Introduction
A few years ago,
Malaysia was under the radar due to human rights issues. However, things are
starting to change – with strong adherence to global standards as part of the
country’s approach to address the ‘Social’ aspect particularly in dealing with
labour standards. It is anticipated that Malaysia is setting its path on the
right track under the ‘Social’ aspect particularly with the aim in reducing
reliance towards foreign labour from enhanced digitalization and automation,
moving forward.
Now that we have
some assurance that the ‘Social’ aspect is heading twards the right direction,
the next question is – how about the ‘Environmental’ aspect?
Climate Ambitions
‘Environmental’
aspect is broad but for the purpose of this article, let us narrow it down to the
current focus under the Environmental aspect i.e. Climate Change.
There are a lot
of discussion around the topic, but one clear response to it for companies
across industries is the establishment of Net Zero pathway; a complex and
challenging subject for all, globally.
Amongst ASEAN
countries, to date, Malaysia has seen to be having the clearest and
comprehensive approach towards Net Zero. Neighboring countries such as Thailand
and Indonesia have committed to achieve carbon neutrality by 2050 and 2060
respectively, while other ASEAN nations that mostly establish aspirations to
the overall Sustainable Development agenda and reduction of greenhouse gas
emissions – not specifically on Net Zero.
There is
however, a similar trend across ASEAN in regards to the view on Net Zero as a
response to combat climate change and emissions. As an example, Malaysia had
made a stance to abstain from constructing new coal power plants and at the
same time accelerating the retirement of existing coal capacity. Similar approach
is being taken with countries such as Thailand, Vietnam and Indonesia that aim
to diminish reliance on coal and increase investment in greener and sustainable
energy alternatives.
Based on the
report on ASEAN countries Energy Transition Index (ETI), which benchmarks
countries performance on their energy infrastructure and systems, and their
readiness towards transition to greener and sustainable energy, there is a
clear distinction with the ASEAN countries rankings.
Even as a
developing country, Malaysia is ranked higher than the southern neighbor,
Singapore, which is one of the developed nations and more economically
advanced.
One of the
observations made was that countries are challenged with the issues of
investments in renewable energy (RE) being economically limited and moving at a
slow rate. Eventually, and as based on historical data, there is projected
reduction in Renewable Energy costs and the return on investments (ROI) surge
from Renewable Energy, this would address the current challenges and would
eventually scale up such investments. However, we need to note that there is
also current contractual obligations from traditional power producers that is
unavoidable, but critical to shift towards transition.
Governments
would need to step up to facilitate the transition and industry is expecting
governments to chart pathways and roll out policies and frameworks to enable
the same. For Malaysia, the government had recently issued roadmap on energy
transition called the National Energy Transition Roadmap.
National Energy Transition Roadmap
Research shows
that nations that have sound ESG and climate agenda tend to create positive
impact on foreign investment (FDI) through enhancing its attractiveness via
mitigation of medium and long-term risks linked with ESG risks across all
aspects. With investors have started to demand ESG criteria integrated into
their investments mandates, nations that are aligned on adhered to global
signatories or standards such those under the United Nations, would be deemed
more attractive to investors that set
ESG compliance within their investment practices. This trend have grown rapidly
in recent years and is forecasted to continue.
On 27 July 2023,
Malaysia’s Minister of Economy launched the Part 1 of the country’s National Energy Transition Roadmap (NETR 1). Subsequently,
on 29 August 2023, Malaysia’s Prime Minister launched the expanded and complete National Energy Transition Roadmap (NETR),
which expands on NETR 1. The
NETR sets Malaysia’s aspiration of
accelerating the nation’s energy transition and sustainable growth agenda.
It establishes a pathway to transition the national energy mix, reduce GHG
emissions, generate significant investment and employment opportunities, and
promote a just and responsible transition. The NETR identifies 6 energy transition levers to facilitate Malaysia’s transition to
clean energy, and outlines the Malaysian Government’s 10 flagship catalyst projects across these levers. The 6 levers
are: (i) Energy efficiency, (ii) Renewable energy, (iii) Hydrogen, (iv)
Bioenergy), (v) Green mobility, and (vi) Carbon capture, utilization and
storage. The expanded NETR outlines 50
key initiatives and five cross-cutting enablers, in addition to the 10 flagship
catalyst projects unveiled in Part 1.
Early in 3Q2023,
the Malaysia government expedited the implementation of the NETR, to
progressively and structurally transition Malaysia from dependency on fossil
fuels towards greener alternatives. The implementation will be done across 10
pilot projects with an estimated cost of over RM620 billion.
The high cost
invested is due to NETR that stretches over long-term, but there is potential
foreign investment will be made to scale up the NETR substantial implementation
deliverables. NETR will place Malaysia at the forefront in green manufacturing
within ASEAN Foreign participation and will note only enable Malaysia to reach
its climate goals, but also become the green manufacturing hub within the ASEAN
region.
As Malaysia strive
towards Net Zero, in line with the structured execution of the NETR, there is
potential for the country to tackle simultaneous issues it faces a weak
currency and declining foreign ownership particularly in the equity
market. This is direct impact from NETR that would enable the
restructuring the economy and also ensuring strong and sustainable GDP growth
in years ahead.
Conclusion
Malaysia is
currently seen as a leader in the ESG and this includes on the climate agenda.
NETR shall further elevate the country’s position to be amongst global peers
and this too will set the expectation for local companies to pursue its own
climate agenda and ambition.
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author and do not represent any particular entity or organisation
