KUALA LUMPUR: Japanese foreign direct investment (FDI) to Malaysia has been flat in recent times but the Japanese companies here are confident that there will be a surge with Industry 4.0.
Their proposed “Hybrid IoT Manufacturing” concept will be the first step to lift the Malaysian manufacturing sector to the level desired by the government.
Hybrid IoT involves SIP (Sensory Inspection Process depends on people's senses) and MES (Manufacturing Execution System) are the primary areas that are important investment areas to improve quality.
“We expect a further increase in investments once the parent companies have a clearer understanding of the intention of the Malaysian government,” they said after a dialogue session with the International Trade and Industry Ministry (MITI) led by minister Datuk Seri Mustapa Mohamed in early November.
The Japanese Chamber of Trade and Industry Malaysia or JACTIM, the voice of the Japanese businesses, was joined by representatives from Japan External Trade Organisation (JETRO) and the delegation was led by ambassador Dr Makio Miyazawa.
The recommendations to MITI as well as the Malaysian Industrial Development Authority (MIDA) were based on the analysis made from a survey undertaken earlier.
Japanese manufacturers were among the leading players in growth of the manufacturing sector in Malaysia thanks to incentives and tax breaks.
The government was keen to listen to the manufacturing players’ views on how to make Malaysia the preferred investment destination in the region.
They acknowledge the government’s commitment in providing the ecosystem that will encourage and support more companies to innovate and adopt Industry 4.0 in their business processes.
Budget 2018, which was tabled in Parliament last month, saw more incentives extended manufacturers located in Malaysia.
They included matching grant under the Domestic Investment Strategic Fund (DISF) to enhance smart manufacturing facilities, extension of the incentive period for Accelerated Capital Allowance on automation equipment 2018-2020, Accelerated Capital Allowance (ACA) Incentive up to 200 per cent for manufacturing and manufacturing-related services sectors and Capital Allowance Incentive for ICT equipment beginning 2018-2020.
To the Japanese companies, Malaysia remains far ahead of other neighboring countries in terms of its attributes - abundant young population with good command of English, R&D specialised personal per capita available, and good social infrastructure.
“In order to transform a current business set-up into regional business hub utilising these advantages, more people need to be trained to be skilled in R&D and product planning,”they said, adding that supply chain that encompasses supplier and end-user must be upgraded.
Automation of manufacturing processes must be undertaken step by step, they advised.
“In addition to reducing the workforce through automation, there must be swift decision-making of management by making operation management transparent in the view of 4 M (Man, Machine, Material and Method) is real nature of automation and it leads improvement of business quality.”
To achieve the transformation, talents must also be groomed to understand how top management operate.
The MES in Hybrid IoT does not require expensive investment and it creates flawless manufacturing process not to mention improve the level of production control particularly in the view of 4M (Man, Machine, Material and Method). This will lead to optimum production output.
“In future, Hybrid IoT Manufacturing” will be a realistic approach to break away from a labour intensive industry.”
As more business hubs adopt “Hybrid IoT Manufacturing”, this will help the manufacturing sector in Malaysia evolve faster and further, they argued.
But they also called for less restriction with regards to meeting manpower needs.
“We have requested for “Flexible securing of labour”, “Flexible fund management” and “Mitigation of tax burden” as important areas to sustain the local businesses of these companies.”
This refers to, among others, foreign worker levy and timing of levy payments.
“We expressed our worry that Malaysia will be unable to sustain its production capabilities if the production system is unable to meet changing demand and supply and to restrain fixed costs.”
To raise the competitiveness of Malaysian companies, the Japanese businesses have also submitted several proposals based on human resource development (training of skilled talents and experts), improvement of IP (Intellectual Property) environment (shortening the time for right acquisition and stricter rights protection etc).
The Malaysian government is recommending automation in order to respond to the shortage of manpower and to manufacture high value-added products.
“ However, the biggest objective of automation in Industry 4.0 is understood to be prompt management decision making in addition to manpower saving.
“As such, it is imperative to secure and nurture key persons who will improve the manufacturing process themselves and are capable of management without falling behind automation.”
This is a common issue among large corporates as well as small and medium corporates.
They have proposed to establish a framework whereby the government funds of 1MGRIP of HRDF (Human Resource Development Fund）be extended for other human resource development according to corporate needs.
It could be extended to increase the number of Malaysian students in Japan through the Look East Policy programme.