THE IMPORTANCE AND CHALLENGES OF MANUFACTURING IN MALAYSIA

Recently, manufacturing industries in Malaysia grow very rapidly if compared to previous

decades. With the rapidly grow of manufacturing industries, the government has to play its role
in order to ensure every aspect of current trading policies and regulatory to be obeyed. Other
than that, this will ensure that the current trading and manufacturing environment in Malaysia to
be peaceful yet globally competitive.

In this report, a number of importance and challenges faced by manufacturing sector in

Malaysia will be focused on. The scope of this report only covers the situation in Malaysia
manufacturing environment and at the same time, it will explain some benefits that our nation
can get from the cooperation with developed countries such as Australia and Japan.

Manufacturing Sector in Malaysia and its Importance

To start with, manufacturing sector in Malaysia contributes almost 80% of overall

country’s export and besides, Malaysia also known as the 17th largest exporting nation in the
world [1]. For that reason, Malaysia’s government has to work hard in order to maintain,
preserve and enhance our manufacturing sector. From [1], it is stated that products
manufactured in Malaysia are accepted in developed countries such as US, EU and Japan. This
shows that our manufacturing sector already achieved a level that can be proud of.

Due to exporting her product to other countries, Malaysia has to obey some regulations
in a particular country. For example, Malaysia also exporting some of its product to Australia and
according to [1], Australia is a very strict country especially in food handling and management.
In order to export food products to Australia, Malaysia have to obey and fulfill all the Australian’s
rules and requirements respectively. Fortunately, Malaysia’s government and her manufacturing
sector are managed to do it. This shows that Malaysia has the ability to fulfill global standards
such as CODEX and Australian Food Standards Code.

As we all know, Malaysia also known for its agro-based sector. In Malaysia, some
commercial-based plants are heavily grown and these plants are harvested to produce some
kinds of raw material such as palm oil, rubber, timber, rice and fiber. Unfortunately, the income
that can be generated from agro-based sector is not really huge compared to manufacturing
sector. For that reason, with the availability of the manufacturing sector, Malaysia does not need
to rely on the agro-based sector only. Furthermore, manufacturing sector can help in boosting
the development of agro-based sector by offering the capabilities of some downstream activities
such as product processing, packaging and distributing. These acclivities are useful in order to
turn the raw material (palm oil, rubber, rice) into finished product or half-finished product.

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Besides, the manufacturing sector can assist in the utilization and development of R&D and ICT
adoption for business and manufacturing purposes. Along the way, ICT adoption can lead to the
wider usage of electronic commerce for business to business. Other than that, ICT will facilitate
the utilization of RFID and product coding standards.

In the education aspects, the development in manufacturing sector can help to boost
Malaysia’s education sector. Manufacturing sector has the capability to offer and provide the
working experience, industrial training and actual case study for education and other
government sectors in Malaysia. As a matter of fact, undergraduate and postgraduate students
in Malaysia can take these chances to get some exposure of working in manufacturing sector in
Malaysia. Besides, a lot of researches can be conducted in order to solve industrial problems
and this can lead to the occurrence of technology transfer and the discovery of new knowledge.

Despite that, Malaysia is one of the Islamic country and other than that, Malaysia also
does a lot of active collaboration between other countries. As from [1], Malaysia can be the
‘door’ for other countries such as developed countries to do collaboration with other Islamic
nations. In the same way, many Islamic countries have the ability to offer lower manufacturing
costs especially the raw material, labor charge and business capital. From the collaboration with
developed countries, the Islamic countries can enhance their economy condition and receiving
technology transfer.

In Malaysia’s manufacturing sector there is no end for continuous development efforts. In

order to achieve the competitiveness level and innovative capability that up to the global
standard, the manufacturing sector is doing its best. For example, Malaysia is doing
collaboration with Australia via Free Trade Agreement (FTA)[1]. By implementing FTA, Malaysia
is trying to achieve and put herself the global manufacturing environment. Along with that,
Malaysia will be a country that manages to produce a higher-tech, higher-value added and more
sophisticated products and services.

Similarly, joint-ventures and collaborations made with developed nations yield a lot of
benefits. Next, Malaysia can go to a higher level and respected globally. In addition, through
joint-ventures and collaborations Malaysia can obtain a flow of expertise that her really need
and as well as valuable technology transfer. On the other side, Malaysia can also carry out
some projects abroad with the developed countries expertise and material and labor from
Malaysia. This will give credits to both parties. After a while, Malaysia can be proud to be known
as a successful developed country.

Challenges for Malaysia’s Manufacturing Sector

To be a developed country, one has to go through series of ups and downs. It is also
same for Malaysia and her journey for glory. Apart from all the benefits of a rapidly-developed
manufacturing sector, there are a lot of challenges to deal with and the most current one is
global economic crisis. During this crisis, almost all big companies worldwide face a hard time.
In Malaysia, KLSE is going down [4] and this give the hardest hit ever to most companies in

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Malaysia and investors. Moreover, demands for export are almost disappear and this affects the
manufacturing sector in Malaysia. Currently, some manufacturers are reducing their
manufacturing volume and capacity and this cause a lot of people become jobless. Now is a
very tough for everyone.

Besides, the manufacturing sector in Malaysia also has a problem in maintaining its
competitiveness, quality and Just-In-Time delivery [1]. This is because all three requirements
mentioned before is crucial in order to gain market share. Nowadays, some manufacturers will
outsource their production in order to maintain competitiveness. Some fields that are widely
outsourced in Malaysia are contract manufacturing, logistics and IT services, internal audit and
R&D [1].

From [1], it is stated that Malaysian manufacturers face some problems during the
shipment of their products. One of them is due to the sets of physical examinations that their
products need to go through before entering a particular country. As a result, these
examinations will cause delay. Other that, there are some manufacturers those need to do
export-direct for their product. To fulfill this need, Malaysia’s government should develop a cargo
consolidation facility and services.

Moreover, because of more than one system of Approving and Inspection Authorities
take place, a significant gap between the information system and overall resources do exist
therefore causing more delays. Besides, the stakeholders do not have enough time to
understand and respond to the rapidly change of trading policies and regulatory. All this
challenges will cause delay in the overall processes of manufacturing management.

Apart from that, the manufacturing sector in Malaysia is an industry that is driven by
technology and knowledge. Moreover, Malaysia also produces and promotes high-tech and
high-value added products and services. For that reason, it is not easy to cope and remain
competitive with current market condition in which, technology is very rapidly developed.

Despite having problem with rapidly-changing product’s technology, Malaysia is also

lacks of technical and marketing skills and these make things worse. The manufacturing sector
is deeply in need of the most recent engineering and technical skills. These skills are needed for
the middle management level and people in this level are expected to design, innovate and
adapt new technologies to the manufacturing environment. Moreover, the manufacturing sector
also lacks of the utilization of ICT in the manufacturing processes. Most people in manufacturing
sector are not yet to master the ICT for the purpose of business and manufacturing. Some of
these people are still working with the conventional manufacturing processes. Other than that,
ICT is a very important tool to close the gap between the existing and the latest technology such
as nano technology, grid computing, RFID and WiFi. These technologies are not just to be
mastered but also to be adopted into our manufacturing environment.

Apart from that, it is well-known that almost all big companies are owned by Chinese in
Malaysia. And from [2], it is mentioned that these companies are passed from generation to
generation. Problems will arise when there is no descendents that have the ability to take care
of the company. This will lead to the company closure or being taken over and because of that,
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some people might lose their job. Other than that, as we all know, members of a family will
increase with respect to time and when a family that owned a company gets bigger it is possible
for the family members to have differences in the way of thinking, opinion, ownership and
management style. It is hard to deny that a company with more than one boss is hard to
maintain. At the end of the day, this kind of companies will be taken over by others and some of
them may face some problems in terms of company’s management. In addition, big companies
are the ‘big player’ in the manufacturing sector of Malaysia and these companies mostly owned
by Chinese people. For that reason, if these companies are having problems, they will give a
massive effect on the manufacturing sector. Some examples of these companies are Malayan
Credit (owned by Teo family), the Cycle and Carriage Group (owned by Chua family) and YHS
Group (owned by Yeo family).

From [3], it is mentioned SMEs cover almost 90% of the Malaysia’s manufacturing sector
and SMEs produce various types of products such as textile and apparel, food and beverages,
metals and metals products and wood and wood products. At the same time, SMEs also face a
couple of domestic and global challenges. One of the challenges is SMEs have a low level of
R&D. This is because they have insufficient engineering and technical skills. Other than that,
SMEs put almost its efforts on supplying for the domestic market and at the same time they
have to compete with products from China and India. From here, it is obvious that they already
set the highest limit for their potential. To overcome these challenges, SMEs should aim high
and they have to be bold and qualify enough to export their products to overseas. In addition, it
is stated in [3], the high level of bureaucracy in government agencies in one of the challenges
for SMEs. Besides, it is mentioned that there is not enough internal sourcing funds for SMEs
and the SMEs believe the available funds are not effectively delivered. In [3], it is suggested that
the Malaysia’s government should avoid delivering the funds through too many agencies to
make sure the funds is effectively delivered. Other than that, it is suggested that SMEs should
try to implement counter-trade to help them getting financially stable.

Conclusion

In light of the above, the manufacturing sector in Malaysia is the biggest earnings for
Malaysia’s government. For that reason, the government is trying its best to ensure that this
sector is competitive and innovative. Moreover, the manufacturing sector contributes to almost
all facets of government sectors. These denote that, the manufacturing sector is worth to invest
on. Besides, collaborations and joint-ventures with other countries especially developed
countries will yield a lot of benefits for our country. These collaborations and joint-ventures will
enhance the technology transfer, flow of knowledge and they can offer the solution to our
shortages of technical and marketing skills. Apart from that, the manufacturing sector also faces
some challenges in order to maintain its competitiveness. These challenges come from various
aspects such as financial, R&D, ICT, technology and knowledge and technical expertise. For
that reason, our government still has a long way to go before our manufacturing sector is able to
achieve the standards of global manufacturing environment and for our Malaysia to be a
developed country. But all those dreams will be closer for grabs day by day.

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References

[1] Raja Musa , Raja Abdul Aziz. “Transactions Costs in Regional Trade and Trade
Facilitation: The Malaysian Business Perspective”. Federation of Malaysian
Manufacturers.

[2] Gomez, Edmund Terrence. “Family Firms, Transnationalism and Generational Change:
Chinese Enterprise in Britain and Malaysia”. Springer Science and Business Media.
June 7, 2007: 153-172.

[3] Saleh, Ali Salman and Ndubisi, Nelson Oly. “An Evaluation of SME Development in
Malaysia”. International Review of Business Research Paper, Vol 2 No 1. August 2006:
1-14.

[4] Zainal Abidin, Mahani. “Malaysia’s Economy Outlook: New Challenges Facing the
Malaysian Economy”. ASLI Outlook Conference 2009. January 15, 2009.