To start the ball rolling with some figures, some key macroeconomic targets of the NIMP are to:
Increase the value added of the manufacturing sector by 61% to RM587.5 billion by 2030 (2022: RM364.1 billion); CAGR of +6.5%.
To grow employment by 20% to 3.3 million persons by 2030 (2022: 2.7 million); CAGR of +2.3%.
To grow the median salary by 128% to RM4,510 in 2030 (2021: RM1,976); CAGR of +9.6%.
It has four broad key missions:
Advance economic complexity in production.
Tech up for a digitally vibrant nation.
Push for net zero emissions.
Safeguard economic security and inclusivity.
These missions seek to achieve a few specific visions:
Foster economic complexity in production.
Create a high income and skilled workforce.
Strengthen domestic linkages and existing clusters while supporting the emergence of new clusters.
Ensure balanced industrial growth and sustainable development.
Here are some of the key strategies under the NIMP 2030:
Invest in research and development (R&D) to develop new technologies and products.
Promote the adoption of digital technologies in manufacturing.
Attract foreign direct investment (FDI) and domestic direct investment (DDI) into high-value-added industries.
Develop the skills of the workforce to meet the needs of the new economy.
Support the development of small and medium enterprises (SMEs).
Promote sustainable development in the manufacturing sector.
The NIMP 2030 is a bold and ambitious plan to transform Malaysia’s manufacturing sector. If successful, it will help to create a more prosperous and sustainable future for the country. However, there are some challenges that need to be addressed in order to ensure the successful implementation of the NIMP 2030:
- The global economy is facing a number of challenges, such as the aftereffects of the COVID-19 pandemic, the war in Ukraine, and rising inflation. These challenges could make it difficult for Malaysia to achieve its economic growth targets. The COVID-19 pandemic has caused a global recession and disrupted supply chains. The war in Ukraine has led to higher energy prices and increased uncertainty in the global economy. Rising inflation is putting pressure on consumers and businesses. These challenges could make it difficult for Malaysia to attract FDI and DDI, and to export its goods and services.
- Malaysia is facing a shortage of skilled workers. This could make it difficult for the country to attract FDI and DDI into high-value-added industries. This is where enablers like MYFutureJobs can come into play to address long term demand-supply requirements in the workforce. The progressive wage policy that has been introduced by the government also aims to address this issue. According to the MEF report, 85% of employers in Malaysia are facing difficulties in hiring skilled workers. The most in-demand skilled workers are in the fields of engineering, manufacturing, and information technology. The mismatch between the skills of the workforce and the needs of the economy is one of the main factors contributing to the shortage of skilled workers.
- Malaysia needs to invest heavily in R&D and digitalization to compete with other countries in the global economy. Government initiatives like the Industry4WRD and JENDELA (digital infrastructure rollout) can significantly accelerate the technology adoption the country needs. The government has also taken note of the growth of Artificial Intelligence and its applicability in the field of governance. The NIMP emphasises on its focus to develop generative and industrial AI solution leaders and system integrators to benefit entire value chains.
- Malaysia also needs to ensure that the benefits of the NIMP 2030 are shared equitably among all stakeholders. This means ensuring that Small Medium Enterprise (SME) and underprivileged groups are able to participate in and benefit from the plan. Malaysia has a large SME sector, which accounts for a significant share of employment and Gross Domestic Product (GDP). However, SMEs often face challenges in accessing finance and markets. The government needs to ensure that SMEs have the support they need to succeed under the NIMP 2030. Malaysia also has a number of underprivileged groups, such as women, the disabled, and indigenous peoples. The government needs to ensure that these groups are able to benefit from the NIMP 2030. We take note of the effort to uplift capabilities of Bumiputera companies in manufacturing via Tindakan Pembangunan Bumiputera 2030 and also develop programmes to increase women participation in high-skilled manufacturing employment.
As the Industrial Revolution burst forth, the English language grew to accommodate its new materials, processes, and routines. In the post-Industrial era, there has been a dismantling of certain words in the pursuit of profit. First, they came for the vowels: ‘Grindr’, ‘Lyft’, and ‘The Weeknd’ all looked egregious on page, but the least you could do is correct them in speech. Today, however, the desire to create the catchiest brand name is chewing up perfectly usable words and spitting them out as mind-numbing confections, which the trend has continued with Wordle. In case you live under a rock and live life before the Industrial age, Wordle is the (six-letter-named) five-letter game that has taken the world by STORM. It’s generally an attractive gameplay, though can be occasionally tricky, and has won many fans.
This is going to sound properly weird but here goes. A month ago, the government announced a NewIndustrial Master Plan (NIMP) with the aim to revitalize Malaysia’s manufacturing sector andtransform its economy through industrialization amidst growing challenges and megatrends. Thispolicy blueprint commonly referred to as NIMP which coincidently means ‘fishing’. This reminds me ofan old Latin proverb ‘piscem natare doces’ that translates “teach fish how to swim”. The phrasedescribes the self-sufficiency of those who know better how to do everything than the experts.The Covid Crisis has sparked the beginning of a new era of government policy aimed at self-sufficiency in sectors of the economy deemed to be of strategic importance. G7 countries openlydeclared their intention to ‘de-risk’ their respective economy by pursuing Industrial Sovereignty (andin some cases, Technological Sovereignty). As major economies race to be self-sufficient, one couldnot help but ask what this would mean to Ricardian model of international trade.
Economists have accepted that specialization is the primary source of economic gain ever since thefamous example of the pin factory with which Adam Smith opened his 1776 classic The Wealth ofNations. David Ricardo extended Smith’s vision of specialization within a given industry tospecialization between industries and nations and made the argument that two countries can benefitfrom free trade even if one country is less competitive in both industries than the other. In Ricardo’shypothetical example, Portugal could produce both cloth and wine with less labour than England. IfEngland specializes in the industry, it was comparatively better at (CLOTH, obviously) and Portugalspecialized in wine, then the total output of both industries would rise. This concept of theadvantages of specialization became the core insight of economics, and it continues to be ingrainedin and promoted by economists today. The dominant definition of economics as a science thatstudies human behaviour as a relationship between ends and scarce means which have alternativeuses, in itself implicitly emphasizes the importance of specialization (so that those scarce resourcescan be efficiently allocated).
This belief in the advantages of specialization lies behind the incredulity with which economists havereacted to the rise of populist politicians like Donald Trump in the US, the UK’s vote for Brexit as wellas the advance of Far Right in Europe. Mainstream economists, at their most self-righteous, haveblamed the rise of anti-globalization sentiment on the public’s irrational failure to appreciate the netbenefits of trade. Or, more commonly, they have conceded that perhaps the electorate has reactednegatively because the gains from trade have not been shared fairly. However, there is anotherexplanation for why this sentiment has risen, and that points to the belief that gains fromspecialization at the national level were not there to share in the first place. There is weakness inRicardo’s theory, with which most renowned 20th-century economist Joseph Schumpeter later called“the Ricardian Vice”. The point is we should not fall victim to “simplifying assumptions”. For example(and borrowing Ricardo’s): if Portugal weregenuinely better at everything than England, wouldthe English industry simply decamp from Englandand move holus-bolus to Portugal if free tradewere allowed?
Ricardo did answer this issue andconceded that England could do so and assertedit would be advantageous to English and Portuguese consumers (supposedly from cost efficiency). But the reality is this scenario could only be advantageous to both consumers if their incomes were unaffected by the shift! It is crucial that we ascertain what is the real-world impact of industrial policy and trade arrangement have on the level as well as distribution of output, on income and on employment of a country as well as community.
“Felix, qui potuit rerum cognoscere causas!”
“Fortunate, who was able to know the causes of things“
by the Latin poet Virgil (70 -19 BC).
What is Mission3 : Push for Net Zero?
Mission 3: Push for Net Zero is a part of the NIMP 2030, developed by the Ministry of Investment, Trade, and Industry. This mission aims to accelerate the transition towards sustainable practices within the manufacturing industry. It includes the development of sectoral decarbonisation pathways to guide the transition and the decarbonisation of “hard-to-abate” sectors.
The mission also involves the introduction of a carbon policy, accounting, and tax to encourage industry players to adopt sustainable practices and reduce carbon emissions. It also plans to launch the iESG framework and transition programmes (2nd October 2023) , catalyse new green growth areas, and promote EV as a key growth driver. Furthermore, the mission aims to grow carbon capture, utilisation, and storage (CCUS) as a new sector, develop a circular economy framework for the industry, shift towards green infrastructure, and accelerate the transformation of industrial estates into eco-industrial parks.
The mission also includes specific projects such as creating decarbonisation pathway role models, launching locally manufactured EVs, and deploying large-scale CCUS solutions. The goal of Mission 3: Push for Net Zero is to reduce greenhouse gas emissions and contribute to the global effort to tackle climate change.
The NIMP 2030 and the Net Energy Transition Plan (NETP), mentioned in two parts in July 2023 and August 2023, is related to Mission 3. This mission emphasizes the transition to renewable and clean energy as a primary source for the manufacturing industry, which is currently largely dependent on the combustion of fossil fuels. This transition is crucial to achieving a Net Zero manufacturing industry, which means eliminating or offsetting all carbon dioxide emissions.
The plan aligns with the Malaysia Renewable Energy Roadmap (MyRER), which provides the policy framework for renewable energy development in Malaysia. MyRER has set a target of achieving 35% renewable energy by 2025 and 40% by 2035. The National Energy Transition Roadmap (NETR) further pushes this target to 70% by 2050.
Moreover, the plan also includes the transformation of industrial estates into eco-industrial parks, which are designed to reduce greenhouse gas emissions, waste production, and natural resource usage. These parks incorporate renewable energy solutions as a key component.
PUSH for Net Zero “A shift for the manufacturingindustryto movetowardssustainability”.
What is ‘Push for Net Zero’ or Mission 3 in the NIMP 2030, it was developed by the MITI and is aimed to accelerate the transition towards sustainable practices within the manufacturing industry.
Malaysia as a whole and individual states, over the years relies heavily on the manufacturing industry as the national GDP in 2022 was at 24.1 % and is a contributing sector to most states as shown in Figure 1.
GDP Breakdown by Sectors 2022 (Source: Ministry of Economy Department of Statistics Malaysia ‘DOSM’)
Manufacturing Sector GDP Contribution 2017-2022 (Source: Malaysia Economy DOSM)
The manufacturing sector contribution to Malaysia GDP over the past 5 years has grown and recovered from the post pandemic low of 2020. Under the manufacturing sector the subsectors 2 main contributors were (i) the electrical & electronic (E&E) and optical products 14.2% (2021 14.6%) and (ii) transport equipment, other manufacturing, and repair subsector at 14.3% (2021 1.4%). The pent-up global demand for E&E products (i.e., semiconductors) continue to aid the country’s export products.
The manufacturing industry’s correlation with the renewable energy (RE) transition plan in Malaysia is multifaceted. As Malaysia seeks to transition to a greener energy portfolio and reduce carbon emissions, there are several intersections between the manufacturing sector and the RE transition plan:
Renewable Energy Infrastructure: The demand for renewable energy infrastructure, such as solar panels, wind turbines, and bioenergy systems, creates opportunities for the manufacturing sector. Manufacturers can tap into this growing market by producing components, systems, or entire setups tailored to the renewable energy industry. Malaysia is a prominent player in the RE market, especially in the Solar industry.
On the left are some of companies that have a significant presence in Malaysia or manufacturing operations. It’s worth noting that while these companies have manufacturing operations or significant presences in Malaysia. Additionally, the renewable energy sector is dynamic, with companies frequently expanding, merging, or changing strategies. 9 Solar Companies with a manufacturing presence in Malaysia (Source: Companies)
Energy Efficiency: As part of the green transition, there’s an increased emphasis on energy efficiency. Manufacturers can adopt energy-efficient practices to reduce energy consumption and costs. This could include using energy-efficient machinery, optimizing production processes, and leveraging energy management systems. Manufacturers can reduce energy consumption and costs by:
In essence, by adopting a combination of modern technologies, efficient practices, and employee awareness, manufacturers can achieve significant energy savings. Manufacturers aiming to thrive in the renewable energy landscape should prioritize several key strategies and investments. A robust commitment to R&D is essential to innovate and introduce state-of-the-art renewable energy solutions. Diversifying their product line, such as integrating solar panel components and wind turbine elements, is also crucial. Equally important is the investment in training and skill enhancement, ensuring their workforce is equipped for the renewable sector’s nuances. An optimized supply chain, focusing on sustainable sourcing and carbon footprint reduction, will be beneficial. Strategic partnerships with leading renewable energy entities, academic bodies, and research institutes can further provide a competitive edge. Lastly, implementing energy-efficient mechanisms within their facilities not only diminishes energy expenses but also underscores their commitment to sustainability.
In summary, the energy transition plan is a critical part of the NIMP 2030’s strategy to reduce greenhouse gas emissions and achieve net-zero carbon emissions in the manufacturing industry.
Malaysia’s E&E industry is a major driver of the country’s economic growth and transformation. Henceforth it is part of the NIMP initiative, as Malaysia is one of the top semiconductor manufacturing players in the world, and it is also a regional and global headquarters/center for many E&E companies.
The E&E industry contributes significantly to Malaysia’s GDP, exports, employment, and investment. In 2022, the E&E industry accounted for 7% of GDP and is growing at a faster rate than the overall economic growth.
The E&E sector contributing 38% of total export making it the largest exporting sector and 45% to Malaysia’s manufacturing sector’s exports making it the twelfth-largest exporter of E&E products and the sixth-largest exporter of semiconductors in the world.
Here’s a fun fact, did you know that the E&E industry contributed a total export of RM593 billion, which is larger than the next 5 top export categories combined
Here is another fun fact: E&E contribution is over 3 times larger than the 2nd largest export category, which is petroleum products!
The E&E industry has a significant multiplier effect on the Malaysian economy. E&E companies spend RM23.7 billion on over 12,000 suppliers, and they create both factory production jobs and back-office support jobs. Employing over 500,000 Malaysians and many of these jobs are high-value and highly skilled. According to MIDA, the average monthly salary in the E&E industry is RM6,450, which is twice the national average. Additionally, Malaysia is one of the top semiconductor manufacturing players in the world. It is home to global semiconductor giants such as Intel, Infineon, and TSMC. Other global players such as Samsung, have recently announced (Aug 23) to commit to join the E&E ecosystem in Malaysia, by building a new advance packaging plant which notably is the first outside of South Korea. This shows Malaysia’s semiconductor industry is continuously a major contributor to the country’s GDP and employment.
In addition to manufacturing, Malaysia is also a regional and global headquarters/centre for many E&E companies. This is because Malaysia offers several advantages, including a (i) skilled workforce, (ii) a competitive cost structure, and (iii) a strategic location in the heart of Southeast Asia.
The E&E industry has played a significant role in Malaysia’s technological advancement. E&E companies have invested heavily in research and development (R&D) in Malaysia, and they have helped to develop new technologies and products. For example: (i) Intel has a R&D centre in Penang, Malaysia, where it develops new semiconductor manufacturing technologies & (ii) Infineon also has a R&D centre in Malaysia, where it develops new semiconductor devices. E&E companies have also helped to train and develop a skilled workforce in Malaysia.
Many Malaysians who work in the E&E industry have the skills and knowledge to develop and produce cutting-edge electronic products.
Plan For Malaysia E&E Sector To Scale To The Next Level
The New Industrial Master Plan 2030 places a clear emphasis on the E&E sector, with the plan aiming to expand high value-added activities of the value chain such as nurturing IC design champions from Malaysia and attracting global leaders to establish wafer fabrication with 28-40nm capabilities in Malaysia. Furthermore, the 28-40nm chips are predominately used in automotive and industrial machinery, as they are more matured, provide good balance of performance, power efficiency and are cost effective.
To achieve these goals, The NIMP plans to emphasize on the importance of nurturing strong capabilities in research, supply chain management, talent, and intellectual property (IP) protection, as well as navigating through government policies to support the development of IC design capabilities. In the NIMP 2030 plan, the government has highlighted the need to establish a wafer fabrication outfit to support scaling new processes, which are faced with inherent uncertainties in modelling and achieving a target manufacturing yield.
To conclude the plan also aims to attract FDI from global wafer fabrication leaders and develop a targeted offensive investment strategy that includes attractive incentives. Furthermore, the plan outlines the importance of identifying high value-added opportunities in the aerospace, pharmaceutical, and medical devices sectors, as well as establishing cooperative ‘vertical integration’ for the global value chain and leveraging alliances with ASEAN countries to integrate the semiconductor, advanced. Overall, the New Industrial Master Plan 2030 aims to strengthen Malaysia’s position as a leading hub for the semiconductor industry and create a robust ecosystem that nurtures and supports local IC design and wafer fabrication companies.
Under Malaysia’s newly announced NIMP 2030, Mission 3.3.1 of the master plan clearly outlines Electric Vehicles (EV) as a key growth driver towards the country’s aim to revitalise the industrial sector. The automotive sector has always been one of Malaysia’s most significant contributors to the economy. The local automotive industry contributes about RM40 billion or 4% of Malaysia’s GDP and employs close to 700,000 people. Calls for less carbon emission has led to a growing demand for EVs, with China leading the pack (China has the highest absolute EV sales globally as of 2022, with Europe being second highest). Malaysia’s expertise in the EV space positions it as a potential EV manufacturing hub in the Southeast Asian region in order to capitalise on the transition to EVs from internal combustion engine (ICE).
That being said, the local automotive industry is still hugely dominated by ICEs. In 2022, 2,631 EVs were sold in Malaysia (2021: 274). This accounts of a mere 0.37% of the 2022 Total Industry Volume (TIV) (2021: 0.05%). The growth looks promising, but there is still a long way to go. According to NIMP 2030, the government targets 15% of TIV to comprise of EVs by 2030, and if we consider Malaysia’s National Automotive Policy 2020 (NAP) target of 1.22 million in TIV by 2030, this translates to 183,000 of EV sales by 2030.
Long Journey Ahead
In order to achieve the targeted 8-year CAGR in EV sales, it is important for Malaysia to achieve two things with regards to EVs: (i) cost parity and (ii) functional parity.
(i) Cost parity
Cost parity, as the name clearly suggests, refers to having a total cost of ownership for EVs similar to, or lower than, ICEs.
To achieve this, we need to price EVs competitively (lower purchase cost) while lowering the costs to charge and maintain EVs (lower operating cost). The latter will largely depend on the government’s fiscal policies, especially vis-à-vis petrol subsidies. As the government phases out petrol subsidies (targeted subsidies aside), the cost savings to charge an EV will be greater. Of course, the savings will also depend on the type of charges used (AC chargers cost less than DC charges at the expense of charging speeds). As for the former, it is important to first understand where the demand for automobiles is mostly coming from to better understand if EV prices are competitive relative to ICEs.
Malaysia’s TIV breached 700,000 for the first time ever in 2022 and is on track to beat the Malaysian Automotive Association’s 2023 TIV forecast of 725,000 (as of August 2023, TIV stands at 501,552 or 69% of 2023F TIV). Diving deeper into the 2022 TIV, however, we can see that more than half of the 2022 TIV are from two marques: Proton and Perodua. Therefore, most of the demand of automobiles are still from the sub-RM60,000 price bracket. This still puts EVs beyond the affordable price point compared to their ICE counterparts (cheapest EV in Malaysia is the Neta V at around RM100,000).
(ii) Functional parity
NIMP 2030 is Malaysia’s latest blueprint for economic growth. The plan identifies four key missions, one of which is to advance economic complexity. This mission aims to transform Malaysia into a high-value manufacturing hub by encouraging industries to innovate and produce more sophisticated products.
The pharmaceutical and medical industry is one of the key sectors that the government is targeting for growth under the NIMP 2030. The plan aims to position Malaysia as a regional leader in the production of high-value pharmaceuticals and medical devices.
This will be achieved by focusing on the following key areas:
The E&E industry contributes significantly to Malaysia’s GDP, exports, employment, and investment. In 2022, the E&E industry accounted for 7% of GDP and is growing at a faster rate than the overall economic growth.
2. Grants and subsidies for R&D activities in the pharmaceutical and medical sector.
3. Support for the development of a skilled workforce in the pharmaceutical and medical sector.
Malaysia identified the pharmaceutical and medical industry as a key industry for the country’s economic transformation in the NIMP 2030 for a number of reasons:
1. To reduce Malaysia’s reliance on imported pharmaceuticals and medical devices. In 2020, Malaysia imported over USD3 billion worth of pharmaceuticals and medical devices. This represents over 90% of the country’s total demand, which makes the country vulnerable to supply disruptions and price fluctuations. By developing a strong domestic pharmaceutical and medical industry, Malaysia can reduce its reliance on imports and improve its self-sufficiency in this critical sector.
2. To create high-paying jobs in the pharmaceutical and medical industry. The pharmaceutical and medical industry is a knowledge-intensive industry that offers high-paying jobs in a variety of fields, including research and development, manufacturing, sales, and marketing. In 2021, the pharmaceutical and medical industry employed over 50,000 people in Malaysia. The government estimates that the industry could create over 100,000 new jobs by 2030.
3. To attract foreign investment in the pharmaceutical and medical industry. Malaysia is already a popular destination for foreign investment in the pharmaceutical and medical industry. In 2020, FDI in the industry amounted to USD1.5 billion. The government’s strong support for the industry, coupled with its skilled workforce and competitive costs, make Malaysia an attractive destination for global pharmaceutical and medical companies.
4. To develop Malaysia into a regional hub for the pharmaceutical and medical industry. Malaysia is well-positioned to become a regional hub for the pharmaceutical and medical industry. It has a strong manufacturing base, a skilled workforce, and a strategic location in Southeast Asia. In 2021, Malaysia exported over USD1 billion worth of pharmaceuticals and medical devices to the region and beyond. The government aims to increase exports to USD3 billion by 2030.
5. To improve the quality and accessibility of healthcare in Malaysia. A strong domestic pharmaceutical and medical industry can help to improve the quality and accessibility of healthcare in Malaysia. By manufacturing more of its own pharmaceuticals and medical devices, Malaysia can reduce the cost of healthcare for its citizens and make it more accessible to everyone.
Malaysia’s pharmaceutical and medical industry is a growing force in Southeast Asia, with a strong focus on both manufacturing and R&D. The industry is supported by the Malaysian government, which has adopted a number of policies to encourage investment and innovation in the sector.
According to the Malaysian Investment Development Authority (MIDA), the pharmaceutical and medical devices sector is one of the fastest-growing sectors in the Malaysian manufacturing industry. In 2022, the sector grew by 10.2%, compared to the overall manufacturing sector growth of 5.7%.
The Malaysian pharmaceutical market is also expected to grow at a CAGR of 8.2% from 2022 to 2027. This growth is being driven by factors such as the aging population, the rising prevalence of chronic diseases, and the increasing demand for healthcare services.
Key Sectorsof Malaysia’sPharmaceutical and Medical Industry:
- Generic drugs: The generic drug sector in Malaysia is one of the largest in the world, accounting for over 50% of the country’s pharmaceutical exports. Malaysia is a major producer of generic drugs for a variety of diseases, including cancer, HIV/AIDS, and diabetes. The government has supported the growth of the generic drug sector by providing subsidies and other incentives. This has made generic drugs more affordable for Malaysians and has helped to improve access to healthcare.
- Medical devices: Malaysia is a growing producer of medical devices. The country’s medical device industry is expected to grow at an annual rate of 7.4% from 2023 to 2028. Malaysia produces a variety of medical devices, including syringes, needles, and surgical instruments. The government has supported the growth of the medical device sector by providing tax breaks and other incentives. This has helped to attract foreign investment and develop local expertise in the sector.
- Medical Tourism: Malaysia is a leading destination for medical tourism in Asia, with a strong healthcare infrastructure, well-trained medical professionals, and affordable costs. The country is attractive to medical tourists from all over the world for a variety of reasons, including its high-quality medical care, convenient travel and tourism, and specialization in a number of areas, such as cardiology, orthopedics, cosmetic surgery, and reproductive health.
How Could Startups in the Pharmaceutical and Medical Industry Take Advantage of the NIMP?
1. Developing innovative products and technologies: The NIMP 2030 encourages startups to develop innovative products and technologies that address unmet medical This could include developing new drugs, medical devices, or digital healthcare solutions.
Microcrystalline Gellulose (MCC) Polymer is identified in the National Advanced Materials Technology Roadmap 2021-2030 as one of the four game changing advanced material that have the potential to revolutionize the manufacturing industry. It is a versatile excipient used in a wide variety of pharmaceutical applications, including tablets, capsules, suspensions, and transdermal patches. MCC can be used as a binder, diluent, disintegrant, lubricant, taste masker, and controlled release agent. It is also used as a thickener and viscosity builder in oral suspensions. MCC is a safe and effective excipient that has been used in pharmaceutical products for decades.
2. Targeting niche markets: There are a number of niche markets in the pharmaceutical and medical devices sectors that are underserve Startups can position themselves to serve these markets by developing specialised products and services.
For example, startups can take advantage of opportunities in the halal medicine industry by developing new products, improving the supply chain, making products more accessible, and educating consumers. Specific opportunities include developing halal alternatives to conventional pharmaceuticals, halal-certified herbal medicine products, halal-certified medical devices, blockchain-based tracking systems, online marketplaces, and subscription services.
3. Focusing on emerging technologies: The NIMP 2030 highlights a number of emerging technologies that have the potential to revolutionise the healthcare industry. Minimally invasive device, point of care products, and medical devices from convergence of technologies are identified as the key growth segments. Startups can focus on developing products and services that leverage these technologies, such as artificial intelligence, robotics, and 3D printing.
4. In addition, startups can also take advantage of the NIMP’s focus on innovation and research and development. The government is providing funding for R&D in the pharmaceutical and medical devices sector. Startups can apply for this funding to develop new products and technologies. In 2022, the country invested over USD100 million in pharmaceutical R&D. The government has supported this investment by providing tax breaks and other incentives to pharmaceutical companies. As a result, Malaysia is now home to a number of R&D centers for both domestic and foreign pharmaceutical companies.
The halal industry was listed as one of the focus sectors in NIMP 2030 with the intention to be a global leader in the industry, extend the domestic linkages to create wealth across the nation from halal manufacturing activities as well as strengthen its position in Global Halal Value Chain.
How big exactlyis the GlobalHalal Industry?
The global Halal industry is thriving due to increased awareness of sustainability, ethics, green growth, and digitalization. The Global Halal Market is expected to reach USD5.0 trillion, up from USD3.1 trillion in 2018. Asia Pacific leads in demand for halal products, followed by the Middle East, Europe, Sub-Saharan Africa, and North America. The global Islamic economy encompasses seven sectors, including Islamic finance, Halal food, modest fashion, media, Muslim-friendly travel, pharmaceuticals, and cosmetics.
A few important factors are driving the Global Halal Industry:
1. Increasing Muslim population: The Muslim population consists of 2 billion people worldwide, representing 25% of the world’s total populatio With the increase in the Muslim population, the demand for certified Halal products has grown, leading to the emergence of many certification bodies and Halal product labels. Subsequently, the increase of the Muslim population also drives the growth of the Halal food source. The Halal Meat Market size is projected to surpass around USD723.7 billion by 2032, and it is poised to reach a registered CAGR of 9.7% from 2023 to 2032.
2. Rising demand for Halal tourism: Halal tourism is one of the world’s most lucrative and rapidly growing industries. By 2026, annual global spending from Muslim travellers will likely skyrocket to USD300 billion according to a report by Mastercard and HalalTrip. The growth of Halal tourism is due to a combination of factors, including the increasing number of Muslim tourists, changing consumer preferences, and ethical considerations. Moreover, the increasing demand for luxury holidays among affluent Muslim travellers is driving up the opportunities for Halal-friendly hotels and resorts from the Middle East to Japan, Thailand, South Korea, and other countries and region These establishments offer special amenities and services tailored for Muslim travellers, such as Halal food options, Muslim ablution facilities, and prayer facilities.
3. Adoption of AI and technology: The Halal industry has undergone significant transformations due to the emergence of digital technology, with AI and automation radically altering various aspects. This shift has enabled companies to innovate faster, develop products more efficiently, and scale their businesses more quickly. This increased digitization is transforming the global Halal industry, with Food-tech startups tapping into this growing market. For example, Halal food-related platforms and apps are rapidly gaining popularity due to the ease of ordering Halal-certified products. With the rapid growth of grocery e-commerce, there is a plethora of opportunities for businesses operating within the Halal sector, from Halal cloud kitchens to ghost kitchens.
Malaysia is a leading country in the Global Halal Industry
Malaysia leads the global halal market with its pioneering government agency overseeing halal matters and certification. This initiative has boosted confidence in locally produced halal food products. Malaysia’s annual halal exports, valued at RM35.4 billion, make up about 5.1% of the country’s total exports. Notably, Malaysia Airlines offers the world’s first halal in-flight catering. The Malaysian halal standard is widely adopted by global multinational companies in sectors like Cosmetics, Food, and Pharmaceuticals. Moreover, Malaysia has expanded into Medical Devices, Medical Tourism, and Modest Fashion, diversifying its presence in the halal industry.
1. Robust and Diversified Domestic Halal Industry: A comprehensive ecosystem that is able to sustain the rapid expansion of the domestic Halal industry and transform it into a key economic contributor to Malaysia’s GDP.
2. End-to-end Shariah Compliance: To adopt and lead in the end-to-end Shariah compliance of Halal supply chain and gain international acceptance and acknowledgment as a prominent industry leader and a reference point in term of industry compliance.
3. Competitive Business Participation: Competitive Halal industry consistently innovates and produces products and services that suit the industry needs. Furthermore, MSMEs will play a key role as one of the main drivers of the growth of the Halal industry.
4. Ease of Doing Business: Business environment that encourages participation and attracts both DDI and FDI into the country.
5. Globalisation of Halal Malaysia: Positioned as a main player in the global Halal industry, gaining international acceptance as a prominent reference centre and fostering strategic partnerships and alliances internationally.
- Enhancing Halal Industry-friendly Policy and Legislation
- Creating new and bigger market spaces for Malaysia’s Halal products and services
- Establishing a larger pool of Halal experts and professionals to meet global needs.
- Enhancing quality and integrated infrastructure development
- Fostering Thought Leadership
- Producing more home-grown Halal Champions
- Facilitating More Competitive Bumiputera Participation in the Halal Industry
Crowdfunding is an alternative avenue of fundraising, enabled by the internet that emerged after the 2008 financial crisis as early-stage start-ups struggled to raise funds for their operations. According to Grand View Research, the global crowdfunding market size was valued at USD1.67 billion in 2022 and is expected to grow at a CAGR of around 16.0% to USD5.53 billion in 2030. Crowdfunding can be broken down into different types, the main one being equity and debt crowdfunding.
Other types, which will not be covered in detail would include, among others, donation and reward crowdfunding, do not offer any ownership in return for the investments made. These gained popularity through platforms such as Kickstarter and Indiegogo as well as blockchain enabled crowdfunding platforms that peaked during the crypto boom.
A couple of notable names that successfully benefitted off crowdfunding include challenger bank Monzo and craft beer company BrewDog.
Highest-funded ECF Project: a Case Study
BrewDog, a multinational brewery headquartered in Scotland, was one of the biggest crowdfunding projects undertaken that lead to the creation of one of UK’s largest craft brewer. All controversies aside, the company had managed to raise more than GBP 80 million from over 100,000 investors through their ECF programme called “Equity for Punks”.
The success of the company’s fundraising campaign not only resulted in high growth company, but also the creation of a community, which became a key aspect to the company’s business model. The “Punks” would eventually be involved indirectly in the direction of the company through community engagements, as the interests were well aligned through their share ownership.
This case study shows that, on top of fundraising, crowdfunding platforms can provide additional benefits to the companies especially in the marketing aspects. With a strong pool of backers, the platform could also be used as a tool to increase visibility which is vital especially for early-stage companies with limited resources available.
The Malaysian Landscape
To put everything into perspective in figures, as reported by the Securities Commission Malaysia, the total capital market size in Malayisa as of 2022 stood at RM3.6 trillion. Out of this, a total of RM179.4 billion was raised through public equity fundraising and corporate debt issuance. Alternative investments, which is still relatively in its nascent stages, represent around 1.6% of the total fundraised. The alternative fundraise totals to RM3.0 billion, raised via private equity, venture capital, ECF and P2P, with P2P representing RM1.6 billion and ECF representing RM0.1 billion.
Emphasising the potential benefits of ECF and P2P, The Malaysia Co-investment Fund (“MyCIF”) was established to invest in MSMEs alongside with private investors through local participating platforms. As of 2022, the allocation by the Ministry of Finance has been used up to co-invest in ECF and P2P campaigns amounting to RM638 million, after accounting for re-investments of P2P notes, FD interest and ECF dividends. This initiative has undoubtedly contributed positively to the growth in the crowdfunding platforms as 3,635 MSMEs have benefitted since inception.
More informationon MyCIF can be found at https://www.sc.com.my/mycif
Considering how important MSMEs, start-ups and innovation is in the Malaysian economy, the government seems to be moving in the right direction by crowding in the investments by moving to co-investment funds mentioned above. Historically, the strategy has been primarily driving innovation via public sector funding agencies through grants and although it has led to the creation of established names in the local scene, it is not sustainable in the long term.
The point raised earlier about collaboration between government, businesses and academia should be the model moving forward. Mariana Mazzucato, in her book Mission Economy, emphasises this point further as we must rethink the capacities and role of the government, approach problems using a collaborative mission-oriented thinking as well as bring a stakeholder view of public private partnerships which would result in not only the sharing of risks, but also the rewards together.
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