Malaysia
MAIN FEATURES OF ECONOMY
At the time of its independence from the British Empire in 1957, Malaysia was a country dependent on agriculture and primary commodities, Since then, the Malaysian economy has evolved to become an export driven economy, spurred by knowledge based and capital intensive industries. This structural transformation of Malaysia’s economy over the last 40 years has been the result of aggressive industrialization policies to develop a manufacturing-based, export driven economy.
Today, Malaysia has a diversified economic structure. The main sectors of the economy are services, manufacturing, agriculture, mining and construction. Malaysia is one of the largest exporters of semiconductors, and air-conditioners in the world, and it is also noted for exports of petroleum, liquefied natural gas and agriculture-based commodities such as palm oil and rubber.
This export driven nature of the Malaysian economy has made it vulnerable to regional and global economic conditions such as the Asian Financial Crisis in 1997, the Electronic and Electrical sector downturn in 2001, and more recently, the SARS epidemic and Iraq crisis in 2003. Nonetheless, the Malaysian government has been able to respond quickly and effectively, and through the implementation of various monetary and fiscal policies, mitigated the worst effects of these adverse external environments.
During the last decade, the Malaysian economy achieved average annual growth rates of about 7%. In 2003, Gross Domestic Product grew by 5.3% to RM231,674 million. Going forward, the government is confident that strong macroeconomic fundamentals will see the country’s GDP increasing by 7.0% in 2004 and a around 6.0% in 2005.
CHARACTERISTICS OF MARKET
Malaysia's rapid industrialisation was the result of the country opening itself relatively early in the 1960s to foreign direct investments. In addition to its market oriented economy, educated workforce and well-developed infrastructure, a major point of attraction for foreign investors have been the government’s commitment to maintain a business environment that is conducive for growth and profit. The government has also recently eased equity policies, and effective from mid-2003, 100% foreign equity holding is allowed for all investments in new manufacturing projects. In addition, a wide range of tax incentives is also available to companies in selected industries.
The Manufacturing sector contributes some 31% to the country’s GDP and remains strong, as the industry migrates to higher value-added products. Currently, approximately 52% of the manufacturing sector output comes from export oriented industries such as electrical, electronics and machinery industries whilst the remaining 48% comes from domestic oriented industries such as plastic and chemical products, food, beverages and tobacco and construction related products.
The last decade has seen a deepening and widening of Malaysia's industrial base as well as the further development of its services sector. As such, a strong foundation has been laid for the economy to move forward into the new globalised environment.
In the coming decade, an important policy component in Malaysia's development plans will be to enhance the knowledge content of the economy. There will be intensive research and technology development with support from venture capitalists and with ICT as the enabling technology. The next 10 years will see a greater emphasis on human resource enhancement, skilled and knowledge workers being among the major pre-requisites to transform Malaysia from a production-based into a knowledge-based economy.
SPECIAL AREAS OF GROWTH
Recognising that growth of the future economy lies in technological development, the government has tailored development plans to shift away from input-driven growth strategies to knowledge and technology driven strategies. In line with this drive towards developing a knowledge-based economy, two key sectors that have been identified as special areas of growth are the fields of ICT and Biotechnology.
ICT
The government planned concerted efforts to position Malaysia as a competitive knowledge based economy, with ICT facilitating development.
The government planned concerted efforts to position Malaysia as a competitive knowledge based economy, with ICT facilitating development.
One of the key efforts in boosting the growth of the ICT sector in Malaysia and accelerating Malaysia’s entry into the Information Age has been the establishment of the Multimedia Super Corridor (MSC). Located at the hub of Asia's fastest-growing markets, the goal of the MSC is to provide an ideal multimedia environment that attracts topflight Malaysian and international IT and multimedia companies, and companies that have the potential to become world-class over time.
The MSC has become the regional launch site for companies developing or using leading multimedia technology, allowing these innovators to harness Malaysia's unique competitive advantages that arise from its multicultural links, committed leadership, and proven track record in developing products and services for regional and global markets.
Companies with strong value-added activities which are providers or heavy users of multimedia products and services can be granted MSC-status, which allows them to enjoy certain privileges and incentives such as freedom of ownership, as well as tax and other financial incentives.
Biotechnology
Biotechnology is another sector that has been identified as a core technology to propel domestic innovation and capability to produce novel products for commercial purposes in areas of medicine, energy, farming and food production as well as environment management.
Malaysia’s formed its National Biotechnology Directorate (BIOTEK) to promote and coordinate R&D activities in biotechnology as well as to develop private-public sector collaboration and to assist the commercialization of research. BIOTEK currently manages seven categories of biotechnology R&D activities, namely molecular, plant, animal, medical, environmental and industrial, biopharmacy and food. The government has also forged a partnership between Massachusetts Institute of Technology (MIT) in 1999 to facilitate the interaction, development and training of scientists in critical areas like genomics, bioinformatics and bioprocessing. This program aims to
nurture a group of professionals capable of spearheading the development of the biotechnology industry in Malaysia.
The government has laid plans for the establishment of BioValley Malaysia, a dedicated zone for biotechnology industries in Malaysia. BioValley will be located within the MSC, and will be the nucleus of the biotechnology industry, adopting a cluster approach to develop biotechnology industries. The establishment of BioValley is aimed at stimulating interests from international centers of excellence for biotechnology to collaborate with the national institutes in terms of research and knowledge. The government reportedly hopes to attract 150 biotech companies and US$10.5 billion in investments in the next decade.
PROSPECTS FOR NORWEGIAN TRADE
In addition to the ICT and Biotechnology fields listed above, there are good prospects for Norwegian companies in the following sectors:
Oil & Gas
The production of natural gas during the first seven months of 2004 increased by 2.3% to 5,098 million standard cubic feet per day (mmscfd) as compared to 4,985 mmscfd during the same period in 2003. Total production for 2004 is projected to increase by 11.3% to 6,094 million standard cubic feet per day with anticipated increase in new operational gas fields. Going forward, Malaysia is set to become the world’s second largest producer of liquefied natural gas (LNG) with the completion of the third liquefied natural gas plant.
Crude oil production in the first seven months of 2003 averaged 754,014 barrels per day (bpd) reflecting an increase of 3.3% as compared with 6% in the corresponding period in 2003. Going forward, the production for the full year is estimated to increase by 2.0% with an average of 753,000 bpd.
Malaysia’s natural gas reserves stand at 87 trillion standard cubic feet and are expected to last 43 years, whilst crude oil reserves are estimated at 4.84 billion barrels. To sustain these reserves, efforts will be taken to develop potential small fields and enhancing the production of matured fields. In addition, exploration in deep-water areas will be continued, especially in the states of Sabah and Sarawak. Murphy Oil has discovered very significant oil reserves at Kikeh field, which lies in the deepwater Block K. Preliminary estimates of recoverable reserves at Kikeh are between 400 million and 700 million barrels.
To attract investments in exploration activities, more favourable terms of the production sharing contracts will also be considered. Acquisition of the state-of-the-art technology in exploration and production, intensification of research in oil recovery and reduction in cost are measures to be undertaken.
During the period 2001-2005, a total of RM61.5 billion will be invested by the petroleum industry. Of this, Petronas and its production-sharing contractors will spend RM41.5 billion for exploration, development and production. Another RM8.1 billion will be expended by Petronas to further develop infrastructure and facilities to attract foreign investments in gas-related industries. Given Norway’s expertise and reputation as a leading oil and gas producer, opportunities exist for Norwegian companies to provide technology, products and services across the spectrum of the oil & gas industry.
Marine Aquaculture
Aquaculture is another sector that presents opportunities for Norwegian companies. The output of the aquaculture industry increased from 117,000 tonnes in 2000 to 197,000 tonnes in 2003, and the government forecasts a further 17.4% growth per annum over the 2004-2005 period.
The Malaysian government aims to increase food production to meet national food requirements and increase export capacity, aquaculture has also emerged as a sector with growth potential. The increase will be contributed by the large-scale expansion of aquaculture activities in gazetted Aquaculture Industrial Zones (AIZs). Towards this end, an additional 4,500 hectares is expected to be developed in Kedah, Melaka, Pahang, Perak, Sabah, Sarawak and Terengganu.
Increased efforts will be undertaken to develop new infrastructure, skills and technologies to promote modern aquaculture, including breeding marketable and highly demanded products. Norway’s expertise in the sector would therefore have a lot to offer.
The government is also looking to increase efforts to encourage private sector participation in large-scale commercial food production, such as the formation of strategic alliances to increase investments in upstream production as well as post harvest activities.
Defence
The Malaysian Ministry of Defence will be spending between RM12 billion to RM15 billion to modernize the Malaysian armed forces during the period 2001 to 2005. Some of the planned acquisitions include multi-role combat aircraft, air defence systems, unmanned aerial vehicles, attack helicopters, submarines, heavy lift helicopters, air defence missiles, maritime patrol aircrafts, offshore petrol vessels, etc.
Fish as food
The demand for fish is expected to increase in the future as a result of population growth, increasing income, health consciousness, and an expanding downstream processing industry.
It is estimated that the total demand for fish and fish products in Malaysia by 2010 is 1,591 million tonnes as compared to local fish supply of 1,500 million tonnes. Therefore, Malaysia needs to import more fish to meet local demand.
Environmental services
As Malaysia strives to become a developed nation, the proper management of the environment and natural resources base will be the major emphasis for the country. Specifically, the major environmental and natural resource challenges include waste treatment (including recycling and incineration), ensuring access to clean air and water; providing adequate food without excessive use of chemicals; providing energy services without environmental degradation; developing healthy urban environments and conserving critical natural habitats and resources.
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