Kuala lumpur: Malaysia must accelerate its transition into high-value and innovation-led industries to strengthen its long-term economic competitiveness, as emphasized by Nottingham University Business School assistant professor of business economics Dr. Tan Chee Meng.
According to BERNAMA News Agency, Dr. Tan stated that Malaysia cannot afford to remain a mid-level assembler in global supply chains and instead must develop its own research, design, and branding capabilities. "We do not want to just be putting parts together. We want to have enough research and design technology to be a brand of our own," he remarked during Bernama TV's The Nation programme.
Dr. Tan, who was one of the panellists alongside IPPFA Sdn Bhd investment strategist and country economist Mohd Sedek Jantan, highlighted that Malaysia lags behind regional peers in research spending, with Singapore investing US$25 billion in research and development compared to Malaysia's US$600 million to date.
To enhance wages and attract higher-quality investments, Dr. Tan suggested that Malaysia shift more resources toward high-value sectors such as ICT, green technology, electronics, and AI-related industries, rather than relying heavily on retail, logistics, and real estate-driven foreign direct investment.
He noted that industries capable of generating higher margins could lead to increased wages. "If you want higher wages, you need to create higher value. Companies can only pay more when their profit margins are big enough," Dr. Tan explained.
Moreover, Dr. Tan asserted that although Malaysia is progressing in the right direction, it must intensify its focus on industries central to a tech-driven economy. This shift would help reduce structural wage distortions and bolster the country's competitiveness.
Dr. Tan also discussed the strategic opportunity arising from the 19 percent tariff imposed by the United States on Malaysia since August. This situation opens avenues for Malaysia to deepen cooperation in areas such as rare earths, which are increasingly important to US defense and green technology supply chains.
Malaysia has secured significant tariff exemptions under a recent US trade deal, with over 1,000 products receiving zero percent tariff, including palm oil, rubber, cocoa, and pharmaceuticals. Dr. Tan noted that the US is actively seeking rare earth supplies from Japan, Australia, and Malaysia, emphasizing Malaysia's advantage lies in improving extraction and recycling capabilities.
Lastly, Dr. Tan mentioned that Malaysia's strong export position is a significant advantage, but the country must prepare for rapid shifts in global demand and changes in geopolitical dynamics that could reshape supply chains in the near future. While Malaysia and ASEAN have attracted multinational firms diversifying production away from China due to US-China tensions, this advantage is not guaranteed. An easing of US-China tensions could alter supply-chain decisions, affecting economies that have benefited from the current geopolitical realignment. Dr. Tan stressed that Malaysia must not rely solely on its export strength or its role as a substitute for China.