MIDA: From an agriculture nation to a sustainable Industry 4.0 powerhouse
31 Aug 2023
This year, Malaysia celebrates 66 years as an independent nation. We are a young nation by the standards of other countries, but 66 years is not a flash in the pan either. Amidst the centennial celebrations, it is worthwhile recalling the journey that Malaysia has made as a nation since its humble beginnings in 1957 as an agriculture-based economy.
Malaysia’s economic progress in a nutshell
Malaysia has witnessed growth even before independence in 1957.
The history of agricultural enterprise in Peninsular Malaysia begins in the 1780s with the arrival of the British in Penang. The compositional change within manufacturing was striking.
Industrialisation began in the 1960s where the role of manufacturing was quite minor involving the processing of rubber, tin, timber, foodstuffs. In any case, these labour-intensive industries saw a steady decline through the 1970s.
There were significant changes in the factor intensities in the manufacturing sector due to significant investment in machinery and equipment toward more sophisticated technologies.
The manufacturing sector grew at 26.2 percent in 1970s, coupled with large increases in the prices of petroleum in 1974 and 1979, had led to high economic growth during the period.
Malaysia began to pursue an import substitution development strategy in 1960s and gradually moved toward an export-oriented industrialisation strategy in the 1970s.
A key element of this strategy was to rely on foreign direct investment to achieve high economic growth through industrialisation.
In response to this, the Federal Industrial Development Authority (FIDA) Act was incorporated in 1965, culminating in the establishment of FIDA by the end of 1967. On March 1, 1979, FIDA was officially renamed the Malaysian Industrial Development Authority (MIDA) to reflect a more Malaysian identity. In 2011, it had another name change to the Malaysian Investment Development Authority, retaining the MIDA acronym, to encompass a broader spectrum of activities, other than just industrial matters.
The manufacturing sector soon became a key driver of Malaysia’s economic growth, with electrical and electronics (E&E), textiles, and automotive industries taking centre stage. The production of E&E goods, in particular, gained prominence, leading Malaysia to become a significant player in the global supply chain, attracting investments and driving economic expansion.
This strategy led to the establishment of special economic zones, such as the Penang Free Trade Zone, which attracted multinational corporations (MNCs) including 500 Fortunes to set up manufacturing facilities.
The first two decades of Malaysia’s economic history could be described as the “take-off” phase. The dominant theme in the third phase of Malaysia’s economic history was the overcoming of resource constraints through a significant restructuring of the economy.
In driving the country’s economic growth, a strategic long-term economic framework known as the Industrial Master Plan has been developed spanning a 15-year horizon and is complemented by shorter-term 5-year plans known as Malaysia Plans. The IMP aims to guide the nation’s industrialisation, economic diversification, and sustainable growth with the focus on fostering innovation, enhancing productivity, and promoting value-added industries.
Today, the Twelfth Malaysia Plan (12MP) further enhances Malaysia’s dynamic industrial landscape into a manufacturing powerhouse with a strong focus on embracing Industry 4.0 through automation and digitalisation. While the manufacturing sector has evolved and moved up the value chain over the last five decades, this was the first time the entire economy was undergoing such a transition.
For instance, Intel’s sprawling semiconductor manufacturing facility in Penang exemplifies the integration of advanced technologies and local talent. The company’s investment not only drives economic growth but also fosters knowledge transfer and skill development, contributing to Malaysia’s long-term competitiveness. The idea of Malaysia as a manufacturing powerhouse was not new, yet it was revitalised, with a newfound determination.
As the government’s principal investment promotion and development agency under the Ministry of Investment, Trade and Industry (MITI), MIDA assumes its pivotal role to oversee and drive the investments into the country. Its mandate extends beyond the manufacturing sector, now encompassing selected services sectors as well. As of today, Malaysia continues to position itself as a choice location for global investors for manufacturing and services sectors.
Industry 4.0 and the Digital Revolution
Malaysia was well-positioned for the pervasive digitalisation of the global economy that occurred in the 2020s and this led to the digital era marked by Industry 4.0.
Recognising the potential of automation, artificial intelligence (AI), and digitalisation in revolutionising manufacturing processes, the country leverages on this technological advancements and digitalisation to further accelerate its economic transformation.
The profound synergy established between Industry 4.0 and the digital revolution do not only propel industries forward but also reshapes consumer behaviour, ushering in a new era of online purchases and personalised experiences.
The convergence of Industry 4.0 and the digital revolution indeed gives rise to a dynamic and ever-evolving landscape that not only redefines conventional economic norms, but also moulds the future of consumption patterns.
Guided by the implemented framework and policies in place, such as 12MP, the National Investment Aspirations (NIA), New Investment Policy (NIP), National Fourth Industrial Revolution (4IR) and Malaysia Digital Economy Blueprint, or MyDigital, renowned global corporations such as Amazon Web Services, Western Digital, and ExxonMobil have established significant operations in Malaysia. The country’s investor-friendly policies, and well-developed infrastructure have positioned it as an ideal gateway for MNCs seeking to tap into the Southeast Asian market.
The recently launched Madani Economy framework also stands as a robust strategy aimed at elevating the economy and bolstering national competitiveness.
It envisions to position Malaysia as one of the top 30 major economies within a decade, setting its sights on achieving remarkable global stature.
Complemented with the New Energy Transition Roadmap (NETR), a strategic blueprint designed to catalyse transformative change, these strategic initiatives are not merely aimed at reinvigorating economic growth, but also serves as a resounding testament to
Malaysia’s commitment to sustainable practices through the pursuit of opening up profitable ventures that are wholesomely good for the environment and economy.
Sustainable Development
As Malaysia advances its industrialisation journey, it remains committed to sustainable development, balancing economic growth with environmental stewardship.
The government’s comprehensive policies, encapsulated within 12MP and the Green Technology Master Plan, underscore its determination to strike a balance between economic growth and environmental preservation.
Climate change had become the defining issue facing the global economy, including Malaysia. It has been the key driver of the transformation of our economy over the last 20 over years.
The Global Climate Change Compact of 2030 – with subsequent reviews every ten years – was probably the most important international agreement in history.
Malaysia’s ambitious target of achieving net zero carbon emissions by 2050 is a testament to its proactive stance in combating climate change and fostering a greener future.
In the area of climate change adaptation, MITI and MIDA have embarked on bold steps towards enabling and achieving sustainable development and positioning Malaysia as an attractive destination for ESG-related investments. In line with this, MITI is finalising the National Environmental, Social and Governance Framework, known as the i-ESG Framework for the manufacturing sector, which is expected to be completed in 2024.
In addition, the National Energy Policy 2022-2040 (NEP) also offers a detailed roadmap for the energy sector. This forward-looking policy is anchored in a visionary goal known as the Low Carbon Aspiration 2040, which envisions a considerable annual contribution of RM13 billion to GDP by attracting investments that spur the growth of low carbon technologies. This paves the way for Malaysia to excel in promising sectors like renewable energy (RE), energy storage, low carbon mobility, and hydrogen economy 5 , potentially creating more than 207,000 new job opportunities and drawing in investments worth RM9.2 billion.
A Cultural Underpinning
Beyond economic factors, Malaysia’s development journey owes much to its rakyat – its people. The resilience, dedication, and spirit of Malaysians have been instrumental in propelling the nation’s progress. Their collective commitment has synergised with the invisible hand of the market and the visible hand of good governance, enabling Malaysia’s remarkable economic transformation.
Source: NST
