Global Trade Tensions: Malaysia’s Neutral Stance and Investment Focus
KUALA LUMPUR: It is too early to determine whether the tariffs imposed by the United States on Canada, Mexico, and China will harm or benefit Malaysia, said Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz.
Long-term Stability in Global Trade Market
For an open trade country like Malaysia (where the ratio of trade to gross domestic product is 130 per cent), long-term stability in the global trade market is very important. We also do not know what the United States will do next to Malaysia and our neighbouring countries, he told Bernama TV in an interview today.
Positive Spillovers in the Short Term
Although the trade war between the US and China is seen to be increasingly tense and may affect certain sectors, Malaysia might receive positive spillovers in the short term. The trade tension had actually started during the administration of Donald Trump 1.0 and was continued by Joe Biden, and now Trump 2.0 is expanding it.
Shift in Global Supply Chain
The trade war has led to a shift in the global supply chain, with investors looking for a more stable alternative location… the realignment is (headed) to countries that are neutral like Malaysia, like ASEAN and some other countries or economic blocs. Neutral countries such as Malaysia and ASEAN members have become preferred destinations because we offer a strong ecosystem and a conducive investment climate… and due to this shift, our country has recorded an increase in export value. Malaysia is chosen because of its political stability, open economy, and neutral status in the geopolitical arena, he noted.
Record High Exports
Last year, Malaysia’s exports reached a record high, driven by the electrical and electronics (E&E) and semiconductor sectors.
Malaysia Remains Neutral, Focus on Investments
Amid the global geopolitical tensions, Malaysia maintains a neutral stance and continues to attract quality investments, said Tengku Zafrul. In 2023, the country posted approved record investments worth more than RM330 billion.
Strengthening Investment Policies
Malaysia is also active in strengthening investment policies, including through the New Industrial Policy (NIMP), the National Energy Transition Roadmap (NETR) and the National Semiconductor Strategy. Investment is not only of high value but should provide economic spillover to local companies, especially small and medium enterprises (SMEs). With the continued trade tensions, global companies tend to choose countries with stable ecosystems, economic openness, and strong free trade agreements (FTAs), he explained.
Advantages of FTAs
He noted that Malaysia has the advantage of having signed 16 FTAs, including the latest one with the United Arab Emirates (UAE) and that "we are also renegotiating the FTA with the European Union and South Korea."
Challenges and Opportunities
However, Tengku Zafrul warned that in the long term, the slowdown in global growth could affect demand and supply chains, emphasising the importance of ASEAN in strengthening internal trade and not being too dependent on the world’s big economies. ASEAN is the world’s fifth-largest economic bloc with a GDP of US$3.8 trillion, but intra-ASEAN trade is still less than 25 per cent… we need to increase regional economic integration. Malaysia is also trying to diversify its export markets to other regions such as Africa and South America to reduce dependence on major economic powers, he added.
Addressing US Concerns
Addressing the US concern about technology security, Tengku Zafrul stressed that Malaysia is committed to complying with international regulations. "We need to ensure continued enforcement and discussions with the US and China to convince them that Malaysia remains a responsible trading partner. Malaysia will continue to monitor global developments and be ready to respond to any major trade policy changes….and we must be ready to take advantage of the opportunities that emerge from these challenges," he added.
Conclusion
In conclusion, Malaysia’s neutral stance and focus on investments have enabled the country to benefit from the shifting global supply chain and attract quality investments. The country’s strong ecosystem, economic openness, and neutral status in the geopolitical arena have made it an attractive destination for investors.
FAQs
Q: How will the tariffs imposed by the US on Canada, Mexico, and China affect Malaysia?
A: It is too early to determine whether the tariffs will harm or benefit Malaysia.
Q: What is Malaysia’s stance on the global trade tensions?
A: Malaysia maintains a neutral stance and continues to attract quality investments.
Q: What is Malaysia’s focus on investments?
A: Malaysia is focusing on strengthening investment policies, including through the New Industrial Policy (NIMP), the National Energy Transition Roadmap (NETR) and the National Semiconductor Strategy.
Q: What are the advantages of Malaysia’s free trade agreements (FTAs)?
A: Malaysia has the advantage of having signed 16 FTAs, including the latest one with the United Arab Emirates (UAE) and is also renegotiating the FTA with the European Union and South Korea.