KUALA LUMPUR: As Malaysia aspires to become the aerospace hub in Southeast Asia by 2030, industry players see this as an opportunity for local small and medium enterprises as well as established foreign aerospace companies to grow in the sector.
In addition, the development of the supply chain is needed as well to support the aviation industry in Malaysia and Asia Pacific.
With the increasing number of local and foreign companies in Malaysia’s aerospace sector, there is a need for more local law firms to provide legal services to these players.
Abdullah Chan & Co partner Datuk Muthanna Abdullah said there were many international law firms that specialised in the aviation and aerospace industry but the number was limited in Malaysia.
“It’s an area of work for corporate law. I think all corporate law firms have been involved in manufacturing contracts for aerospace companies. Some have been involved in financing contracts with banks but it’s not their mainstay.
“They do not do it all the time. I think when you don’t do it all the time, you cannot call yourself a specialist. When we look at international law firms specialising in aviation and aerospace, it’s all they do. They are specialists,” Muthanna told Business Times recently.
Abdullah Chan & Co provides advisory services for Malaysian companies that are starting to get involved in the aerospace business or are already established in the sector.
It has four aviation lawyers who provide legal advisory services for the commercial and business aviation industry as well as companies involved in the aerospace industry.
Some of the advisory services pertain to financial assistance from banks, insurance obligations and technical issues in contracts.
Abdullah Chan & Co views that global aerospace companies which are keen to invest in Malaysia want to understand business processes and laws in the country, including incentives offered by the government under various investment initiatives for the sector.
“First of all, they want to understand the system of law that we (Malaysia) have in place. They want to know whether there are incentives for investments and local equity requirements.
“Those are the questions we see from investors across the board and across different spheres of business,” said Abdullah Chan & Co partner and aviation lawyer Shelina Razaly Wahi.
She said the aerospace sector was still new in Malaysia even though the country housed global aviation and aerospace manufacturers such as Honeywell, Airbus and Spirit AeroSystems.
There is also an increasing need for banks to understand the aerospace business and identify new areas of business.
Muthanna said most financial institutions did not have the full understanding of the aerospace business due to its specialised nature.
“We are hearing from Malaysian companies in the aerospace sector that banks have difficulty understanding their financing needs.
“And when we speak to the financiers, we find that they have difficulty understanding the aerospace industry, in particular how it is part of the global supply chain. If they are able to understand it, they will probably be in a better position to manage the risks of financing the industry,” he said.
Another sector that could grow along with the aviation and aerospace industry is the insurance business for maintenance, repair, and overhaul service centres and aircraft manufacturing facilities.
“When we highlighted the opportunities to insurers and brokers, they were very excited about the potential,” said Muthanna.
The cumulative total investments in the aerospace sector stood at RM4.7 billion from 2010-2014, according to the International Trade and Industry Ministry website.
Under the second Malaysia Aerospace Industry Blueprint (2015-2030), the sector has been identified as a new source of growth for the economy.
In 2014, the industry attracted seven projects worth RM682 million. Of the total, RM187 million came from foreign investments and the rest from domestic sources.