KUALA LUMPUR: Malaysia has proven to be a beacon of stability and progress in Southeast Asia as gross domestic product (GDP) beat expectations in the first three quarters of this year in an era of technological advancements despite global uncertainties and fierce competition.
With GDP growing by 4.2 per cent, 5.9 and 5.3 in the three quarters respectively, surpassing earlier forecasts, it is attracting foreign investors to invest in varied sectors including semiconductors and data centres in the country.
The good news is that growth is supported by a positive ringgit, political stability, low inflation and a thriving tourism sector, which is a commendable performance amid uncertainties in a world still engulfed by trading challenges such as protectionist tendencies.
Despite earlier concerns in the beginning of 2024, the ringgit appreciated by 14.9 per cent against the US dollar in the third quarter and did creditably well against other currencies.
No less important for the economy’s good showing was brisk domestic spending, strong investment activity and continued improvement in exports.
Its other credentials included a surplus in the current account of the balance of payments of RM2.2 billion or 0.4 per cent of GDP during the third quarter.
Among the nation’s major earners, petroleum revenue is estimated to be lower at RM64 billion or 3.2 per cent of GDP, as Malaysia continues its reliance on oil and gas revenues.
Export revenue, meanwhile, from palm oil and palm-oil based products is set to reach RM110 billion, due to higher export demand especially from China.
In leading the charge for a better economy, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim attributed Malaysia’s ability to navigate turbulent waters with its robust economic fundamentals.
Malaysia’s resilience shone despite US-China trade friction, the Russia-Ukraine war, intense competition for investments and protectionism as evidenced by higher tariffs imposed by the United States, for example on solar panels.
Anwar’s assertion that the MADANI Economy framework was instrumental in fostering higher value-added activities via digitalisation and technology that raised Malaysia’s competitiveness was highly justified.
Against such a backdrop, he expressed optimism the country’s GDP will hover between 4.8 and 5.3 per cent for 2024, which will set the stage for a 4.5 to 5.5 per cent growth next year.
Trade Remains Resilient
Malaysia’s trade posted the highest periodic value ever, expanding 9.3 per cent to RM2.383 trillion in the first 10 months of 2024 from the same period in 2023.
Malaysia External Trade Development Corporation (MATRADE) said the country chalked up a trade surplus of RM102.77 billion during the period with exports up 4.8 per cent to RM1.243 trillion and imports increasing by 14.6 per cent to RM1.140 trillion.
For the whole year, trade is projected to grow by 9.4 per cent, with exports and imports increasing by 5.6 and 13.8 per cent respectively.
Despite these positives, Malaysia remains susceptible to global vulnerabilities including the escalation of geopolitical tensions, supply chain disruptions, volatility in financial markets and varying growth prospects across its trading partners especially China, which could affect its own economy.
Vigilance will be the order of the day for the Ministry of Investment, Trade and Industry (MITI) as it monitors closely risks to trade and mitigate them, particularly through intensified promotional activities and opening new export markets.
There is deep concern now following US President-elect Donald Trump’s warning that Washington will impose tariffs on BRICs countries. The US has already imposed tariffs on solar panels from Malaysia to protect its own solar panel market.
Whopping Investments of RM160 billion in First Half
Malaysia’s investment landscape in the first half of 2024 has been robust, with growing interest in technology, green industries and advanced manufacturing sectors.
The country attracted RM160 billion in approved investments in the first six months of this year, up 18.0 per cent from RM135.6 billion in last year’s first half.
Domestic investments accounted for 53.4 per cent or RM85.4 billion while foreign investments contributed 46.6 per cent or RM74.6 billion, representing a double-digit year-on-year growth of 19.1 per cent and 16.7 per cent respectively.
The services and manufacturing sectors attracted the bulk of investments, from real estate services and information and communications sub-sectors, along with electrical and electronics (E&E) manufacturing.
While these comprise traditional sectors, the MADANI government is bent on positioning Malaysia also as a sustainable artificial intelligence (AI) and data centre destination in Southeast Asia to reinforce its position as a leading global investment destination.
As a result, the country continues to climb the chip industry value chain with several proposed investments made by technology giants this year, partly due to the US-China trade tensions.
This includes Microsoft’s US$2.2 billion (RM9.8 billion) investment for cloud and AI infrastructure over the next four years, Google’s US$2 billion (RM8.92 billion) investment to house its first data centre and Google Cloud region as well as Amazon Web Services’ (AWS) US$6.2 billion (RM27.65 billion) investment as part of its long-term commitment through to 2038.
Other notable foreign investments were German semiconductor giant Infineon Technologies AG’s additional €5 billion (RM24 billion) in Kulim, Kedah, and Enovix Corporation’s proposed US$1.2 billion (RM5.35 billion) investment over the next 15 years.
Joining BRICS As Partner Country
In October this year, Malaysia was admitted as among the 13 partner countries to the intergovernmental BRICS organisation, a bloc that collectively accounts for one-fifth of global trade.
The admission into BRICS plus its chairmanship of ASEAN next year will undoubtedly position the nation as a bridge in advocating for regional economic resilience and collaboration between the two blocs.
UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan said that as ASEAN chairman, Malaysia is in a unique position to encourage Southeast Asian economies to explore potential economic benefits of aligning with BRICS.
“Given that both ASEAN and BRICS comprise emerging markets with significant economic growth trajectories, there is a strong foundation for exploring complementary interests,” he said.
Apart from Malaysia, 12 other nations have been officially added to BRICS as partner countries, namely Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Nigeria, Thailand, Turkey, Uganda, Uzbekistan and Vietnam.
Healthy Growth Momentum To Continue Into 2025
Putra Business School’s Master of Business Administration programme director and Associate Professor Ahmed Razman Abdul Latiff concurred with views that Malaysia’s growth was very positive, supported by brisk domestic demand and a resurgence in exports despite global challenges.
“I expect Malaysia to have another positive growth next year with higher exports and the ringgit to continue to strengthen and Bursa Malaysia to see increased capital inflows from foreign portfolio investors.
“The reasons are because Malaysia has invested a lot in infrastructure such as the 5G network and the soon-to-be-completed East Coast Rail Link (ECRL) as well as easing processes to set up businesses in the country,” he told Bernama.
This, he said, will attract more FDIs into the country and encourage local businesses to expand to the global stage helped by various unilateral agreements undertaken by the government.
Reducing Dependency on Trading Through Singapore
Malaysia University of Science and Technology (MUST) economist Prof Emeritus Barjoyai Bardai said it was imperative for the government over the long-term to reduce its dependency on Singapore which was the country’s second largest trading partner.
Singapore has an entrepot trade. It imports from neighbouring countries and exports back to Malaysia and vice-versa. Over the long-term, we need to see how to reduce dependence on trade through Singapore.
“(If possible) we should avoid trading through middlemen. We want to trade directly with our importers and exporters.”
Elaborating, he said the situation was brought about by local businesses who comprise exporters and importers.
They could be overly familiar in dealing with Singapore and see trading through the island republic as the most convenient.
“So they don’t have the initiative to find buyers from whom they can purchase directly. Perhaps government incentives are needed to push our traders to buy directly from original sources or sell directly to the final buyers,” he said.
