This article first appeared in The Edge Financial Daily on November 13, 2019

KUALA LUMPUR: Finance Minister Lim Guan Eng has called on Malaysian businesses to invest in high-value areas to take advantage of global supply chain relocation arising from the US-China trade war.

“The government will be by your side,” Guan Eng told business leaders at The Edge Malaysia-Centurion Club Corporate Awards 2019 ceremony yesterday.

“I trust that as business owners and entrepreneurs, all of you here know best about what works and what does not. And your company’s success and growth will in turn translate into more jobs, higher wages for the people, an increased tax income for the government and a more resilient economy,” he said .

“I would like to encourage you to be brave in taking calculated risks and invest more, especially in high-value areas that can help unlock productivity growth. We need you at the forefront in creating new growth drivers to propel the economy forward.”

Guan Eng said the trade war between China and the US provides Malaysia with a rare opportunity to reverse the premature deindustrialisation and readjust the country’s growth trajectory to be a fully industrialised advanced economy.

As Malaysia’s biggest trade partner, Guan Eng noted there is still space to grow for Chinese investments. Thus, the government has a special dedicated channel for Chinese firms interested in investing in Malaysia.

Citing the Malaysian Investment Development Authority, Guan Eng said the US was the top source of approved manufacturing foreign investments during the first half of 2019, with plans to invest RM11.7 billion, followed by China at RM4.8 billion.

“Malaysia has been suffering from premature deindustrialisation since 2000. Our high-tech share to the GDP (gross domestic product) has been declining and replaced by low-skill and low-cost industries.

“Indeed, from 1988 to 1997, Malaysia’s economy on average grew 9.3% yearly, but from 2000 to 2018 the average came down to 5.1% only. We know this is not sustainable and we need to change our economic trajectory to become a fully industrialised advanced economy.

“The trade tension is reorienting the global supply chain and this is a chance for Malaysia to attract new high-value, high-tech investments from companies adversely affected by the trade tension.”

Additionally, the government will be providing RM50.2 billion at least over five years to put Malaysia back to business and Malaysians back to work.

“Next year, we are encouraging SMEs (small and medium enterprises) to adopt digitalisation,” said Guan Eng, adding that the government will provide a 50% matching grant of up to RM5,000 per company for the subscription of electronic point of sale system, enterprise resource planning (ERP) and electronic payroll system.”

This matching grant, worth RM500 million, is limited to the first 100,000 SMEs applying to upgrade their systems, he said.

Guan Eng also reiterated that the government will be allocating RM550 million to provide Smart Automation matching grants for 1,000 manufacturing and 1,000 services companies to automate their businesses, in which this grant is given on a matching basis of up to RM2 million per company.