Malaysia looks to tech as subsidies decline

Malaysia is looking to technology to boost its manufacturing sector with its National Policy on Industry 4.0 (Industry4WRD) as it tries again to make the jump to developed-world status.

The authorities say they plan to rely more on technology, rather than capital investment and labour, to boost productivity.

Malaysia has a RM1 trillion (US$240 billion) national debt and Finance Minister Lim Guan Eng is expected to unveil a “budget of sacrifice” tomorrow (Friday) with cuts to financial subsidies and incentives to companies.

The budget is expected to bring in fiscal discipline, including new taxes and spending cuts, as Lim has warned voters that they should prepare for sacrifices.

Mahathir echoed the message yesterday.

“Everybody wants subsidies, incentives. Why not just take the profit?” asked Malaysian Prime Minister Mahathir Mohamad, as he launched the industrial policy. “That’s the incentive, to make more money.”

The industrial policy blueprint said state support would come in the form of collaboration via public-private partnerships and investment-friendly taxation.

During his first tenure as prime minister from 1981 to 2003, Mahathir’s Vision 2020 proposed plans to attract skilled talent through job creation, upping productivity and raising innovation for Malaysia to achieve developed-nation status by 2020.

“Given the setback that this country had gone through in the last 1½ decades, it is imperative for us to work even harder and strive with even greater tenacity, greater creativity and effectiveness to ensure very rapid and sustainable growth,” the 93-year-old Mahathir said.

But the budget was still expected to benefit the majority of Malaysians, said former Bank Negara Malaysia governor Zeti Akhtar Aziz.

She said the budget would help create an ecosystem that helped the economy improve.

“The 2019 budget will provide future direction on how the public financial position can be strengthened,” Zeti told the media.

The government intends to boost the number of skilled manufacturers from 18 per cent to 35 per cent by 2025.

Mahathir’s industrial policy hopes to raise the manufacturing industry’s contribution to the economy by 54 per cent to RM392 billion by 2025, meaning a 30-per-cent rise in productivity.

“It is the manufacturing sector that allows Malaysia to consistently demonstrate dynamism and resilience to grow while attracting foreign direct investments,” the returning prime minister said.

Malaysian labour productivity has risen by less than 4 per cent in recent years with its global productivity ranking static since 2009.

In August, Malaysia’s central bank revised down the country’s economic growth this year to 5 per cent, from the earlier projection of 5.5-6 per cent, due to prolonged disruptions in oil and gas production, and lower agriculture output.

Kuala Lumpur hopes to boost its tech credentials. Picture credit: Flickr