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Malaysia - Moving Forward Up the Global Value Chain

Sound economic policies and a focus on high-value activities puts Malaysia in an advantageous position for future growth.

Dec/Jan 09
The tide today is turning. In the past, there has always been a steady stream of companies that chose Malaysia for build-up and expansion, but the stream is now increasing at a greater rate with more new explorations for mutual benefit.

The country continues to exhibit very strong fundamentals. Despite the current global financial crisis, Malaysia is optimistic of a 5 percent GDP growth this year. Malaysia's resilience is a product of decades of sound macroeconomic policies. Malaysia's balance of payments goes from strength to strength, as does the country's financial system. These fundamentals are a hallmark for Malaysia, a hallmark that has provided a sound business environment for investors.

The new Malaysia still keeps a firm eye on these fundamentals. At the same time, the world has changed rapidly, and companies need to respond to this challenge. As every country finds its niche in the world, Malaysia, too, has had to reflect on its direction and its vision for the future. Fortunately, the achievements of the last few decades have put the country in good stead for the next level of development. From its strong fundamentals, the new Malaysia seeks to gradually restructure the foundation and the drivers of growth, in order to occupy a higher position in the global value chain.

This means that first, Malaysia is shifting from low-end manufacturing toward activities that better leverage its strengths and natural advantages. This translates into invigorating certain sectors such as agriculture, agro-based industries, and biotechnology, to take advantage of Malaysia's fertile bio-resources.

In short, the re-branding of Malaysia means shifting the basis of growth towards more high-value activities that leverage its natural advantages and strengths. These activities will be driven by a higher emphasis on human performance and productivity gains.

For the most part, Malaysian manufacturers have focused their efforts on the low value-added segment. With strong competencies in production and assembly and substantial talents in fabrication and product testing, the country has remained a relevant player in the global manufacturing industry, particularly the electrical and electronics sector, over the years. Yet intense competition from other regional contenders has prompted Malaysia to expand its manufacturing philosophy once again.

Recognizing that there are opportunities to strengthen the industry on either end of the value chain, the government has identified the need to enhance the E&E sector competencies in conceptualization, design, product segmentation, marketing, sales, and distribution. In doing so, the industry will keep pace with global demand, as well as further its export significance to include more products and technologies.

Analysts are confident that Malaysia's E&E sector continues to be a preferred location for international and regional investment as the government endeavors to increase the industry's valued-added profile.

Considering the volatility of the global environment today - as well as the seeming attractiveness of other places in Asia and beyond - Malaysia makes for a powerful and competitively valued gateway to Asia. With a stable socioeconomic environment located in the heart of the region and first-class physical infrastructure, combined with a trained and trainable work force, Malaysia offer a conducive and competitive business environment for investors. Investors and companies that have located to Malaysia found it ideal as a base in Asia, be it as an operational headquarters, distribution hub, center for shared services, or a place to do design and R&D.

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