Extract from YB Dato’ Mustapa Mohamed’s (Minister of International Trade and Industry) Message during MITI Annual Dialogue held on 23/7/2009

Last year, Malaysia registered total investment of RM62.8 billion in the manufacturing sector. The amount of investment for the first five months of this year only totals RM9.0 billion, as we are now experiencing the full repercussions of the global crisis. In fact, domestic investment (53.5%), accounted for a more substantial portion of the approved investment. 

In response to the global economic slowdown, one of the measures MITI undertook was the decision to implement automatic issuance of manufacturing licenses granted under the Industrial Coordination Act (ICA) 1975, to facilitate manufacturers in undertaking projects. As of 17 July 2009, a total of 116 companies have been approved manufacturing license under this new procedure. These include: 

  • 8 companies for electrical and electronics sector

  • 3 companies for textile and apparel sector

  • 7 petrochemicals projects

  • 1 pharmaceuticals project

  • 1 rubber products project

Recently the Government has also responded to the request especially by the E&E and textile and apparel industries for the employment of foreign workers, to enable companies to meet increased export demands.

Beyond preparing for the economic recovery, the Government has announced its intention to formulate a new economic model that focuses on achieving high per capita income and a high proportion of the income benefiting Malaysian companies and the workforce.  

Allow me now to highlight the current performance of this Session’s four industry sectors: 

Electrical and Electronic Industry (E&E) 

E&E continues to be Malaysia’s leading industry and largest export revenue earner. This sector experienced a modest growth in 2008 due to slower demand for E&E products in major market such as the US, Europe and Japan. For the first five months of 2009, exports decreased 23.5% and imports decreased 27.4% to RM205.4 billion and RM155.3 billion respectively. Major factors contributing to the slowdown in exports included reduction in orders and cancellation of order renewals, downward pressure on consumer electronics prices that depresses orders and weaker consumer spending in the USA, Japan and Europe as a result of the crisis.  

In terms of investments in the sector, 56 projects were approved with total investments of RM1.4 billion for the period January to May 2009. The industry is showing signs of revival, as exemplified by the increased export orders. 

Petrochemical, Chemical and Pharmaceutical Industries

The petrochemical and chemical industry is the second largest contributor to our total exports. For the period of January to May 2009, export of petroleum products amounted to RM997.4 million, while imports reached RM381.6 million. For the chemicals and chemical product sub-sector, imports and exports totaled RM12.7 billion and RM12.3 billion respectively. During the first five months of 2009, total investments in petroleum products (including petrochemicals) totaled RM1.1 billion, while that for chemical and chemical products amounted to RM1.5 billion. 

The pharmaceutical industry, which is mostly dominated by SMEs, saw an increasing demand trend in the domestic market. The pharmaceutical industry productivity in 2008 grew by 11.6 per cent, while sales value expanded by 11 per cent to RM1.4 billion. This increase is due to demand from the domestic market, arising from better health awareness and ageing population. Manufacturers must continue to expand and upgrade their existing facilities to meet the rising local and overseas demand for generic OTC drugs and food supplement drugs, specialist therapy and medical tourism.  

Rubber Products Industry

Last year was a challenging period for the rubber products industry due to volatility of rubber and oil prices that contributed to uncertainty in the cost of manufacturing. Currently, for the period January to May 2009, exports of rubber products amounted to RM4.9 billion, a decrease of 4.4 per cent, compared with RM5.1 billion for the corresponding period in 2008 while imports decreased 0.7 per cent to RM1.1 billion. During the same period, total investments was RM52.1 million, comprising RM31.7 million of foreign investments and RM20.4 million of domestic investments. 

The Government recognizes that R&D in upstream, midstream and downstream segments are vital to push the industry ahead. The private sector needs to seriously pursue research efforts to enhance improvements in capacity, capability and knowledge of the industry. 

Textile and Apparel Industry

For the period of January to May 2009, exports amounted to RM3.48 billion. Main export items include men’s and women’s clothing valued at RM2.7 billion and woven fabrics valued at RM1.3 billion. During the same period total investments in the textile and apparel industry was RM36.7 million.  

In 2008, the government announced a reduction of import duty for 32 lines on textiles and accessories from a range of 30%-20% to 10%-20%. This measure is meant to enhance the competitiveness of the industry. During the same year, the Malaysian Textile and Apparel Centre (MATAC) also trained 360 students or 9% of total number of students in textiles courses.  

The declining trend in industrial output since the fourth quarter 2008 due to decreasing demand in the export-oriented industries is expected to continue into this year for many industries. While the pharmaceutical, healthcare and medical devices sector is expected to face less impact from the crisis, the petroleum products and petrochemicals and plastics product sector, the basic industrial chemicals, textiles and apparel and cement industry you represent can expect to continue to face a difficult business environment. Nevertheless, prospects for the recovery of manufacturing sector are expected to improve in 2010.

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