Malaysian government industrial and technological development programs identify aerospace and defense as strategic industries with vast potential for growth. As with other ASEAN countries, Malaysia has territorial disputes with China and neighboring countries. The government also faces trafficking, piracy, and militants operating in the broader region. Protecting its maritime security is critical for Malaysia as a country that depends heavily on sea trade and holds offshore economic assets.
Most procurements in these sectors will continue to rely on imported products, as Malaysian manufacturers cannot yet produce the technologically advanced equipment required.. However, Malaysian defense development programs remain hampered by budget constraints, limiting the ability to import more expensive solutions. The Malaysian Armed Forces (MAF) modernization is progressing slowly as the government prioritizes social and economic recovery over military development. The pandemic’s impact, leakage of funds, and political uncertainty over the past two years limited defense spending. These limitations have also prompted a renewed push to maximize local participation in procurements.
The Malaysian government hopes to strengthen domestic manufacturing capabilities of defense products through collaboration and technology transfer, thus reducing reliance on imports. In order to enhance local industry participation, the Industrial Collaboration Program (ICP) and Protégé Program have instituted an offset for tenders above a threshold value.. In almost all cases, foreign companies must take on a local partner before their bids are considered. Procurement often goes through intermediaries rather than being conducted directly by the government.
With the ongoing defense modernization programs, opportunities exist across the entire security and defense industry. Procurement spending will focus increasingly on strengthening Malaysia’s ability to protect its coasts, territorial waters, offshore economic interests, and airspace, as well as developing its intelligence, surveillance, and reconnaissance capability.
Malaysia launched the Malaysian Aerospace Industry Blueprint 2030, an initiative with the goal of positioning Malaysia as Southeast Asia’s most significant aerospace market. Malaysia is currently home to more than 200 aerospace companies including both international and local industry players. The demand for civil aerospace services and equipment is recovering in a post-pandemic environment as air travel picks up with the reopening of borders.
The nation’s defense capabilities are highly dependent on foreign suppliers. The Malaysia Defense White Paper, published in 2019, highlights territorial disputes involving US-China rivalry and non-traditional threats across its borders, including jihadist fighters, the Rohingya crisis, and cyberattacks. It emphasizes the need to boost Malaysia’s naval capabilities to prepare for possible conflict in the South China Sea. It also focuses on developing a modernized ‘smart army’ using cyberspace technology and state-of-the-art systems. That initiative would reduce reliance on traditional equipment such as battle tanks, ships, and weaponry, instead favoring unmanned aerial vehicles, drones, and cybersecurity-related equipment.
The Malaysian Space Agency (MYSA) was formed to lead the implementation of the National Space Policy, empower the national capability in the space sector, coordinate the acquisition of satellite data, and strengthen international cooperation. . Malaysia is an active member of the International Telecommunications Union (ITU) and has been championing equitable access to satellite orbit rights through public and private sector participation. Malaysia’s geographic location close to the equator may offer cost advantages for horizontal air-dropped satellite launch services compared to the traditional vertical rocket variety. The National Space Policy 2030 is expected to contribute at least 0.3 percent to the GDP by 2030 and create 5,000 new jobs.
The National Space Policy aims to drive the growth of the sector, particularly the manufacturing of remote-sensing satellites, satellite components, and data-driven downstream services. The application services of space technology are wide-ranging and include internet connectivity, IoT, navigational tracking, disaster management, resource management, governance, meteorology, defense, and security.
Resources of Malaysian Government Authorities
Royal Malaysian Air Force