Key Highlights of the
Manufacturing Sector in 2019
Total Approved Investments
Total Approved Investments
Total Approved Investments
Malaysia’s manufacturing sector continues to play a vital role in the country’s economic transformation. Its contributions to the nation’s export revenue and job creation ensured the country’s growth despite global economic uncertainties. The priority will remain on producing more high value-added, diverse and complex products, particularly in the catalytic sub-sectors, namely electrical and electronics (E&E), machinery and equipment (M&E), and chemicals and chemical products. The other two high potential growth sub-sectors, namely aerospace and medical devices will also be pursued.
Talent pool development and Industry 4.0 stay on as the main focus areas of Malaysia’s manufacturing sector, revitalising many mature industries and opening new opportunities for other sectors. Companies are encouraged to increase their productivity by accelerating automation and innovation, undertaking research and development (R&D), implementing green and sustainable production practices, and leveraging industry associations in sharing best practices.
Industry4WRD – Manufacturing the Future
Malaysia has made strides towards embracing the Fourth Industrial Revolution (4IR) to ensure that the manufacturing sector continues to be competitive in terms of productivity, innovation, and talent while creating the jobs needed for sustained growth. The Industry4WRD initiative was launched in 2018 as a catalyst to support the manufacturing and manufacturing-related services sectors transition into Industry 4.0 successfully.
This drive for digital adoption was carried into Budget 2020, when the Government announced additional facilities to further encourage automation and digitalisation among companies through the extension of Automation Capital Allowance (Automation CA) for the services sector, on top of the Smart Automation matching grants for 1,000 manufacturing and 1,000 services companies. MIDA also offers assistance and facilitation for businesses to accelerate the adoption of digital technologies and become the catalyst in driving the nations’ digital economy. One of the initiatives is the Industry4WRD Intervention Fund, a financial support facility for Malaysian SMEs in the manufacturing and related services sectors to embrace Industry 4.0. Another initiative that businesses can leverage on is the Digital Transformation Acceleration Programme (DTAP), a strategic partnership initiative between MIDA and MDEC in spearheading the nation’s digital agenda, offering an outcome- based matching grant for the establishment of the pilot phase.
Moving forward, the Malaysian Government foresees an increasing trend of companies adopting digital business models. We continue to welcome investors who can contribute in the areas of 4IR-enabling technologies such as artificial intelligence (AI), robotics, virtual reality, big data analytics (BDA), Internet of Things (IoT), and software engineering. MIDA looks forward to facilitating these companies in the implementation of their projects in the country.
In 2019, the country recorded a total of RM82.73 billion in investments in the manufacturing sector from 988 projects approved, or 39.8% of the total investments across all economic sectors. This is a slight dip of 5.3% from 2018’s figure of RM87.38 billion. FDI made up nearly two-thirds of total investments, amounting to RM53.89 billion (65.1%), while RM28.84 billion (34.9%) were domestic investments. Overall, new projects made up 54.7% of the total projects approved with investments of RM45.20 billion, whilst expansion diversification projects accounted for the remaining 45.3% with investments of RM37.53 billion. These 988 projects are expected to generate 78,606 employment opportunities, or 19,312 more than 2018’s figure of 59,294.
Foreign Investments Dominate
New projects in 2019 accounted for 50.5% or RM27.23 billion of the nation’s total investments, while 49.5% or RM26.67 billion were for expansion/diversification projects. The bulk of FDI was concentrated to the E&E products industry (RM21.79 billion, over double that of 2018), followed by paper, printing, and publishing (RM9.69 billion, nearly double 2018’s figure of RM49.9 billion), non-metallic mineral products, machinery and equipment (RM2.88 billion), chemical and chemical products (RM2.65 billion), scientific and measuring equipment (RM2.41 billion), transport technology (RM1.55 billion), and food manufacturing (RM1.31 billion). PRC was Malaysia’s largest source of FDI for 2019 at RM15.3 billion, followed by the USA (RM14.23 billion, over four times 2018’s investments of RM3.15 billion), Singapore (RM5.61 billion), Taiwan (RM5.24 billion), and Japan (RM3.79 billion).
Domestic Optimism for New Projects
In 2019, domestic investments were mostly focused on new projects. These projects were worth RM17.98 billion (62.3%) of domestic investments, with RM10.86 billion (37.7%) of it going into expansion/diversification projects. The industry that garnered the most interest from domestic investors was transport technology, with RM6.5 billion (which is over six times 2018’s investments worth RM1.22 billion). This was followed by E&E products (RM3.87 billion), non-metallic mineral products (RM2.55 billion), food manufacturing (RM2.49 billion, nearly double that of 2018’s figure of RM1.29 billion), chemical and chemical products (RM2.10 billion), petroleum products (RM2.07 billion), M&E (RM1.58 billion), rubber products (RM1.56 billion), plastic products (RM1.54 billion), fabricated metal products (RM1.35 billion), and paper, printing, and publishing (RM1.07 billion).
Manufacturing sector policies include local company incorporation, manufacturing license application. There are no restrictions on foreign equity ownership and policies feature a liberal expatriate employment policy. Manufacturing sector policies encourage free movement of funds for foreign investments in Malaysia. There is strong protection of Intellectual Property (IP) rights. Company tax is 25% while individual tax rates are from 0%-26%. Minimum conditions of employment under the Employment Act 1955 must be met. Manufacturing sector policies encourage responsible trade unions for harmonious industrial relations. Policies include double taxation agreements and a controlled environmental management policy.