Structural & Policy Reforms: Towards a Sustainable Defence Industry in Malaysia - by Lt Col Ir. Suthan Venkatachalam


by Lt Col Ir. Suthan Venkatachalam

Defence Policy Assistant Director, MiDAS

Source: Dr Kogila Balakrishnan, Perwira Dialogue II



Tracing Malaysia’s Defence Industry Origins Malaysia’s defence industrial base started to develop much later than many of its neighbouring countries, such as Indonesia, Singapore, the Philippines and Thailand. The country’s defence industrial base has advanced in the past twenty years due to the government’s strong drive to promote a home grown defence industry capable of supporting the nation’s tri-services. Although Malaysia’s defence industry is viewed as a strategic sector and forms part of the country’s defence policy, the reality is that the industry’s origins and growth are closely linked to the country’s overall Industrial Master Plan and import substitution strategies. Malaysia’s defence industry was very much a government-led initiative, with most of the defence production facilities operating within the Armed Forces domain.


With the current geo-political uncertainty, there are some of the major changes in defence industry landscape that drives these industries to reform. Due to global economic slowdown, there is an overall reduction in defence spending which directly impacts the R&D in defence sector. Secondly, the emergence of new threats such as cyber threats, disruptive technologies (optimisation of artificial intelligence), climate change and space militarisation. Thirdly, political risks and disruption in international trade whereby with the on-going trade war between the US and China the global supply chain is affected and this will force the defence industry to move from its norms to look for reliable supplies. Besides that, with new and emerging fields there are shortages of skills workers where the defence industry needs to be agile and responsive in acquiring the right human resource.  


In response to the above mentioned challenges, the global defence industry sector began to address them through various innovate ways. One of them is through smart defence concept where development, acquisition and maintenance of capabilities materialised through smart partnership between allies. Besides that integration of fragmented suppliers, diversification of investments into new emerging technologies and building long term sustainable partnership across industrial base are taken into consideration. Managing global supply chain relationship and collaboration between defence and commercial sector also is seen will be more agile towards addressing these challenges.


Malaysia like any other countries is also facing the same challenges and some of recommended reforms for the transformation of the Malaysian defence industrial sector are assuming leadership role at ASEAN by exploiting and leading in niche technologies. Government should practice selective intervention on critical technologies and encourage collaboration through joint funding with other countries. Besides that, with the limited budget, dual use of technology will be more useful and the defence industries should look into new business strategies (indigenous in some areas). Leadership of defence industries should be exposed to new opportunities and challenges. The industry players should embrace agility and change through diversification in their organisation. Government should provide innovative solutions for technology acquisition (leveraging from offset programs for development of defence capability and skills) and encourage the local industries to conduct R&D for defence capabilities through the use of funding that is available.


In summary, innovation-led growth will benefit our defence industries and the government will have to review its policy to stimulate the defence industry by establishing and accentuating the fact that the Malaysian defence industry must have a firm innovation-led base to be relevant and sustainable. Furthermore with the strong interventionist policy towards the development of its defence industry, the government should seriously look into the development of defence catapult that can be placed at the NDUM which eventually radiate innovation and lead towards self-reliance in the future.

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