Reference model for Vietnam

The Fourth Industrial Revolution is taking place strongly around the world, pushing countries to focus on developing high-tech industries such as semiconductors and artificial intelligence (AI). In the Southeast Asian region, Malaysia has made impressive progress, rising to second place after Singapore and far surpassing the remaining ASEAN countries.

Malaysia is becoming a bright spot in Asia in the technology race. (Source: instagram)

Thanks to its early strategic steps, Malaysia is becoming a bright spot in Asia in the technology race. Among Southeast Asian countries, Malaysia is a successful model, with many things worth learning and referring to for Vietnam in the process of developing high-tech industries, especially semiconductors and artificial intelligence.

Ahead but similar

Malaysia and Vietnam, although at different stages of economic development, have many remarkable similarities in terms of economic structure. First of all, in both countries, the service sector is the largest contributor to GDP, typically accounting for around 40-50%. This reflects the general trend of economies shifting from manufacturing activities to trade, finance and tourism activities.

In addition, the industrial sector also plays an equally important role in the economic structure of both Malaysia and Vietnam, with its proportion fluctuating around 30-40%. Notably, the manufacturing and processing industries are the main growth drivers of this sector in both countries, mainly thanks to the contribution of FDI enterprises. Meanwhile, the agricultural sector has tended to gradually decrease its proportion and currently accounts for only about 10% of the GDP of both Malaysia and Vietnam.

Manufacturing and processing industries are the main driving forces in the industrial sectors of the two countries. In addition to similar industry structures, the economic growth models of the two countries also have many similarities in the development process. In the early stages, both Malaysia and Vietnam relied heavily on resource exploitation and agricultural exports. However, the two countries have gradually transformed into export-oriented economies, based on light industry, assembly and manufacturing, in which foreign direct investment (FDI) plays a key role. Moving into the current stage, both Malaysia and Vietnam are making efforts to develop a service and knowledge-based economy with the increasing application of achievements in science and technology.

Malaysia and Vietnam are both countries with large market openness, actively participating in multilateral and bilateral free trade agreements, so export and FDI attraction are the two most important spearheads for economic growth of both countries over the past time. Export turnover of Malaysia and Vietnam often accounts for a very high proportion, over 50% compared to GDP. This is a typical feature of developing economies, which are heavily dependent on external markets. Meanwhile, FDI capital also contributes significantly to the growth of both countries, especially in export-oriented manufacturing and processing industries.

One factor that helps Malaysia and Vietnam maintain their competitive advantage in exports and attracting FDI is the abundant and low-cost labor force. This is an especially important advantage for labor-intensive industries such as textiles, footwear, and electronic component assembly. In addition, both countries have favorable geographical locations, many deep-water ports, and well-developed logistics infrastructure systems. These factors have created a solid foundation for the breakthrough in exports and foreign investment of both Malaysia and Vietnam in recent times.

In short, although at two different stages of development, Malaysia and Vietnam still possess many significant similarities in economic structure, growth model and competitive strengths. These common characteristics have created many opportunities for cooperation between the two countries, while helping Vietnam learn from Malaysia's valuable experiences in the development and integration process.

Prime Minister Pham Minh Chinh attended a discussion with global businesses on cooperation in developing AI, semiconductor chips and ecosystems at the annual World Economic Forum 2024, Switzerland, January 16, 2024.

Malaysia Journey and Reference Lessons

Malaysia’s journey to becoming a semiconductor and AI powerhouse has gone through many stages with the continuous efforts of the Government and the cooperation of many entities. During this process, Malaysia has implemented many synchronous and comprehensive solutions, from long-term strategic planning, building a favorable ecosystem, attracting foreign investment, to developing human resources and promoting scientific research.

In the semiconductor sector, Malaysia has implemented solutions very early to attract foreign investment. Many attractive incentive packages on tax, land, infrastructure and human resources have been introduced by the government to attract technology "giants". One of the most typical projects is the Kulim Hi-Tech Park (CNC) established in 1996 in the state of Kedah, Northern Malaysia.

The Malaysian government has provided special incentives in terms of tax, land, infrastructure and human resources to turn Kulim into an attractive destination for chip and semiconductor manufacturers. For example, Intel - the US technology giant decided to build a $1.3 billion chip factory at Kulim Hi-Tech Park in 1996. This is considered an important milestone, marking a major turning point in Malaysia's efforts to become a chip manufacturing center.

Following that, a series of other large technology companies such as AMD, Fairchild, Infineon, Fuji Electric, Renesas... successively set up factories in Malaysia in the late 1990s and early 2000s. In 2005, AMD opened a chip factory worth 1.7 billion USD in Kulim. Meanwhile, Infineon also continuously expanded its investment in Malaysia with a total capital of up to 2 billion USD as of 2008. The presence of these "big guys" has contributed to the formation of a complete supply chain and a strong industry cluster for the Malaysian semiconductor industry.

Thanks to the above efforts, the Malaysian semiconductor industry has made spectacular progress in the 1990s and 2000s. To date, this industry contributes about 25% of GDP and more than 40% of total exports of Malaysia, making this country the 6th largest exporter in the semiconductor industry, creating large added value and hundreds of thousands of high-quality jobs for workers.

In the field of AI, Malaysia has also made strong moves. In 2020, Malaysia established the National Blockchain and Artificial Intelligence Committee (NBAIC) and launched the National Roadmap for AI Development to promote investment and application of AI solutions into practice. NBAIC is under the direction of the National 4IR Technology Council (National 4IR Council) chaired by the Prime Minister of Malaysia. The Roadmap identifies four priority areas for AI development including healthcare, education, financial services and transportation.

At the same time, the Roadmap also sets out 19 strategies and 62 specific initiatives to build national AI foundations and capabilities, create a comprehensive legal environment, promote public-private sector cooperation, attract investment and develop talent in this field. In 2022, Malaysia adopted 5 National Technology Roadmaps, including technology development in the fields of electrical and electronics, blockchain technology, artificial intelligence (AI), advanced materials technology, and robotics in the period 2021-2030. In particular, the National AI Roadmap sets out the vision of making Malaysia a leading AI innovation and application hub in the ASEAN region by 2030.

Kulim Hi-Tech Park of Malaysia.

Malaysia promotes comprehensive cooperation between the government, academia, industry and society to build a comprehensive ecosystem in the field of AI. Many AI research centers have been established at leading universities in Malaysia. In addition, the government also provides capital support and builds a favorable legal framework for technology startups to easily research and commercialize AI applications in various fields. Malaysia also has a roadmap to become a top 20 startup ecosystem in the world.

Another important element in Malaysia’s technology leadership strategy is the training of high-quality human resources. The country has focused on developing its university and vocational education systems to provide quality human resources for high-tech industries such as semiconductors and AI. Not only that, the Malaysian government has also implemented many programs to attract good experts and engineers from abroad to work, supplementing the domestic human resources.

In fact, Vietnam and Malaysia have many similarities in terms of economic conditions and structures. Therefore, the solutions that Malaysia has implemented can be flexibly referenced by Vietnam and are suitable to the country's context.

Vietnam has had major orientations for developing 4.0 technology, but now it is necessary to specify strategies for important technology fields such as semiconductors, cloud computing, big data, IoT, etc. At the same time, creating incentive mechanisms and policies to attract large foreign investors in the fields of semiconductors and AI should also become a priority in the country's economic development strategy.

Malaysia’s experience shows the importance of forming high-tech industrial clusters to build a favorable ecosystem for businesses to develop together, from production to research and development. Increasing investment in scientific research and developing AI applications will also promote businesses, especially Vietnamese technology startups, to move up the value chain. Although we are behind, we can completely take shortcuts and get ahead by investing in modern infrastructure and equipment.

Malaysia’s lessons also show the special importance of high-quality human resources to meet the requirements of advanced technology industries. Improving the quality of higher education and technical vocational training must go hand in hand with promoting work on overseas Vietnamese with appropriate policies, possibly including specific pilot mechanisms on salary levels, benefits, and socialization plans to attract experts and technological talents to contribute to the country.

National Innovation Center at Hoa Lac Hi-Tech Park (NIC Hoa Lac). (Source: Dan Tri)

Potential for multi-level cooperation

First of all, it is necessary to identify Malaysia as a developed partner that is ahead but not too far away and has similarities for reference. On that basis, promote high-level exchanges and contacts between Vietnamese agencies and Malaysian authorities. Through these visits and exchanges, the two sides can discuss policies, laws and mechanisms to promote bilateral cooperation, creating conditions for signing specific agreements and memorandums of understanding on technology transfer, digital transformation and innovation.

From a local perspective, Vietnamese provinces and cities should proactively learn and study the experiences of infrastructure construction and investment incentive policies from some Malaysian states that excel in the high-tech sector. Some typical localities such as Penang state, the "Silicon Valley of Southeast Asia", can be a valuable reference model for Vietnamese localities in forming semiconductor industrial clusters, attracting investment and developing high-quality human resources.

Selangor State with Cyberjaya Smart City, which concentrates many leading technology corporations, is a typical example of how to build infrastructure and an ecosystem for startups and innovation. Johor State with Iskandar Puteri High-Tech Park follows a model of close connection between research institutes, universities and businesses. Kedah State, which is home to many high-tech industrial parks such as Kulim Hi-Tech, attracts large multinational corporations such as Intel, Bosch, and Panasonic to invest in areas such as semiconductor manufacturing, electronics, and medical equipment, etc.

On the business side, Vietnamese investors need to take advantage of opportunities to access, learn about and cooperate with leading Malaysian technology corporations, such as: Silterra Malaysia, a manufacturer of analog, mixed-signal and logic semiconductor chips; Inari Amertron, a provider of comprehensive manufacturing, assembly and testing services for RF, optical and sensor products; Unisem (M) Berhad, a specialist in advanced semiconductor processing and packaging services; Vitrox Corporation, a company famous for its automation, optical inspection and AI solutions for the semiconductor industry; or Oppstar Technology, a startup providing AI applications in production optimization and industrial data analysis.

To effectively implement the above activities, there needs to be close coordination between the Ministry of Foreign Affairs, our representative office in Malaysia and relevant domestic agencies such as the Ministry of Science and Technology, the Ministry of Industry and Trade, the Ministry of Information and Communications, the Chamber of Commerce and Industry, etc. At the same time, it is necessary to seek the support of industry associations, the business community and Vietnamese experts in Malaysia to effectively exploit the great potential for cooperation with Malaysia in these areas.

Source: https://baoquocte.vn/cong-nghe-ban-dan-va-tri-tue-nhan-tao-o-malaysia-mo-hinh-tham-khao-cho-viet-nam-277138.html