Malaysia’s Trade and Economic Development

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MITI Day. Source: miti.gov.my

The Malaysian economy has made tremendous growth since independence in 1957. The transformation of the economy from one based on primary commodities to a dynamic and vibrant industrialising nation is attributed to a variety of factors. Malaysia’s political and economic stability, prudent and pragmatic investor-friendly business policies, cost-productive workforce, developed infrastructure comparable to that of any western country and a host of other amenities make this country an enticing place for investors. Structural policies carried out over the decades have resulted in a highly open and diversified economy with multiple sources of growth.

In 2017, amid the phase of global uncertainty, Malaysia retained its standing as a key competitive nation. The Malaysian economy recorded a robust growth of 5.9%, supported by faster expansion in both private and public sector spending. Trade registered stellar performance, growing at the highest rate in 13 years. Trade surged by 19.4% to USD434 billion, compared to USD355 billion recorded the previous year. Malaysia was ranked 25th largest exporter, 26th largest importer and 25th largest trading nation in 2017 based on the World Trade Organisation’s ranking.

In terms of competitiveness, the World Bank Doing Business 2018 Report ranked Malaysia at 24th best place in the world. The World Bank’s competitiveness criteria in the Doing Business ranking include ease of starting a business, licensing approvals and ease of cross-border trading. This is a good indication of the facilitative environment for businesses to strive.

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In terms of investment, Malaysia recorded approved investments of USD48.3 billion in the manufacturing, services and primary sectors in 2017. The investment performance demonstrates continued investor confidence in Malaysia. This is also a testament to Malaysia’s structural economic fundamentals, which underscores the resilience of the country’s economy. Malaysia welcomes high-quality investments particularly in new growth areas with emerging technologies, capital-intensive, high value-added, knowledge-based, skills-intensive and export-oriented industries.

Located in the heart of ASEAN, Malaysia is capable of offering MNCs and investors unique access to a steady stream of talent, a modern business ecosystem, world-class infrastructure and connectivity, and competitive cost advantages and incentive packages. MNC’s can use Malaysia as a base for conducting their regional and global operations to manage, control, and support their key functions.

Malaysia is targeting capital, design and R&D-intensive projects that have a high GNI impact plus strong linkages to domestic industries. Sectors such as chemicals, medical devices, electrical and electronics, aerospace, machinery and equipment, biotechnology, oil and gas and medical devices are among the sectors identified as central to Malaysia’s transition to a high-income nation. These sectors are deemed as important industrial contributors to the national industrial growth.

The services sector in Malaysia is one of the main pillars of the national economy. The sector’s contribution to the economy has increased steadily over the years. In 2017, the services sector contributed 54.5% to GDP compared with 54.3% in 2016. Opportunities in the services sector include ICT, oil and gas services, private healthcare services, private higher educational institution, tourism and professional services. The Services Sector Blueprint introduced in 2015 has outlined strategies and initiatives to promote the services sector to achieve 56.5% GDP in 2020.

The focus is also given to Small and Medium Enterprises (SME) development wherein 2017 SMEs recorded GDP growth of 7.2% and continued to outperform the overall economy since 2004. SMEs contributed 37.1% to GDP in 2017 compared with 36.6% in 2016 and employed about 6.9 million workers.

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Technological advancement has become an integral part of Malaysia’s growth as an industrialised nation. With the help of technology, Malaysia is steadfast in providing for the modern day requirements of investor companies based in the country. Malaysia is one of the most technologically developed countries amongst industrialising nations in the ASEAN region. The nation’s persistent drive to engage modern technologies proves to be a great advantage to manufacturers in Malaysia.

Malaysia has adapted to change by embracing new opportunities made available through the Fourth Industrial Revolution mainly through the adoption of smart manufacturing processes and technologies to enhance production flexibility and efficiency. Machine to machine applications are an emerging field and opportunities are available to investors to venture into sensor technology projects in Malaysia. New investments in the advanced Internet of Things (IoT) enabled technologies and eco-system will expand logistics value chains, including warehouse operation and freight transportation.

The conducive business environment in Malaysia has made the country one of the world’s top investment destinations for offshore manufacturing operations. Malaysia has to date attracted more than 5,000 foreign companies from more than 40 countries that have established their operations here. Many of them continue to expand and diversify their operations in the country, reflecting their confidence in Malaysia as the preferred destination for their business ventures.

Increasing competition regionally and globally as well as rapid advancement in technology will make the years ahead more challenging. Malaysia will continue to address them with fortitude and resilience, continuing with its endeavors to shape the economic landscape of the nation. Considering the high speed of technological advancement, Malaysia has to stay alert, continuously adapting and making progress in a new environment characterised by disruptive technology. The Government is committed to strengthen Malaysia’s pro-business environment with prudent and pragmatic policies to ensure a conducive ecosystem as we continue to seek both capital and technology injection into the Malaysian economy.

For more information, visit http://www.miti.gov.my/

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