New Industrial Master Plan 2030 (NIMP 2030)

8.5 Digital Platform for SME Financing (imSME) MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 8 Master Plan 2030 FOREWORD Prime Minister of Malaysia “ Malaysia’s focus remains on creating a high-income and skilled workforce, where the Rakyat prosper and “ industries flourish. ANWAR IBRAHIM Prime Minister, Malaysia MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 9 Malaysia has progressed remarkably since the Third Industrial Master Plan (IMP3) between 2006 and 2020. During this period, the manufacturing sector had contributed approximately 24 per cent to Malaysia’s Gross Domestic Product (GDP), demonstrating its significant role in shaping the nation’s economy. The Government’s commitment to foster As we embark on this journey, Malaysia’s focus innovation and technology adoption, promote remains on creating a high-income and skilled entrepreneurship and invest in human capital workforce, where the Rakyat prosper and during the IMP3 period has solidified Malaysia’s industries flourish. Technology plays a crucial position as a leader in various sectors such as role as a catalyst for growth and to increase electrical and electronics (E&E), petrochemicals, labour productivity. As such, the advancement palm oil, and the halal industry. of technologies will empower the Malaysian workforce to enhance efficiency and accelerate The New Industrial Master Plan 2030 (The NIMP innovative capability. 2030) is developed with the intent for Malaysia to emerge as a global leader in industrial The NIMP 2030 also calls for a balanced development, extend the domestic linkages regional development as this is a key driver to create wealth across the nation from towards safeguarding economic security and manufacturing activities as well as strengthen promoting inclusivity. In line with the Ekonomi its position in the global value chain. MADANI, the Government acknowledges that economic prosperity must be accompanied by The NIMP 2030 places clear emphasis on social progress and therefore, the plan includes reinvigorating economic growth and ensuring strategies to address income inequality and resiliency amidst growing challenges and promote balanced regional growth. megatrends, inspired by the core principles of Malaysia MADANI. The NIMP 2030 will The journey to transform the industry requires be implemented through a whole-of- swift action by all. It is imperative for both the nation approach that not only involves the public and private sector to strengthen our Government machinery but also the private collaboration and implement the necessary sector by working together to achieve a measures to uplift Malaysia’s competitiveness common goal to position Malaysia as a high- and build greater resilience. income economy with a greater degree of economic complexity. “I am confident that the NIMP 2030 will provide the necessary guidance and clear direction for Malaysia recognises the importance of the development of the manufacturing sector environmental preservation in our pursuit to strengthen its position as a key driver to of industrial progress. Malaysia affirms our national economic growth and prosperity. The commitment to international agreements and Government will ensure the plan is carried conventions related to sustainability, including out diligently and benefit not only the private our aspiration towards achieving the Net Zero sector through better investment and trade carbon emission target as early as 2050. This prospects, but also the people through high- commitment requires all economic sectors, skilled and high-income job opportunities.” including manufacturing, to reconfigure their strategies and policies as they perform the Let us embrace the NIMP 2030 and work obligatory role to ensure Malaysia is on track to together to build a vibrant economy for the achieve the goal. future of our next generation. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 10 Master Plan 2030 FOREWORD Minister of Investment, Trade and Industry “ We believe that the strategic curation of the New Industrial Master Plan 2030 (NIMP 2030) – based on four key missions rather than sectors i.e. by nurturing higher economic complexity and aggressively embracing technology, underscored by sustainability and inclusivity principles – “ is set to reform Malaysia’s industries. TENGKU ZAFRUL AZIZ Minister of Investment, Trade and Industry MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 11 Malaysia’s manufacturing sector is a key contributor to the nation’s economic growth, as well as its position in global trade. In 2022, it contributed 24 per cent to our GDP and 84 per cent to total exports, while providing employment opportunities to approximately 2.7 million of the Rakyat. In short, it is a fundamental factor for Malaysia’s economic growth and resilience, as well as international competitiveness. While the development of Malaysia’s beneficiaries that include multinationals, SMEs industrial policies had always been sector- and the Rakyat. A good case in point is when we driven – underscored by sustainable growth nurture our manufacturing industry to produce principles, and capacity-building for Malaysian more sophisticated and complex products companies to integrate better into supply or adopt higher production technology, this chains globally – MITI recognised that a slightly would also elevate our workforce in terms different approach was required to transform of skills and knowledge, which will, in turn, our manufacturing industry and for Malaysia translate into higher wages for the people. to achieve high-income status in the years to come. Further, as we attract more hi-tech and innovation-driven investments, including in This is where we believe that the strategic green manufacturing and renewable sectors, curation of the New Industrial Master Plan 2030 we will not only enhance labour productivity (NIMP 2030) – based on four key missions rather and support our ESG goals, but also ensure than sectors i.e. by nurturing higher economic that our exports enjoy continued access to complexity and aggressively embracing ESG-sensitive markets. technology, underscored by sustainability and inclusivity principles – is set to reform Malaysia’s I would like to thank everyone who has industries. It also focuses on achieving broad- contributed to the development of the NIMP based growth, by ensuring that small and 2030. Your invaluable insights, expertise and medium enterprises (SMEs) are well-integrated unwavering dedication have helped shape a into value chains, both domestic and global, comprehensive master plan that is set to create as well as by ensuring that the benefit of a manufacturing powerhouse towards making manufacturing development and activities is Malaysia a more prosperous and sustainable fairly spread across all States in Malaysia. economy. Apart from a robust stakeholder engagement The NIMP 2030 is an ambitious plan. I am, session, the NIMP 2030 is also well-aligned with however, confident that with an effective 32 related policies and roadmaps to ensure implementation mechanism and support comprehensiveness and consistency in public of all stakeholders, its objectives are highly policy. This alignment and stakeholder support achievable within the target time frame. Time are key to the effective implementation of the is of the essence if we wish to realise a more NIMP 2030 Strategies and Action Plans across inclusive, holistic and sustainable Ekonomi Ministries, Agencies, Government-linked MADANI development for the greater good of Companies and the private sector entities the nation, and our future generations. MITI based on clear goals and objectives, as well as looks forward to the whole-of-nation effort to well-defined enablers. ensure the success of the NIMP 2030. NIMP 2030’s horizontal four-mission policy and set of strong enablers are aimed at addressing domestic and global challenges premised on a whole-of-nation approach. As articulated by the Government’s Ekonomi MADANI, NIMP 2030 also ensures clear across-the-board MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 12 Master Plan 2030 Secretary General of The Ministry of FOREWORD Investment, Trade and Industry “Malaysia has distinctive value propositions to leverage, such as benefitting from being at the heart of the world’s busiest trade route, an educated workforce providing a skilled labour pool for businesses and a robust rule of law which provides certainty and predictability for the “ business community. ISHAM ISHAK Secretary General of the Ministry of Investment, Trade and Industry MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 13 Malaysia’s manufacturing sector remains a key driver of the country’s economic growth, accounting for 24 per cent of GDP and 84 per cent of total exports. The sector continues to play an important role in domestic job creation, employing 2.7 million individuals or around 17 per cent of total employment in the country. Manufacturing has generated over RM35 billion in implemented capital investment as of 2022 and nearly RM853 billion in total from 2006 to 2022. While Malaysia’s industrial development has NIMP 2030 will be implemented in two phases. indeed come a long way, the Government is During the first phase in 2023, the focus is to now setting its sights on the future through strengthen existing industrial foundation to the NIMP 2030. MITI expects to accelerate position Malaysia for the second take off. In industry transformation to achieve Malaysia’s the second phase, 2027 onwards to 2030, the aspirations by 2030. NIMP 2030 will focus on sustaining the growth and resilience of the Malaysian economy, truly Malaysia has distinctive value propositions to capitalising opportunities towards developing leverage, such as benefitting from being at an advanced economy, while moving ahead in the heart of the world’s busiest trade route, an sustainability agenda. educated workforce providing a skilled labour pool for businesses and a robust rule of law I would like to express my gratitude to all which provides certainty and predictability stakeholders for the collaboration and support for the business community. Malaysia is also with MITI throughout the development of blessed with an abundance as well as diverse the NIMP 2030. MITI will continue to provide natural resources offering opportunities for our leadership in spearheading industrial downstream processing and notable high- development in Malaysia and I look forward to quality infrastructures, enabling improved achieving the targets together. connectivity for efficient operations. NIMP 2030 has outlined 21 Strategies and 62 Action Plans across the four Missions, supported by four key Enablers to build the ecosystem around its implementation. Nine Mission-based Projects (MBPs) have been identified to catalyse the Missions and MITI will work closely with the industry to identify more MBPs through the course of the NIMP 2030. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 1 INTRODUCTION New Industrial 16 Master Plan 2030 INTRODUCTION OVERVIEW OF THE NIMP 2030 Malaysia’s strength in the manufacturing the global value chain (GVC), development sector has been significantly driven by the of indigenous capabilities in a knowledge implementation of robust and forward-thinking economy, evolution of environmental, social Industrial Master Plans, first launched in 1986. and governance (ESG) criteria and disruptions from the new industrial revolution. The question The success of the IMP3 (2006-2020) was is not about the necessity of such policies, but anchored on innovation, research and rather what new policies are required and how development (R&D) and human capital to proceed. development to drive high value-added industries to transform Malaysia into a Given the current challenging environment, knowledge-based economy. benchmarking and learning from other country’s experiences are no longer sufficient. The journey towards formulating the NIMP Malaysia needs to embark on its own path 2030 is underscored by the need to build into unchartered territory, to steer the nation a robust industrial sector as an important into the challenging future. The combined prerequisite to achieve socioeconomic impact of the new imperatives and the recent prosperity. Three previous iterations of the pandemic has compelled the Government to Industrial Master Plans have driven industrial rethink Malaysia’s industrial strategy. development in Malaysia, with the Government adopting industrial development strategies With the NIMP 2030, Malaysia intends relevant to the period to transform the to transform the industry into greater economy. Malaysia flourished from a low- heights, capitalising on emerging global productivity agrarian-based economy and is trends, supply chain disruptions, current heading towards achieving developed nation geopolitical landscape, digitalisation and ESG status, underpinned by robust manufacturing considerations. These trends are moving at an and services sectors. The strategy has unprecedented pace and Malaysia has to act successfully raised the living standards of the fast. Rakyat and propelled remarkable growth in Gross National Income (GNI) per capita, Therefore, the NIMP 2030 is designed to increasing 34 times between 1967 to 2019, achieve the aspirations in a span of seven making Malaysia one of the fastest growing years and takes on a Mission-based approach economies in modern history. for industrial development. This approach unites Malaysia by encouraging collaboration Industrial policies have since become more between the Government and the private diverse and complex, incorporating new sector to rally the industries. imperatives including the integration into PURPOSE OF THE NIMP 2030 The NIMP 2030 sets forth Malaysia’s future The NIMP 2030 serves to: direction in industrial transformation. It provides a national integrated plan for resilient • Provide national strategic direction to lead industrial development until 2030 – setting the the industrial development policies; fundamentals for future policy development • Be a conversation piece for investors and and enabling the industry at all levels. It other economies on Malaysia’s position and articulates Malaysia’s position and participation direction; and in the global economic environment. • Feature the role of the Malaysian Government in shaping the economy. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial INTRODUCTION Master Plan 2030 17 SCOPE AND COVERAGE The manufacturing and services sectors are The NIMP 2030 focuses on a whole-of-nation the two largest sectors in Malaysia’s economy. approach, aligned to the plans of other The manufacturing sector is a vital component Ministries and ensures participation across of the economy, focusing on large-scale all sectors for successful implementation. As production of tangible goods, covering a the NIMP 2030 is an overarching policy that diverse range of activities including the strategises and provides the guiding direction conversion of raw materials and components for Malaysia’s industrial development, it takes into finished products using machinery, labour into consideration the interconnectedness of and advanced technology. all industrial-related policies and the various authorities involved. This fosters a common The sector is supported by an array of services to understanding and alignment among multiple assist in various aspects of the manufacturing stakeholders in the industrial ecosystem process, providing essential support and and ensure smooth implementation and expertise to enhance the efficiency, innovation coordination across Government machineries. and global competitiveness of Malaysia’s manufacturing sector. The NIMP 2030 represents a collaborative effort between the Government and the private To ensure continuous growth of the sector, jointly owned to leverage the collective manufacturing sector and related services, the expertise and resources. It is a document to NIMP 2030 outlines clear Missions to achieve foster industrial growth and was developed the desired Goals, with consideration of: through various industry consultations: • Ekonomi MADANI as the true north for • Over 70 focus sessions and 313 stakeholders Malaysia’s economic development: engaged with Ministries, Agencies, • Positioning Malaysia as Asia’s economic Regulators, Industry Associations and leader by building knowledge and industry players; innovation-based economy; and • The NIMP 2030 consultation open day, • Improving the quality of life for the which gathered industry feedback, Rakyat by prioritising the well-being of attended by more than 650 attendees; and the people through high income jobs, • Strategic engagements with industry equal opportunities and comprehensive players as champions to drive the Mission- social welfare. based Projects (MBPs). MBPs are key • NIA, launched on 6 October 2022, where the projects encompassing a wide range of NIMP 2030 Goals are aligned to the five key areas critical to achieving the industrial pillars with ESG as the overarching theme; development objectives. • The challenges for the nation to achieve the Goals – relevant to all sectors; and The NIMP 2030 has enclosures of 21 Sectoral • 32 existing and upcoming policies across Plans included as supplementary references. the Government to ensure alignment These plans provide a view of the respective (Appendix I). sectoral perspectives in the context of the NIMP 2030 document. The 21 sectors covered are: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 18 Master Plan 2030 INTRODUCTION Table 1.1: Sectors Covered in NIMP 2030 Sectors Industry Relevant Sector-specific Policies Priority Sectors 1. Aerospace 1. Aerospace Industry Blueprint 2010 2. Chemical 2. Chemical Industry Roadmap 2030 3. Electrical and Electronics (E&E) 3. Malaysia Plastics Sustainability Roadmap 4. Pharmaceutical 2021-2030 5. Medical Devices 4. E&E Roadmap 2021-2030 5. Malaysian National Medicines Policy Sectors 6. Digital and Information and 6. Industry4WRD: National Policy on Industry Communication Technology 4.0 (ICT) 7. Malaysia Digital Economy Blueprint 7. Automotive 8. Malaysia National Artificial Intelligence 8. Food Processing Roadmap 9. Global Services and 9. National Automotive Policy 2020 Professional Services 10. National Agrofood Policy 2.0 2021-2030 10. Halal 11. Halal Industry Master Plan 2030 11. Machinery and Equipment 12. Foresight Study on the Iron and Steel (M&E) Industry 12. Manufacturing-Related 13. National Mineral Policy Services (MRS) 14. National Mineral Industry Transformation 13. Metal Plan 2021-2030 14. Mineral 15. National Advanced Materials Technology 15. Palm Oil-based Products Roadmap 16. Petroleum Products and 16. National Agri-commodity Policy 2021-2030 Petrochemicals 17. Malaysian Rail Supporting Industry Roadmap 17. Rail 2030 18. Rubber-based Products 18. National Timber Industry Strategic Plan 2021- 19. Shipbuilding and Ship Repair 2025 (SBSR) 20. Textile, Apparel and Footwear 21. Wood, Paper and Furniture Additionally, there are four new growth areas identified in the NIMP 2030: • Advanced Materials; • Electric Vehicles; • Renewable Energy; and • Carbon Capture, Utilisation and Storage (CCUS). Other Services (Scope not covered in the NIMP 2030) The following services areas are not covered under the NIMP 2030, but their growth will continue to contribute significantly to the Malaysian economy, guided by the relevant ministries and policies: • Banking and insurance; • Construction services, guided by the National Construction Policy 2030; • Utilities; • Tourism, guided by the National Tourism Policy 2020-2030; • Private healthcare, guided by the Malaysia Healthcare Travel Industry Blueprint 2021-2025; • Private education, guided by the Higher Education Blueprint 2015-2025 and the Way Forward for Private Higher Education Institutions: Education as an Industry (2020-2025); • Transport and logistics, guided by the National Transport Policy 2019-2030; • Food and beverages; and • Other unregulated services. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 2 MALAYSIA’S INDUSTRIALISATION TODAY New Industrial 20 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Malaysia’s industrialisation landscape is shaped by the evolution of the manufacturing sector over the last few decades. The sector has been playing a pivotal role in driving economic growth by contributing approximately 24 per cent to the country’s GDP and accounting for 84 per cent of Malaysia’s total exports. Both GDP and exports of the sector have been growing at 6 per cent since 2000 and 2006 respectively. In parallel, the sector supports the livelihoods of 2.7 million individuals, representing approximately 17 per cent of total employment in Malaysia. Manufacturing therefore serves as a cornerstone for the nation’s international competitiveness, economic resilience and human capital development. In terms of the services sector, the rapid growth in services contributed to Malaysia’s industrialisation development as it has a positive relationship to manufacturing performance1. Access to services such as telecommunications, logistics and financing will impact the competitiveness of manufacturing firms. PAST PERFORMANCE AND KEY CHALLENGES The performance of the manufacturing and services sectors against IMP3’s macro targets are tabulated below (Table 2.1)2 . Table 2.1: Key Macro Targets for IMP3 Targets Baseline (2005) Target (2020) Realised 2020 Realised 2022 GDP Value of RM149.7 billion RM187.6 billion RM307.8 billion RM364.5 billion manufacturing (based on constant (based on 1987 real (based on constant (based on constant sector3 2005 prices) prices) 2015 prices) 2015 prices) Share of 31.4% 28.5% 22.3% 24.2% manufacturing sector (% of GDP) Share of non- 50.5% 59.7 % 48.5% 49.1% Government services (% of GDP) Share of 7.6% 6.8% 9.2% 9.1% Government services (% of GDP) Implemented Total: Manufacturing: Manufacturing: Manufacturing: private RM464.5 billion RM412.2 billion RM652.4 billion RM862.8 billion Investments Services: Services5: Services6: (cumulative)4 RM687.7 billion RM139.9 billion RM211.2 billion External Trade Exports: RM533.8 Exports: Exports: Exports: billion RM1.4 trillion RM980.99 billion RM1.55 trillion Total trade: Total trade: Total trade: Total trade: RM967.8 billion RM2.8 trillion RM1.77 trillion RM2.48 trillion Source: DOSM (Sectoral GDP); MIDA (Investments); MATRADE (Trade) MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 21 Although the share of manufacturing sector’s contribution to GDP in 2020 was 6.2 percentage points lower than its IMP3 target, it has showed recovery post-pandemic and closed the gap further in 2022 to 4.3 per cent. In terms of value, manufacturing’s GDP broadly doubled and exceeded its IMP3 targets. In 2020, Government services exceeded its target by 2.4 percentage points. However, non-Government services fell short of its IMP3 target by 11.2 percentage points. In terms of the implemented private investments, the manufacturing sector performed above expectations and doubled the target set in IMP3 as of 2022. However, services fell short – its investment in 2022 stood at 30.7 per cent of the IMP3’s target7. This may be explained partly by Malaysia’s higher Services Trade Restrictiveness Index in most services compared to its peers8. Malaysia’s trade performance in 2022 was RM2.48 trillion. Although it was RM32 billion less than the IMP3 target, it grew by 2.5 times relative to its baseline value. Zooming in to exports specifically, Malaysia exceeded its target by RM569 billion. The growth is driven by the outstanding trade performance of E&E products, petroleum products, liquified natural gas, palm oil and palm oil- based agriculture products, machinery, equipment and parts – each recorded its highest export value ever, increasing by more than RM10 billion and registering double-digit growth. Although the manufacturing and services sectors have made some progress over the years, it is crucial to acknowledge that there are key challenges in industrialisation development in Malaysia: Marginal improvement in economic complexity: Malaysia’s degree of economic complexity as measured by the Economic Complexity Index (ECI)9 peaked in 2013, dipped in 2014 and stagnated till 2020. Other Association of Southeast Asian Nations (ASEAN) countries, like the Philippines and Thailand, continued to grow in their respective economic complexities, closing in towards Malaysia’s position. Overall, throughout the IMP3 period, Malaysia remained behind its aspirational target countries in East Asia such as South Korea, Japan and Singapore. Higher levels of economic complexity are associated with higher levels of development and growth10. Crucially, a country’s structural transformation is determined by its capacity to accumulate the capabilities that are necessary to produce a greater variety and more complex goods. Figure 2.1: Economic Complexity Index of Malaysia and Selected Countries, 2006-2020 2.2 2.1 1.9 1.8 1.4 1.3 1.0 0.9 0.7 0.6 0.3 -0.1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Japan South Korea Singapore Malaysia Thailand Philippines Source: The Observatory of Economic Complexity MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 22 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Servicification11 has a positive relationship on the manufacturing performance. For example, access to telecommunications, transport, distribution services and financial intermediation can affect the competitiveness of manufacturing firms. Malaysia’s direct contribution of services to manufacturing value-added is much lower than the OECD average and neighbouring countries. Improving the use of MRS in Malaysia can help to facilitate better manufacturing performance by boosting the competitiveness of manufactured goods. Stagnated labour productivity: Labour productivity growth in Malaysia has significantly slowed down in the past three decades, particularly from 2011 to 2018. Malaysia’s labour productivity growth has been lower than Singapore, Thailand and the Philippines since 2000, and even lower than Viet Nam since 2005 (Figure 2.2). Figure 2.2: Labour Productivity Growth of Malaysia and ASEAN Peers, 1975-2018 (%) Source: ASEAN Secretariat This decline in labour productivity is explained by: • Prolonged use of low-skilled foreign workers in the manufacturing sector: Malaysia had early mover advantage as it opened up to FDI liberalisation with the establishment of the Bayan Lepas Free Trade Zone in 1971 and attracted FDI to establish export-oriented, labour-intensive manufacturing with the help of its relatively low labour costs at that time. Subsequently, other developing countries, like China, has opened up to FDI and attracted low labour-cost manufacturing, posing stiff competition for Malaysia. Malaysia prolonged its use of low-skilled foreign workers to stay on in labour-intensive manufacturing instead of moving on to more technology-intensive activities, which then delayed the upgrading of the Malaysian manufacturing sector. • Relatively low innovation performance: The country’s investment in R&D12 as a percentage of GDP has fallen since 2016 (Figure 2.3) and its Global Innovation Index13 fell from a peak of 46.9 in 2013 to a low of 38.7 in 2022. This has constrained the development of high value-added manufacturing activities. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 23 Figure 2.3: R&D Expenditure in Malaysia, 2008-2018 20000 2 15000 1.5 10000 1 5000 0.5 0 0 2008 2010 2012 2014 2016 2018 Expenditure (RM Million) GERD/GDP Source: National Survey of Research and Development (R&D) in Malaysia 2019 (MOSTI)14 This decline may be attributed to a possible factor where researchers in higher learning institutions (HLIs), which were the main driver for R&D activities in Malaysia, did not pursue research areas related to manufacturing or to meet industrial needs. According to Malaysia’s National Survey of R&D in 2019, a bigger proportion of the Basic Research R&D expenditure came from the HLIs (65 per cent) whereas the Business Enterprises focused on Applied Research and Experimental Development, indicating a mismatch. World Bank found that the main source of mismatch between suppliers of research from HLIs and industry demand, lie in the emphasis on scientific publications for promotions in HLIs15. The researchers in the HLIs are not incentivised to engage in technology transfer and entrepreneurial activities such as commercialising their R&D activities as these were deemed less important for career advancements in the HLIs. Skills mismatch and talent shortage: Skill-related underemployment16 in Malaysia continues to rise by 6.9 per cent annually since 2017 (Figure 2.4). This indicates the labour market’s inability to absorb all higher education graduates – more than a third of employed persons with tertiary education were in the semi- and low-skilled occupations. Semi-skilled wage growth is lower compared to skilled jobs. This underscores the need for high-skilled jobs, to improve workers’ welfare and expand middle-class society. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 24 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Figure 2.4: Skill-related Underemployment, 2017-2023 Skill-related underemployment GERD/GDP Source: DOSM; Note: Rate of skill-related underemployment for 2017 to 2018 is unavailable as employed persons with tertiary education data was not available publicly. The number of graduates in science, technology, engineering and mathematics (STEM) is still below its aspirational target of 60 per cent17. Malaysia is facing a talent shortage, especially as the World Economic Forum expects nine out of the Top 10 emerging jobs in 2025 to be STEM-related18. The talent shortage is further exacerbated by local talents preferring overseas jobs due to the promise of higher pay and the difficulty in hiring skilled foreign workers. Increased reliance on re-exports as export growth driver: Exports as a share of GDP fell steadily throughout the IMP3 period as growing exports was facilitated by growing imports (Figure 2.5). Figure 2.5: Exports USD billion and % of GDP Exports (USD Billion) % of GDP Source: World Bank MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 25 In terms of exports composition, the share of domestic exports to total exports declined continuously since 2011, driven by a higher proportion of re-exports19 (Figure 2.6). Figure 2.6: Share of Domestic Exports to Total Exports (%), 2011-2022 93% 65% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: DOSM Malaysia’s top exports have remained largely in integrated circuits, refined petroleum, palm oil, rubber apparel and petroleum products, and the main export destinations continue to be China, ASEAN and the US. E&E garnered the largest share in manufactured exports for Malaysia, but its share of the global exports has stagnated and fallen due to loss of competitiveness vis-a-vis China. Low utilisation of free trade agreements (FTAs) by local companies: Effectively utilised FTAs help stimulate inward Foreign Direct Investment (FDI) by enhancing the predictability of the member countries’ investment climate20. Malaysia has signed 16 FTAs to date ̶ seven bilateral trade agreements and nine regional trade agreements21. Total FTA utilisation has declined since COVID-19 pandemic and yet to recover (Figure 2.7). ATIGA, ACFTA and AANZFTA are amongst the oldest FTAs and have had higher utilisation compared to other FTAs. More recent agreements such as the AHKFTA and RCEP are less utilised as firms are only beginning to use it. Despite being the largest FTA by total GDP, RCEP was used by fewer than 900 firms in 2022, the year it entered into force. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 26 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Figure 2.7: FTA Utilisation by Number of Companies, 2016-2022 Source: MITI Modern FTAs go beyond tariff liberalisation and include among others, trade and investment facilitation, services liberalisation, and other features such as competition policy, government procurement and intellectual property protection. FTAs can improve the location-specific factors of its signatories by enhancing the predictability of the investment climate of member countries through the provisions in the agreement. Empirically, a study on the impact of ASEAN FTAs with six countries, namely China, India, Japan, Korea, Australia and New Zealand from 2002-2012, concluded that ASEAN and ASEAN Plus Agreements tend to stimulate inward FDI besides other traditional variables such as strong institutions, good physical infrastructure, and low costs of doing business22. For Malaysian manufacturing, it was found that the ASEAN Free Trade Area (AFTA) and bilateral trade agreements have a significant positive impact on Malaysia’s non-resource-based exports that are associated with production sharing23. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 27 Box Article 2.1: Success Stories of FTAs Attracting FDIs Expansion of the Malaysia- What are the benefits of the Turkiye Free Trade MTFTA expansion? Agreement (MTFTA) to include trade-in services, Transparent & predictable investment and e-commerce operating conditions Removing key barriers to trade 17 Apr 2014 MTFTA signed between in services Malaysia & Turkiye Enhancing accessibility of 13 Jul 2021 Joint Declaration on the investments Expansion of the FTA signed Improving mobility for 28 Sep 2022 First Protocal to amend the professionals between Malaysia MTFTA signed & Turkiye Examples: Turkiye companies that have invested in Malaysia TUSAS Malaysia Sdn. Bhd. • Wholly owned subsidiary of Turkish Aerospace Industries Inc, one of the leading companies in the global aviation industry • Established in 2021 in Cyberview, Cyberjaya Key Achievements First Aerospace OEM Design Center in Malaysia First engineering & design office in Southeast Asia MOU signed with UniKL and UM ̶ 10 students completed their internship program at The Turkish Aerospace HQ at Ankara, Tukiye Evyap Sabun Malaysia Sdn. Bhd. • Wholly owned subsidiary of Turkiye-based Evyap Group, a longstanding and well-established personal care product manufacturer • Established in 2011 in Pasir Gudang, Johor Key Achievements Doubled total capacity from 200,000 to 400,000 tonnes per year Invested in a full-scale oleochemical plant to sell specialty chemicals for personal care, food and industrial applications, besides soap Offers tailor-made, specialty oleochemical solutions backed up by strong R&D capabilities Source: MIDA, MIDA Investment Performance Report, Evyap Oleo, Bernama MREM MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 28 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Marginal improvement in product and market diversification: Malaysia’s export concentration index increased since 2006 but tapered down slightly in 2021. This indicates increased vulnerability to external shocks as a decline in demand for a few key products could significantly impact Malaysia’s export earnings. Continued products diversification, especially to include new and more complex products, is paramount to expand exports. Figure 2.8: Export Concentration Index in Malaysia, 2006-2021 Source: United Nations Conference on Trade and Development (UNCTAD) Increasing use of non-tariff measures (NTM): NTMs include a diverse range of policies that countries apply to imported and exported goods that may affect trade by changing quantities traded, prices, or both. However, NTMs often serve a legitimate purpose as they are put in place for valid concerns such as food safety and environmental protection. Malaysia issues up to 713 NTMs for over 5,000 products24. The majority of NTMs comprises Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) totalling 82.9 per cent of the NTMs in the country with SPS at 36.3 per cent and TBT at 46.6 per cent. NTMs can create unnecessary and burdensome regulations that impede trade and raise trade costs, though this may be unintentional. The review of Malaysia’s NTMs must consider the need to achieve the least possible trade restrictions and distortions while meeting legitimate policy objectives. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 29 Competition in FDIs hampering Malaysia’s participation in GVC25 and downward Domestic Direct Investment (DDI) trend: FDI rebounded sharply in 2021 following the drop in 2020 due to the pandemic. Although FDI in 2022 was lower compared to the previous year, the amount still outperformed the peak achieved during the IMP3 period of 2006 to 2020 (Figure 2.9). Figure 2.9: Implemented Domestic and Foreign Investments, 2006-202226 Domestic Investment (RM bil) Foreign Investment (RM bil) Total Investment (RM bil) Source: MIDA MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 30 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Box Article 2.2: High Quality Investments in Malaysia Samsung SDI Energy Malaysia Sdn. Cell Tissue Technology Sdn. Bhd Bhd. (SDIEM) Started operations in Negeri Sembilan’s industrial area in 1991 through Samsung Eletron Devices. Malaysia (SEDM) Approved domestic investment of RM11.2 million in 2021 from Cell Tissue 1999 Technology Sdn. Bhd. #1st Cathode LED LCD Tissue engineering firm in Malaysia Ray Tubes and the commercial arm of Univeristy Kebangsaan Malaysia. A total investment of RM2.8 billion invested from September 2011 to May 2022 created: Focus area in tissue engineeting & stem cell technology: 2,500 3D Bioprinting- production of jobs 1 artificial organs, which is the next frontier in medicine RM2.5 billion 2 3 4 annual exports SDIEM invested cumulatively RM7 billion, to Medical Aesthetic R&D build a state-of-the-art facility to manufacture batteries for EV creating. EV Alligned with Malaysia’s emphasis on using 800 million 1,702 jobs industry 4.0 technologies capabilities, battery cells Intergrating Environmental Monitoring annually System (EMS) with Building Monitoring System (BMS), which can enhance #1st production while ensuring quality. EV manufacturer for electric pasenger vehicles to boost Malaysia towards Net Zero greenhouse gas (GHG) emission by 2050 Source: MIDA, SDIEM, Cell Tissue Technology MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 31 Despite the overall increase in implemented FDI into Malaysia, other countries in the region received more inward FDI in recent years. Indonesia, the Philippines, Thailand and Viet Nam outperformed Malaysia in terms of FDI inflows in 2021 (Figure 2.10). Figure 2.10: Inflows of FDI into ASEAN-5, USD million Source: ASEAN Secretariat FDI has been an important driver to the growth of domestic value-added (DVA) because the activities of the subsidiaries and affiliates of multinationals are part of the domestic economy and thus contribute to the DVA. Even if multinationals do not have direct investments in the economy, their contractual relationships with local suppliers would likewise stimulate domestic economic activities. Malaysia joined the GVCs27 by liberalising FDI through the Free Trade Zone Act 1971. FDI was brought into Penang through FTZ leading to the development of the E&E cluster in the state. Malaysia participates in GVCs mainly through backward linkage, measured by share of foreign value-added (FVA), rather than forward linkage (measured by indirect domestic value-added exports, or DVX). In 2019, the DVX share accounted for 29 per cent, up from 18 per cent in 1995. The share of FVA remained higher than the DVX, at 36 per cent in 2019. Another challenge in investments is that DDI has been on a general downward trend since 2017, indicating the need for strategic measures to facilitate domestic investments. Disparities in manufacturing activities across States hamper inclusive growth: Manufacturing development is unevenly distributed throughout the different States in Malaysia. The three main States contributing to manufacturing value-added in the west coast of Peninsular Malaysia are Selangor, Johor and Penang, along with Sarawak in East Malaysia. Kelantan, Perlis and Sabah contributed the least to manufacturing value-added (Figure 2.11). MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 32 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY Figure 2.11: Manufacturing Value-added by State, 2021 (RM bil) Source: DOSM Limited GVC participation and financing in micro, small and medium enterprises (MSMEs) development: The number of MSMEs in Malaysia almost doubled from 2010 to 2021, with micro enterprises forming the largest share. The services sector consistently accounted for around 80 per cent of MSMEs, while manufacturing made up around 5 to 6 per cent. Malaysia’s MSMEs did not achieve the export target set out in the SME Masterplan by SME Corporation Malaysia (SME Corp) (Table 2.2). Contribution of MSME to overall exports dropped by 5.1 percentage points due to COVID-19. However, non-MSMEs were less affected due to their strong GVC linkages. The value-added per employment for MSMEs was consistently at approximately 20 per cent lower than the national labour productivity. Table 2.2: Contribution of MSMEs to the Overall GDP and Overall Exports Measure Actual Targets in 2020, under SME Masterplan 2016 2020 MSMEs’ Contribution to Overall 37.3 38.1 41.0 GDP (%) MSME’s Contribution to Overall 18.6 13.5 23.0 Exports %) MSME’s contribution to total 47.0 48.0 62.0 employment (%) Source: SME Corp MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 33 MSME development is further hampered by various challenges including financing, insufficient cash flow, high costs of doing business, digitalisation and e-commerce adoption and insufficient financing for exports28. Although there has been an increase in financing provided by financial institutions to MSMEs, accessing finance remains difficult due to insufficient collateral for securing bank loans. Many MSMEs, particularly unincorporated firms, cannot use movable or intangible assets as collateral, leading to frequent loan rejections. Improvements are needed to enable small and medium enterprises (SMEs) to access loans more easily in the future. Insufficient financing for new growth ventures: Malaysia is heavily reliant on traditional debt-based financing from banks for its industrial development. However, this financing method may not adequately meet the diverse needs of innovation and firms that seek new growth ventures. This is because these firms often operate in emerging industries with unpredictable revenue streams and limited tangible assets for collaterals. Therefore, it is crucial to have greater access to a more diverse range of funding and financing instruments to complement the traditional bank- led debt financing and support growth of innovative firms. Need to improve ease of doing business: Although Malaysia’s position in the International Institute for Management Development (IMD) World Competitiveness Ranking improved from 32nd place in 2022 to 27th place in 2023, making it second in Southeast Asia, Thailand and Indonesia are closing the gap. According to IMD, regulatory reforms for ease of doing business at the national and sub-national levels are among the key challenges for Malaysia in becoming a more competitive economy. Malaysia has 31 investment promotion agencies (IPAs), which has led to duplicating roles and lengthy bureaucratic processes. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 34 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY EMERGING MEGA TRENDS Simply observing the current state of Malaysia’s appetite for nearshoring and friendshoring in manufacturing industry is not enough to the region among global investors, especially future-proof Malaysia. Instead, it is essential to export to the US and European Union (EU). to prepare for the desired future economy. The ASEAN economies stand to benefit from This requires a keen awareness of significant these developments. Moving forward, Malaysia global trends that will influence Malaysia’s and its ASEAN neighbours should push for development in the coming decade. Three greater vertical integration across value chains, mega trends will affect the future of trade and particularly in semiconductors, clean energy, investment globally, including Malaysia. critical minerals and other sectors of strategic importance. This implies a focus on working Geopolitical shifts – focus on economic together to build regional strength and security complement one another rather than being a zero-sum game. The world of today is marked by ‘polycrisis’. Industrial development faces multiple threats The Government understands the importance across various dimensions. These range from of advancing in tandem with the ASEAN the uneven recovery following the COVID-19 economies. By integrating with the ASEAN pandemic to climate change catastrophes, as economies, Malaysia stands to be an well as rising geopolitical tensions between indispensable part of the GVC. The way forward countries. should involve further push for an international, rules-based order, while maintaining ASEAN Building resilience has become an important centrality29. policy and strategic tool for managing this increasingly complex web of global risks. In Digitalisation the face of growing supply chain disruptions, countries have had to shift their focus from As the world and Malaysia move towards economic efficiency to economic security. embracing a digital economy, the internet has become an indispensable utility for Industry players these days prefer a shorter accelerating digitalisation. The pandemic has and more secure supply chain to provide added fuel to the surge in digitalisation as goods and services more seamlessly. In this companies were forced to adapt to working regard, there are several key trends in supply from home and opting for online operations chain management and geopolitics that during the lockdown periods. countries need to incorporate in their industrial policy planning. These include nearshoring Embracing digitalisation bolsters companies’ (preferring to invest closer to the investors’ resilience to shocks by safeguarding labour country or origin) and friendshoring (preferring productivity and employment during to set up manufacturing facilities in countries challenging times. This can contribute towards that are geopolitical allies). longer term labour productivity, based on historical evidence from the US and more Malaysia stands to gain from these advanced European economies30. developments. This recent trend is illustrated by the move of notable global players to turn Apart from raising productivity, digital to Southeast Asia as the “Plus One” to ensure transformation can help companies create economic security and supply chain resilience. value and spur innovation. Specifically, digital Apart from that, ASEAN is becoming the transformation enables manufacturing alternative choice due to its strategic location, companies to improve their operations and track record on industrial development and inventory management, as well as employee investment management as well as its relative and customer management. Smart technology macroeconomic and political stability. can ensure a safe working environment, improve productivity rate and product quality. Malaysia and the ASEAN economies are intertwined in trade and investment with both Malaysia’s digital economy grew faster, at 8 warring economies. This unlocks opportunities per cent per annum than the GDP growth at 5 to integrate in the GVC as there is considerable per cent per annum, between 2015 and 201831. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MALAYSIA’S INDUSTRIALISATION TODAY Master Plan 2030 35 Malaysia’s internet economy was worth USD11.4 Physical risks from climate change can be billion in 2020 and has the potential to create disruptive to businesses, from physical asset an annual economic value of RM257.2 billion damages due to flood and supply-side shocks (USD61.3 billion) by 2030. For this to happen, which would result in higher commodity Malaysia has to facilitate digitalisation in the prices and migration of people33. Transition public and private sectors, foster digital talent risks can result in stranded assets, requiring and promote digital trade opportunities. reinvestment and replacement. These risks raise the management costs for companies. Climate Change and Environmental, Social and Governance (ESG) Apart from that, an earlier report indicated that labour productivity in Malaysia could fall by 25 Requirements per cent by 2045. This is due to the negative impact of increased global warming on the Climate change has increased two types of number of unsafe ‘heat stress’ days per year risks for companies globally and they are: and its impact on vulnerable workers34. • Physical risk associated with the physical ESG compliance has become increasingly impact of climate change. By 2050, over 90 important in the face of increasing climate per cent of the world’s largest companies risks as it deals with a company’s impact on will have at least one of their assets highly the environment and society. Investors are exposed to the physical impact of climate progressively taking ESG considerations into change32, such as rising sea levels affecting account in their selection of locations to invest, port operations and increased droughts apart from other traditional variables such as harming hydroelectric power generation. market size, infrastructure, macro-economic • Transition risk as countries shift toward a condition and political stability. Thus, proactive low-carbon economy and are exposed to measures to meet ESG compliance should be regulatory changes and new economic used to drive future investments. requirements. For instance, the use of less carbon-intensive fuels, which may drive up the costs of production in the short-term. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 36 Master Plan 2030 MALAYSIA’S INDUSTRIALISATION TODAY OPPORTUNITIES FOR MALAYSIA All three mega trends imply the reconfiguration of GVCs for risk diversification, leading to a shift in strategy from economic efficiency (‘just-in-time’ model) to economic security (‘just-in-case’ model). In the new model where proximity is valued, there will be an increasing regional focus, where manufacturing will be less fragmented and more concentrated in terms of value-added. It will be platform-driven, more asset-light, with a growing share of services35. Malaysia is well positioned amidst these changes to become a key destination for investors looking to diversify out of China and the US as part of the evolving GVC transformation based on Malaysia’s competitiveness ranking (Figure 2.12). Throughout this period, Malaysia is ranked second among the selected ASEAN member countries, but Malaysia has to act fast to improve its ranking aggressively to be among the top 20 nations. Figure 2.12: World Competitiveness Ranking, 2019-2023 Source: IMD MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 3 VISION, GOALS AND MISSIONS New Industrial 38 Master Plan 2030 VISION, GOALS AND MISSIONS With Malaysia’s strategic position to capitalise on the opportunities, it is pivotal for the nation to set forth an ambitious and holistic vision to propel Malaysia’s industrialisation for the next breakthrough. The vision provides a compelling purpose to galvanise the entire nation – both the Government and the industries. VISION Aligned with the NIA Goals, the NIMP 2030 Vision is for Malaysia to have: Well-developed new and existing industry Competitive industry with high economic clusters complexity – strengthen the existing industrial clusters by – foster industries that embrace innovation, upgrading capabilities, whilst supporting the produce sophisticated products and cutting- emergence of new high-growth industries from edge technologies to compete with global trends such as green economy and digitalisation frontier technologies in a vibrant ecosystem High income and skilled workforce – create innovation-driven, knowledge-based Balanced and inclusive participation job opportunities and help businesses create – foster balanced growth across all States high and better paying jobs that raise the in Malaysia and across different profiles by standard of living and expand the middle-class developing manufacturing opportunities society Strong domestic linkages Sustainable development – enhance participation of the local players, – embrace a balanced industrial growth including SMEs to strengthen domestic supply model that includes social, economic and chains and become more connected within sustainability practices by embracing ESG the global value chain practices To achieve this, Malaysia must ensure that every part of the nation achieves its full potential. The NIMP 2030 is focused on strengthening public and private investment partnerships in high growth opportunities, nurturing an innovative and entrepreneurial culture, driving R&D priorities for industries, improving connections across regional industrial clusters and catalysing transformation in investment and labour productivity across the economy. GOALS AND TARGETS The NIMP 2030 is expected to achieve high-impact growth for Malaysia. It is driven with the aim to contribute to the national manufacturing top-line targets (Figure 3.1). Value-added (GDP) Employment Median salary Manufacturing’s value-added Employment is expected Through the NIMP 2030’s (GDP) is expected to grow to grow at 2.3 per cent interventions, median salary by 6.5 per cent from 2022, from 2022, consistent with for manufacturing sector is reaching RM587.5 billion historical growth rate, expected to grow by 9.6 per by 2030. This indicates an providing livelihood for 3.3 cent, using median average increase of 61 per cent from million Rakyat by 2030. pre-pandemic level, to reach today’s GDP, derived by NIMP The industry’s growing RM4,510. This is an increase 2030 interventions for high- employment trajectory is due of approximately 128 percent impact and emerging growth to the creation of high-skilled from 2021, driven by the sectors including chemical, jobs as the country advances shift of the industry towards E&E, electric vehicle (EV), towards higher value- higher value-added activities aerospace, pharmaceutical added activities coupled and high-skilled jobs and advanced materials. with greater use of labour- opportunities created. enhancing automation and technological advancements. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial VISION, GOALS AND MISSIONS Master Plan 2030 39 The national manufacturing top-line targets of NIMP 2030 are as illustrated below: Figure 3.1: NIMP 2030 Value-added, Employment and Median Salary Targets Macroeconomic Targets for Manufacturing Sector (impact-based) Value added (GDP) Employment Median salary (RM billion) (million persons) (RM) 587.5(CAGR 6.5%) 3.3 (CAGR 2.3%) 4,510 (CAGR 9.6%) 364.1 2.7 1,976 61% 20% 128% Legend: Baseline (2021) Baseline (2022) Target (2030) Value increase Achieving the manufacturing top-line targets This goal can be achieved by strategies such will drive more sophisticated production, as building industrial capabilities to move technologies and expertise, leading to the up the value chain and fostering research, creation of high-skilled jobs. This will contribute development, commercialisation and to improving the overall manufacturing innovation (RDCI) ecosystem. Through a industry productivity level. robust and dynamic ecosystem, businesses, academia and civil societies can work together These manufacturing top-line targets will to innovate and develop new technologies for require the NIMP 2030 to deliver a set of goals industries in the areas of strategic importance, aligned to the Vision. The NIMP 2030 identified integrate value chains across sectors and six key Goals, guided by the NIA’s 5 key pillars support the internationalisation of Malaysian and ESG as an overarching theme, which are companies through access to more in-market as follows: opportunities, robust trade facilitation for intellectual properties (IPs) and strategic Increase economic complexity collaboration with international partners under existing FTAs. Malaysia’s journey towards accelerating economic development towards a high- Create high-value job opportunities income nation hinges upon the acquisition and utilisation of productive knowledge, The creation of high-value job opportunities is particularly in increasingly sophisticated crucial to uplift the society. To remain resilient, industries and products. Malaysia’s economy it is imperative for Malaysia to shift away from must effectively diversify into products that creating low-skilled, traditionally labour- require rich and deep know-how which only a intensive occupations towards knowledge- few other countries master, from innovation- intensive jobs. Global mega trends such as the intensive sectors such as E&E, aerospace, ICT, rising role of Industry 4.0 technologies, climate pharmaceutical, medical devices to the diverse change and environmental sustainability, high-tech engineering products. By increasing demographic shifts and globalisation of value complexity, Malaysia aims to enhance the chains are changing the nature of jobs. Skills strategic competitive positioning in industries transformation to develop future competencies in a wider range of products and services. remains at the forefront of the industrial strategy. It is imperative to support upward MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 40 Master Plan 2030 VISION, GOALS AND MISSIONS mobility of the bottom 20 to 30 per cent of the development within clusters, Malaysia can workforce, which could see jobs displaced and stimulate innovation, attract investments threatened by automation. and promote the growth of high-potential industries. The NIMP 2030 aims to create high-paying jobs and improve living standards for Malaysians Apart from that, clusters facilitate the sharing to build a sustainable middle-class society of resources, access to specialised services and with high purchasing power. This is important the creation of economies of scale. to address present challenges such as skill- related underemployment affecting over Improve inclusivity 894,000 individuals in 2022 and issues of limited increase in average real income for the Malaysia recognises the importance of bottom 50 per cent of the workforce. ensuring that the benefits of economic growth are shared equitably among all segments Among the strategies set include attracting of society. Improving inclusivity contributes high-quality investments from emerging to social cohesion, stability and long-term industries, building a good education base to sustainable development. enhance future workforce readiness, upskilling and reskilling the workforce through market- By promoting policies and programmes responsive STEM and Technical and Vocational that address social and economic disparities, Education and Training (TVET) education Malaysia aims to provide equal opportunities for streams, implementing progressive wage participation and advancement. This includes and inclusive workforce policies, as well as initiatives such as promoting gender equality, strengthening entrepreneurship opportunities. supporting marginalised communities and empowering Bumiputera participation. Extend domestic linkages Enhance ESG practices Developing strong domestic linkages is essential for sustainable industrial ESG practices have gained significant development. This goal emphasises the importance in today’s world. This involves importance of developing the breadth and adopting environmentally friendly production depth of Malaysia’s value chains for domestic processes, ensuring responsible resource industries, suppliers and service providers to management, promoting fair labour practices foster collaboration, knowledge-sharing and and strengthening corporate governance. innovation. Malaysia aims to enhance ESG practices By strengthening local value chains, Malaysia within its industries to promote sustainable can enhance competitiveness in providing development. By embedding sustainability holistic solutions and stimulate investments principles in industrial operations, Malaysia in industries with the greatest backward or can mitigate environmental impacts, promote forward linkages. This also supports domestic social well-being and enhance the long-term industries to achieve greater integration resilience and reputation of its industries. with global value chain and deepen local entrepreneurship. Extending domestic With the above Goals, the NIMP 2030 has linkages can lead to technology transfer, skill formulated the following targets: development and the development of a robust support ecosystem for businesses. Develop new and existing cluster Malaysia aims to develop new clusters in emerging sectors and strengthen existing clusters to enhance specialisation and competitiveness. By fostering collaboration, knowledge exchange and infrastructure MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial VISION, GOALS AND MISSIONS Master Plan 2030 41 Table 3.1: NIMP 2030 Targets The NIMP Outcomes Measures Baseline Targets 2030 Goals (2021) (2030) Sophistication in economic value- High-tech 8.1% of GDP 15% of GDP added manufacturing Consistent with the achievement of • Intensifying efforts in higher and services countries like Korea value-added activities value-added (15.6% of GDP) share of GDP Increase Malaysia as a regional innovation GERD to GDP 1.0% 3.5% economic hub In line with top 10 OECD complexity • Driving R&D-intensive economies (between 2.8-5.6% of companies and academia GDP as at 2021) to accelerate breakthrough technologies and transform industries, develop new products and core technologies High-skilled jobs in the Number of jobs N/A 700,000 total in manufacturing sector created 7 years • Generating high-income job opportunities in manufacturing and related services which Create high- would support a sustainable value job base of middle-income earners opportunities Fair income in the manufacturing Median salary RM1,976 RM4,510 sector From the previous increase of RM64 per • Raising income levels and annum, between 2011 providing fair employment to 2021 to RM 282 per opportunities annum between 2021 to 2030. Internationally competitive SMEs Share of export- 11.7% 25% • Integrating domestic SMEs into oriented SMEs Doubling share of SMEs involved in vendor the Global Value Chain development. Deepened local supply chain Domestic 49% 65% Extend integration value-added in (2018) domestic • Fostering more interconnected manufacturing linkages and robust domestic economy, greater contribution from local companies to production of domestic output and supporting cross-linkages across sectors Accelerated growth in existing core Global market 3.0% 6.0% clusters by diversifying into new share in products high-tech • Deepening existing core manufacturing Develop new clusters for greater economic exports and existing contribution clusters Accelerated growth in emerging Global market 2.0% 4.0% markets such as 4IR and digital share in green • Expanding to new higher-value and digital clusters exports MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 42 Master Plan 2030 VISION, GOALS AND MISSIONS The NIMP Outcomes Measures Baseline Targets 2030 Goals (2021) (2030) Catalysed sectoral and regional Realised FDI Average 25% development through investments and DDI share 13% • Encouraging distribution of of contribution Based on investment investments for more equitable to State GDP approvals regional development across figures the States provided by MIDA Improve High manufacturing value-added Manufacturing 22% of State 30% - 35% of State Inclusivity participation by less developed value-added in GDP GDP States less developed In line with advanced States’ GDP (between • Encouraging value-added and States 35% to 37%) higher income generating activities for balanced growth distribution across the States • Support greater regional industrial linkages across activities between the States Derisked economy against ESG Sustainalytics 56.5 75-100 factors ESG Index (Grade C) (Grade A) • Increasing Malaysia’s attractiveness as an investment destination by meeting global ESG standards and investors’ Enhance ESG needs practices Drive towards Net Zero aspirations Reduction 33% 45% • Achieving commitments in carbon Based on percentage in reducing GHG emissions emission changes in intensity under NDC by 2030 intensity based GHG levels on NDC goals between 2005 and 2019 MISSION-BASED APPROACH The NIMP 2030 takes on a Mission-based approach in industrial policy development. This rallies the nation to work together collectively towards achieving the NIMP 2030 Vision and shared set of Goals. This approach will also serve as a lever to enhance capabilities in line with the strategic investment and industrial goals under the NIA. To effectively drive Malaysian industrial development requires “moon-shot thinking” – setting ambitious goals and pursuing them with bold solutions to achieve transformative outcomes. This approach unites the nation, fostering collaboration to transform industries collectively. It galvanises the whole-of-government and the whole-of-nation, with the participation of both public and private sectors to realise the Missions. It is a shift from the sectoral-based approach of previous IMPs, which primarily focuses on the vertical action plans of individual sectors. The Mission-based approach unlocks the cross-cutting nature of the sectors with horizontal strategies. It outlines targeted and focused action plans in ensuring successful implementation to transform Malaysia’s industry. The NIMP 2030 recognises the importance of focusing on across-the-board shared challenges and common Missions that can generate broad-based effects and impacts. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial VISION, GOALS AND MISSIONS Master Plan 2030 43 MISSIONS To meet the Goals and targets, four Missions were formulated (Figure 3.2): MISSION 1 - Advance economic complexity: This is to encourage high-growth industries to innovate and produce more sophisticated products. This will enhance the competitiveness of Malaysia in the global market MISSION 2 - Tech up for a digitally vibrant nation: By embracing a whole-of-nation digital transformation, Malaysia can drive digital adoption, spur innovation, enhance labour productivity, and unlock opportunities in digital frontier technologies MISSION 3 - Push for Net Zero: This emphasises Malaysia’s commitment to addressing climate change by striving for a Net Zero future. Through sustainable practices and green initiatives, Malaysia aims to reduce carbon emissions and build a resilient and environmentally friendly economy MISSION 4 - Safeguard economic security and inclusivity: Malaysia aims to build resilience and enhance trade security against global shocks and geopolitical tension. Apart from that, Malaysia is creating an enabling environment that fosters entrepreneurship, supporting SMEs, and promoting equitable participation in economic activities to narrow all forms of disparities between the States The Missions are interlinked and requires all to be advanced simultaneously towards achieving the Goals and targets. However, there are multiple systemic and institutional issues that the Malaysian industries are facing – which will be addressed through four Enablers: Enabler 1 Enabler 2 Mobilise financing ecosystem Foster talent development and attraction Enabler 3 Enabler 4 Establish best-in-class investor journey Introduce whole-of-nation governance for ease of doing business framework The Missions and Enablers identified will be executed through 21 Strategies and 62 Actions Plans to unlock the needed enabling ecosystems. Several catalytic Mission-based Projects (MBPs) have been identified to catapult the mission-based implementation. There will be continuous engagements across industries and stakeholders through ‘industry deals’. These deals provide an avenue for industry players to foster collaborative partnerships and submit strategic proposals for MBPs that can be executed in delivering the Missions. Those will drive tangible actions towards achieving the Missions’ intended outcomes. The overall NIMP 2030 framework is illustrated below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 44 Master Plan 2030 VISION, GOALS AND MISSIONS Figure 3.2: Overall NIMP 2030 Framework GOALS MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial VISION, GOALS AND MISSIONS Master Plan 2030 45 Mission-based Projects: MBP 3.1 Create decarbonisation pathway role models MBP 3.2 Launch locally- manufactured EV MBP 3.3 Deploy large-scale CCUS solutions MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 4 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY New Industrial 48 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Increase Create high- Extend domestic Develop new & Improve Enhance ESG economic value job linkages existing clusters inclusivity practices complexity opportunities Malaysia is currently positioned 24th in the Economic Complexity Index ranking. While neighbouring countries have been catching up and moving up the rank e.g. Thailand (37th to 29th) and the Philippines (45th to 37th), Malaysia’s position has remained stagnant in the last 10 years. Malaysia aspires to emulate the economic complexity of Japan, South Korea and Singapore. Malaysia’s established manufacturing ecosystem has given the country the opportunity to expand into more advanced and high value-added manufacturing activities. For the most part, Malaysia has been involved in medium to low value-added segments of the manufacturing value chain. This calls for the industries to innovate, produce and export more sophisticated products and diversify production capabilities. In pursuit of this Mission, Malaysia aims to facilitate industries to move up the value chain, develop a comprehensive ecosystem, reduce dependency on external supply chains and perform targeted R&D focusing on key sectors. The successful implementation of Strategies and Action Plans under Mission 1 will result in impactful outcomes as follows: • Diversification of the economy: While Malaysia has a relatively diversified export basket mix, the country ranks 51st out of 133 countries in terms of export diversity. The Mission is envisioned to improve this performance by expanding our know-how to tap adjacent products with higher value-added activities, integrate into new high-growth opportunities, unlock new invention and reduce dependency on importation of critical products; • Improved global competitiveness through complex product exports: Malaysia will be able to produce a wider range of sophisticated and value-added products and services across the various sectors. This will enhance Malaysia’s participation in the global value chain; and • Higher income and wages: Malaysia will be able to create more high-skilled STEM jobs, as well as attract and retain a world-class talent ecosystem that drives innovation. There are five Strategies, 15 Action Plans and four Mission-based Projects to be carried out to achieve Mission 1, as illustrated below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 49 Figure 4.1: Mission 1 – Advance Economic Complexity MISSION 1 Advance economic complexity

1.1 — Expand to high value-added activities of 1.3 Establish cooperative ‘vertical integration’

1.1 Expand to high value-added activities of 1.3 Establish cooperative ‘vertical integration’ the value chain for global value chain

1.1.1 — Create global IC design champions from 1.3.1 Leverage alliance with ASEAN countries

1.1.1 Create global IC design champions from 1.3.1 Leverage alliance with ASEAN countries Malaysia to integrate the semiconductor, advanced

1.1.2 — Attract global leader to establish wafer materials and clean energy value chain

1.1.2 Attract global leader to establish wafer materials and clean energy value chain fabrication in Malaysia 1.3.2 Develop vertical integration programmes

1.1.3 — Shift from basic to specialty chemical through IndustryConnect conferences

1.1.3 Shift from basic to specialty chemical through IndustryConnect conferences

1.1.4 — Build Malaysian champions for game

1.1.4 Build Malaysian champions for game changing advanced materials 1.4 Foster Research, Development,

1.1.5 — Identify high value-added opportunities Commercialisation and Innovation (RDCI)

1.1.5 Identify high value-added opportunities Commercialisation and Innovation (RDCI) in the aerospace, pharmaceutical and ecosystem medical devices sectors 1.4.1 Assign specific topics and KPIs to universities for industrial-linked R&D

1.4.2 — Digitalise IP application and launch

1.4.2 Digitalise IP application and launch enhanced National IP Policy

1.2 — Develop entire ecosystem to support the

1.2 Develop entire ecosystem to support the high value-added activities 1.5 Increase manufacturing exports

1.2.1 — Build strong local SMEs in manufacturing 1.5.1 Implement national trade advocacy

1.2.1 Build strong local SMEs in manufacturing 1.5.1 Implement national trade advocacy and related services to support the campaign to increase industry utilisation industry champions of FTAs

1.2.2 — Integrate value chains between: 1.5.2 Rejuvenate “Made in Malaysia” branding

1.2.2 Integrate value chains between: 1.5.2 Rejuvenate “Made in Malaysia” branding • M&E and Medical Devices 1.5.3 Address trade restrictive non-tariff • Semiconductor and EV measures (NTMs) and compliance of • Chemical and Pharmaceutical standards

1.5.4 — Update FTA based on geopolitical

1.5.4 Update FTA based on geopolitical conditions Mission-based Projects: MBP 1.1 MBP 1.2 MBP 1.3 MBP 1.4 Create global IC Attract new advanced Deepen to specialty Groom champions design champions in wafer fabrication in chemical vertical in 4 game changing EV, RE and AI Malaysia advanced materials MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 50 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Expand to high value-added activities of the value STRATEGY 1.1 chain Malaysia is well-positioned to transform its economy through high value-added activities along the manufacturing value chain, given the current accumulated production experience. Of significance, the industrial upgrading of capabilities especially through horizontal and vertical integration are becoming important features within a modern and competitive production structure, especially with more flexible processes driven by automation and digitalisation. All manufacturing and MRS sectors have the opportunities to expand to high value-added activities, for instance: • E&E – Adopt higher level of technology in advanced packaging, such as Fan-Out Wafer-Level Packaging and Chiplet die-to-die packaging; • M&E – Expand into refurbishing services (e.g. industrial turbines and generators) and energy efficient solutions (e.g. water and wind turbines, and photovoltaic power generating systems); • Metal – Develop flat products, such as hot-rolled sheets and strips, plates, galvanised sheets and other metallic coated sheets; • Food processing – Expand into ready-to-eat meals and alternative proteins; and • Textile – Leverage smart and advanced textiles for defence, automotive interior furnishings, medical, geo-textile and sportswear. In this strategy, Malaysia emphasises on expansion to higher value-added activities from design and development, product development, supply chain management to integrated services solution delivery. Among the high-tech manufacturing industries identified for this strategy include E&E, chemical, advanced materials, aerospace, pharmaceutical and medical devices, which can generate high economic and innovation knowledge spillovers. Going forward, Malaysia strives to shift away from traditional manufacturing models (e.g. contract manufacturing) and methods towards becoming an innovation-led manufacturing hub. To achieve this, five Action Plans have been formulated: ACTION PLAN Create global IC design champions from Malaysia 1.1.1 The E&E sector forms about 40 per cent of Malaysia’s manufacturing exports (twelfth largest exporter of E&E products and sixth largest exporter of semiconductor in the world36). With semiconductors making about 60 per cent of the total E&E exports, Malaysia is currently among the leading hub for assembly, including outsourced, testing and packaging activities. Building on these capabilities and trends such as the digital revolution which require more advanced chips with greater computational power and memory capacity, Malaysia aims to develop a more integrated involvement across the front-end and back-end semiconductor ecosystem. This will be crucial even as the future semiconductor manufacturing moves towards advanced packaging models, where multiple chip dies are integrated within a single package to minimise fabrication cost and yield higher performance. On the front-end of activities, Malaysia aims to deepen involvement in the Integrated Circuit (IC) design which confers higher profit margins and greater specialisation within the global semiconductor value chain. IC design - which includes design of both physical integrated circuits and associated software - accounts for roughly half of global semiconductor industry R&D investment and value-added. Furthermore, the design of ICs has a sustainable and competitive advantage if close collaboration can be promoted with OEMs in high-technology industries such as mobile communication, defence, medical devices and automotive that requires ICs embedded within their systems. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 51 The involvement in leading-edge chip design and manufacturing will require nurturing strong capabilities in research, supply chain management, talent, and intellectual property (IP) protection, as well as navigating through government policies. The NIMP 2030 plans to support the development of IC design capabilities to capitalise on fast- growing end-market applications such as: Electric Vehicle Proliferation of EV and green mobility presents opportunities for local E&E players to the tune of RM961 billion in electronics and sensors for the global market as well as RM141.2 million in terms of potential annual consumption. Electric drives and energy control system will utilise power inverters, while autonomous driving systems and other on-board control will require purpose- built AI-chips and a wide range of sensors across radar, Light Detection and Ranging (LiDAR) and vision. Custom-designed chips also play an integral role in critical safety features such as redundant power systems to ensure that chips operate safely and reliably in the most challenging environments. Renewable Energy Renewable energy (solar power generation) and energy storage will require greater power management. In this regard, new materials such as Gallium Nitride (GaN) and Silicon Carbide (SiC) are paving the way for higher efficiency and longer lifetime power conversion devices. The use of GaN and SiC transistors in solar inverters can boost system efficiency. At present, more than 90 per cent of the balance of system electronics are imported. Going forward, domestic development of power electronic modules can be synergised to support present value chains for solar in Malaysia, especially in Electronic Manufacturing Service and Advanced Test Packaging, as well as downstream deployment of solar projects domestically through Large Scale Solar (LSS capacity) and globally. Artificial intelligence (AI) AI applications require parallel computation, higher CPU-memory throughput, and an increase in need for edge-based computation for use cases. AI-based chips (e.g. Application Specific Integrated Circuits (ASIC) and Field-Programmable Gate Array (FPGA)) for low-to-medium-based complexity is up to 1,000 times more efficient as a general-purpose CPU for AI tasks. This opens the opportunity to utilise higher node sizes of up to 28nm - 40nm and tune the AI chip to AI application’s complexity rather than using the brute force of smaller node size for general CPUs. Beyond popular consumer applications such as smart phones and PCs, these AI chips are also applied for drones, autonomous robots and manufacturing control and quality monitoring. As these latter applications are still emerging, Malaysia has an opportunity to build indigenous technology supply for industries by way of AI chips, control modules and sensors for local and regional industries to build inertial momentum. MITI will lead the action plan, with support from Malaysian Investment Development Authority (MIDA), Malaysia Productivity Corporation (MPC), Standard and Industrial Research Institute of Malaysia (SIRIM), Collaborative Research in Engineering, Science and Technology (CREST), MIMOS, Malaysia Semiconductor Industry Association (MSIA) and key industry players. The following are key steps to be undertaken: • Create a supportive ecosystem to accelerate the growth of local IC design champions; • Facilitate the collaboration of industry, academia and the Government to create a robust ecosystem to address business demands; and • Provide support to the IC design champions i.e. talent development, funding and incentives. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 52 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY ACTION PLAN Attract global leader to establish wafer fabrication 1.1.2 in Malaysia Wafer fabrication is a manufacturing process of creating semiconductor wafers that are used to produce ICs. Design and wafer fabrication are closely interlinked. Fabrication provides vital input on the design’s manufacturability by providing the test silicon to validate the electronic model. Such close collaboration is especially critical to support scaling new processes which are faced with inherent uncertainties in modelling and achieving a target manufacturing yield. Thus, the need to establish a wafer fabrication outfit grows greater even as Malaysia moves up the semiconductor value chain. Malaysia’s focus will be primarily in the mid-range wafer fabrication as this configuration typically provides the best cost-to-performance balance. Apart from that, the establishment of a wafer fabrication facility will also provide a diversification strategy even within East Asia which has the highest concentration for wafer fabrication. Figure 4.2: Semiconductor Value Chain R&D and IC Design Wafer Fabrication ATP EMS Assembly, Testing Electronics High value added and Packaging manufacturing services Malaysia has a rich Platform for IC Malaysia has a strong pool of engineers to design R&D presence - to build on support IC design existing strenghts to extend market position Local companies High investment cost in IC design space - Large spillover Focus: IC design Focus: 28-40nm • Electric Vehicle (EV) • Attract 1 global • Renewable Energy leader to establish (RE) fabrication in • Artificial Malaysia Intelligence (AI) This action plan will be led by MITI and supported by MIDA, MSIA, SIRIM, CREST, MIMOS and several key industry players. Key activities will be to: • Create a supportive ecosystem to attract global wafer fabrication leaders and integrate opportunities with end applications; • Facilitate the collaboration between industry, academia and the Government to create a robust ecosystem to address business demands; and • Provide support to the wafer fabrication companies i.e. talent development, funding and incentives. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 53 ACTION PLAN Shift from basic to specialty chemicals 1.1.3 The specialty chemical industry plays a pivotal role in driving innovation and the production of high-value specialty chemical products. Known for their complexity, specialty chemicals hold substantial potential for exports, thus contributing to the economic complexity of the country. The specialty chemical market has a huge potential because of its diverse usage: • Electronic chemicals (semiconductor use for etching, bonding, testing); • Construction chemicals (concrete construction, metal construction); • Nutrition chemicals (flavouring, extend shelf life); • Care chemicals (textile manufacturing, personal care products); and • Agro-chemicals (pest control, fertilise soil, promote plant growth). Figure 4.3: Chemical Sector Value Chain End-use/ Feedstock High Value Added Building Specialty Feedstock Intermediates Polymers blocks Chemicals 5 Focus areas Agrochemical Care Chemicals Agrochemical Electronic Construction • Pest control • Textile • Food Chemicals Chemicals • Fertilise soil manufacturing processing • Semiconductor • Concrete • Promote plant • Personal care • Extend shelf etching, construction growth products life, enhance bonding, • Metal taste & colour testing construction Current Under NIMP Export Other countries Feedstock Base Export of Chemical Production of specialty Process to Specialty specialty chemical in Malaysia Chemical chemical End use Import Malaysia Malaysia currently produces and exports • Complement the development and feedstock and intermediate products and growth of other key prioritised sectors imports the value-added intermediates in and create opportunities for export (e.g. the form of specialty chemicals. To remain pharmaceutical, E&E, etc.). competitive and enhance domestic linkages, Malaysia has to advance into producing higher MITI will lead this action plan, supported by value-added intermediates and specialty MIDA and key industrial players. Key activities chemicals. will include: Specialty chemicals produced locally will: • Understanding and providing the necessary support required by other local players • Strengthen the domestic value chain, thus (funding, attracting investment); reducing the need to import; • Strategising the upskilling of local • Boost the local development of niche capabilities; and expertise in specialty chemical technologies; • Facilitating the ecosystem to support the and specialty chemical industry. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 54 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Box Article 4.1: Specialty Chemicals and Their Uses What are specialty chemicals? Commodity Lower Higher Specialty chemicals value add value add chemicals § Produced in large § Typically manufactured in quantities smaller batches § Primarily used as raw § Offers unique characteristics materials for products and performance properties Quick Facts § In 2019, Specialty Chemicals accounted for 11.7% of investments in Malaysia’s manufacturing sector (RM 4.8 billion) § From 2019 to 2026, the global market for Specialty chemicals is expected to grow at a compounded annual growth rate of 5.2% Agrochemical Used to enhance crop yield - typically through protection of plants from pests and diseases e.g. pesticides, herbicides Construction chemicals Care chemicals Used to enable/ease NIMP Specialty Used in formulation of manufacturing or Chemicals personal care products improve performance of personal care products such construction materials Focus Area as cosmetics or toiletries e.g., concrete admixtures, e.g.; emollients, surfactants protective coatings Electronics chemicals Nutrition chemicals Used in production of Used on food products to electronic components enhance qualities such as such as semiconductors taste, texture, appearance and PCBs e,g., silicon or preservation e.g. flavour enhancers Source: S&P Global, MIDA MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 55 ACTION PLAN Build Malaysian champions for game changing advanced 1.1.4 materials Malaysia possesses abundant natural resources that are instrumental in the production of advanced materials. These materials hold great significance in global manufacturing industries and are highly sought after by multinational corporations (MNCs) worldwide. Apart from that, advanced materials play a crucial role in key industries within Malaysia such as EV, healthcare and aerospace. Leveraging its resource advantage, Malaysia is well-positioned to contribute significantly to the production and utilisation of advanced materials. The National Advanced Materials Technology Roadmap 2021-2030 identified four game changing advanced materials that have the potential to revolutionise the manufacturing industry: Table 4.1: Game Changing Advanced Materials Advanced Materials Characteristics Application (Potential usage) Graphene Thinnest, strongest and most Electronics, medical devices, batteries conductive material Nitinol Shape memory effect (returns to its Medical devices, aerospace original shape when heated up), super elastic, pseudo-elastic Rare Earth Strong, lightweight, high magnetic Ideal for battery production, EV properties batteries Microcrystalline Environmentally friendly and Ingredient for food, cosmetics, Cellulose (MCC) sustainable polymer pharmaceutical, structural composites Polymer To produce local champions and spearhead the growth and usage of advanced materials, it is imperative that the Government facilitates the following: • Promote and proliferate downstream application of advanced materials (awareness of benefits to industry players across sectors) and strengthen partnerships to obtain greater market access; • Provide better access to funding, talent and infrastructure for R&D, and provide support to commercialise R&D; and • Protect IP rights and provide incentives (e.g. for R&D activities). This action plan will be led by MITI and supported by Ministry of Science, Technology and Innovation (MOSTI), Ministry of Natural Resources, Environment and Climate Change (NRECC), MIDA, Malaysian Industry-Government Group for High Technology (MIGHT), SIRIM and key industry players. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 56 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Box Article 4.2: Applications of Advanced Materials What is advanced materials? “ Novel or improved materials engineered for targeted and improved properties, that provide New or better materials Designed to have clear advantages to a distinct advantage in (physical or functional) performance common materials and application when compared to conventional materials, “ which enable and provide innovative technological solutions To provide solutions that and sustainability to the economy, environment and society benefit the economy, environment and society MALAYSIAN DEFINITION FOR ADVANCED MATERIALS Surfaces • Coatings and emerging adhesives/ sealants • Improve the properties of materials • E.g. protective coatings can increase the lifetime of a product while also reducing maintenance costs by slowing down degradation Structures • Metals, composites, polymers, high performance structural ceramics, process technologies and geopolymer • Improve on the limits of typical engineering materials • E.g. metals can be developed for extreme features, such as high thermal resistance or electrical conductivity Future Material Platforms • Nanomaterials, reticular materials, smart coatings, shape memory and metamaterials • Tackles problems in the status-quo: sustainability and materials security, materials for energy and high value markets • E.g. metamaterials developed to achieve electromagnetic properties have applications in many industries such as cloaking devices in defense, energy harvesting and solar cells and acoustic and vibration control Importance Essential for innovation and Offer functional solutions and Fuel economic growth, value growth in various industries drive market development creation and competitiveness worldwide, including Malaysia in sectors like healthcare, in the manufacturing sector aerospace and automotive Source: National Advanced Materials Technology Roadmap 2021-2030 MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 57 ACTION PLAN Identify high value-added opportunities in the aerospace, 1.1.5 pharmaceutical and medical devices sectors The aerospace, pharmaceutical and medical devices are important industries in Malaysia. The aerospace sector in Malaysia is home to several major international companies. These companies manufacture a wide range of aircraft components and systems in Malaysia, including parts of the wing, engine components, avionics and drones. Apart from that, there are opportunities present in astronautics upstream segment, in particular space-related manufacturing of satellites and other spacecraft parts and components. On healthcare manufacturing, Malaysia has a strong pharmaceutical and medical devices base which can be enhanced for future growth in a higher range of product segments. Figure 4.4: Key Growth Segments of Aerospace, Pharmaceutical and Medical Devices Sectors Aerospace Pharmaceutical MRO Aerospace Manufacturing Including aeronautics, composite materials Manufacture of API Halal biologics manufacturing medicines System Integration of niche Including capabilities in UAV botanicals or drone Engineering & Design Medical Devices Services Education & Training Astronautics Design, manufacturing, Minimally Point of care Medical and assembly of space invasive device products devices from equipment, satellites, convergence of spacecraft, gound technologies equipment The Government recognises huge potentials in these sectors where the aerospace sector revenue in Malaysia is estimated to skyrocket to RM55 billion by 203037 while the pharmaceutical sector’s GDP value is estimated to reach RM2.5 billion by 2030. It is important that MITI and the Ministry of Health (MOH) along with MIDA, National Aerospace Industry Corporation (NAICO) and Medical Device Authority (MDA) work together to: • Create a supportive ecosystem to cater to the industry’s needs (including collaboration and partnerships between businesses, universities and Government Agencies); • Foster collaboration and knowledge sharing among industry players to adopt the industry’s best practices; and • Facilitate the industry’s product development including R&D, testing and standards compliance. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 58 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Develop entire ecosystem to support the high value- STRATEGY 1.2 added activities Developing an ecosystem to support high value-added activities in Malaysia involves creating a conducive environment that stimulates and sustains the growth of industries engaged in activities of high economic value. This ecosystem focuses on providing the necessary infrastructure, resources, policies and support systems to enable manufacturing industries to thrive in activities that add significant value to products and services. Such an ecosystem encompasses various elements, including R&D capabilities, access to funding and grants, availability of skilled talents, robust IP protection, strong industry-academia collaborations, supportive government policies and incentives and a well-developed supply chain through the participation of SMEs. This approach helps create a favourable environment for innovation and the development of high value-added sectors, positioning Malaysia as a dynamic and attractive destination for high-value economic activities which can result in: • Job creation – generating medium and high-skilled workforce demand; and • Enhance the country’s competitiveness for innovation. To achieve this, two Action Plans have been formulated: ACTION PLAN Build strong local SMEs in manufacturing and related 1.2.1 services to support the industry champions To meet the demand along the value chain, it is crucial to enhance the capabilities of small and medium enterprises (SMEs) and involve them in higher value-added activities. The ambition is to increase the contribution of SMEs to the country’s GDP currently at 38 per cent38, to reach the levels seen in developed countries, ranging from 50 to 60 per cent. Manufacturing sector SMEs play a pivotal role to support large local companies (LLCs) and MNCs as local suppliers with the required skillsets. This reduces the overall cost for these LLCs and MNCs to operate in Malaysia and helps create a more sustainable and robust supply chain. Figure 4.5: Industry Champion Value Chain High Value High Value R&D Design Assembly Logistics Marketing Services SMEs and Mid-Tier Companies Assist SMEs/ Compliance to standards Supplier to MTCs to uplift and regulations with MNCs and capabilities emphasis on LLCs • Quality • Digitalisation • ESG Notes SME - Small and Medium-sized Enterprise MNC - Multinational Company MTC - Mid-Tier Company LLC - Large Local Company MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 59 One approach to help SMEs scale up towards becoming mid-tier companies is by leveraging key SME programmes like PRESTIGE by SME Corp. These programmes provide support and resources to assist SMEs in expanding their operations and reaching higher levels of labour productivity. The SME Roadmap is currently under development by the Ministry of Entrepreneur and Cooperatives Development (KUSKOP). This roadmap will outline the strategic direction and initiatives to further support and empower SMEs in their growth and participation in higher value-added activities. The execution of this action plan will be led by KUSKOP and SME Corp in consultation with MITI, MIDA, MPC, industry players in the prioritised sectors and industry experts. Key actions to be taken include: • Engage industry players in the prioritised sectors to identify strong manufacturing sector SMEs in Malaysia; • Identify gaps in the value chain of LLCs and MNCs with no or few local SMEs participation; • Identify and engage potential SMEs that have the potential to be groomed to meet the standards required by LLCs and MNCs; and • Provide support required to scale up interested SMEs. ACTION PLAN Integrate value chains between: M&E and Medical Device,

1.2.2 — Semiconductor and EV, and Chemical and Pharmaceutical

1.2.2 Semiconductor and EV, and Chemical and Pharmaceutical Integrating value chains between sectors, involves linking the various stages and processes involved in the manufacturing of products in both the sectors. By integrating the value chains between these sectors, Malaysia will have a better-connected economic ecosystem. This integration leads to increased efficiency in resource utilisation, reduced costs, improved innovation and enhanced product complexity. To achieve this, it is essential to nurture local companies and further develop core competencies that are applicable across different sectors. This approach recognises that certain sectors may have specific capabilities, knowledge or resources that can be leveraged to stimulate cross sectoral innovation and unlock new opportunities. These are some examples of how different sectors complement each other to produce more complex products: • M&E (e.g. electronic manufacturing services (EMS) and engineering supporting services (ESS)) and medical devices sectors: Advanced inspection solution in manufacturing adopted in medical devices (imaging, endoscopy); • E&E and automotive sectors – EV components; and • Chemical and pharmaceutical sectors – improved active pharmaceutical ingredient (API) for better quality generic drugs. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 60 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Figure 4.6: Integration between Value Chains • Advanced inspection Machinery & solution Medical equipment Devices • Implantable devices • Minimally invasive surgical tool Electrical & • EV chip Automotive Electronics • Super chargers • Smart sensors • Active pharmaceutical Chemical ingredient (API) Pharmaceutical • Biologics – insulin, vaccines • Solvents, preservatives, excipients in generic drugs This action plan will be led by MITI in collaboration with MIDA, MPC and industry players in the prioritised sectors. Key actions to be taken include: • Identify core competencies that have potential for high value-added activities; • Identify synergies between sectors across the value chain based on complementary strengths; • Prioritise opportunities for collaborations across sectors and discuss potential business case; and • Connect with foreign investors or MNCs, if needed, for greater investment and market access. Establish cooperative ‘vertical integration’ for global STRATEGY 1.3 value chain ASEAN countries, including Malaysia, can bolster their participation in the global value chain by prioritising collaboration as a cohesive trading bloc. A key aspect of this strategy is pursuing vertical integration, where different stages of the value chain for selected industries are integrated across ASEAN countries. This approach enables efficient resource utilisation, promotes specialisation and enhances the region’s overall competitiveness. By working together, Malaysia and its neighbouring nations have the opportunity to achieve collective success through mutual trade cooperation. By leveraging each other’s strengths and collaborating on value chain integration, ASEAN countries can create a win-win situation, fostering economic growth and strengthening their collective position in the global marketplace. To achieve this, two Action Plans have been formulated: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 61 ACTION PLAN Leverage alliance with ASEAN countries to integrate the 1.3.1 semiconductor, advanced materials and clean energy value chain Malaysia aims to take proactive steps to establish an alliance with ASEAN countries to increase its participation in higher value-added activities within the GVC. By collaborating closely with ASEAN partners, Malaysia seeks to leverage the collective strengths and resources of the region to complement each other’s strengths and promote regional cooperation that will collectively capture more value in the GVC. Figure 4.7: Malaysia as Gateway to ASEAN Collaborate with ASEAN countries Leveraging strengths Vertical integration Complement for greater export to within region not compete outside ASEAN Malaysia needs to first upgrade its capabilities and strengths to participate in segments within the GVC of the prioritised sectors. For example: • Semiconductor: IC design and wafer fabrication; • Advanced material: production of advanced materials e.g. graphene, rare earth; and • Clean energy: production of EV batteries and renewable energy. MITI will lead this action plan, supported by MIDA, MATRADE and key industry players. Some of the actions to be taken are: • Identify areas where Malaysia is strong in and have potential global demand; • Engage large global players in prioritised sectors to understand opportunities within the GVC and interest to invest; • Identify and upscale Malaysian local companies with the required capabilities and capacity to participate in GVC; and • Strengthen economic cooperation with countries regionally and globally for opportunities in GVC. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 62 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY ACTION PLAN Develop vertical integration programmes through

1.3.2 — IndustryConnect conferences

1.3.2 IndustryConnect conferences Malaysia will create greater integration with the GVC, supporting SMEs to connect with the supply chains of MNCs and LLCs. Malaysia will facilitate IndustryConnect conferences which provide opportunities for industry players, investors and financiers to interact, share experiences and explore potential partnerships. This conference will involve key industry players from MNCs, LLCs, Mid-tier companies (MTCs), SMEs and other companies within the vendor ecosystem along with financial institutions. This opportunity will provide an avenue where investment deals could be initiated and pursued whereby: • Industry players can support potential suppliers to meet requirement, such as standards, digitalisation and ESG; • SMEs can showcase their innovation, products or capabilities to support in the MNC or LLC value chain; and • Investors and financiers can identify promising funding or investment opportunities. Figure 4.8: IndustryConnect Conference This action plan will be led by MITI and supported by MIDA, Federation of Malaysian Manufacturers (FMM), SME Corp, BNM, SC and key industry players. Some of the actions to be taken are: • Engage MNCs and LLCs to be anchor companies in IndustryConnect conferences; and • Organise IndustryConnect conference, inviting anchor companies, potential vendor ecosystem and financiers. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 63 Foster Research, Development, Commercialisation STRATEGY 1.4 and Innovation (RDCI) ecosystem RDCI plays a crucial role in increasing economic complexity and high-skilled talent development. This seamless connection between research, commercialisation and innovation processes promotes the introduction of new products and services that drive job creation and economic expansion. However, Malaysia faces challenges in achieving high value-added manufacturing due to its relatively low innovation performance. The RDCI ecosystem is a network of organisations and individuals that work together to promote research, development, commercialisation and innovation. The ecosystem includes universities, research institutes, businesses, Government Agencies and financial institutions. To achieve this, two Action Plans have been formulated: ACTION PLAN Assign specific topics and Key Performance Indicators

1.4.1 — (KPIs) to universities for industrial-linked R&D

1.4.1 (KPIs) to universities for industrial-linked R&D Malaysia will gradually shift towards a topic-centric R&D model where efforts are organised and prioritised based on specific topics or areas of focus. Specific topics are identified based on alignment to the NIMP 2030 Goals, strategic importance and industry-specific needs for Malaysia’s advancement. The R&D topics will focus on both horizontal and vertical capabilities within specific areas. They encompass various fields, such as emerging technologies. Some examples include: • Horizontal capabilities – critical in driving innovation across multiple sectors e.g. AI, Blockchain and Cybersecurity; and • Vertical capabilities – targeted focus area in specific sectors e.g. E&E (IC design), aerospace (drone technology, avionics system), and specialty chemicals (electronic chemicals, eco- friendly fertiliser). Figure 4.9: Top-centric R&D for Industrial Application MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 64 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY To achieve this, Malaysia aims to enhance topic-specific R&D ecosystems by facilitating collaboration among research institutions, industry players and funding bodies (e.g. Malaysia Science Endowment) to achieve greater efficiency and impactful R&D. There needs to be a balance between publication, application and commercialisation of R&Ds. These efforts will be aligned to the direction and guidance of the Research, Development, Innovation, Commercialisation and Economy (RDICE) roadmap by MOSTI. Malaysia aims to strengthen existing centres of excellence (CoE) in targeted sectors to develop expertise in high value-added areas. These CoEs will serve as shared facilities to cultivate complex innovation, foster collaboration and accelerate knowledge dissemination. This action plan will be led by Ministry of Higher Education (MOHE) and MOSTI, supported by the National Science Council, Research Management Unit under the Ministry of Economy (KE), Malaysian Research Accelerator for Technology and Innovation (MRANTI), MIMOS, CREST, MITI, SIRIM and other national research institutions (NRI). The key steps to be taken include: • Identify relevant topics for R&D through organising sessions and forums; • Identify potential industry players to collaborate based on R&D topics (e.g. launch academia- industry partnership programmes); • Identify existing CoEs to be scaled up in high value-added areas of prioritised sectors; • Scale up support to topic-specific ecosystem through NRI collaboration; and • Introduce targeted and time-bound incentives on R&D investments. ACTION PLAN Digitalise IP application and launch enhanced National

1.4.2 — IP Policy

1.4.2 IP Policy Intellectual property (IP) rights are essential for manufacturing industries in Malaysia as it can help to protect their inventions and designs from unauthorised use. A new national IP policy to enhance the principles and guidelines that govern how IP is created, used and protected is being developed by the Ministry of Domestic Trade and Costs of Living (KPDN) and the Intellectual Property Corporation of Malaysia (MyIPO). Currently, the IP application process, particularly for patents, is time-consuming. To address this, Malaysia aims to digitalise the IP application process, making it more efficient, accessible and user-friendly. Malaysia is focused on enhancing IP protection by ensuring fair assessments of patents and providing comprehensive coverage for patent owners during disputes. To strengthen the overall IP regime, Malaysia has identified three key areas for improvement: • Strengthen IP Regime – strengthened Malaysia’s IP protection to ensure fair examination of patent applications; • IP Application process – improved patent assessment capability through partnerships with industry and academia; and • IP Commercialisation support – improved IP application process (application, arbitration and dispute centre) and commercialisation support for R&D outcomes to attract investors. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 65 Figure 4.10: Areas to Strengthen in IP Regime This action plan will be led by KPDN and MyIPO supported by MITI, SIRIM and Standards Malaysia. The key related activities are to: • Identify levers to improve current IP protection regime: • Arbitration and dispute measures; • Enforcement mechanism; • Leveraging other countries’ IP systems and IP application process; and • Review relevant agencies current capabilities for better IP support. • Implement key measures to accelerate IP application process: • Digitalise key patent application functions to accelerate application process; and • Increase number of certified IP underwriters to draft patents to reduce lead time and ensure quality IP. • Consider provision of IP bundle to make it attractive for R&D in Malaysia; and • Launch enhanced National IP Policy. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 66 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY STRATEGY 1.5 Increase manufacturing exports Increasing manufacturing exports is one of the most critical objectives for Malaysia seeking to boost its economic growth and international competitiveness. By expanding manufacturing exports, Malaysia can capitalise on its industrial capabilities and leverage global market opportunities. There are several steps that Malaysia can do to increase their manufacturing exports. These ranges from improving the quality of products produced to expanding into new markets or improving the overall trade ecosystem. To achieve this, four Action Plans have been formulated: ACTION PLAN Implement national trade advocacy campaign to 1.5.1 increase industry utilisation of FTAs The utilisation of FTAs in Malaysia is of significant importance as it enables wide market access to participating countries and supports diversification of exports by fully leveraging on the preferential tariffs offered. However, the utilisation of the FTAs especially amongst SMEs is low, and this is largely due to the limited awareness and knowledge to navigate through the complex processes. A national trade advocacy campaign needs to be enhanced to deepen understanding of FTA benefits. It will act as a guide for companies to fulfil requirements of the FTAs among others: • Rules of Origin (ROO); • Certificate of Origin (COO); and • Technical barrier to trade. Malaysia will support in aggregating the competencies of local companies, bringing them together via export consortia to increase their bidding competitiveness for international contracts. The local companies will need to upgrade their capabilities to meet the standards and requirements by the international market. The trade advocacy campaign aims to support SMEs and Bumiputera companies to meet the FTA eligibility criteria and therefore increase exports. Figure 4.11: National Trade Advocacy Campaign MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 67 This action plan will be led by MITI and supported by MATRADE, Malaysia Design Council (MRM), TERAJU, SMECorp and industry players. Key actions are to: • Conduct promotional activities through online and offline model: • Online: interactive webpage, sector specific webinar, online FTA consulting services; and • Offline: live seminars targeted at SMEs, site visits by experts to assist with ROO determination and documentation. • Address issues based on feedback from companies regarding FTA requirements; and • Provide access to experts to address ROO, FTA eligibility and other related issues. ACTION PLAN Rejuvenate “Made in Malaysia” branding 1.5.2 The Made in Malaysia tagline can be a powerful marketing tool to portray Malaysian-made products. A good branding image to Malaysia can result in: • Built brand trust – a tagline that highlights quality and innovation from Malaysia-made products can help build brand trust and loyalty; • Differentiating factor – sets the standard to differentiate Malaysian-made products from those made in other countries; and • Raised awareness – good publicity to attract new national and international partners towards Malaysian-made products. To further enhance Malaysia’s international presence and marketability, it is imperative to develop a national branding theme that fosters a more consistent approach in promoting Malaysian- made products globally. It is essential to tailor a unique value proposition for each export sector, emphasising the distinct strengths and advantages of Malaysian products within their respective industries. Figure 4.12: “Made in Malaysia” Brand This action plan will be led by MATRADE and supported by MITI, MRM and selected industry champions. Key activities are to: • Provide national branding guidelines for public and private sectors, including SMEs; • Work with strategic partners and key influencers in target markets to promote Malaysian brands; and • Facilitate access to funding to cover support for international branding efforts, digital marketing and certification. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 68 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY ACTION PLAN Address trade restrictive non-tariff measures (NTMs) and 1.5.3 compliance of standards The imposition of many Non-tariff Measures (NTMs) by multiple Ministries in Malaysia has resulted in increased costs and complex procedures for local companies seeking to export their products. A number of these NTMs could have overlapping requirements and companies need to spend time and effort to comply with each individual NTMs that are relevant to them. Some of the key requirements to export include: • “Technical barriers to trade” (TBT) and “Sanitary and phytosanitary” (SPS) measures (convention or standards); • Complying with technical specifications and quality requirement, related processes and production methods; and • Labelling and packaging for environmental protection, consumer safety and national security. To address this issue, it is crucial to have a consolidated review on legislation and standard requirements associated with NTMs, and streamline the process to make it more efficient and business-friendly. Consolidating NTMs based on their similarities will simplify procedures and help local companies avoid unnecessary efforts and costs. Apart from that, expanding the product coverage of Mutual Recognition Agreements (MRA) with trading countries would effectively reduce duplicated compliance processes for both importing and exporting countries. Figure 4.13: Pathway to Ease NTMs Process This action plan will be led by MPC and supported by MITI, SIRIM, MATRADE and relevant Ministries with NTMs. Key actions to be taken: • Categorise NTMs based on TBT or SPS classifications; • Engage relevant Ministries to discuss consolidation of NTMs issued; • Engage industry players to understand challenges faced to comply with NTMs; and • Provide guidance and support to local companies through future-developed consolidation platforms to stay updated with the latest requirements. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 69 ACTION PLAN Update FTA based on geopolitical conditions 1.5.4 Free Trade Agreements (FTAs) hold significant importance in Malaysia’s trade and economic strategies. These agreements aim to reduce tariffs and non-tariff barriers, between Malaysia and its trading partners to facilitate the flow of goods, services and investments. However, new modern FTAs have now gone beyond the traditional parameters, evolving to encompass major trends such as ESG considerations, reflecting a broader focus on sustainable and responsible trade practices. Malaysia recognises that the current FTAs approach has not been able to adequately address the evolving geopolitical dynamics and key developments in the global trade landscape. To adapt to these shifts, Malaysia aims to reassess its trade position and capitalise on key areas that should be included in modern FTAs. The five key focus areas encompass supply chain, security, digital trade, ESG considerations, as well as standards. To navigate new trade deals effectively, Malaysia aims to engage in discussions with its FTA partners to refresh and update the agreements accordingly. This approach allows Malaysia to adapt to evolving trade dynamics and ensure that its trade agreements remain relevant and mutually beneficial for all parties involved. Figure 4.14: Key Focus of Modern FTAs This action plan will be led by MITI and supported by MIDA and MATRADE. Key activities include: • Engage key industry champions to understand potential challenges faced to better define FTAs; • Strengthen investment, trade and industrial position for the FTAs; and • Identify the potential FTAs that would require an update on the strategic position. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 70 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Mission-based Project 1.1 and 1.2 Mission-based Project 1.1 IC design and wafer fabrication Create global IC design champions in EV, RE and AI The Government aims to further strengthen Malaysia as a leading E&E hub, focusing on This MBP aims to establish Malaysia as a hub for developing a robust ecosystem that nurtures advanced IC design technologies and solutions and supports local IC design and wafer by developing five globally competitive local fabrication companies, strengthen embedded IC design companies. This MBP will focus systems and build capabilities in advanced on IC design for EV, RE and AI segments, packaging. This will enable them to compete leveraging the strong growth potential on globally and contribute significantly to these technologies and its dependencies on Malaysia’s economic growth. semiconductors. Rationale Actions The rationale behind these MBPs arise from First step towards this would be engaging IC several factors: Design companies with strong export potential to explore possible collaborations, partnerships, • The E&E sector plays a vital role in Malaysia’s investments, or support required for them economy, with over RM595 billion in exports to scale up their operations. Incentives must – contributing approximately 40 per cent to be considered to encourage the scaling up of the nation’s overall exports and 45 per cent local IC design companies and enable them to to Malaysia manufacturing sector’s exports; compete on a global scale. • The semiconductor industry is referred as the “new oil of the future” by many, with an Enablers AT Kearney study projecting the industry to reach USD1.2 trillion by 2030. The study The following are key Enablers to be predicts that the Asia Pacific region will implemented for this MBP: account for the largest share of the market in 2030 at 52 per cent; • Collaboration with industry stakeholders, • Introduction of the Creating Helpful (e.g. automotive companies, RE firms Incentives to Produce Semiconductors and AI-driven technology developers) Act in America (CHIPS Act), provides to understand their specific IC design Malaysia with an opportunity to become requirements. Cross-industry collaborations a neutral country of choice to expand on can foster expertise and knowledge sharing semiconductor manufacturing activities, from various sectors, enhancing IC design capitalising on the US+1, China+1 and capabilities and product offerings; Taiwan+1 trends; and • Deepen capabilities in research, technology • IC design and wafer fabrication represents and industry collaboration; and the high value-added activities in the • Talent development support such as semiconductor value chain. training of IC design engineers and on-the- job training. Specifically, the following MBPs are focused to:

1.1 — Create global IC design champions in EV, Funding

1.1. Create global IC design champions in EV, Funding RE and AI; and

1.2 — Attract new advanced wafer fabrication in Funding for this MBP will be driven by

1.2. Attract new advanced wafer fabrication in Funding for this MBP will be driven by Malaysia. private sector investments and Government funding through the NIMP 2030 Strategic Co- Investment Fund. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 71 Mission-based Project 1.2 Attract new advanced wafer fabrication in Malaysia The wafer fabrication capability needs to be developed in parallel to complement the development of the IC Design ecosystem in Malaysia. As such, the Government is looking to set up local production of mid-tier (28-40nm) wafer fabrication by attracting globally competitive wafer fabrication companies and expand capabilities of local companies. Actions In this MBP, Malaysia aims to attract FDI from global wafer fabrication leaders. This requires developing a targeted offensive investment strategy that includes an attractive incentives package. For example, through the CHIPS Act, the US Government provides 25 per cent investment tax credit for capital expenses incurred by both domestic and foreign companies that invest in semiconductor manufacturing in the US. To further support the realisation of this, the Government looks to assess and collaborate with existing local companies in Malaysia’s semiconductor industry. By identifying companies with existing capabilities, the Government can work with them to expand their operations and establish mid-tier wafer fabrication facilities locally. Companies in other parts of the value chain have the opportunity to explore and venture into wafer fabrication, thus advancing into higher value-added activities. Enablers The following are key Enablers to be implemented for this MBP: • Strategic level engagement with global advance wafer fabrication companies to promote Malaysia as preferred investment destination; • Competitive incentives to attract investments from global wafer fabrication companies to Malaysia; and • E&E ecosystem supported by local SMEs in the value chain for the global wafer fabrication companies. Funding Funding for this MBP will be driven by private sector investments and Government funding through the NIMP 2030 Strategic Co-Investment Fund. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 72 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Box Article 4.3: Why are IC design and fabrication critical to Malaysia’s economy? Main uses... What are IC Design and Fabrication? PCs, laptops Integrated circuit (IC) design and fabrication involve the creation of electronic circuits on a Wearables, smartphones, tablets wafer made of pure semiconductor material IC design is a process of creating a blueprint Autonomous vehicles, drones or layout for an integrated circuit. It involves designing the functionality and placement of Medical devices various components on the semiconductor material Robotics, industrial productions IC fabrication, or wafer fabrication, is the Data centres, IoTs process of building the integrated circuit on a semiconductor wafer Communication system DID YOU KNOW? IC design is a critical front-end manufacturing related services activity that needs to be groomed to link to the global semiconductor value chain Within semiconductor value chain, IC design has the highest value-added component Malaysia is a major global manufacturing hub for the E&E industry which produces semiconductors. This industry has been known as the largest contributor to export of Malaysia, 36.4 per cent (RM405.83 billion) of total export in 2021 (source MATRADE) Hence, IC design and fabrication are critical to Malaysia’s economy as this will pave the way for Malaysia to become a high value-added semiconductor producing country Initiatives for Growth in IC Design and Fabrication… National Policy on Science, E&E Roadmap 2021-2030 Semiconductor Design Technology, and Innovation outlines strategic direction Cluster to attract (NPSTI) to promote and priorities for the semiconductor design research, development, and semiconductor industry in companies to establish their commercialisation of high- Malaysia, including IC design presence in Malaysia value technologies, including and fabrication microelectronics and semiconductor industries Source: MIDA, The Malaysian Reserve, Malay Mail, NAP 2020 MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Master Plan 2030 73 Mission-based Project 1.3 Deepen to specialty chemicals vertical The Government is committed to deepening To support the growth and expansion of the the specialty chemicals vertically, with a vision specialty chemical industry, the Government to achieve multiple strategic objectives. These aims to provide bilateral support required by objectives include spearheading technology the local chemical leader. A comprehensive and innovation development and transitioning support will be extended to other local players from being a specialty chemicals importer to to strengthen their capabilities and capacity, becoming a net exporter. attract investments and cultivate talent within the sector. Rationale Enablers The rationale behind this MBP arises from several factors: The following are key Enablers to be implemented for this MBP: • Malaysia currently produces and exports feedstock and commodities but relies on • Government-to-Government (G2G) support imports for specialty chemicals. There is to facilitate requirements within the an opportunity for Malaysia to bridge the specialty chemicals industry; gap by producing specialty chemicals • Attracting and developing talent, including domestically, capturing both domestic building a talent pipeline for chemists and market demand and export opportunities. polymer scientists, supporting training The specialty chemicals market is programmes for chemical engineers and substantial, with a market size exceeding promoting industry-led research and USD40 billion; development; • The specialty chemicals industry acts • Strengthening IP protection to safeguard as a catalyst for innovation, driving the innovations and encourage further R&D development of higher value-added within the specialty chemicals sector; specialty chemicals products which • Special government incentives to translates into the creation of more high- incentivise investments and foster growth skilled job opportunities; within the specialty chemicals industry. • It offers significant opportunities for Specific details of these incentives to be R&D, leading to product innovation, determined; competencies expansion and in turn drives • Cluster-based linkages within the economic complexity; and existing chemical industry cluster will be • It drives the establishment of forward and strengthened, leveraging geographical backward linkages. Backward linkages proximity to raw materials and facilitating involve developing industries that support collaboration among stakeholders; and specialty chemicals production, while • Capabilities and capacity of players along forward linkages encompass industries the value chain of the chemical industry, that benefit from the innovation multiplier supporting the specialty chemicals sector, effect generated by the specialty chemicals will be enhanced to ensure a robust and sector. sustainable ecosystem. Actions Funding A local chemical leader will lead the investments This MBP will be private led, potentially financed in key specialty chemicals areas, including from the financing ecosystem catalysed under agrochemicals, care chemicals, nutrition the NIMP 2030. chemicals and construction chemicals. Efforts will be made to identify other local players in the specialty chemicals sector with growth potential. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 74 Master Plan 2030 MISSION 1 : ADVANCE ECONOMIC COMPLEXITY Mission-based Project 1.4 Groom champions in 4 game changing advanced materials Malaysia is poised to become a frontrunner • Enhance access to funding: Measures will be in game changing advanced materials implemented to facilitate improved access by catalysing downstream activities, to funding for research, development and strengthening industrial clusters and commercialisation of advanced materials harnessing its rich natural resources. With a projects. Public-private partnerships focus on four key materials – graphene, nitinol, and investment attraction efforts will be rare earth and MCC polymers. Malaysia aims encouraged. to meet global demand and drive exports • Incentivise research and development: to manufacturers worldwide. This strategic Special incentives will be introduced endeavour aligns with the National Advanced to promote research and development Materials Technology Roadmap (2021-2030) activities in advanced materials. These and holds immense potential for key sectors incentives will promote increased industry such as electric vehicles and aerospace. participation and attract local and foreign researchers to contribute to the sector’s Rationale growth. • Safeguard IP rights: Robust measures will The rationale behind this MBP arises from be put in place to strengthen the protection several factors: of IP rights, ensuring that innovators and companies in advanced materials are • Abundance of natural resources: Malaysia’s duly recognised and rewarded for their wealth of natural resources positions itself contributions. advantageously to produce advanced materials of high value, making it a potential Enablers key player in the global market. • Growing demand for advanced materials: The following are key Enablers to be The increasing demand for advanced implemented for this MBP: materials across various industries presents significant opportunities for Malaysia to • Talent development: Efforts will be made meet market needs. to nurture and develop a skilled workforce • Critical importance to key sectors: The in advanced materials. Specialised training identified game changing materials play a programmes, scholarship opportunities vital role in crucial sectors such as electric and collaborations between academia and vehicles and aerospace. Developing industry will be encouraged. expertise and capabilities in these materials • Strengthened IP protection: Stringent will fuel advancements and strengthen measures will be implemented to enhance Malaysia’s position in these sectors. IP protection, safeguarding the innovations • National Advanced Materials Technology and creations in the field of advanced Roadmap: This MBP aligns with the materials. National Advanced Materials roadmap, • Special Government incentives: Tailored which provides direction for the growth of Government incentives will be introduced Malaysia in the field of advanced materials. to provide additional support for the development and commercialisation of Actions advanced materials. These incentives will attract investments, stimulate growth and To realise this MBP, the following key actions drive competitiveness in the sector. will be pursued: Funding • Strengthen partnerships: Collaboration among industry players, research This MBP will be private-led, potentially institutions and Government Agencies will financed from the financing ecosystem be fostered to promote knowledge sharing, catalysed under the NIMP 2030. technology transfer and innovation in advanced materials. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 5 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION New Industrial 76 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Increase Create high- Extend domestic Develop new & Improve Enhance ESG economic value job linkages existing clusters inclusivity practices complexity opportunities In the recent Technology and Innovation Collectively, both the Government and industry Report 2023, by UNCTAD39, which assessed will spur technology innovation and create the global readiness for frontier technologies, more local technology solutions. By supporting Malaysia is ranked 32nd among 166 countries homegrown talent and encouraging disruptive and fifth in Asia. This is contributed by the ideas, Malaysia can transition from being a industry’s adoption and adaptation of frontier technology provider to a technology creator. technologies and access to finance the technologies. The urgency of the digital transformation cannot be understated. It is essential to act The Industry4WRD policy was introduced in swiftly and proactively seize the opportunities 2018 to accelerate Malaysia’s manufacturing that digitalisation offers to remain competitive sector’s digitalisation journey. The aim was to in the rapidly evolving global landscape. transform the manufacturing sector and MRS to adopt Industry 4.0 technologies in order The successful implementation of Strategies to increase the level of labour productivity, and Action Plans under Mission 2 will result in elevate contribution of manufacturing to the impactful outcomes as follow: economy, strengthen innovation capacity and capability and increase the number of high- • Enable economic complexity: skilled workers in the manufacturing sector. The use of technology enhances labour Despite the efforts undertaken, the productivity and efficiency, enabling businesses performance of the manufacturing sector to allocate resources to more complex activities. has not shown significant improvement. The Advanced technology enables R&D activities, growth rate of Malaysia’s labour productivity which will drive innovation to develop high has slowed down in the last three decades value-added products; and this decline was further exacerbated by the COVID-19 pandemic. This is attributed to • Emergence of high-skilled jobs: prolonged use of low-skilled labours, relatively low innovation and low technology adoption in Technology and digital adoption creates the the manufacturing industry. demand for more high-skilled jobs such as data scientists, data engineers, data analysts, It is imperative for companies to adopt artificial intelligence engineers and specialists, digitalisation and shift away from low-skilled system integrators, cybersecurity engineers labour. This is to increase labour productivity and other tech-related services professionals; and create more high-skilled jobs for the and industry. With the changing global landscape, it is no longer sufficient to merely go digital; the future growth of Malaysia hinges on the • Creation of new clusters: organisations’ ability to embrace a digital mindset and fully embody digital capabilities Technology acts as a catalyst for disruptive across all aspects of the manufacturing ideas, enables knowledge exchange and processes. collaboration, and attracts talented individuals. This fosters innovation and spurs economic Similarly, the Government will accelerate activity, contributing to the formation of new digitalisation and integration to support the clusters. The development of these clusters industry. By streamlining and digitalising can be supported through strengthening the processes, it will improve the delivery of public ecosystem infrastructure and capitalising on services and ease the process of doing business emerging market opportunities. in Malaysia. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 77 There are four Strategies, eight Action Plans and two Mission-based Projects to be carried out to achieve Mission 2, as illustrated below: Figure 5.1: Mission 2 – Tech Up for a Digitally Vibrant Nation MISSION 2 Tech up for a digitally vibrant nation

2.1 — Expand to high value-added activities of 2.3 Spur technology innovation

2.1 Expand to high value-added activities of 2.3 Spur technology innovation Accelerate technology adoption 2.3.1 Nurture local technology solution

2.1.1 — Enhance Industry4WRD programmes to providers to support Technology Adoption

2.1.1 Enhance Industry4WRD programmes to providers to support Technology Adoption increase technology adoption Programme

2.1.2 — Accelerate digital infrastructure rollout 2.3.2 Develop generative and industrial AI

2.1.2 Accelerate digital infrastructure rollout 2.3.2 Develop generative and industrial AI (JENDELA) solution leaders and system integrators

2.3.3 — Drive data analytics through a national

2.3.3 Drive data analytics through a national digital platform for manufacturing

2.2 — Shift away from low-skilled labour model

2.2 Shift away from low-skilled labour model

2.2.1 — Introduce multi-tiered levy mechanism

2.2.1 Introduce multi-tiered levy mechanism

2.4 — Accelerate government digitalisation and

2.4 Accelerate government digitalisation and for low-skilled labour to accelerate integration automation

2.4.1 — Digitalise end-to-end government touch

2.4.1 Digitalise end-to-end government touch

2.2.2 — Introduce automation condition in new

2.2.2 Introduce automation condition in new points across business life cycle Manufacturing Licence Mission-based Projects: MBP 2.1 MBP 2.2 MBP 1.4 Transform 3,000 smart Establish Malaysia as factories Generative AI Hub MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 78 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION STRATEGY 2.1 Accelerate technology adoption This strategy aims to accelerate technology adoption by extending from front-end to back-end digitalisation. This will improve efficiency, data accuracy and decision-making by integrating various functions and providing real-time insights. The NIMP 2030 will further enhance the Industry4WRD programmes to accelerate the technology shift towards Industry 4.0. By leveraging Industry 4.0 technologies, Malaysia will continue to maintain its competitiveness amidst the rapidly changing global landscape. The Government is committed to ensuring the readiness of digital infrastructure to support industry development. In the face of rapidly advancing technology, Malaysia must act promptly to establish a robust and adaptable digital infrastructure. Figure 5.2: Industrialisation Evolution Industrialisation Evolution Majority of Manufactures in Malaysia today INDUSTRY 4.0 INDUSTRY 3.0 INDUSTRY 2.0 Cyber Physical INDUSTRY 1.0 Automation, Systems, internet Mass production, computers and of things, Mechanisation, assembly line, electronics networks steam power, electrical energy weaving loom To achieve this, two Action Plans have been formulated: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 79 Box Article 5.1: What is Smart Manufacturing? Smart manufacturing40 involves the seamless integration and connectivity of physical and digital processes across factories and the supply chain to optimise manufacturing operations and processes. By transforming and improving the ways in which people, processes and technologies operate, smart manufacturing facilitates the delivery of critical information for quality decision-making, enhanced efficiency, cost reduction and increased agility. The element of smart manufacturing includes: • Internet of Things (IoT) to connect devices, machines and sensors to collect and exchange data in real time. This creates a networked ecosystem, where machines and systems communicate seamlessly. • Data analytics and big data tools to analyse vast amounts of data collected from various sources within the manufacturing process. This unlocks insights for decision-making, predictive maintenance and optimisation of production processes. • Artificial intelligence and machine learning to automate tasks and continuously improve manufacturing processes. AI-driven systems are capable to identify patterns, adjust to dynamic conditions and optimise operations in real-time. • Robotics and automation enable the efficient and precise execution of repetitive and labour- intensive tasks. These technologies encompass robotic arms, automated guided vehicles (AGVs) and autonomous systems, which streamline production processes and minimize the need for human intervention. • Cloud computing to store, process and analyse manufacturing data. Cloud infrastructure provides scalable and cost-effective resources for data storage, computing power and collaborative applications. • Cybersecurity to protect digital systems, networks and data from cyber threats. Secure networks and protocols are essential to safeguard sensitive information and maintain the integrity of manufacturing processes. Advanced automation Additive and robotics Artificial intelligence manufacturing Predictive analytics for: • Automate tasks such as • continuous self- welding, assembling, • Rapid prototyping optimisation inspecting defects and of new products • product design and packaging development s Cloud computing Large data storage and analytics to: • track production output • identify improvements Source: The Global Smart Industry Readiness Index Initiative: Manufacturing Transformation Insights Report 2022, World Economic Forum MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 80 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION ACTION PLAN Enhance Industry4WRD programmes to increase 2.1.1 technology adoption The Government has introduced programmes to encourage manufacturers to move towards Industry 4.0 technology adoption. In 2019, the Industry4WRD Readiness Assessment (RA) and Intervention Fund (IF) Programmes were launched as flagship initiatives under the Industry4WRD policy. The programmes were aimed to support the adoption of Industry 4.0 technologies by assessing the company’s readiness, identifying priority areas to transform the company and providing funding support for the intervention. Despite having these technology adoption programmes, the industry has not shown significant transformation, especially among the SMEs. The take-up rate was dampened due to limited awareness to tech up and digitalise, high cost of investment and shortage of skilled talent for technology intervention projects. The Government will enhance the Industry4WRD by: • Equipping the industry with the fundamentals to embrace digitalisation and shift towards Industry 4.0; • Enhancing the scope of the RA and IF programmes to include a follow-through in the technology implementation and post-implementation review. This will ensure the long-term sustainability of technology intervention; and • Collaborating with capital market and financial institutions to fund the technology intervention projects. The newly improved Industry4WRD programme is expected to create 3,000 smart factories by 2030. Figure 5.3: Malaysian Manufacturers to Tech Up Malaysian Manufacturers to Tech Up Industry4WRD Launched Technology 3,000 smart Adoption factories by 2030 Oct-18 by MITI Programme Enhanced Readiness Assessment – scale for nationwide take-up To execute this action plan, MITI will lead with the support of MIDA, MPC, SIRIM, MOSTI, Ministry of Communications and Digital (KKD), Malaysia Digital Economy Malaysia (MDEC) and industry associations (e.g. FMM) to conduct the following activities: • Review Industry4WRD programmes, specifically on the readiness assessment and intervention fund; • Introduce the enhanced end-to-end programme to enable the creation of 3,000 smart factories; and • Conduct proactive awareness including seminars, outreach programmes and portals to increase participation in the enhanced programme. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 81 ACTION PLAN Accelerate digital infrastructure rollout (JENDELA) 2.1.2 Digital infrastructure is critical in today’s digital age as it enables smooth operation and connectivity of digital systems. Strong digital infrastructure further lowers the costs associated with innovation for enterprises of all sizes, with the most noteworthy benefits going to SMEs, thereby bolstering overall competitiveness. Since the launch of JENDELA in August 2020, there has been significant improvement in Malaysia’s national connectivity41: • Nationwide access to an average mobile broadband speed of 116.03 mbps higher than the goal set by end of 2022, which is 35 mbps; • Rise in 4G population coverage of 96.92% compared to 91.8% during the early commencement of JENDELA Phase 1; • Access to fibre connectivity across a total of 7.74 million premises; and • Roll out of 5G plans as the next wave. In parallel to JENDELA for the national digital network development, the development of other digital infrastructure is equally important to cohesively support the industry in advanced technology adoption. Examples include cloud computing infrastructure, cybersecurity infrastructure and AI networks. These are critical as they enable the following: • Rapid data transfer that enables businesses to quickly exchange data, access resources and make faster decisions based on real-time information; • Access to cloud-based application, databases and shared resources with minimal latency; • Seamless connectivity for industrial automation and Internet of Things (IoT); and • Protect critical infrastructure from cyberattacks. Continuous effort must be undertaken to ensure Malaysia’s digital infrastructure is continuously upgraded to meet the industry’s needs. KKD, MITI and industry players will work together to: • Facilitate the industry’s digital infrastructure needs; • Foster collaboration and knowledge sharing among industry players to adopt the industry’s best practices for digital infrastructure development; and • Establish clear monitoring and evaluation mechanisms to track progress and ensure the timely completion of the upgrade activities. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 82 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION STRATEGY 2.2 Shift away from low-skilled labour model This strategy aims to incentivise the industry to adopt automation and advanced technology. By embracing automation and technology, it will encourage the industry to shift away from low-skilled labour, thus creating the demand for high-skilled workers. This will increase labour productivity to contribute to economic growth. To achieve this, two Action Plans have been formulated: ACTION PLAN Introduce multi-tiered levy mechanism for low-skilled 2.2.1 labour to accelerate automation In an effort to create job opportunities for local employees in the workforce, the 80:20 workforce policy was introduced in 2016. However, businesses are facing difficulties to meet the ratio, which resulted in the extension of the policy up to 31 December 2024. Moving forward, the Government will consider a multi-tiered levy mechanism to gradually phase out the reliance on foreign low-skilled workforce and accelerate the adoption of automation. The multi-tiered levy mechanism will include the following features: • Higher levy charges will be imposed on companies that employ more foreign low-skilled labour; • Tailored levy rates based on sector. Sectors with high foreign low-skilled labours will be imposed with higher levy; and • Gradual implementation to allow industry players to adjust and adapt to the new policy. Figure 5.4: Multi-tiered Levy Mechanism The execution of this action plan will be led by MOHR, supported by MITI, MIDA, Ministry of Finance (MOF) and key industry players. The following activities will be conducted: • Define baseline to determine the levy rates and structure, with considerations of sectors that are heavily reliant on foreign workers and face labour shortages, skill requirements, wage levels, unemployment rates and future job demand projections to ensure the industry can adapt to the multi- tiered levy mechanism; • Develop the transition plan with a gradual timeline for the industry to adopt the multi- tiered levy. This is to allow adjustments to the new policy while minimising disruptions; and • Establish a monitoring mechanism to track the effectiveness and impact of the levy mechanism. This is to ensure the levy mechanism is continuously reviewed and refined based on market conditions. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 83 ACTION PLAN Introduce automation condition in new Manufacturing

2.2.2 — Licence

2.2.2 Licence In effort to accelerate industry automation, the Government will explore a more impactful approach by introducing automation condition in the issuance of new Manufacturing Licence (ML). However, the journey to automation involves major transformation for many companies. Therefore, a phased approach will be in place to allow companies to transition, based on their maturity and capabilities: • SME companies – a phased approach with a grace period to allow SMEs to adopt relevant automation and technology solutions. This is to ensure foundational automation, technology and capabilities are in place before gradually upgrading into more advanced technologies. • MNCs and LLCs – immediate effect for the MNCs and LLCs as they are equipped with the resources and capabilities to adopt digitalisation. This is to push established companies to adopt Industry 4.0 technologies and beyond. This action plan will be led by MITI and supported by MIDA. The following activities will be conducted: • Identify suitable phased approaches to implement automation condition in ML; • Update policy for inclusion of automation condition in ML and create awareness to industry players of the requirements; and • Develop mechanisms to monitor compliance with automation condition. Governance will be in place to ensure companies regularly perform audit checks and report automation progress, technology adoption achievements and investments in technology. STRATEGY 2.3 Spur technology innovation The strategy aims to foster technology innovation and develop indigenous solutions in Malaysia. This includes stimulating the market for local technology solutions by creating the demand for local providers and encouraging industry-wide adoption. By supporting local talent and innovation, Malaysia aims to shift from being a technology provider to becoming a technology creator. Additionally, this strategy aims to unlock further opportunities for Malaysia through data analytics and artificial intelligence (AI). By harnessing the power of data and AI technologies, businesses can gain valuable insights, make informed decisions and expand into new markets. This enables the industry to venture into untapped potential and explore growth possibilities both domestically and internationally. To achieve this, three Action Plans have been formulated: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 84 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION ACTION PLAN Nurture local technology solution providers to support

2.3.1 — Technology Adoption Programme

2.3.1 Technology Adoption Programme At present, the digital and technology solution is largely provided by foreign technology companies, which is a challenge for SMEs to adopt due to high costs and proprietary limitation. As SMEs make up for the majority of Malaysia’s business landscape, their participation in adopting digitalisation is vital in driving economic growth and competitiveness. To cater to the needs of businesses in Malaysia, it is essential to foster and promote local indigenous digital solutions to achieve the following: • Provide affordable and tailored solutions to the local needs • Provide inclusive technology and digital solutions • Foster a vibrant and dynamic technology industry • Enhance competitiveness of local technology users and technology creators • Cultivate innovation culture in Malaysia To realise this, the industry needs to transition from being technology providers to technology creators. This will be accomplished through the promotion of technology solution providers on the enhanced Industry4WRD: • Support local technology start-ups to supply large scale technologies and innovations for the industry; • Connect SMEs, MNCs and LLCs with local solution providers to address their technology and innovation needs; and • Strategic partnership with higher learning institutions to support local solution providers in R&D. Figure 5.5: Technology Adoption Programme MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 85 MDEC will be the main driver, supported by KKD, MITI, MIDA, MOSTI, SIRIM, MRANTI, Malaysian Technology Development Corporation (MTDC) and solution providers. The following activities will be conducted: • Identify and qualify local technology solution companies (e.g. industry start-ups and SMEs) and onboard them as part of the technology solution developer programme; • Develop new and enhanced programmes together with technology centres (e.g. SIRIM and MTDC), academia (e.g. MOHE) and private companies (e.g. MNCs) to support local technology companies in developing innovative solutions and accelerate technology adoption; • Facilitate in providing financial assistance to support the solution providers in scaling up their products and services; and • Package local solution providers with the enhanced Industry4WRD programme to encourage the usage of local technology solutions. ACTION PLAN Develop generative and industrial AI solution leaders 2.3.2 and system integrators The emergence of generative AI revolutionises the manufacturing industry by enabling new levels of automation, customisation and optimisation. Although generative AI is still a nascent industry, it is rapidly evolving and has shown promising results. Figure 5.6: Generative AI Use Cases Generative AI Use Cases (Selected Examples) TSMC • Design new chip designs • Existing chip – design improve performance and power efficiency • Detect defects in chip designs Toyota Research Institution • Increase speed of vehicle design • Incorporates precise engineering constraints into the design process Siemens Gamesa Renewable Energy • Generate 3D models of wind turbines • Optimise wind farm layouts – increase production, reduce loads and operating costs The use of AI can unlock vast opportunities for the industry. Malaysia has the potential to adopt AI and be an AI solution leader. Based on the Oxford Insights Government AI Readiness Index 202242, Malaysia is ranked 29th out of 181 countries. Amongst the ASEAN countries, Malaysia ranked the second highest, while amongst the APAC countries, Malaysia is ranked the sixth highest. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 86 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Table 5.1: Ten Highest Ranking Countries in APAC Region No. Rank Country Score 1 2 Singapore 84.12 2 6 Republic of Korea 76.76 3 8 Australia 75.29 4 9 Japan 75.25 5 17 China 70.84 6 29 Malaysia 67.37 7 31 Thailand 64.63 8 32 India 63.67 9 43 Indonesia 60.89 10 54 Philippines 55.42 Table 5.2: Government AI Readiness Index, Ranking by ASEAN Region No. Rank Country Score 1 2 Singapore 84.12 2 29 Malaysia 67.37 3 31 Thailand 64.63 4 43 Indonesia 60.89 5 54 Philippines 55.42 6 55 Viet Nam 53.96 7 67 Brunei Darussalam 48.06 8 126 Myanmar 32.45 9 132 Cambodia 31.17 Source: Oxford Insights Government AI Readiness Index 2022 According to the assessment, Malaysia’s ranking is attributed to strong foundation in digital capacity and infrastructure to support AI. While this is the case, the Government must provide support in growing the AI market in Malaysia by ensuring the following are in place: • Sufficient quality AI solution providers – spur the growth of AI solution providers, especially local providers to scale and grow the AI market in Malaysia; • Strong demand for AI adoption – create the demand for AI to attract solution providers. The Government to create the demand by applying generative AI in public service delivery; and • Availability of quality talent to develop and use AI – build capabilities of the public and private sectors to develop and adopt AI. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 87 Figure 5.7: Needs of AI Solution Leaders and SI To implement this, MDEC will lead with the support of KKD, MOSTI, MITI, MIDA, Ministry of Human Resources (MOHR), MOHE and industry players. Together, the following activities will be conducted: • Engage MOHR, MOHE, MOSTI and universities to develop expertise in generative AI by building a strong foundation in AI concepts, algorithms, programmes and system integration; • Attract foreign investments with AI capabilities to build the generative AI market in Malaysia by developing generative AI R&D centres; and • Develop programmes to facilitate and foster partnerships with industry players and generative AI leaders to grow the national AI ecosystem. This is to encourage participation in joint initiatives and knowledge sharing. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 88 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Box Article 5.2: What is Generative AI? What is Generative AI? What can it be used for? Generative AI is a type of artificial Generative AI is still a relatively new field, but intelligence that can create new content, it has the potential to revolutionise the way such as text, images, audio and video. It content is created. does this by learning from a large dataset It can be used to create new forms of art, to of existing content, and then using that generate new product designs, or even to knowledge to generate new content that create synthetic data that can be used to train is similar to the data it was trained on. other AI models. EXAMPLES OF GENERATIVE AI ChatGPT Bard DALL-E2 Generates text, translate languages, write Generates images based different kinds of creative content and answer on text prompts your questions in an informative way SPECIAL CASE Using Generative AI to automate repetitive tasks One example of Generative AI application is to automate repetitive tasks. This can be done by asking the AI to code certain programmes, using prompts designed to elicit the desired code, such as “help me write a programme to automatically format tables”. With AI-generated code, anyone can automate repetitive processes without prior coding experience. This has the potential to increase workplace productivity, by making it accessible to a wider range of individuals by eliminating certain knowledge barriers. Source: OpenAI MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 89 ACTION PLAN Drive data analytics through a national digital platform 2.3.3 for manufacturing With advanced technology and growing data availability, data has become a valuable asset that can unlock opportunities. Businesses and individuals can leverage data to gain insights, make informed decisions and drive innovation. With a national digital platform, it will aggregate manufacturing industry data, which will encourage data analytics. A national digital platform for manufacturing can contribute to better national level planning for supply chain security. The digital platform will be based on an open-source data concept, allowing businesses to access and contribute data, which will enrich the data bank. Figure 5.8: National Digital Platform for Analytics Capacity Requirement MITI will lead the action plan, with support from KKD, MAMPU, MOSTI, MIDA, technology vendors and industry players. The following activities will be conducted: • Develop the architecture for the manufacturing digital platform. Assess leading countries with national digital platform using open-source data to develop use cases; • Engage the manufacturing industry players to understand expectations and obtain buy-ins on data usage and data sharing requirements; and • Launch the national digital platform and promote its use among the industry players. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 90 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION STRATEGY 2.4 Accelerate government digitalisation and integration This strategy aims to accelerate government digitalisation to ensure processes are integrated, providing a seamless experience for businesses in Malaysia. By embracing digital transformation, the Government can modernise its operations, enhance efficiency and improve its public service delivery. The Government will be able to harness data-driven insights, enhance decision-making and deliver more personalised services to businesses. To achieve this, the following Action Plan has been formulated: ACTION PLAN Digitalise end-to-end government touch points across 2.4.1 business life cycle The Government aims to develop a single digital channel for a seamless experience across the end-to-end business lifecycle. The single digital platform aims to provide the following: • Ease access to relevant information, guidelines and resources to guide through the business registration process; • Offer integrated services such as online application capabilities with real-time status updates on application progress; and • Speed up the application and approval processes to support businesses in Malaysia. In order to do this, the Government will include the following: • Streamline and remove redundant processes within and between the Ministries and Agencies; • Digitalise the front-end and back-end processes for straight-through processing; • Integrate all systems into a single interface for ease of access based on end-to-end business lifecycle; • Customise the business lifecycle based on the nature and priority of FDIs, LLCs and SMEs; and • Institutionalise the single company ID system for better visibility of each company’s lifecycle. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 91 Figure 5.9: Government Touchpoints Across the Business Lifecycle 1 2 3 4 Promotion & Deal Investment Implementation Aftercare Marketing Negotiation • Awareness of country & state • Deal and incentive • Business registration • Establish industry premise • Market growth advisory • Gather industry information package assessment • Obtain licenses • Filing & payment of taxes, • Incentives & regulatory • Discuss opportunities for selected industry • Access incentives duties, etc. update / tracking • Clarify process involved • Commit funding • Payment of wages • Recruit personnel • Financial reporting State Authorities Company Government Applications: • Align industrial Approval for Approval for Health & Project registration principal • Manu- placement with site/ infra- utility safety monitoring investment facturing Structure Plan, Local structure installation approval and promotion Licence (ML) Plan and build (May provision of agency • Tax incentives 'Environmental require end-to-end for the Essentials for Siting of approvals facilitation development • Grants Industries in Malaysia from other to all of the • Import duty, (2017)' agencies, projects manufacturing sales tax • Obtain approval for depending approved by and exemption, Environmental Impact on nature the National services MIDA's Assessment Report if of Committee sectors in confirmation Registration business) on required by Malaysia letter for Of tax Investment Environmental Quality exemption account (Prescribed Activity) (NCI) • Expatriate Order 2015 Post • Seek approval prior to • Monitoring & installation of pollution Compliance control equipment subject to Environmental Quality Act 1974 Intellectual Human Financing Importation Property Resources (if required) (if required) (if required) NON-EXHAUSTIVE Sourcing of employees Searching and filing of IPs (e.g. patents, Financial Institutions trademarks, copyright, industrial design & geographical indication) Payment of wages Incentives The execution of this action requires a whole-of-government approach. The action plan will be led by MITI, KKD, MAMPU and MIDA, and supported by MATRADE, MPC, MOF, KPKT, Companies Commission of Malaysia (SSM), Employees Provident Fund (EPF), Social Security Organisation (SOCSO), Customs, Inland Revenue Board of Malaysia (LHDN), MyIPO, InvestMalaysia, Malaysian Industrial Development Finance (MIDF), Banks, and State Authorities and other relevant agencies across the business lifecycle. The following activities will be conducted: • Identify and map all relevant processes from the Ministries and Agencies across the business lifecycle; • Improve internal processes within the Ministries and Agencies by removing duplication and redundancy to make processes more efficient; and • Digitalise processes for straight-through processing and integrate systems with single sign- on capabilities. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 92 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Mission-based Project 2.1 Transform 3,000 smart factories This project aims to drive the adoption of recognised the benefits of technology and Industry 4.0 technologies by transforming automation, Malaysia is faced with high 3,000 smart factories in Malaysia by 2030. competition. Together with FMM, MDEC and A smart factory is a type of manufacturing SIRIM, concerted efforts with other Ministries, facility that enhances its performance by Agencies and industry players are required to incorporating intelligent and integrated support this transformation. processes and resources across cyber, physical and human domains. It leverages Actions on technology and automation to create and deliver products and services more efficiently. The following activities will be conducted for Apart from that, a smart factory collaborates this MBP: with other areas within a company’s value chains to optimise operations and enhance • Leverage the enhanced Industry4WRD RA overall labour productivity. and IF to prepare the industry to transform into smart factories. The Ministries, Rationale Agencies, associations and industry players must work together to increase the The rationale for this MBP is based on the readiness assessment participation and following factors: encourage national level adoption; • MNC and LLC champions will be identified • Transforming into smart factories will lead to guide the industry towards Malaysia’s to an increase in labour productivity; national direction: • It will shift the manufacturing industry from • The large companies will provide low-skilled labour to high-skilled workers. mentorship, guidance and knowledge This will increase wages and improve the to help other industry players grow, livelihood of the nation, thus expanding the adopt advanced technologies and middle-class society; transform into smart factories; and • It can build supply chain resilience as the • The MNC and LLC will integrate the use of automated machineries can reduce SMEs and mid-tier companies (MTC) production downtime. Apart from that, the as part of their value chain. This will use of predictive analytics is able to identify encourage SMEs and MTCs to tech up and mitigate supply chain shortages; and and meet the digital requirements of • It can catalyse other industries in Malaysia larger companies. to support the transformation of smart • Another critical aspect is to ensure Malaysia factories. For instance: has sufficient and qualified solution • Machineries and equipment sector to providers to support the industry through produce system integration, robotics, Government assistance. 3D printing and imaging technology and other Industry 4.0 technologies; Enablers • E&E sector to produce advanced chips and IoT sensors for fully automated The following are key Enablers for this MBP: machinery; and • ICT sector to supply software • Capacity and competency building in development, AI, 5G, cloud computing higher learning institutions and research and cybersecurity that enables institutions to develop technology creators’ automation with less human capabilities; interaction. • Incentives to support industry players in the readiness assessment and local The shift towards smart factories is crucial for solution providers to scale their products Malaysia to remain at the forefront of global and services; manufacturing trends. In the past, Malaysia • Training development to ensure the industry had a competitive advantage due to relatively players are skilled and knowledgeable low labour cost. Now, as other countries for sustainable adoption of Industry 4.0 MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION Master Plan 2030 93 technologies and smart factories; and Funding • Digital infrastructure to support Industry 4.0 technologies, such as connectivity and Funding for this MBP will be driven by private data centres readily available to support sector investments and Government funding cloud computing, AI, etc. through the NIMP 2030 Industrial Development Fund. With this MBP, Malaysia aims to embrace a digital mindset and fully embody digital capabilities across all the manufacturing industry supply chains. It is essential to act swiftly and proactively to seize the opportunities that digitalisation offers to remain competitive in the rapidly evolving global landscape. Mission-based Project 2.2 Establish Malaysia as Generative AI Hub Malaysia aims to position itself as the market leveraging on generative AI to design new leader in generative AI and strengthen presence products, detect defects, etc. This unlocks in the regional and global marketplace by opportunities to create new industries and developing local AI companies with system high-skilled jobs that are AI-powered. integrator capabilities. Generative AI has the potential to increase Rationale efficiency, labour productivity and economic growth. Under the World Bank’s GovTech The rationale behind this MBP arises from Programme that aims to promote a whole- multiple factors: of-government approach to modernise the public sector, Malaysia has outlined clear goals • Firstly, the global AI market is expected to to achieve 80 per cent of end-to-end online grow at a compound annual growth rate government services. With this goal in mind, (CAGR) of 37 per cent with an estimated there is an opportunity to leverage generative value of USD1.3 trillion by 2030, from AI in the public service delivery as it not only USD150.2 billion in 2023. The study forecasts improves the government’s efficiency, but that the Asia Pacific region will account for also creates the demand required for local AI the second largest share of the market in companies to expand their offerings to the 2030; government. • Secondly, Malaysia has embraced the trend and established ambitions through Actions the National Fourth Industrial Revolution (4IR) Policy and the Malaysia National AI The following activities will be conducted for Roadmap (AI-RMAP). MOSTI forecasts that this MBP: AI will boost labour productivity in Malaysia by 30 per cent across all sectors by 2030 • Identify local AI companies that offer and generative AI has been identified as a generative AI solutions and system key enabler; integration to explore potential • Thirdly, Malaysia has strong foundations collaborations, partnerships or support in digital capabilities and infrastructure. required to scale operations and offerings According to the Oxford Insights AI at a large scale; Readiness Index 2022, Malaysia is ranked • Through the GovTech initiatives, the 29th globally (out of 181 countries) for the Government will create the demand for the readiness to implement AI in the delivery of application of AI by identifying opportunities public services; and for generative AI application in the public • Generative AI is rapidly evolving, creating service delivery. This is to encourage the new ways of working. Companies in scaling up of local AI solutions and system the manufacturing industry have been integration providers; MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 94 Master Plan 2030 MISSION 2 : TECH UP FOR A DIGITALLY VIBRANT NATION • MOHR and MOHE with the collaboration of key industry players will provide the necessary education and training programmes for both public and private sectors. The training programmes will cover three stages for AI adoption; basic knowledge, application and development; and • There will be incentives to encourage generative AI adoption and generative AI solution providers, which will drive the AI market. Enablers The following Enablers are key to executing the MBP: • Training development for public and private sector to adopt AI; • Incentives to accelerate AI adoption in the manufacturing sector. This will create demand for local AI companies to grow; • R&D activities to develop use cases for the manufacturing sector to adopt AI at a national level; • Infrastructure readiness to support the growth of data; • Availability of sufficient and quality data to create a reliable knowledge base; and • Legal and regulatory framework to ensure ethical use of Generative AI and considerations on the limitations of Personal Data Protection Act (PDPA). Funding Funding for this MBP will be driven by private sector investments and Government funding through the NIMP 2030 Industrial Development Fund. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 6 MISSION 3 : PUSH FOR NET ZERO New Industrial 96 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Increase Create high- Extend domestic Develop new & Improve Enhance ESG economic value job linkages existing clusters inclusivity practices complexity opportunities The manufacturing industry plays a pivotal role in the global economy, but its extensive reliance on fossil fuels and energy-intensive processes have led to significant greenhouse gas (GHG) emissions, contributing to the acceleration of environmental deterioration. Malaysia is committed to the global effort to tackle climate change and has pledged to reduce GHG emissions intensity to achieve Net Zero emissions as early as 2050. To ensure this target can be met, it is pertinent that Malaysia actively pursues the transition to a greener manufacturing industry. The Industrial Processes and Product Use (IPPU) sector is the second largest emitting sector in 2019, contributing approximately 10 per cent of Malaysia’s total emissions. Industrial energy use contributes a further 10 per cent of total emissions43. The Push for Net Zero mission aims to decarbonise Malaysia’s industries to achieve its Net Zero emission goal through implementation of energy efficiency and waste management measures, rapid RE and technology adoption and robust regulatory frameworks. The decarbonisation push will further present new economic opportunities for Malaysia to capitalise, particularly in positioning itself as a leader in new green growth areas. The successful implementation of Strategies and Action Plans under Mission 3 will result in impactful outcomes as follows: • Enhanced industry readiness towards ESG compliance: Climate change causes disruptions to weather patterns and physical risk to infrastructure and ecosystems. In view of this, Governments, investors, businesses and consumers worldwide increasingly prioritise sustainable practices and low-carbon operations to reduce the contribution to climate change. By actively working towards Net Zero emissions, Malaysia will enhance its industry’s ESG compliance and align itself to the global sustainability agenda; and • Development of new growth sectors: The transition to Net Zero emissions presents significant opportunities for the development of new growth sectors that will position Malaysia as a leader in green solutions in the region. Four Strategies, 10 Action Plans and three Mission-based Projects have been developed to achieve Mission 3, as illustrated below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 97 Figure 6.1: Mission 3 – Push for Net Zero MISSION 3 Push for Net Zero

3.1 — Accelerate transition towards sustainable 3.3 Catalyse new green growth areas

3.1 Accelerate transition towards sustainable 3.3 Catalyse new green growth areas practices 3.3.1 Catalyse EV as a key growth driver

3.1.1 — Develop sectoral decarbonisation pathways 3.3.2 Grow carbon capture, utilisation and

3.1.1 Develop sectoral decarbonisation pathways 3.3.2 Grow carbon capture, utilisation and to guide transition storage (CCUS) as a new sector

3.1.2 — Decarbonise “hard-to-abate” sectors 3.3.3 Develop circular economy framework for

3.1.2 Decarbonise “hard-to-abate” sectors 3.3.3 Develop circular economy framework for

3.1.3 — Introduce carbon policy, accounting and tax the industry

3.1.3 Introduce carbon policy, accounting and tax the industry

3.1.4 — Launch iESG framework and transition

3.1.4 Launch iESG framework and transition programmes

3.2 — Transition to renewable and clean energy 3.4 Shift towards green infrastructure

3.2 Transition to renewable and clean energy 3.4 Shift towards green infrastructure

3.2.1 — Enhance adoption scheme for energy 3.4.1 Accelerate transformation of industrial

3.2.1 Enhance adoption scheme for energy 3.4.1 Accelerate transformation of industrial efficiency or renewable energy estates into eco-industrial parks

3.2.2 — Accelerate availability and accessibility of

3.2.2 Accelerate availability and accessibility of renewable energy source for the industry Mission-based Projects: MBP 3.1 MBP 3.2 MBP 3.3 Create Launch locally- Deploy large-scale decarbonisation manufactured EV CCUS solutions pathway role models MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 98 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO STRATEGY 3.1 Accelerate transition towards sustainable practices Sustainable practices in the context of industrial practices refer to processes that minimise environmental impact via reduced waste generation, emissions and pollutants. Examples of sustainable practices include improving energy and resource efficiency in industrial processes, using RE sources for energy production and implementing waste recycling and management systems. The road to decarbonise Malaysia’s manufacturing industry is dependent upon the adoption of sustainable practices and technologies, particularly for hard-to-abate sectors. This adoption must be accelerated to support Malaysia’s vision to achieve Net Zero emissions as early as 2050. To achieve this, three Action Plans have been formulated: ACTION PLAN Develop sectoral decarbonisation pathways to guide 3.1.1 transition Different sectors have varying emission levels and industry readiness to adopt decarbonisation practices. As such, businesses need to adopt the appropriate decarbonisation pathways that best suit the nature of their sectors without negatively impacting their overall operations. The Government will co-develop decarbonisation pathways with the industry to guide the transition towards low-carbon operations. Among the actions that can be adopted in these pathways include the adoption of energy-efficient equipment and machinery, transition to RE and electrification of industrial processes. MITI will work with NRECC with the support of selected industry associations and industry players to execute this plan and conduct the following activities: • Identify anchor companies and co-develop sector-specific decarbonisation pathways; • Socialise the pathway recommendations to industry players and provide incentives to encourage adoption of decarbonisation initiatives; and • Introduce policy measures to accelerate implementation of decarbonisation plans. ACTION PLAN Decarbonise “hard-to-abate” sectors 3.1.2 Hard-to-abate sectors are typically capital-intensive and involved in upstream activities such as metal, cement, chemical and petroleum. These sectors have inherent difficulty in lowering emissions due to their reliance on fossil fuels for energy and as feedstock, energy-intensive processes and expensive decarbonisation technologies. The need to decarbonise hard-to-abate sectors has become more critical and urgent to protect the environment and Malaysia’s export market. As an example, decarbonising hard-to-abate sectors will address the EU’s Carbon Border Adjustment Mechanism (CBAM)44 tariffs, which will affect Malaysia’s key export sectors as well as other ESG-sensitive markets. Among the actions that can be executed include the adoption of low-carbon technologies in processes and production activities, deploying carbon capture and storage mechanism, recycling and reusing wastes as secondary sources of feedstock. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 99 MITI will work with NRECC, Department of Environment (DOE), MIDA, Malaysian Green Technology and Climate Change Corporation (MGTC) and MTDC to execute this plan and conduct the following activities: • Prioritise the development of decarbonisation pathways for hard-to-abate sectors; • Explore the introduction of sectoral emissions levy, specific for companies in hard-to-abate sectors that produce emissions above a pre-set baseline; • Develop programmes to ease access to financing for companies from hard-to-abate sectors to acquire relevant technologies and implement transition programmes; and • Facilitate industry conference programmes to allow decarbonisation technology providers to showcase products to industry players from hard-to-abate sectors. ACTION PLAN Introduce carbon policy, accounting and tax 3.1.3 Carbon policy will set mandates and guidelines for a carbon accounting model to guide industry players to measure and report Scope 1, 2 and 3 carbon emissions and for the implementation of a carbon pricing mechanism e.g. carbon tax. A robust carbon tax system introduces a cost component that is proportional to emissions produced. This will encourage industry players to adopt sustainable practices to reduce carbon emissions. This action plan is aligned to RMKe-12, which emphasises the need for a carbon pricing mechanism such as a carbon tax system and a GHG emission accounting model to improve monitoring emission levels. MOF, with the support of NRECC and MITI will execute this action plan and conduct the following activities: • Develop a carbon accounting model that provides guidelines to identify emission sources and measure, verify and report carbon emissions; • Study the impact of carbon tax on Malaysia’s emissions in the long term; and • Develop a carbon tax system with an appropriate initial tax rate and a pathway for a gradual increase in tax rate over a set number of years. ACTION PLAN Launch iESG framework and transition programmes 3.1.4 Compliance with ESG is now a critical requirement for the global market, particularly in ESG- sensitive markets. The iESG framework will serve as a comprehensive guideline for the manufacturing sector to adopt ESG practices. The framework has three objectives: • Support manufacturing firms to learn, be agile and adopt ESG practices; • Transform challenges into opportunities; and • Foster symbiotic public-private partnership for value creation. The iESG framework will focus on four central components: Standards, capacity building, financing and market mechanism, each with its own transition programmes. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 100 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Figure 6.2: ESG Framework for the Manufacturing Sector Financing Standards Financial solutions and Financing Standards Implementation, Support to adopt measuring and sustainable practice reporting standards Capacity building Market mechanism Market mechanism Capacity building Carbon pricing, RE Workforce training to certificates, Emission socialise ESG Trading Mechanisms practices TRANSITION PROGRAMMES (SELECTED EXAMPLES) i-ESGStart – KNOWESG – raise Promote Green Set Carbon Pricing sustainability reporting awareness on benefit Financing Options Instrument guideline/ starter kit and opportunities The iESG framework must be aligned with ongoing global reporting standards such as those issued by the International Sustainability Standards Board (ISSB) as well as national frameworks on sustainability. It will be aided by upcoming domestic guides and tools such as the Simplified ESG Disclosure Guide (SEDG) for SMEs by the Securities Commission Malaysia (SC) and Capital Markets Malaysia (CMM). The Guide, which will be released in 2023, offers practical, structured guidance on disclosures expected of SMEs in relation to ESG matters. It will provide SMEs with a simplified and standardised set of ESG disclosures that will enable them to adopt sustainability to remain competitive and relevant and to respond to disclosure requests from stakeholders, including customers, investors, banks and regulators. The SEDG is aligned with the main global frameworks and reporting standards including the ISSB standards and the Global Reporting Initiative (GRI). It will reference local reporting requirements including those under the Bursa Malaysia (Bursa) Listing Requirements, Bursa’s Sustainability Reporting Guide as well as the Malaysian Code on Corporate Governance (MCCG). MITI will execute this action plan and conduct the following activities: • Align the iESG framework with the Simplified ESG Disclosure Guide (SEDG) for SMEs by the Securities Commission Malaysia (SC) and Capital Markets Malaysia (CMM); • Launch iESG framework and socialise recommendations to industry players; • Roll out programmes in each of the four central components of the framework; and • Set up monitoring mechanisms to track take-up of programmes. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 101 STRATEGY 3.2 Transition to renewable and clean energy The manufacturing industry is largely dependent on the combustion of fossil fuel for power generation, producing harmful GHG emissions. A Net Zero manufacturing industry requires transition to renewable and clean energy as its main energy sources. This strategy is aligned to the Malaysia Renewable Energy Roadmap (MyRER), which provides the policy framework for RE development in Malaysia. MyRER specifies a target of 35 per cent by 2025 and 40 per cent by 203545. The National Energy Transition Roadmap (NETR) further pushes this target to 70 per cent by 205046. To achieve this, two Action Plans have been formulated: ACTION PLAN Enhance adoption scheme for energy efficiency or 3.2.1 renewable energy Implementing energy efficiency measures and adopting RE will reduce carbon emissions and provide long-term cost savings. Examples of energy efficiency measures include decommissioning old equipment in favour of new, less power-intensive equipment and implementing energy management systems. RE includes solar photovoltaic cells, hydropower and bioenergy sources such as agriculture waste and biofuel derived from palm oil. A significant barrier for industry players to make this transition is the associated high implementation cost and limited knowledge on RE transition. The Government will address these challenges by developing financial and advisory schemes, to facilitate the adoption of energy efficient measures and RE. MITI, with the support of MIDA, NRECC and Sustainable Energy Development Authority Malaysia (SEDA) will execute this action plan and conduct the following activities: • Engage industry players to understand challenges in adopting energy efficiency measures and RE; • Review and strengthen incentive schemes to ease industry in adopting energy efficiency measures and RE; and • Introduce governance mechanisms to monitor take-up rate of schemes. ACTION PLAN Accelerate availability and accessibility of renewable 3.2.2 energy source for the industry RE is a key component in the decarbonisation of industries. Due to its geographical location, climate and rich agricultural activity, Malaysia has high potential for RE generation such as solar, hydro, bioenergy, geothermal and hydrogen fuel cell. However, the availability and accessibility of RE is a key challenge to facilitate the transition to RE. The types of RE and their potential can be summarised as below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 102 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Table 6.1: Summary of Renewable Energy Resources Potential No. Type of RE Viability Potential (GW) 1 Solar Photovoltaic All year-round solar irradiation 269.0 Cells 2 Hydropower Presence of numerous river basins: • Large hydro 13.6 • Small hydro 2.5 3 Bioenergy Availability of large quantities of 3.6 agriculture, domestic and industrial waste 4 Geothermal Presence of geothermal fields with 0.6 high activity 5 Hydrogen Growing focus on hydrogen as a source New potential of energy Source: Malaysia Renewable Energy Roadmap However, the supply of RE is currently limited due to various challenges, unique to each type of RE source. The Government will address these challenges to accelerate the availability and accessibility of RE for the industry via the Strategies and Action Plans identified under the MyRER. This includes strategic focus on accelerating large scale solar deployment, new business models to explore bioenergy resources, hydro potential and new energy technology exploration e.g. hydrogen fuel cell47. NRECC and SEDA, with the support of MITI, MGTC, MIDA, SIRIM, the Energy Commission and power utility providers such as Tenaga Nasional Berhad (TNB), Sabah Electricity Sdn. Bhd. (SESB) and Sarawak Energy Berhad (SEB) will execute this action plan through the governance of MyRER. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 103 Box Article 6.1: The Hydrogen Economy – Hydrogen as a renewable source What is Hydrogen Economy? A conceptual framework has been Energy system where hydrogen is used as a established to accomplish Hydrogen clean and sustainable energy carrier to replace Economy in Malaysia… traditional fossil fuels in achieving low-carbon future Feedstock for chemical industries 1 The use of hydrogen aims to reduce the impact on climate change which 2 Internal combustion engines fuel predominantly caused by the usage of carbon- intensive energy sources such as coal, oil and 3 Automobiles fuel and energy storage natural gas Hydrogen fuel cells can power vehicles to Energy reduce air storage to pollution Decarbonising increase industrial reliability on processes by renewable using H2 as energy feedstock Provide clean Clean energy electricity carrier as it and heat for emits zero greenhouse Roles in Hydrogen residential & commercial gas Economy use Contributions of Hydrogen Economy Boosting global economic Improvement in public health and through $240 billion direct mitigate climate change as a result investments in 680 large-scale of zero carbon emission hydrogen projects announced from hydrogen fuel cells Excess power from solar and wind Enhance energy security can produce hydrogen through by diversifying energy sources and electrolysis which can be used to shifting reliance on finite fossil fuel generate electricity resulting in reserves reduced energy cost Source: MIDA MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 104 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO STRATEGY 3.3 Catalyse new green growth areas The global demand for green technologies and processes is increasing at a rapid pace as Net Zero targets become a central feature in the climate policy of many countries around the world and industries race to decarbonise their production. This presents new economic opportunities for Malaysia to capitalise, to position itself as a leader in new green growth areas. To achieve this, three Action Plans have been formulated: ACTION PLAN Catalyse EV as a key growth driver 3.3.1 The transport sector is consistently the second largest emission contributor in the energy segment in Malaysia. The emissions are largely attributed to fossil-fuel powered road transportation. Catalysing the growth and adoption of EV will accelerate the decarbonisation of Malaysia’s transport sector. The catalytic effect of EV will further boost growth of related sectors in equipment supply, charging infrastructure and software development for an EV ecosystem. These would harness cross-sectoral collaboration across industries including metal, E&E, digital and ICT and chemical. An EV ecosystem comprises the following key components: • Raw material: Steel, aluminium, plastic composites, etc. • EV components: EV battery, chassis, motors, power electronics and embedded system platform, etc. • Charging Infrastructure: Charging stations • EV services: Maintenance and repairs, EV conversion services, battery testing and safety, battery recycling Figure 6.3: The EV Ecosystem MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 105 The National Automotive Policy 2020 and the Low Carbon Mobility Blueprint 2021-2030 detail aspirations for Malaysia to develop an electric mobility ecosystem. Malaysia has set a target of 15 per cent xEV48 share of the Total Industry Volume (TIV) by 2030. The Low Carbon Nation Aspiration 2040 pushes this target further to 38 per cent xEV share by 204049. To achieve these targets, a National Level Inter-Ministry EV Taskforce was set up. This task force oversees the growth of EV in Malaysia. The National Level Inter-Ministry EV Taskforce under MITI, with the support of Ministry of Transport (MOT), NRECC, MOSTI, MGTC, SIRIM, Malaysia Automotive Robotics and IoT Institute (MARii) and MIDA will execute this action plan and conduct the following activities: • Formulate a comprehensive policy to attract global EV manufacturers into Malaysia, increase SME participation in the local EV value chain and facilitate the set-up of more charging infrastructure; • Facilitate collaboration of industry players with global players for knowledge and technology transfer; • Collaborate with selected industry players to deploy charging infrastructure; and • Improve demand for EV by lowering cost of EV. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 106 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Box Article 6.2: The Electric Vehicle (EV) Value Chain 1 Research & Development Collaborations between Government Agencies, academic institutions, and industry players to develop advanced technologies, improve battery efficiency and enhance the overall performance of electric vehicles 2 Battery Production The production of lithium-ion batteries is a core components of electric vehicles. Battery manufacturers focus on improving energy density, durability and charging capabilities while reducing costs 3 Manufacturing EV manufacturers assemble various components, including the battery pack, electric motor, power electronics and other subsystems, to create the final EV. It involves the integration of software and hardware systems, as well as compliance with safety and regulatory standards 4 Charging Infrastructure The deployment of a robust charging infrastructure is essential for the widespread adoption of EV. This stage involves the installation of public charging stations, home charging units and fast-charging networks to support convenient and efficient charging of EV 5 Technology Solution Digitalisation allows for over-the-air updates on EV software and battery management system. This would support the anti-theft protections, vehicle support and built in navigation enhance customers experience and provide solutions 6 End of Life Managing end-of-life phase of EVs considers battery recycling and second life applications. Secondary application could be viable for non- transportation related. Recycling can help attach a residual value to the battery at its end of life Source: MIDA MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 107 ACTION PLAN Grow carbon capture, utilisation and storage (CCUS) as a 3.3.2 new sector Carbon capture, utilisation and storage (CCUS) is a new potential solution for carbon management, particularly for hard-to-abate sectors. CCUS comprises two possible pathways; Carbon capture and storage (CCS), where emissions are captured and stored in depleted oil fields or other geological formations and Carbon capture and utilisation (CCU), where emissions are captured and utilised to manufacture products. Malaysia is primed to capitalise on opportunities in CCUS as it has a sizeable number of depleted oil fields that are geologically stable, which is suitable for carbon storage. Products manufactured from captured carbon, such as carbon composites and chemical feedstock align to waste-to- wealth principles and help contribute to the growth of priority sectors such as aerospace and chemical. The CCUS sector comprises businesses that offer Carbon Capture-as-a-Service (CCaaS), logistic companies that transport captured carbon to storage sites, technology solution providers that deploy carbon capture infrastructure in industrial plants and technology companies that convert captured carbon into useable feedstock. KE, with the support of NRECC, MITI, MOT, Ministry of Foreign Affairs (MoFA) and MOF will execute this action plan and conduct the following activities: • Develop a CCUS framework and the governance mechanisms for industry development, through Cluster-based approach; • Roll out first CCUS cluster in East Coast Malaysia. targeting hard-to-abate sectors; • Strengthen current carbon management regulation and introduce a carbon tax, to encourage the use of CCUS; and • Explore Government-to-Government (G2G) bilateral agreements to facilitate collaboration between countries. ACTION PLAN Develop circular economy framework for the industry 3.3.3 The traditional linear economy model follows a ‘take-make-dispose’ scheme and exhausts raw materials and energy. This results in overuse of resources and production of large quantities of wastes, pollutants and carbon emissions. A circular economy model promotes an industrial economy that is restorative or regenerative by design, using a closed loop material flow in the economic system. Examples of this include designing products that require less raw materials and can be recycled and reusing wastes as secondary sources of feedstock. A circular economy framework will provide guidelines for industry players to transition to a circular economy model, set targets and ensure the development of enablers such as R&D capability and infrastructure. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 108 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Figure 6.4: Circular Economy Principles This action plan complements Malaysia’s Roadmap Towards Zero Single-Use Plastics 2018-2030 and the National Solid Waste Management Policy. MITI with the support of NRECC, KPKT, MIDA, MRM, SIRIM and selected industry players will execute this action plan and conduct the following activities: • Assess the challenges and economic opportunities in transitioning to a circular economy; • Develop guidelines for industry players and targets for Malaysia to achieve; • Develop programmes to support the transition of industry players to adopt a circular economy model; and • Develop training programmes to facilitate capacity building. STRATEGY 3.4 Shift towards green infrastructure Green infrastructure is a network of natural systems and man-made infrastructure that provide economic value while preserving environmental quality. Green infrastructure in industrial complexes is typically powered by RE and operated sustainably via waste-to-wealth activities that are aligned to circular economy principles and the utilisation of energy efficient equipment. Shifting towards green infrastructure is key to achieve Malaysia’s Net Zero target. To achieve this, one Action Plan has been formulated: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 109 ACTION PLAN Accelerate transformation of industrial estates into eco- 3.4.1 industrial parks Industrial estates typically have a high concentration of companies, which make them GHG emission hotspots. Transforming brownfield industrial estates into eco-industrial parks that have green and resilient infrastructure and sustainable processes reduces greenhouse gas emissions, the amount of wastes produced and natural resources used. The principles of circular economy are a central component of eco-industrial parks. Key components of eco-industrial parks include collective park management activities for resource-efficiency, resilient infrastructure, circularity of waste, advanced wastewater treatment and RE solutions50. Eco-industrial parks have reduced operation costs in the long term and will attract high quality green FDI. Figure 6.5: Types of Industrial Parks MITI with the support of NRECC, DOE, SIRIM and MIDA will execute this action plan and conduct the following activities: • Obtain buy-in of relevant stakeholders to transform industrial estates to eco-industrial parks; • Enhance industrial estates’ development and management; and • Implement green practices in industrial estates. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 110 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Box Article 6.3 : What is an Eco-Industrial Park What is an Eco-Industrial Park? An eco-industrial park, also known as an eco-park, aims to integrate industrial activities with sustainable and environmentally friendly practices. It is designed to minimise the environmental impact of industries and promote resource efficiency, waste reduction and the use of renewable energy sources. EcoWorld Case Study EcoWorld has four strategically-located business parks – Eco Business Parks I, II, III, and V: • Eco Business Park I: 612-acres, in Iskandar Malaysia, Johor, with 500+ SMEs from various industries. • Eco Business Park II: 383-acres, in fast-growing Flagship E of Iskandar Malaysia, close to Johor Bahru and Singapore. • Eco Business Park III: 248-acres, in Pasir Gudang, a growing business hub in Iskandar Malaysia. • Eco Business Park V: 117-acres, in Klang Valley, connected to major expressways, seaports, and airports. Benefits to businesses: • Convenient logistics: • Sustainable features: Green Strategically located near initiatives like rainwater major land and sea routes, harvesting, LED lighting and ideal for a range of industries. ample green spaces to reduce carbon footprint and keep energy usage low. Source: EcoWorld MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 111 Mission-based Project 3.1 Create decarbonisation pathway role models To reduce carbon emissions from industrial Actions activities, it is critical to adopt decarbonisation initiatives. However, without pathways to The following activities will be conducted for emulate, it may be difficult for industry players this MBP: to identify effective initiatives. • Select decarbonisation pathway role This project aims to create decarbonisation models for each hard-to-abate sector, pathway role models, to guide other companies beginning with petrochemical; in the same sector to decarbonise. • Record the MBP champion’s decarbonisation pathways, for other For this MBP, a champion has been identified companies to emulate; to provide a showcase decarbonisation • Socialise the decarbonisation pathways to pathway for the petrochemical sector. The other potential companies; and decarbonisation pathway developed will • Strengthen carbon management guide other petrochemical companies to regulations e.g. sectoral emission levy and decarbonise. Following this, other companies carbon tax system, to encourage adoption in hard-to-abate sectors such as Metal, Cement of decarbonisation pathway. and Chemical will be able to develop their own decarbonisation pathways. Enablers Rationale The following are key Enablers for this MBP: The rationale for this MBP is based on the • Establishing collaboration in technical following factor: assistance to support firms in undertaking their sectoral decarbonisation; • Hard-to-abate sectors have inherent • Mobilising financing to support the difficulty in lowering emissions and greening of value chains and undertake require showcase references to adopt demonstration projects; successful initiatives that utilise effective • Incentives to support industry players to decarbonisation technologies and adopt low-carbon technologies; and methodologies, such as: • Talent development to ensure there is • Implementation of energy efficiency sufficient talent in high value R&D jobs to measures; development new low-carbon technologies. • Electrification of machinery; • Transition to RE; Funding • CCUS; • Sustainable sourcing of raw material This MBP will be private led, potentially financed and feedstock; from the financing ecosystem catalysed under • Adoption of Circular Economy the NIMP 2030. principles: sustainable consumption and management of resources and waste reduction, reuse and management; and • Transition to green infrastructure. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 112 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Mission-based Project 3.2 Launch locally-manufactured EV This MBP is focused on launching a locally-manufactured EV. The aim is to facilitate industry players in the EV ecosystem to develop end-to-end capabilities in EV manufacturing by attracting and developing the relevant value chains in Malaysia. Private sector companies, including SMEs, will be upscaled to participate in the EV value chain, as component manufacturers, charging infrastructure manufacturers and providers and EV service providers. Charging infrastructure is a key component in the EV ecosystem. The unavailability of a network of charging infrastructure induces ‘range anxiety’ amongst EV owners and causes low EV demand and adoption. In tandem with the launching of a locally manufactured EV, it is key to deploy a network of charging stations in strategic locations. Common standards should be established to ensure compatibility of connectors. Rationale The rationale behind this Mission-based Project arises from multiple factors: • Firstly, this MBP is aligned to a national agenda to develop an electric mobility ecosystem in Malaysia. This is evident through the aspirations detailed in the National Automotive Policy 2020 and the Low Carbon Mobility Blueprint 2021-2030, and the set-up of a National EV Steering Committee under the National Level Inter-Ministry EV Task Force to oversee the growth of EV in Malaysia; and • Secondly, this MBP will catalyse the growth of sectors such as R&D, M&E, E&E, Materials, Minerals, Digital and ICT and Energy to supply equipment, parts, infrastructure and capability to enable a local EV ecosystem, that comprises: • Raw materials: Steel, aluminium, plastic composites, etc.; • EV components: EV battery, chassis, motors, power electronics, etc.; • Charging Infrastructure: Charging stations; and • EV services: Maintenance and repairs, EV conversion services, battery testing and safety, battery recycling. Actions The following activities will be conducted for this MBP: • Government-private sector collaboration to set standards for charging infrastructure, ensure compatibility of connectors and establish robust charging infrastructure; • Incentivise the participation of SMEs in the local value chain to support this MBP; • Facilitate the development of a locally-manufactured EV; and • Drive EV-adoption programmes to increase demand. Enablers The following Enablers are key to execute the MBP: • Industry adoption of Industry 4.0 technologies; and • Incentives to lower the cost of EV ownership, to drive demand. Funding This MBP will be private led, potentially financed from the financing ecosystem catalysed under the NIMP 2030. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 3: PUSH FOR NET ZERO Master Plan 2030 113 Mission-based Project 3.3 Deploy large-scale CCUS solutions This MBP is focused on the deployment of CCUS infrastructure to decarbonise hard-to-abate sectors such as Metal, Cement, Chemical and Petroleum. Deploying CCUS comprises four key components: • Carbon capture: Capture CO2 from industrial processes; • Transportation: By ship, pipeline and land transport; • Carbon storage: CO2 storage in depleted oil fields; and • Carbon utilisation: Development of products from captured CO2 and aligned to circular economy principles. The champion for this MBP will invest in R&D to develop CCUS technologies, including for the utilisation of captured carbon and facilitate the transfer of CCUS technologies into Malaysia via partnerships with global companies. Initial focus will be on utilising CCUS to decarbonise selected oil and gas plants. The storage capacity in the identified storage fields will be earmarked for both domestic use as well as for global players. The allowance for global players to store carbon emissions in Malaysian carbon storage fields is beneficial to facilitate technology transfer into the country to accelerate the growth of CCUS as a sector. Figure 6.6: Processes in CCUS Liquid CO2 carriers MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 114 Master Plan 2030 MISSION 3: PUSH FOR NET ZERO Rationale The rationale for this MBP is based on the following factors: • CCUS is a nascent sector with no dominant player in the Asia Pacific. Malaysia can lead the growth of the sector in the region due to several advantages, particularly its vast carbon storage capacity across its depleted oil fields. Malaysia is geographically suitable as it does not have seismic activities and its potential carbon storage sites are 2,000 metres below sea level • The growth of CCUS as a sector will facilitate technology transfer into the country, advance the local R&D ecosystem, create a new pool of skilled workers and a new export service segment e.g. Carbon Capture-as-a-Service (CCaaS). The risks associated with leakages during transportation and at the storage sites will be mitigated through careful selection of storage sites and by reinforcing storage sites and deploying monitoring systems. Actions The following activities will be conducted for this MBP: • Develop a CCUS framework and the governance mechanisms for industry development, through Cluster-based approach; • Roll out first CCUS cluster in East Coast Malaysia, targeting hard-to-abate sectors; and • Explore Government-to-government (G2G) bilateral agreements to facilitate collaboration between countries. Enablers The following Enablers are key to execute the MBP: • Regulation for the growth of CCUS as a sector; and • Carbon management regulations e.g. sectoral emission levy and carbon tax system to encourage the adoption of CCUS. Funding This MBP will be private led, potentially financed from the financing ecosystem catalysed under the NIMP 2030. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 7 MISSION 4 : SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY New Industrial 116 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Increase Create high- Extend domestic Develop new & Improve Enhance ESG economic value job linkages existing clusters inclusivity practices complexity opportunities The world is undergoing a major geopolitical shift, as observed in the US-China trade tension and Russia-Ukraine conflict. In response, MNCs especially from the United States and Europe are actively seeking ways to de-risk their operations by adopting a “Plus One” strategy. Additional challenges posed by the COVID-19 pandemic have resulted in a notable shift in the global supply chain from economic efficiency to economic security. The Government via the NIMP 2030 will navigate the new paradigm, working towards building a resilient and robust economy. There is a good opportunity for Malaysia to embark on a second take-off and expand the middle- class society. In pursuit of this Mission, Malaysia aims to develop a resilient supply chain, foster climate resilient development, strengthen industrial clusters and encourage a more balanced participation by States in socioeconomic activities. The successful implementation of Strategies and Action Plans under Mission 4 will result in impactful outcomes as follows: • Ensure shorter and more secure supply chain: Malaysia is well-positioned as a strategic destination for nearshoring. This involves bolstering the capacity of domestic industries to be part of the global supply chain. • Enhance resilience of manufacturing base: The Government will work towards strengthening manufacturing sector’s ability to withstand and recover from potential disruptions and calamities. • Strengthen domestic and ASEAN vertical integration: The NIMP 2030 will drive collaborative efforts in industrial development among States. It will generate growth in manufacturing sector nationwide and create spill over to other sectors such as tourism, distributive trade and other services sectors. With the strong domestic linkages, Malaysia will be able to position itself strategically within ASEAN to build regional resilience and connectivity. • Promote inclusivity: Malaysia will harness the collective expertise and resources of the nation to drive the NIMP 2030 forward. By involving all stakeholders and fostering inclusivity, Malaysia aims to ensure that the benefits are shared by all members of society. Four Strategies and 10 Action Plans will be carried out to achieve Mission 4, as illustrated below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 117 Figure 7.1: Mission 4 – Safeguard Economic Security and Inclusivity MISSION 4 Safeguard economic security and inclusivity

4.1 — Develop resilient supply chain 4.3 Strengthen industrial clusters for regional

4.1 Develop resilient supply chain 4.3 Strengthen industrial clusters for regional

4.1.1 — Identify specific supply chain resilience development

4.1.1 Identify specific supply chain resilience development strategies for critical sectors 4.3.1 Expand clusters for spillover regional

4.1.2 — Establish supply chain cooperation and impact

4.1.2 Establish supply chain cooperation and impact collaboration through G2G and G2B 4.3.2 Align industrial development plan between programme Federal and States

4.1.3 — Introduce National Mineral Policy for

4.1.3 Introduce National Mineral Policy for downstream processing of critical minerals

4.4 — Empower Bumiputera participation and

4.4 Empower Bumiputera participation and

4.2 — Foster climate resilient development create inclusive workforce

4.2 Foster climate resilient development create inclusive workforce

4.2.1 — Develop sectoral adaptation pathways to 4.4.1 Uplift capabilities of Bumiputera

4.2.1 Develop sectoral adaptation pathways to 4.4.1 Uplift capabilities of Bumiputera guide transition companies in manufacturing via Tindakan

4.2.2 — Foster an adaptation industry to provide Pembangunan Bumiputera 2030

4.2.2 Foster an adaptation industry to provide Pembangunan Bumiputera 2030 adaptation products and services 4.4.2 Develop programme to increase women (including exports) participation in high-skilled manufacturing

4.2.3 — Instil climate resilience measures for employment

4.2.3 Instil climate resilience measures for employment critical economic infrastructure STRATEGY 4.1 Develop resilient supply chain According to the World Economic Forum, the collapse of a systemically important supply chain is rated as one of the highest risks to the global economy, as it may lead to an abrupt shock to the supply and demand of critical goods and services globally51. It is critical for Malaysia to ensure smooth trade, access to essential goods and business continuity by growing and innovating the local industries to become more self-sufficient. Malaysia possesses significant reserves of critical minerals, which are valuable for high value-added manufacturing activities. Therefore, the Government and industries need to ensure sustainable development of critical minerals to meet current and future needs. To achieve this, three Action Plans have been formulated: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 118 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY ACTION PLAN Identify specific supply chain resilience strategies for 4.1.1 critical sectors National supply chain resilience is crucial for materials, critical components for industries the industries to navigate disruptive forces and and products vital for public health, defence swiftly respond to volatile supply and demand. A and infrastructure. Given that, Malaysia needs significant example is the COVID-19 pandemic, to innovate and grow local industries and which had caused disruptions in the global and attract investments for domestic production. local supply chains, as countries implemented lockdown measures, travel restrictions and The action plan will be led by MITI in trade disruptions. The adverse impact was collaboration with key stakeholders particularly felt in the manufacturing sector. including relevant MITI agencies and industry associations. The following activities will be In view of this, it is crucial for Malaysia to conducted: develop a robust model that can identify vulnerabilities and potential disruptions such • Develop supply chain resilience model to as geopolitical shift, overreliance on single identify vulnerabilities, develop scenario sourcing, natural disasters and public health planning and potential response and challenges. This will help Malaysia to determine execute simulation of crisis scenarios; critical products and components that should • Develop business continuity plan in be produced domestically and which can be response to disruptions; and outsourced from other countries. These critical • Conduct regular review to ensure relevance products encompass essential goods, key raw in addressing future disruptions. ACTION PLAN Establish supply chain cooperation and collaboration 4.1.2 through G2G and G2B programme Moving beyond the national level, a broader Malaysia can take advantage of the trade perspective is global supply chain resilience. agreements that have been signed with other The pandemic has revealed the vulnerability of countries to strengthen its supply chain. To global supply chains. As a result, many countries date, Malaysia has implemented 16 FTAs, have made structural changes to their supply comprising seven bilateral and nine regional chain framework by implementing dual or FTAs. G2G and government-to-business (G2B) multiple sourcing strategies. This serves as a cooperation is paramount to ensure that these signal for Malaysia to re-evaluate and fortify its trade agreements comprehensively secure the current supply chain, ensuring preparedness identified critical products and components. for any future disruptions. The action plan will be led by MITI in A significant step towards achieving this collaboration with key stakeholders including resilience is through the adoption of the “Plus MATRADE and MIDA to conduct the following One” strategy, which has gained prominence activities below: in recent years due to escalating labour costs, geopolitical risks, supply chain disruptions and • Identify potential alternative trade partners evolving trade dynamics. or countries to support sourcing of critical products, components or resources; Malaysia is well-positioned as a neutral • Review the current trade agreements to country with existing strengths including map with identified critical products; and in semiconductor, clean energy and critical • Foster new trade agreements aligned with minerals to support the supply chain resilience national interests, where necessary. of the region and the world. Malaysia will form complementary cooperative relationship within the ASEAN framework to build a strong vertical supply chain integration. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 119 ACTION PLAN Introduce National Mineral Policy for downstream 4.1.3 processing of critical minerals Malaysia is set to become an important hub for the development of the mineral industry, leveraging on its abundant mineral resources. The responsible and sustainable use of these mineral resources are essential to ensure the country’s economic security. The rapid development of clean energy technologies is set to supercharge demand for critical minerals. The global critical mineral supply chain is increasingly vulnerable as demand surges for the manufacturing of electric vehicle batteries, satellites and wind turbines. Malaysia should maximise its valuable critical mineral reserves by encouraging domestic downstream industries development. In line with National Mineral Industry Transformation Plan 2020-2030 launched in 2021, NRECC has identified five critical minerals: NR-REE (non-radioactive rare earth elements), bauxite, tin ore, silica sand and kaolin. The estimated value is worth up to RM971.3 billion and Malaysia is well- positioned to capitalise on these economic opportunities. The strategic minerals are essential to produce high-tech products and act as a strong pillar to support other sectors’ continuity and secure national security. Figure 7.2: Strategic Minerals 5 Strategic Minerals NR-REE Bauxite Tin Ore Silica Sand Kaolin (non-radioactive rare earth elements) Strategic minerals value worth up to RM970 billion Permanent Aluminium Pewter Electronic Pharmaceuticals magnets production components (capsules and tablets) Hybrid and Metal alloys Canning Solar cells Cosmetics electric vehicle MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 120 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY A new National Mineral Policy will be rolled out to manage the extraction of minerals and ensure a balance between potential economic benefits and environmental sustainability. It will set a new SOP for all mining operations across the country, with the aim to strengthen enforcement against illegal mining while promoting environmentally friendly mining activities. Another focus is to propel downstreaming of the critical minerals. Malaysia shall take this opportunity to move up the value chain to further add value of the valuable minerals prior to exporting. Figure 7.3: Minerals Value Chain The policy will be led by NRECC in collaboration with key stakeholders such as MITI, MOSTI, State Governments, Local Governments and Jabatan Mineral dan Geosains (JMG). The following activities will be conducted: • Determine and formulate the objective, scope and mechanism of the policy; • Gather and incorporate feedback from States and Local Governments to drive synergy; and • Enforcement of National Mineral Policy nationwide. STRATEGY 4.2 Foster climate resilient development Climate resilient development is a process of implementing both GHG mitigation and climate adaptation options to support Malaysia’s pursuit of sustainable development. In this strategy, the focus will be on climate adaptation to build climate resilience of the manufacturing industry. Based on a study by Khazanah Research Institution (KRI) in the Task Force on Climate Related Financial Disclosures (TCFD) framework, Malaysia’s manufacturing industry is exposed to a range of physical risks associated with climate conditions. These risks can have significant implications for the operations of manufacturing companies and the overall economy. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 121 Figure 7.4: Physical Risks Associated with Climate Conditions Source: KRI’s Compilation Companies face not only short-run losses resulting from climate shocks but potential long-term challenges stemming from chronic climate risks. These chronic risks can have a lasting impact on a company’s financial stability. As a result, there is a need to support the industry in adaptation practices by fostering climate resilience development. By doing this, it reduces risks, adapts to changing conditions, promotes sustainable development, enhances economic stability and fulfils Malaysia’s global responsibility in addressing climate change. To achieve this, three Action Plans have been formulated: ACTION PLAN Develop sectoral adaptation pathways 4.2.1 As climate change worsens, the impact of it poses significant risks to Malaysia’s industries: • Physical risks: Extreme weather events such as rising sea-level and changes in precipitation patterns can damage critical industrial infrastructure, especially in coastal areas; • Supply chain risks: Climate change can disrupt supply chains by affecting the availability, quality and reliability of key inputs, commodities and raw materials; and • Operational risks: Climate change can impact day-to-day operations by increasing operational costs, reducing labour productivity and disrupting business continuity. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 122 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY With the view of the climate change risks, the Government will take a proactive approach to develop adaptation pathway to build resilience. Different sectors require different mechanisms to adapt to the climate change-induced risks. There are sector-specific challenges and vulnerabilities for which solutions must be catered to. The sectoral adaptation pathways will include measures to address: • Changes to infrastructure to adapt to physical risks; • Diversification of sources for critical resources such as energy and feedstock to minimise supply chain risk; and • Adoption of technology. MITI will collaborate with NRECC to execute this action plan and the following activities will be conducted: • Develop sectoral adaptation pathway with the consideration of the current and future climate risks, potential vulnerabilities and climate change impact; • Promote awareness of the pathways and provide incentive to encourage adaption; and • Introduce policy measure to accelerate the implementation. ACTION PLAN Foster an adaptation industry to provide adaptation 4.2.2 products and services (including exports) Malaysia’s GDP loss by 2048 could be as high as 46 per cent due to physical climate impacts52. While this is alarming, the adaptation process can serve as an opportunity to grow local climate adaptation-related industries and service providers. The existence of an adaptation industry can help the Government and other industries manage the impact of sea level rise, coastal erosion, floods, heat stress, agricultural adaptation and other forms of infrastructural effects. For example, according to a report by the National Hydraulic Research Institute of Malaysia (2018), Port Klang is expected to be submerged towards the end of the century with over 1m of sea level rise, based on sea level rise studies that it referred to. The Government shall collaborate with key stakeholders such as port operators, logistics providers, engineers and scientists to implement major infrastructural measures for climate risk mitigation. To execute this action plan, MITI will collaborate with KKR, KE, NRECC and MOSTI. The following activities will be conducted: • Identify risks of physical climate hazards that could cause disruption to industrial structures, supply chain continuity and daily operations. • Determine product and service providers for the provision of climate adaptation advice and subsequent implementation of climate adaptation measures. • Identify opportunities to grow climate adaptation product and service providers for the export market. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 123 ACTION PLAN Instil climate resilience measures for critical economic 4.2.3 infrastructure Economic infrastructure is important to maintain national security, economic vitality, public health and safety to facilitate continuous economic growth. The economic infrastructure in the manufacturing industry must be able to withstand, respond to and recover rapidly from disruptions caused by climate conditions. These climate conditions include floods, rising sea- level, heatwaves, forest fire and haze. The Government will plan, design and build climate resilient infrastructure in anticipation of the changing climate conditions. Based on Organisation for Economic Co-operation and Development (OECD) Environment Policy Paper on Climate-Resilient Infrastructure, the climate resilience measures can be grouped into two categories53: • Structural adaptation measures • Modify physical infrastructure to withstand climate conditions. For example, provide guideline in changing road surfaces to prevent deformation from high temperatures or building seawalls to manage excessive runoff during heavy rainfall. • Utilise natural infrastructure to design adaptation measures. For example, manufacturing facilities can incorporate green infrastructure elements such as rain gardens, bioswales and constructed wetlands to manage stormwater runoff. • Management (non-structural) adaptation measures • Adjust timing of maintenance activities to align with shifting patterns of energy demand and supply. This can optimise operational efficiency and minimise disruptions. • Invest in early warning system and insurance to address financial consequences of climate conditions. • Enhance monitoring of existing assets to identify potential vulnerabilities and reduce the risk of failure as climate conditions change. • Incorporate adaptive management approaches to monitor and adjust to changing circumstances over the asset’s lifetime. To execute this action plan, MITI, KKR, KE and NRECC will lead with support from the industry players. The following activities will be conducted: • Assess vulnerability of critical economic infrastructure in the manufacturing industry. Identify infrastructure such as buildings, transportation systems, power grids and water supply systems that are at risk from climate conditions; • Evaluate the risk associated with climate change impacts on the critical infrastructure. Consider factors such as change in temperature, precipitation, storm and sea-level; • Develop adaptation strategies to instil climate resilience for the critical infrastructure. This should include both structural and management adaptation measures; and • Integrate climate considerations into policies and planning to ensure coordinated efforts. Raise awareness and capacity building to educate the industry. Conduct periodic review and update climate resilience measures to account for changing climate patterns and emerging technologies. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 124 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Strengthen industrial clusters for regional STRATEGY 4.3 development The NIMP 2030 will continue the effort to bridge the development gap among States to ensure balanced regional development. The overarching goal is to unlock the untapped potential of each State and Region, thereby stimulating and accelerating equitable economic growth on a nationwide scale. Priority will be given to industrialisation, leveraging the strengths of States to spur greater economic activities. The Government will strengthen existing industrial clusters and unlock potential new clusters. To achieve this, two Action Plans have been formulated: ACTION PLAN Expand clusters for spillover regional impact 4.3.1 Malaysia has developed strong economic clusters in some States. In line with RMKe-12, the NIMP 2030 targets to address the disparity in industrial development between States. To achieve balanced regional development, the State Governments will work collaboratively based on respective complementary strengths. This allows the States in geographical proximity to gain spill over effects from existing clusters. For example, the northern corridor of Kedah and Perak benefit from the rapidly expanding E&E cluster in Bayan Lepas and Batu Kawan in Penang. Integrated high-tech park in Kulim, Kedah which focuses on high technology manufacturing, advanced technologies and R&D activities can potentially support the E&E cluster. This expansion accelerates the growth of the economic clusters, drives local innovation and enables Malaysia to stay competitive in the global market by expanding the base. There are other examples of clusters that have the potential to create spill over impact, such as: • M&E cluster: Batu Kawan, Penang • Automotive cluster: Gurun, Kedah; Tanjong Malim, Perak • Petrochemical cluster: Pengerang, Johor; Gebeng, Pahang; Kerteh, Terengganu MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 125 Figure 7.5: Economic Clusters in Malaysia Another existing example is the East Coast Rail Link (ECRL), a strategic infrastructure project connecting the East and West Coasts of Peninsular Malaysia spanning across Kelantan, Terengganu and Pahang towards Port Klang. To unlock the transit-oriented development for ECRL, MIDA and China Communications Construction Company Ltd (CCCC) have signed an MOU for the development of the Economic Accelerator Projects (EAPs) along the ECRL alignment. To date, MIDA has identified three logistic hubs and 11 industrial parks, and is expecting more development to be established to grow regional economy. The details are as shown below: MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 126 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Figure 7.6: Transit-oriented Development for ECRL Table 7.1: Logistics Hubs in Malaysia No. Logistics Hubs Location 1 Malaysia China Kuantan International Logistic Kuantan Port City Station, Pahang Park (MCKILP) 2 ITT Gombak Transit Gateway ITT Gombak Station, Selangor 3 Serendah Cargo Hub Bandar Serendah Station, Selangor 4 *Potential Pasir Puteh Logistic Hub Pasir Puteh Station, Kelantan 5 *Potential Dungun or Terengganu Silica Valley Dungun Station, Terengganu Logistic Hub 6 *Potential Maran Logistic Hub Maran Station, Pahang 7 *Potential Bentong Logistic Hub Bentong Station, Pahang (Warehouse and storage, collection and aggregation center, distribution and packaging center) 8 *Potential Jalan Kastam Logistic Hub Jalan Kastam Station, Selangor MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 127 Table 7.2: Industrial Parks in Malaysia No. Logistics Hubs Location 1 Tok Bali Industrial Park (TBIP) Pasir Puteh Station, Kelantan 2 Santong & Batu 7 Industrial Park Dungun Station, Terengganu 3 Kertih Terengganu Industrial Park 4 Kertih Biopolymer Park Kemasik Station Spurline, Terengganu 5 Kemaman Heavy Industrial Park (KHIP) Chukai Station, Terengganu 6 MCKIP3 7 Malaysia China Kuantan International Logistic Park Kuantan Port City Station, Pahang (MCKILP) 8 Pahang Technology Park (PTP) Paya Besar Station, Pahang 9 Gambang Halal Park (GHP) 10 Bentong Industrial Area Bentong Station, Pahang 11 UMW High Value Industrial Park Serendah Baru Station, Selangor 12 *Potential Puncak Alam Industrial Park Puncak Alam Station, Selangor 13 *Potential Kapar Industrial Park 14 *Potential Klang Industrial Park Jalan Kastam Station, Selangor 15 *Potential Pulau Indah Industrial Park Source: MIDA The action plan will be led by MITI in in States, to encourage vertical integration collaboration with key stakeholders such as KE, that complements each other; State Government, economic corridor, MIDA • Engage State Governments to ensure and sub-national IPAs. The following activities synergy between State’s growth plan with will be conducted: national plan; and • Integrate potential investments to the • Develop recalibration plan of existing existing clusters. clusters to identify untapped opportunities ACTION PLAN Align industrial development plan between Federal and

4.3.2 — States

4.3.2 States The Government underscores the importance insufficiency can be addressed by exploring RE to enhance industrialisation development in options. States and consistently engages with State Governments to ensure that the strategies Sarawak is aiming to become a leader in are aligned. This action plan will leverage local hydrogen economy in Malaysia, with plans strengths and capabilities to unlock potential to begin large-scale commercial production economic growth. With that, the Government and export of hydrogen by 2027. The intends to improve the investment ecosystem Government will work closely with Sarawak and attract new investors directed at to upscale the production capacity to address improving industrial distribution for balanced domestic demands and improve access to the development. international market. The rich natural resources in Sabah including As outlined in the Perlis Strategic Development oil and gas, timber, minerals and palm oil Plan 2012-2030, agriculture (food processing), provide opportunities to drive growth in biotechnology, RE and mining sectors are downstream manufacturing. Opportunities the key focus areas of Perlis’ manufacturing lie in downstream activities of these valuable industry. The Government will coordinate resources instead of exporting them in raw with the state to further develop these areas, form. On top of that, Sabah’s current energy especially for the RE sector, which have the MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 128 Master Plan 2030 MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY potential to benefit from the solar technology • Identify potential growth areas in the companies in neighbouring Kedah. States through regular engagement with the State Governments and sub-national The action plan will be led by MITI in IPAs; and collaboration with key stakeholders such as • Provide support to State Governments MIDA, State Government, sub-national IPAs in the regional growth, among others, in and developers. The following activities will be the areas of infrastructure, investment conducted: opportunities and talent development. Empower Bumiputera participation and create STRATEGY 4.4 inclusive workforce Empowering Bumiputera participation and creating an inclusive workforce lie in the objective of reducing disparities, embracing diversity, overcoming systemic barriers and promoting equal opportunities. The NIMP 2030 requires collaborative efforts to create a supportive and empowering ecosystem for workforce participation. To achieve this, two Action Plans have been formulated: ACTION PLAN Uplift capabilities of Bumiputera companies in 4.4.1 manufacturing via Tindakan Pembangunan Bumiputera 2030 Bumiputera development agenda continues to be one of the national priorities with the NIMP 2030 encouraging balanced and inclusive participation, including Bumiputera companies. TERAJU has launched their Tindakan Pembangunan Bumiputera (TPB) 2030 in 2021, which outlines key priority focus for Bumiputera manufacturers. The NIMP 2030 is aligned to the TPB 2030 and aims to empower Bumiputera companies in advancing economic complexity, increasing digitalisation, pushing for decarbonisation and ensuring economic security. There are 10 programmes outlined under TPB 2030 to support Bumiputera companies: Figure 7.7: NIMP 2030 Incorporated Bumiputera Programme MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial MISSION 4: SAFEGUARD ECONOMIC SECURITY AND INCLUSIVITY Master Plan 2030 129 Apart from that, the Government is committed to empower Bumiputera women in employment and leadership position. As of 2022, Bumiputera women workforce participation rate is recorded at 52.6 per cent54. MITI will be working closely with TERAJU and Bumiputera communities to support women to return to workforce and uplift their well-being. The following activities will be conducted: • Identify Bumiputera programme that require intervention to enhance the growth of Bumiputera communities; • Create linkage between Bumiputera communities, including women and youths, to existing programmes under the NIMP 2030, which are: • Talent development programme; and • Market access. • Create linkage between Bumiputera communities to economic opportunities e.g. halal industry. ACTION PLAN Develop programme to increase women participation in 4.4.2 high-skilled manufacturing employment Malaysia is experiencing low female labour force participation despite the dominating education enrolment. This can be attributed to various factors including family responsibilities and workplace inequalities. Occupational concentration in certain sectors further misallocates human capital resources especially in the manufacturing industry. To address the challenges, the Government will focus on these areas: • Strategic collaboration with the private sector to empower women through nationwide programmes, providing resources, training and career advancement opportunities; • Implementing flexible working arrangements to support women in balancing family and professional commitments, including flexible working hours and hybrid work models; and • Creating a conducive working environment by incentivising childcare and elderly care support, ensuring safety protocols and providing resources for mental health support. The action plan will be led by MOHR in collaboration with MITI, Ministry of Women, Family and Community Development (KPWKM) and TalentCorp. The following activities will be conducted: • Strengthen existing policy to close the gender gap including protection and benefits for women in the workforce; • Provide access to affordable and easily available childcare support and care centres; and • Provide upskilling or reskilling programmes for women who have taken a break and returning to the workforce. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 8 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES New Industrial 132 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Malaysia has the strength and potential to capture the opportunities from emerging trends; geopolitical shifts towards economy security, digitalisation and compliance with ESG requirements. However, there are several challenges that remain inherent and have limited the potential of the manufacturing sector in the past, as highlighted in Section 2. The Enablers aim to drive systemic and institutional reforms through: • Mobilising a comprehensive financing ecosystem to support industry development; • Fostering and attracting the right talent to support high value-added activities; • Establishing best-in-class investor journey to provide seamless investor experience in Malaysia; and • Introducing a whole-of-nation governance to rally the industry and implement the NIMP 2030. By addressing the Enablers, the expected outcomes are: • Cohesive ecosystem The Enablers will create a supportive, synergistic and collaborative environment, where the industry as a whole can collectively address challenges, seize opportunities and achieve the shared outcomes of the NIMP 2030; and • Resource optimisation By leveraging synergies, sharing resources and pooling efforts, it ensures efficient resource allocation and maximises the collective impact of the ecosystem. There are four Strategies and 19 Action Plans to be carried out to achieve the Enablers, as depicted below. Figure 8.1: Enablers ENABLERS E.1 Mobilise financing ecosystem E.3 Establish best-in-class investor journey for E.1.1 Introduce NIMP Industrial Development ease of doing business Fund and NIMP Strategic Co-Investment E.3.1 Establish a unified investment strategy Fund and align investment evaluation to new E.1.2 Boost financing for digitalisation and parameters under NIA decarbonisation transition E.3.2 Harmonise and streamline functions and E.1.3 Establish green sukuk to facilitate transition KPIs across IPA landscape E.1.4 Establish supply chain financing for SMEs E.3.3 Review and design competitive, agile and E.1.5 Increase utilisation of the capital market relevant incentives E.1.6 Expand the imSME platform to show E.3.4 Improve One-Stop Portal for seamless all available funding options including investor experience government funding and capital market E.1.7 Review government funding for consolidation E.2 Foster talent development and attraction E.2.1 Leverage mynext and MYFutureJobs for strategic workforce planning to address E.4 Introduce whole-of-nation governance long-term demand-supply requirement framework E.2.2 Introduce progressive wage system policy E.4.1 Establish public-private collaborative E.2.3 Improve policy to enable fast and hassle- councils free access to high-skilled foreign talents E.4.2 Set up NIMP 2030 Delivery Management E.2.4 Expand TVET programmes for high-skilled Unit jobs in critical sectors E.4.3 Develop NIMP 2030 dashboard system E.2.5 Raise profile of high-tech manufacturing career to attract interest in STEM subjects MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 133 ENABLER 1 Mobilise financing ecosystem The Missions and Enablers require significant Mission 2: investments to support the industrial development through the following areas: • Digital adoption for 3,000 smart factories; • Solution providers development; • Ensure coordination of large funding for • Training for digital adoption (including civil the industry to expand into high value- servants); and added activities; • National digital platform for manufacturing • Increase accessibility to funds for Malaysian sector. companies, including SMEs (e.g. R&D, product and services development, Mission 3: training, technology and sustainability adoption); and • Adoption of sustainable practices to achieve • Expand financing options to support Malaysia’s national commitment; national plans and initiatives. • iESG transition programme; • New growth opportunities for sustainability, The NIMP 2030 will mobilise various types of e.g.: financing, from the financial institutions to • Locally-manufactured EV; the capital market, supported by government • CCUS sites; and funding in strategic areas. • Renewable Energy. • Transformation towards eco-industrial The funding will be required based on the parks. following components: Mission 4: Mission 1: • Supply chain resilience, especially among • Supporting the industrial upgrading to SMEs and trade facilitation programmes; near-by adjacencies to increase economic • State industrial development programmes; complexity through IC design, wafer • Women workforce participation fabrication, E&E embedded system, programmes; and specialty chemicals, advanced materials, • Bumiputera development programmes aerospace, and pharmaceutical and (under TERAJU’s funding). medical devices manufacturing; • SME development (including capacity or capability development and value chain Enablers: integration); • Talent development; • Supporting the financing of public-private • Streamline of IPA landscape; partnership in undertaking research, • Investor One-Stop Portal; and development, commercialisation and • The NIMP 2030 dashboard. innovation by identifying the right financial modalities and risk-reward sharing To achieve this, seven Action Plans have been mechanisms; and formulated: • Export programmes. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 134 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Introduce NIMP Industrial Development Fund and NIMP E.1.1 Strategic Co-Investment Fund The NIMP 2030 will introduce two funds to support the Strategies, Action Plans and MBPs across the four Missions and Enablers: The NIMP 2030 Industrial Development Fund (“NIDF”) The NIDF will be funded by the Government to enhance the capability of Malaysian companies, including SMEs, and assist them to participate in the global value chain. This matching fund focuses on the overall industrial development for the manufacturing and related services, covering: • Research, development, commercialisation and innovation; • Technology adoption; • Licensing or purchase of new or high technology; • Talent development or capacity building; • International standards or certification; • Infrastructure development and upgrading – eco-industrial estates or parks; and • Industrial cluster development for regional development. The NIDF will be utilised for: • Direct funding for the industrial development programmes; • Provision of matching grants for Malaysian companies including SMEs; and • Providing partial support to reduce the cost of financing. Box Article 8.1: Funding for Malaysian companies including SMEs to Support MBPs and for Their Own Tech Up and Supply Chain Resilience MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 135 The NIMP 2030 Strategic Co-Investment Fund (“NIMP 2030 CoSIF”) The NIMP 2030 CoSIF will be a co-investment fund, that supports strategic and high-impact MBPs to spur Malaysia’s economic growth, by crowding private sector financing. This public and private funding models will contribute to the following: • Increase the pool of capital to support the MBPs; and • Reduce the risk profile for investors and increase attractiveness of projects to raise capital in the equity and bond markets, as well as leverage alternative financing. While nine MBPs have currently been identified under the NIMP 2030, other strategic projects which align to the Missions of the NIMP 2030 in achieving Malaysia’s industrial objectives may subsequently be identified as MBPs. Box Article 8.2: Funding Options for MBPs Requiring Large Investments This action plan will be led by MITI and supported by MOF and KE. The following activities will be conducted: • The funds will be launched from 2024 onwards, with an overarching structured governance together with MOF and KE, on the fronts of: • Funding mechanism for the co-investment funds, including considering the structure of co-investment funds like the Malaysia Co-Investment Fund (MyCIF); • Allocation of the strategic funds; • Design structures to support the evaluation of eligible high impact projects; and • Monitoring of performance and evaluation of outcomes. • The Government will engage the public and private players to explore investment opportunities and participation in the co-investment fund. This includes the GLICs, other international and institutional investors and state governments. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 136 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Boost financing for digitalisation and decarbonisation E.1.2 transition There are various financing options available for SMEs to support their digitalisation and sustainable transition towards a low-carbon economy. These include: • BNM High Tech and Green Facility, RM1.1 billion allocation (available until full utilisation); • BNM SME Automation and Digitalisation Facility, RM1.5 billion allocation (available until full utilisation); • BNM Low Carbon Transition Facility, RM1 billion allocation on matching basis (available from February 2022 until full utilisation); and • Funds from financing institutions which have been allocated for transition financing in their sustainability agenda. To increase the take-up rate of financing by SMEs, the Government will encourage the banks to provide financing in technology and sustainability areas by: • Coordinating funding between the manufacturing players, such as MNCs, LLCs, SMEs and financial institution through programmes such as supply chain and vendor development programmes led by MIDA; • Working closely with the banks to identify and finance bankable projects and initiatives in digitalisation and decarbonisation transition; • Facilitating to strengthen the banks’ capabilities in evaluating and assessing technological and innovative projects. The Government will explore the potential to leverage the Readiness Assessment from the Technology Adoption Programme and BNM’s TechUP and GreenUP initiatives for preliminary view of applicants’ risk level; • Collaborating with international financial institutions or multilateral development banks for blended financing and expertise on appropriate financial structures and risk sharing and risk mitigation mechanisms; and • Collaborating with other countries with experience and expertise to develop innovative financial instruments and risk sharing or risk mitigation mechanisms suited to the needs of the green transition in Malaysia. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 137 Box Article 8.3: The European Green Deal Source: The European Commission MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 138 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Establish green sukuk to facilitate transition E.1.3 For further support of the decarbonisation transition, Malaysia will be exploring the issuance of a Sustainable Development Goal (SDG) Bond, which can be in the form of a Green, Sustainability or Sustainability-Linked bond or sukuk. These bonds and sukuk are key transition finance instruments as they channel financing to green or sustainable activities or link sustainability targets to financing. Such green bond issuance will serve as reference for the corporate green bond market, deepen market liquidity for green bonds and attract green issuers, capital and investors. This avenue will create greater availability of funds to support the SMEs involved in high emission intensity industries to decarbonise their operations. This approach involves the issuance of Sustainable Malaysian Government Securities (MGS) or Government Investment Issue (GII) through BNM as part of the annual auction calendar. It will be backed by the Green Assets under the existing Government of Malaysia’s SDG Sukuk framework. Foreign and domestic investors can subscribe to the Sustainable MGS or GII. The Government will manage the invested funds and channel through the local banks to provide transition financing to the SMEs. A KPI-linked model for the transition financing can be considered, where SMEs will be given preferential rates as they meet the decarbonisation criteria such as reduced carbon emissions, increased RE utilisation or deployment of green tech or solutions. Figure 8.2: Green, Sustainability and Sustainability-linked Sukuk to Tie to Decarbonisation Targets by SMEs This deepening of capital market to support Malaysia’s ESG transition can be instrumental in: • Accelerating the greening of value chain; • Supporting business with ESG principles to thrive and create high-value jobs; • Attract diversified FDI investments; and • Enhance Malaysia’s reputation as a pre-eminent ESG market. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 139 ACTION PLAN Establish supply chain financing for SMEs E.1.4 As part of the efforts to support the SMEs ecosystem, Malaysia is encouraging more supply chain financing facilities to be made available. Supply chain financing is a financial arrangement where the banks will provide a facility to anchor buyers, especially MNCs or LLCs, to provide financing to their SME suppliers in their supply chain. It facilitates the smooth flow of funds within a supply chain network and allows SMEs to have healthy cash flow. Sustainable supply chain financing can also be considered to help accelerate decarbonisation efforts at the supply chain level and support disclosure initiative. The Banks offer early payment to the SMEs and their vendors or suppliers on behalf of the anchor buyer and the anchor buyer repays the banks on a later agreed-upon date. Supply chain financing benefits the entire supply chain ecosystem where: • SMEs and their vendors or suppliers have access to funds faster, improving cash flow; • Buyers can optimise their working capital by extending the payment terms while still supporting their suppliers; and • Banks will earn a fee in providing the supply chain financing service. Figure 8.3: Supply Chain Financing for SMEs RM Agreement Early settlement Settlement SMEs and Anchor Buyer Banks their vendors This action plan will be led by BNM and the banks. The following activities will be conducted: • Engage banks to encourage them to offer supply chain financing facilities; • Encourage efforts by corporates to collaborate with the financial sector to promote the design and offering of supply chain finance solutions to their vendors; and • Educate industry players on the availability and benefits of the supply chain financing facilities. Apart from that, supply chain financing facilities can be offered by P2P platforms to assist SME suppliers optimise their working capital and cash flows. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 140 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Increase utilisation of the capital market E.1.5 The capital market provides a multi-layered market ecosystem with multi-product solutions for efficient capital allocation and fund intermediation. Malaysia has a well-established capital market with proven financing options, including digital platforms, to cater for the different financing needs of companies across their growth cycles. Figure 8.4: Funding Stages of Companies and Capital Market Solutions Pre- Early Stage Growth Stage Late Stage Matured commercialisation LEAP Market ACE Market Main Market Private Placement Bonds/ Sukuk Angel Investment Venture Capital Private Equity Equity Crowdfunding (ECF) Initial Exchange Offerings (IEO) Peer-to-peer (P2P) Financing Source: Securities Commission Malaysia The range of capital market financing options to support businesses at various stages of growth are as follows: • Bonds and Sukuk – for businesses or projects that have large financing requirements; • Equity Market (Main Market, ACE Market and LEAP Market) – for mature, late-stage and even growth companies; • Equity Crowdfunding (ECF) digital platforms – for smaller companies and start-ups; • P2P Financing digital platforms – for growth to late-stage companies to raise funds for business or working capital purposes; and • Venture Capital and Private Equity (VC and PE) – for companies and start-ups at early to growth stages, as well as late-stage companies (involving PE investment). MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 141 The industry can gain several benefits from leveraging the capital market: • Ability to access wider range of capital and funding sources, including investors with specific mandates to invest in listed stocks with better liquidity; • Enhanced profiling, branding and increased visibility will enhance attractiveness to domestic and international investors; • Better access to both equity and bond markets will enable companies to optimise their capital structure and valuation. It enhances merger and acquisition opportunities; • With transparent reporting requirements as a listed entity, companies are in a better position to obtain bank borrowings. Listed entities can utilise shares for acquisitions and share transactions will not be subject to capital gains tax; • Flexible terms and structure – flexible repayment structures, collateral requirements and equity ownership. This can be beneficial depending on the growth stages of the company; and • Advisory from specialised experts – often involves partnerships with private investors such as VC or PE that have industry knowledge and expertise. Companies can gain insights, guidance and mentorship to grow their business. There is much more opportunity for companies, particularly SMEs, to increase their utilisation of capital market financing in Malaysia. Currently, SME fundraising from the capital market accounts for less than 5 per cent. The Securities Commission Malaysia (SC), capital market intermediaries and MITI will collaborate to increase the utilisation of the capital market by: • Guiding industry players on how to access and utilise the capital market. This will be done by increasing awareness of the capital market funding channels available, ranging from the equity market, bond market, Recognised Market Operators (e.g. ECF, P2P) to the private market (VC or PE); • Providing transparent frameworks, processes and a supportive market-based financing ecosystem to build industry players’ confidence to utilise the capital market; • Facilitating the provision and accessibility of lower cost financing options for issuers from the industry; • Enhancing the efficiency of the fund intermediation process to facilitate sizeable funds at scale to finance the industry; • Promoting the capital market as an attractive investment option for foreign investors, as well as domestic institutional and individual investors; • Uplifting market capabilities and services, including debt and equity analysis, to enhance the flow of information to investors; and • Improving Malaysia’s attractiveness through easing of tax rules and a facilitative regulatory process, including for the VC and PE ecosystem, in consultation with MOF and LHDN. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 142 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Box Article 8.4: Market-based financing avenues in Malaysia Capital market presents financing avenues (including VC and PE) for firms that require capital for digitalisation and decarbonisation Bonds and Sukuk Main Market • Average amount raised: • Average amount raised: RM300 million RM400 – 500 million • Highest amount raised: • Highest amount raised: RM30.6 billion RM12.8 billion ACE Market LEAP Market • Average amount raised: • Average amount raised: RM50 – 60 million RM3 – 5 million • Highest amount raised: • Highest amount raised: RM275 million RM12.5 million ECF P2P Financing • Average amount raised: • Average amount raised: RM1.7 million RM70,700 • Highest amount raised: • Highest amount raised: RM20 million RM19.2 million Source: Securities Commission Malaysia MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 143 ACTION PLAN Expand the imSME platform to show all available funding E.1.6 options including Government funding and capital market There are multiple funding options for industry players, which include government funding and private sector funding from banks and capital market. However, information on available funding options is disparate causing challenges, such as: • Low awareness of available funding options; and • Difficulty in tracking government grant disbursements by different agencies. In 2018, a single financing platform was launched by CGC, called the imSME which aggregates financing information from financial institutions, agencies and alternative financiers. Expanding the imSME platform to include Government funding will provide a comprehensive coverage of the funding options available. The platform will provide the Government an avenue to better: • Trace interest in the funding options; • Coordinate campaigns to increase awareness on the funding options with low take up; and • Track Government fund application to enable fairer access to Government funding. Figure 8.5: CGC imSME Platform Source: CGC MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 144 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES This action plan will be led by CGC in collaboration with MOF, KE, MITI, BNM, SC and Bursa. This is a timely national initiative for CGC because it had, in July 2022, established a wholly owned data and fintech subsidiary, namely, CGC Digital, to: • Develop the imSME platform with embedded finance that provides MSMEs in Malaysia with a one-stop digital marketplace for financing and assistance to accelerate their business. CGC Digital is taking a Mission-based, MSME-centric approach to all its development and offerings, prioritising outcomes over outputs; • Develop innovative digital credit guarantee and other digital credit supplementation products and services that are essential to facilitate MSMEs in obtaining the financing that they need; • Increase the chances of MSMEs, especially the thinner-file ones, in obtaining financing with embedded digital credit guarantee. CGC Digital is developing algorithms and its proprietary credit model using traditional and alternative data to advance financial inclusion among MSMEs in Malaysia; and • Identify and collaborate with partners to: • Increase synergistic effects on imSME’s digital ecosystem; and • Improve efficiency in the areas of funding and facilitating online buyer-seller marketplace for ease of doing business along the supply chain. The imSME platform will partner with relevant companies to provide MSMEs with better access to the local supply chain, which can be integrated to foreign supply chain, to increase Malaysian MSMEs’ competitiveness locally and internationally. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 145 Box Article 8.5: Digital platform for SME financing (imSME) Many Many SMEs FIs Benefits + One stop portal makes it easy for SMEs to browse and apply for compatible financial products + Acts as a hub for FIs to manage financing applications + One stop portal can act in advisory capability to help SMEs capability build and close gaps in financing applications Case Study: imSME partners with 30+ organisations to help SMEs secure financing 27 financial institutions 3 capacity offering 65 unsecured SME financing/ loan building 9 Peer-to-Peer (P2P) Platform agencies to help SMEs Operators offering 17 unsecured SME secure financing/ financing/ loan loans 3 financiers and 3 equity crowdfunding organisations 4 TO APPLY FOR A EASY LOAN / FINANCING STEPS Total Visitors 2.5 million Total Registered MSMEs 72,700 Total Approved Financing 5,700 approvals RM 589 million Source: imSME, CGC MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 146 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Review Government funding for consolidation E.1.7 Multiple Government Agencies have been allocating government funding to facilitate industrial development, aligned to their respective objectives. They include MIDA, SMECorp, SME Bank, MIDF, MDEC, MTDC, Cradle, MAVCAP, MDV and TERAJU. Several challenges have been identified with this current model, among others: Table 8.1: Issues in Government Funding No. Issues Location 1 Confusion regarding the types of funding assistance available, documentation required, requirements, approval process, etc. 2 Multiple constraints that limit the types of companies that may Applicants apply for funding 3 Insufficient fund allocation that limits the number of companies that can be assisted with government funding 4 Fragmented and duplicated funding programmes that cause administrative burden (multiple funding programmes require independent assessments by multiple agencies) The Government 5 The distribution of Government funding is not optimised To address the challenges, MOF and KE together with MITI and MIDA will review government funding for consolidation. The following activities will be conducted: • Identify available Government funding offered by various Ministries and Agencies; • Review the Government funding and consolidate funds for similar focus areas, where necessary. Consolidating the funding options will allow the Government to create larger fund size, reduce its administrative duties and monitor the use of public funds more effectively; • Establish the governance to oversee the Government funding and conduct periodic reviews to monitor the take-up and effectiveness of the funding; and • Create database of industry players and their financial information to improve matchmaking opportunities for funding and corporate deals. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 147 ENABLER 2 Foster talent development and attraction In the pursuit of the Missions involving higher value-added activities, innovation and new growth opportunities, Malaysia will require a large pool of high-skilled talent. Malaysia’s workforce boasts high education attainment levels and proficiency in the English language. It is critical for Malaysia to capitalise on these strengths and continue to foster the development of local talent apart from attracting the right foreign talent to cater to the industry’s requirements. It is important to upskill and reskill current talent and develop and guide new talent into high value job pathways. The ambition is to elevate the skill level of all Malaysians, providing the opportunity to command high wages. This helps strengthen Malaysia’s middle-class society. Talent mismatch is a key challenge in Malaysia, where trainings provided are not aligned with the industry’s requirements. Malaysia aims to close the gap, creating more relevant higher-skilled talent. The Government emphasises on public-private partnership model for talent development. To achieve this, five Action Plans have been formulated: ACTION PLAN Leverage mynext and MYFutureJobs for strategic E.2.1 workforce planning to address long-term demand-supply requirement Recognising the challenge on talent mismatch, establishing a strategic workforce planning will address the long-term talent demand-supply requirement. The strategic workforce planning forecasts the talent-supply based on current education and training and the talent-demand based on the industry’s requirements. This forecast model requires significant data as input. The mynext and MYFutureJobs platforms can be leveraged to serve as the platform for the data gathering. The data that will be gathered covers: • Demand: skills and number of talents required from the industry players; and • Supply: education, internships and training programmes provided by the higher learning and TVET institutes. The mynext and MYFutureJobs platforms will be the holistic employment platform for the nation that serves the purpose for national workforce planning, targeting different segments of the workforce. MOHR and MOHE, will lead this action plan with the support of TalentCorp, PERKESO, Human Resource Development Corporation (HRD Corp), National Employment Council (NEC), and MITI. The following activities will be conducted: • Assess the talent supply from the workforce and learning institutions such as government and private universities and colleges and TVET institutions; • Assess the demand for talent from the industry by engaging anchor companies and developing estimates for talent needs of the future; and • Align courses to meet the demands of key sectors, where necessary. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 148 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Introduce progressive wage system policy E.2.2 Wages play a key role in building the livelihood of the society. Malaysia has seen a shrinking middle-class society as wages have remained stagnant over the years. It has become increasingly difficult for Malaysia to attract and retain high-skilled talent as they move to countries that offer more attractive wages. Currently, Malaysia has enforced the minimum wage system, which imposes the same levels of minimum wages for workers from all sectors. While this offers social protection, there is great opportunity to introduce an intervention to support the wage increase in strengthening Malaysia’s middle-class society. The Government, with the leadership of KE, is exploring the potential to introduce a progressive wage system (PWS) policy to increase the wages in Malaysia. With the PWS, employees are classified into different skill level, each with a baseline wage level. Figure 8.6: Progressive Wage System The PWS maps out a career pathway for employees to improve skills, earn fair wages and enhance career prospects. It incentivises employees to upskill and acquire more experience to progress to higher levels and wages. In turn, that will lead to higher productivity for employers. KE and MOHR will lead this action plan with the support of MITI, MOF, MPC and MIDA. The following activities will be undertaken: • Conduct a study on PWS by assessing its impact in benchmark countries and potential challenges in adoption; • Engage selected industry players to receive feedback in the short-term impact of PWS on businesses and support required to facilitate adoption; and • Develop a plan to implement PWS in Malaysia, including measures to facilitate adoption. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 149 ACTION PLAN Improve policy to enable fast and hassle-free access to E.2.3 high-skilled foreign talents As Malaysia moves towards higher value-added activities and build an innovation-led economy, the industry needs highly specialised talents with niche capabilities that Malaysia may not currently have. The Government is committed to ensure the availability of sufficient high-skilled talent to propel the local industry. Malaysia aims to attract high-skilled foreign talent to support the demand for talent in certain critical jobs, where the supply of local skilled talent is limited. In line with this, TalentCorp currently provides a special visa called the Residence Pass-Talent for eligible foreign talent, where successful applicants are given a 10-year work permit. Malaysia will further facilitate access to high-skilled foreign talent by introducing a green lane process for specific critical jobs to support Malaysia’s strategic industrial objectives. The Malaysia Critical Occupation List (MyCOL) developed by MOHR and TalentCorp will be the key reference for the critical jobs eligible for the green lane. This list will be reviewed and updated on a more frequent basis. Figure 8.7: Green Lane Process for Specific Critical Jobs Assessed by Applications with Eligibility assessed regulator/ approving Application sent to Documentations against updated COL MYXPats Centre agency Green Lane The green lane will be applicable for the highest tier of Employment Pass (EP) applications and will include additional benefits such as shortened application process and accelerated approvals for dependents. The introduction of this green lane will ease access to foreign high-skilled talent and enable Malaysia to quickly attract top global talents. MOHR and TalentCorp, will lead this action plan, with the support of Ministry of Home Affairs (KDN), Immigration Department and MITI. The following activities will be conducted: • Identify critical occupations for which the green lane applies; • Enhance the current national single window for foreign talent to incorporate the green lane application flow; and • Implement the green lane and develop programmes to socialise the enhanced single window for foreign talent. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 150 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Expand TVET programmes for high-skilled jobs in critical E.2.4 sectors Malaysia is committed to strengthen the quality of local talent to support the industry. TVET is a crucial pathway to provide technical education and elevate the skills level of Malaysia’s local talent pool. TVET programmes in Malaysia are offered at certificate, diploma and degree levels. However, the TVET take up rate has reduced by 11.6 per cent CAGR between 2018 and 2020. The Government will work closely with the private sector to enhance the quality of the TVET programmes. The Penang Skills Development Centre (PSDC) Model will be a benchmark, which includes: • Reducing skills mismatch by working closely with industry partners to identify the skill needs of the workforce; • Offering flexibility via a variety of class options (full-time, part-time and online courses); and • Offering career support for job search, job placement opportunities, resume writing and interview skills. The National TVET Council (MTVET) will lead this action plan with the support of MOHR, MOHE, MITI, TalentCorp and Department of Skills Development (JPK). Selected industry players will be engaged for input to develop TVET programmes for the critical sectors and offer job placement opportunities. The following activities will be conducted: • Identify critical high-skilled jobs at risk of insufficient talent; • Co-develop TVET syllabus with industry players from critical sectors; and • Build an attractive brand for the TVET programmes by socialising the benefits in terms of high-skilled job opportunities, wages and role in the industrial development. ACTION PLAN Raise profile of high-tech manufacturing career to attract E.2.5 interest in STEM subjects Similarly, STEM education plays a critical role to advance growth in technology and innovation. Driving economic complexity, tech up and digital innovation and decarbonisation transition are enabled by STEM. Malaysia targets 60 per cent STEM enrolment by 2025. However, STEM enrolment has been on a negative trend, with a reduction of 5.5 per cent CAGR between 2018 and 2020. This can be attributed to several negative perception of STEM: • Difficult course and subjects; • Adverse job prospects; and • Low wages. Raising the profile of high-tech manufacturing career can attract students’ interest in STEM subjects, improving take-up. MOHE and MOE will lead this action plan, in collaboration with MITI, TalentCorp, JPK and selected industry players. The following activities will be conducted: • Highlight potential for high wages depending on sector, skills and qualification; • Socialise success stories of STEM professionals; • Socialise the role of STEM in the making of exciting everyday products e.g. drones, smartphones, Virtual Reality and Augmented Reality headsets; and • Boost the reputation and brand strength of local manufacturing companies as desirable workplaces. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 151 Establish best-in-class investor journey for ease of ENABLER 3 doing business It is imperative for Malaysia to improve the ease of doing business to strengthen its position as a competitive investment destination. Improving the ease of doing business enables Malaysia to attract new FDIs and encourage long-term reinvestments. This strategic approach can potentially reverse the net capital outflow from the country. FDIs indirectly increase DDIs as MNCs based in Malaysia source products and services from local companies. This uplifts the capacity and capabilities of local companies and contributes to Malaysia’s strengthened participation in the global value chain. It is crucial for Malaysia to improve the ease of doing business to ensure that the investment projects are attracted and expeditiously implemented, leading to the realisation of benefits which can be reaped by Malaysia’s economy such as creation of high-value jobs for Malaysians. Among the areas which need to be addressed to improve the ease of doing business are: • Strengthening Government synergy to simplify and speed up business processes; • Enhancing communication of information to investors; and • Providing improved fiscal and non-fiscal incentives. To achieve this, four Action Plans have been formulated: ACTION PLAN Establish a unified investment strategy and align E.3.1 investment evaluation to new parameters under NIA Investments have contributed significantly to Malaysia’s economic and industrial development, particularly by spurring the creation of robust ecosystems for entrepreneurship, technology and innovation. Over the years, Malaysia has implemented initiatives to facilitate the transfer of knowledge and technology from foreign investments to local companies, thus building the capabilities of the local industries. Malaysia continues to pursue the development of its local industries in line with the shifting global trends and evolution of technology. The global geopolitical situation which has driven companies to adopt a “Plus One” strategy and consider Southeast Asia as a preferred investment destination, provides Malaysia with the prime opportunity to attract high-quality investments. Malaysia’s industrial direction towards becoming knowledge-intensive and innovation-driven serves as the guiding position for the Government’s investment policy decisions and initiatives. Moving forward, the Government will strengthen its synergy across Ministries and Agencies in driving towards the National Investment Aspirations (NIA) as the country’s unified development goals. Firstly, the unified investment strategy will require a legislative refresh of the Promotion of Investment Act (PIA). The current PIA’s promoted areas are sector-centric, overlapping and limiting for reinvestments. The PIA will shift from sector-centric approach to Mission-based approach in line with national priorities such as RE and digital economy. Apart from that, the reinvestment scope is targeted to expand to include more thematic opportunities, encouraging investors to intensify reinvestments. The refresh of the PIA will be undertaken in line with the tax incentive review undertaken by MOF. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 152 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Secondly, the Government will review the investment evaluation criteria leveraging the cost- benefit analysis (CBA) to align to the NIMP 2030 Goals (aligned to the National Investment Aspiration’s pillars). This will ensure that the investments attracted into Malaysia contribute towards achieving the desired end outcomes. Another key driver is the Government synergy across various Ministries and Agencies in the investment process. It is important to form a holistic view across all stakeholders to align on the national priorities. This will require for a review of the KPIs to strengthen alignment across the Ministries and Agencies. Figure 8.8: Parameters under NIA The action plan will be led by MITI in collaboration with key stakeholders such as MIDA, MOF, LHDN and KE. ACTION PLAN Harmonise and streamline functions and KPIs across E.3.2 IPA landscape Malaysia has recognised the challenge in its investment promotion landscape, which comprises over 30 IPAs, each with their own direction and potential overlapping responsibilities. Malaysia aims to streamline the roles and responsibilities of all IPAs. Through this: • MIDA is mandated as the national body to centralise investment promotion and marketing; • Project Implementation and Facilitation Office (TRACK), formerly known as Project Acceleration and Coordination Unit (PACU), a unit under MIDA, will be empowered to accelerate investment implementation; and • The functions of subnational IPAs will be streamlined to support the investment ecosystem. Apart from that, there is a need to streamline KPI across IPAs to drive synergistic value creation in the investor journey. The National Committee on Investment (NCI) is tasked to redesign a new set of KPIs to encourage collaboration amongst IPAs. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 153 Figure 8.9: Entities Identified as Carrying Investment Promotion Mandates The action plan will be led by MITI in collaboration with key stakeholders such as MIDA and subnational IPAs. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 154 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES ACTION PLAN Review and design competitive, agile and relevant E.3.3 incentives The incentive mechanism of the Government will be improved to ensure that the incentives offered remain attractive for investors and approvals are accelerated to speed up investment implementation. This initiative will be undertaken in line with the tax incentive review led by MOF and entails the review of incentives to: • Strengthen the competitiveness of the existing incentives; and • Ensure the incentive outcomes are better aligned with national targets (NIAs). Figure 8.10: Incentive Mechanism Three actions will be undertaken: • Review and design competitive, agile and relevant incentives • Investors seek broader value propositions when making investment decisions, with non- fiscal factors such as the business regulatory environment as well access to talent becoming increasingly important considerations. Therefore, the Government will focus on incorporating non-fiscal incentives, such as easing access to talent and creating simplified and expedited business processes to facilitate project implementation. This is especially important due to impending introduction of the Global Minimum Tax (GMT). • Establish tiered incentive system • A tiered incentive system acts as a funnel to prioritise national resources based on investor contribution to the national agenda. Each tier has incremental access to more generous benefits e.g. exemptions on import duties and income taxes, talent visa, etc. • Establish dual incentive application pathway • Conventional investments – Introduce self-assessment mechanism to allow incentives below a certain value to be disbursed without requiring further approval from relevant authorities. • Strategic investments – National Committee on Investment (NCI) to tailor the right set of incentives that are aligned to CBA tools. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 155 To review incentives, four actions are required: • Formalise feedback channels between investors and NCI; • Review incentive monitoring to align incentives in delivering national targets; • Establish dedicated unit to ensure the accountability of the incentive governance process; and • Establish regular incentive review to assess the incentive ecosystem. The action plan will be led by MITI in collaboration with key stakeholders such as MOF, MIDA and KE. ACTION PLAN Improve One-Stop Portal for seamless investor experience E.3.4 Malaysia is committed to creating a seamless and efficient journey in doing business for investors. Currently, throughout the investor’s journey, there are multiple touchpoints requiring the investors to access different systems, affecting their experience. A One-Stop Portal (OSP) will be established as a central platform for investors across the investor journey by: • Integrating different systems into a single interface; • Covering end-to-end investment processes which includes, among others, set-up, taxation, legal advisory, talent recruitment, financing, exporting and IP registration; • Customising to the respective investors’ journey; and • Acting as a reliable source for information and for problem resolution. Figure 8.11: Investors’ Journey in the Manufacturing and Selected Services Sectors MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 156 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES The action plan will be led by MIDA in collaboration with key stakeholders, which include but are not limited to, MITI, MPC, SOCSO, Royal Malaysian Customs Department (RMCD), MATRADE, SSM, LHDN, KPKT, EPF, MIDF, other financial institutions, MyIPO, State Authorities and MOF. ENABLER 4 Introduce whole-of-nation governance framework The success of the NIMP 2030 hinges upon an integrated whole-of-nation approach, where Government Ministries and Agencies synergise and align towards establishing a robust ecosystem that covers: • High-skilled talent; • Robust infrastructure, including industrial facilities; • Investment facilitation; • Financing; • Digital connectivity; • Balanced regional development; and • Vibrant RDCI ecosystem. To achieve this, three Action Plans have been formulated: ACTION PLAN Establish public-private collaborative councils E.4.1 Collaborative councils comprising stakeholders from the Federal Government, State Government and public and private sectors will be established to ensure the timely and effective implementation of the NIMP 2030. The objectives of establishing the public-private collaborative council are to: • Promote collaboration – leverage strengths and expertise to ensure the success of the NIMP 2030; • Foster co-ownership in the implementation of the NIMP 2030 – drive accountability and transparency; and • Spur proactive and continuous flow of two-way feedback – ensure alignment to Goals, effective communication and swift decision-making. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 157 Figure 8.12: Industry Development This initiative will be undertaken through the collaboration of MITI along with the Federal Government, State Governments and public or private sector players and involve the following activities: • Define the terms of reference (TOR) that outline the scope, objectives and guidelines for the NIMP 2030 governance; • Identify the stakeholders and representatives from the Federal Government, State Government and public or private sector players to be part of the committee; • Design the governance structure with clearly defined roles and responsibilities; and • Determine the meeting and reporting cadence with clear agendas outlined. ACTION PLAN Set up NIMP 2030 Delivery Management Unit E.4.2 MITI will establish a NIMP 2030 Delivery Management Unit (DMU) to coordinate all efforts across stakeholders and ensure the timely implementation of the NIMP 2030. The roles of the DMU will be to: • Track and monitor progress of the NIMP 2030 in meeting the Goals and targets; • Mitigate risks and resolve issues effectively and efficiently; • Facilitate cross-collaborations between Ministries, Agencies, State Government and industry players; • Ensure alignment to other national policy plans; • Develop and execute an effective communication plan; and • Develop a digital dashboard for effective tracking and monitoring. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 158 Master Plan 2030 ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Figure 8.13: NIMP 2030 Delivery Management Unit Structure Public-Private Governance Outcomes Reporting Progress Delivery Management Unit (under MITI) Implementation Implementation Ministries and Agencies The setup of the NIMP 2030 DMU is critical and requires strategic planning. The following activities will be conducted: • Define the purpose and objectives of the DMU to ensure alignment to the NIMP 2030 Goals and targets; • Establish the DMU structure and role, with the right resource expertise to drive the NIMP 2030; and • Ensure tools and platforms are available for effective project management and communication. ACTION PLAN Develop NIMP 2030 dashboard system E.4.3 A single interface digital dashboard will be developed to track and monitor the progress of the NIMP 2030. The digital dashboard will contribute to: • Real-time visibility – Provide real-time information allowing for proactive decision-making and timely intervention; • Effective performance tracking – Track and measure performance against pre-defined targets and objectives with visual presentation to assess progress; • Data-driven decision making – Provide access to data that facilitates data analysis, contributing to making informed decisions based on real-time insights; and • Transparency and accountability – Enhance visibility on progress and performance of the NIMP 2030 to create a sense of ownership in ensuring the projects are executed successfully. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial ENABLERS: ADDRESSING SYSTEMIC AND INSTITUTIONAL CHALLENGES Master Plan 2030 159 Figure 8.14: NIMP 2030 Dashboard Illustrative This action plan will be led by MITI and supported by the relevant stakeholders including the Federal Government, State Government and industry players. The following activities will be conducted: • Clearly define the metrics and parameters to measure the targets and progress of the NIMP 2030; • Identify data sources from the relevant Ministries and Agencies, State Government, as well as industry players to track the implementation; • Develop the dashboard considering the following: • User-friendly interface and visualisation for ease of data analysis; • Back-end infrastructure to collect data from various sources, process and store data from various Ministries and Agencies; and • Security and privacy measures to safeguard data and information from the dashboard. • Deploy and maintain the dashboard – the deployment will include communication with all relevant stakeholders on how to leverage the dashboard. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 9 SMALL AND MEDIUM ENTERPRISES (SME) INDUSTRIALISATION New Industrial 162 Master Plan 2030 SMALL AND MEDIUM ENTERPRISES (SME) INDUSTRIALISATION OVERVIEW Malaysia’s SMEs including micro enterprises contributor towards achieving the NIMP 2030 as seen in the past, have always played an Goals and Missions. important role in promoting economic growth, employment and income. SMEs in Malaysia are The economic contribution by the SMEs is, diverse, ranging from traditional businesses however, not without challenges. There are to growing sectors such as manufacturing, several key areas that must be addressed, such services and technological industries. as technical skills shortage, low technology adoption, access to financing and regulatory SMEs form the backbone of the Malaysian compliance. economy, creating roughly 97 per cent of total business establishments in the country. SMEs contribute to about 38 per cent of the They account for a substantial portion of total GDP in Malaysia and 8.5 per cent of SMEs employment (circa 48 per cent) in Malaysia55. participate in the manufacturing industry. Labour productivity rate of SMEs is 20 per cent In the NIMP 2030, SMEs have a significant lower than the national average and this is role, acting as key suppliers of local content, largely due to the size of SMEs (78 per cent of providing value chain and export support and total Malaysian MSMEs are classified as micro contributing to overall regional development. enterprises)56. These position them as crucial economic ROLE OF SME IN THE NIMP 2030 Malaysian SMEs will play an integral role in Tech up for a digitally vibrant nation fulfilling the Missions and Goals set in the NIMP 2030. SMEs in Malaysia are poised to adopt digitalisation to improve labour productivity. Advance economic complexity There will be opportunities to develop innovative digital solutions that are scalable SMEs form a crucial part in the value chain and agile to support the NIMP 2030’s mission of larger industries. They support the larger to transform Malaysia into a digitally-driven corporations by acting as suppliers and nation. subcontractors, providing components, raw materials and specialised services. The NIMP 2030 will enhance technology adoption programmes for manufacturing SMEs SMEs are a source to innovation in the economy. to increase labour productivity and reduce As the country moves towards climbing the reliance on foreign low-skilled labour. There value chain by providing higher value-added will be programmes to develop technology activities, SMEs are deemed to be more agile solution providers for start-ups and SMEs and flexible to introduce new products and to complement the need for local solution specialised services. This will springboard providers under the Technology Adoption Malaysia towards economic growth and Programme. diversification. Push for Net Zero The NIMP 2030 will provide access for SMEs to support activities in new higher value-added Following the nation’s pledge to achieve opportunities in manufacturing and MRS. Net Zero carbon emissions as early as 2050, Efforts will be put in place to encourage SMEs Malaysian SMEs are given the opportunity to to collaborate with LLCs and MNCs to deliver contribute towards the country’s sustainability solutions at scale, addressing any resource goals and in adopting ESG principles. The limitations faced and bridging any technical opportunity will allow SMEs to become early gaps that may arise. adopters in areas such as RE, energy efficient solutions, eco-friendly manufacturing and green technologies. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial SMALL AND MEDIUM ENTERPRISES (SME) INDUSTRIALISATION Master Plan 2030 163 To support this adoption, the NIMP 2030 can play a crucial role by providing policy frameworks, incentives as well as funding avenues specifically tailored for SMEs. Safeguard economic security and inclusivity SMEs play a critical role to ensure economic security and inclusivity. SMEs contribute to job creation, thus providing employment opportunities. Their close connection to surrounding communities fosters localised economic development. SMEs that are involved in higher value manufacturing and services draw higher demand in salary. Businesses that are established in rural or less developed areas stimulate economic growth in those areas. The NIMP 2030 provides access to more opportunities for local production from the expansion to higher value-added activities to the integration into the larger supply chain. The NIMP 2030 looks to ensure Malaysian businesses, particularly SMEs, are resilient to supply chain disruptions and external economic shocks to ensure long-term sustainability. KEY SUCCESS FACTORS The success of Malaysian SMEs in the manufacturing and MRS sectors rely on several key factors: Skilled workforce and nurturing talent SMEs attract, nurture and retain talents to be equipped with required technical expertise for the businesses. Continuous training and development programmes are vital to enhance the capabilities of employees and ensure they stay relevant to the industry’s advancements. Technological adoption and digitalisation Embracing technology and digital tools can significantly enhance SMEs’ competitiveness. This includes implementing productivity-enhancing software, exploring automation opportunities and embracing Industry 4.0 technologies, to improve operational efficiency, support innovation and enable SMEs to stay ahead in a digital-driven economy. Networking and collaboration By building strategic partnerships with suppliers, distributors and industry associations, SMEs can access new markets, share resources and leverage each other’s strengths. Collaborative initiatives and knowledge sharing can foster innovation, enhance market presence and open doors to business opportunities. Access to financing Adequate financial support is essential to invest in equipment, technology upgrades and working capital. Access to various funding options, from capital market investments, financial institutions and government support programmes tailored to SMEs will enable SMEs to seize growth opportunities, expand their operations and stay competitive in the manufacturing and services sector. By focusing on these key success factors, the Malaysian manufacturing and MRS SMEs can position themselves for growth, innovation and long-term success. These factors, when combined with effective management, enable SMEs to thrive and contribute to the overall economic landscape of Malaysia. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 10 IMPLEMENTATION – WHOLE-OF-NATION New Industrial 166 Master Plan 2030 IMPLEMENTATION – WHOLE-OF-NATION Implementation is crucial to convert the NIMP 2030 into tangible actions and measurable outcomes. The NIMP 2030 adopts a whole-of-nation approach that involves both public and private to work collaboratively to achieve the Vision and Goals. This inclusive approach promotes visibility and transparency throughout the implementation of the NIMP 2030. All stakeholders will have shared accountability to ensure the success of the NIMP 2030 implementation. The whole-of-nation implementation approach has the following success factors: Accountability and responsibilities: Both public-private stakeholders will be directly involved in the implementation and governance of the NIMP 2030. It is important to define the respective accountability to ensure collective efforts are put in for the success of the NIMP 2030. Transparency: Periodic reporting of the NIMP 2030 progress will provide transparency in the implementation of Strategies and Action Plans. Linkages with multiple stakeholders: Consistent and effective communication for sharing of information is key to ensure stakeholders are always informed, made aware and aligned. Engagement with relevant stakeholders is crucial to nurture collaboration across sectors and help leverage diverse expertise, perspectives and resources, which can then lead to effective solutions. Execution with discipline: It is imperative for the implementation of the NIMP 2030 Action Plans to be undertaken with strict discipline to meet the milestones set. This is to ensure timeliness of the implementation to meet the overall Vision and Goals. This chapter focuses on the approach of implementation, governance structure, monitoring mechanism, communications with stakeholders and implementation phases. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial IMPLEMENTATION – WHOLE-OF-NATION Master Plan 2030 167 GOVERNANCE AND MONITORING MECHANISM GOVERNANCE The structure below outlines the governance for the implementation of the NIMP 2030: Figure 10.1: Governance Structure of the NIMP 2030 • YAB Prime Minister (Chair) 1 National NIMP 2030 - YB Minister MITI - YB Minister NRECC Council - YB Minister MOF - YB Minister KKD - YB Minister KE - YB Minister MOHR (Annually) - YB Minister MOSTI - YB Minister KUSKOP • YB Minister MITI (Chair) 2 NIMP 2030 Steering • YB Minister KE • KSP Committee • KSU MITI (Quarterly) • Representatives of: - MOSTI - MOHE - BNM - NRECC - MOE - SC - KE - KUSKOP - Bursa - MOF - KPDN - Selected industry reps - KPK - KKD - MBP champions - MOHR - State 3 Delivery • • KSU MITI (Lead) Representatives of: Management Unit - Mission and Enabler working groups (DMU) M1: Advance M2: Tech Up M3: Push M4: Enablers Working Group Economic for A Digitally for Net Zero Safeguard (Report progress quarterly) Complexity Vibrant Working Economic E1: Mobilise Financing Working Nation Group Security and Ecosystem Working Group Working (Report Inclusivity Group (Report Group progress Working progress (Report quarterly) Group E2: Talent Development quarterly) progress (Report Working Group quarterly) progress quarterly) E3: Investor Journey Working Group • MITI (Champion) • MITI (Champion) • MITI (Champion) • MITI (Champion) • MOF • MIDA • Selected • MOSTI • KKD • NRECC • KE • KE • BNM industry • MOH • MOHR • KE • NRECC • MITI • SC reps • KUSKOP • MOSTI • Energy • MOHR • MOHR • Bursa • KPDN • MDEC Commission • KPWKM • MOHE • Talent Corp • MIDA • Talent Corp • SIRIM • State government • MOE • HRD COrp • MATRADE • Cyber Security • Selected industry • MIDA • KDN • IPA • NAICO Malaysia reps • MATRADE • SIRIM • Nano Malaysia • SIRIM • MBP champions • TERAJU • MPC • MARii • MPC • HRD Corp • MyIPO • Selected industry • Selected industry • SME Corp reps reps • SIRIM • MBP champions • MBP champions • MPC • Selected industry reps • MBP champions Legends: Ministry Association *List is non-exhaustive, the Ministries, Government Agencies, Associations and Industry champions are identified based on Missions and Enablers Agency Industry MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 168 Master Plan 2030 IMPLEMENTATION – WHOLE-OF-NATION National NIMP 2030 Council A dedicated National NIMP 2030 Council, chaired by YAB Prime Minister, will be responsible for the successful achievement of the NIMP 2030. The council will be responsible for offering strategic oversight throughout the implementation period of the NIMP 2030. The council will review industrial strategies undertaken for a whole-of-Government policy coherence, undertake tactical decisions and endorse the annual reports on implementation progress approved by the NIMP 2030 Steering Committee prior to disclosure to the public. This includes a mid-term review report will be prepared by the NIMP 2030 Steering Committee by the end of Phase 1 (2026). NIMP 2030 Steering Committee Participation of private sectors in the governance structure is essential to ensure close collaboration between the industry players and the Government. As such, the NIMP 2030 Steering Committee, chaired by YB Minister of MITI, will be established with permanent members of KE, MOSTI, Ketua Setiausaha Perbendaharaan (KSP), KSU MITI and two selected industry representatives. There will be other representatives on invitation basis. The key responsibilities of the Steering Committee include the following: • Provide advice and strategic direction on the industrial strategy and potential corrective actions; • Make decisions and endorse recommendations from DMU on policies relating to the NIMP 2030; • Resolve strategic issues on ecosystem and funding related matters; • Assess relevance of ‘industry deal’ proposals in delivering Missions, with the support of technical experts; • Approve the NIMP 2030 funding requests; • Review NIMP 2030 progress, annual and mid-term review reports; • Facilitate independent, expert evaluation of economic outcomes by the industrial strategies and policies and MBP deliverables – including by independent advisory groups for timely reviews of success metrics; and • Facilitate collaboration across Ministries, States, Agencies and private industry players. Delivery Management Unit (DMU) The DMU will drive the implementation of the NIMP 2030 via the five Working Groups. As the Secretariat to the NIMP 2030 Steering Committee led by KSU MITI, the DMU will be monitoring all the progress of the NIMP 2030 delivery. Key responsibilities of DMU are as follows: • Track and monitor progress of Mission-based Strategies, Action Plans and Projects in delivering the NIMP 2030 Goals and targets; • Facilitate to resolve and formulate recommendations for strategic and operational issues; • Manage the NIMP 2030 funding related matters; • Manage the Working Groups to ensure implementation timeliness; • Manage the communication plan and implementation; • Manage, track and report on utilisation of NIMP 2030 funds; and • Prepare the annual report for the NIMP 2030. Working Groups The Working Groups will be responsible to implement the respective Strategies and Action Plans. Each Working Groups will be chaired by identified champions. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial IMPLEMENTATION – WHOLE-OF-NATION Master Plan 2030 169 The Working Group’s key responsibilities are as follows: • Manage the implementation of the Strategies and Action Plans to achieve required milestones and deliverables; • Resolve operational issues; • Assess and evaluate the NIMP 2030 fund request; and • Support DMU in preparing the progress report of the NIMP 2030. MONITORING MECHANISM The DMU will measure the performance in terms of timeliness and effectiveness of implementation. It will establish a dashboard to monitor achievements of the Targets as well as the progress of implementation. The dashboard will provide visibility on insights to assist in decision making. The Targets will require more granular data to evaluate the achievements. The DMU will work closely with DOSM to obtain the NIMP 2030 requirements to track along with collaboration with the different Ministries, Agencies and industry players. Annual reports will be published periodically on the progress thus far to ensure the implementation is in line with the Vision and Goals and timeliness of the implementation against the planned timeline. Mid-term review will be conducted and report will be generated and published on the challenges identified throughout the implementation in the first phase along with proposed potential mediation. Alignment will be made to ensure the implementation is on track. COMMUNICATION As the governance shifts towards a more inclusive approach, communication has played a vital role to ensure strategic objectives and Goals are aligned among the stakeholders. Cadence will be set for communication among the NIMP 2030 committees upon the launch of the NIMP 2030 by the Government. This can lead to a more efficient communication and thus expedite the implementation process. The key components of the strategic communication plan include: • Establish open feedback channel: Feedback channel will be set up to promote two-way communication via receipt of feedback from public and for DMU to respond to any suggestion, recommendation and clarification relating to the NIMP 2030. This will improve collaboration between the Government and public via active participation from the stakeholders; • Facilitate ‘industry deals’: Industry will be provided opportunity to submit inputs and proposals on ‘industry deals’. There will be a governance mechanism to assess the proposals and subsequently the Government will facilitate financing for the champions; • Increase transparency of the NIMP 2030’s progress: Periodic reporting and disclosure on progress of the NIMP 2030 will increase transparency of the NIMP 2030 in achieving the Goals and targets. Such can be achieved with the publication of progress via dashboard reporting; • Constant alignment on the policies relating to the NIMP 2030: Policies and master plans developed by other Ministries will be aligned to ensure the implementation is in line with the Vision and Goals of the NIMP 2030 for the benefit of the Rakyat; and • Promote Malaysia as the preferred investment destination: Awareness will be raised continuously to gain traction of the industry and public to support the implementation of the NIMP 2030. Continuous engagement with the industry players will be undertaken to obtain time-to-time update and input from the industry. The recommendations gathered via any of the communication channels will be considered and fit in the Action Plans, where necessary. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 170 Master Plan 2030 IMPLEMENTATION – WHOLE-OF-NATION PHASED APPROACH The NIMP 2030 will be executed in two phases over the period of seven years to achieve the Vision and Goals. Figure 10.2: Phases of the NIMP 2030 Phase 1 – Strengthen Foundation (2023 to 2026) The immediate priority for the next three years until the end of 2026 is to strengthen the collaboration between the public and private sector and set the foundation for the implementation of the NIMP 2030. The focus of Phase 1 will be to: • Set up and institutionalise the governance: The governance structure will be formalised and implementation processes will be defined (e.g. funding, industry collaboration and deals, etc.); • The NIMP 2030 Steering Committee will focus on unblocking systematic challenges related to talent, funding and ease of doing businesses. • The 5 Working Groups will be responsible for respective Action Plans and delivering the respective milestones. • Establish foundation stones for SMEs • Manufacturing sector SMEs will be identified, qualified and onboarded to related programmes under the NIMP 2030; and • As nurturing the growth of SMEs requires time, it is imperative to commence involvement of SMEs at this stage to achieve full potential by 2030. • Set MBPs to take off: MBPs are catalysed projects that will spur the economy and provide high impact to escalate Malaysia to high value-added activities and venture into green growth economy. It is crucial to ensure the required ecosystem are in place for the MBPs to achieve its success. By the end of Phase 1, key foundation will be established. Most programmes will be deployed and continue its implementation. Ecosystems have started taking shape and regulatory reforms have been iterated with the industry and taken place. Most MBPs have begun implementation, while new MBPs will be explored. Malaysia’s industries will be positioned to take the leap into Phase 2. Mid-term review (end of 2026) A mid-term review will be conducted by end of 2026 to review the targets and implementation progress of the NIMP 2030. It will provide the opportunity to assess any further global trends and recalibrate any gaps to achieve the NIMP 2030 Goals. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial IMPLEMENTATION – WHOLE-OF-NATION Master Plan 2030 171 Phase 2 – Sustain Growth and Resilience (2027 to 2030) The foundation set during the first phase will create the growth momentum of the nation’s manufacturing industry. This phase of the NIMP 2030 will focus on: • Driving implementation at scale: Both the public-private sectors will take necessary measures to intensify implementation to capture the growth opportunities apart from addressing any gaps from the mid-term review findings; and • Creating resilience: Diversify the economic base, create stronger local linkages and strengthen global cooperation for greater economic resilience that enable sustained growth given any economic conditions. By the end of Phase 2, Malaysia will be home to competitive industries with high economic complexity that create high income and skilled workforce with strong domestic ecosystem. Malaysia will be in the forefront of new industry clusters while existing clusters will be strengthened. This will contribute to a balanced and inclusive participation across the nation, doing so in a sustainable manner. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY 11 CONCLUSION New Industrial 174 Master Plan 2030 CONCLUSION CONCLUSION The NIMP 2030 is a comprehensive industrial master plan that sets a clear direction for Malaysia over seven years from 2023 to 2030. Its successful implementation is crucial to maintain the global competitiveness of the manufacturing industry and its related services in the country, with overall aim to bolster the country’s GDP, create better job opportunities and increase the salary. The NIMP 2030 underscores the significance of the whole-of-nation approach, where collaboration and unity are emphasised, breaking down silos that may impede progress. By rallying together, Malaysia can harness the collective strength of its public and private sectors as well as academia, propelling Malaysia towards achieving its Goals. The NIMP 2030 Missions prioritise inclusive growth, recognising that no single entity can single- handedly drive this forward. Empowering local communities and supporting SMEs are essential to ensure economic success. By investing in human capital and promoting research and innovation, Malaysia fosters a knowledge-driven economy that fuels sustainable growth and competitiveness on the global stage. The implementation of the NIMP 2030 emphasises transparency, open communication and collaborative governance. As Malaysia rallies together, united in purpose, the NIMP 2030 Missions will pave the way for a vibrant future that benefit the Rakyat of Malaysia, particularly by expanding Malaysia’s middle- class society. The NIMP 2030 Missions will catalyse economic success and social well-being, improving the quality of life of the people and ensuring a prosperous future for generations to come. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 175

APPENDIX I: LIST OF POLICIES AND ROADMAPS — LIST OF POLICIES AND ROADMAPS

APPENDIX I: LIST OF POLICIES AND ROADMAPS 32 current and to-be-launched policies and roadmaps were assessed to the NIMP 2030 and are aligned across the government, which is essential for successful implementation. No. Policy/ Roadmap Name 1 Malaysia MADANI 2 Twelfth Malaysia Plan (RMKe-12) 3 New Investment Policy 2022-2027 4 National Trade Blueprint 2021-2025 5 Industrial Master Plan 3 2006-2020 6 Industry4WRD 2025 7 MyDIGITAL Blueprint 8 Malaysia Productivity Blueprint 2020 9 E&E Roadmap 2021-2030 10 Aerospace Industry Blueprint 2030 11 National Advanced Materials Technology Roadmap 2021-2030 12 National Science, Technology and Innovation Policy 2021-2030 13 MySTIE 10-10 14 National Automotive Policy 2020 15 Jalinan Digital Negara 16 National AI Roadmap 2021-2025 17 National Energy Policy 2022-2040 18 Malaysia Renewable Energy Roadmap 19 National Mineral Industry Transformation Plan 2021-2030 20 Tindakan Pembangunan Bumiputera 2030 21 Chemical Industry Roadmap 22 National Energy Transition Roadmap 23 RMKe-12 Mid-Term Review* 24 Research, Development, Innovation & Commercialisation Ecosystem Plan* 25 National IP Policy* 26 SME Development Roadmap* 27 SME Digitalisation Roadmap* 28 Long Term Low Emission Development Strategy* 29 Nationally Determined Contributions* 30 iESG Framework* 31 Hydrogen Economy and Technology Roadmap* 32 National Mineral Policy* *Indicates policies and roadmaps yet to be launched MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 176 Master Plan 2030

APPENDIX II: GLOSSARY — GLOSSARY

APPENDIX II: GLOSSARY Acronym Definition Acronym Definition 4IR Fourth Industrial Revolution CREST Collaborative Research in Engineering, Science and AANZFTA ASEAN-Australia-New Zealand Free Technology Trade Area ACE Access, Certainty, Efficiency DDI Domestic Direct Investments ACFTA ASEAN-China Free Trade Area DMU Delivery Management Unit ADB Asian Development Bank DOE Department of Environment AHKFTA ASEAN-Hong Kong, China Free DOSM Department of Statistics Malaysia Trade Area DVX Indirect Value-Added AI Artificial Intelligence E&E Electrical and Electronics AIFTA ASEAN-India Free Trade Area EAP Economic Accelerator Projects AJCEP ASEAN-Japan Comprehensive ECF External Crowdfunding Economic Partnership ECI Economic Complexity Index AKFTA ASEAN-Korea Free Trade Area ECRL East Coast Rail Link ASEAN Association of Southeast Asian Nations EMS Electronic Manufacturing Services ATIGA ASEAN Trade in Goods Agreement EP Employment Pass BMS Building Monitoring System EPF Employees Provident Fund BNM Bank Negara Malaysia ESG Environment, Social and Governance Bursa Bursa Malaysia ETS Emissions Trading System CAGR Compound Annual Growth Rate EU European Union CBA Cost-Benefit Analysis EV Electric Vehicle CBAM Carbon Border Adjustment FDI Foreign Direct Investments Mechanism FMM Federation of Malaysian CCaaS Carbon Capture-as-a-Service Manufacturers CCCC China Communications FTA Free Trade Agreement Construction Company Ltd. FVA Foreign Value-Added CCS Carbon Capture and Storage G2B Government-to-Business CCU Carbon Apture and Utilisation G2G Government-to-Government CCUS Carbon Capture, Utilisation and GDP Gross Domestic Product Storage GERD Gross Expenditure on Research and CGC Credit Guarantee Corporation Development CHIPS Act Creating Helpful Incentives to GHG Greenhouse Gas Produce Semiconductors Act GHP Gambang Halal Park CIS Commonwealth of Independent States GII Government Investment Issue CMM Capital Markets Malaysia GLIC Government-linked Investment Company CO2 Carbon Dioxide GMT Global Minimum Tax CoE Centre of Excellence GNI Gross National Income COO Certificate of Origin GRI Global Reporting Initiative CPTPP Comprehensive and Progressive Agreement for Trans-Pacific GVC Global Value Chain Partnership HLI Higher Learning Institution MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 177 Acronym Definition Acronym Definition HRD Corp Human Resource Development LEAP Leading Entrepreneur Accelerator Corporation Platform IC Integrated Circuit LED Light Emitting Diode ICT Information and Communication LLC Large Local Company Technology M&E Machinery and Equipment IEO Initial Exchange Offerings MAMPU Malaysian Administrative IF Intervention Fund Modernisation and Management Planning Unit IMD Institute for Management Development MARii Malaysia Automotive, Robotics & IoT Institute IMF International Monetary Fund MATRADE Malaysia External Trade IMP3 Third Industrial Master Plan Development Corporation Industry4WRD National Policy on Industry 4.0 MAVCAP Malaysia Venture Capital IOT Internet-of-Things Management Berhad IP Intellectual Property MBP Mission-based Project IPAs Investment Promotion Agencies MCC Microcrystalline Cellulose IPPU Industrial Processes and Product MCCG Malaysian Code on Corporate Use Governance ISSB International Sustainability MCKILP Malaysia-China Kuantan Standards Board International Logistic Park JENDELA Jalinan Digital Negara MCKIP3 Malaysia-China Kuantan Industrial Park JMG Jabatan Mineral dan Geosains MDA Medical Device Authority JPK Department of Skills Development MDEC Malaysia Digital Economy Malaysia KDN Ministry of Home Affairs MDV Malaysia Debt Ventures Berhad KE Ministry of Economy MGS Malaysian Government Securities KHIP Kemaman Heavy Industrial Park MGTC Malaysian Green Technology and KKD Ministry of Communications and Climate Change Corporation Digital MIDA Malaysian Investment Development KKR Ministry of Works Authority KPDN Ministry of Domestic Trade and MIDF Malaysian Industrial Development Costs of Living Finance KPI Key Performance Indicator MIGHT Malaysian Industry-Government KPKT Ministry of Local Government Group for High Technology Development MITI Ministry of Investment, Trade and KPWKM Ministry of Women, Family and Industry Community Development ML Manufacturing Licence KRI Khazanah Research Institute MNC Multinational Corporations KSP Ketua Setiausaha Perbendaharaan MOF Ministry of Finance KSU Secretary General MoFA Ministry of Foreign Affairs KUSKOP Ministry of Entrepreneur and Cooperatives Development MOH Ministry of Health LCD Liquid Crystal Display MOHE Ministry of Higher Education LHDN Inland Revenue Board of Malaysia MOHR Ministry of Human Resources MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 178 Master Plan 2030 Acronym Definition Acronym Definition MOHR Ministry of Human Resources NR-REE Non-Radioactive Rare Earth Elements MOSTI Ministry of Science, Technology and Innovation NTM Non-Tariff Measures MOT Ministry of Transport OECD Organisation for Economic Co- operation and Development MOU Memorandum of Understanding OSP One-Stop Portal MPC Malaysia Productivity Corporation P2P Peer-to-Peer MRA Mutual Recognition Agreements PACU Project Acceleration and MRANTI Malaysian Research Accelerator for Coordination Unit Technology and Innovation PDPA Personal Data Protection Act MRM Malaysia Design Council PE Private Equity MRS Manufacturing-Related Services PERKESO Pertubuhan Keselamatan Sosial MSIA Malaysia Semiconductor Industry Association PIA Promotion of Investment Act MSME Micro, Small and Medium Enterprise PM Prime Minister MTC Mid-Tier Company PSDC Penang Skills Development Centre MTDC Malaysian Technology Development PTP Pahang Technology Park Corporation PWS Progressive Wage System MTFTA Malaysia-Turkey Free Trade R&D Research and Development Agreement RA Readiness Assessment MTVET National TVET Council RCEP Regional Comprehensive Economic MyCIP Malaysia Co-Investment Fund Partnership MyCOL Malaysia Critical Occupation List RDCI Research, Development, MyIPO Intellectual Property Corporation of Commercialisation and Innovation Malaysia RDICE Research, Development, Innovation, MyRER Malaysia Renewable Energy Commercialisation and Economy Roadmap RE Renewable Energy NAICO National Aerospace Industry RM Ringgit Malaysia Corporation RMCD Royal Malaysian Customs NCI National Committee in Investment Department NDC Nationally Determined RMKe-12 Twelfth Malaysia Plan Contributions ROO Rules of Origin NEC National Employment Council SBSR Shipbuilding and Ship Repair NEP National Energy Policy SC Securities Commission Malaysia NETR National Energy Transition Roadmap SCF Social Climate Fund NIA National Investment Aspirations SDG Sustainable Development Goal NIDF NIMP 2030 Industrial Development Fund SEB Sarawak Energy Berhad NIMP 2030 The NIMP 2030 Strategic Co- SEDA Sustainable Energy Development CoSIF Investment Fund Authority Malaysia NIP New Investment Policy SEDG Simplified ESG Disclosure Guide NRECC Ministry of Natural Resources, SESB Sabah Electricity Sdn Bhd Environment and Climate Change SIRIM Standard and Industrial Research NRI National Research Institution Institute of Malaysia MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 179 Acronym Definition SME Small and Medium Enterprise SME Corp SME Corporation Malaysia SOCSO Social Security Organisation SOP Standard Operating Procedure SPS Sanitary and Phytosanitary SSM Companies Commission of Malaysia STEM Science, Technology, Engineering and Mathematics TBIP Tok Bali Industrial Park TBT Technical Barriers to Trade TCFD Task Force on Climate Related Financial Disclosures The NIMP The New Industrial Master Plan 2030 2030 TIV Total Industry Volume TNB Tenaga Nasional Berhad TOR Terms of Reference TPB Tindakan Pembangunan Bumiputera TRACK Project Implementation and Facilitation Office TUSAS Turkish Aerospace Industries TVET Technical and Vocational Education and Training UN United Nations UNCTAD United Nations Conference on Trade and Development UNFCC United Nations Framework Convention on Climate Change US United States USD United States Dollar VC Venture Capital WIPO World Intellectual Property Right Organisation WWF Worldwide Fund for Nature YAB Yang Amat Berhormat YB Yang Berhormat YBHG Yang Berbahagia YBRS Yang Berusaha MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 180 Master Plan 2030

APPENDIX III: ACKNOWLEDGEMENTS — ACKNOWLEDGEMENTS

APPENDIX III: ACKNOWLEDGEMENTS The publication of the NIMP 2030 would not have been possible without contributions and inputs from a range of individuals and organisations. The Ministry of Investment, Trade and Industry would like to express its appreciation for their invaluable contribution in providing feedback and insights. 1. YAB Dato’ Seri Anwar Ibrahim, Prime Minister of Malaysia 2. YB Senator Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz, Minister of Investment, Trade and Industry 3. YB Liew Chin Tong, Deputy Minister of Investment, Trade and Industry 4. YBhg. Datuk Seri Isham Ishak, Secretary General of Investment, Trade and Industry 5. YBhg. Datuk Hanafi Sakri, Deputy Secretary General (Industry) of Investment, Trade and Industry 6. YBrs. Hairil Yahri Yaacob, Deputy Secretary General (Trade) of Investment, Trade and Industry 7. YBhg. Datuk Bahria Mohd Tamil, Deputy Secretary General (Investment) of Investment, Trade and Industry NIMP 2030 Taskforce members 1. Dr. Ong Kian Ming, former Deputy Minister of Investment, Trade and Industry 2. Dr. Yasuhiko Matsuda, Country Manager Malaysia, The World Bank 3. Fraziali Ismail, Assistant Governor, Bank Negara Malaysia (BNM) 4. YBhg. Datuk Muhamad Umar Swift, Chief Executive Officer, Bursa Malaysia 5. YBhg. Datuk Wira Arham Abdul Rahman, Chief Executive Officer, Malaysian Investment Development Authority (MIDA) 6. YBhg. Datuk Charon Makhzani, Group Managing Director, Malaysian Industrial Development Finance Berhad (MIDF) 7. Nicholas Khaw, Head of Research, Economist, Khazanah Nasional Berhad (KNB) 8. Yin Shao Loong, Senior Research Associate, Khazanah Research Institute (KRI) 9. Nurhisham Hussein, Chief Strategy Officer, Employees Provident Fund (EPF) 10. Professor Tan Sri Datuk Seri Noor Azlan Ghazali, Director, National University of Malaysia (UKM) 11. Professor Tham Siew Yean, Visiting Senior Fellow, ISEAS–Yusof Ishak Institute 12. Professor Dato’ Dr Rajah Rasiah, Executive Director, University of Malaya (UM) 13. Hamdan Majeed, Managing Director, Think City Ministries 1. Ministry of Agriculture and Food Security (MAFS) 2. Ministry of Communications and Digital (KKD) 3. Ministry of Domestic Trade and Cost of Living (KPDN) 4. Ministry of Economy (KE) 5. Ministry of Entrepreneur Development and Cooperatives (KUSKOP) 6. Ministry of Finance (MOF) 7. Ministry of Health (MOH) 8. Ministry of Higher Education (MOHE) 9. Ministry of Human Resources (MOHR) 10. Ministry of Natural Resource, Environment and Climate Change (NRECC) 11. Ministry of Plantation and Commodity (KPK) 12. Ministry of Science, Technology and Innovation (MOSTI) 13. Ministry of Transport (MOT) 14. Prime Minister’s Office of Malaysia (PMO) MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 181 Government Agencies and Regulators Government-Linked Investment Companies (GLICs) and Financial 1. Bank Negara Malaysia (BNM) Institutions 2. Bursa Malaysia 3. Collaborative Research in Intelligence, 1. Bank Pembangunan Malaysia Berhad Science and Technology (CREST) (BPMB) 4. Department of Standards Malaysia (JSM) 2. Credit Guarantee Corporation (CGC) 5. Department of Statistics Malaysia (DOSM) 3. CIMB Group 6. East Coast Economic Region Development 4. Employees Provident Fund (EPF) Council (ECERDC) 5. HSBC Malaysia 7. Export-Import Bank of Malaysia (EXIM 6. Khazanah Nasional Berhad (KNB) Bank Malaysia) 7. Kumpulan Wang Persaraan (KWAP) 8. Halal Development Corporation (HDC) 8. Lembaga Tabung Angkatan Tentera 9. Intellectual Property Corporation of (LTAT) Malaysia (MyIPO) 9. Lembaga Tabung Haji (LTH) 10. InvestKL 10. Malaysian Industrial Development 11. InvestPerak Finance Berhad (MIDF) 12. Jabatan Mineral dan Geosains (JMG) 11. Malayan Banking Berhad (Maybank) 13. Malaysia Automotive, Robotics, IoT (MARii) 12. Permodalan National Berhad (PNB) 14. Malaysia External Trade Development 13. Public Bank Berhad Corporation (MATRADE) 14. RHB Group 15. Malaysia Digital Economy Corporation 15. Sumitomo Mitsui Banking Corporation (MDEC) (SMBC) 16. Malaysia Productivity Corporation (MPC) 16. The World Bank Group 17. Malaysia Steel Institute (MSI) 18. Malaysian Communications And Chambers and Industry Associations Multimedia Commission (MCMC) 19. Malaysian Design Council (MRM) 1. ACCESS Blockchain Association Malaysia 20. Malaysian Foresight Institute 2. American Malaysian Chamber of (MyForesight) Commerce (AMCHAM) 21. Malaysian Industry-Government Group 3. Association of Accredited Advertising for High Technology (MIGHT) Agencies (4As Malaysia) 22. Malaysian Investment Development 4. Association of Malaysian Medical Authority (MIDA) Industries (AMMI) 23. Malaysian Meteorological Department 5. Association of Marine Industries of (MMD) Malaysia (AMIM) 24. Malaysian Railway Development 6. Board of Engineers Malaysia (BEM) Corporation (MRDC) 7. British Malaysian Chamber of Commerce 25. Medical Device Authority (MDA) (BMCC) 26. MIMOS Berhad 8. Chemical Industries Council Malaysia 27. Malaysia’s Digital Economy Blueprint (CICM) (MyDIGITAL) 9. China Enterprises Chamber of Commerce 28. NanoMalaysia Berhad in Malaysia (CECCM) 29. National Aerospace Industry Corporation 10. Confederation of Malaysian Tobacco (NAICO) Manufacturers (CMTM) 30. National Chamber of Commerce and 11. Confederation of Master Brewers Berhad Industry of Malaysia (NCCIM) (CMBB) 31. National Measurement Council (MPK) 12. Danish Chamber of Commerce Malaysia 32. National Pharmaceutical Regulation (DamCham Malaysia) Agency (NPRA) 13. Dewan Perniagaan Melayu Malaysia 33. Securities Commission Malaysia (SC) (DPMM) 34. SIRIM Berhad 14. Electric Vehicle Association Malaysia 35. SME Corporation Malaysia (SME Corp) (EVAM) 36. Talent Corporation Malaysia Berhad 15. Environmental Management and (TalentCorp) Research Association of Malaysia 37. Unit Peneraju Agenda Bumiputera (ENSEARCH) (TERAJU) 16. Federation of Goldsmiths and Jewellers Associations of Malaysia (FGJAM) MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 182 Master Plan 2030 17. Federation of Malaysian Fashion, Textile 49. Malaysian Footwear Manufacturers’ and Apparel (FMFTA) Association (MFMA) 18. Federation of Malaysian Foundry and 50. Malaysian Furniture Council (MFC) Engineering Industries Associations 51. Malaysian International Chamber of (FOMFEIA) Commerce & Industry (MICCI) 19. Federation of Malaysian Manufacturers 52. Malaysian Institute of Accountants (MIA) (FMM) 53. Malaysian Insulation Manufacturers 20. Federation of Malaysian Skills Group (MIMG) Development Centre (FMSDC) 54. Malaysian Iron and Steel Industry 21. Federation of Sabah Industries (FSI) Federation (MISIF) 22. Japanese Chamber of Trade & Industry, 55. Malaysian Knitting Manufacturer’s Malaysia (JACTIM) Association (MKMA) 23. Kuala Lumpur & Selangor Indian Chamber 56. Malaysian National Computer of Commerce & Industry (KLSICCI) Confederation (MNCC) 24. Machinery and Engineering Industries 57. Malaysian Oil and Gas Services Council Federation (MEIF) (MOGSC) 25. Malaysia Aerospace Industry Association 58. Malaysian Oleochemical Manufacturers (MAIA) Group (MOMG) 26. Malaysia Association of Sustainable 59. Malaysian Organisation of Pharmaceutical Supply Chain & Innovation (MASSCI) Industries (MOPI) 27. Malaysia Medical Device Association 60. Malaysian Palm Oil Board (MPOB) (MMDA) 61. Malaysian Petrochemicals Association 28. Malaysia Paper Association (MaPA) (MPA) 29. Malaysia Printers Association (MPA) 62. Malaysian Photovoltaic Industry 30. Malaysia Quarries Association (MQA) Association (MPIA) 31. Malaysia Rail Industry Corporation 63. Malaysian Photovoltaic Manufacturers (MARIC) Association (MPMA) 32. Malaysia Semiconductor Industry 64. Malaysian Plastics Manufacturers Association (MSIA) Association (MPMA) 33. Malaysia Shipowners’ Association (MASA) 65. Malaysian Pulp and Paper Manufacturers 34. Malaysia Steel Association (MSA) Association (MPPMA) 35. Malaysian Air-Conditioning & Refrigeration 66. Malaysian Rubber Products Association (MACRA) Manufacturers’ Association (MRPMA) 36. Malaysian American Electronics Industry 67. Malaysian Service Providers Confederation (MAEI) (MSPC) 37. Malaysian Automotive Association (MAA) 68. Malaysian Spanish Chamber of Commerce 38. Malaysian Automotive Component Parts & Industry (MSCCI) Association (MACPMA) 69. Malaysian Structural Steel Association 39. Malaysian Association of Convention (MSSA) & Exhibition Organisers & Suppliers 70. Malaysian Textile and Apparel Center (MACEOS) (MATAC) 40. Malaysian Association of Facility 71. Malaysian Timber Association (MTA) Management (MAFM) 72. Malaysian Timber Council (MTC) 41. Malaysian Association of Pharmaceutical 73. Malaysian Wood Industries Association Suppliers (MAPS) (MWIA) 42. Malaysian Cable Manufacturers 74. Malaysian Wood Moulding & Joinery Association (MCMA) Council (MWMJC) 43. Malaysian Ceramic Industry Group (MCIG) 75. Malaysian-Finnish Business Council 44. Malaysian Consortium of MidTier (MFBC) Companies (MCMTC) 76. Motorcycle & Scooter Assemblers and 45. Malaysian Corrugated Carton Distributors Association of Malaysia Manufacturers’ Association (MACCMA) (MASAAM) 46. Malaysian Cosmetics and Toiletries 77. Muar Furniture Association (MFA) Industry Group (MCTIG) 78. P.W. Gold & Silver Ornament Merchants 47. Malaysia Entrepreneurs’ Development Association (PWGS) Association (PUMM) 79. Perak Footwear Industry Association 48. Malaysian Food Manufacturing Group (PFIA) (MAFMAG) 80. Perodua Suppliers Associations (P2SA) MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 183 81. Persatuan Pengusaha Gaharu 8. Ann Joo Steel Berhad (AJSB) Bumiputera Malaysia (PENGHARUM) 9. Arkitek Mustapha Kamal Sdn Bhd (AMK) 82. Pharmaceutical Association of Malaysia 10. Aspirational Breakthrough Consultancy (PHAMA) (ABC) 83. Proton Vendors Association (PVA) 11. Asia Digital Engineering Sdn Bhd (ADE) 84. Sabah Timber Industries Association 12. Asia Food & Beverages Sdn Bhd (STIA) 13. Associated First Rubber (M) Sdn Bhd 85. Safety Glass Processors Association of 14. Austria Technologie & Systemtechnik Malaysia (SGPAM) Malaysia (AT&S) 86. Sarawak Manufacturers’ Association 15. Avago Technologies (Malaysia) Sdn. Bhd (SMA) 16. AWS Technologies Sdn Bhd 87. Sarawak Timber Association (STA) 17. Bahru Stainless Sdn Bhd 88. Selangor and FT Chinese Printing 18. B.Braun Medical Supplies Sdn Bhd Presses’ Association (SFTCPPA) 19. BrandMe Associate Sdn Bhd 89. Semiconductor Fabrication Association 20. BASF PETRONAS Chemicals Sdn Bhd Malaysia (SFAM) 21. Boston Consulting Group (BCG) 90. Small and Medium Enterprise 22. Cochlear Malaysia Sdn Bhd Association Malaysia (SAMENTA) 23. Composites Technology Research 91. Steel Wire Association of Malaysia Malaysia Sdn Bhd (CTRM) (SWAM) 24. Continental Tyre Malaysia Sdn Bhd 92. Technological Association Malaysia 25. CSC Steel Sdn Bhd (TAM) 26. Curge Advance Shd Bhd 93. The Associated Chinese Chambers of 27. Daiki Aluminium Industry (M) Sdn Bhd Commerce (ACCCIM) 28. DASC International Sdn Bhd 94. The Association of Bumiputera 29. Deloitte Consulting Malaysia Sdn Bhd Women in Business and Profession 30. Duopharma Biotech Berhad (Peniagawati) 31. Duta Edge Sdn Bhd (DESB) 95. The Association of Malaysia Bumiputera 32. EB Frozen Food Sdn Bhd Timber and Furniture Entrepreneurs 33. Ecava Sdn Bhd (PEKA) 34. Ernst & Young Consulting Sdn Bhd (EY) 96. The Cement & Concrete Association of 35. Euto Capital Partners Ltd (HK) Malaysia (C&CA) 36. Fraser & Neave Holdings Bhd (F&NHB) 97. The Electrical & Electronics Association 37. Falah Al Hadid (M) Sdn Bhd of Malaysia (TEEAM) 38. Falcon Safe Marketing Sdn Bhd 98. The Federation Of Malaysia Hardware, 39. Fonterra Brands Malaysia Sdn Bhd Machinery & Building Materials Dealers’ 40. Global Turbine Asia Sdn Bhd Association (FMHMBA) 41. Goodyear Malaysia Berhad 99. The Malaysian Institute of Certified 42. Grid Vision T&D Sdn Bhd Public Accountants (MICPA) 43. Haleon Malaysia 100. The Malaysian Panel-Products 44. Hartalega Holdings Berhad Manufacturers’ Association (MPMA) 45. Hexcel Composites Sdn Bhd 101. The National Tech Association of 46. Honda Malaysia Sdn Bhd Malaysia (PIKOM) 47. Hong Leong Yamaha Motor Sdn Bhd 102. Timber Association of Sabah (TAS) 48. Hovid Berhad 103. US-ASEAN Business Council Institute 49. Hyundai-Sime Darby Motors Sdn Bhd (USABCI) 50. Ichia Rubber Industry (M) Sdn Bhd 51. Idaman Pharma Manufacturing Sdn Bhd Industry Players 52. Infinecs Systems Sdn Bhd 53. Infineon Technologies (M) Sdn Bhd 1. Aerospace Composites Malaysia Sdn Bhd 54. Inmagine Group Sdn Bhd (ACM) 55. Innotech Textile (M) Sdn Bhd 2. Aerospace Malaysia Innovation Centre 56. Intel Corporation (AMIC) 57. Intermedex (M) Sdn Bhd 3. Ain Medicare Sdn Bhd 58. International Business Machines 4. Airlift Associates Sdn Bhd Corporation (IBM) 5. Alpine Pipe Manufacturing Sdn Bhd 59. Japan External Trade Organization (APMSB) (JETRO) 6. AM Alloy Industries Sdn Bhd 60. Jin Huo Gold & Jewellery Industries (M) 7. AMTECH Chemical Sdn Bhd Sdn Bhd MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 184 Master Plan 2030 61. Johnson & Johnson Sdn Bhd 114. Spirit Aerosystems Malaysia Sdn Bhd 62. Kamstrup Asia Pacific Sdn Bhd 115. Sri Majutex Sdn Bhd 63. KCK Pharmaceutical Industries Sdn 116. Sri Nona Food Industries Sdn Bhd Bhd 117. Star Medik Sdn Bhd 64. Knight Frank Malaysia Sdn Bhd 118. Strand Aerospace Malaysia Sdn Bhd 65. Kotra Pharma (M) Sdn Bhd 119. StanleyCo Corporate Services Sdn Bhd 66. KRA Group 120. Sydney Cake House Sdn Bhd 67. Linaco Specialty Industries Sdn Bhd 121. Teksoft (SEA) Sdn Bhd 68. Linatex Rubber Products Sdn Bhd 122. Toyo Tyre Malaysia Sdn Bhd 69. Longcane Industries Sdn Bhd 123. Trinity Group 70. Maersk Malaysia 124. T7 Global Berhad 71. MAI Q Consult & Services 125. UMW Aerospace Sdn Bhd 72. Malayan Flour Mills Berhad (MFM) 126. Unex Industries Sdn Bhd 73. Malaysia Marine and Heavy Engineering 127. ViTrox Corporation Berhad (ViTrox) Holdings Berhad (MHB) 128. WEG South East Asia Sdn Bhd 74. Malaysian Consortium of Rubber 129. Western Digital Tech and Regional Products Sdn Bhd (MALCORP) Center (M) Sdn Bhd 75. Master Pack Group Berhad 130. ZALORA 76. Murni Allianze Consult Sdn Bhd 77. Micron Memory Malaysia Sdn Bhd Research Institutes and Higher 78. Mitsubishi Motors Malaysia Sdn Bhd Education Institutions 79. Motosikal dan Enjin Nasional Sdn Bhd (Modenas) 1. Academy of Sciences Malaysia (ASM) 80. Monitor ERP System Sdn Bhd 2. Construction Research Institute of 81. Motorola Solutions Malaysia Malaysia (CREAM) 82. MyCreative Ventures Sdn Bhd 3. International Islamic University Malaysia 83. Mycron Steel CRC Sdn Bhd (IIUM) 84. My-Sutera Sdn Bhd 4. Khazanah Research Institute (KRI) 85. Nichias FGS Sdn Bhd 5. MARA University of Technology (UiTM) 86. Nicom Steel Centre Sdn Bhd 6. National University of Malaysia (UKM) 87. Northport (Malaysia) Bhd 7. PETRONAS University of Technology (UTP) 88. Nike Sales Malaysia Sdn Bhd 8. Putra University of Malaysia (UPM) 89. Nippon Paint (M) Sdn Bhd 9. Raffles College of Higher Education 90. OMRON Electronics Sdn Bhd 10. Sunway University 91. One Auto Worldwide (M) Sdn Bhd 11. The National Energy University (UNITEN) 92. Pahang Pharmacy Sdn Bhd 12. University of Kuala Lumpur (UniKL) 93. Petroliam Nasional Berhad (PETRONAS) 13. University of Malaya (UM) 94. PETRONAS Carbon Management 14. Universiti Malaysia Pahang (UMP) Division 95. PETRONAS Chemicals Group Berhad (PCG) 96. PETRONAS Chemicals Marketing Labuan Ltd (PCML) 97. Pharmaniaga Berhad (Pharmaniaga) 98. Powerista Technologies Sdn Bhd 99. Proton Holdings Berhad 100. PS Food and Beverages Sdn Bhd 101. REDtone International Bhd 102. Ramly Food Industries Sdn Bhd 103. Rentokil Initial (M) Sdn Bhd 104. Respimedic Sdn Bhd 105. Ricky Tan & Co 106. Robolab Technology Sdn Bhd 107. Selasih Aman Sdn Bhd 108. Senior Aerospace UPECA Sdn Bhd 109. SERC Sdn Bhd 110. Shorubber (Malaysia) Sdn Bhd 111. Singularity Aerotech Asia Sdn Bhd 112. SME Aerospace Sdn Bhd 113. Southern Steel Berhad MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 185

APPENDIX IV: FOOTNOTES AND REFERENCES — FOOTNOTES AND REFERENCES

APPENDIX IV: FOOTNOTES AND REFERENCES No. Footnotes and References Page 1 Cassey Lee (2019). “Manufacturing Performance and Services Inputs: Evidence 20 from Malaysia”, ISEAS Economics Working Paper, No. 2019, No.2. 2 The most recent IMP, IMP3 spanned from 2006 to 2020. The industry’s 20 performance was measured until 2022 instead of 2020 due to the COVID-19 pandemic and associated supply chain disruptions. 3 Constant price GDP is a measure of all goods and services produced in a year, 20 adjusted for inflation and expressed in the prices of a base year. It allows for more meaningful comparisons of GDP by considering both the quantity and value of goods and services. 4 The implemented data is compiled based on the results from a survey 20 conducted by MIDA on the implementation status of projects. Projects that are implemented are those that are in the production or machinery installation/ factory construction stages, which are used as a proxy measure for realised investments. Projects can take one to two years to be implemented depending on the project gestation period. The coverage for the survey is projects that were approved under MIDA, which would be those under the manufacturing and selected services sectors. Baseline 2005 figures are the total for 1996-2005 (IMP2 period) and breakdown for manufacturing and services across this period is not available. Target 2020 figures are targets set for 2006 to 2020 (IMP3 period). Realised 2020 figures refer to investments for IMP3 period. 5 Realised 2020 figures refers to investments for 2006 to 2020. Services realised 20 investment data is under the purview of MIDA only. 6 Realised 2022 figures refers to investments for 2006 to 2022. Services realised 20 investment data is under the purview of MIDA only. 7 The services sector’s share may be underestimated as the data only covers 21 services under the purview of MIDA. 8 World Bank (March 2022). “Strengthening Services Trade in the Malaysian 21 Economy”. 9 ECI covers two dimensions of exports, namely product diversity (number 21 of products a country can export competitively) and product complexity (number of countries able to export each of these products competitively). See “Complexity and Growth: Malaysia’s Position and Policy Implications” by BNM (March 2018) for more information. 10 EPU (2014). “Complexity Analysis Study of Malaysia’s Manufacturing Industries”. 21 11 The servicification of manufacturing pertains to the increasing dependence 22 of manufacturing firms on services as intermediate inputs, and the number of workers within manufacturing that are performing service-related activities. Services are increasingly embedded in goods to create more value. 12 R&D investment measured in terms of Gross Expenditure on R&D (GERD) 22 increased from 2008 to 2016 but fell back to slightly less than the 2010 share in 2018. 13 World Intellectual Property Right Organisation (WIPO). 22 14 2018 is the most recent data available. 23 15 World Bank (2020). “Towards a Resilient Recovery”. Development Digest, Issue 9, 23 November 2020. 16 Defined as tertiary-educated workers in jobs that do not require tertiary 23 education (i.e. semi-skilled and low-skilled jobs). 17 According to the “STEM Education in Malaysia” report by MOHE: In 1967, Higher 24 Education Planning Committee reports recommended that the range of students in Science or Technical stream compared to that in art stream is to be at the proportion of 60:40, or what is called now 60:40 policy. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial 186 Master Plan 2030 18 World Economic Forum (2020). “The Future of Jobs Report 2020”. 24 19 Domestic exports: Products manufactured in Malaysia, including imported 25 products from foreign countries that have been significantly changed or enhanced in value domestically; Re-exports: Products of foreign origin that have entered Malaysia but are "re-exported" in substantially the same condition as when imported. 20 Masahiro Kawai and Kanda Naknoi (2015). “ASEAN Economic Integration through 25 Trade and Foreign Direct Investment: Long-Term Challenges”, ADBI Working Paper Series, No. 545. 21 The bilateral agreements are with Australia, Chile, India, Japan, New Zealand, 25 Pakistan and Türkiye. The regional trade agreements are the ASEAN Trade in Goods Agreement (ATIGA); ASEAN-China Free Trade Area (ACFTA), ASEAN-Japan Comprehensive Economic Partnership (AJCEP), ASEAN-Korea Free Trade Area (AKFTA), ASEAN-India Dree Trade Area (AIFTA), ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) and ASEAN-Hong Kong, China Free Trade Area (AHKFTA); the Regional Comprehensive Economic Partnership (RCEP); and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). 22 Masahiro Kawai and Kanda Naknoi (2015). “ASEAN Economic Integration through 26 Trade and Foreign Direct Investment: Long-Term Challenges”, ADBI Working Paper Series, No. 545. 23 Choong, P W & Khalifah, N.A. & Nor, Abu & Ismail, Mohd. (2018). “Free Trade 26 Agreements and Production Sharing in Malaysian Manufacturing Industries”, Jurnal Ekonomi Malaysia. 52. 97-111. 10.17576/JEM-2018-5203-7. 24 The Ministry of Health Malaysia is responsible for 70.4 per cent of the NTMs in 28 the country, followed by Ministry of Agriculture and Food Security (MAFS) at 12.1 per cent, Ministry of Natural Resources and Environment at 5.5 per cent, Ministry of Plantation Industries and Commodities at 3.8 per cent, with the balance by 9 other institutions. 25 Malaysia participates in GVCs mainly through backward linkage, measured by 29 share of foreign value-added (FVA), rather than forward linkage (measured by indirect value-added exports, or DVX). In 2019, the DVX share accounted for 29 per cent, up from 18 per cent in 1995. The share of FVA remained higher than the DVX, at 36 per cent in 2019. 26 The statistics on this are not fully comprehensive and would not be comparable 29 to the total approved investments published in MIDA’s website which includes investments or projects compiled from other Ministries and Agencies. 27 A country can participate in GVCs through either backward GVC participation 30 (backward linkage) as measured by the share of foreign value-added (FVA), or forward GVC participation (forward linkage) as captured by the share of domestic value-added incorporated in third countries’ exports (indirect value-added exports, or DVX) in gross exports. 28 SME Corp. (2021). Economic Performance and Outlook 2021. World Bank (2022). 33 “Malaysian SME Program Efficiency Review, March 2022”. 29 ERIA (2023). “ASEAN’s Role in the Threat of Global Economic Decoupling: 34 Implications from Geographical Simulation Analysis”. 30 IMF (2023). “COVID-19 Crisis Implications for Productivity and Labour Markets in 34 Advanced Economies”. Staff Discussion Note. 31 AlphaBeta (2021). “Positioning Malaysia as a Regional Leader in the Digital 34 Economy: The Economic Opportunities of Digital Transformation and Google’s Contribution”. 32 Reuters (2022). “Large companies' assets at growing risk of climate impact - S&P 35 Global”. 33 Bank Negara (2023). “Navigating Malaysia’s Economic Transition towards a 35 Decarbonised Future”. Economic and Monetary Review 2022. MINISTRY OF INVESTMENT, TRADE AND INDUSTRY New Industrial Master Plan 2030 187 34 Global Risk Insights (2015). “The Economic Impact of Climate Change in 35 Southeast Asia”. 35 Zhan, James. (2021). “GVC transformation and a new investment landscape in 36 the 2020s: Driving forces, directions, and a forward-looking research and policy agenda”. Journal of International Business Policy. 4. 10.1057/s42214-020-00088-0 36 MATRADE (2023). “MATRADE Kicked-Off International Sourcing Programme 38 (INSP), Promoting Malaysia's Strengths & Capabilities in The Semiconductor Industry”. 37 Malaysia Aerospace Industry Blueprint 2030 57 38 Department of Statistics Malaysia 58 39 UNCTAD (2023). “Technology Innovation Report 2023”, page 154 76 40 Gartner. “Smart Manufacturing” 79 41 Malaysian Communications and Multimedia Commission (March 2023). “Digital 81 Connectivity. Ensuring Everyone Gets Connected: A Glance at Malaysia’s Digital Connectivity Journey” 42 Oxford Insights (2022). “Government AI Readiness Index 2022”. 85 43 United Nation Climate Change (2022). “Malaysia Fourth Biennial Update Report 96 Under the United Nations Framework Convention on Climate Change”. 44 World Economic Forum (2022). “CBAM: What you need to know about the new 98 EU decarbonization incentive”. 45 Sustainable Energy Development Authority (2021). “Malaysia Renewable Energy 101 Roadmap (MyRER)”. 46 Ministry of Economy (2023). “National Energy Transition Roadmap (NETR)”. 101 47 Sustainable Energy Development Authority (2021). “Malaysia Renewable Energy 102 Roadmap (MyRER)”. 48 xEV refers to all types of EVs (battery EV, plug-in hybrid EV, hybrid EV, fuel cell 105 EV). 49 Economic Planning Unit (2022). “National Energy Policy 2022-2040”. 105 50 SIRIM (2020). “Eco Industrial Parks (MyEIP)”. 109 51 World Economic Forum (2023), “The Global Risks Report 2023 18th Edition”. 117 52 Swiss Re (2021), “The Economics of Climate Change: Impacts for Asia”. 122 53 OECD (2018), “Climate-Resilient Infrastructure”. 123 54 Department of Statistics Malaysia (2022), “Bumiputera Statistics 2022”. 129 55 Department of Statistics Malaysia (2020). “Small and Medium Enterprises (SMEs) 162 Performance 2020”. 56 Department of Statistics Malaysia (2020). “Profile of MSMEs in 2016-2022”. 162 MINISTRY OF INVESTMENT, TRADE AND INDUSTRY NEW INDUSTRIAL MASTER PLAN 2030 e ISBN 978-967-0020-04-4 -0-2398-24-0 -25709-4-3 --9- 9 789670 020044 KEMENTERIAN PELABURAN, PERDAGANGAN DAN INDUSTRI

New Industrial Master Plan 2030 (NIMP 2030)

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