KUALA LUMPUR: The International Trade and Industry Ministry (Miti) is projecting lower growth in the manufacturing and services sectors of 4.8% and 5.7% respectively for 2019.
International Trade and Industry Minister Datuk Darell Leiking said the lower projection is due to uncertainty caused by trade tensions that may affect exports numbers.
“Malaysia is also a manufacturing nation so obviously the exports have some issues. At the same time we’ve managed to overcome a lot of the challenges and while the figures may not be as high as last year, the consistency of the exports as well as the orders are still there despite all the challenges,” he told reporters at the launch of the Miti Report 2018 and Productivity Report 2018/2019 today.
“There are a lot of contractions simply because it’s self-inflicted as well. A lot of people are deciding to make less orders, make less contracts simply because they are unsure of the current situation with the US and China, as well as where the trade diversions are happening today,” he said.
He said the manufacturing sector’s growth this year will be underpinned by the shift towards high value-added, diverse and complex products.
In 2018, the manufacturing and services sectors grew 5% and 6.8% respectively. Total trade expanded 5.9% to RM1.88 trillion while trade surplus was the largest since 2012, driven by total exports almost reaching the RM1 trillion mark.
Total approved investments in the manufacturing, services and primary sectors amounted to RM201.7 billion last year. In the first quarter this year, investment approvals rose 3.1% to RM53.9 billion, driven by the manufacturing sector.
“We’re still seeing good diversions and good orders. Even without the trade diversions, we are doing okay but with diversions obviously we are going to do much better... we do not like to take advantage of situations where there are tensions but if there are diversions that come in, we’ll definitely filter in those diversions,” said Leiking.
He said to date, the electrical and electronics sector has been the biggest beneficiary of the trade diversions.
Malaysia Productivity Corp (MPC) chairman Tian Chua urged the industries to be more aggressive in attracting investments to Malaysia and that MPC will try to provide guidelines for selecting investments that will boost Malaysia’s productivity and provide high added-value.
While countries like Vietnam would absorb labour-intensive industries, he said Malaysia should aim for medium to higher level technologies.
“This is our advantage for a country that has moderate technological growth, this is what we have to take advantage of, to build strategic partnerships with those industries that need to be based here and re-branding to be a Malaysian product,” he added.
Meanwhile, Leiking said domestic direct investments have seen a huge increase as well. In terms of boosting productivity, Chua said the manufacturing sector is currently transforming from a labour-intensive industry into a newer platform that includes Industry 4.0, automation, robotics and others as the sector can no longer depend on low level type of production.
He said the government should take the opportunity to build sufficient infrastructure such as highways, railroads, internet connectivity and digitisation in order to grab the potential of untapped resources while ensuring that the regulatory and approval framework is facilitative.
Labour productivity is projected to grow by 2.9% this year on account of productivity improvement in the manufacturing (3.9%) and construction (3.4%) sectors as forecasted by the Finance Ministry.