Slow demand, lack of skilled workers among top worries of German firms in Malaysia
PETALING JAYA: Slow demand, lack of skilled workers and weak exchange rates are the top three concerns of German companies in Malaysia, the latest AHK World Business Outlook survey found.
The biannual survey captured the views of globally active German firms including those in Malaysia from March 25, 2024, until April 21, 2024.
Other concerns for German companies in Malaysia include the volatile geopolitical landscape with respondents naming the China-Taiwan conflict as a concern and the Russia-Ukraine war which contributes to poor sentiments among investors.
On the positive side, 49% of German firms in Malaysia said they are well-prepared for these shocks and 61% said they have already implemented or are in the process of implementing a supplier network expansion plan, a trend consistent with contingency strategies that many corporates have embraced when supply chains were disrupted during the pandemic. These include exploring new sales markets, diversifying supplier networks and procurement as well as employing shorter transportation routes.
However, German firms said the top three obstacles in diversifying their supply chain are finding suitable suppliers and business partners (62%), high business costs (36%), and identifying a suitable sales market (34%).
Asked about the economic outlook, 54% expect the Malaysian economy to remain the same for the next 12 months while 29% expect conditions to be better.
For the first time, the survey featured a segment on climate change and sustainability to gauge its importance in Malaysia.
Although environmental, social and governance is a crucial trend for businesses, 64% of German companies said the issue was somewhat important but a lack of public debate surrounding climate change and measures to mitigate it remains a concern.
Often touted as a key to clean energy, the survey revealed that 49% of companies viewed hydrogen technologies as a slightly important topic with potential opportunities.
German firms also pointed out Malaysia’s heavy reliance on fossil fuels, while, 48% said there is awareness of the need to transition to renewable energy sources although the necessary frameworks were lacking and only 14% of respondents said Malaysia has a credible strategy for its renewable energy transition.
Half of the companies surveyed said an energy transition strategy would have a direct impact on their company.
Additionally, the companies also see business opportunities in Malaysia in the areas of industrial energy efficiency, renewable energy generation, and energy-efficient buildings.
“From declining demand to concerns surrounding geopolitical tensions, these findings are consistent across the region and also mirror global sentiments as businesses are feeling the impact of economic risks. The silver lining is German investors in Malaysia are well-prepared to cushion themselves from these impacts and confidence in conducting business here is high,” said Malaysian-German Chamber of Commerce and Industry (MGCC) executive director Jan Noether.
“Recent foreign investment announcements point to a positive economic ripple effect and the Malaysian economy also grew faster than expected in the first quarter of 2024. Given the importance of climate protection, our overall findings under the section on sustainability indicate that awareness of the issue is present but further clarity in policy is needed for Malaysia to achieve net zero by 2050,” he said.
In Malaysia, the survey was completed by the MGCC network of companies, comprised of mostly German and local small and medium-sized enterprises, mainly from the manufacturing and construction industry, as well as trade and services sectors.
