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Malaysia’s Diversified Economy Will Lower Downturn Impact Amid Slowing Global Growth, Geopolitical Tension: MIDA

Malaysia’s Diversified Economy Will Lower Downturn Impact Amid Slowing Global Growth, Geopolitical Tension: MIDA

03 Jan 2023

Malaysia is fortunate in that it has e and this will cushion the downturn expected from the slowing global growth. However, it is pertinent for Malaysia to reinvigorate its investment climate to ensure the country captures investment opportunities that arise from trade diversion due to geopolitical tension, including the US-China trade conflict and shifting global supply chains.

“In order to achieve this, MITI together with the agencies like MIDA seeks to target policies and initiatives towards ensuring Malaysia aligns itself with the global economy needs and trends, as well as standards.  One of the major trends which need to be addressed is the adoption of ESG, where Governments worldwide have integrated issues such as climate change and carbon emissions, deforestation, labour standards and company governance and transparency into their trade policies. Global investors are also increasingly applying ESG factors when making investment decisions,” said MIDA Chief Executive Officer Datuk Wira Arham Abdul Rahman recently.

MIDA will support MITI in its initiative in developing the ESG Framework for the manufacturing sector which is targeted to be completed by 2024. The framework will guide and support companies in the manufacturing sector in accelerating the adoption of ESG principles. This will ensure Malaysia attracts investment, both FDI and DDI, which are ESG-driven and also strengthen the integration of local companies into the global supply chain.

Speaking to BusinessToday exclusively recently, Arham said MIDA will also target investment that addresses the current critical global needs, such as ensuring energy and food security due to the impact of the Russian-Ukraine war and inflation. In this perspective, MIDA will continue to accelerate investments in the adoption and development of clean energy sources and technologies, as well as support the development of the Halal and Smart Farming subsectors which were identified as strategic sectors under the Twelfth Malaysia Plan (12MP).

As Malaysia embarks on its journey towards greater digitalisation and sustainable development, more efforts need to be done to ensure we keep abreast with current trends to stay competitive in the future.

Malaysia’s manufacturing sector and its related services have been gearing up to adopt the Industry 4.0 module, to enable digitalisation and automation of its processes, enhancing its efficiency and long-term competitiveness on the global stage. This new-age approach allows for high-level integration of information, communication and systems by connecting multiple devices and machines at every step of the manufacturing process.

Industry4WRD is Malaysia’s response to the call for digital transformation by facilitating companies to embrace Industry 4.0 in a systematic and comprehensive manner, and be smarter and stronger driven by people, processes and technology.

There is a growing enthusiasm among businesses for Industry 4.0, and many are currently keen to acquire the knowledge and expertise needed for the transition. SMEs are the backbone of industrial development in the country and they are encouraged to embrace technologies that are brought about by Industry 4.0 which will significantly increase productivity and help ensure that the country remains competitive, he added.

Industry4WRD: National Policy on Industry 4.0

The National Policy on Industry 4.0 was launched by MITI on 31 October 2018 in collaboration with several other key ministries and agencies. Industry4WRD is tailored to Malaysia’s context and the needs of our industry to move forward by adopting Industry 4.0, focusing on manufacturing and manufacturing-related services.

Several important measures identified in the Policy include strengthening digital connectivity, enhancing the capability of the existing workforce and developing new talents and skills, improving data integrity and standards, intensifying research, innovativeness and technological development programmes and activities.

The Automation Capital Allowance (Automation CA) was introduced for the manufacturing sector in the National Budget 2015 and the services sector in the National Budget 2020. The main objectives of the Automation CA are to encourage manufacturing and services companies to adopt automation and enhance their productivity through an investment in automation machinery and equipment. The Government is providing Automation CA of: –

  • 200% on the first RM4 million expenditures incurred for labour-intensive industries;
  • 200% on the first RM2 million expenditures incurred for other industries including services.

MIDA has also formulated strategic programmes to continue facilitating the establishment and expansion of multinational corporations (MNCs) and local large companies (LLCs) as well as mid-tier companies in Malaysia. Equipped with a structured and completed ecosystem in various industries, MIDA promotes the strategic collaboration between domestic companies with MNCs and LLCs to become part of local supply chains with technological capabilities.

National Fourth Industrial Revolution (4IR) Policy

To ensure that Malaysia receives optimum benefits from 4IR, the Government, through the Economic Planning Unit, Prime Minister’s Department launched the National 4IR Policy on 1st July 2021 in anticipation of emerging developments. This Policy provides an overarching direction that gears the country for the 4IR. It guides and promotes coherence in achieving the 4IR agenda, besides managing potential risks that could arise from 4IR. The 4IR policy will complement the Malaysia Digital Economy Blueprint (MyDIGITAL) in driving digital economy development.

The National 4IR Policy has four (4) thrusts covering society, business and the Government:

  • To equip the people with 4IR-related knowledge and skillsets.
  • To form a nation with connectivity through the development of digital infrastructure.
  • To provide appropriate rules for the future needs so that they are flexible according to technological changes.
  • To accelerate innovation and adoption of 4IR technology.

Digital Investment Office (DIO)

The Digital Investment Office (DIO) is a fully-digital collaborative platform between MIDA and MDEC that was established on 22 April 2021. The main objectives are to coordinate and facilitate all digital investments in Malaysia, in line with the Government’s aim to attract RM70 billion investments in digitalisation by 2025.

As the Digital Economy is the engine of future growth for Malaysia, the setting up of the DIO is timely and in line with the evolution of the global investment landscape towards digitalisation and Industry 4.0, creating unique and interesting value propositions for digital projects.

DIO looks into elevating a broad range of industries through digital tech development and adoption. The clusters of digital enablers, including data centre infrastructure, artificial intelligence (AI), cloud computing and big data analytics will expand opportunities for support services, skilled jobs and productivity upskilling among both large and small business communities.

Driven by the National Investment Aspirations, the Malaysian Government, through the Malaysian Investment Development Authority (MIDA), will intensify its focus towards capturing investments in high technology, innovation and research-driven industries that will complement and further strengthen the Malaysian industrial ecosystem in sectors with significant economic potential and sustainable long-term growth such as the digital economy, electrical and electronics, pharmaceutical, chemical and aerospace.

Political stability is one of the many essential elements in attracting investment. It influences the economic policy direction and is a sign of clear commitment of a host country. Investors need signals of stability but also of commitment to an economic agenda in creating the right ecosystem in terms of investment policies, regulations, financial system and labour market.

It is important to focus on further strengthening Malaysia’s fundamentals in order to ensure the country’s sustainable economic development in the long term. These include strengthening the institutional framework and streamlining coordination of Government processes to facilitate ease of doing business, talent development initiatives to ensure a steady supply of high-skilled talent, and infrastructures such as digital connectivity and logistics infrastructure to support the supply chain and spur new business opportunities in Malaysia.

Source: Business Today