GDP - composition by sector: industry: 41.2 percent; agriculture: 11.9 percent; services: 46.8 percent (2012 est.). Industrial production growth rate: 1.4 percent (2011 est.), country comparison to the world: 128. [Source: CIA World Factbook]

Important industries: automobiles, furniture, optical and scientific equipment, automobile parts, electronics. At oen time semiconductors, hard-disk drives and other electrical and electronic products accounted for as much as half of Malaysia’s exports.

The west coast of Malaysia has traditionally been more industrialized than other part of the country. Top industries by region: 1) Peninsular Malaysia - rubber and oil palm processing and manufacturing, petroleum and natural gas, light manufacturing, pharmaceuticals, medical technology, electronics and semi-conductors, timber processing; 2) Sabah - logging, petroleum and natural gas production; 3) Sarawak - agriculture processing, petroleum and natural gas production, logging

Malaysia successfully made the leap into high-end manufacturing. In the 1990s it was the world’s leading exporter of electronic semiconductors, room air-conditioners, audio-visual equipment. It industrial technology is advanced enough to manufacture centrifuges that can be used to enrich uranium for nuclear bombs.

Thailand and Malaysia took 10 years building the expertise, production base and infrastructure for a precision metalworks that could sell components to Swiss watchmakers. The Chinese took over the business in only a year. Lots of foreign companies that otherwise might have come to Malaysia instead went to China where the labor costs were 50 percent to 80 percent lower.

The industrial sector arguably is Malaysia’s most important economic sector, particularly the manufacturing subsector. According to government and World Bank data, from 1980 to 2005 the industrial sector’s share of total employment increased from 24.1 percent to 36.1 percent, and its share of gross domestic product (GDP) increased from 41 percent to 48.8 percent in the same time period. When industry is disaggregated into subsectors, manufacturing’s share of total employment increased from 15.7 percent to 28.4 percent, while mining and construction decreased from 8.4 percent to 7.7 percent of total employment in the same period. Furthermore, from 1980 to 2005 manufacturing increased from 21.5 percent of GDP to 31.5 percent, while mining and construction declined from 19.5 percent of GDP to 9.4 percent. High-technology exports have accounted for much of industrial growth. Other important industries are chemical products, light manufacturing, logging and timber processing, petroleum production and refining, and rubber and plastic products.

As of 2004, Mattel produced 3 percent of it toys in Malaysia. Value of clothing and textiles exports in 2002: $3 billion, 25th in the world. [Source: WTO and OECD]

Malaysia, Thailand and the Philippines have earmarked billions of dollars for the study and use of biotechnology . Malaysia has created a biotech hub outside Kuala Lumpur called “biovalley.”

See Rubber

Electrical and Electronics Industry in Malaysia

Malaysia is a major electronics producer and exporter. The electrical & electronics (E&E) industry is the leading sector in Malaysia's manufacturing sector, contributing significantly to the country's manufacturing output (26.94 percent), exports (48.7 percent) and employment (32.5 percent). In 2010, the gross output of the industry totaled US$50.94 billion, exports amounted to US$75.7 billion and created employment opportunities for 325,696 people. The major export destinations are USA, China and Singapore while the major import destinations are Taiwan, USA and South Korea. [Source: Malaysian Investment Development Authority]

Over the years, Malaysia's E&E industry has developed significant capabilities and skills for the manufacture of a wide range of semiconductor devices including photovoltaic cells and modules, high-end consumer electronics, and information and communication technology (ICT) products. The E&E manufacturers in the country have continued to move-up the value chain to produce higher value-added products. These include intensification of research and development efforts and outsource non-core activities domestically.

The E&E industry in Malaysia can be categorised into four sub-sectors: 1) consumer electronics, 2) electronic components, 3) industrial electronics, and 4) electrical products.

The industrial electronics sub-sector consists of multimedia and information technology products such as computers, computer peripherals, telecommunication products and office equipment. The Industrial electronics sub-sector accounted for 6 percent of the total investment approved in the electronics sector in 2011. In 2011, the majority of the investments approved amounting to RM2.6 billion were from Electronic Manufacturing Services (EMS) companies producing low volume high mix products for various applications such as medical, aerospace, oil and gas and telecommunication.

Consumer Electronics and Electronic Components

The consumer electronics sub-sector includes the manufacture of LED television receivers, audio visual products such as blu-ray disc players/recorders, digital home theater systems, mini disc, electronics games consoles and digital cameras. The sector is represented by many renowned Japanese and Korean companies which have contributed significantly towards the rapid growth of the sector.The leading companies are now undertaking R&D activities in the country to support their global and Asian markets. Exports of consumer electronic products in 2011 amounted to RM22.36 billion (USD8.7 billion). [Source: Malaysian Investment Development Authority]

Products/activities which fall under the electronic components sub-sector include semiconductor devices, passive components, printed circuits and other components such as media, substrates and connectors. The electronic components are the most important sub-sector and they account for 36 percent of the total investments approved in the electronics sector in 2011.

The sub-sector is mainly dominated by the semiconductor players especially MNCs, mainly undertaking the assembly and test activities. However, the development of the semiconductor cluster has shown a gradual increase over the years. More companies are expanding the research, design and development activities in their operations with less emphasis in the manufacturing of low end products. The increase in demand for the miniaturisation and high performance devices for mobile, automotive and green applications has further stimulated the growth of outsourcing activity in the semiconductor industry.

Semiconductor products constituted of export value RM107 billion (US$34.4 billion). It contributes 93.4 percent of the total export of electronic components or 50.8 percent of the total electronics export for 2011.

Electrical Products Industry

The major electrical products produced under this sub-sector are lightings, solar related products and household appliances such as air-conditioners, refrigerators, washing machines and vacuum cleaners. In 2011, Investments in the sub-sector amounted to RM9.7billion, of which 91.4 percent is dominated by foreign investments while domestic investments accounted for 8.6 percent of the total approved investments in 2011. With exception to the solar industry, most of the investments in the electrical sub0sector were from the domestic sources, especially in the production of household appliances and electrical components. [Source: Malaysian Investment Development Authority]

Malaysia is home to many of the largest and renowned solar players such as First Solar and AUO-Sunpower. The presence of these MNCs has contributed to the development of various products under the solar cluster. The growing awareness of the importance of the green technology including renewable energy has led to the introduction of the LED roadmap by the Malaysian Government. This has spurred the growth of the LED industry and opens up new opportunities for both local and foreign investors in developing Malaysia’s LED industry. The introduction of Feed-in-Tariff (FiT) in 2011 has encouraged the usage of renewable energy in the country. This mechanism allows electricity produced from indigenous renewable energy resources to be sold to power utilities at a fixed premium price for a specific duration.

Electronic Manufacturing Services (EMS) Industry

Electronic Manufacturing Services (EMS) Industry providers are making an important role and a significant impact on manufacturing concerns worldwide. EMS companies function as strategic partners to Original Equipment Manufacturers (OEMs), Original Design Manufacturers (ODMs) and Original Brand Manufacturers (OBMs) by providing them with a full range of services from contract design and manufacturing to post-manufacturing services. By using the services of EMS providers, OEMs, ODMs and OBMs can concentrate on their core competencies such as research and development, brand building and marketing. [Source: Malaysian Investment Development Authority]

Outsourcing to EMS providers also enables OEMs, ODMs and OBMs to gain access to the latest equipment, process knowledge and manufacturing know-how without having to make substantial investments. The trend in manufacturing partnership has been growing steadily as OEMs, ODMs and OBM's strive to reduce time-to-market, time-to-volume, flexibility and quality in the advanced technology evolution services and strategic business solutions to maintain their competitive advantages.

The EMS Industry has shown a significant growth not only in investment but also extensive development in technology where most of the operations has now shifted from the board level operation (components) to providing full range of services including contract design, prototyping, final assembly, configuration, repair and after sales services. With additional high capital investment and by diversifying into major R&D activities, some of the companies have geared up with the technology by producing more high mix low volume products for the medical, aerospace and instrumentation applications.

Electronics Companies Come to Malaysia and Move on to China

In the 1990s and 2000s Malaysia was primarily involved in assembling and testing semiconductors and electronics components , a labor intensive process that doesn’t need much technology skill. Matsushita (Panasonic) made television sets, air conditioners, fax machines and other products in Malaysia. It also had a research and development center there. As of 2003, Dell produced laptop computers; Motorola made cell phones; and Intel made most f its high-ended processors in Malaysia. As of 2003, Dell, Intel and Motorola employed 90,000 people, down from a peak of 114,000.

Dell, Intel and Motorola all had factories in Penang , where 220 other companies, including the chipmaker, Advanced Micro Devices, electrical generator maker Astec Advanced Power System and zip drive maker Iomega Corp, had more than 700 factories in neat little industrial parks. Many Malaysian called Penang “Silicon Island.” To remain competitive a variety of training courses were offered to workers to teach them new skills. The Bayan Lepas Industrial zone in Penang was home to overseas plants for Intel, Hitachi, Advanced Micro Devices.

Many electronics manufacturers moved to China. In 2002, Intel switched to a Chinese supplier of computer motherboards from the Malaysia firm Unico, costing Malaysia hundreds of jobs. Dell moved a large share of its computer manufacturing from Malaysia to China. A number of other companies did the same. Penang lost 30,000 jobs between 2000 and 2003 and the total work force was reduced to 150,000. A forth lost jobs in the high tech sector, many because of competition from China.

Malaysia’s Multimedia Super Corridor and Cyberjaya

Malaysia’s Multimedia Super Corridor is a $20 billion, 750-square-kilometer high-tech area stretching for 30 miles south of Kuala Lumpur, between the Petronas Towers and the new airport, with Putrajaya, the new capital in the middle. Carved out of rubber and palm plantations, it is intended to be Malaysia's answer to Silicon Valley, boasting state-of-the-art labs, fiber-optic networks, and tax-free zones. Planners hoped to attract $5.2 billion in investment over five years and create 35,000 technology jobs. The project became up and running around the time of the dot.com bust in the early 2000s and never lived up to expectations.

The Multimedia Super Corridor was announced in 1995. As of 2001, $4 billion (17 percent of Malaysia’s annual national budget) had been spent on it and $10 billion had been pledged. The completion date was 2020. Tenants that signed on included NTT, Telekom Malaysia, Alcatel SA, Oracle, British Aerospace, MIMOS Berhad, Microsoft, IBM, Hewlett-Packard, Sun Microsystems, and Lucent. Most of the companies that signed up were small Malaysian start ups. For the most part the big companies had small investments.

Multimedia Super Corridor will contain Cyberjaya, a village for high-tech professionals. Jaya is a Malay word for success. The centerpiece of the project is the Cybeview Lodge, a resort of hotels with high-definition fish tanks, man-made waterfalls. The government hoped it would be home to 240,000 people. In 1999, it still felt like a modern ghost town.

In addition to being poorly timed, Malaysia’s Multimedia Super Corridor and Cyberjaya never really took off in part because Malaysia didn’t have enough technology specialists. Many analysts believe that the money would have been much better spent upgrading research facilities at universities which could be used to train student as well do research.

Intel Insists It Is Committed Malaysia Despite Moving Operations Back to the U.S.

In June 2010, B.K. Sidhu wrote in The Star, “Intel, the world’s largest chipmaker, is committed to remain in Malaysia even though the rationalisation of its operations will lead to the moving of its assembly and test development (ATD) unit back to Arizona in the United States. “The wafer fabrication and assembly lines must be close to each other, as there is a need for a lot of interaction because we need to respond to market trends and consumers fairly quickly,”Intel Malaysia managing director Atul Bhargava said. “Being in different time zones (makes it difficult and that is why) we are moving the unit back to the US. Intel continually optimises its resourcing and business model in line with evolving business needs,’’ he said. [Source: By B.K. Sidhu, The Star, June 14, 2010]

The shift of the ATD unit to the U.S. took place in 2011. “The affected workers, about 500 of them, at the plant in Kulim Hi-Tech Park will be absorbed into the group and redeployed for other job functions at the Kulim and Penang facilities. “So we are not shutting down any plants. It is just that the ATD development needs to be closer home in the US,” he added.

Intel has been in Malaysia since 1972. It is the largest offshore facility outside the United States for the chipmaker. The company has so far invested US$3.9bil (RM13bil) in Malaysia. Intel Malaysia comprises three campuses and employs more than 10,000 people. Intel Penang is a key assembly and testing site, Intel Kulim assembles processor packaging and is an important operations centre for mobile modules, and Intel Kuala Lumpur includes a multimedia super-corridor development centre as well as a sales and marketing office.

Of the 10,000 people employed, 55 percent are involved in the manufacturing division, 25 percent in the design of products, and the balance 20 percent are in services (IT, shared and other service-related areas). “We are fairly big in doing design work here and our plants are high-tech, so we really need knowledge workers as the job is not about pushing of buttons,’’ Atul said. Asked whether Intel would follow Western Digital and invest more to expand its operations in the country, Atul said: “Our investment in Malaysia is growing every year as we are here for the long haul. “We have worked hard and diversified, we have the latest technology here, and we are committed to stay. But just like other companies we move around for the needs of our customers.” (Western Digital recently announced it would invest about US$1.2bil in Penang.) Atul said in whatever Intel did, it made sure there is benefit to the company, the country and the consume

Biotechnology, Science and Making Malaysia the “First Developed Muslim State”

Malaysia's achievements in science and technology mean it will be the first Muslim nation to become a developed country, Malaysian prime minister Abdullah Badawi said in 2005. But, Mike Shanahan wrote in EN “a shortage of trained scientists threatens to derail Malaysia's technological ambitions. According to William Miller of Stanford University in the United States, Malaysia needs to both hire foreign scientists and lure back home-grown researchers who have left the country. Bernama reports that former prime minister Mahathir Mohamad agreed that Malaysia should accept foreign scientists. "If we don't take them, others will," he said. Mahathir also pointed out that those funding R&D must realise that failure rates can be as high as 90 percent. "R&D is not like doing business. There can be no projection on returns on investment. Much of the money would probably go down the drain," said Mahatir. "But if we can strike gold, then we will really make it." [Source: Mike Shanahan, EN, September 13, 2005]

According to the Malaysian Government: The Ninth Malaysian Plan states the Government's intention to make Malaysia a biotechnology hub. In its quest to be a major biotech player in the region, the government launched the National Biotechnology Policy (NBP) in April 2005. This saw the creation of the Malaysia Biotech Corporation (MBC), a dedicated government agency to develop the industry. The transformation of the biotechnology sector will be led by the Ministry of Agriculture and Agro-based Industry, the Ministry of International Trade and Industry , the Ministry of Health and the Ministry of Plantation, Industries and Commodities. [Source: Malaysian Government]

Biotechnology is the application of biological knowledge to the development of products that can improve various aspects of life such as health, food supply, environment and general well-being. Examples of biotechnology application in the field of medicine include diagnosis of genetic diseases, and production of medicinal pharmaceutical preparations such as vaccines. Additionally, biotechnology can also be broadly applied in non-medical areas such as production of transgenic crops in the agriculture sector, and DNA fingerprinting for criminal investigation.

Malaysia’s Biotech Ambitions Hurt by Researcher Brain Drain

A 2011 World Bank report said Malaysia's brain drain was intensifying with more than one million of its citizens, mainly ethnic Chinese, living in Singapore and other countries largely due to higher wages, unhappiness over poor governance and lack of meritocracy. It warned the outflow of skilled people could bog down Malaysia's economy.

In November 2006, Reuters reported: “Malaysia is counting on bright, ambitious people like Tan Chye Ling for its future, to lead it away from manufacturing and into the knowledge age. But the 34-year-old scientist, a post-graduate in molecular biology, is not counting on Malaysia to look after her future. "I felt very suppressed in Malaysia," said Tan, who moved to neighbouring Singapore, the region's pace-setter for biotech investment, after a decade of study and research in Malaysia. "I have benefited from the better research environment and salary scheme here. Things are much smoother," she said by phone from the National University of Singapore where she is studying dust mites and allergies. Tan estimates that 60 percent of the research teams she works with in Singapore are from Malaysia, despite her country's efforts over several years to develop a biotech industry. [Source: Reuters, November 13, 2006 ***]

“The Malaysian government unveiled plans last March to spend $553.3 million over five years to boost research, attract foreign investment and build new facilities. But its efforts are wasted unless it can retain more talented people like Tan. Malaysia has thrived since the 1970s on cheap labour, serving as a global manufacturing base for electronics. But cheaper rivals like China, India and Vietnam are forcing it to look to higher-tech industries to secure its economic future.

“The biotech campaign is not new — Malaysia has tried various schemes over the past five years with little success — but its efforts have taken on a new urgency after U.N. data showed an 11 percent fall in direct foreign investment between 2004 and 2005. "By the time we have the research environment in place, every other country would have taken a slice of the biotech investment pie," said Iskandar Mizal, head of the state-run Malaysian Biotech Corporation which oversees the government's strategy.

The Malaysian Biotech Corporation wants to lure domestic and foreign firms into Malaysia's nascent biotech industry. There are no foreign biotech companies in Malaysia, though drug companies like Merck, Novartis, Pfizer, AstraZeneca and Novo Nordisk have representative offices here.

Malaysia aims to increase its stable of 123 local biotech firms to 400 and bring in eight foreign biotech firms by 2010. Under the five-year plan, the government plans to spend $126.7 million on research and development, $172.4 million on luring foreign and domestic investment and $254.2 million on new research facilities for biotech companies. But critics say Malaysia's strategy misses the point: the country needs more bright, young scientists rather than more state-of-the-art laboratories.

"Some of our research centres are already as high-tech as the ones in the United Kingdom and Australia," said Ruslan Abdullah, a molecular biologist who heads research in a private firm. To attract researchers, Malaysia must speed up distribution of research funds, streamline bureaucratic procedures for procuring laboratory supplies and hire more support staff. "If these are not tackled, there would just be more expensive equipment and laboratories than researchers," said Ruslan.

Researcher Tan adds one more request: raise salaries. A post-doctoral fellow in Singapore earns up to $3,210 a month, nearly five times the salary paid in Malaysia, she said. "With the increasing cost of living, it is not fair to expect post-doctoral fellows to teach and do research on 2,500 ringgit ($685)," said Tan, who moved to Singapore more than a year ago. Malaysia recently increased funds for postgraduate research schemes five-fold to $180 million under its five-year plan. But this is a tiny fraction of the $8 billion Singapore is investing in biotech R&D and biomedical firms over the next five years, including $3.4 billion in life-sciences research alone. "We need people, not infrastructure to bring in the investors," said molecular biologist, Ruslan.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Malaysia Tourism Promotion Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated June 2015

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