Business Services - ETP Economic Transformation...

BusinessServices

164 ETP ANNUAL REPORT 2012

BusinessServices

The Business Services NKEA represents an important catalyst in Malaysia’s development towards high-income nation status. It focuses on accelerating the growth of selected, specialised

economic sectors in which the country can carve a sustainable and competitive global niche.

In 2012, this NKEA documented achievements which put it well on track for a target contribution of RM78.7 billion to

Gross National Income (GNI) by 2020.

Among key highlights during the year include the establishment of Malindo Airways by home-grown aviation pioneer, NADI (National Aerospace and Defence Industries), and Indonesia’s Lion Air. The aviation maintenance, repair and overhaul (MRO) services industry also saw the emergence of a new domestic player AIROD Aerospace Technology. Both these moves are seen to help Malaysia’s MRO services industry further take flight.

Fruitful efforts were also witnessed in drawing new foreign direct investment, with global research and consulting firm Frost & Sullivan setting up its Global Innovation Centre for Excellence in Iskandar Malaysia. Other foreign firms, AIG, Chartis and AIA, also expanded their shared services centres in Malaysia during the year, providing continued momentum for the growth of the outsourcing sector.

In areas such as aerospace and automotive engineering services, local champions Strand Aerospace Malaysia and DreamEdge Sdn Bhd strengthened their businesses through expansion in France and Vietnam, while also diversifying their service offerings.

The developments in 2012 bode well for this NKEA going forward. With these accomplishments and further efforts underway in creating new areas and sustainable economic growth, it is envisioned that Malaysia will not only achieve developed-nation status by 2020, but emerge as a global leader in a diverse range of sectors and segments.

Datuk Seri Dr S. Subramaniam

Minister of Human Resources

ETP ANNUAL REPORT 2012 165

NKEA: Business Services Minister’s Message

Human capital represents an integral component in achieving this goal, and Business Services plays a major role in nurturing innovation and broadening the country’s knowledge and skills base. This is essential to the development of a high-income and high-value economy. It also extends Malaysia’s export portfolio beyond traditional commodities and manufactured goods to include Maintenance, Repair and Overhaul (MRO), Business Process Outsourcing, and Knowledge Process Outsourcing services as well as other offshoring activities.

As Business Services cut across various industries and professions, it is also central to efforts in raising productivity and enhancing overall economic competitiveness. In Malaysia, Business Services has been the second-fastest growing sector in the past decade, expanding at an average annual rate of 7.9 per cent. IT services and outsourcing formed the largest sub-segment, accounting for 37 per cent of the sector’s GNI contribution.

Initiatives introduced under this NKEA are intended to grow the sector’s GNI contribution by fourfold to RM78.7 billion by 2020, through six Entry Point Projects (EPPs) categorised under two themes: “accelerate the growth of differentiated sectors”, and “develop future segments”.

BUSINESS SERVICES

The first theme focuses on areas where Malaysia has existing capabilities and comparative advantage, and covers MRO services, Outsourcing in Business, IT and Knowledge Processing and Data Centres.

The second exploits opportunities in segments that boast high potential for future growth, exports and job creation. These encompass Pure-play engineering design services and Green Technology. In 2012, the NKEA added another sub-sector, shipbuilding and ship repair.

While this NKEA recorded significant achievements in 2012, the increasingly competitive global environment and slowing economic growth in many markets, place emphasis on the need to redouble efforts under Malaysia’s Business Services offerings.

However, with strong foundations already laid, the outlook remains positive for this NKEA to continue with its momentum going forward.

Business Services represents a critical sector in Malaysia’s goal towards becoming a fully developed nation by 2020, expanding the country’s areas of specialisation into new, untapped sectors.


2012 Key Performance Indicators

NKEA Business Services KPI (Quantitative)

No. KPITarget(FY)

Actual(YTD)

Achievement

Method 1 Method 2 Method 3

% %

EPP #1

Revenue from Fleet Technical Management – RM million

300 286 95 • 95 • 0.5 •Revenue from training centers – RM million

18 20.7 115 • 100 • 1.0 •Revenue from Airframe MRO (Line and Base maintenance) – RM million

1,200 1,238.6 103 • 100 • 1.0 •Revenue from Engine MRO – RM million 1,600 750 47 • 47 • 0.0 •Revenue from Components MRO – RM million

1,227 1,404 114 • 100 • 1.0 •EPP #2

Overseas sales revenue – RM million 1,011.2 1,252.9 124 • 100 • 1.0 •Number of jobs created 8,000 9,512 119 • 100 • 1.0 •

EPP #3

Increment rack-space: Data Centre White Floor Space – square feet

150,000 150,600 100 • 100 • 1.0 •Data Centre Organizational Certifications

11 8.8 73 • 73 • 0.5 •Total DC services revenue – RM million 395 450 114 • 100 • 1.0 •

EPP #4

Number of jobs created 4,000 7,696 192 • 100 • 1.0 •Revenue generated from main sources of segmentation e.g. RE/EE/SWM/GTFS – RM million

1,788.8 3,657 204 • 100 • 1.0 •Establishment of accreditation framework for ESCOs

100% 100% 100 • 100 • 1.0 •(more on next page)


NKEA: Business Services Overview

Exhibit 8.1

(continued from pevious page)

NKEA Business Services KPI (Quantitative)

No. KPITarget(FY)

Actual(YTD)

Achievement

Method 1 Method 2 Method 3

% %

EPP #5

Revenue for Strand Aerospace Malaysia Sdn Bhd (SAM) – RM million

19.15 16.18 84 • 84 • 0.5 •Investments for Strand Aerospace Malaysia Sdn Bhd (SAM) – RM million

3.5 3.5 100 • 100 • 1.0 •Revenue for DreamEdge Sdn Bhd (DESB) – RM million

14 16.28 116 • 100 • 1.0 •Investments for DreamEdge Sdn Bhd (DESB) – RM million

2.16 2.98 138 • 100 • 1.0 •114% 94% 85%

Method 1 Scoring is calculated by a simple comparison against set 2012 targets. The overall NKRA composite scoring is the average of all scores

Method 2 Scoring is calculated by dividing actual results against set 2012 targets with an added rule: • Ifthescoringislessthan100%,score#2istakenastheactualpercentage • Ifthescoringisequalormorethan100%,score#2istakenas100%TheoverallNKRAcomposite

scoring is the average of all scores

Method 3 Scoring is calculated by dividing actual results against set 2012 targets with an added rule: • Ifthescoringisequalandlessthan50%,score#3isindicatedas0 • Ifthescoringismorethan50%andlessthan99%,score#3isindicatedas0.5 • Ifthescoringisequalormorethan100%,score#3isindicatedas1


The goal of this EPP is to develop Malaysia into a regional aviation MRO services hub, capitalising on global market growth projected to reach RM205 billion in 2020 at a compounded annual growth rate (CAGR) of 3.9 per cent.

Malaysia is well-positioned to be a competitive regional MRO hub in view of the many new aircraft purchased by local airlines. This creates a demand for the MRO sector as these aircraft are serviced in Malaysia. In addition, there is an increasing number of new MRO players to match demand, coupled with an expansion of Tier 2 and Tier 3 supplier and airframe MRO capabilities.

There is also greater development of Malaysia’s airport infrastructure with growing air traffic, availability of land and the creation of a more conducive operating environment through improved tax and civil aviation regulations which continue to make the country a preferred MRO destination.

To further improve industry structure and regulations, the Department of Civil Aviation Malaysia (DCAM) has embarked on adopting the European Aviation Safety Agency (EASA) standards. In this regard, DCAM has engaged a consultant to review any civil aviation regulations to be replaced, aimed at keeping abreast with international standards.

DCAM is also in the process of introducing an E-exam platform to expedite licensing, such as for new aircraft engineers. This will allow some 1,500 aircraft engineering students to be tested and receive their results faster, while helping to ensure there is ample supply of talent to fill human capital needs in a timely manner. Additionally, the online exams will be prepared and updated frequently, utilising EASA standards as a reference.

On the industry’s part, an Industry Working Group (IWG) meets on a monthly basis to discuss issues including domestic and international business developments and human capital needs. Established in August 2011, the IWG is led by MAS Aerospace Engineering (MAE), with AIROD as Deputy Chair and another six MRO and MRO-related companies as members.

ENTRY POINT PROJECTS

Achievements and ChallengesThis EPP marked a number of achievements in 2012 by both market players and regulators. These achievements led to improvements in the industry’s structure and its regulation, expansion of the MRO ecosystem and its geographic reach, and the offering of higher value-added services.

Sepang Aircraft Engineering (SAE), an MRO service provider owned by EADS (European Aeronautic Defence and Space Company), secured EASA 145 certification, a standard for the certification and operation of an aircraft maintenance organisation. The certification will allow SAE to expand its service to more airline operators, further boosting third -party business revenue. It also creates potential for the company to establish a regional presence and ability to compete in servicing A320 and A330 aircrafts and potentially, A380s.

NADI, a pioneer of Malaysia’s aviation industry and the parent company of Malaysia’s flagship MRO service provider AIROD, teamed up with Indonesian budget carrier Lion Air to establish Malindo Airways, Malaysia’s second low-cost airline.

NADI also established a new domestic MRO service provider, AIROD Aerospace Technology (AAe). AAe is seen to strengthen the market’s large-scale MRO operations, complementing other local players and boosting Malaysia’s profile as a MRO location. Meanwhile, AIROD secured a contract to provide its services for overhauling helicopter engines belonging to the US’ AAR Airlift Group, which provides aviation services to Government and defence customers.

Growing Aviation Maintenance, Repair and Overhaul Services (MRO)

EPP 1

Sepang Aircraft Engineering (SAE) hangar in Sepang


NKEA: Business Services EPP 1

In spite of these positive developments, this EPP still saw its share of challenges during the year. For one, the reversal of the MAS and AirAsia share swap has led to some uncertainty in MAE’s operations, impacting procurement of third-party business and future expansion plans, including potential joint ventures. Nonetheless, it is envisaged that MAE’s current cost rationalisation exercise and existing strategic partnerships with target companies in key business segments will provide further business opportunities going forward.

Further challenges faced by the MRO industry include new engine options for next-generation aircraft and competition from original equipment manufacturers (OEMs), with increasing competition from OEMs in aftermarket sales seen as a risk to MROs’ market share. Rising labour costs is also seen as a challenge to the industry.

Moving ForwardThe introduction of new incentives and the enhancement of the regulatory framework will help enhance MRO players’ capabilities in key business segments and create niche markets, thus boosting their competitiveness. Coupled with the expected entry of two new foreign MRO players in the first half of 2013, the industry is also projected to see improved margins, especially in the area of composite materials repair.

Additionally, Eurocopter’s MRO facility at the Malaysia International Aerospace Centre will expand current fixed-wing MRO services to include rotary wing services, putting Malaysia on the regional map of Eurocopter’s products.

As part of efforts to meet manpower demand and promote human capital development, the MRO IWG has proposed to improve students’ access to education financing through loans or scholarships. In addition, MAE is ramping up its regional training centre to enhance the capabilities of aircraft engineers and technicians. For 2013, this EPP targets RM380 million in revenue from fleet technical management and almost RM2.4 billion in revenue from airframe MRO (line and base maintenance) and training centres in 2013.

AIROD Aerospace Technology (AAe)

AAe will provide a range of MRO services to third-party operators, such as General Electric Capital Aviation Services, Sriwijaya, whose significant fleet size and existing orderbook will help increase AAe’s revenue and provide substantial opportunities to leverage international third-party business.

This will in turn extend Malaysia’s capabilities for MRO services to next-generation aircraft. It also expands Malaysia’s MRO global footprint.

AIRODAerospaceTechnologyhangarinSubang


While the global outsourcing industry has emerged as a crucial component in increasing business efficiency, Malaysia has only captured 3.9 per cent of the Asian outsourcing market (excluding Japan); missing out on the projected 12 per cent annual growth of the Asia-Pacific outsourcing industry.

Nonetheless, Malaysian companies are in the midst of developing a competitive advantage in a number of areas in outsourcing, namely financial services, oil and gas, and logistics. This EPP will focus on the areas of business process outsourcing (BPO), IT process outsourcing (ITO) and knowledge process outsourcing (KPO), with the view of creating a globally competitive outsourcing industry and establishing Malaysia as an offshoring and outsourcing hub.

Building Globally Competitive Outsourcers EPP 2

The initiatives under this EPP are both Government- and industry-led, aimed at enhancing industry capability and credibility and fostering greater competitiveness. MAMPU, an agency under the Prime Minister’s Department, has been entrusted with leading the consolidation of the Government’s IT and non-core business processes, targeting 30 per cent in cost savings by 2020.

Local outsourcing industry leaders Multimedia Development Corporation (MDeC) and Outsourcing Malaysia (OM) also play a role in ensuring Malaysia’s continued attractiveness as a global outsourcing and offshoring hub. This will support the activities of foreign multinationals and Malaysian companies with regional and global ambitions. Together with efforts under the Human Capital Development SRI, upskilling programmes were developed to ensure the necessary industry-related competencies are fulfilled.

Achievements and ChallengesThe measures undertaken for this EPP delivered encouraging results in 2012 from both Government-and industry-led initiatives.

GovernmentOutsourcingThe 1GovUC (Government Centralised Unified Communication System) project was launched in April, in which TM Bhd will implement a two-year effort to consolidate Government communications. This will improve service delivery while reducing information, communications and technology (ICT) operational costs.

The launch of 1GovUC was followed by the start of operations of Government Data Centre (GDC-1) in May. The facility is aimed at consolidating Government ICT infrastructure. Under the same initiative, the contract for GDC-2 was awarded to Strateq Sdn Bhd, which will manage a Government data and disaster recovery centre under a two-year contract.

Exhibit8.2:ThetargetoutsourcingservicesfrombasicITOtoKPO

Value

KnowledgeProcess

Outsourcing(KPO)

BusinessProcess

Outsourcing(BPO)

IT Outsourcing(ITO)

Example of Services



IndustryGrowthIn 2012, the industry saw the entry of new foreign direct investment from Frost and Sullivan and the expansion of shared services by AIG, Chartis and AIA. The companies’ establishment and expansion of shared services centres in Malaysia will create over RM100 million in investments and over 2,000 new jobs, in addition to raising Malaysia’s profile as a world-class centre for outsourcing services.

These investments are significant as it comes in the face of the global economic downturn, which has threatened the Asia-Pacific outsourcing industry as growth remains sluggish in Europe and the US.

Despite these achievements, while Malaysian players have established themselves in the market and built expertise in their field, they still lack the scale and scope required to compete with traditional industry powerhouses, such as those from India.

Moving ForwardMAMPU, which is developing the blueprint and framework for the outsourcing of Government’s non-core business processes, has commissioned a study to identify the scope and scale of the initiative, which is expected to be completed by the end of 2Q2013.

MDeC and OM will focus its ongoing industry initiatives on two key thrusts: Maintaining a competitive environment in Malaysia to attract foreign investment in outsourcing; and increasing the competitiveness of local companies by enhancing their scale, credibility and market reach.

As part of these initiatives, leading local companies will be benchmarked against global standards set by the International Association of Outsourcing Professionals (IAOP). This will be used to strengthen their profile and develop enhancement programmes.

Efforts will be taken in 2013 to help the local outsourcing players build scale via a mergers and acquisitions programme in addition to increased promotions to international markets.

The Asia-Pacific region has demonstrated promising growth in the data centre (DC) market, with revenue projected to rise by 16.3 per cent annually to reach US$3.4 billion in 2014. EPP 3 aims to capitalise on this opportunity by making Malaysia the preferred destination for DC investors and increasing the supply of internationally certified DC space in Malaysia.

Initiatives undertaken through this EPP aim to address the supply and demand of DC services. On the supply side, EPP 3 has attended to the cost of doing business by engaging with stakeholders such as telecommunication firms, energy firms, landowners, regulators and the DC players themselves. A key area of focus here included addressing bandwidth costs to enhance the operational efficiency of DC firms.

In order to increase awareness of the local DC industry and thus drive demand, media campaigns have been implemented, while a study has commenced in an effort to better understand customer needs.

Currently, DC facilities are undergoing an international certification process, with eight data centres obtaining International Data Centre Organisational Certifications in 2012. These are aimed at adding value to the DC facilities as well as increasing the capabilities and credibility of these data centres.

Achievements and Challenges A number of data centres were launched in 2012, adding more than 150,000 square feet in new DC capacity spread across Cyberjaya, Petaling Jaya and Mont’ Kiara.

As at December 2012, Malaysian DC facilities obtained eight more DC certifications, including the Uptime Institute Tier III Design Certification, Green Building Index certification and ISO 27001: Information security management system. In October 2012, the Maxis/HDC Uptime Institute Tier III certified DC was launched, representing the first facility in Malaysia and only the second in ASEAN to achieve the Uptime Institute Tier III Design certificate.

Additionally, efforts to engage telco providers to offer competitive bandwidth costs have led the telcos to offer a special pricing model for DCs. This is expected to boost the global competitiveness of local players.

Positioning Malaysia as a World-Class Data Centre Hub

EPP 3


In November 2012, the Malaysian DC Alliance was established, representing a unified voice for the DC industry. The Alliance is expected to further drive the creation of a conducive environment for the growth of Malaysian DC services.

In September 2012, the Malaysian Data Centre Directory was officially launched (http://datacentre.my/), representing a one-stop guide to Malaysia’s data centre providers. The guide has been well-received and translated into Japanese to attract clients from Japan.

The focus on drawing Japanese clients is part of a wider goal to attract more foreign investors and customers to the Malaysian DC market. This is to address the lower take-up of Malaysia’s DC services by international customers compared to that of local customers. This represents a key concern for this EPP, and is coupled with the need to create a more efficient operating environment which minimises business costs, such as for Internet bandwidth and electricity.

Moving ForwardIn the year ahead, this EPP will spearhead the establishment of DC Parks, with Iskandar Malaysia and Cyberjaya earmarked as locations for the facilities. The main objective of the establishment of these facilities is to aggregate bandwidth utilisation in an effort to lower data centre operational costs.

While efforts will be taken to nurture the local DC market, ongoing measures to market Malaysia’s DC services abroad will also continue. International conferences are being planned for 2013 in partnership with globally recognised event partners, starting with the Second Data Centres Malaysia Summit by BroadGroup UK in January.

Project By White Space New Built-up Capacity

CSF CX5, Cyberjaya 67,000 sq ft 201,000 sq ft

CJ1 Centre by MyTelehaus, Cyberjaya 38,100 sq ft 38,100 sq ft

NTT MSC Cyberjaya3, Cyberjaya 17,500 sq ft 17,500 sq ft

CRF Disaster Recovery Data Centre, Petaling Jaya 20,000 sq ft 20,000 sq ft

Safehouse Data Centre, Mont’ Kiara 1,000 sq ft 5,000 sq ft

AktifNet Data Centre, Bandar Utama and KL Sentral 3,300 sq ft 3,300 sq ft

Patimas Data Centre, Technology Park Malaysia 2,700 sq ft 2,700 sq ft

Finexus Data Centre 1,000 sq ft 1,000 sq ft

Total 150,600 sq ft 288,600 sq ft

Exhibit8.3:Listofdatacentreslaunchedin2012andtheircapacity

CSFGroup’sCX5datacentreinCyberjaya,launchedinJanuary2012withover200,000squarefeetofsellabledatacentrespace

NTTMSC’s‘RimbaDigital’datacentrelaunchedinApril2012,with17,500squarefeetofsellabledatacentrespace



As the way forward in resolving global energy needs, the green technology industry is an important area in which Malaysia must harness an early-mover advantage. Representing a multi-billion dollar industry globally, there remain tremendous opportunities for growth in this market. It is therefore imperative for Malaysia to tap its vast potential to develop sustainable green technology solutions.

Recognising the importance of this industry going forward, Malaysia took early steps to spur the local industry, including by establishing the Ministry of Energy, Green Technology and Water (KeTTHA) in 2009 and creating the Green Technology Council, chaired by the Prime Minister. The focus now is to raise Malaysia’s profile as an Asian green technology hub and increase local industry capabilities.

Achievements and Challenges The International Green Technology and Eco Products Exhibition and Conference (IGEM) is an annual event by KeTTHA. First held in2009, IGEM 2012 is aimed at creating awareness amongst consumers and industry players on the importance of green technology. The event also targeted to encourage the rapid adoption of green technology to help achieve sustainable economic growth while addressing environmental and energy security issues.

Jump-Starting a Vibrant Green Technology Industry

EPP 4

366 companies comprising 214 local and 152 foreign companies participated in IGEM 2012. RM1.32 billion in potential business opportunities arose through Business Matching Sessions held at the exhibition, while seven Memoranda of Understanding in various fields of green technology were signed.

The Green Technology Funding Scheme (GTFS), which was established by the Government in 2009 to kick-start and offer companies to access financing, has now been extended beyond 2012 to 2015. Since its implementation, 251 applications have been processed and 219 companies have received Green Certification. Out of this number, a total of 76 projects have been approved loans from related financial institutions with a total funding of RM1.02 billion. These figures show that more local companies, especially small and medium industries (SMIs), are embarking on and benefiting from green technology-based businesses. The fund is now worth RM2.6 billion, and offers a 60 per cent loan guarantee and a two per cent rebate from the Government on total interest rates.

To further improve the fund’s uptake, Malaysian Green Technology Corporation (MGTC) has embarked on measures including updating GTFS criteria for paid-up capital, standardising investment templates and increasing promotions of this fund to both users and producers.

This EPP also saw the implementation of the Energy Service Companies (ESCO) accreditation framework by the Energy Commission, aimed at improving the quality of services offered by green technology firms, increasing consumer confidence and regulating the industry.

These achievements however do not imply that the green technology industry is fully prepared to take off in Malaysia. For one, pricing and business viability remain a concern in offering sustainable energy solutions. Furthermore, the implementation of the Energy Efficiency and Conservation Act remains uncertain, resulting in the absence of strategic policy tools and regulatory oversight to help achieve energy efficiency.

Moving ForwardIn 2013, KeTTHA and MGTC will focus on ensuring that the value of loans disbursed under the GTFS surpasses RM300 million. KeTTHA, via the Electrical and Electronics NKEA, will also facilitate the implementation of the electric vehicle roadmap, creating tremendous spillover effects to the services sector.

Benefits of ESCO accreditation framework:

Develop professional and qualified ESCOs and energy •auditors or managers

Enhance the standing of ESCOs, particularly energy •auditing services

Support services procurement and selection procedures•

Support public sector incentives to promote energy •efficiency

Reduce waste and false claims against industry players•

IGEM 2012

The exhibition focused on eight sectors, namely energy, transportation, water management and solid waste management, building, eco-products and services, green financing, ICT and manufacturing. Among other events held during the exhibition were international business matching, green career matching, and seminars and workshops.


Additionally, in collaboration with PEMANDU, KeTTHA will target foreign investment in waste water treatment and management to help create alternative water resources for current and future demand. In the area of solid waste management, the Government via the Ministry of Housing and Local Government will issue tenders for the construction of new solid waste treatment plants. This is to reduce the amount of waste destined for landfills, thus reducing the impact of greenhouse gases.

The Malaysian Industrial Group for High Technology (MiGHT) will continue considering potential companies for offset projects. These companies have been referred to it by MGTC, following the signing of a Memorandum of Understanding (MoU) between MGTC and MiGHT in July 2012. The MoU allows green technology start-ups unable to access financing through financial institutions to tap offset contracts administered by MiGHT.

EPP 5 aspires to create globally competitive aerospace and automotive engineering services companies by promoting market conditions that attract high-value engineering services to Malaysia. This is to capitalise on the rapidly growing global market value of the aerospace and automotive engineering services industry, which is forecast to surpass RM960 billion by 2020.

Efforts from this EPP have seen the development of Strand Aerospace Malaysia (SAM) and DreamEdge Sdn Bhd (DESB). These companies have grown their engineering workforce to over 100 each, from less than 10, since the start of the ETP. Both are now considered Tier 2 companies for design engineering and have expanded their reach to Europe and Japan.

Achievements and Challenges In 2012, SAM signed resourcing agreements with two French aerospace companies, Snecma and AKKA Technologies, to provide services including aircraft engine and structural components design. The company has also been approached by major firms such as Atkins, the sixth-largest global engineering services firm, to explore opportunities in strategic long-term collaboration.

In its bid to diversify its expertise, SAM has also begun providing engineering services to oil and gas firm SBM Offshore. SAM has also teamed up with Dassault Systèmes and Khazanah Nasional Bhd to develop a smart city in the Iskandar region and commenced discussions with Boustead Engineering to offer maritime product life-cycle management solutions.

Nurturing Pure-Play Engineering ServicesEPP 5

DESB meanwhile has consistently delivered strong results, with revenues of over RM24 million in just two years. The company continues to engage its strategic partnership with NISSAN Japan, and has signed an agreement with NISSAN Techno in Vietnam, which will offer more design engineering work to DESB.

In the field of CAD/CAM dentistry, DESB has emerged as the first company outside of Japan to be awarded with an outsourcing project for a dental CAD/CAM system. This follows the establishment of its Digital Dental Solutions Centre, underlining its ability to diversify into other engineering verticals. The centre is the first purpose-built facility of its kind in Malaysia, facilitating research and development, fabrication and human capital development.

DESB also received renewed commitments from PROTON and Scomi Rail for more resourcing projects, such as for SCOMI’s monorail projects in Mumbai, India; Sao Paolo, Brazil; and Kuala Lumpur, Malaysia. DESB is also working closely with Siemens to provide capability on mass rapid transit (MRT) works. Its diversification strategy, meanwhile, has resulted in the company working with Boustead Heavy Industries Corporation Bhd in shipbuilding and ship design, focusing on product life-cycle management solutions.

SAM and DESB’s increasing expertise and growing scope of work however mean that both firms must strive for competitiveness, sustainability of their business models and continued growth and diversification in their capabilities.


NKEA: Business Services EPP 4 – EPP 5

SAM, which is exposed to the European markets, will also need to ensure that its business model remains flexible and resilient against external shocks, while both SAM and DESB must ensure responsiveness towards the potential of new entrants to the market. DESB in particular will also need to bolster its current capabilities to differentiate and protect itself in an increasingly competitive market.

Moving ForwardSAM is expected to penetrate new markets such as France and Germany as it elevates itself to Tier 2 vendor status. It will also hire experienced trainers and develop a more cogent training syllabus for engineering services, while offering specialised solutions in new industries including oil and gas, rail transport, and maritime and urban management to counter thinning margins and cyclicality.

DESB, in partnership with Tokyo R&D Japan, will develop motorsport R&D capabilities for racing cars, with a prototype to be shipped to Malaysia by early 2013. The company has also developed its own electric vehicle, with its first prototype set for rollout in February 2013.

This EPP was introduced in 2012, following the rapid growth of Malaysia’s local shipbuilding and repair industry. In 2011, the industry generated turnover of about RM7.05 billion and about 32,500 jobs. It has also attracted investments worth RM6 billion.

Through initiatives led by Boustead Heavy Industries Corporation Bhd (BHIC) and Boustead Naval Shipyard Sdn Bhd, Malaysia’s growing market share of the industry off the Straits of Malacca and in the offshore vessel market off East Malaysia is expected to increase the country’s 1.11 per cent share of the global market for shipbuilding and repair.

Among initiatives that have been undertaken under this EPP include the development of in-country design capabilities for Offshore Support Vessels (OSV), with BHIC and Boustead Naval Shipyard to train up to 160 engineers and technicians in shipbuilding and ship-repair. This measure seeks to develop the first Malaysian-designed OSV.

This EPP will also focus on providing competitive pricing, enhanced facilities and increased capabilities for the shipbuilding and MRO market to cater to the growing industry.

Developing Malaysia as a Shipbuilding and Repair Hub

EPP 6

Achievements and Challenges Although this is a new EPP, in 2012, BHIC and Boustead Naval Shipyard recruited over 80 engineers and technicians to help develop future capabilities in catering to external contracts.

A challenge for this industry, however, is for local shipyards to upgrade their capability and capacity to satisfy shipowners’ quality, cost and delivery expectations. Local players will also need to improve their capabilities to aid their expansion into new markets.

Moving ForwardThe target is for Malaysia to be a global shipbuilding player in niche products and services. The enhancement of design capabilities will catalyse the growth of a new market for local design houses, and more importantly, phase out Malaysia’s dependency on foreign designs or brands.

DreamEDGECADroomandtrainingcentreinTaiping,Perak


Business Opportunity 1:Multi-DisciplinaryPracticeConstructionDuring the year, PEMANDU worked closely with HSS Engineering, a prominent Multi-Disciplinary Practice (MDP) Construction firm involved in the MRT project as an independent consulting engineer. While it could take some time before other MDPs are established in Malaysia, there are endless opportunities in the construction industry for the establishment of such firms in the near future.

BUSINESS OPPORTUNITIES

Business Opportunity 2:Accounting SectorEfforts are underway to increase the capability and credibility of human capital in the accounting sector. Together with the Competition, Standards and Liberalisation SRI, the Malaysian Institute of Accountants has implemented multi-pronged initiatives to enhance the standards of the accounting practice.

Among key initiatives undertaken is a review of the curriculum of local higher level institutions listed under Part I of the First Schedule of the Accountants Act 1967. This is the first time since the introduction of the Act that it has undergone a review. The assessment is in line with market and regulatory changes in finance and accounting, and is aimed at enhancing the field’s human capital capabilities in line with global standards.

Summary of Business Services NKEA

2020 Target

Incremental GNI impact RM78.7 billion

Additional Jobs 245,000

Critical targets for 2013:

10 per cent revenue growth on overseas sales for Shared Services & Outsourcing•

Four new companies performing Knowledge Process Outsourcing (KPO) services•

25 per cent revenue growth on Data Centre services•

RM2 billion investment realised for Green Technology initiatives•

RM300 million approved in loan value under Green Technology Financing Scheme (GTFS)•

140 new specialist consultant engineers in Pure-Play Engineering Services•


NKEA: Business Services EPP 6 and Business Opportunities

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