Malaysia proves its strength as an export hub
Malaysia’s consistent export growth and strong future potential, combined with its strategic location, make it an important global supply market.
From 2001 – 2021, Malaysia’s exports grew at a CAGR of 6%. During the pandemic, the country’s exports declined by 1.7% to USD 234bn in 2020. Malaysia’s exports surged by 27.8% to USD 299bn in 2021. This has proved its strength as an export hub.
The top destinations for Malaysia’s exported goods are its ASEAN (The Association of Southeast Asian Nations) partners, China, the USA, Japan, India, and South Korea. These countries accounted for more than 70% of Malaysia’s total exports in 2021.
Trends: While China, Singapore, and USA are Malaysia’s top export partners with a share of 15%, 14% and 11% respectively, the ASEAN countries, when put together, account for 27.7% of its exports. Machinery & electronics, chemicals & plastics, and fuels are Malaysia’s top three export categories, and these make up a total share of 70% of its exports.
- During the pandemic in 2020, Malaysia’s exports dipped by around 2%, but recovered swiftly, with a positive export growth rate of nearly 28% in 2021, as economic activities resumed with the easing of COVID-19 restriction measures.
- Exports grew at a CAGR of around 6% from 2001-2021, with metals & minerals achieving the highest CAGR of 11% during this time.
- Malaysia has registered a trade surplus since 2010, and its consistent export performance has made its trade surplus grow to an all-time high of USD 61bn in 2021.
- Malaysia’s exports mainly comprise of capital goods and consumer goods, which contributed more than 70% of the country’s total exports in 2019.
- Machinery & electronics (43%), chemicals & plastics (15%), and fuels (13%) were the top three export categories in 2021.
- The top three export products in 2021 were integrated circuits (USD 60bn), refined petroleum (USD 21bn) and palm oil (USD 14bn).
- The expansion in exports has been driven by petroleum products, metal products, electronics, chemicals, and palm oil and palm oil-based agriculture products
Upshot: Due to its advantageous location near the Straits of Malacca, a waterway connecting the Andaman Sea (Indian Ocean) and the South China Sea (Pacific Ocean), Malaysia has traditionally been an active trading country. Currently, Malaysia has seven bilateral Free Trade Agreements (FTAs) with the following countries: Australia, Chile, India, Japan, New Zealand, Pakistan, and Turkey. The Association of Southeast Asian Nations (ASEAN) members have established the ASEAN Free Trade Area, which proved to be one of the best ways to open up foreign markets for Malaysian exporters, as they benefit through preferential treatment and market access.
- Malaysia is a global leader in the export of vulcanised rubber and apparel, as well as palm oil, solar power diodes or semi-conductors, and integrated circuits.
- In recent years, Malaysia has developed significant capabilities in electronics and semi-conductor exports, which are among the fastest-growing industries contributing to the present boom in exports.
- The agriculture sector is an important contributor to the Malaysian economy as the country exports large quantities of palm oil and rubber.
- As Indonesia has recently banned exports of palm oil, Malaysia can fill this gap as it is the second largest producer of palm oil in the world.
- Government policies that support business environments with opportunities for growth have made Malaysia an attractive manufacturing and export base. The Malaysian government has launched a number of efforts to help SMEs (Small and Medium Enterprises) by means of the Market Development Grant (MDG). This is a support initiative in the form of a reimbursable grant, which was first introduced in 2002.
- The Malaysian economy is expected to continue its growth trajectory in line with continued expansion in global growth, and with the help of supportive government policies.
Imperatives: Malaysia’s exports are forecast to exceed USD 500bn in 2030 with an average annual growth rate of more than 8%.
- Consider taking advantage of Malaysia’s strong economic development, manufacturing strength and adoption of liberal trade policies, which puts a high emphasis on regional and bilateral trade agreements.
- An increasing number of corporates are looking towards Malaysia for sourcing their products, due to which there is real competition for resources.
- It is important to be aware of specific sectors and products where Malaysia has demonstrated its strength and export potential, since it has a relatively diversified range of goods available for export.
- To drive procurement and supply from Malaysia, improve procurement teams’ awareness of Malaysia’s continuously changing voluntary reductions and elimination of tariffs. These are aimed at enhancing the country’s competitiveness and capacity in exports of various products.