Assessing the economic effects of final demand for the machinery and equipment industry in Malaysia: An input-output analysis

The machinery and equipment (M&E) industry has been a key industrial base in Malaysia. Since the First Industrial Master Plan, 1986-1995, until the current New Industrial Master Plan 2030 (NIMP 2030), the M&E industry has received attention from the Malaysian Government as one of the industries for industrial development. It continues to catalyse the transition of the Malaysian manufacturing sector towards Industry 4.0 by producing high-value-added and high-tech machinery and equipment products for the usage of other sectors. As an export-oriented industry, the M&E industry faced declining export demand by approximately 5% in 2021 and 2023, respectively, attributed to supply chain disruption due to the COVID-19 pandemic and slower global demand. However, the export demand increased sharply by 20.6% in 2024 following improved global trade. The reliance of the M&E industry on external demand and the latest NIMP 2030 national policy to attract investments in the M&E industry highlight the need for a simultaneous scenario analysis to address the decrease in export demand and reallocation of investment in the M&E industry and its key sectors. Hence, this study aims to identify the M&E industry supply chain in Malaysia, classify the key sectors within the supply chain, and estimate the economic effects of lower export demand for the M&E industry and reallocation of investment in the M&E industry and the key sectors in its supply chain. JEL Codes: Keywords: Machinery and equipment industry, Supply chain, Input-output analysis