“The Asia-Pacific region accounts for more than 30% of the global aviation industry. We cannot afford to simply observe from the sidelines. We need to participate,” says CAAM CEO Captain Norazman Mahmud, who moderated the “Shaping Malaysia’s LAE: Building a National LAE Strategy” session at the LAE Forum 2026 last week.
Around 240 companies worldwide are racing to certify eVTOL aircraft, while more than 200 patents related to eVTOL technologies are awaiting regulatory approval, he notes.
Norazman says Malaysia already possesses many of the capabilities needed to participate in the industry, including a well-established aerospace manufacturing base, a globally competitive semiconductor sector, expanding data centre (DC) investments and telecommunications infrastructure.
“The country has secured RM184 billion [$58 billion] in DC and cloud infrastructure investments that could support the digital backbone required for autonomous aviation, while drone applications are already being deployed commercially. Petroliam Nasional, for example, uses drones to inspect approximately 1,900km of gas pipelines.
“We can do this. But we need to scale up. We want to be a hub, not merely be followers,” Norazman adds.
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‘Learn from China rather than reinvent the rules’
Lai Han Sheong, managing director of Beijing-based early-stage venture capital firm Future Capital Discovery Fund, urges Malaysia to adapt proven regulatory models instead of developing an entirely new framework.
“Study China’s regulations, modify and adapt them to the local environment. Don’t start from zero,” he tells The Edge on the sidelines of the forum.
China has emerged as the global leader in the LAE. Beginning July 1, the country will allow civilian drones operating below 120m to fly in approved areas without prior approval, requiring only notification to authorities. Previously, low-altitude airspace had been tightly controlled by the military.
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“Without opening the sky, the [low-altitude] economy cannot happen,” Lai says.
China holds about 66% of global LAE patents and 56% of worldwide eVTOL patents, according to Lai. Chinese drone manufacturer DJI controls some 80% of the global consumer and enterprise drone market.
That technological lead is already translating into economic activity. The industry has already created about 100,000 jobs in China, while drone-delivered automated external defibrillators in Shenzhen can reach cardiac arrest victims in an average of five minutes.
Rather than replacing workers, Lai argues the industry would generate demand for technicians, software engineers, AI specialists and airspace planners.
Malaysia can become Asean’s testing ground for eVTOLs
Malaysia’s comparative advantage lies less in designing aircraft than in becoming Asean’s testing hub for eVTOL technologies, Lai says.
The country already has three key strengths: its electrical and electronic (E&E) and semiconductor industries, a mature automotive manufacturing ecosystem and rapidly expanding DC capacity.
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“What Malaysia does not have is the AI capability for smart air traffic communications. That is where we can participate,” he says.
Lai proposes that Malaysia focus on developing future-proof vertiports or landing sites for eVTOL aircraft capable of accommodating multiple eVTOL manufacturers and different digital air traffic systems.
By attracting international eVTOL developers to conduct flight testing locally before commercial deployment, Malaysia could position itself as a launch market for the region.
“When companies think about expanding overseas, they should think of Malaysia,” he adds.
Earlier at the forum, in which Lai was one of the panellists, he said Malaysia ranks second only to Singapore among Southeast Asian countries in terms of its LAE potential, based on manufacturing capability, operational readiness, supporting industries and aerospace services.
Singapore excels in infrastructure but lacks sufficient land for large-scale testing, creating an opportunity for Malaysia, he notes.
Indonesia and Thailand currently trail Malaysia in certification readiness, although Indonesia recently granted the first overseas airworthiness certification for a Chinese eVTOL cargo drone developed by Shanghai AutoFlight Co.
Despite the optimism, another panellist, Malaysia Aerospace Industry Association (MAIA) president Naguib Mohd Nor, cautions that Malaysia’s aerospace supply chain remains relatively underdeveloped.
“Malaysia has capabilities in precision machining, composites, electronics and sheet metal fabrication, but aerospace manufacturing demands significantly higher engineering standards than general industries.
“We have to stop fooling ourselves that because we have headline capabilities, we can automatically achieve what we want,” he says.
While Malaysia has thousands of precision machining companies, only about seven currently possess aerospace-level assembly capabilities, he notes.
The industry also struggles to source more than RM1 billion worth of machine parts domestically each year despite substantial local manufacturing capacity.
“A number of companies look like aerospace suppliers from the outside, but they are not operating at global aerospace standards,” he observes, noting that Malaysian manufacturers often prioritise speed and cost over engineering depth and process discipline, limiting their ability to compete in higher-value aerospace programmes.
Financing remains a structural constraint
Access to financing presents another obstacle.
Naguib says it took seven years for the industry to establish Malaysia’s first equity financing scheme for small and medium aerospace enterprises.
Although companies often secure long-term supply commitments from global aerospace manufacturers, banks typically assess only existing contracts and current cash flow, making it difficult to finance capacity expansion.
“As soon as business developers identify opportunities in the supply chain, financing often becomes the limiting factor,” Naguib says.
Without financial mechanisms that recognise future order books and long-term industrial commitments, suppliers will struggle to expand quickly enough to meet demand.
Khazanah Nasional chief investment officer Hisham Hamdan says government support will be critical in the early stages of the LAE.
Private investment is unlikely to accelerate until public-sector demand and development spending create commercial confidence, he says, citing China’s allocation of about RMB300 billion ($57 billion) over 15 years to develop its LAE as a model for long-term industrial support.
“We don’t have to be perfect. We will make mistakes. The important thing is that we create the right ecosystem while managing those risks carefully,” Hisham adds.
National Aerospace Industry Corp (NAICO) Malaysia CEO Shamsul Kamar Abu Samah says the LAE, together with the emerging space sector, could become new growth drivers for the country’s aerospace industry. Malaysia’s aerospace industry is targeting RM55.2 billion in revenue by 2030 under the Malaysian Aerospace Industry Blueprint 2030.
NAICO Malaysia projects the aerospace sector could exceed RM100 billion in economic value by 2035 if regulatory and industrial bottlenecks are resolved.
“If we can generate RM30 billion from the LAE over the next decade, together with growth in the space economy, we can surpass RM100 billion by 2035,” he estimates.
Both sectors have already been identified under Malaysia’s New Industrial Master Plan 2030 as high-growth, high-value industries.
AirAsia Drone accountable manager Alvin Tan Xing Kai says demand for drone training has expanded beyond aviation, attracting participants from plantation companies, utilities, construction, insurance, mining and renewable energy firms. AirAsia Drone is the autonomous technology and drone training arm of Capital A.
Tan, a panellist in the “Building Malaysia’s Drone Innovation from the Ground Up” session, says the growing interest reflects wider adoption of the technology across industries, with companies seeking better data collection to improve project execution and operational efficiency.
However, he says many new drone operators still lack awareness of aviation requirements, including airspace management, coordination with other users and safety procedures.
Tan notes that more than half of those attending the company’s training programmes already operate drones, although some may not have obtained the necessary permits.
LGMS co-founder and managing director Fong Choong Fook says regulation has become the industry’s No 1 priority.
“Battery technology remains the biggest constraint on wider commercial drone adoption, particularly for long-distance delivery services.”
He notes that a breakthrough in power density could transform the industry, allowing drones to operate for hours instead of minutes and enabling applications, such as drone delivery, to become more viable.
However, regulations need to be established before the technology matures, he says.
“Regulations have to come fast because technology will come even faster,” Fong says, comparing the development of drone regulation to the challenges faced in regulating AI.
Meanwhile, questions about whether Malaysia is ready for eVTOL technology miss the point, MAIA’s Naguib says.
“The technology will come whether we are ready or not. The real question is whether we participate in the economy or simply become consumers.”
He compares the transition to electric vehicles, arguing that autonomous aviation and the broader space economy are inevitable developments.
“All the elements are already in place. The question is whether we can scale,” he adds.
This story first appeared in the June 29 issue of The Edge Malaysia
