Malaysia aiming to hit total trade target of RM1.6t by year-end

By DASHVEENJIT KAUR / Pic By ISMAIL CHE RUS

Scholar of international political economy Robert Gilpin once said, “Trade is the oldest and most important economic nexus among nations”, and over the last hundreds of years it has driven global growth and development.

Trade provides new market opportunities for domestic firms, stronger productivity and innovation through competition.

It contributes to poverty reduction, improves wages, geopolitical benefits derived from deeper economic integration and at the individual level, increases choice and freedom.

Trade has always played an integral role in the Malaysian economy and the ratio of trade to overall economic activity is among the highest in the world.

The first-half of 2017 (1H17) trade figures prove Malaysia’s footprint in global trade and investor confidence in the country.

Trade Statistics

In 1H17, Malaysia’s exports have returned to the growth path since November last year.

Total trade rose by 22% year-on-year (YoY) to RM859.17 billion from RM704 billion recorded in the 1H16.

Exports increased by 21% YoY to RM451.05 billion, while imports expanded by 23.3% YoY to RM408.12 billion, government data noted.

A trade surplus of RM42.93 billion was recorded for the period compared to RM41.79 billion during the same period last year.

The monthly trade figures showed exports have grown on rising demand from major trading partners like China and Asean markets, after having slowed in 2016.

Malaysia’s imports have expanded at an even faster speed, with import growth in double-digit levels since November last year as it hit a high of 39.4% in March this year.

 On a Broader Scale

According to Malaysia External Trade Development Corp (Matrade), Malaysia is ranked as the 27th top trading nation, while being the 24th largest exporter and 26th largest importer.

From an economy dominated by the production of natural resources such as tin and rubber as recently as the 1970s, Malaysia today has a diversified economy and is a leading exporter of manufactured products like electrical appliances, electronic parts and components, palm oil products and natural gas.

Manufacturing goods exported between January and June 2017 were worth a total RM368.12 billion.

Matrade data shows Malaysian products are exported to more than 200 countries worldwide, with the latest major export countries being Singapore (14.6% of total exports), followed by China (13.3%).

According to the World Bank Group, after the Asian financial crisis of 1997 to 1998, Malaysia continued to post solid growth rates, averaging 5.5% per year from 2000 to 2008.

The country’s economy was then hit by the global financial crisis in 2009, but recovered rapidly — posting growth rates averaging 5.7% since 2010.

Regional Peers

In the Asean region, Malaysia has become China’s largest trading partner with bilateral trade rising by 28% YoY to RM139.2 billion in 1H17.

According to Matrade, the growth in trade was led by a 41.2% surge in exports to RM59.79 billion, mostly of electrical and electronic (E&E) products, petroleum products, chemicals and chemical products, rubber products, as well as liquefied natural gas.

International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said Malaysia’s total trade target for this year is to hit RM1.6 trillion.

“Malaysia’s total trade grew by 1.5% to reach RM1.49 trillion in 2016, so we envisaged it to reach RM1.6 trillion by year-end,” he told reporters after the opening ceremony of Asean Day 2017 in Kuala Lumpur yesterday.

He said the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade agreement (FTA), is making good progress.

“There would be an update on RCEP by the year-end — Malaysia is pushing hard to conclude the negotiation as soon as possible.

“When RCEP comes into being, it will offer us a huge consumer market of over three billion people, or nearly half of the world’s population, as well as immense potential for trade and investment opportunities for participating economies,” Ong said.

RCEP is a proposed FTA that will include 10 Asean countries (namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and the six states that Asean has existing FTAs with (Australia, China, India, Japan, South Korea and New Zealand).

What the Market Has to Say About It

After five consecutive quarters of slower gross domestic product (GDP) growth, Malaysian GDP growth has started to pick up since the third-quarter of 2016 (3Q16) to reach a two-year high of 5.6% in 1Q17.

The pace of growth surpassed various polled forecasts, and was boosted by strong domestic demand and private expenditure, as well as improved trade figures.

The pace of growth has thus led to a revision of forecasts.

The Asian Development Bank and International Monetary Fund have also upgraded Malaysia’s growth outlook to 4.7% and 4.8%, from 4.4% and 4.5% respectively, for 2017.

Additionally, the improved forecast figures were due to stronger GDP growth in the 1Q that had been driven by rising exports and continued growth in the manufacturing sector.

In a recent report, the research arm of MIDF Amanah Investment Bank Bhd, MIDF Research, noted the current outlook for the global economy is positive as major international economic bodies have projected a sustained recovery in global trade.

MIDF Research believes Malaysia’s external trade performance would remain upbeat, albeit moderating in 2H17 due to the favourable global market condition and modest recovery in commodity prices.

“In line with our estimate, exports will remain growing at solid pace this year. Synchronised economic performance in both major and emerging economies is a boost for trade.

“Gradual improvement and stability in commodities prices is another positive catalyst that will elevate Malaysia’s trade performance in 2017,” it added.