THOUGHTS

Are We a Producer, Creator or Consumer Economy?

26/11/2021 10:56 AM
Opinions on topical issues from thought leaders, columnists and editors.
By :
Dato’ Ts. Madani Sahari

A few years ago, I had an interesting chat with a foreign technology expert. We spoke about Malaysia’s capabilities in the automotive sector. The conversation delved deep into Malaysia’s place in the world economically.

To many of us, we still reference Malaysia as a developing country. However, I was immediately corrected on my loose use of the term. He said, “I don't think Malaysia is a developing country. It is a middle income country!”

Without getting into a semantic debate on the matter, the key note here is that it is to look at our growth and develop a fair assessment to where we are, and where we need to be.

For a country that grew its GDP per capita from US$4,043 to US$10,401 between 2000 and 2020 (highest was in 2019 – US$11,414 before the pandemic hit), it’s difficult to say we haven’t come a long way.

However, what separates us from this elite list of developed countries? Of course, GDP per capita seems to be a simple, single-factor method of measurement. Are we moving fast enough? What and where are the gaps?

I believe there is a strong correlation between the types of economic levels we participate in and the levels of income of nations.

A quick glimpse of the world map shows nations that consume more depend on natural resources to furnish their livelihoods, with little control of the costs of the supply chain to fulfil their needs. These are the countries that rely heavily on subsidies and tax cuts to ensure disposable income is sufficient.

Countries that engage in value added activities – manufacturing, skilled services and processing of natural resources – tend to fare better, as while they consume imports, they are also able to generate more income from the exchange of their valuable time for a higher share of the cost structure.

Nations which are creators

There is one more level – nations which are creators. These nations have abundance of skills in design of products, services and processes. They are the brains behind the products that we buy, and they derive maximum benefit from the highly sought after capability of generating new ideas and executing them to fruition.

A good example of this is Apple Inc., where designs of hardware, software and marketing are done by their employees and business partners in the United States, but manufacturing is outsourced to many countries including Mongolia, China, Korea or Taiwan.

Of course, there are many factors that contribute to the wealth of a country, such as historical pathways, socio-political limitations and geographic characteristics, but for the purpose of this piece, allow me to delve into economic value.

When Malaysia’s automotive industry began circa the 1980s, the main focus was the assembly and production of the various components for vehicles, be it the car itself or the components that they comprised. However, the dependence on design and specifications provided by foreign expertise kept our industry only as manufacturers, with limited control on the product designs.

This dependence limited our competitivity within the market (which was locally focused) - as production volume, lack of workforce experience, and lower purchasing power of the local economy made growth difficult.

However, we took the correct – albeit ambitious – path, when the developed local talent and businesses to achieve higher value capabilities. It was the year 2000 when Malaysia could claim itself as a full-fledged designer and manufacturer of vehicles, when the Proton Waja was launched. A product of both Malaysian designers and manufacturers, it placed the nation's human capital at a higher level - and opened up new opportunities for more local talent to be part of a sector with a high premium for technological expertise, including the 600-strong parts and components as well as 700,000 automotive workforce we see today.

Since the National Automotive Policy 2014 was launched, a total of RM74.4 billion worth of automotive parts were exported. In 2020 alone, Malaysia recorded almost RM13 billion in exports, a huge chunk coming from automotive parts and components. Despite it being a year marred by the backdrop of a pandemic, this figure signified Malaysia's importance as a manufacturing hub within the automotive sector in the region.

Era of connected mobility

However, as we transition into the era of connected mobility, new opportunities arise as the automotive sector expands in new sectors that change the face of transportation, to include a higher level of electrification and automation.

In the next decade or so, we will see higher global demand for electric vehicles - which when combined with technologies such as autonomous driving – create a next generation of vehicles that may look the same as cars today, but are filled with new technologies that we have not produced before.

With that said, there will be an increased demand for critical components and systems that cater specifically to next generation vehicle technology.

This year, Budget 2022 included incentives for electric vehicles - through the exemption of excise and import duties for those purchasing EVs and equipment to supplement the EV lifestyle.

This is an important step, as it completes the ecosystem to incentivise the EV sector in Malaysia through direct incentives to the consumer itself - which will in turn excite market interest in investing in new businesses that support the use of EVs, such as sales, service and repairs, battery management, charging stations, and many more.

The National Automotive Policy 2020, which is an update of its predecessor under the custodianship of the Ministry of International Trade and Industry, includes the development of critical components for Next Generation Vehicles (NxGVs), in which electric vehicles are an important aspect for development of the overall sector.

These components include batteries, battery management systems (BMS), on-board charging, lightweight bodies, radars, LIDARs, vision sensors and cloud-based controllers, to name a few.

Alongside these, there are also many opportunities in the design and development of systems and system integrators, applications that must meet standards and regulations that are compliant with global requirements.

New generation of transportation technology

As the world embarks on a new generation of transportation technology, such as in EVs, it is important to learn from history and seize new opportunities to remain at the top of the value chain through locally engineered components.

Since 2014, MARii has established many programmes and infrastructure to facilitate the development of local talent in both product and process design within the connected mobility sector, in which its applications also find themselves in many other sectors as well.

In general, product design consists of three main stages - the styling stage (where concepts and ideas are generated), the engineering stage (where components are detailed out) and validation (where function and durability are tested).

The MARii Design Centre was established in 2017 to enhance design engineering and prototyping, overcoming investment barriers OEMs and vendors and ease access to design facilities through shared infrastructure. The centre is equipped with a design studio, clay modelling area and engineering room to perform various design functions.

To facilitate the validation process, the MARii Simulation & Analysis Centre (MARSAC) was launched as a standalone facility within MARii’s headquarters in Cyberjaya, equipped with high performance workstations, powered by MARii’s existing High Performance Computing servers which enable real-time data analysis and cloud-based operations.

Both facilities allow vehicle and component engineers to perform digital design, simulations during the validation phase of automotive and mobility-based parts, components, systems and processes.

To further enhance local talent in the above areas, MARii also conducts numerous training programmes such as the Design Engineering & Prototyping (DEP), MARii Unlimited CAE, Additive Manufacturing and Product Optimisation programmes.

In the future, more facilities and infrastructure that include Industry 4.0 technologies such as Additive Manufacturing, Virtual & Augmented Reality and an Autonomous Vehicle test bed are being planned to allow local design talents to flourish.

There are currently around 700 parts and components manufacturers operating in Malaysia, with about a quarter of this need of localised design capabilities to ensure industry competitivity. MARii's one-stop design centre connects OEMS and their supply chain to collaboratively design innovative products and would accelerate this learning curve, in line with the National Automotive Policy 2020.

It is therefore key that design be made an important agenda of the economy to ensure that we remain competitive and participate at higher value aspects of the entire economic chain.

-- BERNAMA

Dato’ Ts. Madani Sahari is Chief Executive Officer of Malaysia Automotive, Robotics and IoT Institute (MARii).

(The views expressed in this article are those of the author and do not reflect the official policy or position of BERNAMA)