ECONOMY OF

MALAYSIA
INTRODUCTION
OF MALAYSIA
ECONOMY

The economy of Malaysia is the sixth largest in Southeast Asia and the
36th largest in the world in terms of nominal GDP. When measured by
purchasing power parity, its GDP climbs to the 30 th largest. Malaysia is
forecasted to have a nominal GDP nearly half a trillion US$ by the end
of 2024. The labour productivity of Malaysian workers is the third
highest in ASEAN and significantly higher than Indonesia, Vietnam and
The Philippines. The 2024 Global Competitiveness Report ranked
Malaysian economy the 34th most competitive country economy in the
world.

Malaysia is the 25th most export-intensive economy globally, higher

than even Switzerland with total export activities exceeding 76% of its
GDP. In addition, Malaysian economy has developed vertical and
horizontal integration across several export linked industry while
capturing a significant global market share for manufactured products
and commodities ranging from integrated circuit, semiconductor, palm
oil to liquefied natural gas. Furthermore, Malaysia is an important

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nexus in the global semiconductor market and is the third largest
exporter of semiconductor devices on the planet. Malaysia has
unveiled plan to target US$100 billion in investment for its
semiconductor industry as it position itself as global semiconductor
hub.

By middle of year 2024, the country has successfully attracted large

foreign direct investment centered on global artificial intelligence
boom with foreign technology companies like Google, Microsoft and
ByteDance flocked to the country and invested US$2 bilion, US$2.2
bilion, and US$2.1 bilion, respectively, to capitalise on Malaysia
competitive advantage in the data centre and hyperscale construction
due to its highly educated workforce, cheap land acquisition, low water
and electricity cost and most importantly absence of natural disasters.
This is expected to consolidate Malaysia position as a cloud computing
hub for wider Asia, increasing its high value sector and propel its
economy to meet the government high income economy goal.

Overall, the Malaysian economy is highly robust and diversified with

the export value of high-tech products in 2022 standing around US$66
billion, the third highest in ASEAN. Malaysia exports the second largest
volume and value of palm oil products globally, after Indonesia.

Malaysians enjoy a relatively affluent lifestyle compared to many of its

neighbours in Southeast Asia. This is due to a fast-growing export-
oriented economy, a relatively low national income tax, highly
affordable local food and transport fuel, as well as a fully subsidized
single-payer public healthcare system. Malaysia has a newly
industrialised market economy, which is relatively open and state-
oriented.

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VISION, GOALS AND
MISSIONS:
MALAYSIA’S NEW
INDUSTRIAL
DEVELOPMENT PLAN 2030

Since gaining independence in 1957, Malaysia has achieved

remarkable success in transforming from a primary commodity export-
based economy into an upper middle-income industrialised country.

With the introduction of comprehensive industrial strategies in the

form of so-called Industrial Master Plans (‘IMP’) starting from 1986, the
manufacturing sector in the country has been able to gradually climb
up in the global industrial value chain.

At present, the importance of manufacturing in Malaysia’s economic

and social development is apparent: The sector (including related
services) accounts for almost one quarter of the national GDP and
almost 85 percent of all Malaysian exports, providing jobs for around
17 percent of the population. In terms of international trade, Malaysia’s
industrial exports have in fact exceeded the latest targets set in IMP3
(2006-2020) significantly, namely by RM 569 billion (around EUR 113,5
billion). Main contributors are Malaysia’s well-known capabilities in the
fields of electrical and electronics (‘E&E’), petroleum products, liquified
natural gas, palm oil and palm oil-based agriculture products,
machinery, equipment and parts.

Despite this overall positive development, the new Malaysian

Government under Prime Minister Anwar Ibrahim has identified some
notable shortcomings and bottlenecks that urgently need to be
addressed in order to stay competitive internationally and to further

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improve the living conditions of the Rakyat (i.e., its people). These
challenges include

 An insufficient level of economic complexity,

 The stagnation of labour productivity,
 A mismatch of skills and job requirements,
 An underutilisation of Malaysia’s 16 free trade agreements by
companies along with unintentional side-effects of non-tariff
measures,
 Growing competition for foreign direct investment (‘FDI’)
(especially from other ASEAN members),
 Disparities in manufacturing across different states,
 Insufficient financing for new ventures and
 A general need to improve the ease of doing business in the
country.

Summary overview of NIMP

2030
Drafted under Malaysia’s Ministry of Investment, Trade and Industry
(‘MITI’) following multiple stakeholder focus sessions, public
consultations and strategic engagements with different industry
players, NIMP 2030 is closely tied to the Government’s new EKONOMI
MADANI policy. NIMP 2030 differs in so far from previous IMPs as it
adopts, for the first time, a so-called mission-based approach instead
of laying too much emphasis solely on specific sectors.

Although all missions and enablers under the plan are supposed to be
implemented contemporaneously,

Mission 1: (Advance economic complexity) marks the logical first

step in the upgrading of Malaysia’s economy to propel itself upwards in
the global value chain. The underlying strategies and action plans
(such as ‘shift from basic to speciality chemical’, ‘identify high value-

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added opportunities in the aerospace, pharmaceutical and medical
devices sectors’ or ‘leverage alliance with ASEAN countries to integrate
the semiconductor, advanced materials and clean energy value chain’)
give useful guidance for both public and private stakeholders which
actions in which fields to prioritise in the coming years.

Mission 2: (Tech up for a digitally vibrant nation) responds to the

need for digital transformation both in industrial production as well as
in related public administration. The increased adoption of innovative
technologies such as state-of-the-art automation and robotics, AI
models for different application scenarios and cloud-based integration
of industrial systems are deemed relevant to enhance productivity and
efficiency. The Malaysian Government intends to create a national
digital platform for manufacturing and even make the level of factory
automation a requirement when accessing applications for
manufacturing licenses in the future.The transition towards more
sustainable manufacturing practices and the shift towards the use of
more renewable and clean energy are two of the strategies.

Mission 3: (Push for Net Zero) that underline Malaysia’s commitment

to achieve Carbon Net Zero by 2050 as also envisioned in its new two-
parts National Energy Transition Roadmap (‘NETR’). Similar to the
digital transformation, the Malaysian Government sees great growth
potential also within different areas of the sustainability transformation
of the manufacturing industry, in particular in the areas of renewable
energy, electric (and other new-energy) vehicles, Carbon Capture,
Utilisation and Storage as well as circular economy.

Lastly, Mission 4: (Safeguard economic security and inclusivity)

should serve as guideline for more resilient supply chains that can
withstand present and future disruptions caused by global events such
as climate change, the recent Covid-19 pandemic or the geopolitical
tensions between the United States and China. At the same time, it
addresses the urgent need to level out disparities in economic

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participation between different states and different groups within the
Malaysian society.

All four Missions and the supporting enablers (i.e. (i) mobilise financing
ecosystem, (ii) foster talent development and attraction, (iii) further
improve ease of doing business and (iv) the introduction of a so-called
‘whole-of-nation’ governance framework) are applied to all
manufacturing activities in Malaysia, but a particular focus is placed on
support of small and medium-sized enterprises.

The implementation of NIMP 2030 will be carried out in accordance

with the above-mentioned ‘whole-of-nation’ approach which consists of
a multi-tiered governance structure involving various public and
private decision-makers and stakeholders. This structure should ensure
transparency and accountability on one hand and provide a
mechanism for performance evaluation on the other.