KUALA LUMPUR (July 31): Deputy Minister of International Trade and Industry Dr Ong Kian Ming said today Malaysia needs to strike a balance between opportunities for growth given to multinational corporations (MNCs) in the electrical and electronics (E&E) industry and local companies to ensure the latter's development is not neglected.

Ong said although the ministry acknowledges the importance of MNCs' contribution from a foreign direct investment perspective, it has received feedback from domestic players requiring more support for their progress and development in the sector.

"We therefore need to have a balance between creating an ecosystem to allow for new products to be brought in by existing MNCs and at the same time focusing on large local companies and SMEs," he said in his opening speech at the Malaysia E&E: A reality check seminar organised by the ministry here today.

Ong said many existing players in Malaysia's E&E industry are well known MNCs that have contributed to the sector's growth. He said the attractiveness of tax and other related incentives have influenced their global headquarters relocation investment decisions.

He said this may have inadvertently caused competition that neglects local companies and small and medium enterprises (SMEs).

Citing a Bank Negara Malaysia (BNM) report, Ong said many industry players have enjoyed uninterrupted tax incentives for a number of years, and there is now a narrative stating that it is time to call back some of those incentives or reduce them moving forward as a means to protect the local players.

"But subsequent research by BNM has shown that the E&E sector has played an important role in productivity growth. Even though E&E contribution to gross domestic product is less than 10%, it contributes more than 90% to our trade surplus.

"If we can achieve that sweet spot of balance, then the public narrative will be one that is much more compelling, whether it be through providing tax incentives for MNCs or investing domestically in local companies," Ong said.

Looking ahead, he said the number and amount of Chinese investments in the Malaysian E&E industry are expected to grow significantly as a result of the US-China trade and technology conflict, which is not likely to abate anytime soon.

"Malaysia must find ways to integrate these Chinese E&E players into the local ecosystem so that they can grow together with the existing MNCs and LLCs (large local companies)," he said.

He cited VTech Holdings Ltd, a Hong Kong listed company offering electronics manufacturing services, which in 2018 acquired the factory operations of Pioneer Corp in Muar, Johor.

"Now because of the trade conflict, they (VTech) are doing better in its Malaysian operations compared to back home in China. Their plant in Muar is the only plant outside of China. I foresee more investments like this increasing in the country with the trade conflict," said Ong.