How The New Industrial Master Plan 2030 Will Transform Malaysia’s Manufacturing Sector And Economy

Malaysia is a country with a rich and diverse industrial heritage. From its humble beginnings as a producer of primary commodities, such as rubber and tin, Malaysia has evolved into a dynamic and competitive manufacturing hub in Southeast Asia, exporting a wide range of products, such as electrical and electronic goods, palm oil, rubber products, machinery, chemicals, and medical devices.

However, Malaysia also faces many challenges and opportunities in the 21st century, such as the rapid advancement of technology, the emergence of new markets and competitors, the increasing demand for environmental sustainability, and the need for social inclusion and equity. To address these issues and to achieve its vision of becoming a high-income, developed, and dignified nation by 2030, Malaysia has launched the New Industrial Master Plan 2030 (NIMP 2030) on September 1, 2023 .

The NIMP 2030 is an industrial policy for the manufacturing and manufacturing-related services sector, which accounts for about 22% of Malaysia’s GDP and employs about 3.2 million workers. It is a key component of the MADANI Economy framework, which aims to elevate the dignity and status of the nation by pursuing economic growth that is balanced, inclusive, sustainable, innovative, and resilient.

The NIMP 2030 has six key goals: to increase economic complexity, create high-value job opportunities, extend domestic linkages, develop new and existing clusters, improve inclusivity, and enhance ESG practices. It also has four missions: to advance economic complexity, tech up for a digitally vibrant nation, push for net zero, and safeguard economic security and inclusivity. These missions are supported by four enablers: to mobilise financing ecosystem, foster talent development and attraction, strengthen best-in-class investor journey for ease of doing business, and introduce whole-of-nation governance framework.

Advance economic complexity

Economic complexity refers to the diversity and sophistication of a country’s products and exports. A higher level of economic complexity indicates that a country has more knowledge and capabilities to produce a variety of goods that are in high demand in the global market. Economic complexity is also positively correlated with higher income levels, lower inequality, and faster growth.

Malaysia ranks 25th out of 133 countries in terms of economic complexity in 2019. However, its economic complexity has stagnated since the 1990s, while other countries such as China, Thailand, Vietnam, and Indonesia have improved their rankings significantly. Moreover, Malaysia’s exports are still dominated by low- to medium-technology products that face intense competition from lower-cost producers.

To advance its economic complexity, Malaysia aims to increase its share of high-technology products in its exports from 17% in 2019 to 25% by 2030. It also aims to increase its share of medium-high-technology products from 26% to 35%, while reducing its share of low-technology products from 28% to 15%.

To achieve these targets, Malaysia will pursue several strategies, such as:

• Identifying and developing new growth areas that have high potential for value creation and innovation. Some of these areas include advanced materials, biotechnology, nanotechnology, robotics, artificial intelligence (AI), internet of things (IoT), cloud computing, big data analytics (BDA), cybersecurity, blockchain technology (BCT), additive manufacturing (AM), renewable energy (RE), electric vehicles (EV), smart cities (SC), healthcare devices (HD), aerospace engineering (AE), etc.

• Enhancing existing industries that have strong comparative advantages and market presence. Some of these industries include electrical and electronics (E&E), machinery and equipment (M&E), chemicals and chemical products (C&CP), rubber products (RP), palm oil products (POP), food products (FP), wood products (WP), textiles and apparel (T&A), etc.

• Promoting diversification and upgrading within industries by encouraging firms to move up the value chain from producing intermediate goods to final goods or services. For example,

  • In the E&E industry

    • from producing components such as semiconductors

    • to producing devices such as smartphones or laptops

    • or providing services such as software development or system integration

  • In the M&E industry

    • from producing parts such as gears or valves

    • to producing machines such as industrial robots or CNC machines

    • or providing services such as maintenance or repair

  • In the C&CP industry

    • from producing basic chemicals such as ethylene or propylene

    • to producing specialty chemicals such as pharmaceuticals or cosmetics

    • or providing services such as testing or consulting

• Fostering linkages and synergies among industries by creating platforms for collaboration and cross-fertilization of ideas and technologies. For example,

  • In the biotechnology industry

    • leveraging the strengths of the palm oil, rubber, and food industries

    • to develop new products such as biofuels, bioplastics, biopharmaceuticals, or nutraceuticals

  • In the nanotechnology industry

    • leveraging the strengths of the E&E, M&E, and C&CP industries

    • to develop new products such as nanosensors, nanomaterials, nanomedicine, or nanocoatings

  • In the robotics industry

    • leveraging the strengths of the E&E, M&E, and AI industries

    • to develop new products such as industrial robots, service robots, or humanoid robots

By advancing its economic complexity, Malaysia will be able to produce more value-added and differentiated products that can compete in the global market and meet the changing needs and preferences of consumers. This will also create more high-value job opportunities for Malaysians, especially in the fields of science, technology, engineering, and mathematics (STEM).

Tech up for a digitally vibrant nation

Digital technology is a key driver of innovation and productivity in the modern economy. It enables firms to improve their efficiency, quality, flexibility, and customer satisfaction. It also enables firms to access new markets, customers, suppliers, and partners. Digital technology also creates new business models, products, services, and solutions that can disrupt existing industries and create new ones.

Malaysia has made significant progress in adopting digital technology in its manufacturing sector. According to the World Bank’s Digital Adoption Index (DAI), Malaysia ranks 9th out of 180 countries in terms of digital adoption in firms in 2019. However, there is still room for improvement, as Malaysia lags behind some of its regional peers such as Singapore (2nd), Hong Kong (3rd), South Korea (4th), Taiwan (5th), and China (6th). Moreover, there is a wide gap between large firms and small and medium enterprises (SMEs) in terms of digital adoption.

To tech up for a digitally vibrant nation, Malaysia aims to increase its DAI score from 0.77 in 2019 to 0.9 by 2030. It also aims to reduce the digital adoption gap between large firms and SMEs from 0.25 to 0.1.

To achieve these targets, Malaysia will pursue several strategies, such as:

• Accelerating digital transformation in firms by providing incentives, grants, loans, tax breaks, technical assistance, training programs, etc. to encourage firms to adopt digital technologies such as IoT, BDA, AI, BCT, AM, etc.

• Enhancing digital infrastructure and connectivity by investing in broadband networks, data centers, cloud services, cybersecurity systems, etc. to ensure reliable, affordable, secure, and inclusive access to digital services for firms and consumers

• Developing digital skills and talent by strengthening STEM education at all levels of schooling and higher education institutions (HEIs), promoting lifelong learning and upskilling programs for workers and professionals, creating digital hubs and ecosystems for entrepreneurs and innovators

• Fostering digital innovation and entrepreneurship by supporting research and development (R&D) activities in HEIs and research institutes (RIs), facilitating technology transfer and commercialization of research outputs, encouraging collaboration among academia-industry-government-civil society (AIGC) actors

By teching up for a digitally vibrant nation, Malaysia will be able to harness the power of digital technology to enhance its industrial competitiveness and resilience. This will also create more opportunities for Malaysians to participate in the digital economy and benefit from its positive spillovers.

Push for net zero

Net zero refers to achieving a balance between greenhouse gas (GHG) emissions and removals in a given period of time. It implies that any GHG emissions are offset by an equivalent amount of GHG removals through natural or artificial means. Net zero is a crucial goal for mitigating climate change and its adverse impacts on human health, environmental quality, and economic development.

Malaysia is committed to reducing its GHG emissions intensity of GDP by 45% by 2030 compared to 2005 levels. However, this target is not sufficient to limit global warming to 1.5°C above pre-industrial levels, which is the aspiration of the Paris Agreement. To achieve this, Malaysia needs to aim for net zero emissions by 2050 or sooner.

To push for net zero, Malaysia aims to reduce its total GHG emissions from 800 MtCO2e in 2019 to 500 MtCO2e by 2030, and to achieve net zero emissions by 2050. It also aims to increase its share of renewable energy (RE) in its electricity generation mix from 22% in 2019 to 40% by 2030, and to 100% by 2050.

To achieve these targets, Malaysia will pursue several strategies, such as:

• Implementing carbon pricing mechanisms, such as carbon tax or cap-and-trade system, to incentivize firms and consumers to reduce their carbon footprint and invest in low-carbon technologies and solutions

• Expanding RE capacity and grid integration, such as solar, wind, hydro, biomass, biogas, etc., to replace fossil fuels and increase energy security and affordability

• Promoting energy efficiency and conservation measures, such as smart meters, LED lighting, green buildings, etc., to reduce energy demand and wastage

• Enhancing natural carbon sinks, such as forests, peatlands, mangroves, etc., to sequester and store carbon dioxide and provide ecosystem services

• Developing carbon capture, utilization, and storage (CCUS) technologies, such as biochar, carbon capture and conversion (CCC), etc., to remove and utilize excess carbon dioxide from the atmosphere or industrial sources

• Encouraging green growth and circular economy practices, such as green procurement, eco-labeling, waste management, recycling, etc., to reduce resource consumption and environmental pollution

By pushing for net zero, Malaysia will be able to contribute to the global effort to combat climate change and its negative consequences. This will also create more opportunities for Malaysians to enjoy a cleaner, greener, and healthier environment and lifestyle.

Safeguard economic security and inclusivity

Economic security and inclusivity refer to ensuring that the benefits and opportunities of economic development are fairly distributed and accessible to all segments of society. It also refers to protecting the national interests and sovereignty of the country from external threats and interference. Economic security and inclusivity are essential for maintaining social cohesion, political stability, and national unity.

Malaysia is a country with a diverse and multicultural population, comprising various ethnic, religious, linguistic, and cultural groups. Malaysia also has a complex and dynamic geopolitical environment, surrounded by neighboring countries with different political systems, economic models, and strategic interests. These factors pose both challenges and opportunities for Malaysia’s economic security and inclusivity.

To safeguard its economic security and inclusivity, Malaysia aims to achieve several outcomes by 2030, such as:

• Reducing the income gap between the top 20% and the bottom 40% of households from 6.6 in 2019 to 4.5

• Increasing the share of Bumiputera equity ownership in the corporate sector from 16.2% in 2015 to 30%

• Increasing the share of women in decision-making positions in the public and private sectors from 37.4% in 2019 to 50%

• Enhancing the participation and empowerment of other disadvantaged groups, such as youth, persons with disabilities, indigenous peoples, etc.

• Strengthening the national defense and security capabilities and readiness

• Enhancing the regional and international cooperation and diplomacy

To achieve these outcomes, Malaysia will pursue several strategies, such as:

• Implementing progressive taxation and redistribution policies, such as income tax, wealth tax, inheritance tax, etc., to reduce income and wealth inequality and fund social welfare programs

• Promoting affirmative action and empowerment programs, such as Bumiputera Economic Empowerment Agenda (BEEA), Women Economic Empowerment Agenda (WEEA), etc., to increase the representation and participation of marginalized groups in the economy

• Enhancing human capital development and social protection systems, such as education, health care, social security, etc., to improve the quality of life and well-being of all Malaysians

• Investing in defense and security infrastructure and technology, such as military equipment, cyberdefense systems, border control systems, etc., to safeguard the territorial integrity and sovereignty of the nation

• Engaging in regional and international platforms and initiatives, such as ASEAN, APEC, RCEP, CPTPP, BRI, etc., to advance Malaysia’s interests and values in the global arena

By safeguarding its economic security and inclusivity, Malaysia will be able to ensure that its economic development is not only prosperous but also just and equitable for all Malaysians. This will also create more opportunities for Malaysians to contribute to the peace and stability of the region and the world.

Conclusion

In conclusion, the NIMP 2030 is a visionary and ambitious industrial policy that aims to transform Malaysia’s manufacturing sector and economy in the next decade. It is aligned with the MADANI Economy framework, which seeks to elevate the dignity and status of the nation by pursuing balanced, inclusive, sustainable, innovative, and resilient growth.

The NIMP 2030 is not only a policy document but also a call for action for all stakeholders involved in Malaysia’s industrial development. It requires strong commitment, collaboration, and coordination among various actors, such as government agencies, industry players, academia, civil society, etc. It also requires continuous monitoring, evaluation, and adaptation to ensure its relevance and effectiveness in a changing world.

By implementing the aforementioned missions and enablers, the NIMP 2030 targets to build Malaysia’s industrial capacity and resilience for long-term, sustainable growth. It also expects to create positive impacts on Malaysia’s GDP, employment, exports, innovation, environmental quality, and social equity.

The NIMP 2030 is a bold step towards achieving Malaysia’s vision of becoming a high-income, developed, and dignified nation by 2030. It is also a contribution to the global community’s efforts to achieve the Sustainable Development Goals (SDGs) by 2030. It is hoped that the NIMP 2030 will inspire other countries to pursue similar industrial policies that are aligned with their national aspirations and values.