech exports are telecommunication devices, focusing mostly on mobile telephones. In 2017, 40.16% of Vietnam’s high-tech exports were mobile telephones, amounting to USD 29.76 billion. That said, Vietnam’s export of electronics integrated circuits is also growing rapidly at a rate of 49.66% CAGR (2010-2017). If Vietnam is to continue its current growth trajectory, there is a strong possibility that Malaysia’s current leading position in the exports of electronics integrated circuits, will be overtaken by Vietnam within the next 8 years.
In summary, Malaysia’s 2018 performance in the export of high-tech merchandises is commendable, and a new milestone was established. However, Malaysia’s lacklustre growth performance over the last 8 years is hampering it from competing effectively against many fast-moving emerging economies, like Vietnam. Besides competing economies, there is also a need for Malaysia to keep-up with the world’s growth in demand for high-tech merchandises. Moving forward, Malaysia should review and renew its high-tech export strategies, as well as rejuvenate its high-tech exporting industries, in order to meet the growing challenges in exporting high-tech merchandises to the world.
You may have experienced this at least once while driving along the highways – the streetlights still switched ON in broad daylight. You cringe at the sheer waste; there must be a better way of handling this – and indeed there is.
In today’s world of Sustainable Development Goals (SDGs) and the many green sustainability programmes, the idea isn’t too far-fetched. Potential energy efficiency programme using light emitting diode (LED) lighting, and retrofit of air-conditioning units, installation of solar panel system, and installation plus operation and maintenance of a network of electric vehicles (EV) charging stations are significant developments that can effectively address the need for prudent energy consumption in the modern transportation industry and its infrastructure.
The SDGs which is also known as the Global Goals, were adopted by all United Nations Member States in 2015 as a universal call for action to end poverty, protect the planet and ensure that everyone enjoy peace and prosperity by 2030.
In 2009, Malaysia formulated the New Economic Model (NEM) which further cemented Malaysia’s commitment to pursue sustainable development based on three pillars, namely high income, inclusivity and sustainability, which mirrors the three elements of the SDGs, namely economy, social and environment. The NEM is the basis of Malaysia’s 5 year SDGs Plan until 2020. The current 5-year Malaysia Plan i.e. the 11th Malaysia Plan (2016-2020) is premised on the three pillars of NEM, themed “Anchoring Growth on People” with people as the centrepiece whom will benefit from the overall nation’s SDGs development programme.
In support to the SDGs commitment, MIGHT, TNB Energy Services Sdn Bhd (TNBES) and Projek Lintasan Kota (PROLINTAS) embarked on the GREEN ENERGY PROGRAMME (GEP) which supports the implementation of Malaysia Green Highway Index (MyGHI) under Lembaga Lebuhraya Malaysia (LLM). This is in line with the Sustainable Development Goals (SDGs) through conservation approach of a highway from the design, planning, construction through the maintenance stages of roadway which combines transportation and ecological sustainability nationwide.
The initiative endeavours to strengthen, promote and develop collaboration between the respective parties towards achieving compliance with the Malaysia Green Highway Index (GHI). It encourages and promotes collaboration in developing potential projects involving renewable energy (RE) and energy efficiency (EE) initiatives to support the national targets of emission reduction, and carbon reduction, Electric Vehicle (EV) Charging Station and Energy Management System (Enmesh).
A green highway programme will benefit not only the transportation infrastructure, but also the ecosystem, urban growth, public health, and surrounding communities.
It is not quite common knowledge that as at 2018 Malaysia has more than 100 shipyards and close to 200 SBSR industry-related activities. These include a myriad of activities such as marine parts and component manufacturer, maintenance, repair and operations (MRO) and design works among others. It is proving to be pretty lucrative deal too with the average annual turnover for the industry chalking between MYR 5 to 10 billion since 2011. At its peak in 2011 the industry provided in excess of 33, 000 jobs.
The Malaysian Shipbuilding and Ship Repair (SBSR) industry’s humble beginning is rooted in the establishment of the Brook Dockyard in Sarawak some 100 years ago. Since then the industry has grown to be a highly strategic industry having spurred the development of numerous spill-over and support activities in fisheries, oil & gas, port operations as well as tourism.
Fully realising the potential of the industry in expanding the nation’s economy MIGHT has produced the Malaysian SBSR Industry Strategic Plan 2020 advocating the use and adoption of high technology products and processes in Maritime industry. Moving ahead, the adoption of Industry 4.0 technologies such as Artificial Intelligence, Robotics, 3D Design and 3D Printing promises to create new opportunities especially for local players. The SBSR industry is also to be developed as a promoted industry as outlined in the Malaysia Shipping Master Plan 2017 – 2022.
There is no underestimating the criticality of technological advancement in the SBSR industry to national security. Currently, Malaysian government is in the midst of acquiring 6 Littoral Combatant Ship, 2 Littoral Mission Ship, 3 Offshore Patrol Vessel, 6 New Generation Patrol Craft (NGPC) with the latest being the acquisition of the 18 Fast Interceptor Craft for the Royal Malaysian Navy and Malaysian Maritime Enforcement Agency. These procurements are worth over MYR11 billion.
It is imperative that the local content element of these procurement exercise be paid particular attention to as it holds immense potential to boost the local economy, mainly through job creation, skill strengthening, and the enhancement of suppliers and local enterprises development. This also applies to the commercial sector for example offshore support and port operations.
MIGHT greatly encourages maximisation of local content through industry localisation for example through local ship design and building. This also encourages in-house technological capabilities development through integration of local processed raw materials, production of equipment, integration of equipment and fitting, and provision of technological expertise in services such as system integration, fabrication, overhaul, modification and upgrading.
In terms of design, it is vital for local SBSR industries to adopt the complete 3D Design System which allows for the development of the Digital Twin. This will integrate with and maximise local content that complies with the specification, quality and classification requirements in the design stage.
Just imagine one day, Malaysia, a small country in South East Asia, known as one of the leaders in high technology exports with the latest product and services. Business communities and researchers would come to Malaysia seeking out the latest technology and gadgetry coming out from our shores. YAB Tun Mahathir Mohamad also mentioned a country must ensure the proliferation of knowledge-intensive enterprises that leverage on science and technology in order to take the economy to the next level. Subsequently, many policies were formulated, many organisations were created, and large investments to support YAB Tun’s vision. However, there are some areas that requires further intervention from the Government to ensure that his vision is on the right track, especially in the realm of technology transfer.
The technology transfer landscape in Malaysia is currently in its developmental phase and is vital towards developing a knowledge-based economy. Many innovations that are being generated at research institutions (RIs) and industry, do not find their way to the market for various reasons.
According to OECD’s study Malaysia Innovation Policy Review 2016, it highlighted many challenges that the university faces which regards to technology transfers ecosystem. Some of the pressing challenges that have been identified are as follows:
1. University-Industry mismatch
Current Scenario: Most solutions created at research organisations mismatched with market need. Industry and universities need to identify and understand the problem before creating the solutions. There is a need to have a strategic national platform to coordinate “match-making” exercise.
MIGHT’s View: All stakeholders must look at this issue beyond just a mere simple collaboration and paper agreements. It needs to be viewed as a symbiotic relationship between industry and academia, or in simple term, they need each other to survive and remain competitive & relevant. Ignoring this issue will create a negative impact of inefficiency and waste for all stakeholders.
MIGHT’s Take: High Priority – Create an Interest Group specific for Tech Transfer ecosystem.
2. Tech transfer professional and technology transfer office
Current Scenario: The Tech Transfer Office (TTOs) in the university is considered as the gateway of getting innovation out to the market place. Hence, there is need to have a dedicated professional that facilitates the movement of technology for industry to uptake and well versed in many areas such as invention disclosure assessment, IPRs, marketing technologies, negotiation of deals, basics of license agreements and spinout company formation.
MIGHT’s View: There is a need to create a new career path for tech transfer professionals. High level policy makers and universities administrators must understand the importance to have dedicated professionals that will manage the movement of innovations, ingenuity and inventions to the marketplace. This responsibility should not be put on the shoulders of the lecturers that are responsible to create future leaders and new research.
MIGHT’s Take: Medium to High Priority – Further discussion with Ministry of Education and Public Service Department
3. Measuring greater impact
Current Scenario: Measurement of successful impact of technology transfer such as the patents filed, spin-out companies created are some of the common variables that is measured. However, there is a need to be deploy a methodology that will measure the true impact of technology transfer and to determine its spill over effects to an economy.
MIGHT’s View: Government must have a clear definition and policies of tech transfer. We should also look into the socio-economy impact, job creations, and environmental that will highlight the true success story. Budget is getting smaller which will result in lower probably of innovation to make it out to the market place. How will we be able to prioritize projects that has the higher chance to be monetize and commercialize?
MIGHT’s Take: Medium to High Priority – Develop policy intervention and impact matrix.
31st July 2018 marks a momentous comeback when MIGHT welcomed nation’s beloved YAB Tun Dr Mahathir as our Patron. MIGHT, a brain child of YAB Tun, was first established on 22nd February 1993 under the auspices of the Prime Minister’s Department as a think-tank to develop the high technology industry through partnerships between the public and private sector. The return of YAB Tun, MIGHT’s first Patron from 1993 to 2003 is like welcoming home the long awaited father.
It was a great feeling to be back in business under the leadership of YAB Tun and thus far we have organised two successful MIGHT Consultation series. MIGHT CONSULTATION is a significant platform for the Prime Minister to regularly convey his aspirations and mandates to the stakeholders especially the industry players. Various issues were discussed pertaining to the Fourth Industrial Revolution and the Sustainable Development Goals. YAB Tun encouraged more industry driven research-based activities, where MIGHT is tasked to develop a National High Technology Industry Agenda 2.0. He further highlighted the needs for the Industry players to exploit the vast applications of semiconductor technology especially in the security, environment and communication fields.
The “Blockchain” hype entered the mainstream consciousness when it was promoted as one of the key movers of fintech, in the process stirring questions about the viability of the global financial system and the role of financial intermediaries. As an answer, the financial system is a complex platform for an array of stakeholders that probably has benefited best from the wake up call to innovate and to be mindful about the interests of the users. Improvement is work in progress, as change is a constant to be calculated in matters of days and the idea of “rational decision” assumed in the traditional economics.
On the quieter side, technically, Blockchain technology have helped to solve swarm robotics challenges, enhance NASA’s aviation and space management and actively discussed at international level by growing number of collaborative and standard bodies. The stakes are high, especially with “smart contract” as a part of the blockchain narrative expected to impact global supply chain management. The standard architecture, definition and its position in the data-driven world is yet to be formally established, but innovation hits the world at unprecedented speed under the “blockchain” hype. It appears like the open source is galvanising the digital native to step up in taking charge of public environment and this has created an new ecosystem of social capital.
To be realistic, many of these progress are coated by technical jargons which might have refrained the public from embracing this ecosystem wholeheartedly.Against this background, MIGHT started its journey to explore how Malaysia could benefit from the maverick blockchain technology in solving some of its challenges in 2016 as a Foresight effort.
Blockchain communities were mostly informal and existed in closed ecosystem. MIGHT found them through MAGIC’s start-up events and started planning for the KL Blockchain Conference 2017 to gather the communities and make them counted. What follows has been a three years journey and history communicated in this report.
The report proposes that the next level of development involving blockchain technology to be espouse as a cluster of emerging technologies (develop an ABCD-I framework), social (shared prosperity by mobilising open source and social capital) and industry (develop via partnership and new business models) for Malaysia. Blockchain where network effects reign could help position Malaysia as a country which capitalises knowledge and technology to navigate its future which is in line with the national principle embedded in Rukunegara.
The Shared Prosperity 2030 will be the thrust of the government’s policies and programmes in its bid to make Malaysia on a path of sustainable development that prioritises equitable growth of each value chain, class, community and geography to support a greater sense of harmony and stability among the people. The new economic model comprises three main objectives which includes to ensure the income gap and people’s wealth would be looked into, to create a more structured, progressive, knowledge-based and high-value economy; and to turn Malaysia into an important economic axis in Asia.
This requires strengthening the local industry capabilities and to embrace advanced technologies, innovation, and research and development. R&D is widely recognized to be the prerequisite of technological advance, and levels and rates of growth of R&D expenditures are viewed as reliable indicators of innovative capacity. Across the world, two-thirds to three quarters of all R&D activities are carried out in the private sector. Therefore, the private sector is not only the principal financing sector of R&D, it is also by far the main performer of R&D activities. The involvement of the private sector in research-driven activities is thus crucial for Malaysia’s future economic growth and competitiveness for various reasons.
Firstly, the private sector R&D can create wealth because they are closer to the market. By actively participating in R&D activities indirectly create the process of transforming knowledge into products and services that Malaysian and others in today’s global marketplace, need, want and will pay for.
R&D done in private sector will also strengthen the technical advances made possible by innovation which will allow them to improve productivity, succeed in competitive markets, and meet environmental and regulatory requirements. Although the private sector has traditionally developed research capabilities in house, they have also need to established collaborative links with other organizations, such as universities, and acquired the results of innovation from other enterprises through licensing or takeovers. Indirectly the involvement of the private sector in R&D could also generate high skills human capital which is needed for the country.
Various mechanisms were introduced globally in order to promote private sector R&D. Some of the widely used financial instruments includes subsidies/grants and tax incentives. For example a generation ago, the United States was one of the first nations to encourage private sector R&D through tax credits. Since then, a wide range of economists have agreed that every tax credit dollar stimulates anywhere from USD$1 to $3 in additional private investment on the part of U.S. companies. Unlike many other items in the tax code, R&D actually spurs investment and a greater return. In the case of Malaysia, there are numerous tax incentives to encourage private sector and institutions to carry out R&D activities. The main R&D incentives are granted in the form of Pioneer Status, Investment Tax Allowance and Double Deduction or tax exemption. Obviously, a new innovative approach needs to be implemented in order to enhance the private sector R&D activities for targeted foreign direct investment and also to enrich the direct domestic investment.
An innovative approach in order to encourage private sector R&D which was championed by MIGHT was the formation of Aerospace Manufacturing Innovation Centre (AMIC). The centre is jointly funded from the Government and industry which includes Airbus, Rolls Royce and CTRM. One of the significant features of AMIC is that the R&D that will be done in the university will be based on the industry needs and will able to provide an opportunity for the local industry to participate. AMIC will also be able to train local talent by conducting training courses at Masters and Doctor of Philosophy (PhD) levels in the field of aerospace technology.
AMIC is a Research & Development centre of excellence formed and bench marked after the model of Advanced Manufacturing Research Centre (AMRC) in Sheffield, United Kingdom. The AMRC with Boeing is a £45million partnership of the University of Sheffield and over 40 partner companies, which builds on the shared scientific excellence, expertise and technological innovation of the world’s leading aerospace companies, and world-class research within the University of Sheffield’s Faculty of Engineering. It develops innovative and advanced technology solutions for materials forming, metal working and castings. It also has internationally acknowledged research in the field of composite materials, an area crucial to the development of Boeing’s next generation aircraft. The AMRC’s success is built on an extensive partnership. It is situated on an Advanced Manufacturing Park, where it is co-located with other internationally significant research and technology transfer organisations. The AMRC has benefited directly from ongoing support and funding from both the public and private sector.
In the rail industry, MIGHT was instrumental to establish the Malaysian Rail Industry Consortium (MARIC), a consortium of local rail companies to enhance the local rail industry capability and capacity. The consortium will be a platform to assist these companies to enhance their capacity, competency and ability by working together or partnering with OEMs (original equipment manufacturers) to have the skill to bid for projects.
With government’s support through its localisation policy, the local rail industry has developed and achieved international standard and recognition. This is evident in local player’s involvement in three major projects under The Greater Kuala Lumpur Plan 2010. The projects were awarded based on the capabilities of MARIC members, together with each respective local and international rail partner. Through these projects, MARIC members expand their expertise through knowledge transfer such as involvement in after sales, MRO and export capabilities. It also accorded MARIC members credibility as engineering, procurement, construction and commissioning (EPCC) partners to the international original equipment manufacturer (OEM), enabling smart-partnership between various parties, locally and abroad.
Going forward, MARIC has a vision of expanding its organisation that would further benefit its members. Amongst them are incorporation of MARIC Incorporated and MARIC Trading House, establishment of Rail Industry Zone that includes research and innovation centre, warehouse and heavy engineering storage, and establishment of Rolling Stock Anchor Company, Technology and Innovation Anchor Companies and MARIC Product Focus Group.
Through these initiatives, MARIC is ready to achieve more with the government’s support and recognition. Through collaboration with international construction, engineering and financial giants, MARIC members can adapt easily to both western to eastern technology. Such exposure also inculcates awareness on the standards of quality and expectations of the local players and increase their capabilities such as managing high level maintenance, repair and overhaul of LRT Ampang Line, KLIA Express and KTMB ETS wagons. In addition, parts and components can also be produced locally with support and assistance from OEM and rail owners. Key operators such as Prasarana and KTMB has long embarked into vendor development programme where they identify special components to be locally manufactured while opening up windows of opportunities to grow abroad.
Achieving the right blend between the public sector and private industry is a complicated economic endeavour due to the fact that Malaysia is a small country with limited resources. But neither the private sector’s invisible hand nor governmental heavy-handedness can be the solution. It is true that the private sector cannot spur an innovation agenda without the government, but it is equally true that the government cannot replace private-sector market forces. It is therefore imperative that the public and private sectors start working together through MIGHT and together we can make it happen.