Greater KL well-placed to support high-value supply chain management
Kuala Lumpur, Malaysia

22 June 2021

The importance of a well-oiled supply chain is all the more apparent today as the global business landscape undergoes transformational shifts arising from macroeconomic pressures, challenges from the pandemic, as well as the ongoing geopolitical and trade tensions between the US and China.

As a well-established business location and one of the more well-connected cities within Asia's economic hub, Greater Kuala Lumpur (Greater KL) has been on the radar of many multinational corporations (MNC) over the years for its multitude of business advantages.

One of the key benefits that we offer MNCs looking to invest and set up their base here is the ability to link into the global supply chain, delivering greater efficiencies with lower costs and access to markets.

The city has taken on significant roles in high-value supply chain link, moving from a supply focus to a demand focus, for instance, through a shared services delivery model which considers innovation, knowledge leadership, digitalisation, design development and implementation, and delivery within an integrated system, among others.

Many MNCs have based their regional headquarters, procurement centres, global back-office operations, regional treasury management centres, commodities trading, and research and development hubs in Greater KL.

Companies like GRAB demonstrate this high-value link through its research and development centre and its regional centre of excellence based in Greater KL.

These centres fulfill the company's core business strategy and operational functions across the region, a move that targets creating high-value jobs and nurturing Malaysia's deep tech talents.

Facilitative innovation hubs driving next-generation supply chain

Anchoring our own efforts towards making Greater KL a high-value, high-impact hub for MNCs is the National Investment Aspirations framework.

This framework focuses on attracting high-quality investments in technology and innovation-based activities to catalyse Malaysia's move towards a highincome economy.

Very recently, Microsoft Corp announced a US$1 billion investment in Malaysia over the next five years that comprise setting up of a data centre region in Greater KL and offering cloud services to the Malaysian government.

This bodes well for upskilling and knowledge transfer for Malaysians with an estimated job creation of 19,000 jobs, including 4,000 IT-related jobs among its cloud users.

Many of the MNCs which have set up their base in Greater KL have adopted various business models that support supply chain capacity such as the distribution hubs, procurement hubs, R&D hubs and centres of excellence to serve the regional or global markets.

Malaysia's principal hub scheme, introduced in 2015, helps to facilitate companies that want to establish decision-making structures closer to their markets of interest. This is done by regionalising key functions and undertaking a more diverse scope of activities in the host country.

These essential functions include management of risks, decision making, strategic business activities, trading, finance, management and human resource.

Once a regional principal hub is established with its key strategic functions, companies would be better positioned for greater operational agility.

Building a connected supply chain advantage

In cases where the regular supply chain could be disrupted by unforeseen events such as natural disasters or political instability, a decentralised supply chain model has much to offer in terms of increased efficiency and flexibility.

In this regard, Greater KL has become a considered destination for MNCs looking to decentralise their supply chain and optimise their high-value, high-impact central operating models.

Facilities such as bonded warehouses play a significant role in global supply chain management, providing flexibility in an ever-changing import and export environment.

The Port Klang Free Trade Zone (PKFZ), a well-connected and strategic commercial area, provides such facilities for international cargo distribution and consolidation centres.

In 2019, Steinweg Group, one of the world's leading warehousing and logistics service providers, launched its integrated commodities hub and Malaysia's first European-standard chemical warehouse in Port Klang to meet the strong growth in chemical logistics needs in the Asia-Pacific region.

Besides warehousing and distribution, its customers can leverage one-stop value-add services such as repacking of chemicals and plastics, maximising and localising their supply chain to serve regional markets via Malaysia.

To strengthen supply chain management, the expansion of the Authorised Economic Operator platform is made available to logistics service providers and approved warehouse operators.

Obtaining this status means a business can enjoy the fast clearance of goods from customs control, deferred payment of import and export duties, and sales tax.

Committed to strengthening supply chain management for long-term aspiration

Keeping the competitiveness in global and high-value supply chains requires investment in people, skills and high-quality digital infrastructure. It is crucial that we continuously strengthen our global supply chain management capabilities which are vital towards our aspiration to be a business destination of choice for MNCs.

This includes ensuring that our knowledge infrastructure is forward-looking in equipping talents here with the relevant comprehension of global supply chain trends and movement.

The Malaysia Institute for Supply Chain Innovation (MISI), a collaboration with the Massachusetts Institute of Technology (MIT), keeps a pulse on the ground to develop programmes that build talent pipelines to match the needs of supply chain changes and development.

Tax incentives have also been put in place under the national Budget 2021 which aims to position Malaysia at the forefront for high value-added investments.

These include tax incentives for investments in the selected services sector, including those adapting to digitalisation and Industrial Revolution 4.0 technology.

Extending support and connectivity

MNCs consider Greater KL because of the educated and skilled talent pool, an enabling environment for innovation, strong intellectual property rights protection, pro-business policies, attractive funding and tax breaks, and of course the city's status itself as one of Asia's most liveable cities.

These offerings complement Greater KL's competitive advantages as a global supply and value chain destination with its strategic connectivity within the Asian market.

Part of being a facilitative supply chain management also includes the hands-on roles investment agencies such as InvestKL play.

Although long-term MNCs in Greater KL such as General Electric Co (GE)7 has had a presence here for the last 45 years, they still invariably reach out to us in InvestKL for ongoing assistance and facilitation efforts, crediting InvestKL for the help extended to them in getting the Kuala Lumpur IT team up and running.

This is a validation of our commitment to support MNCs and their supply chain needs for high-value and high-impact industries on an on-going basis. Undeniably, Greater KL and Malaysia's position as an investor-friendly, business-ready destination with world-class facilities, as well as its resilience in its high-value supply chain management offers business decision-makers an attractive alternative as MNCs seek to relocate their global supply chains.

* The writer is the chief executive officer of InvestKL. It is focused at attracting large global multinationals such as Fortune 500 and Forbes 2000 companies, unicorns, fast growing and hidden champion type companies to establish their regional business, innovation and talent hubs in Greater KL.

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