Industrial Master Plan 3 - malaysian society for engineering and ...

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Malaysia – Third Industrial Master PlanTarget Growth SectorsManufacturingThese industries are strategically important in contributing to greater growth of themanufacturing sector in terms of higher value added, technology, export, knowledgecontent, multiplier and spin-off effects and potential to be integrated regionally andglobally. The 12 manufacturing growth sectors identified are as tabled below.ServicesWithin the services sector, 8 sub-sectors have been targeted for greater developmentand promotion. These sub-sectors have the potential to contribute to exports andstrengthen inter-sectoral linkages, including facilitating and supporting the greatergrowth of the manufacturing sector.Manufacturing IndustriesNon-resource based:‣ Electrical and Electronics‣ Medical Devices‣ Textiles and Apparel‣ Machinery and Equipment‣ Metals‣ Transport EquipmentResource based:‣ Petrochemicals‣ Pharmaceuticals‣ Wood-based‣ Rubber-based‣ Oil Palm-based‣ Food ProcessingServices Sub-sectors‣ Business and Professional services‣ Logistics‣ ICT services‣ Distributive trade‣ Construction‣ Education and training‣ Healthcare services‣ Tourism servicesExports and Investment Targets for the 12 Targeted Manufacturing IndustriesSub-sector Exports Investment2006-2020 2020 2006-2020 2020(RMbn) Average Share (%) (RMbn) Share (%)AnnualGrowth (%)Total 11,403.2 7.1 100.0 362.5 100.0Non resource-based 9,202.5 7.1 80.6 232.8 65.3Electrical & electronics7,533.9 6.3 65.9 82.4 23.1productsMetal products 514.6 7.6 4.5 44.2 13.6Machinery and equipment 494.4 6.4 4.3 30.8 7.7Textile & apparel 248.8 7.8 2.1 13.7 3.1Transport equipment 232.5 6.3 2.0 42.3 11.6Medical devices 178.3 7.6 1.6 19.4 6.2Resource-based 2,200.7 7.1 19.4 129.7 34.7Palm oil 781.7 7.6 7.0 26.1 7.6Wood based products 545.2 6.4 4.7 25.4 6.2Petrochemical products 377.4 6.3 3.3 34.0 9.4Food processing 244.6 7.8 2.2 24.6 6.2Rubber Products 239.0 7.6 2.1 12.9 3.0Pharmaceuticals 12.8 6.3 0.1 6.7 2.3Source: Ministry of International Trade and IndustryOur Thoughts…IMP2 behind target duemainly to externalshocksThe performance of the Malaysian economy during the IMP2 failed to meet thetargets and we view it as largely caused by global events such as the Asian financialcrisis in 1997-98, Sept-11 Attacks in 2001 and SARS in 2003 which led to an overallglobal slowdown. Malaysia’s real GDP averaged 4.6% per annum over the IMP2period from 1996 to 2005, falling short of the forecasted 7.9%. All sectors missedtheir growth target except for mining and quarrying, which expanded 2.5%, above the1.9% target and contributed 6.7% to GDP (vs 4.2% target). The faster than expectedgrowth can be attributed to the development of the oil and gas industry in Malaysia.Meanwhile, although failing to meet the targeted growth, the services sectorcontributed 58.1% to GDP in 2005, more than the planned 48.4% in the IMP2, withnon-Government services sectors contributing the bulk of the growth. This reflectsthe increasingly important role of the services sector as the Malaysian economymoves towards a developed nation status.Fixed Income & Economic ResearchHL Markets- 4 -
Malaysia – Third Industrial Master PlanContribution of the Services Sector to Gross GDP in Selected Countries, 2004USA Hong Singapore Ireland Thailand MalaysiaKongShare to GDPServices (%) 80.4 91.8 70.1 44.6 49.9 60.3Manufacturing (%) 12.7 3.7 25.1 40.8 38.7 31.6Primary Sector (%) 2.2 0.1 0.1 4.0 11.4 15.4GDP growth rate (%) 4.4 8.1 8.4 4.9 6.1 7.1Services sector growth rate 5.1 7.8 6.4 3.8 6.5 6.4(%)Share of services sector to 79.0 94.5 79.2 65.0 43.1 57.8total employment (%)Source: USA: Bureau of Economic Analysis & Bureau of Labour Statistics; Singapore: Economic Survey of Singapore: HongKong: Central Statistics Hong Kong: Thailand: National Economic & Social Development Board: Ireland: Central Statistics Office,Ireland: Malaysia: Economic Report 2004/2005 and Bank Negara Report 2004.IMP3 emphasizes onattaining globalcompetitiveness……by leveraging onexisting strength, ANDbuilding on newcompetenciesIMP3 seeks to addressissues and challengesextensivelyServices sector to takeover the driver seat butwith manufacturingsector to remainprominentFinancial servicesamong the beneficiaryLimited short term gainbut long term positive6.3% growth target isachievable barringmajor externalsetbacksThe 3 rd Industrial Master Plan (IMP3), 2006-2020 outlines the industrial strategiesand policies, which form part of the country’s continuing efforts towards realising itsobjective of becoming a fully developed nation by 2020. The IMP3 rides on itsobjective to achieve global competitiveness through innovation and transformation ofthe manufacturing and services sectors while contributing to meeting the 5development trusts of the National Mission introduced under the 9MP.The IMP3 leverages upon the strengths and capabilities of existing industries and thecountry’s resources as well as its experiences of the previous plans, adjusted toreflect developments and opportunities in the global, regional and domesticenvironments. With this in mind, emphasis is given to technological upgrading,attracting and generating quality investments, developing innovative and creativehuman capital and integrating Malaysian industries and services into the regional andglobal networks and supply chains.The Malaysian economy is targeted to grow at an average of 6.3% YOY during theentire IMP3 period (2006-2020) after having expanded an average of 4.6%YOY from1996-2005. The IMP3 deals comprehensively with issues and challenges faced bythe manufacturing and non-government services sectors, including the provision of ahighly skilled and knowledgeable workforce, creation of an efficient network oflogistics services and application of advance technologies.While the manufacturing sector was targeted to take the lead in driving growth in theIMP2, the IMP3 sees the services sector assuming the lead role in driving economicgrowth from 2006-2020. The manufacturing sector is expected to remain animportant source of growth and is targeted to contribute 28.5% to GDP in 2020 withan annual growth of 5.6% per annum during the IMP3. The services sector is set toplay a bigger role by broadening its economic base and contribution to exports. Overthe next 15 years, the sector is expected to grow at an annual rate of 7.3% andcontribute 66.5% to GDP where 59.7% share is estimated to emanate from the non-Government services sectors. Meanwhile, even as the agriculture sector is expectedto become the third engine of growth, it is only expected to contribute 7.0% to GDP in2020, down from 8.2% in 2005. It is also interesting to note that all sectors, exceptservices, are expected to see a decline in their contribution to total GDP by 2020.Since RM1.3 trillion in overall investments or RM84.6bn of investments are neededannually to support growth in the targeted sectors, the financial services industrycould be among the most notable beneficiary of the IMP3 in terms of growth ascompanies look to the capital/ financial markets to raise their capital requirements.This is despite the fact that it is not one of the target growth sectors.We are of the view that the impact on the economy will be limited in the short-termbut it will be a positive in the longer term should competitiveness and potentials of thetargeted industries and services are enhanced during the IMP3 period.We believe that the 6.3% targeted growth for the entire IMP3 period (2006-2020) isachievable barring major economic setbacks arising from a global downturnespecially in the US and that the IMP3 policies and strategies are efficiently andeffectively implemented. We are also of view that the IMP3 will be able to ride on theup-cycle of economic growth in Asia and other emerging markets. It is hopeful thatFixed Income & Economic ResearchHL Markets- 5 -
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