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New Straits Times

Malaysia poised to cement role as future-ready manufacturing powerhouse

KUALA LUMPUR: Malaysia is fast emerging as a competitive, future-ready manufacturing hub, a transformation that, if sustained, could chart the course of the nation's economic journey for years to come. Recent data and investment flows point to growing confidence in Malaysia's industrial capabilities, with an economist saying the country is poised for a stronger manufacturing performance in the second half of 2025. This cautious optimism comes despite lingering headwinds, from volatile energy prices and fragmented trade dynamics to ongoing shifts in global supply chains. UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the firm remains cautiously optimistic about the overall outlook for 2025, while holding a more confident view of the second half. "The external environment appears to be on a firmer footing, with a reduction in disruptive developments from major economies such as the United States and China. "Unlike the first half of the year—which was characterised by volatility in global trade policy, monetary tightening, and geopolitical uncertainty—the remainder of 2025 is likely to benefit from greater policy clarity, a more balanced global economic outlook and improving investor sentiment," he told Business Times. According to the Malaysian Investment Development Authority (MIDA), Malaysia approved RM89.8 billion in total investments in the first quarter of 2025, with RM30.5 billion directed specifically toward the manufacturing sector. Of this, foreign investments made up RM25.52 billion, representing 84 per cent of the manufacturing total, and are expected to generate 18,317 new jobs. Sedek said the key catalysts in the coming months include the resolution of tariff-related uncertainties. He said the 90-day reciprocal tariff pause is set to expire on July 9 and a constructive outcome, particularly the avoidance of a 24 per cent blanket tariff and continued exemptions for semiconductors, would remove a major source of trade-related risk. He added that at the domestic level, the upcoming 13th Malaysia Plan (13MP), scheduled to be tabled between July and August, will provide a critical medium-term development framework. "Aligned with the Madani Economy Framework, the New Industrial Master Plan 2030 (NIMP 2030) and the National Energy Transition Roadmap (NETR), the 13MP is expected to prioritise high-value sectors, digitalisation, sustainability and industrial deepening," he said. He added that further domestic catalysts include the upcoming rollout of the National Investment Incentives Framework (NIIF) and the Johor–Singapore Special Economic Zone (JS-SEZ) blueprint in the third quarter, both anticipated to attract significant investment and strengthen regional economic integration. "Momentum in capital expenditure remains strong, supported by increased approvals of manufacturing projects, rising imports of capital goods, and continued credit expansion for industrial building activity. "The data centre segment is a standout, with Pearl Computing expected to tender contracts for five hyperscale data centres valued at RM10 billion in the second half, while Tenaga Nasional Bhd (TNB)'s plan to sign up to 2GW in new electricity supply agreements reflects a structural shift in energy demand linked to digital infrastructure," he said. Sedek added that 2026 Budget, scheduled for tabling in October, is expected to be expansionary, potentially exceeding RM420 billion, as it aligns with 13MP, NETR, and NIMP 2030 goals. FUTURE-PROOFING MALAYSIAN MANUFACTURING By embracing market diversification and integrating advanced technologies such as artificial intelligence (AI) and automation, Malaysian manufacturers can build greater resilience, optimise costs and stay competitive in an increasingly unpredictable global environment. Epicor Malaysia senior country manager Ben Lim said the industry players must adapt digital transformation, automation and workforce development strategies to remain competitive amid escalating global trade uncertainties and supply chain disruptions. He said local manufacturers must prioritise agility, resilience and technological adoption to navigate the increasingly complex economic landscape. "Global supply chain realignment definitely is in place. Looking at such drastic trade policy uncertainties—and of course, there is protectionist measurement—this can really bring up a lot of challenges for manufacturing sectors," he said. While acknowledging the difficulties, Lim said geopolitical disruptions, including protectionist trade policies, have led to unpredictable costs and supply chain vulnerabilities. "It's a two-edged sword. While there are challenges, we're also seeing significant benefits, whereby foreign investment has been flowing steadily into the region. "Over the past five years, sectors like semiconductors, factory automation and industrial machinery have grown rapidly. In fact, Malaysia's manufacturing industry is booming," he added. Lim said technology, especially supply chain optimisation and AI, is now critical for manufacturers navigating unpredictable conditions. "They can look at advanced supply chain solutions. These are helping them to have a visibility which enables their capability to analyse," he added. Lim said Epicor's investment in AI began four years ago, with tools now evolving into intelligent assistants and allows users to make faster and smarter decisions. "We started this AI journey about four years back. Now we have predictive, generative and today personalised AI. That is where Epicor AI module heads towards—personalised AI—and a combination of all these different modes of AI that bring towards cognitive enterprise resource planning for Epicor Kinetic." Echoing the same sentiment, Sedek said local players especially MSMEs, need to diversify their markets and adopt new technologies to reduce risks and stay competitive. He said diversifying export markets and leveraging trade initiatives like the Malaysia–Gulf Cooperation Council (GCC) free trade agreement can reduce exposure to protectionism, while robust domestic demand, supported by wage hikes and tourism recovery, offers resilience in consumer-driven sectors. He added that AI will play an increasingly strategic role in reducing systemic risks and enhancing competitiveness, while simultaneously driving semiconductor demand and accelerating the expansion of Malaysia's data infrastructure. "With TNB expected to sign up to 10 new electricity supply agreements in 2025, supporting a 1.5–2GW capacity uplift, the country is consolidating its position as a regional data centre hub. "AI is also catalysing the development of smart city solutions, enabling decentralised decision-making, real-time monitoring, and greater operational efficiency across sectors. "These shifts are raising Malaysia's total factor productivity and embedding digital resilience into the industrial fabric," Sedek said.