1. Malaysia's economy is performing well in the region in terms of efficiency and business regulations despite modest GDP growth of 4.1 percent in 2016 (below the ASEAN average of 4.5 percent).
2. Malaysia is a net recipient of FDI, which accounts for the majority of inflows into the economy. Inward FDI is projected to have grown by 40 percent year-on-year in 2016 to reach MYR 50 billion, with the 2015 total (MYR 36 billion) having been surpassed by the end of September. Manufacturing accounted for the majority (51.2 percent) of investment, followed closely by services (47 percent). Primary industries received the final 1.8 percent.
EXTERNAL FACTORS ANALYSIS
1. Governance - The Malaysian Investment Development Authority’s (MIDA) i-incentives portal lists 144 incentives to foreign investors. These include tax incentives and non-tax incentives(grants and ‘soft loans).
2. Economy - Predictions for 2017 GDP growth range between 4.3 percent and 4.7 percent, indicating faster growth than in 2016. The rubber and palm oil industries are also significant with 63 percent of the world’s rubber gloves coming from Malaysia in 2016. Investment in Malaysia’s higher education market continues to see growth. The appointment of Alibaba’s Jack Ma as Digital Economy Advisor is hoped to boost growth in the e-commerce industry above the 11 percent it achieved in 2016.
3. Society - Malaysia’s active working-age population is expected to grow by 1.6 percent in the next decade with a literacy rate of 95 percent, widely spoken English and an ever increasing number of higher education graduates.
4. Technology - Four related business opportunities have been identified by PEMANDU:
(i) Fixed Services – Shift to digital will increase demand for high-speed broadband, which requires fixed-line services
(ii) Mobile Services – Biggest opportunity is the introduction of LTE (4G) networks across the country. Related opportunities include application development, tower-related maintenance and integration work.
(iii) Courier, Post and Broadcast – e-commerce related opportunities, including transaction fulfillment, warehousing and inventory management
(iv) Regional Operations – ASEAN integration requires service syndication across countries
5. Cluster Development - The Malaysian government has earmarked MYR 2.1 billion of funds for infrastructural development in five key economic corridors:
(i) Iskandar Malaysia
(ii) Northern Corridor Economic Region (NCER)
(iii) East Coast Economic Region (ECER)
(iv) Sabah Development Corridor (SDC)
(v) Sarawak Corridor of Renewable Energy (SCORE).
2017 Q1 TRADE SURPLUS
1. Malaysia reported a MYR 8.7 billion trade surplus in February of 2017, compared to a MYR 7.35 billion surplus a year earlier and beating market consensus of a MYR 6.05 billion surplus.
2. Exports surged by 26.5 percent to MYR 71.8 billion, following a 13.6 percent rise in January and above market consensus of a 17.9 percent growth. Imports went up 27.7 percent to MYR 63.1 billion, compared to 16.1 percent growth in the preceding month and higher than market expectations of a 21.7 percent increase.
3. Exports increase for the fourth straight month boosted by electrical & electronic products (22.4 percent to MYR 24.6 billion, 34.2 percent of total exports), palm oil and palm based products (62.8 percent to MYR 7.0 billion, 9.7 percent share), crude petroleum (50.4 percent to MYR 2.4 billion, 3.3 percent share), natural rubber (85.5 percent to MYR 505.8 million, 0.7 percent share) and LNG (2.1 percent to MYR 3.3 billion, 4.6 percent share), and timber and timber-based products (7.4 percent to MYR 1.7 billion, 2.4 percent share).
4. Imports to Malaysia jumped 27.7 percent from a year earlier to MYR 63.1 billion in February of 2017, compared to 16.1 percent rise in the preceding month and higher than market expectations of a 21.7 percent. It was the fourth consecutive month of increase, as imports went up for most categories : intermediate goods (39.9 percent, due to fuel & lubricants (258.4 percent); parts & accessories of capital goods, except transport equipment (14.1 percent); industrial supplies, processed (26.4 percent). In contrast, imports for cosumption goods declined (0.6 percent, due to semi-durables (-5.3 percent), non-durables (-3.7 percent).
MSC SECTOR
1. In 2017 March, Malaysia Digital Economy Corporation (MDEC) reported Malaysia saw a steady increase in export sales from MSC companies to record RM19.1 billion, an 18% growth from 2015. The Creative Content and Technology (CCT) cluster recorded the highest growth, contributing RM1.17 billion to total export sales in 2016.
2. The top destinations for export sales are Singapore, the United States, Germany, the Netherlands and the United Kingdom.
3. growth of export sales from local companies was higher than average last year 2016 with a 21% recorded export sales growth.
4. Tech-based exports are a key focus of Malaysia’s economy and growth was aided by FDIs from leaders in global cutting-edge technologies.
5. Companies include Swiss company Luxoft, a leader in automotive high-end solutions choose to locate its global hub in Malaysia. Australian Internet of Things (IoT) company Medicine set up an IoT medical hub in Cyberjaya. Japanese gaming giant Bandai Namco set up its global hub for visual arts production in Malaysia.
BNM ANNUAL FORECAST
1. The Malaysian economy is projected to register a sustained growth of 4.3% - 4.8% in 2017.
2. Malaysia’s exports and imports account is expected to register a surplus of 1.0% - 2.0% of GNI in 2017.
3. Headline inflation is projected to average higher in the range of 3.0% - 4.0% in 2017, given the prospect of higher global commodity and energy prices, and the impact of the depreciation of the ringgit exchange rate.
THOUGHTS
1. On 31st January 2017 the Companies Act 2016 came into force and applies to all companies in Malaysia, including those that are foreign-owned.
2. The new regulations have been introduced in order to reduce the costs of doing business, increase the flexibility of managing affairs of companies and further protect key stakeholders of companies registered in Malaysia. The act also introduces a new online portal, MyCoID 2016, with the intention of easing corporate establishment and registration.
3. An advanced infrastructure, highly educated and growing workforce and strong regulatory environment allow Malaysia to service high value add industries effectively and continue to entice overseas investors.
4. MDEC plans to set up new Digital Hubs, which will act as catalysts for further growth of a robust startup ecosystem. Digital hubs essentially function as digital brains, analyzing and communicating with customers across online and offline channels and touch points to present a comprehensive view of customer experiences.
(Source: aseanbriefing, tradingeconomics, Digitalnewsasia, MDEC, BNM)
