Asia remains the world's growth driver, within Southeast Asia lies Greater Kuala Lumpur, Malaysia, which is slowly building itself up to cater to the world market including European businesses. Cognizant of the long lasting connection to German businesses, which reaches back to the early 1800s, the Malaysian government is paving the way for more business cooperation by relying on its large population of young multilingual workforce, low operational costs and strategic location as a gateway to ASEAN.
Trade and investment
As such, Germany is now Malaysia’s largest trading partner from the EU with total bilateral trade rising 7.1% to €10.0 billion in 2016. From this total, exports to Germany increased by 13.5% to €4.9 billion, and imports from Germany increased by 1.8% to €5.2 billion.
From January to August 2017, total trade with Germany amounted to €7.2 billion, up 15.4% from the corresponding period in 2016. Exports to Germany were valued at €3.7 billion, while imports from Germany were at €3.5 billion. Since 1980, German companies have invested RM31.21 billion (€6.24 billion) across 417 manufacturing projects that have created 44,833 jobs for the country.
In 2016, Germany was the third largest foreign investor in Malaysia, with 21 approved manufacturing projects valued at €530 million. These investments are expected to generate about 3,250 job opportunities. On the services side, German companies invested in 106 projects to the tune of €200 million in 2016.
This was more than double the value of German investments in the country in 2015, which was ¤230 million across 22 approved projects, underscoring the country’s increasing importance as an investment destination.
Supportive government policies
Since 2010, Malaysia’s “Economic Transformation Programme” (ETP) has influenced policymaking across 12 National Key Economic Areas: Oil, Gas & Energy, Palm Oil & Rubber, Financial Services, Tourism, Business Services, Electronics & Electrical, Wholesale & Retail, Education, Healthcare, Communications Content & Infrastructure, Agriculture, Greater Kuala Lumpur/ Klang Valley.
The ETP’s goal is to elevate the country to developed-nation status by 2020, targeting gross national income per capita of US$15,000. This will be achieved by attracting US$444 billion in investments which will, in turn, create 3.3 million new jobs. Most importantly, by making Greater Kuala Lumpur a key focus area, the Malaysian government is looking to boost the capital’s connectivity and business-friendly environment even further.
Spearheading this initiative is the InvestKL agency, which focuses on attracting Fortune 500 and Forbes 2,000 multinational corporation (MNCs) to create new high-skilled and high value jobs to support Malaysia’s transition into a high-income economy. Of the 100 MNCs it has targeted to bring into Kuala Lumpur by 2020, InvestKL has attracted 64 MNCs with approved and committed investments of RM8.9 billion, as well as creation of more than 9,300 regional high-skilled jobs up to 2016.
Malaysia’s competitiveness and rankings
These and many other efforts outlined have been doubled as Malaysia enters the final lap to become a high-income nation by 2020. The country’s policies under the ETP and particularly, the Greater Kuala Lumpur area, have served to attract investments and drive innovation and productivity through regulatory reform – and received global recognition in the process. The Global Competitiveness Report 2016-2017, published by the World Economic Forum, has ranked Malaysia 25th out of 138 economies, putting the country among the top 20% of competitive economies and the highest ranked developing Asian economy. Malaysia also maintained its top 20 position among 61 global economies in the World Competitiveness Yearbook 2016 released by the Institute for Management Development of Lausanne. Malaysia was ranked 19th, ahead of Finland (20th), Israel (21st), Belgium (22nd), Iceland (23rd), Austria (24th), China (25th), Japan (26th), Thailand (28th) and South Korea (29th).
Ripe for expansion
Some German companies have been drawn to expand existing operations in the country as a result of these efforts. In 1991, Malaysia witnessed its first locally-assembled BMW model and in May 2017, BMW Malaysia opened the doors to its new regional parts distribution centre near an airport in Southern Malaysia. Meanwhile, Linde, which has been in the country since 1960, invested a further €12 million to build its first automated industrial gases cylinder filling plant in South Asia and ASEAN in Malaysia in mid-2017. Malaysia has been at the centre of Linde’s investment focus over the 12 months. In September 2016, Linde Malaysia’s joint venture with Petronas Gas secured a long-term gas supply agreement valued at €142 million.
In January 2017, Linde commenced construction on its new €6.25 million facility in East Malaysia, and it is expected to double Linde’s production capacity to approximately 66 tonnes per day of liquefied gases.
Honing skilled talents
But not all investors have the might and weight of Linde, and these need to tap local resources such as Malaysia’s skilled engineering talent, to grow while keeping competitive. Eppingen-based Dieffenbacher -- brought in by InvestKL -- is a fifth-generation family-owned company which did not expect to hire more than four technical staff when it opened in Malaysia in 2013.
Fast-forward to 2017, and the manufacturer of press systems and production systems for wood, automobile, and supplier industries has trained 25 local engineers. Their Malaysian engineers were also appreciated by their more experienced European staff which led to very high demand from their headquarters for local talent not only in ASEAN projects but worldwide. Recognising the need for trained skilled talent even then, the Malaysian government established two long-standing bilateral institutions in 1992: The Malaysian-German Chamber of Commerce and Industry and the German-Malaysian Institute (GMI) – the latter a vocational training institute for young Malaysians, based on the German dual system.
Towards Industry 4.0
However, Malaysian policy makers are not resting on their laurels and are aware that more needs to be done, especially as the country evolves quickly to adapt to Industry 4.0, smart factories, robotics, and Big Data. ifactory 4.0 Innovation Centre was jointly set up by GMI and German Training Centre for Injection Moulding. This is the first learning factory set up to feature the latest production concepts according to the German Industry 4.0 standards in Southeast Asia.
In August, the Malaysian government paired up with 15 Bavarian companies to hold a series of Industry 4.0 workshops in three highly urbanised states, linking them with 600 local SMEs. A recent dialogue on Smart Cities and Big Data also featured 21 German participants, including industry representatives from Siemens, Lufthansa Technik, IFM Electronic, Beckhoff Automation, T-Systems, SAP and Festo.
Given that Germany has pioneered the concept of Industry 4.0 in Europe, and started to set down new standards around it, Malaysia is leveraging the presence of German investors in Greater KL that already have a strong foothold and capabilities in the space of Smart Manufacturing or Industry 4.0 technologies.
German investments in our manufacturing sector are strong in electrical and electronics, petroleum products including petrochemicals, chemicals, and scientific and measuring equipment. While Germany’s large MNCs are already well established here, there are still more business opportunities available for German companies in various sectors.
To date, a total of 18 German companies such as B.Braun, SGL Carbon, BMW, Infineon, Muehlbauer and Schmidt & Clemens have participated in the programme by offering annual internships for Malaysian students at their production facilities throughout Germany.