PETALING JAYA: Malaysia should focus on building its small and medium enterprises (SMEs) to attract foreign direct investments (FDIs) to boost the economy, according to Small and Medium Enterprises Association (Samenta) chairman William Ng.
He said that while Malaysia is still seen as an attractive destination for investors in the electrical and electronics (E&E) sector, more should be done to help SMEs play a bigger role in the supply chain.
“A strong supply chain can then become an attraction (for investors) in itself. That will set the country apart from others in the region,” Ng told FMT Business.
Multinational corporations (MNCs) normally depend on local SMEs for the supply of raw materials and services such as transport and logistics. Such supporting industries have always been critical in attracting FDIs.
Ng was responding to questions from FMT Business on the possibility of Malaysia taking advantage of the US-China tech war that has led to many American electronics and other businesses giving China a miss in their search for new places in which to put their new investments.
For instance, US chip software maker Synopsys recently announced that it would invest in training electrical engineers in Vietnam.
It also announced that it would donate software licences for a chip design centre to the Southeast Asian country, giving it a rare opportunity to get ahead in the race for regional dominance in the sector.
Synopsys is among a handful of US companies that dominate the global market for electronic design automation (EDA) or chip design software.
The EDA industry is smaller than semiconductor fabrication but is becoming a critical front in the chip war because Beijing has struggled to foster an alternative to the US oligopoly, according to a recent report by Nikkei.
Malaysia has yet to see new investments coming in from the US or China since the world’s two largest economies fired the first salvos in the tech war.
Ng noted that many investors were once attracted to Malaysia’s generous tax incentives, but these were also being offered by neighbouring countries now.
“We must remain vigilant as countries in the region are looking to attract investments from companies steering away or hedging their presence in China,” he said.
Malaysian International Chamber of Commerce and Industry (MICCI) executive director Shaun Cheah said the fact that Synopsys had opted to set up its engineer training facility in Vietnam rather than Malaysia raised some questions.
“Our country has been an electronic chip industry player for decades, but it has not been able to move up the value chain in design engineering,” he told FMT Business.
He said that when the China-US tech war began, MICCI had pointed out that foreign investors would be looking for a place to land.
“We should have used this opportunity to create and establish pro-FDI policies and incentives, but we ended up with political instability and high-profile governance problems instead,” he said.
Economist Ramon Navaratnam said the country’s standards had taken a dive, consequently discouraging investors.
“As an investor, you want good resources, materials, hardworking and disciplined staff who will compete to elevate, experiment and move forward,” he said.
However, he said, the poor quality of education and increased corruption had affected the competence of the country’s talent.
“We are no longer a strong economy. If we don’t have a meritocracy and our race-based education policy continues to protect (a certain community) rather than promote greater competition, we can expect to not perform as well as others,” he added.
Source: https://www.freemalaysiatoday.com/category/highlight/2022/09/07/focus-on-building-smes-to-attract-more-investors-says-association/