Strategic Thrusts for Malaysian Oil-Palm Based Industry

The assignment provides five strategic thrusts for the Malaysian oil-palm based industry to increase its exports. These include broadening and diversifying into higher value-added palm oil products, raising the market share of Malaysian oil palm products, encouraging outward investments and global marketing networks in palm oil industry, enhancing R&D in palm oil and commercialization of research findings through collaborations with MNCs, and strengthening institutional support and infrastructure to enhance domestic capacities and capabilities of the industry. By implementing these thrusts, the Malaysian oil-palm based industry can increase its exports and become more competitive globally.

1) Analyse the differences between “New Economic Model” and “Vision 2020”.
The differences between NEM and Vision 2020 is NEM is part of the pillars of national
transformation which was targeted to hit the objectives of Vision 2020.
The purpose of launching the NEM is to double the Malaysia’s citizen’s annual average
income and lead Malaysia to become high-income country. Based on the report of NEAC,
NEM has three major objectives. Firstly, Malaysia tend to increase the citizen’s annual
average income with 6.5 percent gradually. Malaysia’s government hope each citizen’s
annual average income are able to maintain between 1,5000 to 2,0000 in US dollar in 2020.
Besides, Malaysia’s government tends to enhance the inclusiveness to ensure all of the
communities to benefit from national prosperity. The key challenge is to design a series of
effective mechanisms to balance the special status of indigenous peoples and the legitimate
interests of different groups. The government will adopt pro-market policies to help the weak,
including assistance to the bottom 40% of households in the economy. Among these families,
77.2% are indigenous and the people of Sabah and Sarawak. NEM's last aim is longevity,
which refers to existing generations fulfilling present needs without undermining the
generations in the future. And of that, policy must protect the natural wealth we are having
now from being misused. In turn, quality of life must be maintained and government steps
will be taken to improve the sector in order to achieve productivity and equity. (UKEssays,
2018)
The Malaysian Vision 2020, is an ambition program launched to turn Malaysia into a fully
developed country within 30 years. With the launching of Vision 2020, Malaysia’s
government tends to let their citizens have enough necessities such as food and shelter for
living purpose. Vision 2020 aims to eliminate poverty in Malaysia by catching up the gap
between rich and poor. It also aims to replace race association with main economic functions
and to have an equal distribution with regard to power, management and ownership of the
global economy. Thus, Vision 2020 was established to sustain an annual population growth
rate of 2.5 per cent and to double real GDP every ten years, between 1990 and 2020. The
ultimate target of Vision 2020 is to makes Malaysia become fully developed nation by 2020.
(UKEssays, 2018)
For NEM, there are having several challenges that would be an obstacle for achieving its
objective. Political will is one of the key and fundamental factors allowing the NEM to accept
improvements in this new policy. It is difficult for the government to attain the target in NEM

without the political will. It is stated in the NEM report that the political will and leadership
needed to break the log-jam of resistance and to prepare the people. In other terms, the
government must have determination to crack the log-jam of vested interest and rent-seeking
beneficiaries. If the log-jam of vested interest and rent-seeking beneficiaries still persists
during NEM's operationalization, it will cause injustice to only some group received the
advantage of NEM and this result would lead to the inability to reach the inclusiveness NEM
goals. Besides, another one of the challenges of achieving NEM goals is mindset which is
referring to the way people think. Through the NEM strategy, both the mindset of the people
and the mindset of the leader must be prepared for the change in Malaysian economy. Most
people in Malaysia do not realize that the Malaysian economies lag behind some of the
countries that are now experiencing emerging economies like China and India. This change
of attitude is the NEM's greatest challenge in achieving its goals, since NEM's
operationalization involves the participation of the entire country. Unless they are not able to
change their attitude, then the NEM strategy has great potential not to function smoothly or it
may struggle to achieve its goal. (UKEssays, 2018)
For Vision 2020, it also has few challenges that may stopped Malaysia for achieving its
goals. One of the challenges is the attempts of the Government to distribute resources are not
sufficiently successful to reduce the income gap. While Malaysia's income gap between the
rich and the poor is narrowing in, it is still one of Southeast Asia's highest income inequalities
country. With the rising cost of living, such disparities would seriously impact Malaysians
within the lower income brackets. Secondly, the lack of talent in the STEM fields (curriculum
for educating students) at the innovation and scientific development is one of the major
hindrances towards establishing a scientific and liberal society. Education plays a key role in
generating professional human resources for higher income and economic development. A
rise in the pool of talent would not only drive Malaysia to achieve a high-income economy,
but also to become a developed country. Colleges and universities in most developed
countries seek to encourage imagination among their students through a mix of
extracurricular activities. Unfortunately, Malaysia’s education system aims to producing
endless “As” for the existing and coming generations instead of focused on encourage
innovation. (You Jing, 2019)

2) Choose any FIVE (5) of the strategic thrusts of the Third Industrial Master Plan (IMP3)
and analyse how these strategies thrusts could help to further develop the Malaysian
manufacturing industry.
One of the strategic thrusts of IMP3 is stepping up the status of Malaysia as a major trading
country. The strategic thrust tends to develop and promote Malaysian brands and
strengthening exports by meeting international criterion. If Malaysian brands fulfil with
international standard, it will attract large numbers of people by having the intention to
purchase Malaysian products. Therefore, Malaysian manufacturing industry might generate
greater sales from it. When Malaysian products are well-known, the demand will increase
and it cause the raise for sales. So, Malaysian products are able to develop further which
means it can sell more to the overseas. Sales will increase and the profit earned can invest for
the development of Malaysian manufacturing industry. Besides, the strategic thrust aims to
nurturing domestic companies, including GLCs and SMEs, to become globally competitive.
When number and quality of domestic companies become greater, it will attract foreign
investment to Malaysian manufacturing industry and helps to move the industry forward.
Strategic thrust of IMP3 aims to integrating Malaysian companies into regional and global
networks by encouraging industries to concentrate within regional and international networks
on one core competencies and strengths. When industries concentrate within regional and
international network, it would increase the exposure of Malaysian manufacturing products to
outsiders. It also may attract investment from local and foreign countries. With the
investment, it helps to build stability for development of Malaysian manufacturing industry.
Thus, this thrust also can be done through the outsourcing, off-shoring and other types of
business practices. When most of the companies undertaking outsourcing and off-shoring,
they will experience lower labour costs and make real savings and concentrate more on their
core business. These manufacturing firms can continuously improve the quality of
development. So, it enables Malaysian manufacturing industry to develop further.
Strategic thrust of IMP3 also includes creation of innovative and creative human resources by
matching skills and abilities with business requirements and enhancing the availability of
technologically qualified, experienced, and ICT-trained workforce. When the supply of
qualified labour fulfils the market needs, the process of production will be very smooth
without any problems occurred. It helps to increase the production of Malaysian

manufacturing industry because the process of production is running smoothly. By acquiring
a lot of skilled labour in the in the manufacturing industry, it will enhance the making process
run effectively and efficiently. It ensures the quality of the new products and achieved the
economies of scale at same time. When the quality of products had guarantee, it helps to
enhance buyer’s confidence when purchase the product and therefore it helps to build a good
reputation for manufacturing industry in Malaysia. It will attract MNEs to invest in
Malaysian manufacturing industry due to the outcome of their production are having a good
reputation in foreign and local country.
Thrust also includes maintaining the manufacturing sector's contribution to growth by
accelerating the change to higher value-added goods and activities, and high-tech and capital-
intensive activities. It can be very cost-effective. By increasing the performance of
manufacturing industry’s equipment and processes, it can minimize energy consumption,
reduce production time, reduce waste, and use less material. Also, it helps save customers
costs so that they will support local’s manufacturing products rather than foreign countries.
With high value-added products, it makes the products become useful and able to attract
customers to purchase the products. It shows that the demand of manufacturing products will
increase and able to increase sales. For capital intensive activities, it includes automize
machine which means some of the workloads no need to rely on labour intensive. It helps to
save labour costs and increase the budget of development. Therefore, it helps to further
develop the Malaysian manufacturing industry.
Lastly, IMP3’s strategic thrust includes creating a more competitive business operating
environment by ensuring the efficiency and effectiveness of the delivery system. When the
process of delivery system run smoothly, customer would satisfy about it as they no need to
waste their time for waiting to receive the products. It would build a good image of the
company in their mindset and they would introduce to their friends. Therefore, it leads to the
increase in demand and able to have a healthy competition in the industry. When there is
having a great competition within the manufacturing industry, it would motivate the company
to enhance themselves to compete with other companies. Besides, a more competitive
business operating environment also can be done by ensuring greater transparency of
policies, rules and regulations. This will boost customer’s confidence towards the company
that have done such act because customers are clear with the rules and regulations that the
company stated and it will not cause any misunderstanding issues in the buying process. So,

the company can survive in the competition in the industry and also inspire its own
competitors. It makes Malaysian manufacturing industry having the ability to further develop.
3) There are FOUR (4) challenges faced by the Electronic and Electrical industry. If these
challenges are not addressed, discuss the probable negative impacts on the Malaysian
economy.
In Malaysia’s industrial development, electrical and electronics (E&E) industry has been a
key driver and driving supporter that contributes altogether to the development of export
earnings, investment, gross domestic products, and employment. Based on the research, 45.6
% of manufactured exports and 38.2% of total exports were accounted by the industry in
2018. Nevertheless, the ability is still limited to attract high-end investments due to these
existing challenges. Challenges facing by E&E industry in Malaysia includes limited research
and development, shortage and mismatch of qualified human resource, inadequate
infrastructure for high technology projects, and new rulling on “green” guidelines by the EU.
Malaysia’s economy might be affected badly if government are not able to address the
challenges faced by E&E industry. It caused slowdown in E&E industry when the challenges
are still existing.
Although exports in Malaysia are diversified with many commodities and manufacturers,
when there is a slowdown in the E&E industry, almost all export items are impacted at the
same time especially electrical and electronic products. Due to the huge amount of
manufacturing exports contributed for approximately 45% to the electrical and electronic
sector, this sector was going to have a major impact on Malaysia’s economy. Besides, the
competitiveness of E&E industry will drop when the growth in the industry slowdown. It
makes Malaysia’s income getting decrease as the falls in competitiveness of E&E industry
caused the industrial production drops. Therefore, the revenue of the E&E companies will be
reduced due to the slowdown of growth in E&E industry.
Thus, the challenges mentioned earlier will cause the investment decreases in the
manufacturing sector if have not addressed. Foreign investment is important to Malaysia’s
economy growth and employment. Malaysia’s GDP will drop if multinational company did
not invest in Malaysia and the standard of living of individuals will drops. The
unemployment rate will increase because of there is no investment from other foreign

countries. So, it makes individuals not able to earn income and therefore the standard of
living getting lower.
Moreover, employment opportunity in Malaysia might have negative impact when it faced
the slowdown of growth in E&E industry. Unemployment rate will increase due to the lesser
participation of E&E industries in export. It means Malaysia’s consumers will become lesser
and the demand of E&E goods will be decreased as well as the demand for labour too. Since
E&E business is labour intensive which mean this industry required a lot of workers. The
slowdown of growth towards E&E industry will make the workers concerned about their jobs
as the employers might be fired them and replaced them by foreign workers. It is because of
the salary that pay to foreign workers was lower compared to locals. (UKEssays, 2018)
In conclusion, it is difficult for Malaysia’s economy to move forward if the government fails
to address the challenges facing by E&E industry. When MNEs choose to not invest in
Malaysia E&E industry, Malaysia’s GDP will be fall when it is lack of sufficient investment.
It causes employment opportunity become less after the drop of investment from foreign
countries, and it makes the export revenue decreases.

4) FIVE (5) major strategic thrusts have been put in place for the Malaysian oil-palm based
industry. Examine how these strategic thrusts could help to increase the exports of Malaysian
oil-palm based products.
First strategic thrust to the foreign market is to broaden and diversify into a broader variety of
higher value-added palm oil products. When the selling range of higher value-added palm oil
products is wider, it would increase the exposure of Malaysia’s palm oil products. The
demand of Malaysia’s palm oil products will increase when the products are putting in a
wider range. Besides, higher value-added palm oil products are able to charge for higher
price as it contains higher value. So, it is able to attract high income level group from foreign
countries since they believe goods with high price are having an equal value. This would lead
to an increase in demand for Malaysian’s palm oils products. When more foreigners get know
about value of the products, they would import the products to their country. Therefore, it
helps to increase the exports of Malaysian oil-pal based products.
Second strategic thrust is raising the market share of Malaysian oil palm products and
develop new markets. When the market share of Malaysian oil palm oil products continues to
increase, it will prevent their rivals or substitutes from taking business from them. When
Malaysian oil palm products grows its market share, its popularity should expand to attract
new customers, its sales should rise, its customer base should increase. Customer base and
sales increase mean the demand of Malaysian oil palm products getting increase so the
demand curve shifted rightward. Furthermore, if the government develops a new market, it is
possible for the government to go abroad and trade with other countries. Then, new market
for Malaysian palm oil products exist and it can attract new potential buyers. It leads to the
increase in the demand of Malaysian palm oil products and helps to raise the export of the
products.
Third strategic thrust is encouraging outward investments and global marketing networks in
palm oil industry. It means Malaysian oil palm industry can extends its activities abroad by

promoting outward investments. This can take shape as an investment in a green field, a
merger / acquisition or the expansion of an established international facility. Since Malaysia
market become saturated, so it is able to acquire better business opportunities abroad to
generates extra sales. When promoting global marketing network, it brings Malaysian oil
palm products on global basis. It increases the exposure of oil palm products to customers
worldwide. This thrust also enables Malaysian oil palm industry to change rapidly when
required based on the consumer demands and trends in the global marketplace. When
Malaysian oil palm products are able to fulfil needs of customers worldwide, their demand
towards Malaysian oil palm products will increase. Therefore, export of Malaysian oil palm
products will be increase as well.
Forth strategic thrust is enhancing R&D in palm oil and commercialization of research
findings through collaborations with MNCs. It means that enhance and restructure the
products to meet local and foreign customer’s needs. By matching the needs of customer
worldwide, Malaysian palm oil industry able to attract many foreign customers to purchase
their palm oil products. Moreover, the collaborations with MNCs would also increase the
exposure of Malaysian palm oil products. Many outsiders will know the existence of palm oil
products in Malaysia. So, many foreigners will purchase Malaysian palm oil products and it
makes the export increases for Malaysian palm oil industry.
Fifth strategic thrust is strengthening institutional support and infrastructure to enhance
domestic capacities and capabilities of the industry. When Malaysia’s government allocates
more resources to the oil palm industry, it helps to improve the capacities and capabilities of
the industry. So, oil palm companies would have more spaces to increase oil palm
production. It ensures that the number of oil palm products is sufficient to meet the needs of
export. It also means the supply of oil palm products increase so Malaysia is able to meet the
needs of export worldwide. When there is having substantial demand of the oil palm
products, Malaysian oil palm industry do not need to worry shortage about the stocks of their
products as they have enough inventories to meet world’s demand. Other countries would
also dare to order huge amount for Malaysian oil palm products if Malaysia oil palm
industry’s supply is increasing to meet the needs of foreign. Therefore, export of Malaysian
oil palm industry will increase.