• What is the status of Perak’s manufacturing nationally?
• What is Perak’s growth pattern for manufacturing?
• What is the manufacturing sector contribution towards state’s economy?
Malaysia has transformed itself over the decades from raw materials producing country to a leading exporter of electrical appliances, electronic parts and components, processed palm oil and natural gas, among others. Currently, manufacturing remains as the second largest contributor to the nation’s GDP. It is driven strongly by electric & electronic (E&E) sub-sector. The sector employs a total of 2.3 million people which representing 16.5% of the overall total employment of the country in 2015.
Figure 1 depicts the manufacturing production value by states in Malaysia for the year 2014. Selangor and Pulau Pinang, two of Perak’s neighboring states, top the list, ranking first and second respectively whilst Perak, ranks eighth position overall.
Selangor’s manufacturing value came up to RM67,032 million, twice more than it’s nearest competitor, Pulau Pinang (RM29,183 million). On the other hand, when comparing between Selangor and Perak (RM10,051 million) the former is almost seven times larger than the latter.
There are two factors which are holding Perak back in terms of manufacturing when compared to its neighbour’s Selangor and Pulau Pinang. Both neighbours have manufacturing friendly connectivity such as commercial port and airport to facilitate direct export activities, while Perak lacks such infrastructure.
Another factor is the development of manufacturing industry itself which is in the transition from labour-intensive to technology intensive that requires high skilled manpower. Perak has a shortage of high skilled labour which is needed for high-tech manufacturing and this is an issue when trying to attract investment especially for technologically based manufacturing. The reason for this is the opportunities for high skill jobs is less vibrant in Perak when compared to its neighbors.
Figure 2 shows a comparison of manufacturing production value with its contribution to State GDP. Perak’s manufacturing sector contributed 18.3% to its total GDP, close to the overall manufacturing sector contribution at the national level which is at 23%. Meanwhile, Selangor manufacturing sector contributes 29.5% to the State GDP. Perak and Selangor has a lower contribution to the State GDP from manufacturing in comparison to states like Pulau Pinang and Melaka which have over 40% contribution to the State GDP. Should Perak manufacturing sector be increased to match Pulau Pinang that seems to have a higher contribution?
Just because a State has a high manufacturing value it does not necessarily mean that it has an equally high contribution to its GDP. Selangor for example, which has a high manufacturing value only contributes less than 30% to its GDP. This is because the manufacturing sector in Selangor has boosted its service sector and becomes the engine of growth. The same trend is observed in Perak.
Perak is moving gradually towards a dynamic manufacturing sector where it acts as a catalyst and integrated into the service sector. As for contribution of manufacturing to GDP, it is clear that Perak’s manufacturing has more in common to Selangor’s than Pulau Pinang’s. Both Perak and Selangor manufacturing sector has created a spillover effect into the service sector so much so that the service sector dominate in terms of contribution to State GDP.
So in terms of creating spillover effect, Perak is heading in the right direction where the service sector now contributes 60% to the State GDP. The same trend is observed in the Selangor Service sector which contributes 59.5% to the State GDP. This is in line with Global Manufacturing role which is changing in which it consumes more and more services and rely on them more heavily.
Figure 3 shows that the manufacturing sector in Perak State has gradually increased in recent years and has great potential for the improvement of its productivity. The manufacturing production value has grown from RM7,568 million in 2010 to RM10,051 million in 2014, recording an increase of 32.8%. Over the years, the manufacturing sector managed to register annual positive growth and Perak needs to continue to focus on sustaining the existing player and simultaneously venture into the new diversified market.
MANUFACTURING AND EMPLOYMENT
The manufacturing in Perak accounts for a fifth of employment opportunities, this makes it an important driver of economic growth. In 2015 the manufacturing sector has employed 176,100 employees which represents 17.4% of 1,014,300 total labour force in Perak. The majority of the employment opportunities created for the manufacturing sector are in the urban area as illustrated in Figure 4. This accounts for 81.8% employment or 144,100 manufacturing jobs whilst the balance of 18.2% or 32,000 manufacturing jobs are in the rural area. Male dominated with 58.6% employment or 103,100 compare to women 41.4% or 73,000 as illustrated in Figure 5. Based on these figures, the State should take serious strategic actions to improve the perfomance of the manufacturing sector so more employment opportunities can be created as this will boost the economy of the state.
In Perak, the manufacturing sector is made up by numerous sub-sectors covering a variety of fields such as medical, technology and food. The question is if Perak wants to improve its performance in manufacturing, which activities should the focus be? Perak, should give special focus to sub-sectors that could accelerate the economic growth of the State. Based on the research report ‘Development of Perak – Moving Forward to a Developed State Status’ produced by Institut Darul Ridzuan and University of Malaya Centre for Regulatory Studies (UMCoRS) 2010, four promising manufacturing activities were identified as the biggest contributors to manufacturing value added in Perak;
i. Electric components & boards
iii. Non-metal & mineral product
iv. Vegetable oil & fat
THE WAY FORWARD
In conclusion, the facts pointed to several subsectors namely vegetable oil & fat, metal & vehicle component & body assembly and electronics as having the possibility and potential to significantly impact the state’s manufacturing sector performance. The State is recommended to take the following measures:
1) Conduct strategic and profile mapping of manufacturing clusters in Perak so a cluster strategy could be developed to leverage in existing manufacturing in the State.
2) The State should form an advisory and working committee to monitor and appraise the development of identified clusters, and study the industry linkages and contribution to the overall socio-economic development of Perak’s economy.
3) The State should create an inventory of talents qualified to work in the manufacturing sector, and match it with the existing demand in the manufacturing sector.
4) The State should also focus on attracting and supporting the needs of high-tech manufacturers. This can be done by creating a cluster of hightech manufacturing in a strategic location near to export infrastructure.
5) Support and provide incentives for R&D intensive manufacturing so a rich pipeline of innovations in materials and processes—such as nano-materials 3-D printing to advanced robotics can be created.