Revamp initiative to develop local suppliers, Putrajaya told

A man works on products at an automotive parts factory in Kuala Lumpur. (Bernama pic)

PETALING JAYA: Putrajaya has been urged to revamp a programme to develop local suppliers to support domestic and foreign companies, saying the initiative established in the late 1980s has been reduced to “lip service” over the years.

Businessman Abdul Rahman Shariff said policies and initiatives are needed to support the growth of local companies, especially in the face of technology disruptions.

He called for a “rebirth” of the vendor development programme established during Dr Mahathir Mohamad’s first stint as prime minister to encourage the development of an indigenous auto-parts supply system.

Rahman, the chairman of oil and gas services company Dynac, told FMT that many vendors are still competing based on price and cheap labour instead of homegrown technology, intellectual property and quality.

“We are stagnant, content with the success of the past. We take too long to migrate to new technology and stay ahead of the pack,” he said.

“Many vendors are thinking and acting like subcontractors and cannot see past Malaysian shores.”

Rahman said it is pointless to expect success from the same old strategies as the world has changed throughout the years.

“We have no choice but to rebuild indigenous companies and their capabilities,” he said, adding that there is both room and potential for growth in small and medium enterprises.

He referred to companies in Germany which he said have limited numbers of employees but emphasise the development of proprietary technology.

Although such companies are not publicly listed, he said, they can easily chalk up revenue of €100 million to €500 million a year.

“This was Tun’s vision, where there is no need for massive funding from banks or governments, and where the risks and rewards are entirely dependent on the creativity of the company.

“Disruptive technology is here to stay, and the only way forward is to develop local vendors that are competitive and competent enough to go overseas and get business.”

Rahman said some Malaysian companies had done this, not only surviving but thriving on the international stage without depending on handouts or big government contracts.

He said such companies have a competitive edge as they can withstand both the external and internal pressures of the current economy.

He urged the government to identify and strengthen vendors which have the potential to become “international champions”.

“The rate of technology disruption in the global supply chain is only going to escalate from here on,” he said, cautioning that a sizeable chunk of manufacturing activity would move elsewhere.

“Already, we can see large foreign companies heading back home.” - FMT