Zafrul: Asean ‘biggest beneficiary’ of supply chain realignment
14 Sep 2023
Malaysia and the broader 10-country Association of Southeast Asian Nations (Asean) have emerged as the biggest beneficiaries of the supply chain realignment caused by rising US-China tensions, according to Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.
“There are challenges in the longer term, but in the short term, we need to be opportunistic,” Tengku Zafrul said in an interview with Bloomberg TV’s Rishaad Salamat on Thursday on the sidelines of the 10th Milken Institute Asia Summit in Singapore, referring to businesses looking for a neutral supply chain base. “People are looking at re-shoring and friend-shoring.”
As the geopolitical divide between the world’s two biggest economies grow, Malaysia is positioning itself as just that neutral base, as it looks to lure the likes of Microsoft Corp and Alphabet Inc’s Google. The Southeast Asian nation secured approved investments of RM71.4 billion in the first three months of 2023, up 60% from the year-earlier period.
“We’re seeing the realignment of the supply chain because of what’s happening — the trade war, the tightening of monetary policy, and inflation,” Tengku Zafrul said, adding that it “had actually benefited our region, Asean in particular, and Malaysia as well”.
Malaysia and Indonesia are the top destinations of companies seeking to enter a new market in Southeast Asia, according to a study by HSBC Holdings plc. A quarter of the firms surveyed with no presence in Malaysia plan to expand there in the next two years, led by mainland China and the US.
Tengku Zafrul cautioned that the slowdown in the world’s No 2 economy may weigh on the Southeast Asian nation’s activity, given China’s position as Malaysia’s top trading partner as well as a key source of foreign direct investment.
Winning more investments is key for trade-reliant Malaysia to offset the slowdown in demand for goods, which has seen its exports shrink for five straight months through July. That contributed to Malaysia’s economy expanding at the slowest pace in nearly two years in the second quarter of 2023.
Malaysia earlier this month unveiled a RM95 billion plan to grow and transform its manufacturing sector over seven years to boost contributions to its economy. Interventions will focus on high-impact areas, such as electronics, electric vehicles, aerospace, pharmaceutical, minerals and metal.