Positioning Malaysia as a Global Supply Chain Hub: MIDA Continues to Attract Investment from China

Malaysia is a progressive nation with a robust economy. Located in one of the fastest-growing economic regions in the world, the International Monetary Fund (IMF) projected our country to grow at a rate of 6.3 per cent in 2021 despite global economic uncertainties. This positions Malaysia as the fastest growing economy among our neighbours such as Indonesia, Thailand, the Philippines and Singapore.

Malaysia’s industrial landscape offers exciting avenues for investment in areas such as pharmaceuticals, medical devices e-commerce, advanced electronics, machinery and equipment, advanced materials, research and development as well as global services and operations hub.

The Malaysian Investment Development Authority (MIDA), the country’s principal investment promotion and development agency has been mandated to promote investments from all countries that meet our national investment agenda. MIDA’s focus is not only on the absolute value of investments but the quality of investments that will eventually expanding our local business ecosystem. Malaysia’s ultimate goal is to move towards strategic economic diversification to increase competitiveness, by focusing on complex, knowledgeintensive and high-end products and services.

MIDA’s overseas centres work to customise our investment promotion efforts strategically in specific regions to attract high technology investment based on the strengths of the industries in the respective region or country. For example, looking at the European block and the Brexit situation, MIDA has been systematically targeting not only big multinational corporations (MNCs) from the region to make Malaysia their stepping stone into Asia, but we have also been engaging with small and niche technologies companies in Europe that are seeking to further expand their market coverage.

In considering the impact of the US-China Trade War and COVID- 19 pandemic, MIDA has been reformulating our country-specific promotion strategies specifically for China. After comprehensive market surveys, research and discussions, Malaysia is increasingly considered as a viable alternative location for Chinese companies and MNCs, particularly as a solution to mitigate risks associated with the supply chain disruptions.

China currently is the dominant manufacturing site for the world. In 2019, China produced and shipped USD2.499 trillion worth of goods around the globe. However, substantial supply-chain disruptions around the globe due to the trade war and pandemic have resulted in global companies seeking out new alternative bases of operations. Given our strategic location, Malaysia welcomes both Chinese companies and MNCs in China to leverage on Malaysia as an alternative supply chain hub in Asia.

Companies from China that are looking to navigate trade frictions due to the trade war can find a new ideal home base in Malaysia, provided that they comply with rules of origin (ROO). MIDA is equipped to facilitate the redeployment of investment and production to Malaysia by major companies who have existing operations both in China and Malaysia.

China’s Belt and Road Initiative (BRI) complements Malaysia’s policy direction and strategies in our Eleventh Malaysian Plan (11MP), which prioritises building up of infrastructure, logistics, transportation and energy, e- commerce, renewable energy as well as other emerging growth areas.

On 25 April 2019, MIDA and the China Communications Construction Company (CCCC) signed a Memorandum of Understanding (MoU) for the development of the Economic Accelerator Projects (EAP) along the East Coast Rail Link (ECRL) Corridor. This includes the development of industrial parks, infrastructure, logistics hub and transit-oriented developments. This catalytic project will offer vast opportunities for new and existing local and foreign investors to grow and expand their businesses in Malaysia.

Malaysia will continue to target huge technologies companies in China, particularly market leaders given their track record and capabilities. MIDA, through our three offices in China (Beijing, Shanghai and Guangzhou) are currently actively engaging with Chinese and foreign companies in China to better understand their investment trajectory, and ultimately to facilitate their shift to Malaysia as their new operation base outside of China.

China continues to be among the top investors in the country, representing the largest foreign direct investor in Malaysia’s manufacturing sector for four consecutive years, from 2016 to 2019. These consistent investments from China are evidence of the increasing awareness among investors on the abundant business opportunities available in our country. The investment strategies chart the way forward for Malaysia to further build on our strengthening economic relations with China.

Renowned Chinese companies that have made their footprints in the country include Huawei, Longi, Jinko Solar, Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), Alibaba Group, Geely Auto Group, Alliance Steel, Xinyi, Eastern Steel, Jinjing, Kibing as well as Xiamen University.

On 19 May 2020, MIDA hosted a special briefing to YB Dato’ Sri Tiong King Sing, Prime Minister’s Special Envoy to the People’s Republic of China. The briefing highlighted the economic ties between Malaysia and China, especially the commendable investment track record between both countries. MIDA also reaffirmed its commitment to continue targeting quality investments from China in line with Malaysia’s current policies and strategies. The recent relocation incentives will further encourage flows of FDI from China.

Malaysia continues to welcome quality foreign investment through MIDA’s engagements with investors; conferring of competitive incentive packages to strategic industries and facilitating the implementation of investors’ projects. As partners to investors, MIDA’s offices in Beijing, Shanghai and Guangzhou are ever ready to work together with investors to capitalise on the opportunities present in the region, and ultimately, to make Malaysia the preferred investment destination for companies in China.