The Malaysian Insight

MALAYSIA cannot depend on benefits from the US-China trade war to sustain its growth, said a US-Malaysian commerce group, adding that the country must strive to be a competitive, high-value investment destination.

The American Malaysian Chamber of Commerce (Amcham) said although the trade war has increased investments in Malaysia over 18 months, whether those benefits can be sustained is uncertain.

This is because the global supply chain that Malaysia is part of is highly complex, and it is difficult to see how the trade war will impact any given country, said Amcham executive director Siobhan Das.

“The trade war is largely outside Malaysia’s control. The best thing the Malaysian government can do is to focus on enhancing the country’s value proposition to foreign investors.

“This can be done via the traditional routes of developing our talent pipeline and ensuring ease of doing business.

“To realise sustainable economic benefits, Malaysia needs to position itself as an attractive investment destination, regardless of what happens with the trade war,” she told The Malaysian Insight.

This means working to leverage Malaysia’s existing strengths, such as its infrastructure, diversity, robust small and medium business ecosystem, and strategic geographical location, she said.

At the same time, said Das, the country must address the long-standing business concerns of skill shortages, access to labour, bureaucratic red tape and need for regional harmonisation.

“Ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership would also be very much a step in the right direction to keep Malaysia competitive.”

Her comments follow the latest investment figures released by the government that showed Malaysia continuing to reap the benefits from the trade war, which was started by US President Donald Trump.

No guarantees

According to the figures from the Malaysia Investment Development Authority (Mida), investments from the US jumped to a whopping US$5.62 billion (RM23.45 billion) in the first six months of the year from the US$113 million recorded in the same period in 2018.

The increase is believed to be due to US companies moving some of their operations out of China and into Malaysia.

Mida said the biggest chunk of new US investments in the first half of 2019, or RM11.52 billion, went to the services sector. In comparison, the sector received only RM42.3 million in US investments in the same period last year.

In the first six months of 2019, Malaysia approved US investment proposals worth RM1.69 billion in the manufacturing sector, compared with RM307 million a year ago.

Vietnam and Malaysia are two of the most attractive destinations for such companies, said a Reuters report.

And yet, said Das, Malaysia cannot expect the positive impact to continue.

“The trade war neither guarantees nor precludes Malaysia from securing additional investments and economic gains.

“Rather, it is an external factor that must be carefully monitored and navigated, while Malaysia focuses on enhancing our international competitiveness based on our own merits.”

The belief that Malaysia can keep looking forward to the large-scale relocation of factories from China is also misplaced, she said.

“I think this early optimism was based on some misconceptions or assumptions about how the global supply chain works, and how multinational companies make their investment deployment decisions.

“Firstly, you’re unlikely to see the large-scale shutdown of US companies in China, because China is itself an enormous market, and much of the manufacturing that US companies undertake in China is to serve the domestic Chinese market.”

Late last year, the American Chambers of Commerce in Beijing and Shanghai surveyed US companies in China, and 65% said they had no plans to move out their manufacturing facilities, she added.

Of the remaining 35% considering relocation, about half were looking at Southeast Asia, with Thailand, Malaysia and Vietnam being the prime candidates.

“However, competition for foreign investments these days is very much global in nature, and multinationals will also consider options further afield, depending on the nature of their operations and specific business needs,” said Das. – September 8, 2019.