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(Last updated: 12 Nov 2008)
Trends and opportunities
The market
The transport industry in Malaysia covers the automotive, aerospace, shipbuilding and ship-repairing sub-sectors. The automotive sub-sector is the largest under the transport industry in Malaysia.
Automotive
Road transport accounts for nearly 90 per cent of total passenger and freight movement in Malaysia. With over 65,00km, the road system is very well developed.
The implementation of the country's first national car project by Perusahaan Otomobil Nasional Bhd. (PROTON) in 1985 was an important step towards the development of an integrated motor vehicle industry. Following its success, a number of projects to produce other types of motor vehicles (passenger and commercial vehicles and motorcycles) have been launched. These national automotive projects have created the base volume needed to sustain the manufacture of components parts.
With the rapid development of the motor vehicle assembly and manufacturing industry in Malaysia, the value of component parts and accessories manufactured in the country totalled over US$1.61 billion in 2007. However, there is still potential for growth as Malaysia currently imports a substantial amount of automotive components and parts, such as engines, transmissions and auto electronic components. The total import value, including those for completely knocked-down parts, amounted to about US$2.7 billion during the same year.
Development of this sector is seen as a way of upgrading local engineering or technical skills and developing capabilities to manufacture quality products. The government proposes that the industry be competitive internationally and that components and vehicles be exported.
Consequently, most motor vehicle components have been gazetted as promoted products to encourage investment in this sector.
Aerospace
Another strategic sub-sector is the aerospace industry, one of the world's largest technology-based and knowledge-intensive industries. The development of the sub-sector has wide potential in the nation's industrialisation program and technological development. The main activities include the assembly of light aircraft, manufacture of parts and components, maintenance and repair of aircraft (MRO), as well as modification and conversion activities. The current emphasis is on the manufacture of avionics components, composite material parts and the design or development and assembly/production of light aircrafts.
The country also aims to be a regional aviation centre for maintenance, repair, overhaul, modification and conversion services. Towards this end, strong government support, an educated and skilled workforce and good infrastructure facilities, including design, research and development capabilities, have attracted international companies such as Boeing, General Electric, Honeywell Aerospace, Parker Hannifin, MTU Maintenance, Hamilton Standard and Eurocopter to set up operations in the country to serve both the national and regional markets.
Shipbuilding and ship-repairing
The shipbuilding and ship-repairing sub-sector covers the building and repairing of all types of ships, including leisure crafts such as yachts, jet skis, sail boats, speed boats, canoes, inboard/outboard boats and special purpose vehicles such as barges, trawlers, ferries and cement carriers.
The manufacture of leisure crafts, hydrofoils and hovercrafts is eligible for tax incentives in Malaysia, while shipbuilding and ship-repairing activities are encouraged in the Eastern Corridor States of Peninsular Malaysia, Sabah and Sarawak. In addition, the manufacture of parts and components and the maintenance, repair, overhaul, modification, servicing or testing of ship components or accessories are provided incentives under Malaysia's Industrial Linkage Programme.
Opportunities
Opportunities vary across the transportation sector in Malaysia and include:
- Automotive original equipment components, technology transfer and investment
- Road safety
- Professional, engineering and training services
- Information technology, smart card technologies and ticketing
- Safety equipment and clothing
- High speed petrol/rescue boats
- Aluminium kit boats
Competitive environment
Malaysia’s transportation industry is becoming more open, although there is still some way to go. The removal of trade barriers within ASEAN has opened up a vast regional market for automotive companies which stand to benefit from potential economies of scale and enjoy access to cost competitive components produced in ASEAN countries.
Recently the government announced that it will review the incentives for the aerospace industry to attract more foreign investors to the sector. The aerospace industry in Malaysia is expanding and has become mostly globally competitive.
The development of the Malaysian shipping industry is closely linked to national policy, which emphasises greater self-sufficiency in shipping services. This is primarily aimed at reducing the severe outflow of freight payments to non-national shipping lines. In this regard the Malaysian maritime industry is considered as still in its infancy stage. As a trade dependent economy, the government felt it necessary to promote the growth of a national merchant fleet to enable the carriage of more national cargo on national–flagged ships. |