Malaysia’s Trade Strategy: Joining BRICS, Strengthening Ties with ASEAN, and Promoting Midstream and Downstream Industries
Malaysia has recently applied to join the BRICS (Brazil, Russia, India, China, and South Africa) grouping, a move that is expected to further boost the country’s international trade and economic ties. This development is in line with the country’s plan to resume free trade agreement (FTA) negotiations with the European Union (EU) and strengthen its economic ties with ASEAN member states.
Pursuing FTA with EU and Strengthening Ties with ASEAN
Trade with ASEAN countries currently accounts for 23% of Malaysia’s total trade, leaving significant room for growth and opportunities to further boost trade with countries in the region. Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz emphasized the importance of strengthening ties with ASEAN member states, stating that "there is an opportunity for us to further boost trade with countries in the region."
Payment Settlement and Currency Usage
In terms of payment settlement, discussions have been ongoing with China to use the ringgit and renminbi for trade settlement on a bilateral basis. However, Tengku Zafrul noted that it is difficult to implement this for all countries, as the usage of local currencies is not widespread, and the US dollar remains the dominant currency used. The country is also planning to increase the use of other foreign currencies.
Joining BRICS: Reducing Risks and Promoting Stabilization of the Ringgit
Hamzah Zainudin, a member of the opposition, asked whether the move to join BRICS is intended to reduce risks due to prolonged geopolitical conflicts and whether it would lead to de-dollarization and a reduced presence of investors from the Middle East. Tengku Zafrul responded by stating that the move is not solely aimed at reducing risks, but also at promoting the stabilization of the ringgit, the country’s local currency.
Focusing on Midstream and Downstream Industries
Tengku Zafrul also emphasized the importance of focusing on midstream and downstream industries to reduce exports of upstream products. He cited the example of the government’s ban on the export of rare earth raw materials, which has led to a jump in exports of mid- to downstream products. The country’s exports have increased by 6% to approximately RM99 billion for the January-August 2024 period, with electrical and electronic products making up the largest share at almost 40%.
Conclusion
Malaysia’s efforts to join BRICS, strengthen ties with ASEAN, and promote midstream and downstream industries demonstrate the country’s commitment to diversifying its economic ties and reducing its reliance on any one particular region or industry. By doing so, Malaysia can reduce its exposure to global economic volatility and strengthen its position in the global economy.
FAQs
Q: What is the purpose of Malaysia’s application to join BRICS?
A: Malaysia’s application to join BRICS is aimed at promoting economic cooperation and diversifying trade ties with other member countries.
Q: What is the current percentage of trade with ASEAN countries?
A: ASEAN countries account for 23% of Malaysia’s total trade.
Q: Will the move to join BRICS reduce risks due to prolonged geopolitical conflicts?
A: The move is not solely aimed at reducing risks, but also at promoting the stabilization of the ringgit, Malaysia’s local currency.