Saturday July 21, 2012
Johor strengthens position as EMS hub
By ZAZALI MUSA
THE Government is deemed to be making the right decision to further develop, strengthen and position Johor to be a leading electronic manufacturing services (EMS) hub in Malaysia.
The move will not only reaffirm Johor as one of the preferred destinations for manufacturing-related activities in the country but also as a leading EMS hub in the region.
Deputy International Trade and Industry Minister Datuk Mukhriz Mahathir said recently that plans were already in the pipeline to make Johor as Malaysia's leading EMS hub.
EMS is a term used for companies that design, test, manufacture, distribute and provide return/repair services for electronic components and assemblies for original equipment manufacturers.
South Johor SME Association chairman Teh Kee Sim says the timing is right for Johor to move up the value chain in the manufacturing sector.
“By moving up (the value chain), Johor can attract more capital-intensive and high-technology investments to the state,” he says in an interview with StarBizWeek.
Teh says Johor has established itself in the electronics and electrical (E&E) manufacturing activities for years and now is the time to bring it to the next level.
He attributes Johor's position as one of the leading E&E manufacturing hubs not only in the country but also in the region today to the Japanese manufacturers.
Teh says it was due to the Japanese companies' business acumen about 20 to 30 years ago to set up operations in Johor that helped to establish Johor into what it is today.
He adds that the manufacturing sector will remain important to Johor as it has contributed immensely to the state's economic growth and progress over the years.
“But Johor cannot depend on the labour-intensive business anymore if it wants to progress in tandem with Malaysia's aspiration to become a high-income nation by 2020,” says Teh.
He says Johor has all the right ingredients to become a successful EMS hub not only in the country but also the region.
Teh says Johor's close proximity with Singapore is another added advantage to attract multinational corporations (MNCs) and Singapore investors to relocate their operations to Johor Baru.
He also hopes the Johor government and Iskandar Regional Development Authority (Irda) beef up their efforts and be more proactive to attract MNCs in China to relocate their operations to Iskandar Malaysia.
Teh says feedback from the association's business associate in China shows that many of MNCs especially those in the coastal cities are considering to leave China due to high operating costs there.
He says another reason is the trade barrier imposed by the European Union and the United States on “made-in-China” goods and many of the MNCs are looking for a third country to manufacture their products.
Teh says that by attracting more capital-intensive and high-technology investments, the small and medium enterprises (SMEs) in Johor will also benefit.
“Most of the MNCs are outsourcing their parts and components from us (SMEs) and support industries, so it's a win-win situation for all,” he says.
Teh say that while the manufacturing sector still requires assembly and production-related activities, the capital-intensive investments require knowledge workers and semi-skilled labour.
He hopes the Federal and Johor governments will first address the issue of shortage of semi-skilled and skilled workers faced by many MNCs here and SMEs to ensure the EMS project will succeed.
Teh says there is a shortage of engineers and technicians for the manufacturing sector in Johor Baru and attributes it to the mismatch between industries and the universities for not being able to produce a sustainable workforce.
“Being closer to Singapore also has disadvantages for Johor as many Johoreans and locals who made Johor Baru their home preferred to work in Singapore,” he says.
Teh says that waking up early to commute to Singapore daily and crossing the infamous congestion at the Causeway is not an issue for thousands of Malaysians working there due to better salary schemes there.
Teh quips the only time they come back to work in Johor Baru was when Singapore slipped into recession in 2008 and 2009.
“Like it or not we have to continue hiring foreigners to ensure our survival or else we have to hire skilled or semi-skilled workers from India or China,” he says.
Gan adds that with so many job opportunities available in the country, locals will only consider working in factories as the last resort, unlike in Indonesia or Vietnam, for instance.
He says that the only way for the company and many other manufacturers in Johor to overcome the issue is to continue providing training and invest in upgrading their workers' skills from time to time.
“But then, another issue will crop up. Those (locals) whom we have trained will be pinched by other companies or they cross over to work in Singapore,” says Gan.
He says the only resolution is to train foreign workers as they will have to stay with the respective company until their contract ends.
Gan adds that having trained many Indonesian workers over the years at the company's manufacturing facilities in Senai, it comes in handy when the company decided to set up operations in Indonesia.
“There are so many Indonesians who had workers in factories in Malaysia; hence these semi-skilled people are sought after by many MNCs in Indonesia,” he says.
Gan says the company does not face problems hiring 800 Indonesians at its first factory at the Jakabekas Cikarang industrial area in Bekasi, Jakarta, which is involved in surface mounting technology manufacturing activity.
He adds plans are already in the pipeline to hire between 1,500 and 1,800 workers for its second factory in Indonesia which is expected to be completed in the second half of 2013.
VS Industry is investing US$15mil this year on the new 200,000 sq ft factory also in Bekasi to produce sustainable energy storage fuse boxes for an American MNC.
“Back to the EMS hub, we hope the Government will come out with special incentives to attract more MNCs from all over the world to set up their operations in Johor,” says Gan.
He adds another issue that requires immediate attention from the relevant authorities is the shortage of skilled and semi-skilled locals to work in factories which has been bugging many MNCs in the country for years.
Land for EMS hubs
VS Industry, is one of the biggest and fully integrated EMS providers in Malaysia and saw its ranking in the Global Top 50 EMS providers in 2011 climb to 32nd place from 50th position in 2010.
It has nine manufacturing facilities in Johor, China and Indonesia, employing over 10,600 people and serves MNCs from Europe, Japan and the United States.
Meanwhile, the Johor government has identified 323.74ha in Sedenak belonging to the state investment arm Johor Corp and a site in Kulaijaya spanning over 404.68ha near the Senai Airport for the EMS hubs.
Statistics from the Malaysian Industrial Development Authority shows that it had approved 929 manufacturing-related projects for Johor from 2007 until April this year with RM41.48bil investment.
Of the RM41.48bil investment, RM14.99bil (14.4%) came from the domestic investors and RM26.49bil (15.3%) from foreign investors.
Out of the total number of approved projects for Johor, 506 or 54.5% were new investments while 423 were existing projects (45.5%) for additional investments and expansion purposes.
This accounts for 15% out of the RM276.54bil investments nationwide and Johor is in the second spot after Selangor when it comes to the manufacturing sector.