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Business Services

The Business Services sector continued its rapid growth trajectory in 2014 due to robust expansion of key players in the industry and grew 9.9 per cent in the past year, making it one of the fastest growing NKEAs. The Business Services NKEA contributed RM39.9 billion in GNI for the year and makes up 3.9 per cent of the country’s GNI.

The Business Services sector has been the second fastest growing sector in Malaysia over the past decade, with selected sectors such as green technology and data centres recording double digit growth.

This NKEA is on track to achieve the 2020 target of RM78.7 billion in GNI assuming a CAGR of 12 per cent.

A Note From the Minister

Malaysia has also gained further recognition as a hub for business services, as evidenced by a Memorandum of Understanding signed between the Malaysian Data Centre Alliance (MDCA) and the Japan Data Centre Council to exchange best practices and to cooperate in promotional events.

EPP Highlights
EPP 1: Growing Aviation Maintenance, Repair & Overhaul Services

Revenue growth did not reach expectations largely due to difficulties faced by the biggest aviation industry player – Malaysia Airlines. This impacted its unit, MAS Aerospace Engineering (MAE), which underwent major restructuring in 2014 and affected the overall industry growth. As a result, the industry achieved RM5.27 billion in revenues, or 96 per cent of the 2014 target of RM5.5 billion.

KEY TAKEAWAYS
The MRO industry is expected to receive a significant boost from the establishment of EPP 7 and the implementation of the strategies in the new National Aerospace Blueprint. Nevertheless, there is a need to address human capital development issues through improved alignment between regulators, industries and institutions of higher learning. This is to ensure that industry demand for the supply of skilled manpower is met, allowing the industry to grow. New strategies are also needed to strengthen the manufacturing subsector, accelerate the development of local SMEs and build up the global OEM presence in Malaysia to expand the country’s MRO capabilities and capacity.

EPP 3: Positioning Malaysia as a World-Class Data Centre Hub

The Data Centre (DC) space continued to record strong revenue growth in 2014, and achieved revenues of RM795 million against the target of RM785 million. This represented an achievement of 101 per cent against the KPI target, and the Malaysian DC industry has continued to experience 40 per cent growth for the past three years, ahead of the Asia Pacific growth rate of 16 per cent.

KEY TAKEAWAYS
Malaysia faces growing competition in the DC space. In order to maintain regional competitiveness, the industry must be supported in managing costs of doing business, particularly with regards to broadband and power. Prices for Malaysia’s dedicated server hosting bandwidth can be as much as 57 times more expensive than Singapore, while the threat of rising powers tariffs and current charges being offered at commercial rates, which are higher than industrial rates given to manufacturing companies, continue to pose challenges.

Malaysia faces growing competition in the DC space. In order to maintain regional competitiveness, the industry must be supported in managing costs of doing business, particularly with regards to broadband and power. Prices for Malaysia’s dedicated server hosting bandwidth can be as much as 57 times more expensive than Singapore, while the threat of rising powers tariffs and current charges being offered at commercial rates, which are higher than industrial rates given to manufacturing companies, continue to pose challenges.

EPP 6: Developing Malaysia as a Shipbuilding & Ship Repair Hub

Job growth was strong in 2014 as workforces expanded to cater to local demand, contributing to this EPP’s achievement of KPIs for job creation. The industry created 262 new jobs in 2014, against a target of 240.

KEY TAKEAWAYS
While Government incentives have proven instrumental in spurring the growth of the industry, more efforts are needed to attract investments and take the industry to greater heights towards attaining the 2020 target. Shipping trades slumped in the 2008 global economic crisis, showing that the industry is highly affected by global economic conditions. The declining oil prices could prove to be another dampener on industry growth, particularly in reducing the demands of oil and gas companies for additional OSVs.

Therefore, shipbuilding and ship repair industry players need to embark on providing more value-added products to remain competitive in the global market. Local players must strive to aggressively market their products and secure new build contracts without going through third parties, and must take the opportunity to penetrate the regional and global markets as a result of Malaysia’s Free Trade Agreements.

In addition, MIGHT will continue to work hand-in-hand with state Governments, particularly in improving communication and alignment of federal and state initiatives to make project implementation and future industry planning easier. Government support through various related Ministries and agencies is vital for the creation of a healthy industry landscape that will contribute to the growth of the shipbuilding and ship repair industry.

  • 1
    Growing Aviation Maintenance, Repair & Overhaul Services
  • 3
    Positioning Malaysia as a World-Class Data Centre Hub
  • 6
    Developing Malaysia as a Shipbuilding & Ship Repair Hub
KPI Achievement 2014
  • Method 1 96%
  • Method 2 89%
  • Method 3 75%
Business Opportunities 2015
  1. The green technology sector is expected to grow a further 10-15 per cent through implementation of the initiatives captured in the Green Tech Master Plan.
  2. Pure-play engineering services industry is expected to grow via expanded capacity and broadening of services to other sectors such as healthcare and oil & gas.
Critical Target 2015
  1. Securing one major FDI of a Data Centre
  2. 15% revenue growth in overseas sales for Shared Services & Outsourcing
  3. RM44 million worth of investments into Pure-play Engineering Services
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