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KUALA LUMPUR — Malaysian Prime Minister Mahathir Mohamad on Wednesday announced a new national policy aimed at raising productivity in the manufacturing sector, in the hope wresting production back from regional peers such as China.
The “Industry4WRD” policy aims to make the country a primary destination for high-tech industries by promoting areas such as artificial intelligence and autonomous robots.
Mahathir described the initiative as “a pivotal step” as Malaysia seeks to strengthen structural reforms “to become a developed nation that is equitable, sustainable and inclusive by 2025 or even earlier,” in front of a crowd of roughly 1,000, including public officials and corporate leaders, at the Ministry of International Trade and Industry.
The government will provide funding and outcome-based incentives to encourage makers to adopt new technologies and invest in research and development, with particular focus on electronics, machinery and equipment, aerospace and medical devices.
Enticing companies to relocate production operations from China and other Northeast Asian countries is a key priority for Mahathir’s government, which hopes to raise the level of productivity in the manufacturing sector by 30% per person, and lift its contribution to gross domestic product by 54%.
The prime minister said that Malaysia had fallen behind regional peers in the 15 years since the end of his first stint as leader, and as such needed “to run faster” than its competitors.
Mahathir led the country during a period of rapid growth between 1981 and 2003, and set a target of achieving developed-nation status by 2020. That goal has now been pushed back as the country recalibrates its economy following the change of government in May.
Once the cornerstone of the country’s economic development, Malaysian manufacturing has been largely undercut by regional competitors. The sector’s contribution to GDP had declined to 22.8% as of March 31 from 29.1% in 2008.
“Disruption is a thing that we have to accept,” said Mahathir. “It is like a marathon, while we pace ourselves, we still need to be several steps faster or we will be consistently behind.”
Foreign direct investment will also likely have to play a greater role if Malaysia is to achieve Mahathir’s development target. According to government data, FDI in approved manufacturing projects rose 63% year on year to 15.2 billion ringgit ($3.6 billion) in the first six months of 2018. Investment growth was led by China, which accounted for 43% of the total, followed by South Korea at 16% and Japan at 10%.
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