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M'sia needs to step up, invest more in technology: experts

Publication Date : 10-10-2012


The Malaysian government should look into providing more tax incentives to attract more high value-added technology into the country against the backdrop of fast-rising Asean countries such as Indonesia, Myanmar, Thailand and Vietnam, experts said yesterday.

The experts, who attended the Deloitte TaxMax forum discussion in Petaling Jaya, said the country would then progress into the next stage of development and rely less on cheap foreign labour to power up its crucial industries,

Deloitte managing director Yee Wing Peng said Malaysia needed to step up and invest more in technology “so that we can break away from the middle income trap.”

“We are neither here nor there; we can't compete with the advanced countries in terms of technology. We also can't compete in terms of low cost labour as we are outclassed. Investment in technology is key for our future success and sustainability,” Yee said at a press conference after the forum here yesterday.

Yee cautioned that should Indonesia be able to attract high-value added industries, Malaysia would be negatively affected eventually.

“Indonesia's government is stepping up to increase the value-added activities such as increasing the export levy for crude palm oil (CPO) because they want it to be further processed in Indonesia and be refined there.

“Moving forward, minerals like tin and nickel will not be exported in raw form but processed first,” he said.

“If they (Indonesia) step up the value added activities, then they will increase their exports from the present 25 per cent which will further hurt the Malaysian's ability to export,” Yee added.

Commenting further, the EU-Malaysia Chamber of Commerce and Industry chairman David Jones said an incentive was needed for investment in high-tech processing or manufacturing of equipment.

“Many are happy with the status quo today. As long as you can continue to employ cheap foreign labour for the country - (but) is this necessarily going to be an advantage for Malaysia going forward?

“I would argue that it's not because Malaysia is employing a lot of foreign labour on a contract basis and at the end of the contract period they have no interest of the long term future of Malaysia,” Jones said.

“If you're not careful, they will leave these companies both foreign and domestic (located in Malaysia) as they are starting to do now and will start (similar) operations offshore and they will start to go to places such as Vietnam and Indonesia as they continue to grow. Malaysia has to be wary of (this trend),” Jones added.

He also said Malaysia should take a leaf out of how Switzerland 50 year ago despite being one of the smallest countries in Europe had managed to transform itself from a purely agricultural economy to a high-value added country today.

“Switzerland was a largely agricultural economy but you wouldn't say that today.

“With a population of 7 million people and a small land mass, they continue to be innovative, move up the value chain and continue to be productive.

“Their products are not always the cheapest but everyone knows a Swiss product is of quality,” Jones said.

On another matter, RHB Research's chief economist Lim Chee Sing said that the Government needed to tackle its operating expenditure which stood at 97.8 per cent of revenue leaving only 2.2 per cent for developmental purposes to employ new sources of growth for the country's economy.

“Obviously, the tackling of the expenditure part is not sufficient up to (this) point.

“To reduce the deficit and lower the debt bubble, you need more revenue and among the ways are to broaden the tax base with the goods and services tax (GST), improving tax efficiency and rationalising taxes,” said Lim.


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