An important component of Malaysia’s fast-expanding knowledge economy, the aerospace industry has grown substantially in the nearly 20 years since the government rolled out its first National Aerospace Blueprint (NAB). Characterised today by a robust mix of maintenance, repair and overhaul (MRO) activities and a burgeoning parts assembly and manufacturing segment, the sector has welcomed a surge of investment in recent years, with some of the world’s largest multinationals establishing and expanding operations across a growing network of aerospace facilities.

Though the sector continues to grapple with human resource challenges in the wake of soaring regional demand, ongoing expansion plans will see the creation of an “aerospace city”, set to provide economic benefits and thousands of new jobs, and a stringent offset programme has channelled investment into development of domestic human capital, painting a bright outlook for growth.

A Brief History

In 1997 the Malaysian government launched the NAB, followed by the establishment of the Malaysian Aerospace Council (MAC) in 2001. At the time four niche areas were identified for development – namely parts and components manufacturing, MRO, avionics, and system integration – as was the establishment of a Centre of Excellence for Aerospace Training. As a steering body for development of the country’s aerospace industry, MAC operates under the chairmanship of Prime Minister Najib Razak, and includes Cabinet ministers, heads of state agencies and industry executives. Strong collaboration between industry, academia and government is encouraged, especially by the council’s secretary, who is also president and CEO of the Malaysian Industry-Government Group for High Technology (MIGHT).

Established as an industry-driven non-profit in 1993, MIGHT was formally incorporated in 1994, and operated under the Ministry of Science, Technology and Innovation between 2004 and 2010, before being transferred to the Prime Minister’s Department under the science advisor to the prime minister. The company is focused on supporting economic growth through accelerated use of high technology, serving as a bridge between industry, government and academia, and functioning through three primary roles: as think tank, high-tech incubator and access provider to a network of centres of excellence around the world. Together with MAC, MIGHT oversees aerospace development and policy planning in Malaysia.

Government Goals

With the early goal of capturing at least 5% of the global market by 2015 and winning a larger number of contracts for aerostructure work packages on next-generation aircraft programmes, Malaysia’s government has channelled significant capital into developing its aerospace industry, and has made efforts to attract investment from major global players.

The original NAB involved an ambitious transformation into a regional aerospace centre, and saw the government convert Kuala Lumpur’s former Subang International Airport into the Malaysia International Aerospace Centre (MIAC), as well as the creation of the Satellite Development and Astronaut Programmes. MIAC today is home to over 150 local and international aerospace businesses, and is Malaysia’s primary MRO centre. It was launched in 2005 and had outgrown its home by 2015, with expansion plans now pushing it into new facilities at Kuala Lumpur International Airport (KLIA). MIAC service clusters include helicopter, general aviation, aerospace training, aerospace technology and business support.

In the country’s most recent Aerospace Industry Blueprint, running from 2015 to 2030, the government has again targeted capturing 5% of the global MRO market by 2030, in addition to generating annual revenues of RM55.2bn ($13.7bn) and creating 32,000 high-skill jobs. Malaysia’s Economic Transformation Plan, meanwhile, forecasts the aerospace industry to be worth $1trn by 2020.

In order to draw investors to the sector, authorities have created a host of attractive perks including pioneer status, investment tax allowances, reinvestment allowances, and exemption from duty and import taxes on machinery and raw materials. Development of human capital remains an important priority as well, and a mandatory offset programme requires firms that complete major equipment sales to invest a specific amount of capital into Malaysia, in order to support technology transfer and innovation. Malaysia’s offset programme stipulates 100% investment in most cases, meaning that for every dollar spent on aerospace purchases, the vendor must invest one dollar in domestic aerospace programmes.

Regional Dynamism

As highlighted by the Malaysian Foresight Institute, South-east Asia’s dynamic regional aerospace market has left Malaysia well-positioned to capitalise. The institute reported that more commercial aircraft are being produced today than at any other time in history. The Ministry of International Trade and Industry reported in February 2016 that Boeing is planning to deliver 38,050 new commercial aircraft worth $5.6trn to the Asia-Pacific market by 2034. Airbus’s global market forecast for 2015-34 anticipates increasing its supply sourcing base in the region to provide 34% of total orders, from current levels of 1%. This leaves Malaysia very well-positioned to capitalise on future aerospace demand – indeed, the country has already witnessed sharp growth in aerospace activities since 2010.

Recent Growth

According to a March 2015 report by Malaysian Foresight Institute, aerospace industry turnover hit RM11.8bn ($2.9bn) in 2014, spread across 159 companies and employing 19,500 people. Total investment in the industry stood at RM387m ($95.8m) in 2013, with aerospace exports valued at RM2.4bn ($594.1m) in the same year, dominated by the MRO segment. MRO activities account for 55% of the country’s aerospace industry, according to the report. The second-largest segment is manufacturing, which comprises 33% of the industry.

At present, Malaysia is home to 34 MRO companies, eight aircraft assembly companies and 20 aircraft parts manufacturers, enabling development of a vibrant local supply chain comprising both international and local industry players. By 2030 the industry is expected to reach revenues of RM20.4bn ($5bn) for MRO activities, RM21.2bn ($5.2bn) for aero-manufacturing, and RM13.6bn ($3.4bn) for engineering and design services.

Private Investment

During the industry’s nascent stages in the 1970s and 1980s, most airlines and aircraft companies were heavily reliant on the Malaysian military to support MRO activities, although the situation has changed dramatically in the years since, with a host of major multinationals building up their capabilities within Malaysia’s borders, driving the country to become a regional leader in aerospace activities.

According to the Malaysian Investment Development Authority, 41 investment projects in the aerospace sector were approved between 2009 and 2014, worth a cumulative RM5.3bn ($1.3bn). Of these, 19 were MRO projects, while 2014 witnessed seven new investments worth RM687m ($170.1m), of which 27% was foreign investment. In February 2016 the minister of international trade and industry, Mustapa Mohamed, reported that the aerospace industry attracted RM4bn ($990.1m) of investment in 2015, nearly half the total approved investments of RM8.7bn ($2.2bn) recorded between 2011 and 2015.

Investment is expected to continue rising in 2016, as development of Asia Aerospace City (AAC) in Subang continues and existing players move to expand their operations.

For example, Rolls Royce announced in February 2016 that it will produce Trent 1000 engine fan cases in Malaysia, after signing a 25-year agreement with UMW M&E, the investment arm of Malaysian conglomerate UMW, which recently established an aerospace subsidiary. More recently, Malaysia Airlines announced in May 2016 that it had teamed up with US firm Aircraft Propeller Service to establish an ATR Aircraft turboprop MRO facility at KLIA, after the airline allocated RM16m ($4m) in capital expenditure for ATR maintenance. The new facility will be a regional first, as ATR’s propeller MRO facilities are currently only available in Europe and the Americas.


One of the largest global aerospace players, Boeing, first established aerospace operations in Malaysia through Boeing Aerospace Malaysia in 1993, the same year that Malaysia ordered eight F/A-18D Hornets from Boeing Defence, Space and Security. As part of the company’s industrial participation commitment in delivering the new jets, Boeing completed a 10-year, $271m offset programme within seven years.

Since then the company has established a number of new partnerships with local and international players, signing a contract with Composites Technology Research Malaysia (CTRM) for provision of ScanEagle hardware services in 2012, which were supplied to the Malaysian Armed Forces. Boeing also partnered with US firm Hexcel to establish Aerospace Composites Malaysia (ACM), a global supplier of composite products and subassemblies, in 1998. ACM’s $32m plant was officially inaugurated in 2002, and in 2005 ACM became the world’s sole supplier of aileron composites for next-generation 737 commercial jetliners. In November 2013 it expanded its operations by 40% to support increased production at Boeing. The $17m investment enabled the company to boost its high-tech manufacturing workforce from the previous level of 950 employees, demonstrating the importance of the role aerospace is set to play in provision of skilled workers.

Spirit Malaysia

Another major player entered the aerospace industry in October 2009, when Spirit AeroSystems, the world’s largest independent aerostructure manufacturer, opened its wholly-owned subsidiary, Spirit Malaysia. Located at MIAC on a 242,000-sq-foot plot, the plant provides a wide array of manufacturing, engineering and support functions, including composite subassembly for Airbus A320 single-aisle jetliners.

Spirit Malaysia acts as anchor tenant at MIAC, and accounts for a significant proportion of the Malaysian aerospace industry, in addition to acting as a major growth driver for other private companies. The company is a major supplier of wings for the Boeing 737 and Airbus A320 models, with an annual turnover of $7bn, which is expected to double over the next five years.


In October 2013 Airbus also announced plans to expand the operations of its joint venture maintenance unit, Sepang Aircraft Engineering (SAE), which was launched in 2006 in partnership with Malaysian entrepreneur Syed Budriz. The plans saw the company construct a new hangar specialising in MRO activities for Airbus single-aisle aircraft, with a floor area of 13,000 sq metres and capacity for three A320 aircraft for maintenance checks. SAE’s existing hangar is capable of accommodating six single-aisle aircraft at one time.

Airbus has identified Asia-Pacific as a core market, according to a company statement, with the region accounting for 31% of all company orders as of late 2013. There are more than 2270 Airbus aircraft in service with 98 operators across the region, and 2000 more on order. The company also reports that Malaysia is an important source of composite materials competence, as evidenced by its strong relationship with local aerospace players, including CTRM and SME Aerospace, two key domestic suppliers of composite structures.

Domestic Capacity

Outside of MIAC and the offset programme, development of domestic capacity is also getting a boost from facilities including the Aerospace Malaysia Innovation Centre (AMIC) and the planned AAC.

AMIC was established in 2010 as a joint venture between Airbus parent company European Aeronautics Defence and Space Company, jet engine producer Rolls Royce, and domestic companies including CTRM Aviation, MIGHT, and Universiti Putra Malaysia. The centre plays a critical role in supporting industry growth, complemented by MIAC, with responsibilities including facilitating cooperation between domestic and foreign companies, as well as university-based research.

The Majlis Amanah Rakyat (MARA) business park, meanwhile, is being constructed in Subang Jaya, with its dedicated AAC targeting human resource development. The city will be developed in three phases over 3.5m sq feet, with a range of integrated facilities including office space, research and development facilities, academic campuses, residential space, and a convention centre.

Human Resources

As highlighted by Malaysian Foresight Institute, there are currently 66 education and training providers offering services for the aerospace industry, including 11 organisations, approved by the Department of Civil Aviation, that train students to become aircraft maintenance technicians and aircraft maintenance engineers. There are also 11 licensed flight schools for pilot training, two cabin crew training centres, and 27 post-secondary institutions offering bachelor’s degrees in aerospace-related areas.

However, Boeing has projected that by 2032, demand for MRO technicians and pilots in Southeast Asia will rise to 50,300 and 48,100, respectively, making development of human capital a high priority for Malaysia’s aerospace stakeholders. Already the largest provider of aerospace workers regionally, Malaysia is poised to meet this rising demand, with an estimated 50,751 technicians and 16,746 pilots expected to graduate by 2030, largely as a result of ongoing work to develop AAC.

The government has allocated RM250m ($61.9m) for MARA to develop a second campus for the Universiti Kuala Lumpur Malaysia Institute of Aviation Technology, which will be located at AAC. In February 2016 authorities announced that the academic portion of AAC is now 90% complete, with the campus expected to supply 4000 highly-skilled engineers annually once it is inaugurated. The first phase of the rest of AAC’s construction kicked off this year, and is expected to wrap up in early 2018, paving the way for long-term development of a skilled, integrated aerospace workforce.