THE IMPORTANCE AND CHALLENGES OF MANUFACTURING IN MALAYSIA

Recently, manufacturing industries in Malaysia grow very rapidly if compared to previous decades. With the rapidly grow of manufacturing industries, the government has to play its role in order to ensure every aspect of current trading policies and regulatory to be obeyed. Other than that, this will ensure that the current trading and manufacturing environment in Malaysia to be peaceful yet globally competitive.

In this report, a number of importance and challenges faced by manufacturing sector in Malaysia will be focused on. The scope of this report only covers the situation in Malaysia manufacturing environment and at the same time, it will explain some benefits that our nation can get from the cooperation with developed countries such as Australia and Japan.

Manufacturing Sector in Malaysia and its Importance

To start with, manufacturing sector in Malaysia contributes almost 80% of overall country’s export and besides, Malaysia also known as the 17th largest exporting nation in the world [1]. For that reason, Malaysia’s government has to work hard in order to maintain, preserve and enhance our manufacturing sector. From [1], it is stated that products manufactured in Malaysia are accepted in developed countries such as US, EU and Japan. This shows that our manufacturing sector already achieved a level that can be proud of.

Due to exporting her product to other countries, Malaysia has to obey some regulations in a particular country. For example, Malaysia also exporting some of its product to Australia and according to [1], Australia is a very strict country especially in food handling and management. In order to export food products to Australia, Malaysia have to obey and fulfill all the Australian’s rules and requirements respectively. Fortunately, Malaysia’s government and her manufacturing sector are managed to do it. This shows that Malaysia has the ability to fulfill global standards such as CODEX and Australian Food Standards Code.

As we all know, Malaysia also known for its agro-based sector. In Malaysia, some commercial-based plants are heavily grown and these plants are harvested to produce some kinds of raw material such as palm oil, rubber, timber, rice and fiber. Unfortunately, the income that can be generated from agro-based sector is not really huge compared to manufacturing sector. For that reason, with the availability of the manufacturing sector, Malaysia does not need to rely on the agro-based sector only. Furthermore, manufacturing sector can help in boosting the development of agro-based sector by offering the capabilities of some downstream activities such as product processing, packaging and distributing. These acclivities are useful in order to turn the raw material (palm oil, rubber, rice) into finished product or half-finished product.

Besides, the manufacturing sector can assist in the utilization and development of R&D and ICT adoption for business and manufacturing purposes. Along the way, ICT adoption can lead to the wider usage of electronic commerce for business to business. Other than that, ICT will facilitate the utilization of RFID and product coding standards.

In the education aspects, the development in manufacturing sector can help to boost Malaysia’s education sector. Manufacturing sector has the capability to offer and provide the working experience, industrial training and actual case study for education and other government sectors in Malaysia. As a matter of fact, undergraduate and postgraduate students in Malaysia can take these chances to get some exposure of working in manufacturing sector in Malaysia. Besides, a lot of researches can be conducted in order to solve industrial problems and this can lead to the occurrence of technology transfer and the discovery of new knowledge.

Despite that, Malaysia is one of the Islamic country and other than that, Malaysia also does a lot of active collaboration between other countries. As from [1], Malaysia can be the ‘door’ for other countries such as developed countries to do collaboration with other Islamic nations. In the same way, many Islamic countries have the ability to offer lower manufacturing costs especially the raw material, labor charge and business capital. From the collaboration with developed countries, the Islamic countries can enhance their economy condition and receiving technology transfer.

In Malaysia’s manufacturing sector there is no end for continuous development efforts. In order to achieve the competitiveness level and innovative capability that up to the global standard, the manufacturing sector is doing its best. For example, Malaysia is doing collaboration with Australia via Free Trade Agreement (FTA)[1]. By implementing FTA, Malaysia is trying to achieve and put herself the global manufacturing environment. Along with that, Malaysia will be a country that manages to produce a higher-tech, higher-value added and more sophisticated products and services.

Similarly, joint-ventures and collaborations made with developed nations yield a lot of benefits. Next, Malaysia can go to a higher level and respected globally. In addition, through joint-ventures and collaborations Malaysia can obtain a flow of expertise that her really need and as well as valuable technology transfer. On the other side, Malaysia can also carry out some projects abroad with the developed countries expertise and material and labor from Malaysia. This will give credits to both parties. After a while, Malaysia can be proud to be known as a successful developed country.

Challenges for Malaysia’s Manufacturing Sector

To be a developed country, one has to go through series of ups and downs. It is also same for Malaysia and her journey for glory. Apart from all the benefits of a rapidly-developed manufacturing sector, there are a lot of challenges to deal with and the most current one is global economic crisis. During this crisis, almost all big companies worldwide face a hard time. In Malaysia, KLSE is going down [4] and this give the hardest hit ever to most companies in Malaysia and investors. Moreover, demands for export are almost disappear and this affects the manufacturing sector in Malaysia. Currently, some manufacturers are reducing their manufacturing volume and capacity and this cause a lot of people become jobless. Now is a very tough for everyone.

Besides, the manufacturing sector in Malaysia also has a problem in maintaining its competitiveness, quality and Just-In-Time delivery [1]. This is because all three requirements mentioned before is crucial in order to gain market share. Nowadays, some manufacturers will outsource their production in order to maintain competitiveness. Some fields that are widely outsourced in Malaysia are contract manufacturing, logistics and IT services, internal audit and R&D [1].

From [1], it is stated that Malaysian manufacturers face some problems during the shipment of their products. One of them is due to the sets of physical examinations that their products need to go through before entering a particular country. As a result, these examinations will cause delay. Other that, there are some manufacturers those need to do export-direct for their product. To fulfill this need, Malaysia’s government should develop a cargo consolidation facility and services.

Moreover, because of more than one system of Approving and Inspection Authorities take place, a significant gap between the information system and overall resources do exist therefore causing more delays. Besides, the stakeholders do not have enough time to understand and respond to the rapidly change of trading policies and regulatory. All this challenges will cause delay in the overall processes of manufacturing management.

Apart from that, the manufacturing sector in Malaysia is an industry that is driven by technology and knowledge. Moreover, Malaysia also produces and promotes high-tech and high-value added products and services. For that reason, it is not easy to cope and remain competitive with current market condition in which, technology is very rapidly developed.

Despite having problem with rapidly-changing product’s technology, Malaysia is also lacks of technical and marketing skills and these make things worse. The manufacturing sector is deeply in need of the most recent engineering and technical skills. These skills are needed for the middle management level and people in this level are expected to design, innovate and adapt new technologies to the manufacturing environment. Moreover, the manufacturing sector also lacks of the utilization of ICT in the manufacturing processes. Most people in manufacturing sector are not yet to master the ICT for the purpose of business and manufacturing. Some of these people are still working with the conventional manufacturing processes. Other than that, ICT is a very important tool to close the gap between the existing and the latest technology such as nano technology, grid computing, RFID and WiFi. These technologies are not just to be mastered but also to be adopted into our manufacturing environment.

Apart from that, it is well-known that almost all big companies are owned by Chinese in Malaysia. And from [2], it is mentioned that these companies are passed from generation to generation. Problems will arise when there is no descendents that have the ability to take care of the company. This will lead to the company closure or being taken over and because of that, some people might lose their job. Other than that, as we all know, members of a family will increase with respect to time and when a family that owned a company gets bigger it is possible for the family members to have differences in the way of thinking, opinion, ownership and management style. It is hard to deny that a company with more than one boss is hard to maintain. At the end of the day, this kind of companies will be taken over by others and some of them may face some problems in terms of company’s management. In addition, big companies are the ‘big player’ in the manufacturing sector of Malaysia and these companies mostly owned by Chinese people. For that reason, if these companies are having problems, they will give a massive effect on the manufacturing sector. Some examples of these companies are Malayan Credit (owned by Teo family), the Cycle and Carriage Group (owned by Chua family) and YHS Group (owned by Yeo family).

From [3], it is mentioned SMEs cover almost 90% of the Malaysia’s manufacturing sector and SMEs produce various types of products such as textile and apparel, food and beverages, metals and metals products and wood and wood products. At the same time, SMEs also face a couple of domestic and global challenges. One of the challenges is SMEs have a low level of R&D. This is because they have insufficient engineering and technical skills. Other than that, SMEs put almost its efforts on supplying for the domestic market and at the same time they have to compete with products from China and India. From here, it is obvious that they already set the highest limit for their potential. To overcome these challenges, SMEs should aim high and they have to be bold and qualify enough to export their products to overseas. In addition, it is stated in [3], the high level of bureaucracy in government agencies in one of the challenges for SMEs. Besides, it is mentioned that there is not enough internal sourcing funds for SMEs and the SMEs believe the available funds are not effectively delivered. In [3], it is suggested that the Malaysia’s government should avoid delivering the funds through too many agencies to make sure the funds is effectively delivered. Other than that, it is suggested that SMEs should try to implement counter-trade to help them getting financially stable.

Conclusion

In light of the above, the manufacturing sector in Malaysia is the biggest earnings for Malaysia’s government. For that reason, the government is trying its best to ensure that this sector is competitive and innovative. Moreover, the manufacturing sector contributes to almost all facets of government sectors. These denote that, the manufacturing sector is worth to invest on. Besides, collaborations and joint-ventures with other countries especially developed countries will yield a lot of benefits for our country. These collaborations and joint-ventures will enhance the technology transfer, flow of knowledge and they can offer the solution to our shortages of technical and marketing skills. Apart from that, the manufacturing sector also faces some challenges in order to maintain its competitiveness. These challenges come from various aspects such as financial, R&D, ICT, technology and knowledge and technical expertise. For that reason, our government still has a long way to go before our manufacturing sector is able to achieve the standards of global manufacturing environment and for our Malaysia to be a developed country. But all those dreams will be closer for grabs day by day.

References

[1] Raja Musa , Raja Abdul Aziz. “Transactions Costs in Regional Trade and Trade Facilitation: The Malaysian Business Perspective”. Federation of Malaysian Manufacturers.

[2] Gomez, Edmund Terrence. “Family Firms, Transnationalism and Generational Change: Chinese Enterprise in Britain and Malaysia”. Springer Science and Business Media. June 7, 2007: 153-172.

[3] Saleh, Ali Salman and Ndubisi, Nelson Oly. “An Evaluation of SME Development in Malaysia”. International Review of Business Research Paper, Vol 2 No 1. August 2006: 1-14.

[4] Zainal Abidin, Mahani. “Malaysia’s Economy Outlook: New Challenges Facing the Malaysian Economy”. ASLI Outlook Conference 2009. January 15, 2009.