According to a joint study by KPMG and US-based The Manufacturing Institute, called “Cost of Manufacturing Operations Around the Globe”, Malaysia was ranked fourth out of 17 trading economies in terms of economic competitiveness as a manufacturing hub. Malaysia came after Canada, Taiwan, and South Korea, but ranked higher than other key countries in Asia such as China, Japan, and India.
The study evaluates 23 factors that impact the cost of operations, also known as the Cost of Doing Business (CoDB) of a business conducting manufacturing operations. Malaysia topped the list under the Primary Cost Index category by outperforming on three factors – hourly compensation costs, real estate costs, and corporate tax rates. Conversely, Malaysia ranked 11th on the Secondary Cost Index due to the quality of labor, infrastructure and risks, and protection. The overall CoDB Index scores are determined at an equal weightage of the primary and secondary costs.
KPMG Malaysia Managing Partner Datuk Johan Idris stated that to remain competitive, the Malaysian government shall continue its efforts to strategically improve the secondary factors, particularly in the quality of labor and infrastructure. Malaysia would be ranked the number one most cost-effective location in the CoDB Index if the country could change the weight of the primary costs and secondary costs from equal (50%–50%) to 70%–30%.
CEO of InvestKL Muhammad Azmi Zulkifli, who leads the Government Investment Promotion Agency, said Malaysia offers a thriving ecosystem for companies looking to locate their operations. There is a strong focus on advanced manufacturing and services which aims to push the industry up the value chain towards high-impact, high-tech, and sustainable activities. In the first six months of 2020, the country received a total of MYR 64.8 billion (USD 15.9 billion) worth of investments in the manufacturing, services, and primary sectors, of which manufacturing contributed more than half (55.1%) or MYR 35.7 billion (USD 8.7 billion).
(Sources: Edge Markets; Sun Daily)