Carmelo Ferlito, who heads the Center for Market Education, said too much emphasis had been put on Malaysia’s services industry at the expense of manufacturing.
“This has led to Malaysia not having as many high-value manufacturing activities as it should. We can see these activities are shifting towards other countries in the region,” he told FMT.
“It means we have lost that first-mover advantage as we used to be a manufacturing powerhouse in the region.”
He was commenting on the finance ministry’s statement that Malaysia’s fundamentals remained robust as indicated by consistent export growth and competitiveness, ample foreign reserves and a low inflation trajectory.
Ferlito said Malaysia’s strong exports were a symptom of a weak currency which caused imports to become more expensive, as reflected in food prices rising by 4% in March.
He said semiconductors, which accounted for 22.7% of all exports, were a component used for higher-level industrial transformation elsewhere, as with Italy, which has been a sub-supplier of mechanical products for the German heavy industrial sector for decades.
“When Italian firms couldn’t make that jump to the next level, the Germans got their products from other markets,” he said. “Malaysia needs to avoid falling into that trap.”
Yeah Kim Leng, an economics professor at Sunway University, said there was a need to take the manufacturing industry to the next level through industrial transformation and improvements to the overall ecosystem.
He said this transformation should be driven by a high-level task force comprising the authorities and industry players.
Yeah said the focus on services in recent years had led to a reduced emphasis on manufacturing, which underpinned many services that were important to the people, including wholesale, retail, health and education.
“As amply demonstrated in the current pandemic and geopolitical crises, the ability to ensure the security of supply of various goods is based on having adequate production or manufacturing capabilities,” he said.