INEVITABLE, UNRELENTING, AND OVERARCHING

Malaysia 2019 | INDUSTRY & HIGH TECHNOLOGY | INTERVIEW

To avoid the fallout of a broader Pacific trade war, Malaysia must continue to take the helm in being technology driven, proactive, and an attractive trading partner.

Datuk Darell Leiking
BIOGRAPHY
Datuk Darell Leiking has been the Minister of International Trade and Industry of Malaysia since July 2018. He holds an LLB (Hons) from the University of Hertfordshire and is a qualified barrister-at-law of Lincoln’s Inn London. He has been a Member of Parliament for Penampang, Sabah since 2013. He co-founded Parti Warisan Sabah in 2016, a constituent party of the ruling government, and serves as its Deputy President.

What role will high-tech sectors play in Malaysia's transition to a high-income and developed economy?

A strong manufacturing sector would pave the way to enhanced productivity, job creation, innovation, a high-skilled talent pool, economic prosperity, and social wellbeing. The national policy on Industry 4.0: Industry4WRD was developed with four specific overarching goals, namely to drive growth in manufacturing, increase national productivity, create higher-skill employment opportunities, and raise innovation capabilities and competitiveness. Industry 4.0 will revolutionize the manufacturing sector by pushing down costs, expanding market reach to consumers, and create new competitors. For Malaysia, which still heavily depends on foreign labor for its production, there is a need for a change in mindset to embrace new technologies, increase efficiency and productivity, and expand into markets through digital platforms. Accelerating labor productivity is key to pushing Malaysia to becoming a high-income nation, something that can be achieved by embracing the Industry 4.0 adoptions. Ultimately, the policy will drive Malaysia to become a strategic partner for smart manufacturing and related services in Asia Pacific, a primary destination for the hi-tech industry, and a total solutions provider for advanced technology. Our readiness to adapt to this evolution will have huge bearing on our economic success.

How do you assess the impact of trade tensions between the US and China on Southeast Asia's supply chains, Malaysia in particular?

The continuous US-China trade conflict affects the supply chains in Southeast Asia. It is expected that most economies, including ASEAN member states (AMS), as well as AMS' companies with investments and businesses based in the US and China, will be affected in the medium and long run due to their interconnected supply chains in the global market. UNCTAD estimates that about two-thirds of world trade now occurs through global production. The current trade tensions can affect Malaysia's trade and investment in a number of ways, for better or worse First, our direct exports to the US could decrease because of tariffs, which include some of Malaysia's major exports. The same goes for our trade with China, since some of our exports there contribute to the export of final products to the US, as well as other markets. Moreover, any slowdown in China's economy could also affect our exports to China. However, the US could also substitute some of its imports from China with imports from Southeast Asia, including Malaysia. Investment diversion is another potential positive impact, as investments shift away from China. Hence, the tariffs imposed on China have the potential to generate trade and investment spillovers in Malaysia's trade and investment with both. Being a small open economy, Malaysia is highly interconnected with the global economy through its active participation in global value chains (GVCs) and FDIs into the country, especially the non-resource-based sector, such as electrical and electronics (E&E). Against this backdrop, change is inevitable, unrelenting, and overarching. Strategy and timing are essential; Malaysia must be careful not to get trampled by the trade conflict, but it can still reap maximum benefits from a trade war by attracting more high-quality investments. In fact, Malaysia has already benefited from American and Chinese companies relocating here to hedge against broader risks. It is also an opportunity for Malaysia to build its status as an Asian tiger by becoming the most attractive investment destination for quality investments in the region. Despite positive signs, the country remains cautious the conflict will create a domino effect. This is why we have no choice but take the helm in global trade by being technology-driven, proactive, and an attractive trading partner and investment destination. This is the crux of our fourth industrial revolution.