Wish list for the New Industrial Master Plan 2030

While Malaysia’s NIMP2030 may set out ambitious goals in the form of targets that it intends to achieve, it will likely need the support of the government to make it a reality. — Bloomberg

THE New Industrial Master Plan 2030 (NIMP2030), to be launched next month, is expected to propel the Malaysian economy to the next level with a focus on five key sectors that the government believes will drive industrial development and increase the nation’s economic complexity.

According to the Investment, Trade and Industry Ministry (Miti), the five key sectors identified under the NIMP2030 are aerospace, chemical/petrochemical, digital economy, pharmaceuticals, and electrical and electronics (E&E), which also includes medical devices.

In terms of complexity, only the chemical and E&E sectors can be considered as sectors with high complexity while others lagged.

The ministry also highlighted that one of the ways to achieve the goals set out is to accelerate tech adoption, spurring the next generation of tech innovation companies and developing business opportunities by leveraging on new data sources.

The aspirations and sectors that have been identified to take Malaysia to the next level look attractive on paper and rightly picked up by the ministry.

Of course, this will require carefully crafted policies that will not only encourage domestic direct investment (DDI) but also attract multinational corporations (MNCs) in the form of foreign direct investment (FDI).

These policies may include how we attract the right talent, capital and tax policies that will encourage investments into the respective sectors to achieve the goals of NIMP2030 as well as the cost to the government.

The cost factor

When China launched “Made in China 2025” in 2015, one of the visions was to turn China into a leading industrial country by 2049.

The intention was not only to increase the domestic market share of local suppliers to 70% but to take market leadership in key sectors.

These, among others, include the information technology sector, green energy/vehicles, aerospace equipment, power equipment, agriculture machinery, medicine and medical devices, new materials, railway equipment, ocean engineering and robotics.

Other than providing support for producing specialised goods and making investments in research and development, China also provided subsidies and financed state-owned enterprises to achieve these ambitious objectives.

Although no official figures are available, it is widely believed that China spent billions of dollars to achieve its Made in China 2025 objectives a reality.

Hence, while Malaysia’s NIMP2030 may set out ambitious goals in the form of targets that it intends to achieve, it will likely need the support of the government to make it a reality, especially to encourage greater investments in the five key sectors.

The government’s support could be both in the form of monetary and non-monetary terms as it will be an added attraction for investments from the private sector.

Human capital

The most important element in driving these five sectors is human capital that will take the five industries to the next level.

Granted that we are near full employment with the latest unemployment rate at just 3.5%, what incentives the government rolls out will be critical, especially for skill sets that are not available in Malaysia.

Will NIMP2030 attract high skilled workforce from overseas and will our Premium Visa Programme (PVIP) be fine-tuned to ensure the five sectors get the right boost in terms of human capital?

In addition, will there be other forms of incentives for Malaysians who will be at the forefront of transformation under the NIMP2030?

At the time of writing, the government had announced a tailor-made Residence Pass-Talent (RP-T) for strategic investors who have committed to invest at least RM5bil to be invested in the targeted manufacturing sector as promoted by the government via the New Investment Policy and the soon-to-be-launched NIMP2030.

In addition, the introduction of the Digital Nomad Pass (DNP) for digitally or technically skilled foreign talent to stay in Malaysia with their spouse and dependents for up to two years too is a welcome gesture.

Tax incentives

Death and taxes are certainties in life but for businesses, tax incentives are the biggest carrot that a government can dangle to attract investments, as this will allow not only new investors to come to Malaysia but local DDI that could take advantage of the carrots thrown in to achieve the goals and objectives of NIM20230.

Incentives like pioneer status, investment tax allowance and reinvestment allowances have been used before to attract FDI into Malaysia and this again will likely be one of the ways to attract new investments into Malaysia’s five key identified sectors.

In addition, providing tax breaks or lower maximum tax rates to employees working in these newly set-up businesses or investments too can be another added benefit to attract the right workforce needed to drive investments.

New economic zones

While Malaysia is one of the most attractive locations in the region due to the extensive transportation network, Malaysia also boasts one of the cheapest rates in the region for utility supplies, which of course include electricity, water, and high-speed broadband.

The government can also encourage businesses in the five key economic areas via the setting up of special economic zones to cater to the five different sectors that the government is targeting to nurture to meet the objectives of NIMP2030.

For example, a new economic zone for the aerospace sector could be located in Subang while the chemical/petrochemical industry could see further investments in either Pengerang or Kertih as the current ecosystem is well in place.

The digital economy sector should be located in Cyberjaya while pharmaceuticals and the E&E sector to be further expanded in Penang.

These special economic zones will not only enjoy preferential tax treatments but the government could also provide special packages for utility supplies to make the economic zones a success.

New investments will not only be an economic multiplier but also create new jobs and place Malaysia on the right growth path and get our mojo back in the form of being top destination of choice for investors.

Pankaj C. Kumar is a long-time investment analyst. The views expressed here are the writer’s own.