The government is expected to launch a national policy on Industry 4.0 by mid-2018, as the country embraces the evolution of a technology-driven global economy.
Deputy International Trade and Industry Minister Datuk Seri Ahmad Maslan (picture) said the process of drafting the national policy started last year in collaboration with several ministries and relevant agencies.
Public consultations to record inputs from stakeholders, namely industries and academicians, were also held as part of the drafting process, he told the Dewan Negara yesterday.
Ahmad was responding to Senator Datin Rahimah Mahamad who asked on the status of the framework and how the country’s small and medium enterprises are positioned to embrace the Industry 4.0.
“The policy is expected to be launched mid-next year,” he said, adding that the high-level task force set up by his ministry in May 2017 was aimed to formulate a comprehensive nationwide policy and action plan for the development of Industry 4.0.
“In general, this policy aims to make Malaysia a strategic partner for smart manufacturing and related services in Asia Pacific, a key destination for high-tech industry investment and a comprehensive solution provider for advanced technology,” Ahmad said.
P Premkumar & Dashveenjit Kaur(2018, April 5). Industry 4.0 National Policy to be Launched. The Malaysian Reserves. Retrieved from https://themalaysianreserve.com/2018/04/06/industry-4-0-national-policy-to-be-launched/
KUALA LUMPUR: Malaysia and 10 other Asia Pacific countries signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in Santiago, Chile on Thursday.
The Minister of International Trade and Industry (MITI) Datuk Seri Mustapa Mohamed said the countries were Australia, Brunei Darussalam, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore and Vietnam.
“Despite the absence of the US, Malaysia still stands to gain from market access to countries like Canada, Peru and Mexico with whom we currently do not have preferential trading arrangement,” he said in a statement.
“In addition to the market access, our participation in the CPTPP will also benefit us in terms of enhancing governance in a number of economic sectors, strengthening economic cooperation among member countries and promoting adoption of international standards.
“Malaysia believes that this agreement will help us to further promote our trade and investment agenda and mitigate the challenges of the global economic environment,” he said.
Mustapa said Malaysia would gain from the CPTPP as it would enable more Malaysian companies to expand their presence beyond the borders of the country.
The deal would also enhance Malaysia’s position as a premier investment destination and eventually create additional quality jobs for our people.
“The Malaysian public at large will also benefit from the increase in consumer choices on goods and services in our market,” he said.
To recap, the CPTPP was concluded on Jan 23, 2018 in Tokyo after eight rounds of negotiations which started in early 2017 at Ministers and Senior Officials level.
Mustapa said CPTPP ministers shared the view that, by achieving a high-standard and well-balanced outcome, the Agreement will strengthen the mutually-beneficial linkages among participating economies, boost trade, investment and economic growth in the Asia-Pacific Region, and create new opportunities for businesses, consumers and workers.
“In light of recent protectionist sentiment which is prevalent in a number of countries, the signing of the CPTPP is timely as it sends a strong signal of our commitment towards an open and liberal trading system.
“What the world needs now is more trade and investment flows and not restricted markets,” it said.
The Star Online(2018, March 9). Malaysia, 10 other AsiaPac Nations Ink Trade Deal. The Star Online. Retrieved from https://www.thestar.com.my/business/business-news/2018/03/09/malaysia-10-other-asiapac-nations-ink-trade-deal/
INDUSTRIALISATION is the process of transformation from a primarily agrarian economy to one based on the manufacturing of goods. This process fosters development in aspects beyond economic fundamentals such as social, demography, and politics.
Besides that, it enables urban-rural migration and social mobility, improves purchasing power and spending habits, and creates political movements that challenge the traditional agrarian elites.
However, industrialisation is passé for most advanced economies as they have long progressed past that into the post-industrial phase of development, which was brought about through new technological discoveries.
The concept of replacing an old economic practice with a new one was coined as “creative destruction” in the early 1900s by Joseph Schumpeter, a political economist. Over time, creative destruction spurred advanced economies to deindustrialise and shift their focus to services.
Historically, the US was the very first country to experience deindustrialisation back in the mid-1950s, when the economy saw declining employment within the manufacturing sector.
During the period of deindustrialisation, the share of employment in the manufacturing sector has been declining while manufacturing value-added remained constant to the total share of Gross Domestic Product (GDP) – evidence of increasing labour productivity growth within the sector.
Over the years of development, contribution of manufacturing sector towards GDP growth will likely plateau as manufacturing productivity peaks. Therefore, more efforts would be directed towards the services sector to achieve higher growth.
As a matter of fact, a proper deindustrialisation process requires consistent heavy investments into education and infrastructure, as the economy divests into more growth sectors. Then, only would the transition from a manufacturing-oriented economy into service-oriented economy be smooth.
Hence, share of employment within the services sector will increase, as automation gradually takes over employment within the manufacturing sector.
Manufacturing spearheaded Malaysia’s growth
Before the 1997 Asian Financial Crisis (AFC), a strong emphasis was placed on the manufacturing sector to drive the Malaysian economy. Manufacturing output grew sharply from 14% in the early-1970s to nearly 30% in the late-1990s.
Privatisation, which was officially announced in 1983, picked up pace as the government sought to reduce its financial and administrative burden. By mid-1990s, there were 200 privatisation projects in the pipeline.
Nevertheless, this economic liberalisation nurtured industrialisation and gave Malaysia an early start in the manufacturing sector, especially in the electronics and electrical (E&E) segment.
However, manufacturing expansion slowed down and became less significant to the country’s economic growth after the AFC, which resulted in a slump in private investment.
Consequently, Malaysia underwent a structural change to a services-led economy. According to statistics, services output rose from 43% in 2000 to 53% in 2016.
Similarly, manufacturing output also gained momentum post-AFC and increased by 31% in the late-1990s. However, such growth was not sustainable as it dwindled to below 25% and has been flat for the past decade.
As at 2016, contribution from the manufacturing sector stood at a meagre 20% of GDP.
The 24th Productivity Report 2016/2017 by the Malaysian Productivity Corporation stated productivity growth of 1.4% within the manufacturing sector – below the 11th Malaysia Plan (11MP) target of 2.6%.
Ultimately, Malaysia seems to exhibit signs of premature deindustrialisation as the country looks towards becoming a service-oriented economy without having had a proper experience of industrialisation. Here, we explore the possible causes of Malaysia’s premature deindustrialisation.
Globalisation and the rise of the dragon
As the country opened up to trade, the manufacturing sector began to “import” deindustrialisation from the advanced economies. Due to its market size in world markets, Malaysia was essentially a price taker.
Therefore, the decline in the price of manufacturing in advanced economies put a squeeze on manufacturing in Malaysia, right when technological progress was about to pick up steam.
Furthermore, China’s accession to the World Trade Organisation (WTO) in 2001 marked the time China began to engage more fully with the global economy. As a result, developing countries were indirectly impacted negatively by China’s export expansion.
According to a study by Gordon H. Hanson and Raymond Robertson on China and the Manufacturing Exports of Other Developing Countries, had China’s export supply capacity remain constant over the 1995 to 2005 period, export demand would have been 0.6% to 1.8% higher in developing countries.
Change in consumption preference
The declining share of manufacturing to GDP is not unique to Malaysia. From 1997 to 2015, the global services sector recorded relatively faster growth as it rose from 63% to 69%.
At the same time, manufacturing grew slower from 20% to 15%, indicating higher income growth around the world and a shift in consumption preferences away from goods and towards services.
In the case of Malaysia, spending on goods (food and non-alcoholic beverages, clothing and footwear, furnishing and household equipment) made up 33% of monthly household expenditure in 1994. However in 2016, it fell to 26% of total household spending.
Meanwhile, spending on services (health, recreation and culture, education, restaurants and hotels) increased from 20% of household expenditure in 1994 to 22% last year.
Besides the shift in preference towards services, the proliferation of e-commerce has also altered consumer behaviour. The intersection of globalisation and technology means greater connectivity and speed between buyers and sellers when conducting sales transactions.
Since e-commerce requires a manufacturing firm with flexible and agile production capacity, the traditional manufacturing model of mass production is slowly losing its significance.
In order to survive the age of disruption, manufacturers are required to adopt a business strategy that can quickly respond to customer needs and market changes in a cost-effective manner.
The necessity to address the elephant in the room
At present, the fast pace of technological advancement has begun paving way for the imminent disruptive wave of Industry 4.0.
Through the gradual incorporation of robotics and artificial intelligence, usage of big data and cognitive computing, and implementation of cashless transactions in all sectors of the economy, corporates attempt to maximise productivity and profitability while being cost-effective.
Not surprisingly, Malaysia has already felt the effects of disruptive technology, from ride-hailing taxi apps such as Grab, to shopping within the comfort of your own home without even physically being at the mall using online shopping apps such as Lazada and 11street.
Thus, it is crucial to address the probable issue of premature deindustrialisation in our economy.
Within the manufacturing sector, jobs in the assembly line would be most affected. The onset of automation will likely replace lower skilled labours with robots, causing jobs displacement in the short run.
With the E&E segment having the largest added value contribution and highest employment share of 421,018 workers, the 24th Productivity Report 2016/2017 stated that around 2.3% of total E&E employments were lost largely due to automation replacing unskilled workers – translating into almost 10,000 job losses.
Therefore, unskilled workers disrupted by this, especially ones without a college degree, should be given adequate reskilling training in order for them to adapt to a higher skilled job, increasing their productivity and allowing them to value add in their future employment.
Preparing Malaysians for the change
Currently, measures have already been taken by the government pertaining to this issue as the country strives towards the new Transformasi Nasional 2050 (TN50) plan.
Just recently, Malaysia was listed among 25 “Leading Countries” well-positioned to gain from Industry 4.0 in the Readiness for the Future of Production Report 2018 published during the recent World Economic Forum 2018.
As part of an initiative to cultivate globally competitive young Malaysian students, the government allocated RM2.2bil worth of scholarships for young Malaysians to pursue their higher education, with an additional of RM90mil under the MyBrain scheme specifically for postgraduate studies in the latest Budget 2018.
Through the Malaysia Education Blueprint initiated in 2011, the Science, Technology, Engineering and Mathematics (STEM) approach was integrated into our learning system to provide students with much more relevant skills gathering and analysing problems based on up-to-date real world situations.
Additionally, our Prime Minister announced that computational thinking skills will be integrated alongside STEM into the education system’s syllabus, from as young as Year One students.
Meanwhile, the Technical and Vocational Education and Training programme is currently being developed to prepare the future workforce in facing the disruptive force of Industry 4.0.
However, with all the policies and initiatives introduced by the government to prepare our nation in embracing the Fourth Industrial Revolution, policy execution remains the key to success.
Manokaran Mottain(2018, February 10). Malaysia in the Age of Disruption. The Star Online. Retrieved from https://www.thestar.com.my/business/business-news/2018/02/10/malaysia-in-the-age-of-disruption/
Small and medium enterprises (SMEs) are agile enough to adapt and use digitalisation through big data, cloud computing, the Internet of Things (IOT) sensors and 3-D printing through all aspects of manufacturing and production.
Through these digitalisation technologies, SMEs have the ability to enhance the operation of machines and devices, manoeuvre the movement of all material from different locations, as well as the consumption of energy by the minute.
These are the technologies involved in the Industry 4.0 initiative worldwide which include robotics and machine learning.
Industry 4.0 was created in Germany and made huge changes in machine intelligence and automation driven by software, computing power and sensor hardware.
To learn and keep abreast of Industry 4.0 and digitalisation issues, 21 Malaysian journalists were sponsored by the Human Resources Development Fund (HRDF) and K Pintar on a study tour to Germany from Dec 4-10.
During the workshop on the road from Berlin to Stuttgart and in Munich, Malaysian media practitioners had an opportunity to visit the FabLab Berlin, a place where anyone or SMEs can build prototypes using 3-D printing before undertaking mass production.
The media was also introduced to some of the equipment used in the IOT.
The technology is definitely a game changer in many ways as it can instantly print parts and entire products, anywhere in the world.
3-D printing is available in Malaysia and can help SMEs grow tremendously as they can take the risk of creating designs without the burden of a heavy investment.
It is time for Malaysian SMEs to keep up with the changes and “learn how to learn” through digital education opportunities due to the rapid growth of technology and the required skill sets.
HRDF Deputy Chief Executive Muhammad Ghazali Abdul Aziz said technicians of the future won’t just maintain machines.
“They need to also know about cloud computing, integrate cloud communication with the machines, and create interfaces between one machine and another.
“To achieve this, HRDF has introduced programmes like the National Empowerment in Certification and Training for Next Generation Workers (NECT-GEN).
“To help talent handle digitalisation of production, it covers areas such as Big Data, Cloud Computing, the Internet of Things (IOT), Cyber Security and Vertical Integration,” he told Bernama.
The seven-day Industry 4.0 and Digitalisation Study Programme in Germany was also organised in collaboration with the Berlin-based European School of Management and Technology (Esmi) and the Malaysian Press Club.
Esmi is an international business school founded by 25 leading global companies and institutions which are reputedly among the most effective to educate people on Industry 4.0, digitalisation through the IOT, crisis reporting and its related areas.
Throughout the course, the 21 media practitioners were exposed to Industry 4.0 and Digitalisation through IOT via a combination of classroom sessions and on-site visits to Porsche, Festo, BMW, Impact Hub, FabLab Berlin and IDG Communications Media AG, among others. — Bernama
Bernama (2017, December 31). SMEs agile enough to adapt to digitalisation for manufacturing facilities. Bernama. Retrieved from http://www.themalaymailonline.com/money/article/smes-agile-enough-to-adapt-to-digitalisation-for-manufacturing-facilities#ujGKV5GR0jZ5iDsH.97
The Ministry of International Trade and Industry (MITI) hopes to announce the National Industry 4.0 policy framework before mid-year, said Deputy Minister Datuk Chua Tee Yong.
He said the framework, currently at the last stage of drafting, would be announced by the MITI Minister, Datuk Seri Mustapa Mohamed.
“It’s in the progress. We try to avoid the framework form being just a government-driven agenda, so there is a lot of engagement being done with the industry players, including the small and medium enterprises.
“The input process took a while for us (MITI) to formulate. We are hopefully try to hit before middle of this year,” he told reporters after visiting Saiyakaya (M) Sdn Bhd’s factory here today.
To recap, Mustapa said, the ministry was coordinating five working groups, involving various ministries, in drafting the National Industry 4.0 policy framework.
The ministries are the Ministry of Science, Technology and Innovation, Ministry of Human Resources, Ministry of Higher Education, Ministry of Finance and the Ministry of Communications and Multimedia.
“After the framework is tabled in Parliament, the government will decide which ministry will drive the implementation of the National Industry 4.0,” he said.
On trade performance, Chua said, the 2018 would register a positive growth but not as strong as 2017.
He said the excellent 2017 results, which saw the export figures registering a consistent double-digit growth, created a higher base for this year.
“Nevertheless, with the initiatives that the government is looking at (on enhancing trade) will play a role in assisting Malaysia (to continue post growth).
“We believe that to hit a (month-on-month) double-digit growth will be challenging. It will be single-digit growth,” he added.
In November 2017, Malaysia’s total trade surged by 14.8 per cent to RM157.05 billion compared with the corresponding month of last year.
During the period, exports rose by 14.4 per cent to RM83.5 billion, the highest monthly export value ever recorded after the RM82.62 billion registered in March 2017 while imports surged by 15.2 per cent to RM73.55 billion.
Trade surplus amounted to RM9.95 billion, the 241st consecutive month of trade surplus since November 1997.
On monthly basis, total trade, exports and imports rose by 1.9 per cent, 1.5 per cent and 2.4per cent respectively.
For the first eleven months of 2017, the total trade grew by 20.8 per cent year-on-year to RM1.622 trillion, with exports totalling RM856.05 billion (up 20.4 per cent) and imports at RM766.07 billion (up 21.2 per cent).
Trade surplus was recorded at RM89.98 billion, higher by 13.6 per cent compared to the corresponding period a year ago. — Bernama
Bernama (2018, January 10). MITI hopes to announce National Industry policy before mid-year. Bernama. Retrieved from http://www.themalaymailonline.com/money/article/miti-hopes-to-announce-national-industry-4.0-policy-before-mid-year#ILhyOK8Vxl0gkeLz.97