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Speech by
THE HONOURABLE MR. LIM GUAN ENG,
MINISTER OF FINANCE


BELANJAWAN 2020 FOCUS GROUP DISCUSSION:
MOVING UP THE VALUE CHAIN FOR THE ELECTRICAL &
ELECTRONICS INDUSTRY

at

KULIM GOLF & COUNTRY RESORT (KGCR)
KULIM HI-TECH PARK, KEDAH

SUNDAY, 15 September 2019, 2.30 p.m.


 

Yang Berusaha Pengerusi Majlis,

Yang Amat Berhormat Dato' Seri Utama Haji Mukhriz Mahathir
Menteri Besar Kedah

Yang Berhormat Tuan Tan Kok Yew
Ahli Majlis Mesyuarat Kerajaan Merangkap Pengerusi Jawatankuasa Industri & Pelaburan Negeri Kedah

Yang Berbahagia Datuk Seri Issace
Ketua Eksekutif, Pihak Berkuasa Pelaksanaan Koridor Utara (NCIA)

Yang Berbahagia Dato' Asri bin Hamidin @ Hamidon
Timbalan Ketua Setiausaha Perbendaharaan, Kementerian Kewangan

Yang Berbahagia Dato’ Haji Norizan Khazali
Timbalan Setiausaha Kerajaan (Pembangunan) Negeri Kedah

Panel Penceramah

YBhg. Dato-dato, Tuan-tuan serta Hadirin Sekalian

Para hadirin yang dihormati sekalian,


INTRODUCTION

1. Terlebih dahulu, saya ingin merakamkan ucapan terima kasih kepada kerajaan Negeri Kedah, Pihak Berkuasa Pelaksanaan Koridor Utara (NCIA) serta semua pihak yang terlibat dalam merancang dan mengatur majlis perbincangan hari ini.

2. Saya berbesar hati dengan kehadiran dan penyertaan industry players di platform ini yang diadakan dengan tujuan mendapatkan pandangan dan maklum balas ke arah penyediaan Belanjawan 2020.

3. Dengan izin majlis, saya akan meneruskan ucapan saya dalam Bahasa Inggeris.

THE E&E SECTOR IN MALAYSIA

Ladies and Gentlemen,

4. As the seventh largest Electrical & Electronics exporter in the world, the E&E sector has been the backbone of the Malaysian manufacturing sector, and the economy as a whole.

5. From the years 2016 to 2018, RM30.0 billion worth of E&E investment was made. Out of that, 44.4% came from the Northern Corridor Economic Region (NCER). Penang as the principal E&E hub in Malaysia contributed RM9.93 billion of these investments, with Kedah attaining RM1.85 billion while Perak RM1.58 billion. Penang recorded RM9.2 billion investment for the first half of 2019. These benefits from trade and investment diversion as a result of trade war are not bound to last forever.

6. Furthermore last year the industry contributed 38% of the total Malaysian exports that yielded us a goods trade surplus worth RM120.3 billion. The large E&E sector has created high-value and specialised jobs, while growing local ecosystem to become a solid regional manufacturing base.

7. We need to do more to serve current and future global needs, especially with the emerging Industry 4.0, and the reorientation of the global supply chain due to the ongoing trade war between China and the US.

8. To retain our strong foothold in the global E&E supply chain, we must now rethink how best to innovatively fortify the domestic ecosystem, while consistently staying ahead of the curve in terms of design and development, and innovations.

THE ROLES OF THE STATE AND INDUSTRIALISATION POLICY

9. Malaysia’s industrial policy has seen results. In 1987, agriculture formed 20.0% of the Malaysian economy but by year 2000, it was only 8.6%. This was replaced by manufacturing, as its share of the GDP rose from 19.8% to 30.9% during the same period. Meanwhile, total trade reached 220% of the GDP. In 2018, the size of total trade remained significant at 140% of our economy.

10. The industrialisation propelled Malaysia to become an upper middleincome country from an agriculture and mining powerhouse. In 2018, our GDP per capita in purchasing power parity (PPP) terms and in constant prices was USD28,176. This is already comparable to some European economies.

11. These achievements would not have been possible if the State had not played its roles as a facilitator, or even a mover, of industrialisation.

PRE-MATURE DEINDUSTRIALISATION

12. The role of the state is all the more important today when we realize that Malaysia is deindustrialising too soon and too fast. Malaysia has been experiencing “pre-mature deindustrialisation” since 2000.

13. In 2018, manufacturing share of the economy was only 21.6%, 9.3 percentage points lower than it was in 2000. Within the manufacturing subsectors, the deindustrialisation effect is best seen among high-tech manufacturing: its share of the economy has declined from an estimated of 15.3% in 1999 to about 7.9% in 2016.

14. What replaces the manufacturing sector now is the low-value traditional service sector, while growth of high-value add services have been weak. What makes it worse is that our reliance on low-cost labour-intensive sectors has increased.

15. All that means our productivity growth has been on a declining trend. In the 1985-1996 period, our productivity grew at an average of 3.9% yearly. In the 2011-2016 period, it averaged 2.5% yearly.

REINDUSTRIALIZING MALAYSIA

16. To become an industrialized economy and join the ranks of the highincome economy, we need to halt the pre-mature deindustrialisation and reindustrialise. And the Government clearly has a role to play.

17. The Government has a responsibility to boost Malaysia’s investment numbers and enhancing the country’s position in the global supply chain. State interventions are required to improve national competitiveness, raise productivity, prioritize investment in strategic sectors, re-energise export-led industrialisation and structure market incentives around political goals of encouraging entrepreneurship.

18. Having said that, the government does not forsake the free market so long as it is fair, and does not disavow trade liberalization provided that poorer countries are protected with favourable trade status so that they get a chance to compete. Deregulated finance must also protect minority shareholders and members of the public from predatory speculators and opportunists. Safeguard must be there to protect the losers of liberalization, as we cannot live in a zero-sum game world.

TRADE WAR AND THE REORIENTING GLOBAL SUPPLY CHAIN

19. As we are moving up the value chain, the ongoing trade war between China and the United States cannot be ignored. Truly, the global upheaval provides Malaysia with an extra impetus to raise our competitiveness and ensure our manufacturing bases, especially with regards to E&E, remain crucial to the reorienting global supply chain.

20. We must understand Malaysia is not the only country looking to capitalise on the reorientation. Economies like Thailand and Vietnam are eager to grab the opportunities to embed their economy deeper in the global supply chain. We are in a race that could determine the trajectory of our individual national growth for decades to come, just as the industrialization of the past had boosted our growth for about 4 decades.

21. Despite the competition, I am confident Malaysia’s comparative and competitive advantage will enable us to benefit from business relocation as well as trade and investment diversion. We have superior infrastructure, multilingual population with widespread use of English, skilled workers, strong rule of law particularly in terms of intellectual property rights, and strong links to the world’s markets. Our institutional reforms have also made our institutions more trustworthy and transparent. And Malaysia is already the 15th easiest place to do business out of 190 economies according to the World Bank.

22. That has made Malaysia an excellent safe haven amid the trade war, as companies seek to create new supply chain to avoid the trade war. We have been making good progress too. In the first half of 2019, approved foreign investment across all sectors rose 97.2% to RM49.5 billion from RM25.1 billion last year. Out of the RM49.5 billion approved foreign investment, RM25.1 billion were in manufacturing. This is after approved foreign investment reached record high in 2018, hitting RM80.1 billion last year with RM58.0 billion went into the manufacturing sector.

23. The Government is doubling efforts to attract more high-quality investments that create better paying jobs. On our part besides giving various generous incentives, we have recently established the National Committee on Investment I (NCII) co-chaired by the Minister of International Trade and Industry, and I as the Minister of Finance. The NCII will expedite investment approval process and help Malaysia manoeuvre quickly in a rapidly changing environment. In our inaugural meeting, 3 projects from local and foreign investors valued at RM2.2 billion were approved.

24. Our RM21.6 billion National Fiberization and Connectivity Plan (NFCP) is among our strategies to reindustrialize Malaysia through publicprivate collaboration in the age of Industry 4.0. With wider coverage of faster and higher quality connection, and more affordable broadband internet, Malaysia would be ready for the implementation of 5G technology in the near future, putting us ahead of the pack.

PENANG AND KEDAH AS THE E&E CLUSTER

25. The Economic Impact Survey 2018/19 for the E&E sector by the American Malaysian Chamber Of Commerce (AMCHAM) reported that E&E members are mostly clustered around Penang and Klang Valley. Penang leads with 27 investments, followed by 10 investments in Klang Valley, and Kedah in the close third with five (5) investments, while Perak and Perlis recorded two (2) and one (1) investment respectively for the year in survey.

26. Kedah has a proven manufacturing ecosystem that augments Penang as the regional hub. Place such as the Kulim Hi-Tech Park (KHTP) houses prominent E&E conglomerates and enriches the northern E&E supply chain. These successes can be emulated by the other NCER states via strong regional collaborations to create a network of diverse and competent local suppliers, as well as local electronic manufacturing service companies.

27. A clear example of NCER synergy is the establishment of the Southeast Asian test engineering hub in Penang. The collaborative programme fostering Research & Development & Commercialisation (R&D&C) capabilities in test engineering will be extended to Kulim HiTech Park, Kedah Science & Technology Park, Chuping Valley Industrial Area in Perlis, and the Perak Hi-Tech Industrial Park.

TALENT DEVELOPMENT

28. Rapid advancements have led to introduction of new technology, new machines and new equipment. Our workforce has no choice but to embrace these changes. They have to be continuously trained in the latest technology, be empowered to handle disruptive technologies, and be able to manage regional or global operations.

29. The establishment of Centers of Excellence for E&E in NCER have been crucial in developing industry-ready talents, and moving the sector up the value chain by developing high-end production among Multinational Companies (MNCs), Large Local Companies (LLC), Small and Medium Enterprises (SMEs) and start-up companies.

30. I am pleased to note that NCIA is leading the robust implementation of talent development programmes, ranging from the NCER Talent Enhancement Programme (NTEP) that addresses high-level skills and knowledge requirement, to empowerNCER programme that tackles basic human capital development at the grassroots levels.

CLOSING

31. As the pioneers and leaders in steering the E&E industry since the 1970s, we seek you expert views in advancing the Malaysian E&E industry and reindustrialize Malaysia. Your contribution here today will help determine the apportionment of national resources to grow the industry, which in turn will help fulfil the Shared Prosperity agenda espoused by the Prime Minister.

32. I look forward to our discussion.

Sekian, terima kasih.