KUALA LUMPUR (Oct 12): The government must take “drastic” action to reduce its reliance on imports and strengthen domestic manufacturing, said Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani.

He said specifically, the government is reviewing products that contribute to Malaysia's large trade deficit with China, including goods that were once made locally. 

Johari did not specify the measures being considered or their implementation timeline.

“We have held many engagement sessions with local companies. Although they disagree, we must take very drastic action for the country’s long-term benefit, to protect our economy without depending on countries that we believe could adversely affect our economy as a whole,” Johari said during oral question time in the Dewan Rakyat on Monday.

The trade minister was responding to Datuk Adnan Abu Hassan (BN-Kuala Pilah), who asked about Malaysia’s exposure to trade tensions and new tariffs arising from its concentration on major trade markets, such as the US and China.

Adnan also asked how the government would ensure export diversification developed higher-value added products, instead of merely expanding assembly or processing activities with limited domestic value added.

Johari said Malaysia recorded a trade surplus of about RM100 billion with the US last year, alongside a deficit of about RM146 billion with China.

In plain terms, Malaysia sells far more to the US than it buys from it, but buys far more from China than it sells to it. 

The Ministry of Investment, Trade and Industry will examine why some products previously made by Malaysian companies were now being imported, and whether domestic manufacturers could resume producing them, he said.

He argued that relying on cheaper imports could undermine local manufacturing capacity. Once domestic factories closed, products previously imported at low prices could become more expensive, he added.

“We can no longer simply allow imports as the easy way out,” Johari said. The government would identify sectors requiring support to produce raw materials and semi-finished goods locally, with small and medium enterprises playing a greater role in supplying exporters.

Responding separately to a supplementary question from Permatang Pauh MP Muhammad Fawwaz Mohamad on domestic value added in electrical and electronics (E&E) exports, Johari cited RM712 billion in E&E exports and RM567 billion in imports last year, resulting in a sectoral trade surplus of about RM145 billion.

For non-E&E products, he cited exports of RM897 billion and imports of RM885 billion, leaving a much smaller surplus of RM12 billion.

Johari said Malaysia’s semiconductor companies should expand beyond conventional assembly, testing and packaging into advanced packaging. He acknowledged that Malaysia’s substantial exposure to E&E exports left it vulnerable to a downturn in the global semiconductor cycle, changes in technology, supply-chain disruptions and geopolitical tensions.

A sharp downturn could trigger inventory adjustments and production cuts, weighing on national exports, particularly if growth in other sectors was insufficient to offset the decline, he said.

“The government’s approach is not to reduce the role of E&E and semiconductors, which are among Malaysia’s competitive strengths. Instead, we are managing the risks of this dependence through three main strategies,” he said.

These comprise strengthening the E&E value chain through activities such as integrated circuit design and advanced packaging; developing other high-value industries and domestic supply chains; and broadening export markets.

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