Thursday, 29 September 2016

NAP 2014: Towards a design, innovation-based economy

In the first part, this article explained the historical rationale and general framework of the National Automotive Policy 2014 (NAP2014). At the heart of the policy was the propulsion of a design and innovation based automotive economy, working towards global competitiveness through the gradual liberalisation of the automotive sector.

The formulation of the NAP2014 was done through an arduous consultation process with all stakeholders of the automotive ecosystem. The engagement, performed over a three-year period, took into account inputs, views and interests of industry players, academic circles, government bodies and public participation.
This allowed for a fair assessment in the formulation of key development areas within the entire ecosystem, covering missing industry linkages, technology and human capital gaps, as well as innovation capacities across from the economic, policy and societal points of view.

A key lesson from the consultation process was the overwhelming clamour for a streamlined direction in allowing innovation to realistically materialize. Investment in technology and the necessary human capital development, is not a straight forward process, albeit a decision that all stakeholders were prepared to make to stay competitive, despite its high cost.

The automotive sector is extremely diverse, not just in its product range, but also the quantity of manufacturing process specializations it requires.
Furthermore, the infrastructure, manpower and skill levels were vastly different when comparing the manufacturing sector against the after sales sector.
It only made economic sense when technology goals are streamlined in a clear direction – allowing capacity building to take place based on an educated assessment of market opportunities and the risks associated with them.
This was one of the main reasons the NAP2014 was focused towards the creation of a regional hub for Energy Efficient Vehicles (EEVs).
It is now common knowledge that EEVs focus on any vehicle that meets a set standard of fuel consumption and carbon emission level.
The NAP2014 would allow business incentives to be directed towards technology and talent development that centres around energy efficient products and processes.
This would further spur targeted research and innovation led by the industry, in turn allowing increased participation from academia, research institutions and the public.

As mentioned in the first part of this series, the EEV policy was also tailored towards future demands in vehicle technology – fuel efficient, safe, secure and environmentally friendly.

The NAP2014 was not just formulated for innovation, but a business driven venture, with its first penetration point being the ASEAN region – a base of more than 600 million people which until today, had developed automotive industries with only cheap labour and commodities as its competitive advantage.
Overall, the policy was designed to allow Malaysia to emerge as a champion for sustainable mobility solutions in ASEAN.
It aims to further strengthen the current manufacturing and after sales sectors of the industry, tapping the wealth of skilled labour created by our education system, and streamlining research and innovation from the various institutions that has been set up in the country, through both public and private initiatives.

To make Malaysia a high income economy, it must provide high value jobs coming from high value businesses. High value businesses can only be created though policies that drive high value.

For Part 3, click here

The writer is the chief executive officer of Malaysia Automotive Institute.

Thursday, 22 September 2016

NAP 2014: Its roots and future

GOING GLOBAL: Automotive policy to spur country’s industrialisation

In 2006, the National Automotive Policy (NAP) was announced as a policy review for the three-decade-old industry that was created to spur Malaysia’s industrialisation.

The policy was necessary to keep up with shifts in the regional and global automotive industry networks. It was further reviewed in 2009 to create a more conducive investment environment in the domestic industry.

As the Malaysian automotive industry entered the 21st century, there was a key realisation – automotive industry was in the midst of globalisation, and that business practices and consumer purchase decisions were rapidly taking a different shape compared with previous business models.

Firstly, advances in production efficiency saw the influx of cheaper, more fuel-efficient models from Japan. This caused disruption in global markets, especially in markets traditionally dominated by continental and American models.

Secondly, the rise of oil prices created an urgent need for alternative powertrains in order to reduce dependency on fossil fuels.

Coupled with stronger demand for environmentally-friendly vehicles, the popularity of hybrid and electric vehicle technology increased, causing global car makers to quickly implement alternative powertrain programmes to keep abreast with latest trends.

As technology demands became more complex, carmakers soon realised that no single company could stand on its own feet, and that collaborative development of vehicle platforms and powertrains were the only way forward to stay ahead in the industry.

This led to numerous partnerships, such as the General Motors Group, Hyundai-Kia, Peugeot-Citroen and Renault-Nissan alliances, allowing cross-platform sharing and technology collaboration in a more cost-friendly environment.

The Malaysia automotive industry has established a significant and robust manufacturing base, with more than 10 original equipment manufacturers and 700 parts and component manufacturers operating nationwide.

However, the next step is braving the new economic order requires enhancement of in-house product designs and process development capabilities through out the supply chain.

Hence, the NAP 2014 was conceived as an update to the achievements in the industry so far.

The policy was announced under targeted approach that focused on Energy Efficient Vehicles (EEVs). This was to streamline the efforts of industry players, research institutions and government initiatives towards product and process technologies that were relevant to global trends of future powertrains, fuel consumption patterns and emission requirements.

This was done through six roadmaps that supplemented the NAP 2014 - containing guidelines to enhance technology, supply chain, human capital and after-market sectors.

It has been almost three years since the NAP 2014 was announced, resulting in tremendous excitement for both industry and consumers. The domestics industry continues to be robust despite the recent economic uncertainty.

There are now numerous new models assembled by Malaysian hands, and more vendors are proficient in lean production processes and soon will be establishing in-house product and tooling development capabilities, performed through collaboration in cyberspace. Consumers have wider choices in the cars they are purchasing today.

Most importantly, at the heart of the NAP 2014 is the drive towards a gradually liberalised, global mindset - as technological penetration moves at its fastest rate when the playing field is open to all players.

It will take time for us to transition from the clutches of protectionism, but it is designed to allow us to fly when we are free. "change is difficult but often essential for survival".

For Part 2, click here

The writer is chief executive officer of Malaysia Automtive Institute.

Thursday, 15 September 2016

Malaysia - A nation geared for competitiveness

Malaysia has come a long way, from a nation that achieved independence six decades ago, to what it is today – one of the fastest growing economies in the region, emerging as a high-tech industry-based economy, from its roots as a basic commodity producer of petroleum, tin and agro-based products.
Since independence, Malaysia’s gross domestic product(GDP) rose from merely US$1.9 billion (RM7.85 billion) in 1960 to US$296 billion in last year.
We are within the world’s 35 largest economies by GDP and also within the top 20 countries in terms of ease of conducting business, recording a trade surplus of RM94.3 billion last year with a total trade of RM1.47 trillion.
A significant factor for this growth has been sound economic policies that were geared towards global competitiveness through gradual liberalisation of the economy and the automotive industry is not spared.
The recent 2015-2016 Global Competitiveness Report (GCR) published by the World Economic Forum ranked Malaysia as the 18th most competitive economy in the world (6th in the Asia Pacific region).
Through the Global Competitiveness Index, it measures the economic institutions, policies and factors within countries that set the sustainable current and medium-term economic prosperity levels.
Interestingly, the GCR showed that Malaysia is among the top 10 countries in terms of goods market efficiency and financial market development.
Other notable pillars are our business sophistication, innovation and labour market efficiency.
Despite our overall high ranking, we must strive to improve our ability to compete in the globalised world.
It is noteworthy that despite upward trends in the GCR, we must improve in the areas of technological readiness and human capital development, especially within enrolment rate into secondary and tertiary education, as well as use of information and communications technologies.
The world is moving through the fourth industrial revolution in which competitiveness does not only require intellectual capital, but also a unified intellectual capital – one that must penetrate all corners of the nation and provides each member of society access to social upward mobility, while harnessing all forms of expertise.
From a strategic point of view, Malaysia’s automotive industry has evolved in function from merely spurring local production to becoming the final baton holder in creating a Malaysia that is a worthy contender in the high-technology industrialisation process.
Since the formation of Proton, which was centralised in Shah Alam, automotive industrial zones have been operational across the country, in Melacca, Kedah and Pahang.
There are more than 500 vehicle parts and components manufacturers nationwide.
Automotive technology has also started to penetrate Sabah and Sarawak, through the recent establishment of the transport innovation centre in Kuching, which will allow stronger participation in automotive research and development activities.
However, in the age of the Internet of Things (IoT) and Big Data, one factor must be managed - perception. As Malaysians, it is our duty to have a fair world view to remain competitive as the ability to make fair assessments as where we are and where we need to be will ensure that our relevance within the world’s economy is sustained.
Lastly, we must realise that no person, business or industry can survive alone in a vacuum.
To propel the nation forward, we recognise that each member of society, from all walks of life, levels and backgrounds – contribute to the nation’s wealth and knowledge in their own unique way.
I urge all Malaysian citizens to strive and excel in their own area of expertise and contribute to the pool of excellence that we have built since independence and for many years to come.
In order to ensure the continuous growth and prosperity of the nation and its citizens, let us iron out our differences and work together to make Malaysia the advanced nation it deserves to be.
The famous saying goes “Ask not what your country can do for you, but what you can do for your country.”
Happy Malaysia Day!
The writer is the chief executive officer of Malaysia Automotive Institute.

Thursday, 8 September 2016

Ecosystem sustainability key to economic prosperity

It is common that in uncertain economic times, there will be discussions and debates on the robustness of the economy and the future.
The fear of the unknown ahead naturally triggers the popularity  of polemic-based analysis towards economic administration during downward trends in the economic cycle.
The old adage that "to predict the future, we must look at history" becomes a relevant mind set in these times.
Throughout our history, Malaysia has survived numerous economic downturns.
Despite three major crises in recent decades, our economy had shown an overall upward trend over the last 40 years, recording a gross domestsic product of US$9.3 billion (RM37.8 billion) to US$296 billion in 1975 and 2015, respectively.
Interestingly, the gross domestic product increase was most rapid after the materialisation of the nation's industrialisation agenda, rising from US$72 billion in 1998 and continuing its rapid upward trend to what we see today.
Furthermore, our gross national income (GNI) per capita rose from US$3,420 in 2000 to US$10,600 last year - which is close to the World Bank's technical definition of a high income nation (US$12,475).
The key factor for economic prosperity is the sustainability of the business ecosystem.
Malaysia has enjoyed an 18-year trade surplus, at RM94.3 billion last year, with a total trade value of RM1.47 trillion.
This has created career enhancement for employees, better livelihood for families and increased government revenue that further strengthens the structural value of the business and social ecosystem.
Administrative costs, such as government expenditure and natioal debt may be argued as indicators towards future economic trends.
Despite its convenient polemic use, these figures do not often paint a holistic picture of the current state of the nation .
For example, higher government expenditure and sovereign debt may indicate increased efforts to stimulate the economy, and not reduce cost efficiency.
When the business ecosystem faces difficult times, it becomes strategic and natural for governments to play a more active role in business facilitation as this not only keeps businesses afloat, but also helps maintain stability of government income streams.
It is imperative to realise that Malaysia has come a long way since it moved from a commodity-based economy in the 1970s to what is wants to be in the future - an industrialised nation with high value income.
As we move closer to our 2020 deadline, the next key agenda is to enhance our exports growth by introducing more competitive, high value products and services into the global market.
The National Export Council, chaired by the Prime Minister, was set up to formulate strategies and measures to boost Malaysia's exports.
With respect to the automotive industry, the Automotive Export Enhancement Programme was introduced with the aim of exporting 150,000 vehicles by 2020, along with more than RM9 billion worth ox exports of new and remanufactured automotive parts and components.
This economic goal is meant for all Malaysians - to ensure that all of us participate in an economic growth that encompasses not just higher revenue, but higher value employment, localisation of industry as well as expansionof the market through exports.
In conclusion, it is important to realise that economic prosperity fluctuates in cycles, but holding the course and the strong belief in the industrialisation agenda is key to achieving such prosperity.
"A smooth sea will never make a skilful sailor"

The writer is chief executive officer of Malaysia Automotive Institute

Thursday, 1 September 2016

Intellectual unity vital to drive industry growth

The core stakeholders of the automotive sector - the industry players, academia and government bodies – have important roles to fulfill to ensure global competitiveness of the domestic industry. The synergy of all these factors contribute push-and-pull factors to each other to create a balance that drives technology acquisition and human capital development forward at a higher pace.

It is important to observe the key characteristics within the work methodology, field experience and financial mobility of each stakeholder, and derive the best direction to maximise their contributions and effectiveness towards the implementation of developmental projects that are scattered across the supply chain.

I have written previously about the importance of design capabilities among industry players within the domestic automotive supply chain in order to survive in the eventual and unavoidable liberalised global economy. 

However, developing design capabilities are an undoubtedly mammoth task, especially among small and medium enterprises, as they are competing in the shadow of more advanced nations that have had the luxury of an entire century to develop such capabilities.

This challenge is further exacerbated by industry needs to develop its design capabilities while overcoming daily operational hurdles - managing productivity, quality expectations and capacity constraints - rendering technology investments a risky venture to shoulder based on its operating cash flow, especially during uncertain economic times. 

It therefore becomes imperative that the greater intellectual ecosystem, comprising academia and government, is harnessed to expedite the development of domestic industry players, especially in research and development (R&D).

There are about 80,000 academics currently residing within our local institutions of higher learning, with more than a quarter holding doctorates across various fields. They comprise talents that are well versed with the proper methodologies of science, technology and innovation, and can be absorbed into collaboration with industry players to achieve the progression needed for competitiveness in the fields of product and process design, productivity solutions, as well as general enhancements within the automotive intellectual base.

As the same time, numerous publicly-funded institutions are ready to assist the industry, either from a technology standpoint, marketing, shared facilities and financial support. Organisations, such as the Standards and Industrial Research Institute of Malaysia, the Malaysia Productivity Corporation, SME Corporation Malaysia and Malaysia External Trade Development Corp, have been set up to ensure that local enterprises can reduce their risk averseness in developing high value R&D capabilities.

The ecosystem to develop global competitiveness is not just aimed at basic R&D capabilities. As the world now moves into the fourth industrial revolution, the design infrastructure needs to be developed and revolve around massive influx of data and cloud collaboration capabilities. As we expect the complexity of automotive products and processes to place data points and sensors in almost every component and system within the transportation infrastructure – making the Internet of Things and Big Data Management an important component of development.

Malaysia Automotive Institute (MAI) recently launched the MAI Intelligent Technology Systems (MITS) to facilitate collaborative development programmes between all stakeholders. An important component is the Design Engineering & Prototyping (DEP) programme, a platform that allows such collaboration among the intellectual pool of experts to produce globally competitive products in the cloud.

To conclude, it is important to observe that Malaysia’s infrastructure has been established to allow for a conducive environment of intellectual excellence. 

All it needs is a concerted efforts from all stakeholders to ensure that intellectual unity is harnessed towards global competitiveness.

Every individual has strength and weakness. However, if we unite these individuals into an intellectual collective, the strengths shine and the weaknesses disappear.

The writer is the chief executive officer of Malaysia Automotive Institute.