The Defence Industry Blueprint

1
Published by Defence Industry Division,

Ministry of Defence , Malaysia in
collaboration with PRIMA CONSULTING
MALAYSIA
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any
means,electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of Defence Industry Division, Ministry
of Defence, Malaysia
Compiled
Compiled by
by
PRIMA CONSULTING MALAYSIA
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57000 Kuala Lumpur
Tel : 03 - 90583191
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URL : www.primenet.com.my
CONTENTS
PART A: FOREWORD
PART B: OBJECTIVES OF THE BLUEPRINT
PART C: STAKEHOLDERS OF THE BLUEPRINT
PART D: INTRODUCTION :
The Malaysian Defence Industry
Strategic Analysis of The National Defence Industry
The Competencies
PART E: THRUST AREAS AND INITIATIVES
PART F: SUMMARY OF THRUST STATEMENTS AND
KEY INITIATIVES
PART A
FOREWORD
PART B
OBJECTIVES OF THE BLUEPRINT
The Objectives of the Defence Industry Blueprint are:

to provide an overview of the Malaysian Defence Industry;
to provide guidelines for the development of local defence Industry;
to identify strategic technology areas of focus to catalyse the defence
industry development and capability building; and
as a reference to all stakeholders of local defence industry.
PART C
STAKEHOLDERS OF THE BLUEPRINT
9
The Defence Industry Blueprint comprise stakeholders under the following three classifications:
1. Key Players:
2. Supporting Players:
Members of MDIC
Financial Institutions
Malaysian Defence Industry Companies
R&D Institutions
Ministry of Defence ( MINDEF), Malaysia
Companies in Related and Supporting Industries
The Malaysian Army

The Royal Malaysian Air Force
Higher Education Institutions / Technical /

Vocational Training Institutions
The Royal Malaysian Navy

Ministry of Internal Security
Royal Malaysian Police
3. Interests Groups
Department of Civil Defence
Original Equipment Manufacturers (OEM

(OEMs)
Ministry of Home Affairs

Department of Immigration
Ministry of Housing and Local Government
International Defence Contractors

Research / Industry Analysts
Foreign Governments
Malaysian Fire & Rescue Department

Other Agencies
Royal Customs Department
10
PART D
INTRODUCTION
1.0 BACKGROUND
2.0 THE MALAYSIAN DEFENCE INDUSTRY
3.0 STRATEGIC ANALYSIS OF THE NATIONAL DEFENCE INDUSTRY
4.0 THE COMPETENCIES
11
1.0 Introduction
Shaping the Defence Industry Competency

Defence industry is a strategic component that
forms an integral part in the development of the
nations defence capability. A well developed
defence industry contributes significantly to the
availability of the state of the art technology,
weapon systems and military solutions. It also
provides through life support structures and
services that have a bearing on the serviceability
rate of the armed forces inventory. This has
become more significant with the implementation of
outsourcing and contractorisation. The role of the
defence industry in maintaining, repairing,
overhauling, upgrading and modernising military
equipment has become increasingly significant. A
well developed local defence industry reduces the
nations reliance on foreign manufacturers and
suppliers, hence building up national self
dependence.
The contribution of defence industry to socioeconomic development of the country should also
be recognised. Defence industry contributes towards
the creation of employment opportunities, savings
from foreign exchange, technology transfer, inward
flow of foreign direct investments (FDIs) and dual
use of technology. It also generates spin-offs to
other sectors of economy. These in turn contribute
to the economic well being as well as political
stability of a country which is the essential
ingredients of national security.
The Government in the Eight Malaysian Plan Mid
term report re-iterated the importance of the defence
industry in creating value added activities as well as
enhance the economic development of the country.
Since the industry as a whole involves the
manufacturing of products for use in aerospace,
maritime, defence, automotive and ICT, therefore it
provides vast opportunities
in the area of
technology development, skills enhancements and
export. The spill over effects from these activities will
accelerate the development of other supporting
industries
12
The development of the Malaysian defence
industry started in the early 1970s when the
nation embarked on the setting up of a government
owned ordnance factory. This was then followed
by the privatisation of the depot facilities of the
Royal Malaysian Air Force and the Royal
Malaysian Navy in the 1980s and 1990s. With the
launching of the Industrial Master Plan in 1986, the
industrial
sector
expanded
significantly,
contributing to the development of a broad
industrial base, a necessary prerequisite for the
development of the defence industry
This
development encouraged some companies
engaged in the production of commercial goods to
venture into defence sector .
The defence industry received further impetus with
the nations procurement of capital equipment in
the 1990s and the implementation of the offsets
policy, enabling the country to leverage on the
procurement process to acquire technology.
The Eight Malaysia Plan Mid Term Report

emphasized the importance of offset arrangement
as a strategy to obtain transfer of technology to
upgrade and improve the local technology base as
well as provide training and spin-offs for the local
industry. The Government will review the whole
approach of the offset programme with the aim of
strengthening its framework and formulating
guideline as well as determining appropriate
process, structure and practices.
However, on the whole, the development of the
defence industry is still far from its true potential as
compared to other leading sectors such as
electronics, oil & gas and automotive.
Malaysian defence industry today contributes to a
growing supply of military assault rifles, small caliber
ammunitions, aerial reconnaissance vehicle (ARV),
patrol vessels, information and communications
technology (ICT) based solutions and military gear
and apparel. It has also developed capabilities to
undertake activities in the area of maintenance,
repair and overhaul, upgrades and modernisation in
certain areas as well as the capability to
manufacture parts and components for both local
and foreign markets.
13
Nevertheless, much remains to be done in

enhancing indigenous defence capability. Various
challenges stand in the way of accelerating the
pace of growth for the defence industry. These
include the lack of critical mass, high capital
investment, lack of research and development,
rigid specifications, lack of competencies, absence
of uniformity and lack of promotional
and
marketing activities.
It is best to describe the competencies along the

value chain for manufacturing and such
components are listed as follows:
Taking cognisance of these challenges as well as

continued defence industry development initiatives
and programmes, it is imperative that the nation
formulates and put in place a national strategy that
charts out the strategic direction and the way
forward for the nations defence industry. As such,
it is indeed timely a Defence Industry Blueprint be
formulated to provide the strategic direction of the
industry.
y Integration
y Research and Development

y Design
y Manufacturing
y Assembly
y Maintenance
It is noted that the components of the value chain

vary with the functions prescribed under the
Ministry of Defence.
Therefore, the intention of this document, is to look

into the existing and future capabilities in order for
the nation to be able to maintain its self reliance,
self defence capability and full combat readiness,
in any circumstances.
14
1.1 Background
1.1.1 The Armed Forces

The Malaysian Armed Forces comprise three core
groups : The Malaysian Army
The Royal Malaysian Navy
The Royal Malaysian Airforce
The functions and activities of these three core
groups are supported by the Armed Forces Head
Quarters.
The functions and responsibilities of the Armed
Forces are:
y To manage national defence;
y To implement the national defence policy and
general government policies;

y To provide management and administrative
service to the components of the Malaysian

Armed Forces; and
Managing national defence is a costly affair to the

nation
as
many
key
technologies
and
competencies are not readily available. It is the
agenda of this blueprint to identify areas where
technologies and hence competencies that can be
developed in order for Malaysia to be a selfsustaining nation in defending her sovereignty.
The development of local capabilities will ensure
savings in terms of purchasing of new weapon
systems and in the maintenance of the existing
systems in the Armed Forces. Apart from savings,
development of competencies may help the nation
to overcome dependence on imports should
sanctions and embargoes being imposed on
Malaysia. A friend today may be a foe tomorrow.
Initial investment towards building national defence
capabilities is
expensive. Nevertheless, such
investment is necessary as building a strong and
coherent national defence capability is of strategic
importance to the nation.
y To manage resources allocated for national
defence.
15
There are many ways to develop such capabilities
and the Armed Forces have taken steps towards
achieving such goals. Core competencies across
the disciplines of the Armed Forces need to be
identified, acquired, developed and strengthened.
Investment in such competencies will eventually
benefit the Armed Forces and the nation as a whole.
Malaysian Armed Forces require the necessary
military hardware and software in order to carry out
its functions effectively. The need for some of these
hardware and software may be similar among the
three components of the Armed Forces.
One of the main objectives of this Blueprint, is to
identify the common competencies available from
the acquisition of the military hardware and software
across the three components of Armed Forces. This
Blueprint will eventually identify products for the local
industry to produce in compliance with Malaysian
requirements and specifications. The objective for a
return on investment may be secondary for selected
strategic
products however the competencies
acquired can be extended to other civilian
applications in order to strengthen the technical
competencies of the nation.
1.1.2 Malaysian Defence Industry Council

The Malaysian Defence Industry Council (MDIC)
was formed in August 1999 to ensure the
coordinated development of the defence industry in
Malaysia.
The Council, chaired by the Hon. Minister of
Defence, consist of representatives from Ministry
of Defence, Economic Planning Unit, Prime
Ministers Department, Ministry of International
Trade and Industry, Ministry of Finance, Ministry of
Entrepreneur and Cooperative Development,
Ministry of Home Affairs, MIGHT and local defence
industry companies.
The Functions of the MDIC are to:
steer and direct the orderly development of the

defence industry taking into consideration the
objectives of the Government as well as that of
the nation as a whole;
discuss common problems encountered by

defence companies;and
establish and maintain a grouping of national

companies concerned with and interested in
the defence industry in Malaysia.
16
The Functions of the MDIC are to:
1.1.3 Development of the Blueprint
assist in the promotion of the products and

services developed by the local companies.
disseminate information to defence companies

regarding offsets and transfer of technology
programme;
facilitate the dissemination of information relating

to export opportunities and assist defence
companies in accessing foreign markets;
assist and coordinate the presence and

representation for defence companies at relevant
overseas trade shows, promotions and marketing
activities;
act as clearing house for the exchange of

information and to organise seminars on defence
industry related issues;and
develop and build upon working relationships with

appropriate
foreign
defence
industry
organisations.
The move towards the development of the

Defence Industry Blueprint started a few years
ago. This was then followed with the gathering of
key players to a workshop on 10th to 12th
October 2002 at the Regency Hotel and Resort,
Port Dickson. This workshop was the first
consultative workshop held for the development
of the National Defence Industry Blueprint.
The consultative workshop comprise players
from industry, the Government Agencies and
personnel of the Ministry of Defence.
The recommendations made in this Blueprint are
based upon extensive consultation between the
major stakeholders in the defence industry.
These consultations involved a wide spectrum of
people with interest in the development of
national defence capabilities for both military and
civilian purposes.
17
18
2.0 The Malaysian Defence Industry
There is a need to coordinate the development of the
local defence industry taking into consideration the
needs of the Malaysian Defence Forces, the industry
and the nation as a whole
Dato
Dato Seri Mohd Najib Tun Abdul Razak
Source: Bulletin Malaysia Defence Industry Council,
October 2000
2.1 Outline
In this section, members of the MDIC Taskforce
reviewed the rationale for developing a defence
industry, and also highlighted the importance of the
defence industry towards defending the sovereignty of
the nation.
This section shall also identify the role of the key
players in the development of the industry and the
importance of sustaining the capability already available
in the three components of the Malaysian Armed
Forces.
19
2.2 The Rationale for Developing the Defence Industry
Currently, the industry lacks critical mass to encourage
diversification of markets and users to support the export
initiatives of the defence industry. A relatively high capital
investment is required for the development of the
defence industry. In order to reduce the high capital
investment, a planned distribution of work may reduce
the burden of high investment on the chosen main
contractors.
2.2.1 Reducing The Balance of Payment

Military products and services of the Malaysian Armed
Forces are numerous in types and of varied
specifications. The quantum for each product and
service do not justify the production capacity of profit
margin for local companies. As a result, Malaysia has
to import such products and services hence,
contributing to high import bills on defence. One way of
reducing the balance of payment is to create certain
capabilities and the production of major parts in the
country. Malaysia must at least be able to overhaul
and maintain the military equipment procured.
2.2.2 Employment Opportunities

The development of the defence industry means
development in three (3) different applications; mainly
applications for land, sea and air. These applications
tend to employ people in various disciplines and skills,
thus creating business activities and employment
opportunities principally for skilled and semi-skilled
workers.
Retired military personnel can also be
absorbed into the industry.
2.2.3 Technology Gateway/Spin-Off Benefits
Defence industry houses the most complex core
technologies which have potential applications in other
industries. The technological competencies developed
in the whole spectrum of the value chain shall be
extended for use in other industries. This provides
opportunity for the universities, skill development
centres and industries to work hand in hand in
promoting new technologies and skills especially for the
use in the maintenance programme of the military
hardware and products.
The development of competencies shall ensure a
certain degree of technological sustainability for the
nation, military might to be maintained on a regular
basis and to ensure its combat capability in times of
need.
This will also enable the armed forces to have all
military equipment to be maintained on regular basis by
a competent and capable local defence industry.
20
21
2.2.3 Technology Gateway/Spin-Off Benefits contd
The government must take the lead and identify
companies that can carry out certain products/hardware
utilising local R & D capability in collaboration with
foreign parties. Companies will have to continuously
nurtured and monitored until the product is successfully
produced.
There may be export potential that can be realised with
government support and funding. The product can
therefore be continuously improved. A good example is
the experience of South Korea. Many companies are
now hardware / product exporter in the defence sector.
Their success story can be emulated by local
companies with the Governments assistance.
Therefore, the spirit / slogan Malaysia Boleh can be
realised with full commitment from both parties, i.e the
Government and the private sector. We have to be bold
and aggressive to realised the vision.
22
2.2.4 Revenue Generation
The return on investment for military hardware and
systems purchased is expected to be low unless steps
are being taken to add value for such hardware and
systems. Since this is the scenario, it is imperative for
the defence industry to take a different approach in
tackling the issue on the return of investment made for
the military hardware and systems purchased.
The revenue generated may not be obtained directly
from the technology developed and the selling of the
hardware. Nevertheless, the return on investment can be
expected from the development of competencies and
extension of such competencies for application in the
spin-off industries.
2.2.5 Security
The ability to maintain our own military hardware and
software will enable us to sustain our defence deterrent
capabilities. This should greatly enhance our
independence in areas such as military intelligence and
HiTech defensive capabilities.
23
2.3
The Malaysian Defence Industry - Critical Issues
2.3.1 National Defence Policy

The national defence philosophy advocates the
sustenance of national defence through directing of all
national resources available. This indicates the need to
build up capabilities to sustain own equipment and
weaponry for engaging intruders into the Malaysian
territories. Apart from the philosophy mentioned, the
National defence policy is based upon the three main
fundamental elements, namely self-reliance, total
defence and international cooperation.
The build-up of defence capabilities very much depend
on policies as stated in New Economic Policy, The
Second Industrial Master Plan, The National Defence
Policy and the Policy on Privatisation and
Contractorisation.
It is the objective of this Blueprint to enhance the
national defence policy in implementing the the selfreliance elements into the Malaysian defence.
24
2.3.2 Dependence on Foreign OEMs

The current military hardware and software are very
much depended upon foreign Original Equipment
Manufacturers (OEMs). There is a need to develop an
efficient technology management programme in the
long run. This is to reduce the cost of developing the
technological capability without compromising on
technological superiority.
2.3.3 Limited Defence Budget

The development of military superiority is an expensive
exercise. During the financial crisis that hit the region in
1997, major cutbacks in defence expenditure hampered
the growth of the industry. However, the global
uncertainties since the September 11 tragedy has
generated greater interest towards enhancing national
security.
Defence budget is mostly allocated for the purchase of
military hardware but little is being allocated towards the
development of the technology locally. As a result, the
companies involved in the development of military
technology do not have the economy of scale to sustain
further growth in the technology that they are already
involved in. This leads to the non-retention of resources
and dedicated players for the defence industry. Specific
research and development grants channelled through
STRIDE and selected companies with research and
development facilities would go along way in alleviating
the problem.
25
2.3.4 Small Domestic Market
Due to our small population of 22 million and with a
relatively small land covering a total area of 329,758 sq.
km, the local defence industry players do not enjoy the
luxury of a strong local base to market the products on
a large scale. So there is a need to export these
products to the global market and compete with
international players right from the start. Perhaps
Malaysia should be a leading manufacturer for nations
in the South-South Cooperation and as OEMs for the
more renowned international players.
2.3.5 Late Entry
The development of the defence industry in Malaysia is
still at the nascent stage compared to some of our
neighbouring countries. Singapore, which began its
expansion drive in the early 80s, currently has the
largest maintenance, repair and overhaul (MRO)
facilities in the Asia-Pacific region. Nevertheless, this
should not be seen as a problem, but seen as an
opportunity to look at the area of MRO. With the
introduction of various equipment from non-traditional
western suppliers, Malaysia can now position itself for a
niche market.
26
2.3.6 Constant Threat
Southeast Asias security dynamics, rather than
getting simplified in the post-Cold War era, have
become more complex and multifaceted. Regional
peace, security and stability has always been a priority
to ASEAN countries.
The self reliance defence
capability is an important concept in the development
of the defence capability of the ASEAN countries. The
ASEAN countries, despite the regional security and
stability has to be wary of the threat of terrorism and
aggressive acts in the wake of globalisation and
unipolarity.
With the advent of technology and
increased sophistication of weaponry and systems, the
terrorists now are better equipped with state of the art
weaponry and combat systems.
Hence, it is
imperative for the countries in the region to harness
and capitalise on
advanced technologies in
developing
and
strengthening
their
defence
capabilities and systems to deter the threat of
terrorism and other aggressive acts.
The ASEAN countries must also continue to
strengthen the existing cooperation in the defence
area for sustainable regional stability and peace.
27
2.3.7 Human Resource Development
In terms of manpower resources, there approximately
100,000 personnel in the Malaysian Armed Forces.
Malaysia is in the process of filling in the occupational
gaps in its industrial sectors. Roles played by training
institutes, companies and government agencies are
critical towards the development of skilled manpower in
strategic areas with potentials in the upgrading of
Malaysian military capability. Such capabilities, with
clearly defined and structured programmes, will catapult
the defence industry into new heights. Thus the need to
increase defence competencies among the armed
forces personnel through programmes that are clearly
defined, has become increasingly important.
2.3.8 Supporting Industries
The role of both supporting industries and government
is to provide a conducive business environment for the
development of the defence industry. In terms of
regulatory aspects, Malaysia has still a long way to go
before it can become a serious contender in the global
defence market.
There is a need to promote standardization and
interoperability among the products so as to enable the
vendor to cater certain parts of the products used in the
army, navy and air force.
28
2.3.9
Infrastructure
Supporting infrastructure such as materials technology

development and research institutes focus on defence
products and technology are still lacking in Malaysia. There is
a need to accelerate and develop the capability in producing
strategic materials.
Malaysia needs to blend with foreign expertise for further
development in technological competencies and this needs to
be looked into closely during the purchase of new military
equipment. This can be achieved through close monitoring of
the offset programmes.
Lack of standardization and interoperability exacerbates
logistics and maintenance problems and hence inviting many
players who finally require dependency on foreign experts and
companies.
2.3.10
Newly Emerging Market Players
New competition from emerging defence industrial players

which include but not limited to countries like India, Turkey,
Taiwan, Korea, Singapore, Indonesia, Brazil and South Africa
will have sights towards countries which still depend so much
on third countries in order to refurbish and maintain their
military equipment. In most of these countries, the defence
industries are being nurtured through strategic defence
policies and implementation programmes.
29
2.4 Key Players
The key players in the defence industry can be categorised
according to the sub- sectors as follows:
a) Aerospace
b) Maritime
c) Automotive
d) Weapon and Ammunition Systems
e) Information and Communications Technology
f) Common user
The list of the key players according to the six sub-sectors
above are as in Appendix.
30
31
3.0
3.1
STRATEGIC ANALYSIS OF THE NATIONAL

DEFENCE INDUSTRY
Outline
This section analyzes the competitiveness on the broad

defence industry activities using the Porters Diamond
Model.
3.2
3.2
Competitive Analysis..(contd)
In order to address this situation, we must identify the

key issues faced by the local players and the
government in upgrading the nations competitive
advantage in the defence industry.
3.3
Determinants of National Competitive

Advantage
Competitive Analysis
The defence industry is very much dependent upon the

requirements of the individual nations and the
geographical terrain of the nation. Based on the needs
of these individual countries, the global defence industry
has grown and is now not limited to the superpowers of
the West. A few developing nations have developed the
capabilities to produce the necessary defence
equipments and able to sell them to nations which may
need them.
Using Michael E. Porters Dynamic Diamond, a SWOT

analysis is carried out by examining attributes for the
industry as a whole which Malaysia intends to embark
on. The four corners of the diamond represent the
determinants or attributes which are necessary for
achieving and sustaining competitive advantage in
knowledge intensive industries that form the backbone
of the advanced economies of today. These are
outlined as follows.
In spite of the above, certain quarters of the Malaysian

defence industry capabilities have been promoted to the
international market. Apart from that, the nation imports
almost all military requirements from the West and
Russia.
32
3.3.1
Factor Conditions
Factor conditions refer to the nations ability to deliver

on factors of production such as skilled labour and the
relevant infrastructure deemed necessary to compete in
any given industry. Malaysia possesses an adequate
supply of highly-skilled labour and excellent
infrastructure to support the defence industry.
3.3.2
Demand Conditions
3.3.3
These refer to the presence or absence of suppliers and

related industries that are internationally competitive in
the nation. Industrialisation in Malaysia has resulted in
activities that may be relevant to in the defence
industry. There are various similar products & services
that can be provided by the non-military manufacturers
towards strengthening the development of the defence
industry.
3.3.4
These refer to the nature of demand (domestic and

international) for the industrys products or services.
Though Malaysia herself offers a very small market, the
developing countries should be viewed as the potential
market for Malaysias defence products and services.
Related and Supporting Industries
Firm Strategy, Structure and Rivalry
These refer to the conditions in the nation governing

how companies are created, organised and managed.
It also takes into account the nature of domestic rivalry.
These determinants, both individually and collectively,
provide the contextual structure within which companies
are created and compete for available resources and
skills towards achieving a competitive advantage in any
given industry.
33
3.4
The Defence Industry
It is the vision of the Malaysian Government to have an

efficient and innovative defence industry to support a
knowledge driven Malaysian Armed Forces in fighting
and winning.
In order to achieve such a vision, there is a strong need
to develop an indigenous knowledge based defence
industry to support the Malaysian Armed Forces. The
objective of achieving this vision is driven by three (3)
key defence policy attributes, namely
To develop and enhance the local defence industrial
capabilities;
To achieve self-reliance in defence technology;and
To prepare for global competition in selected niche
areas.
It is identified that in order to enhance the capabilities of
the indigenous defence competencies, the Malaysian
Armed Forces needs to have the following criteria:
The need to have a 10

defence industry.
years Blueprint for the
Upgrading of Local companies to be Prime

Contractors instead of Foreign Contractors for
Defence Equipment Purchase
Preferential treatment to be given to the local
companies
Future requirements of the Armed Forces must be
acquired with the incorporation towards the
development of capabilities of the defence industry
The Defence Industry Blueprint needs to be
incorporated into the coming Malaysian Industrial
Master Plan (IMP) and the Five Year Development
Plan
The need to develop policy guidelines on the
demarcation line for the involvement of local defence
industry in specific areas
Accelerate the pace of the enhancement by
Increasing the local content
Offset and technology acquisition
Smart partnership with technology provider
The need to link the defence industry with the
general industry to cater for both the military and
commercial clients
34
The Defence Facilities Requirements
The products under the 6 sub-sectors of the defence

industry may then be broken down into the roles and
types that they play in the battlefield. The analysis
conducted is on the overall defence industry
requirements and not looking into each sub-sector
defined in the divisions of the Malaysian Armed Forces.
Training
Fixed Wing
Rotary Wing
Recognition
Korvet
Assault Boat
OPV
Carrier
Sub Marine
Figthers
VIP Trans
Logistic
Classification of Defence Facilities Needs

Frigates
As illustrated in Fig. 3.1, the types of platform to carry

the weapons are mainly the land, sea and air types.
ICT is used to integrate the systems used for the land,
sea and air weapons and vehicles whilst logistics form
an essential support for all the three divisions of the
Armed Forces.
Fig 3.1
Light
Arm
Missile
Systems
The defence facilities requirements are as shown in

Figure 3.1. The requirements are very much based
upon the functions of the Malaysian Armed Forces.
Artillery
Systems
3.5
Defence
Facilities
Needs
C4I
Armoured
Bridging and
Recovery
Unmanned
Logistic
Medic
Costume
C4I
Fuel
Storage
Food &
Beverage
SAR
Logistic and
Transportation
35
3.6
A Competitive Analysis of The Defence

Industry
It is important to apply this competitive analysis model

on the defence industry on the whole. At this juncture, it
is not possible to look into sub-sectors and perhaps this
will be looked into closely in the future. The nature of
the products may be applied in some of the sub-sectors
identified in the Second Industrial Master Plan. This can
also be examined in detail later.
The competitive analysis is carried out on the basis of
evaluating Strengths, Weaknesses, Opportunities and
Threats (SWOT) of the various elements/attributes
which determine the competitive advantage of a nation
in a particular industry (with reference to Porters
Diamond).
These elements, to reiterate, are Factor Conditions,
Demand Conditions, Firm Strategy, Structure and
Rivalry and Related and Supporting Activities.
3.6.1
Factor
Conditions
Demand
Conditions
The Defence Industry Competitive Framework - (Based on Blueprint Workshop Report)

Strengths
Weaknesses
Opportunities
Threats
Resource
Human
Development in place
Adaptable and resourceful
work force
Infrastructure ready
Lack of capital
on
foreign
Dependent
product/technology
Human resource not focus
on defence
on
foreign
Dependent
expertise
lack
of
Perceived
confidence by the user
retired
military
Trained
personnel
SMIs not fully utilised
Knowledge workers growing
in numbers
of
Increasing number
graduate in technology
Increase offset requirements
Increase local content
demand
of
Greater
competitive products for
Developing Countries
of
Consolidation
international
defence
company
Low retention of resources
and expertise
Globalisation
Pace of technology
Export restriction
imposed
by
Condition
critical component suppliers
Increasing defence budget

Increase in fleet size
export
quality
Some
products and services
global
Increasing
uncertainties
networking
and
Good
promoting capabilities
Visionary Government
Poor negotiation skills and 5+5 Contractorisation Policy Lack of clear policies to
strategy
protect LDI
Good standing of Malaysia
Fragmented
Lack of unified direction
Lack of clear policies on
Competition with foreign
defence industry
companies
Lack of clear definition of
AFTA
LDI Company
for
foreign
Preference
products
Inadequate policy to protect
interest of LDI
LDI involved at tail end of
procurement exercise
No defined R&D grants
Internal security does not
patronise LDI
perception
on
Foreign
Malaysia
Acquiring proper Transfer of
Technology
Strength
in
other
sectors
Fragmented
Expanding local defence No dedicated players

Related and
such
as
oil
palm, Infancy stage
industry
AFTA / Liberalisation
Supporting
automotive, electronics and Too small in size
sub-contracting Cheaper sub-contracting
More
Industries
canpublication
support themay
defence
All rights
reserved; no partICT
of this
be reproduced,
stored
in a retrieval system,opportunities
or transmitted in any form or by any
sources
R&D
Lack of
industry
means,electronic, mechanical,
photocopying, recording, or
without the prior written permission of Defence Industry Division, Ministry
Lack of capital
otherwise
Firm
Strategy,
Structure,
and Rivalry
36
37
3.7
Observations - Based On SWOT
Based on the analysis, it can be observed that there are

challenges that needs to be addressed in developing a
strong local defence industry. These challenges include:
Specifications should reflect local conditions

and should not follow NATO etc
STRIDE
should
develop
appropriate
specifications suitable for local conditions
Identify sectors, areas and levels of capabilities
High Capital Investment / Lack of Investment

Investment does not guarantee return due to
absence of
long term commitment on
procurement programme
Lack of support from government agencies
There is a need for a close cooperation
between industry and government agencies so
that industry can match its growth/investment
to the needs of the country
Government to facilitate to resolve conflicts
between agents, Local Defence Industry
(LDIs) and OEMs
Tender award
Preferences not given to Local Defence
Industry
Selection process not transparent
Fair competition
Establish database for local industries and

conduct auditing to establish thorough
capabilities and performances
Networking between LDIs
Incentives for LDIs
Import duties exemption for LDI on equipment
/ spares to support defence needs
Government agencies should assist LDIs to
get certification for export
Pioneer status - special consideration for LDIs
Government to give support to sustain LDI in
economic crisis
Close cooperation between user, administrator
and LDI in determining requirements and
providing support
Use procurement as leverage to get industry
to improve
Specification based on specific equipment

rather than functional requirement
38
3.7
Observations - Based On SWOT..(contd)

Improve offset management
Improve procurement procedures (see Figure
3.2)
Government should conduct R&D to establish
the multi use of common items and not
depend entirely on OEMs
Increase Industrial Linkages

LDI should complement each other rather than
compete
Enhance the skills to meet the need of self
reliance
True Local
engineering
Content,
not
screw
driver
Joint development to reduce cost
39
3.8
Current National Procurement Process
The current national procurement process could be further

improved by bringing the industry much earlier on to the
procurement process.
This will enable the local industry to understand the
requirements and proposed a more cost effective and
sustainable approach to fullfill the needs of the Armed
Forces
There is an urgent need to re-examine the current
procurement process in order to have effective
participation of the local defence industry players in it. To
further encourage the development of local initiatives, it is
proposed a Prototyping Stage is to be included in the
National Procurement Process. This is meant to allow a
local defence industry to develop a prototype to a
requirement of the Malaysian Armed Forces for
evaluation purposes. In this manner, the local defence
industry is in a better position to assess the appropriate
technology transfer required as well as making better
estimates of the contract value.
40
Figure
Figure 3.2
3.2 Current
Current National
National procurement
procurement process
process flow
flow
Determine Allocation
Prepare Specifications
Determine Type of Tender
Bumiputera
Open
Tender
Limited
Tender
Direct Negotiation
Get Treasury Approval

Prepare Tender Documents
41
Figure
Figure 3.2
3.2 National
procurement process
process flowcontd
flowcontd
A
Advertise
Open Tender
Evaluate Tender
Prepare Tender Briefs
Tender Board Consideration
Non-Unanimous deliberation of more than RM7
million documented for Treasury approval
Below RM7 million, decided

by Procurement Board
Treasury inform agency of

decision
Implement Decision
B
Figure
Figure 3.2
3.2 National
procurement process
process flowcontd
flowcontd
42
B
If need to negotiate, issue

Letter of Intent
Negotiation Stage
Issue Letter of Acceptance
if offer is accepted
Contractor returning Letter
of Acceptance
Prepare Contract Document
Sign Contract Document
Monitoring/Payment of
Contract
Source: National Procurement Guide Book, Ministry of Finance, Malaysia
43
Figure
Figure 3.3
3.3 Proposed
Proposed Defence
Defence procurement
procurement process
process flow
flow
NATIONAL
NATIONAL OBJECTIVE
OBJECTIVE
DEFENCE
DEFENCE POLICY
POLICY
SELF-RELIANCE
SELF-RELIANCE
MKN
MKN
MINDEF
MINDEF
MALAYSIAN
MALAYSIAN DEFENCE
DEFENCE INDUSTRY
INDUSTRY COUNCIL
COUNCIL
Identify offfset / leveraging &

local content to develop local
defence industries
ARMED
ARMED FORCES
FORCES ++ DEFENCE
DEFENCE INDUSTRY
INDUSTRY
SPECIFICATION
SPECIFICATION
TENDER
TENDER
Source : Local Defence Industry Blueprint Workshop Report, Regency Hotel &
Resort, Port Dickson, 10-12 October 2002 Defenece
44
Figure
Figure 3.3
3.3 Proposed
Proposed Defence
Defence procurement
procurement process
process flow
flow
Inputs from Local Industry
TENDER
TENDER
SPECIFICATION
SPECIFICATION
User
Local Product
Functional Specifications
Local content
Operational Requirements
Technology transfer
Quantity
Work share
TENDER
TENDER
Sub contract
Offsets
AWARD
AWARD
DELIVERY
DELIVERY
AUDIT
AUDIT
Source : Local Defence Industry Blueprint Workshop Report, Regency Hotel &
Resort, Port Dickson, 10-12 October 2002 Defenece
45
46
4.1
Competencies Requirements
In order to enhance competencies for the sustenance of

Malaysias military capability in conflicts, objectives
need to be defined.
The requirements of the Malaysian Armed Forces are
as depicted in Figure 4.1. The Malaysian Armed Forces
defence requirements such as systems, weaponry and
other products and services are mostly met by foreign
supplies.
The situation is more apparent if we breakdown the
competencies further. It can be further broken down to
look in depth of the competencies available in the
country. This will then indicate the competencies that
need to be developed in order to produce Made-InMalaysia products and services.
Since the products used by the Malaysian Armed

Forces are varied in nature and coming from various
technologies, it is logical to look into the maintenance of
these products and hence developing the technological
competencies in-house for the available products. This
is derived from the objective of the defence industry for
the 10 year period.
The experience gained from the maintenance can be
put into use for the development of new products for the
defence industries.
Figure
Figure 4.1
4.1 The
The National
National Defence
Defence Requirement
Requirement
International
Defence
Demands &
Needs
National Defence Demands and Needs
LOCAL PLAYERS
Product Provider
Research & Development
Design
Manufacturer
Assembler
Maintenance
Integrator
Weapons and
Ammunition
Missile
Systems
Light Arms
Launchers
Artillery
Systems
Ammunition
Aerospace
Fixed Wing
fighters &
bombers
interceptors
transport and
logistics
reconnaissance
Rotary Wing
helicopters
Unmanned Aircraft
Vehicles (UAV)
Services Provider
Planning
Analysis
Design
Installation
Integrator
Maritime
Automotive
Assault Boats
Rafts
Hovercrafts
OPV / MPV
Corvettes
Frigates
Carriers
Submarines
Minesweepers
Survey vessels
Armoured Vehicles
Soft-Skin Vehicles
Specialist Vehicles
Heavy Machinery
Vehicles
ICT
Command
Control
Communication
Co-ordination
Intelligence and
Reconnaissance
Platform
management
system
Software
development/
Customisation
Common User
Apparels and Gears
Bio-Medic
Food & Beverages
Storage
Fuels
Parachutes
Defence Industry Needs

47
COMPETENCIES IN MALAYSIAN DEFENCE

INDUSTRY (COMPETENCY MATRIX)
Maritime
48
SURFACE COMBATANT - PLATFORM

Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
N/A
N/A
2010
L-M
N-S
N/A
N/A
2020
N/A
N/A
Current
2010
N-L
N-L
N-L
M-S
L-M
M-S
2020
Current
2010
L-M
L-M
L-M
S-H
S-H
2020
Current
2010
L-M
L-M
L-M
S-H
S-H
S-H
2020
Current
2010
L-M
L-M
L-M
S-H
L-M
L-M
2020
Item
Structure
Propulsion
System
Electrical
System
Auxiliary
IPMS
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A -Not Available
Maritime (contd)
(SURFACE COMBATANT-COMBAT SUITE)
Element
49
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
2010
N-L
N-L
N-L
M-S
L-M
L-M
2020
Current
2010
N-L
N-L
N-L
M-S
L-M
L-M
2020
Current
2010
N-L
N-L
N-L
L-M
L-M
L-M
2020
Current
2010
N-L
N-L
N-L
L-M
2020
Current
2010
N-L
N-L
N-L
L-M
L-M
N-L
2020
Item
Integrated
Navigation
System
Integrated
Communication
System
Weapons Fire
Control System
Weapons
Electronic
Warfare
Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Maritime (contd)
(SUBMARINE-PLATFORM)
Element
50
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
2010
N/A
N/A
2020
N/A
N/A
2010
2020
2010
2020
2010
2020
2010
2020
Item
Current
Structure
Current
Propulsion
System
Current
Electrical
System
Current
Auxiliary
Current
IPMS
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Maritime (contd)
51
(SUBMARINE-COMBAT SUITE)
Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
2010
2020
2010
2020
2010
2020
2010
2020
2010
2020
Item
Current
Integrated
Navigation
System
Integrated
Communication
System
Weapons Fire
Control System
Periscope Sonar
Current
Current
Current
Weapons
Current
Electronic
Warfare
Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Weapons & Ammunitions

52
Element
R&D
DESIGN
MANUFACTURING
ASSEMBLY
INTEGRATION
MAINTENANCE
REFURBISHMENT/
Item
UPGRADE
Small Arm
Current
Weapon
2010
2020
Medium Calibre
Current
Weapon/
2010
Cannon/Mortar
2020
Large Calibre
Current
Cannon/Guns/
2010
Mortar
2020
Fire Control
Current
System for
2010
Cannon/Guns
2020
Small Arm
Current
Ammunition
2010
2020
Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not
Available
Weapons & Ammunitions (contd)

Element
R&D
DESIGN
MANUFACTURING
ASSEMBLY
53
INTEGRATION
MAINTENANCE
REFURBISHMENT/
Item
Medium
Calibre
Ammunition
Large Calibre
Ammunition
Components
for
Ammunition
Guided
Weapons
System
Note: N-None
Available
UPGRADE
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not
A VEHICLE (WHEELED + TRACK)
Automotive
Element
Transmission
Suspension
Hull
Track
Turret
* Note: N-None
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
system
equipment
system
system
equipment
system
equipment
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
N/A
2010
N/A
2020
N/A
Current
N/A
2010
N/A
2020
N/A
Current
2010
2020
Item
Power Train
R&D
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
54
Automotive
55
A VEHICLE (WHEELED + TRACK) (.contd)

R&D
DESIG
N
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
system
system
equipment
system
equipment
system
equipment
Current
2010
2020
Current
2010
2020
Current
N/A
2010
N/A
2020
N/A
Current
2010
2020
Current
2010
2020
Elemen
t
Item
Fire Control
System
Weapon System
Tyres / Wheel
Communication
Add On System
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Automotive
56
B VEHICLE
Element
Power
Transmission
Suspension
Note: N-None L-Low
N/A-Not Available
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
system
equipment
system
system
equipment
system
equipment
Current
N/A
2010
N/A
2020
N/A
Current
2010
2020
Current
2010
2020
Current
2010
2020
Item
Chassis
R&D
S-Sufficient
M-Medium
H-High
Automotive
57
B VEHICLE (.contd)
R&D
DESIG
N
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
system
system
equipment
system
equipment
system
equipment
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
N/A
N/A
N/A
2010
N/A
N/A
N/A
2020
N/A
N/A
N/A
Element
Item
Electronic /
Electrical
Instrumentation
Body
Add On Systems
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Aerospace
58
AIRCRAFT
Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Item
Structure
Avionics
Electronic
Warfare
Simulator
Note: N-None L-Low S-Sufficient

N/A-Not Available
M-Medium
H-High
Aerospace (contd)
59
AIRCRAFT
Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Item
Weapon Fire
Control
System
Electrical
System
Ground
Support
System
Integrated
Navigational
System
Note: N-None L-Low S-Sufficient

N/A-Not Available
M-Medium
H-High
Aerospace (contd)
60
GROUND ELECTRONIC DEFENSE SYSTEM

Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Item
Radar
System
Radio
System
Navigational
Aids
Auxiliary
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Aerospace (contd)
61
SATELLITE
Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Item
Structure
Electrical
system
Control
System
Payload
Bus/Platfor
m
* Note: N-None
L-Low
S-Sufficient
M-Medium
H-High
N/A-Not Available
Information and Communication Technology (ICT)

62
Element
R&D
DESIGN
MANUFACTURING
MAINTENANCE
INTEGRATION
ASSEMBLY
(system)
(system)
(equipment)
(system equipment)
(system)
(equipment)
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
2010
2020
Current
N/A
N/A
N/A
N/A
N/A
N/A
2010
N/A
N/A
N/A
N/A
N/A
N/A
2020
N/A
N/A
N/A
N/A
N/A
N/A
L-Low
S-Sufficient
Item
Integrated
Comms
System
Combat
Managemen
t System
Electronic
Warfare
IPMS
Simulator
* Note: N-None
M-Medium
H-High
N/A-Not Available
63
4.2
Current Available Competencies
From the summary of competencies available in the

country, it looks as though the defence industry is ready
to support the Malaysian Armed Forces. This situation
portrays the general outlook of the competencies of the
suppliers to the Ministry of Defence. It is an indication of
capabilities available but upon closer look, most of
these companies are basically manufacturers and
assemblers of components. The capabilities portrayed
in the summary are capabilities pertaining to the
production of light aircraft, light patrol boats, light
weapon systems.
There is a lot of work need to be done to increase the

capability of the Malaysian companies to produce
defence products and services according to the required
standards and specifications
The capabilities to produce the final products are not

readily available in the country for many defence
product sectors. This is the reason why Malaysian
companies are still dependent on foreign suppliers to
provide the sub-components of major parts of the final
product.
Hence there is a need to do a micro study on the
competencies of the products produced by Malaysian
companies. From here, it is then possible to look at the
competencies required to do heavy weight products,
capable of defending the nation based on user
requirements.
64
4.3
Supporting Industry Requirements
The development of core industries depends heavily on

the availability of supporting industries. The role of these
supporting industries is to be the recipient of the
outsourcing programme by the core industries. No
single company can manufacture all items required in
producing a product.
In the development of the local defence industry, the
core industries may come from the foreign suppliers.
Nevertheless, the offset programme should go to the
local supporting industries with close cooperation from
the foreign suppliers. This is to promote the local
supporting industries to become vendors for other
markets.
Close working relationship from the foreign suppliers is
essential in ensuring the successful implementation of
the offset programme by local supporting industries. As
shown in Table 4.1 only 24% of the local supporting
industries receiving the offset programme in 1990-2000
have completed the offsets.
Table 4.1 Offset Programmes

Total Number of Procurements From
1990 - 2000
30
Total Number of Offsets Generated
230
Completed
55
Unaccounted
81
No response
94
Note : No response was due to companies having

closed down, merge and unavailability of
information
Source: Survey Response, Study on Offset Programme of the National
Defence Procurement by MiGHT ( March 2002)
From Table 4.1, it can be inferred that the risk in the

implementation of the offset programme by local
companies could be mitigated through close linkages
with foreign suppliers.
65
Figure
Figure 4.2
4.2 Supporting
Supporting Industries
Industries for
for Defence
Defence Products
Products
Electronics
Electronics &
& Electrical
Electrical Industry
Industry
Food
Food Based
Based Industry
Industry
Transport
Transport Industry
Industry
ICT
WEAPONS
AEROSPACE
AUTOMOTIVE
COMMON USER
MARITIME
HUMAN RESOURCE
Natural Resources
Based Industry
LOGISTICS
Petro-Chemical
Industry
DEFENCE INDUSTRY
Telecommunication
Telecommunication Industry
Industry
Education
Education Industry:
Industry:
Formal
Formal
Non-Formal
Non-Formal
Training
Training Institutes
Institutes
Textile
Textile &
& Apparel
Apparel Industry
Industry
Machinery
Machinery &
& Equipment
Equipment Industry
Industry
Materials
Materials Industry
Industry
66
PART E
THRUST AREAS AND INITIATIVES
67
5.0
Introduction
The primary purpose of the Blueprint is to guide the

development of the Malaysian Defence Industry, into a
strong and reliable economic sector that is able to
provide strategic support in sustaining the defence
capability of the nation at all times.
Thrust Area 2
Technology
Development
Figure 5.1 illustrates the framework in developing the

industry through this Blueprint. Five key thrust areas
have been identified for the Blueprint.
Thrust Area 1
Human Resource
and Competency
Development
This covers issues and actions

related to the development of
basic
and
strategic
competencies for the industry.
The primary factor required for
competencies development is
Human
Resource.
Human
Resources
Development
is
central towards competency
development.
Thrust Area 3
Industry
Development
Technology is strategic in
developing a strong national
defence. The ability to develop
and deploy technology is critical
for the Armed Forces. The
industry must continue to
upgrade
technology
either
through R & D or Technology
Acquisition / Transfer.
Only
with
the
available
competency and technology, the
Malaysian Defence Industry can
grow. The Malaysian Armed
Forces requirement cannot be
established primarily for the
development of the industry and
at the expense of national
security.
It has to move in sync with each
other. The industry must invest
in the best to give the best to the
nations defence forces.
68
Thrust Area 4
Domestic
Defence
Procurement
Thrust Area 5
International
Marketing
The
National
Defence
Procurement
Policy must
provide greater avenue and
preferences to local defence
contractors in awarding the
tender and local defence
contractors to be allowed to be
involved in determining major
defence requirements. This will
make it obligatory for OEMs to
transfer related technology and
capability to the local players.
The local defence experience
could be extended to other
nations. Malaysian Defence
Industry should tap on the global
defence spending. This will
provide a good base for the
industry
to
develop
its
technology
and
business
capability.
Figure 5.1
NATIONAL SELFRELIANCE
69
STRONG LOCAL
DEFENCE INDUSTRY
DOMESTIC DEFENCE
PROCUREMENT
INDUSTRY
DEVELOPMENT
INTERNATIONAL
MARKETING
TECHNOLOGY
DEVELOPMENT
HR & COMPETENCY
DEVELOPMENT
DRIVERS FOR GROWTH

70
5.1
Issues and recommendations

5.1.3 Industry Development
5.1.1 Human Resource and Competency

Development
The issues related to Human Resource and
Competency Development for the Defence Industry
include:
Lack of technical capabilities
Lack of technologists & engineers in the Weapons and
Systems;
Lack of focus by human resource development on
defence industry needs;
Lack of knowledge workers in the defence industry;
Lack of capitalization by Defence Industry on manpower
potential from the pool of trained military personnel and
trainable human resources.
The issues related to Industry Development for the

Defence Industry include:
Fast pace of technological development
- Local Defence Industry and support services are not in
tandem with acquisition
Small number of competent producers / manufacturers
(generally still consumer based)
Fragmented players / industry
Lack of support from government agencies
Insufficient vendor development
Internal security does not patronise LDI
No dedicated policy and direction to support development
of LDI
High capital investment
Uncertain return on investments
5.1.2 Technology Development

The issues on Technology Development are as follows:
Lack of Research and Development
Offset programme
- level of technology transfer and capability development
of local companies.
No R& D grant allocated for Defence Industry
Limited funding on research and development
71
5.1.4 Domestic Defence Procurement
The issues related to Domestic Defence Procurement
include:
Rigid specifications
Over dependence on foreign OEMs
Lack of standardisation
Inadequate policy to protect interest of LDI
5 + 5 Contractorisation
Lack of support for Defence Industry Development by
procurement system.
- LDI is at tail end of procurement exercise
- Controlling of supply chain
- supplies of spare parts are often given to agents
5.2
Thrust areas and initiatives
From the FIVE thrust areas, key issues are

identified for further action. Key initiatives are then
established from the key issues that have been
selected
5.1.5 International Marketing

The issues related to International Marketing include:
Only some companies are able to export quality products
and services.
Competition
- Open Market - Globalisation, AFTA
- Regional players
- Foreign companies
- Government owned companies
Poor negotiation skill and strategy
5.2
72
Thrust areas and initiatives
5.2.1
THRUST AREA 1
HUMAN RESOURCE AND COMPETENCY
DEVELOPMENT
ISSUE 1
The Malaysian Armed Forces has various categories of
equipment that fall under the various sectors of IMP2.
For example, defence transportation equipment has
similarities in terms of applications and functions with
the transportation equipment under the cluster of IMP2
which covers equipment for use on land, sea and air.
With such similarities, it is possible to analyze and
derive products, technology and competencies required
for meeting the needs of the Malaysian Armed Forces.
The competencies identified can be mapped along the
manufacturing value chain and this will then facilitate the
identification of lead players and the supporting
industries for the production of such equipment.
Key Initiative I
To develop competencies in defence industry in
particular aerospace, maritime, automotive, weapon and
ICT through the more effective management of offset
programmes
It is recommended that the offset programme for future

acquisitions of defence equipment shall be based on
competencies of local defence industry and the
identification of local companies having such
competencies be intensified. Thus, the identified lead
industrial player and its related supporting players be
invited to participate in receiving the offset technology
and competencies
ISSUE 2
Development of competencies means the need to train more
people in specific areas. The defence industry should continue to
enhance skills, knowledge, resources and other assets in keeping
up with the nations strategic needs and regional realities within the
specified time frame. There is a need to promote skills in areas
that cover the competencies along the value chain. These include:
competencies in the R&D for the land, sea and air applications;
competencies in the design of the military hardware and
equipment required on land, sea and air;
competencies in the manufacturing of the product and product
components;
competencies in the assembly of such products and
components; and
competencies in the marketing of such products.
The participation of universities, skill training and development
centres is crucial in ensuring the successful implementation of skill
and competency development programmes. These development
programmmes need to be well co-ordinated to ensure that those
programmes are inter-linked and complement each other rather
than competing with each other.
The development of human resource on defence technologies will
require specialised training facilities at skill training centres and
universities. Among areas of human resource development in
defence technologies are on in depth knowledge of defence and
weapon systems, new explosion capacity, lighter and more
efficient firing systems, ballistics and new materials technology.
Such knowledge and skill development are not readily available in
the local training centres and universities.
73
New faculties need to be introduced in the local
universities particularly in the research and design
capabilities in defence products and equipment and the
skills training centres should focus on the production
techniques.
Activities mentioned under human resource development
will thus increase the linkages between MINDEF and the
local universities, colleges and the skills training centres.
Key Initiative 2
To develop a cohesive and comprehensive defence
industry human resource development programme to
ensure sustainability in competency development,
capacity and capability building
Key Initiative 3
To effectively draw upon the pool of trained military
personnel leaving the Armed Forces with attractive
remuneration packages
5.2.2
THRUST AREA 2
TECHNOLOGY DEVELOPMENT
ISSUE 3
The development of core competencies and strategic
technologies should be supported by intensive and
continuous R&D initiatives. The government has to commit,
initiate and promote dedicated long term R&D programme
related to defence industry in the areas of product and
application development.
Dedicated R&D programmes may be undertaken by the
public or the private sector. It has to be co-ordinated and
closely monitored by Malaysian Defence Industry Council
(MDIC) and Science and Technology Research Institute for
Defence (STRIDE).
The development for R&D should also include training the
industry personnel at the suppliers design and training
centres. The emphasis of such training should be on
design competency to enable those industrial personnel to
produce design concepts and prepare coherent blueprint of
the final product prior to manufacturing.
MINDEF should be a key player in the promotion of
defence industry technologies. The promotion of such
technologies by MINDEF can be undertaken by joint
collaboration
in research related activities between
STRIDE, local / foreign universities and renowned and
established
defence research and development
laboratories.
74
Contracts on defence research and development should be
awarded to the appropriate parties. In line with the spirit of the
New Development Policy, preference should be given to R & D
company, organisation or institution with majority Bumiputera
equity ownership and participation. Research and development
on defence products, equipment and systems should focus on
technologies pertaining to new defence platforms for air, land
and sea, electronics warfare systems and weaponry. The
promotion of defence industry technologies shall entail the
setting up of technology bank and database by STRIDE which
may include information on defence technologies , technology
providers and transfer of technology activities.
Key Initiative 4
To establish comprehensive, well coordinated and dedicated
long term R & D programmes and to promote the development
of defence industry technologies through joint collaboration
between STRIDE, local/foreign universities and renowned
defence R & D laboratories as well as the need to establish a
technology bank and database by STRIDE
Key Initiative 5
To allocate dedicated and sufficient funding for R & D activities
by both the Government and Malaysian Defence Industry
companies
ISSUE 4
ISSUE 5
The acquisitions of the defence products and equipment

are relatively costly affairs. Hence, there is a need to
consider various and affordable modes of payment for
such acquisitions.
75
New strategic technology acquisition means the need to have

the right infrastructure which includes the readiness of the
followings:
Skill for new technologies;
Core players;
Malaysia is rich in natural resources and one of the

alternative initiatives of acquiring defence products and
equipment is through a counter trade arrangement.
Malaysia should utilise her rich natural resources to
trade for defence products and equipment, besides the
direct
offset
programmes.
This
countertrade
arrangement should also include any purchasing of
services from any foreign countries.
Supporting industries to support technologies;

Incentives;
Market;
Financial assistance; and
Assistance from government agencies.
It takes some time for these to be put in place. However, the
technology component has to come in first before other
components such as human resource development,
incentives, market, financial assistance and government
assistance.
Key Initiative 6
Key Initiative 8
To determine and negotiate more effective offset

programmes for technology transfer to Malaysian
Defence Industry
To step-up investments in the development of support

facilities and infrastructure for new strategic technology
acquisition/capital assets
Key Initiative 7
Key Initiative 9
To encourage Malaysian Defence Industry companies to

enter into smart partnerships/collaborations/alliances
with overseas technology partners
To promote technological development through the hosting

and participation of international defence exhibitions and
seminars
76
5.2.3
THRUST AREA 3
INDUSTRY DEVELOPMENT
ISSUE 6
Defence industry in Malaysia is at the early stage of
growth. Most of the defence requirements are met by
foreign suppliers. There is a need to increase the local
contents and add value to the defence equipment used
in Malaysia for strategic purposes. This will render the
country from being too dependent on foreign equipment
and spare parts.
Malaysian Armed Forces is a ready market for the
defence products manufactured by the local companies.
There is a certain form of return on investment for
companies to venture into defence industry. Various
offset programmes have been initiated by the
government to spearhead and support the development
of local capability in the defence industry. Close
monitoring and co-ordination is required in order to
achieve self-reliance capabilities of defence industry.
This can be achieved by identifying sectors, areas and
levels of capabilities through
A good governing body and strong capabilities are key

pre-requisites for the local defence companies to align
their capabilities and competencies to meet the Armed
Forces requirements. A good governing body is also
required to oversee the industry and act where
necessary. This include imposing a penalty for failure or
on errant contractors, preventing duplication of
specialisation, rewarding those who are good and
promoting healthy competition among the players
A close cooperation and continuous dialogue between
the Government and the local defence industry is very
important as for the users to upgrade their knowledge
and awareness on what the local defence industry could
offer.
Key Initiative 10
To enhance and develop in-country capability and
expertise in defence industry to achieve self-reliance in
line with the National Defence Policy, the Second
Industrial Master Plan (IMP2), the Third Outline
Perspective Plan, Privatisation, Contractorisation and
other Government policies
Establishing database for local industries and conduct

auditing to establish thorough capabilities and
performances; and
Networking between LDI companies.
77
ISSUE 7
ISSUE 8
Defence industry needs to be recognised as an industry

by itself and be classified as a sector of strategic
importance, similar to those mentioned in the Second
Industrial Master Plan (IMP2).
Malaysian defence hardware and software depend

heavily on foreign products and services. Currently the
nation still purchase equipment from overseas. The
purchase of such defence hardware and software is
costing the nation billions of Ringgit. Proper coordination
is essential in ensuring successful transfer of technology
to local defence industry players.
Key Initiative 11
To recognise and classify Malaysian Defence Industry
as a sector and incorporate it as part of the existing
Industry Working Groups and Task Force under the
IMP2
There is a need to capitalise on such acquisitions in the

development of the local defence hardware
manufacturers and their supporting vendors. Through a
proper technology transfer process we can increase our
competency and therefore reducing our foreign supply
and support services for defence equipment.
Key Initiative 12
To encourage partnerships with foreign contractors in
developing products and services for the defence and
security forces. This will also facilitate in the inward
flow of foreign direct investment
78
ISSUE 9
Defence industry covers a wide area of applications.
This industry would also cover the application for nondefence products and equipment on land, sea and air.
These products and equipment can be further classified
into technologies and competencies that can be applied
to produce certain components required for applications
covering all sectors of the defence industry. One such
application may be on the electronics warfare system or
the usage of radar for any defence application either on
land, sea or air.
The areas identified by the government under the

contractorisation programme should be used as
reference for the industrys competency development
and specialisation. Local companies must complement
each other and avoid duplication of activities, thus
avoiding unhealthy competition among themselves. The
specialisation based on core competency will ensure
greater focus and accelerate the process of self reliant.
There is a dire need to classify the defence industry into

clusters as identified in IMP2. This would require
specialisation by core manufacturers for each of the
sectors of the local defence industry such that one of
the core manufacturers could be a lead player while
others could be vendors. Thus, duplication of activities
by the core manufacturers could be avoided. Hence,
production costs incurred by these manufacturers could
render to be effective, in terms of investment amount
and time.
To structure Malaysian Defence Industry by areas of

specialisation
Key Initiative 13
79
ISSUE 10
The large investment requirements towards developing
the defence industry is too much a cost to be borne by
local industry players alone. The materials used in
defence industry are not similar to that used in the nonmilitary environment. Apart from the materials used, the
robustness and the endurance of the material used also
need consideration. All these adds up to more reliable
and robust production processes.
So there is a need to formulate a new incentives for
those involved in defence industry. The incentives
formulated need to take into account of existing industry
players as well new players but already involved in
producing of non-military products and have been in the
non-military market for sometime.
The incentives should also cover import of raw materials
since Malaysia do not produce the raw materials
required for the defence industry. It has to be noted that
current incentives given to manufacturers are for the
imports of finished products as part of the final product
(outsourcing components) and do not include the
importation of raw materials.
Other incentives identified include:

Import duties exemption for LDI on equipment /
spares to support defence needs
Government agencies should assist LDIs to get
certification for export
Pioneer status - special consideration for LDIs
Government to give support to sustain LDI in
economic crisis
Close cooperation between user, administrator and
LDI in determining requirements and providing
support
Use procurement as leverage to get industry to
improve
The establishment of research and development
grant for the purpose of continuing development
work in the ICT areas but not limited to the
involvement of STRIDE.
Key Initiative 14
To provide special incentives for Malaysian Defence
Industry in developing local defence products and
services
80
5.2.4
THRUST AREA 4
DOMESTIC DEFENCE PROCUREMENT
ISSUE 11
Defence technology acquisition programmes should
serve the purpose of industrialising the local defence
Industry through systematic acquisition of specific
knowledge and technologies. This requires the
involvement of all parties concerned including:
End-users;
Coordinating bodies;
Government of Malaysia;
R&D Institutions particularly STRIDE;
Universities;
Skill development centres;
Industry players;and
Financial institutions.
The involvement of these players is to ensure any of

the new technologies to be acquired may require
new development in each of the specialised areas.
In this regard, MDIC has to be a moderator in
ensuring all parties concerned are fully aware of the
implications and requirement of the new
technologies.
Defence procurement is part of the national

procurement policy, therefore it would always take
into consideration to :
Develop and encourage the development of

local industries;
Encourage and to give priority to the

involvement of Bumiputera owned and
controlled companies;
Enhance local institutional and industrial

capability through knowledge and technology
transfer;
To further utilise local service sector;
Achieve economic growth, as a tool for

fulfilling the objectives of socio-economic
development;
Fulfill the procedures and requirements of

government procurement;
To always be in line with the terms and

conditions imposed on all agreements related
to privatisation and concession, by the
Government;
81
To be line with guideline by the Ministry of

Finance related to procurement for national
defence.
In addition to this, agencies related to industrial

development should be involved in helping the industry
players in the national procurement agenda for the
defence
The acquisition of new technologies means there is a
need to consider issues pertaining to the technology
acquisitions such as transfer of technologies, capability
and competency development, enterprise development,
mode of payment and financial aid to the enterprise.
Opportunities in projects must be given to local
contractors with maximum local contents, where
possible. This is to ensure that the country has an
adequate level of self sufficiency and self reliant.
Foreign partners and organisations should only be
limited to areas and competency not available in the
country.
Figure 5.2 shows the defence technology acquisition

and its implications to the defence industry players in
the country.
Key Initiative 15
To involve and increase the participation of all parties
concerned in the procurement planning and decision
making processes to ensure smart defence
procurement
Key Initiative 16
To introduce new initiatives on procurement
processes such as Long Term Contracts (5+3+2),
Public Private Partnerships (PPP) and Private
Finance Initiatives (PFI)
82
ISSUE 12
Involvement of Stakeholders in the Acquisition Process
Improving the Bidding and Selection Process
The acquisitions of new defence products and

equipment for the Malaysian Armed Forces are the
responsibilities of all the parties concerned, in particular
the Government of Malaysia through MINDEF, defence
industry companies, skill training institutes and financial
institutions. In this respect, these parties are to assist in
formulating appropriate procurement planning to ensure
that the nation is ready for any acquisition or placement
of any new technology pertaining to defence.
The existing bidding process of technology acquisition for

defence products and equipment in Malaysia is relatively
a long process. This bidding process could continue to
maintain its relevancy should the inputs towards the
selection process with respect to any acquisition of
defence products and equipment as proposed by the
bidders be professionally evaluated. Therefore, there is a
need to develop
a professional selection process
methodology that can quantify and justify a qualitative and
superior technology acquisition approach for defence
products and equipment for the Malaysian Armed Forces.
In ensuring any smooth technology acquisition for

defence products and equipment and in line with the
requirements for self-reliance, there is a need for closer
involvement among all the parties concerned in the
procurement planning and decision making process. All
the parties as mentioned above are stakeholders for
such acquisition and they are strategic partners to the
local defence industry.
83
Realignment of Procurement Activities and Strategic
Goals
In order to be self-reliance on the defence
capabilities, the Government of Malaysia had
undertaken a numbers of procurement exercises
through
various
countertrade
and
offset
programmes. Under these programmes, the
government encourage the local defence companies
to develop technological capabilities in defence
which could acquired from foreign counterparts,
rather than undertakes procurement exercise per se.
Currently the technological capabilities in defence,
acquired by the local defence companies are not in
tandem with the acquisition of products and
equipment by the Malaysian Armed Forces.
There is a dire
need to realign the existing
countertrade and offset procurement activities with
strategic goals of the nation to ensure continuos
development of capabilities in related defence
technologies and competencies.
Preferential Treatment to Bumiputera Companies

In line with the spirit of National Development Policy,
the selection process encourage the involvement of
Bumiputera companies given that the companies fulfil
the technical specifications, pricing requirements and
other relevant government requirements. This will help
the Bumiputera companies to participate in the
development local defence industry.
Key Initiative 17
To improve acquisition of platforms, weapon systems
and various solutions by focusing on product life cycle
management and codification
5.2.5
84
THRUST AREA 5
INTERNATIONAL MARKETING
ISSUE 13
Key Initiative 20
The market for local defence products should be further
expanded into non traditional defence market. Present
capabilities in production, manufacturing and marketing of the
defence products and equipment should be further enhanced in
order to increase the competitiveness of local defence products
and equipment in the international market. The Government
should assist the local players to expand their market coverage
through Government to Government networking and
arrangement.
To leverage bilateral defence meetings to promote

Malaysian products and services
Key Initiative 21
To effectively utilise the office of Malaysian Defence
Attaches and MATRADE to promote Malaysian
products and services
Key Initiative 18
Key Initiative 22
To upgrade present Malaysian Defence Industry capabilities

to international standards so as to ensure that the products
and services meet the needs of overseas customers
To develop a comprehensive directory of Malaysian

products and services for effective international
marketing
Key Initiative 23
Key Initiative 19
To promote Malaysian products and services through
participation in international defence exhibitions
To restructure the Defence Industry Division to take

on the role of promoting Malaysian products and
services abroad such as is the case of DESO, UK
FRAMEWORK
FRAMEWORK FOR
FOR TECHNOLOGY
TECHNOLOGY ACQUISITION
ACQUISITION
IN
IN GOVERNMENT
GOVERNMENT PROCUREMENT
PROCUREMENT
Figure 5.3
85
KEY SECTORS
( TECHNOLOGY INTENSIVE )
Aerospace
Automotive
Health
Education
TECH. DEV.
POLICIES &
GUIDELINES
S & T Policy
Industrial & Tech.
Policies
IRPA
Industrial Master
Plan
Blueprint ( various )
TECHNOLOGY
NEEDS
Agriculture
Marine
Transportation
STAKEHOLDERS
Platform Technologies
Companies
System Integration
Universities
Advanced Material
Adv. Manufacturing
Research
Institutions
Molecular
MTDC
Nanotechnology
others
EPU
Treasury
TDA
MiGHT
Other
Ministries
TARGET
PROCUREMENT
Transportation
Resource Based
Agro-Based
Machinery
Equipment
DEV. &
BUDGET PLANS
Malaysia Plan
Outline Perspective
Plan
Annual Budget
Chemicals
Photonic
etc.
Administering &
Implementing
Ministry
ACADEMIA
R&D
INSTITUTIONS
BENEFICIARIES
OEMs
Source : MiGHT, Study on Offset

Programmes of the National Defence
Procurement , March 2002
86
PART F
SUMMARY OF THRUST STATEMENTS AND
KEY INITIATIVES
87
SUMMARY
SUMMARY OF
OF THRUST
THRUST STATEMENTS
STATEMENTS AND
AND KEY
KEY INITIATIVE
INITIATIVE
OBJECTIVE
The Defence Industry Blueprint is aimed at :

to provide an overview of the Malaysian Defence Industry;
to provide guidelines for the development of local defence Industry;
to prioritize strategic technology areas of focus to catalyze the defence industry
development and capability building; and
as a reference to all various entities and stakeholders of local defence industry
88
To
spearhead the sustainable development of
Local Defence
Industry, the government, stakeholders and players have identified

FIVE
Strategic Thrust areas, supported by Twenty-three Key
Initiatives.
RECOMMENDATIONS
89
THRUST & KEY INITIATIVES Human Resource
THRUST AREA I
Human Resource and
Competency Development
A comprehensive and cohesive human resource

development plan to build critical competencies for
the Malaysian Defence Industry is crucial in ensuring
the industrys ability to carry out its role in the nations
defence
Key Initiative 1
To develop competencies in defence industry in particular

aerospace, maritime, automotive, weapon and ICT
through the more effective management of offset
programmes
Key Initiative 2
To develop a cohesive and comprehensive defence

industry human resource development programme to
ensure sustainability in competency development, capacity
and capability building
Key Initiative 3
To effectively draw upon the pool of trained military/security

personnel leaving the Armed Forces/Security Forces with
attractive remuneration packages
THRUST & INITIATIVES Technology Development

THRUST AREA 2
Technology Development
Key Initiative 4
To ensure that Malaysian Defence Industry has continuous 90

access to the state-of-the-art technology for the use of the
Malaysian Armed Forces. For this purpose, a comprehensive
program to acquire technological capability either through
indigenous development or technology transfer from foreign
partners including international collaboration, should be clearly
identified and strictly monitored to ensure success
To establish comprehensive, well coordinated and dedicated long

term R & D programmes and to promote the development of defence
industry technologies through joint collaboration between STRIDE,
local/foreign universities and renowned defence R & D laboratories as
well as the need to establish a technology bank and database by
STRIDE
Key Initiative 5
To allocate dedicated and sufficient funding for R & D activities by

both the Government and Malaysian Defence Industry companies
Key Initiative 6
To determine and negotiate more effective offset programmes for

technology transfer to Malaysian Defence Industry
Key Initiative 7
To encourage Malaysian Defence Industry companies to enter into

smart partnerships/collaborations/alliances with overseas technology
partners
Key Initiative 8
To step-up investments in the development of support facilities and

infrastructure for new strategic technology acquisition/capital assets
Key Initiative 9
To promote technological development through the hosting and
participation of international defence exhibitions and seminars
THRUST & INITIATIVES Industry Development

91
THRUST AREA 3
Industry Development
To ensure the nation is focussed and committed in

developing a credible domestic defence industry for
achieving national self-reliance
Key Initiative 10
To enhance and develop in-country capability and expertise

in defence industry to achieve self-reliance in line with the
National Defence Policy, the Second Industrial Master Plan
(IMP2), the Third Outline Perspective Plan, Privatisation,
Contractorisation and other Government policies
Key Initiative 11
To recognise and classify Malaysian Defence Industry as a

sector and incorporate it as part of the existing Industry
Working Groups and Task Force under the IMP2
Key Initiative 12
Key Initiative 13
To encourage partnerships with foreign contractors in

developing products and services for the defence and
security forces. This will also facilitate in the inward flow of
foreign direct investment
To structure Malaysian Defence Industry by areas of
specialisation
To provide special incentives for Malaysian Defence Industry

All rights reserved; no part of this publication may be reproduced, stored
in a retrieval system,
or transmitted
in any and
form services
or by any
in developing
local defence
products
Key Initiative 14
THRUST & INITIATIVES Domestic Defence Procurement92

THRUST AREA 4
Domestic Defence
Procurement
Key Initiative 15
The domestic defence procurement process must be

leveraged as a strategic tool in acquiring strategic
technologies as well as in the development of
Malaysian Defence Industry
To involve and increase the participation of all parties

concerned in the procurement planning and decision
making processes to ensure smart defence procurement
Key Initiative 16
To introduce new initiatives on procurement processes such

as Long Term Contracts (5+3+2), Public Private
Partnerships (PPP) and Private Finance Initiatives (PFI)
Key Initiative 17
To improve acquisition of platforms, weapon systems and

various solutions by focusing on product life cycle
management and codification
THRUST & INITIATIVES International Marketing

THRUST AREA 5
International Marketing
To ensure that Malaysian Defence Industry becomes a

truly global player, the issues of international
standards and competing in the international
marketplace has to be addressed
Key Initiative 18
To upgrade present Malaysian Defence Industry capabilities

to international standards so as to ensure that the products
and services meet the needs of overseas customers
Key Initiative 19
To promote Malaysian products and services through

participation in international defence exhibitions
Key Initiative 20
To leverage bilateral defence

Malaysian products and services
Key Initiative 21
To effectively utilise the office of Malaysian Defence

Attaches and MATRADE to promote Malaysian products and
services
Key Initiative 22
To develop a comprehensive directory of Malaysian products

and services for effective international marketing
meetings
to
promote
To restructure the Defence Industry Division to take on the

role
promoting
products
and
abroad
All rights reserved; no part of this publication may be reproduced, stored
in aof
retrieval
system,Malaysian
or transmitted
in any form
or byservices
any
means,electronic, mechanical, photocopying, recording, or otherwise without
the
prior
written
permission
of
Defence
Industry
Division,
Ministry
such as is the case of DESO, UK
Key Initiative 23
93
94
References
1. Local Defence Industry Blueprint Workshop Report, Regency Hotel & Resort, Port Dickson,
10-12 October 2002
2. Piloting The Aerospace Industry Take-Off, Blueprint for The Malaysian Aerospace Industry,
Malaysian Industry-Government Group for High Technology (MiGHT), December 1996.
3. Economic Report 2002 / 2003, Ministry Of Finance, 20 September 2002
4. Bulletin, Majlis Industri Pertahanan Malaysia, volume 2/2001, June 2001
5. System Analysis and Design Methods, Fourth Edition, Jeffrey L. Whitten, Lonnie D. Bentley , 1998
6. Study on Offset Programme of the National Defence Procurement by MiGHT ( March 2002)
7. Automotive Technology Competencies Programme, Perkhidmatan Rundingan Industri Malaysia
(PRIMA), November 2001
8. Countertrade Gap Analysis Report,Johan J van Dyk, September 2002
95
Published by Defence Industry Division,

Ministry of Defence , Malaysia in
collaboration with PRIMA CONSULTING
MALAYSIA
Defence Industry Division

Ministry of Defence Malaysia
8th floor , Wisma Pertahanan,
Pertahanan, Jalan Padang Tembak,
Tembak,
50634 Kuala Lumpur
Tel: 03 2071 5675 Fax: 2961 2735
PRIMA CONSULTING MALAYSIA

No 34 Jalan 4/146, Bandar Tasik Selatan
57000 Kuala Lumpur
Tel : 03 - 90583191 Fax : 03 - 90584191
URL : www.primenet.com.my

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1

Published by Defence Industry Division,

The Objectives of the Defence Industry Blueprint are:

Malaysian Defence Industry Companies

Ministry of Defence ( MINDEF), Malaysia

Companies in Related and Supporting Industries

The Malaysian Army

Higher Education Institutions / Technical /

The Royal Malaysian Navy

Department of Civil Defence

Original Equipment Manufacturers (OEM

Ministry of Home Affairs

International Defence Contractors

Malaysian Fire & Rescue Department

Shaping the Defence Industry Competency

The Eight Malaysia Plan Mid Term Report

Nevertheless, much remains to be done in

It is best to describe the competencies along the

Taking cognisance of these challenges as well as

y Research and Development

It is noted that the components of the value chain

Therefore, the intention of this document, is to look

1.1.1 The Armed Forces

general government policies;

service to the components of the Malaysian

Managing national defence is a costly affair to the

y To manage resources allocated for national

1.1.2 Malaysian Defence Industry Council

steer and direct the orderly development of the

discuss common problems encountered by

establish and maintain a grouping of national

assist in the promotion of the products and

disseminate information to defence companies

facilitate the dissemination of information relating

assist and coordinate the presence and

act as clearing house for the exchange of

develop and build upon working relationships with

The move towards the development of the

2.2.1 Reducing The Balance of Payment

2.2.2 Employment Opportunities

The Malaysian Defence Industry - Critical Issues

2.3.1 National Defence Policy

2.3.2 Dependence on Foreign OEMs

2.3.3 Limited Defence Budget

Supporting infrastructure such as materials technology

Newly Emerging Market Players

New competition from emerging defence industrial players

STRATEGIC ANALYSIS OF THE NATIONAL

This section analyzes the competitiveness on the broad

In order to address this situation, we must identify the

Determinants of National Competitive

The defence industry is very much dependent upon the

Using Michael E. Porters Dynamic Diamond, a SWOT

In spite of the above, certain quarters of the Malaysian

Factor conditions refer to the nations ability to deliver

These refer to the presence or absence of suppliers and

These refer to the nature of demand (domestic and

Related and Supporting Industries

Firm Strategy, Structure and Rivalry

These refer to the conditions in the nation governing

The Defence Industry

It is the vision of the Malaysian Government to have an

The need to have a 10

years Blueprint for the

Specifications should reflect local conditions

Establish database for local industries and

Specification based on specific equipment

Joint development to reduce cost