New industrialisation vision

The vision was realised without undue strain on resources and capabilities. And it was tenable, for a while. The limits of import substitution were quickly reached. The domestic market and purchasing power were limited. There was nowhere to expand but outwards. The vision then shifted to export-led industrialisation. This vision was more challenging. The economic base was narrow. Domestic firms were operating on a small scale. Diversification had to be initiated by bigger foreign companies. A new industrial infrastructure had to be emplaced - industrial estates, legislation, incentives. In institution building, the role of the Malaysian Industrial Development Authority (Mida) in promoting inflows of investments became pivotal. As the country progressed in its industrialisation drive, with heavy dependence on multinational corporations (MNCs), a national-centric dimension of industrialisation took shape. While attracting MNCs, domestic industrial capabilities needed to be developed as well. The rationale was simple. It was a balancing act. Malaysian firms and interests should also be more directly involved in the industrialisation process and gain from the experience. While they may grow to become MNCs themselves, their industrial roots will remain in the country. This vision required a lot more effort, costs and perseverance to make it happen. The most ambitious aspect of this vision was the national car. Starting from scratch, after more than two decades, the saga of this vision is still unfolding. Today, Proton is a reality. Proton cars are running on the roads. Nevertheless, more bending and welding are required before Proton becomes a fulfilled and enduring vision. It can thus be observed that while the core vision of industrialisation, that of transforming Malaysia into a major producer of industrial products, remained, the nature of the transformation, and dimensions of the vision, underwent evolution with each phase of industrialisation. The dimensions are captured in the Industrial Master Plans which had been formulated to steer the course of industrialisation. The focus of the vision for the First Industrial Master Plan (IMP1), 1986-1995, was on laying the foundation for the manufacturing sector to become the leading growth sector of the economy. This was largely realised. At the end of the plan period, the share of the sector to the gross domestic product (GDP) increased from 15.7 per cent in 1986 to 27.1 per cent in 1995, while the share of manufactured exports to total exports increased from 43 per cent in 1986 to 77.5 per cent in 1995. The focus of the vision for the Second Industrial Master Plan (IMP2), 1996-2005, was on the further development of the manufacturing sector, by strengthening industrial linkages, increasing value-added activities and enhancing productivity. Generally, progress was being achieved in these areas:* In respect of industrial linkages, an increasing number of MNCs were beginning to source their requirements for parts and components from domestic suppliers and input providers. In the case of the electrical and electronics industry, a semiconductor cluster took shape in Penang. In research and development, collaboration within the cluster involved the industry, the government and academia through the formation of the Collaborative Research and Resource Centre, based in Universiti Sains Malaysia.* During the IMP2 period, there was a shift towards higher technology and capital-intensive activities in the manufacturing sector. In investments, high technology projects undertaken included wafer fabrication, with investments valued at RM15.9 billion, and photonics (RM452.1 million).* Productivity in the manufacturing sector improved. In terms of labour productivity, in 2005 the sector recorded an improvement in labour cost competitiveness. There was an increase of 13.9 per cent in productivity (measured by sales value per employee), compared with the increase of labour cost per employee of 4.1 per cent. Taking into consideration the industrialisation progress achieved during the period of the two Industrial Master Plans, the focus of the vision for the Third Industrial Master Plan (IMP3), 2006-2020, has been set higher still. The vision is for Malaysia to achieve global competitiveness. Extremely challenging, no doubt, but not unreachable. This is like the high jumper who has gained experience and excelled in national and regional competitions now going for the Olympics. The vision is to be realised through the innovation and transformation of not only the manufacturing sector, but the non-government services sector as well. It is anticipated that while the manufacturing sector will continue to grow, its contribution to the GDP, at the end of the IMP3 period, will be relatively smaller, at 28.5 per cent, compared with 31.4 per cent in 2005. A bigger potential is envisaged for the non-government services sector, which is expected to grow and contribute 59.7 per cent to the GDP by 2020. Recently, a new dimension has been added to the vision of Malaysia becoming globally competitive. This has to do with the international trading aspect of a globally competitive industrialised nation. The potential for Malaysia to be involved in such activities in a big way needs to be explored and exploited. Under one of the ten strategic thrusts of the IMP3, Malaysia's position as a major trading nation will be enhanced. This thrust will now be strengthened. Enhancement will need to be measurable. The total trade rankings of the World Trade Organisation (WTO) will be used as the benchmark. The vision is for Malaysia to become the top 10 global trading nation by 2020. In the past, the highest position reached was 17th. In 2008, Malaysia was at the 27th position, with total trade valued at US$356.4 billion (RM1.26 trillion), one-tenth of the total trade of the top ranked trading nation, the US (US$3,466.5 billion, or RM12.27 trillion), and two-fifths of the 10th trading nation, Canada (US$874.8 billion, or RM3.1 trillion). It is obvious that massive efforts in a broad front are required in the pursuit of the vision. They may involve realignment, in certain aspects, even overhaul, in the ways international trade is now being handled by Malaysia. The areas include logistics system and infrastructure, port and airport operations, and trade facilitation and related services. There is also a need to nurture a dynamic merchanting community. Like the high jumper aiming for the Olympics, Malaysia's aim for the top 10 global trading nation requires relentless determination and dedication. Within a decade, putting efforts together, as a nation, the vision can be turned into reality.Datuk Abdul Hadi is the adviser to the Ministry of International Trade and Industry.

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