By ANNA CHIDAMBAR

Malaysia ranks third in the 2017 Global Retail Development Index (GRDI) in retail investment for the second successive year, driven by higher influx of tourists, better disposable income and government investment in infrastructure.

Malaysia’s retail market continues to grow despite a slight dip in overall gross domestic product (GDP) growth and short-term pressures of currency fluctuation and inflation, said management consulting firm AT Kearney yesterday.

“The long-term prospects of the retail sector remain strong with higher disposable income and a steady stream of government infrastructure projects spurring the economy,” it said.

The GRDI, in its 16th edition, ranks the top 30 developing countries for retail investment worldwide. The index analyses 25 macroeconomic and retail-specific variables and identifies both currently attractive markets and those that offer future potential.

In the 2017 ranking, India took the first place superseding China, which took second place, from the previous year where China ranked first followed by India in the index.

“Retail sales in Malaysia grew 3.8% in 2016, driven largely a 6.1% increase in private consumption. This was despite the headwinds of a depreciating currency and the 2015 roll-out of Goods and Services Tax,” said AT Kearney.

It said tourism was a cornerstone of the government’s long-term growth plan and had boosted retail sales with the number of tourists projected to grow from 26 million in 2016 to 36 million by 2020.

“The numbers are expected to be boosted by Chinese travellers, who have been granted visa-free entry since March 2016,” it said.

“Malaysia’s successful performance in this year’s index is consistent with the increased interest foreign retailers are showing in this market, in both traditional and online channels,” it added.

AT Kearney partner and head of South-East Asia Soon Ghee Chua said in a statement that aggressive moves were being made into the convenience segment by companies such as Japanese retailer AEON Co (M) Bhd, which aims to triple its number of stores in Malaysia to 150 within the next three years.

“Online retail is expected to grow at 23% per year through 2021, driven by electronics and media. Growth in online retail, along with the rise in mobile phone adoption across the nation, will continue to provide momentum to the sector’s growth and attract further investment,” he said.

He said the government’s continued efforts to position Malaysia as a hub for cross-border e-commerce was another factor that was playing an important part in Malaysia’s retail growth story.

Recent moves included the government establishing the world’s first Digital Free Trade Zone in Malaysia, in collaboration with Alibaba Group Holding Ltd.

As part of the agreement, Alibaba will set up a regional fulfilment hub in Kuala Lumpur and a one-stop cross-border online trading platform, which will allow Malaysia’s small-and-medium sized enterprises to sell online with transactions fulfilled through Alibaba.

The increased reach of e-commerce has also been aided by the government’s US$280 million (RM1.2 billion) plan to roll out high-speed broadband access to rural areas.

Other countries in the GRDI ranking included Turkey (4), United Arab Emirates (5), Vietnam (6), Morocco (7), Indonesia (8), Peru (9) and Columbia (10).

Bolivia (28), Brazil (29) and Thailand (30) were at the bottom of the ranking in terms of retail development.