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  • MALAYSIA INTERNATIONAL TRADE AND INDUSTRY

    REPORT 2006

    Ministry of International Trade and Industry Malaysia

    M A

    LAYSIA IN

    TER N

    ATIO N

    A L

    TR A

    D E A

    N D

    IN D

    U STRY

    R EPO

    R T 2005

    www.miti.gov.my

  • MALAYSIA INTERNATIONAL TRADE AND INDUSTRY

    REPORT 2006

    Ministry of International Trade and Industry Malaysia

  • ISSN 0128-7524 JUNE 2007

    Copyrights Reserved

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    Senior Director, Strategic Planning Division, Ministry of International Trade and Industry, Malaysia 12th Floor, Block 10, Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur. Tel: 603-6203 4750 Fax: 603-6201 2573 MITI Homepage: www.miti.gov.my e-mail: [email protected]

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  • iii

    In 2006, Malaysia launched the Ninth Malaysia Plan, for the period2006-2010 and the Third Industrial Master Plan (IMP3), covering theperiod 2006-2020. Both these Plans had the underlying theme of guiding Malaysia to achieve global competitiveness. Various policy measures and strategies have been outlined in the Plans to achieve this objective. It is necessary for the Government and the business community to work together to implement the action plans and to ensure national aspirations are achieved.

    Malaysia continued on its path of sustained economic growth in 2006. The economy grew by 5.9 per cent, compared with 5 per cent in 2005. The growth was led by both the manufacturing and non-Government services sectors, which expanded by 7.1 per cent and 6.8 per cent, respectively. In 2006, the growth of the manufacturing sector exceeded the IMP3 annual target of 5.6 per cent, while the non-Government services sectors’ growth was slightly lower than the targeted annual growth of 7.5 per cent.

    Malaysia's external trade achieved a major milestone in 2006, with total trade surpassing the RM1 trillion mark. Total trade reached RM1.07 trillion, increasing by 10.5 per cent over the preceding year. Exports expanded by 10.3 per cent, while imports grew by 10.8 per cent. The expansion in exports was attributed to sustained export competitiveness, strong external demand and increase in investment activities.

    Both domestic and foreign investments in the Malaysian manufacturing sector recorded the highest level in 2006. Investments totalling RM46 billion were approved during the year, with the share of domestic investments amounting to 56.1 per cent and foreign investments accounting for 43.9 per cent. Total investments approved in 2006, exceeded the annual investment target of RM27.5 billion set in the IMP3. The high level of foreign investments approved in 2006 is indicative of Malaysia's ability to continue to attract foreign investments, despite the more competitive global investment environment. Existing foreign investors also continued to show confidence in Malaysia by undertaking expansion/reinvestment, particularly in high value-added activities and technology-intensive operations, including research and development and engineering and product design centres.

    FOREWORD

  • In 2006, productivity in the manufacturing sector grew by 4.4 per cent, while productivity in the services sector expanded by 2.6 per cent. During the period 1997-2006, Malaysia recorded an average annual Total Factor Productivity growth of 3.3 per cent for the manufacturing sector and 1.4 per cent for the services sector.

    Malaysia continued its efforts to secure preferential market access for goods and services, as well as liberal treatment on investments originating from Malaysia, through bilateral and regional free trade negotiations. Preferential market access and a liberal, transparent and predictable investment regime would contribute towards increases in two-way trade and investment flows.

    Following the resumption of the Doha Round in all areas of negotiations in January 2007, Malaysia will continue to be actively engaged in the WTO negotiations. This is to ensure that the outcomes of the negotiations are beneficial to Malaysia.

    The economic outlook in 2007 remains favourable. It is anticipated that exports will maintain its momentum of growth, as the economies of Malaysia's major trading partners are forecasted to maintain positive growth. With the Government's initiative to improve the public delivery system and dismantle bureaucratic hindrances, the business operating environment is envisaged to further improve. It will create the necessary conditions to further enhance investors' confidence in Malaysia.

    DATO' SERI RAFIDAH AZIZ Minister of International Trade and Industry Malaysia

    29 June 2007

    iv

  • v

    CHAPTER 1 WORLD ECONOMIC, TRADE AND INVESTMENT DEVELOPMENTS . . . . . . . . . . 1

    Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Economic Developments by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Trade Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Investment Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

    CHAPTER 2 MALAYSIA'S EXTERNAL TRADE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

    Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Trade Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Direction of Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Trade Practices Affecting Malaysia's Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

    CHAPTER 3 POLICY INITIATIVES AND MEASURES IN MANUFACTURING AND MANUFACTURING-RELATED SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

    Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Initiatives for Enhancing Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Small and Medium Enterprise Development Policy Initiatives . . . . . . . . . . . . . . . . . . . . . . . . 37 Initiatives to Promote Information and Communication Technology . . . . . . . . . . . . . . . . . . . . 38 Development of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Development of Manufacturing-Related Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Human Resource and Skills Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

    CHAPTER 4 INVESTMENTS IN THE MANUFACTURING SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

    Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Approved Projects by Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Approved Projects by Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Approved Projects by Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Implementation of Approved Manufacturing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

    CONTENTS

  • CHAPTER 5 PERFORMANCE OF THE MANUFACTURING SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . 65

    Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Electrical and Electronics Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Transport Equipment . . . . . . . . . . . . . . . . . . . . .