The Malaysian Insight

ORDERS are pouring in for some Malaysian small and medium enterprises (SME) thanks to the US-China trade war, but there are pitfalls in the form of a talent shortage and human resource policies, according to SME Association of Malaysia president Michael Kang.

He said companies in a range of sectors have seen increased orders from both the US and China after the two superpowers began their dispute last year.

“I have learnt from association members that companies from US and China have started looking for partners here,” Kang told The Malaysian Insight.

These include electronics companies based in Penang. Malaysia exports electronic parts and components to China, which uses them to produce mobile phones, computers and other products, some of which are then exported to the United States.

However, if additional US tariffs lead to a decline in the output of Chinese products, then China’s demand for components will also be affected.

The other result of the trade war is that Malaysian companies are being engaged as a partner for either China or US firms to act as a conduit to each other’s market, Kang said.

“I have learnt that a plastic product manufacturer from the Hong Kong Trade Centre is looking for a partner in Malaysia, through whom the products will be sold to the United States.

“US manufacturers of paper tableware have also come to Malaysia to find business partners with the intention of exporting to China.”

The US is also a top importer of electrical machinery, optical and medical instruments, rubber, furniture and bedding from Malaysia.

However, Kang cautioned that Malaysia’s current human resources policies would not put it in good stead for the long run.

“They are not as conducive for foreign companies as policies in Vietnam and Indonesia. Hence, we are becoming less favourable to labour intensive industries looking to set up a base in the region,” Kang said.

Malaysian tech alternative for US

Malaysian technology companies, meanwhile, are enjoying good business in the wake of the trade war.

One of them is Swift Bridge Technologies Sdn Bhd, which has seen a solid order book and business volume up by 83% in the space of one year.

Managing director SK Chong said the cable solutions provider has seen a spike in orders from both the US and China.

“From 2017 to 2018, my business volume suddenly increased by 83%. In the first half of this year, I achieved the amount in annual turnover I had in 2018. My performance has increased from 50% to 60%.

“In addition to the increase in US orders, there are recent orders from China, which are also on the rise,” Chong said.

The bulk of his orders are from firms in the US, where Chong graduated and worked for almost two decades. His experience and network there have helped him tap the US market.

Chong also continues to participate in US trade fairs and urged Malaysian SMEs to do the same in foreign exhibitions to obtain a wider market for their brand.

“Don’t just participate in small-scale small exhibitions,” he advised, as such efforts pay off in the long run.

Chong said he recently began doing the same in the China market and this had started bearing fruit.

Malaysian businesses should seize the opportunities that have come as a result of the US-China trade war, he added.

For example, Malaysian tech firms could take China’s place as an alternative for the US.

However, one problem is the lack of tech talent in Malaysia.

Chong said this was due to brain drain with a lot of local talent leaving the country to work abroad.

Short-term benefit

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) president Ter Leong Yap said Malaysia’s gains from the US-China trade war were mostly short-term.

“The US should recognise China’s standing as an economic powerhouse.”

He said he hoped both countries resolved their differences soon, as the trade war was detrimental for the global economy.

Malaysian Employers’ Federation executive director Shamsuddin Bardan said that Malaysia ultimately was not seen as a strong base for in comparison with Vietnam.

Shamsuddin agreed with Kang that Malaysia’s human resource policies are not favourable for foreign companies to set up base here.

Until that is resolved, Malaysia has little to gain from this trade war, he said. – June 3, 2019.