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Malaysia saw a total of RM152 billion approved investments for the manufacturing sector in 2023, of which RM46.1 billion were realised last year, involving 445 projects, according to the Ministry of Investment, Trade and Industry (Miti).

The achievement, which created 29,693 jobs, is deemed “encouraging”, considering that the projects have been able to be implemented in less than the usual period, which usually takes between 18 to 24 months, Miti told Dewan Negara on Monday.

Throughout 2023, Miti said only one manufacturing investment project was cancelled, involving RM19.2 million, while the implementation of nine projects were deferred, involving some RM455 million.

Malaysia’s approved investment rose 23% to a record high of RM329.5 billion in 2023, of which 57.2% was from foreign capital while 42.8% from domestic.

The services sector constituted the largest portion of total approved investment in 2023, amounting to RM168.4 billion or 51.1%, followed by the manufacturing sector’s RM152 billion or 46.1%, and the primary sector’s RM9.1 billion or 2.8%.

Miti said approved investment refers to investment planning for the capital expenditure of a project in the long term, including the cost of purchasing land, factories, machines, machinery and others.

“Generally, an approved project takes between 18 and 24 months to be implemented or realised, depending on the scale and complexity of the projects concerned,” it said.

Source: The Edge Malaysia

Nearly one-third of 2023 approved investment in manufacturing sector realised, says MITI

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The government is calling on local companies to explore new markets via the country’s free trade agreements (FTAs), said Minister of Investment, Trade and Industry Datuk Seri Tengku Zafrul Abdul Aziz.

The minister said the Malaysia External Trade Development Corporation (MATRADE) has been tasked to focus on securing new markets.

“We are also looking at the EU now and we want to initiate discussions on the EU-Malaysia FTA. I hope the FTA will bring in something. Soon (we are also going) to resume the FTA (talks) with South Korea,” he said at the ministry’s breaking of fast event with orphans, organised by Mamee-Double Decker (M) Sdn Bhd.

Speaking on the halal industry, Tengku Zafrul said the industry is an important part of MITI’s focus via the Halal Development Corporation (HDC) and that the companies involved should feel free to work closely with the agency in expanding their businesses in this area.

“We just did a roadmap for HDC for halal development. The target for the global halal market is worth US$5 trillion and we want to make sure that we capture it as we are in a good position (to capture the market share),” he added.

Source: Bernama

Govt calls on Malaysian companies to take advantage of FTAs and explore new markets

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The Malaysia Semiconductor Industry Association (MSIA) will visit the Netherlands to attract Dutch semiconductor companies to invest in Malaysia, while many Chinese firms are keen to relocate here.

Semiconductor firms relocating overseas are considering Malaysia as their preferred investment destination as every company is preparing for future growth, driven by the phenomenal increase in the usage of artificial intelligence (AI) in semiconductor chips.

MSIA president Datuk Seri Wong Siew Hai said the mission to the Netherlands follows a high-energy dialogue recently between the association and potential Dutch investors who were exploring business opportunities in the semiconductor sector in the Asia-Pacific region.

“We are now trying to make a trip to the Netherlands and convince them to come here. This is purely an industry initiative,” he said.

“When we see an opportunity like this, it is important to talk to them and tell them the attributes we have in Malaysia, more so since the companies are of high value which will strengthen our ecosystem,” he told Bernama.

The planned visit comes as Dutch firm Neways, a global innovator in mission-critical technology for leading semiconductor, connectivity and smart mobility companies, set up a new state-of-the-art manufacturing facility in Klang with production to start in the fourth quarter of 2024.

Wong also revealed that a lot of Chinese companies “are coming here” to overcome disruptions to their production and exports and avoid US tariffs following the US-China trade war.

As for companies preparing for future growth, he said semiconductor revenue is projected to increase to a staggering US$1 trillion (RM4.7 trillion) by 2030.

“This is driven by the phenomenal growth in the use of semiconductors in every aspect of our lives,” he said.

US companies are coming out of China and looking to relocate while Chinese companies unable to ship to the US due to Washington citing “national security” concerns are also wanting to move abroad to avoid American tariffs.

Malaysia, Wong said, should capitalise on this and the timing now is perfect due to the geopolitical tension between the US and China.

Source: Bernama

Semiconductor industry to woo Dutch, China investors

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The East Coast Economic Region (ECER) Development Council (ECERDC) has realised investments totalling RM41.4 billion up to March 2024, or 84 per cent of the RM49 billion target under the ECER Master Plan 2.0 (EMP 2.0).

These investments have created 68,000 job opportunities and 23,000 entrepreneurial opportunities in ECER, Prime Minister Datuk Seri Anwar Ibrahim said in a post on his Facebook page today.

“During the same period, ECERDC also achieved RM55.2 billion in committed investments, or 79 per cent of EMP 2.0’s target of RM70 billion,” he posted after chairing the first ECERDC meeting for 2024, which was also attended by the Menteris Besar who sit on the council.

Anwar, who is also the Finance Minister, said he emphasised the important role played by economic corridor authorities in investment facilitation along with the Malaysian Investment Development Authority.

He said governance for planning and completing projects through the economic corridor authorities also needs to be refined by the relevant ministries prior to approvals.

Therefore, the meeting has agreed to establish an executive committee (exco) to study and make decisions on all operational matters for ECER development.

“The formation of this exco will enable the ECERDC to focus more on strategic and policy matters in the ECER socioeconomic development,” he added.

Source: Bernama

PM: Investments worth RM41.4b realised by ECERDC up to March 2024

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The country recorded foreign investment amounting to RM188.4 billion last year, marking a 15.3% increase from 2022, said Deputy Investment, Trade and Industry Minister Liew Chin Tong.

He said domestic investment contributed RM141.1 billion, reflecting a 35.1% increase from the previous year.

Foreign investment accounted for 57.2% of the total investment of RM329.5 billion approved in 2023, while domestic investment represented the remaining 42.8%.

“We aim to expedite the realisation of approved investments to maximise their spillover effects on the national economy.

“By actualising the approved investments, we can create better job opportunities with higher wages for Malaysians,” Liew said during a question-and-answer session in the Dewan Negara on Monday.

He was replying to Senator Datuk Lim Pay Hen’s query regarding the amount of investment successfully secured by the government throughout 2023.

According to Liew, the country previously recorded high investment amounts without prioritising localisation.

“This time, the government aims to ensure that incoming investments generate quality jobs with higher wages, and prioritises localisation to benefit local entrepreneurs from foreign investment,” he added.

Source: Bernama

Malaysia saw RM188.4b foreign investment, RM141.1b domestic investment last year, says Liew

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The United States (US) Ambassador to Malaysia Edgard D Kagan has expressed confidence in the continued investments of American firms in Malaysia, attributing their interest in the country’s market potential and its integration into global trade networks.

He underscored the enduring economic partnership between the US and Malaysia and highlighted the significant investments and job opportunities generated by American companies in the region.

“We are very proud that US investments in Malaysia have created over 300,000 jobs,” he said on Bernama TV’s The Nation programme on Monday.

He said Malaysia has benefited extraordinarily from global trade and has prospered as a result of its engagement in international trade.

“One of the things that became very clear during the pandemic was that there were challenges in areas, for instance, like supply chains, which traditional trade didn’t really address,” he said.

Kagan also highlighted the importance of Malaysia’s participation in the Indo-Pacific Economic Framework (IPEF) and emphasised Malaysia’a role in shaping international trade norms and standards.

IPEF encompasses 14 countries in the Indo-Pacific region, representing about 40% of global gross domestic product (GDP).

It was set up under US President Joe Biden’s administration to address long-term economic issues, enabling partners to nimbly respond and keep pace with new global challenges and opportunities.

The 14 countries are Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the US and Vietnam.

He said these countries are extraordinarily important and are not limited to those that are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) comprising Malaysia, Vietnam, Brunei, Singapore, Indonesia, Thailand and the Philippines.

“We are going to grow,” Kagan said, referring to the IPEF.

“I think that having a seat at the table, helping shape the outcomes, reflects Malaysia’s long-standing engagement on trade,” Kagan said.

He also pointed out that Malaysia’s long-standing engagement in helping set the norms that govern international trade sends a signal to investors that Malaysia wants to be part of setting the highest possible standards.

“You can see the impact of that by the initiatives, the additional flows of investment from American companies into Malaysia since the IPEF was announced,” he said.

Kagan also highlighted the strong US-Malaysia economic ties, citing over RM150 billion worth of foreign direct investments (FDIs) since 2021. The US is the top investor in Malaysia.

Source: Bernama

Malaysia’s market potential drives continued US investments — Ambassador

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The implementation of targeted subsidies in the future, as considered by the government, will not affect foreign investments in the country, said Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.

He said the implementation, if carried out, would not affect foreign investments because investors have invested for the long term.

The investors, he said, focus more on looking at the policies as well as national policies that are consistent before deciding to invest in this country.

“For example, I mention the semiconductor sector…this sector started in the 1970s and it has been 50 years, and that is the focus for our investors to see how the country’s policies are, if consistent, they will invest.

“In terms of costs, we are still low compared to other countries because most companies do not receive targeted subsidies.

“Therefore, even if the subsidies are withdrawn for large companies, they and also investors will compare us with other countries, and our country is still attractive in terms of costs,” he told reporters after the Ihya Ramadan and Iftar event at Masjid Jamek Al Ansar, Felcra Changkat Lada near here, today.

Tengku Zafrul said this when asked if the implementation of targeted subsidies that is being considered by the government would affect foreign investments in Malaysia.

Earlier, he presented contributions to the asnaf group and prospective Hajj pilgrims at the event.

Meanwhile, regarding the Malaysia-Korea Free Trade Agreement (MKFTA), Tengku Zafrul said both parties will begin discussions at the officials’ level in May this year.

“We have just agreed to resume our negotiations because in 2019 the negotiations were suspended due to issues that we felt were not favourable to our side.

“In the discussions before we resume, the Korean side has agreed to consider and understand sensitive issues, especially in sectors we feel are important in the country, so we resume.

“There are no details yet, maybe after the May meeting I can provide an update,” he said.

On March 26, 2024, the Investment, Trade and Industry Ministry announced that Malaysia and South Korea have resumed the MKFTA, which is set to increase bilateral trade and investment between the two countries.

According to the ministry, both countries are also parties to the ASEAN-Korea FTA and the Regional Comprehensive Economic Partnership (RCEP) agreement.Apart from that, regarding the electric vehicle (EV) charging stations in the country, Tengku Zafrul said his discussions with the relevant parties found that they are confident in building more charging stations due to high demand.

“I am trying to ensure that we can achieve the targets,” he said.

Tengku Zafrul was reported saying that the ministry would review the target of 10,000 EV charging stations operating in the country by 2025 as previously set.

Source: Bernama

Targeted subsidies implementation will not affect foreign investments, says Tengku Zafrul

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Prime Minister Datuk Seri Anwar Ibrahim stressed today that Malaysia must have clear and responsible investment policies to attract foreign investors.

He said when he was in Germany to lead a Malaysian delegation on an official visit recently, many investors wanted an explanation from Malaysia regarding its policies.

“As a result, many have expressed their interest to invest in Malaysia, and they want to come to Kulim and Johor,” he said in his speech before breaking fast at Masjid Al-Muttaqin here.

“Many investors have picked Sarawak in terms of energy transition.”

He noted that Sarawak has a clear policy, coupled with political stability and strong leadership that concentrates on the development of the country, adding that it knows how to choose green and renewable energy that is required by the world.

“Then there is the question of digitalisation that the state government is currently undertaking.

“I raise this issue because sometimes we, especially in Peninsular Malaysia and among the Muslim community, are still stuck with old issues…always wanting to quarrel and be angry at other people,” he said.

The prime minister took a swipe at social media that blew out of proportion minor differences.

“We should learn from Sarawak. The state is peaceful, we see here all the communities are here. The Malays, Dayaks, Melanaus, Orang Ulu and Chinese live peacefully and in harmony,” he said referring to those who attended the event.

He said this means that there exists a spirit of racial unity in Malaysia, and certainly Sarawak has this kind of spirit.

“That is why I have said earlier that when there is political stability in Malaysia we can concentrate on implementing our main policies,” he said.

Source: Malay Mail

Malaysia must have clear and responsible investment policies to attract foreign investors, says PM Anwar

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Northeast Group Bhd, a precision components manufacturer, on Friday filed for an initial public offering (IPO) on Bursa Malaysia’s ACE Market to raise funds for expansion, including on a new factory costing over RM50 million.

The IPO involves a public issue of 168.99 million new shares and offer for sale of 51.8 million existing shares, according to its draft prospectus posted to Bursa Malaysia. All in all, the listing would offer investors up to a 30% stake in the company.

Northeast, based in Penang, mainly manufactures precision engineering components used in the photonics, electrical and electronics, semiconductor, telecommunication and optoelectronics industries for both local and foreign clients including from the US, the UK, Thailand, Singapore, Canada, and Germany.

Further, the company also provides surface finishing, sheet metal fabrication and mechanical sub-assembly. Northeast recorded a profit after tax of RM18.36 million on a revenue of RM93.34 million for the financial year ended Sept 30, 2023.

Out of the 168.99 million new shares, the company is allocating 37 million to the public, 29.6 million for eligible persons, and 102.38 million to select investors and Bumiputera through private placement. The sale of existing shares meanwhile will also be done through private placement for Bumiputera investors.

Proceeds from the new share sale will be used to finance construction of a new factory in Penang with production floor space totalling 79,020 sq ft. Northeast also plans to purchase new computer numerical control machines, or CNC machines, which will raise its operating capacity by 8.5-25%.

Northeast has also earmarked some of the proceeds as working capital, repaying bank borrowings, and to defray estimated listing expenses.

Meanwhile, any money raised from the offer-for-sale will accrue entirely to selling shareholders including managing director Ng Chay Chin and his brother and senior operations director Ng Chai Hee.

Affin Hwang Investment Bank is the principal adviser, sponsor, sole placement agent and sole underwriter for the IPO.

Source: The Edge Malaysia

Northeast Group files for ACE Market IPO to fund new RM50 mil factory

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Malaysia stands as one of the top four countries identified as prime offshore locations in the Asia-Pacific region, according to a study conducted by Knight Frank.

The research indicates a significant expansion in the Asia-Pacific outsourcing market, with Malaysia, India, the Philippines, and Vietnam recognised as established players in the global offshore landscape.

Malaysia has consistently been ranked as the third-best global outsourcing location since 2014. The study further highlighted Malaysia’s substantial contribution, with an estimated share of over eight per cent in the Asia-Pacific offshoring market.

The report indicated that Penang is emerging to be a major offshoring hub that has built up offices catering to these facilities in Bayan Lepas. This is in line with the state government’s plans to drive the economy by making Penang a prime investment destination for global business services activities, research and development, and technology hubs.

Prime office rent in Penang is about 25 per cent lower than those in the country’s capital, it noted.

“Companies today face a multitude of challenges, including cost management, sustainability, talent retention, and attraction. At a time when companies worldwide are looking to increase performance, efficiency, and innovation while also prioritising cost control, Asia-Pacific offers considerably lower operating costs, at nearly 70 per cent less than the United States, based on Knight Frank research.

“For every square foot of office space, occupiers can expect to save on average US$70.86 in the four cities compared with mature markets. This translates to a staggering 54 per cent cutback in occupancy costs annually,” said Knight Frank global head of occupier strategy and solutions Tim Armstrong.

He said that globally, the office sector is going through a generational shift, with three distinct flights to quality taking place: a flight to sustainable buildings, a flight to amenity-rich offices, and a flight to offices that can provide greater flexibility.

“With the decline in confidence in the office sector, most pronounced in the US, occupiers are turning to the Asia-Pacific. High-quality premium office space in city centres and ESG-compliant buildings remain highly sought after by occupiers in this region as they prioritise 2030 net-zero targets.

“Moreover, the highly educated, versatile, and multilingual talent pool in the region’s developing markets is well-equipped to deliver high-quality customer service, positioning them ahead of the curve,” he added.

Knight Frank Asia Pacific research head Christine Li said cost savings factors are expected to encourage offshoring activities, as evident in India, whereby the country’s leasing transactions involving the Global Compatibility Centre’s proportion rose by 10 per cent, accounting for 35 per cent of the total market share.

“This trend was similarly observed in the other three key markets, the Philippines, Malaysia, and Vietnam, where offshoring is playing an increasingly significant role in driving demand for office spaces,” said Li.

She added that occupiers are still cost-conscious due to the challenging macro environment. The silver lining is that corporate occupiers continue to prioritise offshoring functions, fuelling headcount growth in regions that offer growth and innovation at a lower cost while maintaining efficiency in pricier locations.

“As such, occupiers concentrate on boosting office demand in these strategic locations while reducing real estate needs elsewhere.

“This strategic resource allocation helps mitigate rental declines in markets such as Vietnam and the Philippines, while rents have even strengthened in Malaysia and India despite higher vacancies,” she said.

She said that with higher demand, rental prices in Malaysia may increase for prime office markets as the flight-to-quality trend grows.

Source: NST

Malaysia among four prime offshore locations in Asia-Pacific: Knight Frank study

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Selangor has attracted the highest investment value in Malaysia, totalling RM231.7 billion between 2019 and 2023, according to recent data by the Ministry of Investment, Trade and Industry (Miti).

In a written parliamentary reply, its minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said Selangor’s investment haul contributed 18 per cent of the total RM1,285.5 billion approved nationally during the period.

This was followed by Penang (RM221.5 billion or 17.2 per cent) and Johor (RM162.4 billion or 12.6 per cent).

Combined, the three states accounted for nearly half (47.9 per cent) of all approved investments in Malaysia from 2019 to 2023.

“Of the overall 24,231 projects (from total investment), it is expected to create 611,705 new job opportunities, with foreign investment contributing RM709.5 billion (55.2 per cent), while domestic investment amounted to RM576 billion (44.8 per cent),” said Tengku Zafrul in a written reply dated March 27, responding to a question from Paya Besar MP Datuk Mohd Shahar Abdullah, who asked the ministry to provide investment values and returns by state and district from 2013 to 2023.

In terms of other states, Kuala Lumpur received RM159.8 billion, followed by Kedah (RM129.9 billion) and Sarawak (RM104.8 billion).

Sabah, Perak, and Negeri Sembilan accumulated RM62.4 billion, RM39.6 billion, and RM39.4 billion in investments, respectively.

Meanwhile, Pahang, Melaka, and Terengganu recorded RM36.9 billion, RM25.9 billion, and RM12.6 billion, respectively.

Smaller contributions in states such as Kelantan, WP Putrajaya, WP Labuan, Perlis, and others recorded a total of RM45.7 billion in investments.

Source: Selangor Journal

Selangor leads in investment growth, RM231.7 bln recorded from 2019 to 2023

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Malaysia and China will engage in more collaborations in the field of technical and vocational education and training (TVET), said Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi.

He said this was discussed during his meeting with Liu Jianchao, Minister of the International Department of the Central Committee of the Communist Party of China on Thursday

“China has also expressed its willingness to provide more training series, share experiences and educational opportunities in technology and vocational fields, particularly to students and workers in Malaysia,” he said in a post on his Facebook page.

In addition, Ahmad Zahid said the meeting also discussed the celebration of the 50th anniversary of Malaysia-China diplomatic relations on May 31.

He said in recent months, he had met with many top Chinese leaders who visited Malaysia, and they were all confident that the relationship between the two countries would grow to greater heights.

Ahmad Zahid said they also requested for more cooperation at both party and governmental levels for the benefit of the people of both countries.

Also present at the meeting were Minister of Higher Education Datuk Seri Dr Zambry Abdul Kadir, Deputy Foreign Minister Datuk Mohamad Alamin, and Majilis Amanah Rakyat (Mara) chairman Datuk Dr Asyraf Wajdi Dusuki.

Ahmad Zahid said Liu was accompanied by China’s Ambassador to Malaysia, Ouyang Yujing; and embassy officials.

Source: Bernama

Malaysia, China to enhance TVET collaboration — Ahmad Zahid

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BATTLES are won with tactics. Wars are won with logistics, Tesla chief executive officer Elon Musk said. Indeed, improving performance of logistics helps organisations and economies further engage in local and international trade. This makes logistics a powerful driver for growth and development.

According to the World Bank, performance of a country’s logistics industry is a great deal for its competitiveness on export markets, and its ability to reliably, affordably secure importation of goods needed for production and consumption.

Hence, the development of the Logistics Performance Index (LPI) to help economies identify areas where logistics could be improved. The LPI measures the ease of establishing reliable supply chain connections and the structural factors such as quality of logistics services, trade and transport-related infrastructure, as well as border controls.

Malaysia scored well in the LPI 2023. It climbed 15 notches to the 26th place – emerging as the second-best performing Asean country after Singapore. This is due to significant contributions from entities such as the Investment, Trade and Industry Ministry (Miti), Malaysia External Trade Development Corporation (Matrade), Malaysian Investment Development Authority (MIDA), and more, in driving the environmental, social, and governance (ESG) agenda and fostering sustainable export practices.

However, there is still much to be done in driving ESG adoption among small and medium enterprises (SMEs). The Organisation for Economic Cooperation and Development (OECD) suggests there is an ESG scoring bias in favour of large-cap companies, and against SMEs. OECD notes that this burden, may be due in part to the ability of large firms to dedicate more resources to reporting and poses a market inefficiency to the extent it affects both relative cost of capital and corporate reputation.

All is not doom and gloom for SMEs, which are likely hovering at the adoption crossroads amid whirlwinds of an uncertain business landscape that is rapidly changing based on the latest ESG strategies and practices. This is an opportunity for SMEs to kickstart their sustainable journey and up their game in the business arena — ultimately through transforming operational procedures, increasing brand exposure and boosting trade locally and intentionally. Tackling logistics can be a starting point towards the net zero path, while boosting business.

A trade requirement

Saloodo! – the Carrier Management Portal for DHL, defines trade logistics as the management process that includes the entire flow of goods and information between suppliers and companies and between customers and companies. Trade logistics also includes the internal flow of goods.For trade logistics to be as efficient as possible, the use of computer-based merchandise management systems is indispensable, as they enable item-specific inventory tracking and disposition. Trade logistics’ aim is to ensure availability of goods at the point of sale. By continually refining and strengthening its logistics capabilities, countries can solidify their positions as great players in the global trade arena.

Furthermore, cost efficiency is paramount in a globalised world. Robust logistics infrastructure, including well-developed ports, airports, road networks, keep transportation costs down, giving any exporting nations a competitive edge in international markets. It is crucial to explore the importance of logistics and how it helps SMEs to venture further into the global market.

Describing logistics as the lifeline of international trade, PKT Logistics Group Sdn Bhd managing director and chief executive officer Datuk Seri Michael Tio notes that the logistics sector is a major contributor of carbon emissions and urged the industry to reduce carbon emissions by aligning with ESG ideals.

Sharing the same sentiment, DHL Express (Malaysia and Brunei) managing director Julian Neo says: “Logistics is inextricably linked to trade. In its very essence, it is the engine that drives the movement of goods and services across borders.

“Local and international supply chains are dependent on the efficiency of transit amidst multiple stakeholder, tax, customs, and regulatory considerations. High performing logistics operations increase countries’ ability to compete on an international scale, connect sectors across geographies, and ensure continued trade flows.”

Noting that the concept of ESG has long been woven into the fabric of logistics, Neo explains that the first and arguably most scrutinised facet for companies is environmental impact. He emphasises that companies are under increasing pressure to report and mitigate emissions — and will soon be mandatory.

“Europe’s Non-Financial Reporting Directive and Corporate Sustainability Reporting Directive; United States’ SEC Climate Disclosure Rule; and Japan’s endorsement of the Task Force on Climate-related Financial Disclosures all point to a rapid shift towards greater environmental transparency.

“Most relevant to the logistics sector, Scope 3 emissions, refers to the indirect greenhouse gases produced in each company’s value chain, including downstream transportation and distribution.

“This has given rise to alternative energy and mobility solutions as logistics providers seek to decarbonise while balancing market demand. For DHL, we have invested in the use of sustainable aviation fuel through contracts with BP, Neste, and World Energy, and are allowing customers to benefit via our GoGreen Plus insetting service as well,” shares Neo.

Securing a future

Many remain sceptical about ESG, the most famous one being Tesla’s Musk, who called ESG a “scam”.

Tio and Neo beg to differ. Given that the world population is projected to increase from the current 8.1 billion to 10 billion by 2050, Tio notes that ESG can preserve and nuture the planet for future generations but suggests governing ESG bodies, like the United Nations and governments, to set differing net zero timelines for countries according to their level of development.“The Paris Agreement called for the Race to Net Zero by 2050. However, differing net zero targets should be set for different parts of the world as third world countries are still struggling with basic economic, social and political stability. Perhaps, the deadline for developed countries should be 2050, developing countries by 2060, third world countries by 2070 and beyond,” says Tio.

Neo says: “ESG is simply a natural extension of efforts to invest and give back to people and the planet. It should not be discounted because it has become a key differentiator in business today, and one that serves a very positive purpose.

“We recognise sustainability as a nonnegotiable requirement to ensure the long-term viability of our company. A person’s most basic moral obligation is to do the right thing. This is a core value for DHL, extending across our company and informing how we conduct our business, treat our employees, and serve our communities.”

Meanwhile, DHL’s recent Global Connectedness Report 2024 found that globalisation reached a record high in 2022 and remained close to that level in 2023.

“The growth of international trade flows is keeping pace with and in some cases exceeding domestic trade activity. In the face of geopolitical crises, flows of trade, capital, information, and people between countries have proven resilient. At the same time, we must ensure that this growth does not come at the expense of our environmental, social, and governance responsibilities,” says Neo.

Emulating the how-to’s

Neo recommends SMEs to familiarise themselves with established ESG frameworks such as the Global Reporting Initiative, Sustainability Accounting Standards Board, and Task Force on Climate-related Financial Disclosures as they provide guidance on ESG reporting and materiality assessment.“Armed with this knowledge, SMEs should then be able to determine ESG issues that are most relevant to their business, industry, and stakeholders. This will help companies pivot their efforts and prioritise areas that leave the greatest impact.”

Neo also advises startups and smaller organisations to take an incremental approach to ESG tracking and monitoring by utilising available resources.

“Gradually build capabilities over time. This allows for flexibility and ease in managing costs effectively. Engaging logistics partners can help to jointly address ESG challenges and share best practices.”

It might seem that a company’s ESG compliance is limited to reporting frameworks, transparency, target monitoring, regulatory adherence, but Neo says there is much more beyond that and companies can consider compliance partnerships as an enabler of sustainability goals.“A benefit is the sharing of ESG priorities, which drives greater innovations if aligned between two parties. Some examples include transport fleet electrification, further strides in eco packaging, or enhanced facility energy management.”

Leveraging on AI

Neo shares that there are multiple subsets of interactive Artificial Intelligence (AI) that have seen varying trade applications ranging from geolocation and navigation, optical character recognition (OCR), chatbots, digital assistants, speech-to-text dictation, and e-payment, to name a few.

“Within the supply chain, this brings greater operational efficiency. Among use cases, the deployment of AI algorithms for trade data analysis to identify patterns, predict demand, and optimise inventory is most widespread.”

He also notes that OCR is growing in sophistication as companies extract and digitise information from trade documents, reducing manual data entry errors and improving documentation accuracy.

“Used together, they can produce more efficient Natural Language Processing (NLP) for ESG disclosures. Through analysis of textual data like ESG reports and non-financial reporting directives, alignment of disclosures with current frameworks and guidelines can be quickly assessed,” he says.

In PKT’s experience, AI has been harnessed to enable Machine Learning where it uses it in conjunction with Optical Character Recognition (OCR) for data entry, storage, analytics and manipulation using Robotics Process Automation.

“This improved data capture capability and reduced paper usage, greatly helping us to perform logistics-related administrative processes such as customs declarations, trade-compliance, analytics, reporting and more.”

Pointing out that the business of logistics is to be efficient and lean, Tio says PKT’s GAP #1 of LEAN before MEAN pushes this ideal.

“This means opting for measures that reduce costs through efficient planning and efficient practices before we consider ESG initiatives that incur additional costs to roll out. However, if it is consciously chosen — for example to use only certified sustainably sourced packaging materials which are more costly — then this will be jointly undertaken with our customers,” says Tio.

Pains of non-compliance

The ultimate pain SMEs would and are facing for not adopting ESG is to lose their respective market segment share, in addition to hindering their own development. Research by Xiamen University Malaysia and Universiti Teknologi Brunei found that investors prefer companies that share information about their ESG.

Fndings by the Sustainable Finance Institute Asia 2022 estimates that Malaysian SMEs risk losing RM292bil in revenue due to non-ESG compliance. SMEs without incorporating ESG principles in their business operations are losing out in the eyes of investors, customers, government tax incentive, and financing bodies.

The United Nations Global Compact Network Malaysia and Brunei also mentions that when companies do not provide enough ESG information, it is seen as a sign of business risks, like issues specific to that company, not the overall market. These risks can negatively affect a company’s image and decrease its brand value.

Overall, small businesses that do not follow ESG rules are seen as having bad management and not caring about the environment or long-term sustainability.

Reiterating that “If there is no ESG, there is no MSG (Multinational Sales Growth)”, Tio says planning out a roadmap to achieve net zero emissions by 2050 is a good start that would assist SMEs’ competitiveness as they scale their business to another level or work with multinational companies.

“Aligning production processes with ESG will appeal to conscientious stakeholders – customers, investors and partners who are more inclined to do business with reputable companies who place sustainability at the core of their operations.

“Akin to PKT’s Green Action Plan (GAP) #1, LEAN before MEAN – we believe in embedding lean principles before managing our environmental agenda needs, optimising production processes resulting in minimising waste, resource consumption and emissions.

“In addition, positively impacting our social practices by prioritising workplace safety, and increased operational efficiency for better governance and transparency, all attractive on the global front for enhanced trade partnerships.”

Another challenge of ESG adoption for SMEs and large-cap companies is that the rules of the ESG game are still being developed and there is no one clear path or paths towards ESG compliance, says Tio.

“However, the logistics industry is already playing its part by helping shippers make their supply chains more efficient e.g. the setting up of Regional Distribution Centres (RDCs) that place products storage closer to their intended consumption locations while shortening lead times and improving reaction times.

“This RDC model in itself reduces the carbon footprint by reducing cross border shipping compared to a disaggregated, criss-cross supply chain. Therefore, enabling our customers to pursue a lean supply chain is already an ESG initiative on its own.”

A helping hand

Although the industry is lacking in ESG experts, it certainly makes up for it in terms of other types of aid to help Malaysian SMEs get into the ESG space. Miti Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz has urged businesses to “view ESG as an opportunity”, saying that ESG is not just as a risk management strategy against regulations and customer demand but also as an economic opportunity to tap new areas.

“Big companies are not in danger because they understand and they also have stakeholders who want them to meet ESG requirements. But targeting the whole supply chain means big companies also need their suppliers to be ESG-compliant.

“This is where SMEs in Malaysia need to realise the importance of ESG. There’s a timeline and they are not expected to adopt it overnight, but they need to start investing in knowledge and capacity building in both systems and processes,” said Zafrul on his social media platform.

The government and other entities have launched a slew of initiatives to ease businesses’ way towards sustainable development and trade.

Miti released the i-ESG Framework, which includes a free assessment tool, after which companies are given a guide on how to begin the sustainability journey. Clinic sessions and outreach programmes called KenalESG are being conducted by Miti across the country.

There is also the New Industrial Master Plan (NIMP2030), whereby funding is a key enabler. Budget 2024 allocated RM200mil for NIMP2030 activities, a portion of which is dedicated to helping companies implement ESG initiatives. The process of identifying qualified export-oriented companies is being done by Matrade and the grant allocation is starting this year.

Other incentives include RM20bil in guarantee funding by Syarikat Jaminan Pembiayaan Perniagaan Bhd for SMEs involved in the green economy, technology and halal fields, as well as tax deductions of up to RM50,000 for each year of assessment on ESG-related expenditure from 2024 to 2027.

Mida supports the growth of companies undertaking integrated logistics services (ILS) by offering the ILS incentive and International ILS (IILS) status. As of 2022, Mida had approved 257 ILS projects, of which the majority of the applicants were Malaysian-based companies.

ILS incentives include the Pioneer Status incentive on statutory income of five years and 60 per cent investment tax allowance on qualifying capital expenditure incurred within five years, which can be offset against 70% of the investor’s statutory income for each assessment year.

Besides the government, external parties are also lending a hand. The United Nations Global Compact Network Malaysia and Brunei has developed the SME ESG Hub, to provide SMEs with fundamental understanding and free practical tools needed to kickstart their ESG journey and incorporate ESG practices into their businesses.

To sum up, adoption of ESG is a must for efficient supply chain management and logistics, improving the resilience of value chains and adjusting them to trade patterns reshaped by climate change and digital technology is crucial to boost trade.

Source: The Star

Logistics, a magic bullet for sustainable trade?

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Malaysia’s digital investment soared to RM46.22 billion last year, surpassing the targeted amount of RM30 billion by 54 per cent.

Malaysia Digital Economy Corporation (MDEC) chief executive officer Mahadhir Aziz said this was contributed by 256 companies, with 53 per cent in the information technology cluster.

He said this was followed by global business services (26 per cent), data centres and cloud (13 per cent), and technology and creative content (eight per cent).

“A total of 22,258 high-value jobs were created last year, with the global business services cluster contributing 51 per cent of the total,” he said at a media briefing recently.

“The number of jobs created represents a growth of 36 per cent compared to 2021.”

Mahadir said local digital companies also achieved remarkable financial results, generating revenue of RM8.87 billion, surpassing the target of RM7.5 billion by 18 per cent.

Furthermore, he said, the export value surged to RM3.18 billion, an increase of 181 per cent from 2021.

“Malaysia’s digital footprint has expanded globally, with companies now operating in 17 countries. Indonesia, the Philippines, and Vietnam are the top three countries where Malaysian digital companies have a strong presence,” he said.

Moving forward, Mahadir said MDEC would be introducing a new tax incentive in May for Malaysian companies with digital status and existing Multimedia Super Corridor-status companies.

“We have an amended tax incentive that will be announced in May. This is something that we want to be able to take on, and we will announce it together with the Finance Ministry,” he added.

Source: NST

‘Digital investments hit RM46.22b in 2023’

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The Sarawak government will continue to empower downstream industries such as in biomass production, furniture and industries based on bamboo and engineered wood to further increase the production of high value-added wood products.

Sarawak Deputy Premier Datuk Amar Awang Tengah Ali Hasan said this empowerment measure is part of efforts to transform the timber industry in the state which is currently still focused on exporting the main product.

“Therefore, timber industry players are urged to be more committed to implementing the transformation of their activities and operations towards the production of high value-added wood products by using more raw materials from forest and bamboo plantations,” he said.

Awang Tengah who is also Sarawak’s Minister of International Trade, Industry and Investment said this at the Sarawak Timber Industry Development Corporation (STIDC) Annual Donation Ceremony here today.

According to him, the biomass industry has great potential to be explored in the development of the green economy.

“Biomass products such as wood pellets, biochar and charcoal briquettes are in high demand in the global market because they are more environmentally friendly fuels than fossil fuels,” he said.

Awang Tengah said the production of wood pellets from Sarawak has increased by 130 per cent from 35,522 tonnes in 2022 to 81,800 tonnes in 2023.

He said Japan, France and South Korea are the main importers of these wood pellets which also have great potential to generate green energy in Sarawak, in line with the state government’s green energy policy.

“At the same time, players in the timber industry are advised to adopt Industrial Revolution 4.0 (IR4.0) technology which emphasises the use of automation and digital technology to be more resourceful,” he said.

He said STIDC has produced the Engineered Wood Product Blueprint as a guideline for the development of the engineered wood industry in Sarawak, in addition to implementing research and product development initiatives in smart collaboration with local and foreign research and higher education institutions.

“The Sarawak Bamboo Industry Development Plan has been prepared by STIDC to develop this industry in a more planned manner. The global export value of bamboo-based products in 2022 was US$68 billion and is expected to grow at a rate of four per cent per year,” he added.

Source: Bernama

Sarawak govt empowers downstream industries to produce high value wood products, says deputy premier

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Foreign Minister Datuk Seri Mohamad Hasan wants Malaysian ambassadors and High Commissioners to be knowledgeable on trade aspects to attract investment into the country.

He said that apart from maintaining good bilateral relations with other countries, expertise in exploring and attracting investment and trade is crucial to drive the country’s economy forward.

“Foreign policy should not only follow the standard operating procedures (SOPs) when it comes to building and maintaining bilateral diplomacy.

“I want the Ministry of Foreign Affairs, ambassadors and High Commissioners to also be competent in trade to attract as many investors as possible to Malaysia,“ he told reporters after the Khatam Al-Quran Ramadan event held here today in conjunction with Nuzul Al-Quran.

Mohamad, who is also Rembau MP, said apart from the role of the Malaysian Investment Development Authority (MIDA) and Malaysia External Trade Development Corporation (MATRADE) in attracting investments, it is more effective for the envoys to speak directly to investors and convince them.

He suggested that newly appointed envoys should first be placed in MIDA to familiarise themselves with the investment environment and effectively persuade potential investors to invest in Malaysia.

Source: Bernama

Malaysian envoys urged to be savvy on investment, trade

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National carmaker Perodua is set to lead the charge in making EVs accessible and affordable to the masses.

Slated for the end of 2025, this initiative aligns with the New Industrial Master Plan 2030 (NIMP2030), aiming to transform Malaysia into a hub for affordable EV production.

On March 26, International Trade and Industry Minister (MITI), Tengku Datuk Seri Zafrul Abdul Aziz said on X that Perodua has been picked to be the nation’s lead brand to produce affordable EV.

He said Perodua’s role in breaking the cost barrier, could facilitate a broader adoption of eco-friendly transportation solutions such as EV.

“Yesterday I had a discussion with Perodua to find out more about the development of their EV project and how the government can help to make the project a success for the well-being of the people and the national economy.”

According to Soya Cincau, Perodua was reported developing a prototype EV in collaboration with an undisclosed international car manufacturer.

The anticipated 2025 launch of Perodua’s electric vehicle coincides with the expiration of the RM100K price ceiling for imported completely built-up (CBU) electric vehicles under the MITI’s Franchise AP policy.

The automaker previously unveiled a concept design for an electric vehicle, dubbed the Electric Motion Online (EMO), at the Malaysia Auto Show in May 2023.

It has the size of a Myvi and boasts a 50kWh battery capable of delivering a range up to 350km on a single charge.

Source: The Sun

Perodua to spearhead affordable EV charge in 2025

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Malaysia remains steadfast in its commitment to reforming the economy while embracing innovation and sustainable development, said Deputy Prime Minister Datuk Seri Fadillah Yusof.

Fadillah said under the visionary leadership of Prime Minister Datuk Seri Anwar Ibrahim, Malaysia is embarking on an ambitious agenda of economic transformation driven by the principles of inclusivity, innovation, and sustainability.

“Central to our vision is the BRI (Belt and Road Initiative), which presents unprecedented opportunities for collaboration between Malaysia and China in various fields, including infrastructure development, connectivity, trade facilitation, and people-to-people exchanges.

“By leveraging the synergies between our economies and harnessing the transformative power of the BRI, we can unlock new avenues of growth, create jobs, and improve the livelihoods of our people,” he said in his keynote address at The Silk Road and Asian Civilisation Forum 2024 here, today.

Also present were Deputy Investment, Trade and Industry Minister Liew Chin Tong, Communist Party of China’s (CPC) International Liaison Department Minister Liu Jianchao, and Chinese Ambassador to Malaysia Ouyang Yujing.

Fadillah said that at the heart of Malaysia-China bilateral relations lies a robust framework of trade and investment that has served as the cornerstone of economic cooperation between the two nations.

He said in 2023, China continued to be Malaysia’s largest trading partner and had remained so for 15 consecutive years since 2009, taking up 17.1 per cent share of Malaysia’s total trade.

“China was also Malaysia’s largest import source, absorbing 21.3 per cent share of total imports. Imports from China stood at RM258.63 billion with major imports comprising E and E (electrical and electronics) products, machinery, equipment and parts, as well as chemicals and chemical products,” he said.

Fadillah, who is also the Energy Transition and Water Transformation Minister, said Malaysia is fully committed to promoting green energy and environmental sustainability as integral components of its development agenda.

He said Malaysia and China were also poised to lead the way in promoting green energy and renewable resources, and both nations are committed to investing in clean energy technologies, such as solar, wind, and hydroelectric power.

“Through collaborative efforts and knowledge-sharing initiatives, we aim to harness the vast potential of green energy to reduce greenhouse gas emissions, mitigate the adverse effects of climate change, and create a more sustainable future for our planet.

“By prioritising innovation and sustainable development in the energy sector, Malaysia and China are not only contributing to global efforts to combat climate change but are also unlocking new opportunities for economic growth and prosperity,” he said.

Source: Bernama

Belt and Road Initiative central to Malaysia’s economic makeover

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The Melaka government is on track to meet its RM10 billion investment target this year by focusing on 10 key industries.

State Economic Planning, Finance, Land Affairs, Non-Government Agencies, Investment, Industry and Development of Technical and Vocational Education and Training (TVET) Committee chairman Datuk Khaidhirah Abu Zahar said the sectors include electrical and electronics, automotive, aerospace, oil and gas, renewable energy, halal manufacturing, biotechnology, machinery and equipment, pharmaceuticals and shipping.

“This target is a challenge to ensure that Melaka remains relevant as a prime investment destination in the country.

“To achieve this goal, the Academy in Industry (AiI) programme is one of the initiatives that can boost the growth and productivity of the industrial sector in the state,” she told reporters here today.

Khaidhirah added that the AiI programme can help improve the quality or skills of the workforce, especially for the industrial sector to reduce dependence on foreign labour and enable Melaka residents to fill the jobs offered by industry.

She called on more industries in the state to participate in the AiI programmes as it shows the serious commitment of the state government to attract more foreign investors to the state.

Source: Bernama

Melaka aims for RM10b investment, focuses on 10 key sectors, says exco

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The prospects for the local renewable energy (RE) sector is bright, thanks to the abundance of solar photovoltaic (PV) system engineering, procurement, construction and commissioning (EPCC) jobs, says Kenanga Research.

According to the research house, the outlook for solar EPCC jobs is strong, underpinned by new contracts under the Corporate Green Power Programme (CGPP) estimated to be worth RM2.4bil and the 2GW Large-Scale Solar 5 (LSS5) worth an additional RM5bil.

There is also an extra quota of 400MW under the net energy metering (NEM) scheme, the research house noted.

Under the National Energy Transition Roadmap, the government has set a target of RE making up 70% of total generation capacity by 2050 compared with 25% currently, with an aspiration to achieve net-zero GHG by 2050.

The targets entailed at least 20GW of new RE from now until 2050, of which more than 90% is expected to come from solar.

The government has introduced a list of initiatives to promote investment in solar power generation comprising the Feed-in Tariff programme, NEM mechanism, LSS and CGPP projects.

“Over the immediate term, the flow of PV system EPCC jobs will come from the CGPP with a completion deadline by end-2025, following the completion of LSS4 in end-2023.

“Based on our estimates, the 800 megawatt peak (MWp) capacity under the CGPP will translate to RM2.4bil in PV system EPCC jobs,” the brokerage firm said.

“Subsequently, the Energy Commission will embark on LSS5 with a capacity quota of 2GW, which allows developers to bid for up to 500MW from 50MW previously.

“We estimate that LSS5 will generate RM5bil worth of PV system EPCC jobs, which can keep PV system EPCC contractors busy until 2028.

“In addition, there is a new 400MW quota under the NEM scheme from February to December 2024 to further encourage investment in solar energy assets.

“Businesses, driven by commercial reasons (i.e. to save cost) and environmental, social and governance considerations, have voluntarily invested in solar energy generation assets following the recent hikes in electricity tariffs,” it said.

All in all, Kenanga Research said the prices of solar panels are at historic low while the supply of components is abundant. As solar panel makers struggle to make a profit, PV system EPCC contractors enjoy good margins and are poised for more jobs as cheap solar panel prices stimulate investment in PV systems, it added.

Source: The Star

Outlook for RE bright with more solar PV jobs

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The government aims for the Northern Corridor Economic Region (NCER) to record RM367.8 billion in realised investments by 2030 through three new focus areas.

Prime Minister Datuk Seri Anwar Ibrahim said NCER plans to become a world-class economic and technological hub through three new areas of focus — advanced services, high value manufacturing and modern agriculture.

He said the two drivers of change that will support the plan are Environmental, Social and Governance (ESG) practices and applying digital usage.

At the 31st Northern Corridor Implementation Authority (NCIA) meeting he chaired on Wednesday, the prime minister said he had examined the main issues related to the NCER Strategic Development Plan 2024-2030.

“From 2021 to 2022, NCER contributed 34% (RM197 billion) of the total approved investments,” he noted in a post on X (formerly known as Twitter) on Wednesday.

Anwar said the meeting also discussed the “Facilitation@NCER” initiative to drive and realise investments in the corridor region. “This will involve coordination with the Malaysian Investment Development Authority (Mida) for ease of access to information, management of investment relationships, adjustment of services and use of the On-Track digital management platform,” he added.

The meeting was also attended by Deputy Prime Minister and Minister of Rural and Regional Development Datuk Seri Dr Ahmad Zahidi Hamidi as well as the relevant menteris besar as NCIA council members.

Source: Bernama

PM: Govt eyeing RM368b in realised investments for NCER by 2030

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The planning and implementation of a 10-gigawatt renewable energy (RE) project signed by the Malaysian Investment Development Authority (Mida) and United Arab Emirates company Abu Dhabi Future Energy Co PJSC (Masdar) is a commercial arrangement between the two entities.

Deputy Prime Minister and Minister of Energy Transition and Water Transformation Datuk Seri Fadillah Yusof said that in this regard, the planning and implementation of the project’s joint venture will be determined by both parties.

“However, the government adheres to the policy that approval for the development of RE projects in this country must be carried out transparently, fairly and based on current regulatory provisions.

“Therefore, Masdar’s investment, like other RE development companies in the country, needs to be done through participation in the existing RE programmes that are being and will be implemented,” he said.

According to him, existing RE programmes include the Large Scale Solar (LSS) Programme for utility-scale solar development; Feed-in Tariff Programme for the development of non-solar resources; New Enhanced Dispatch Arrangement Programme for the development of non-solar resources; and Rooftop Solar Programme for solar installation on the roof of building premises.

Fadillah was replying to an oral question from Yeo Bee Yin (PH-Puchong) on the implementation of the collaboration and the party responsible for the “off take” of RE in Dewan Rakyat today.

At the same time, Fadillah said, the government planned and drafted the implementation of third party access (TPA) to enable developers to supply RE directly to consumers by using the grid infrastructure of utility companies.

Therefore, according to him, the RE offtaker for the investor company will be determined based on the type of RE programme that the company participates in.

“For example, if a company participates in the LSS programme, then the energy offtaker is the utility or Tenaga Nasional Bhd (while) if an investor participates in the rooftop solar programme, then the energy offtaker under this programme is the electricity user himself.

“If the company participates in the TPA programme in the future, then the corporate user who has a contractual relationship with the developer will be an offtaker for the RE generated,” Fadillah explained.

Overall, he said, the entry of new capacity by Masdar and other RE developer companies should be based on the planning and development of electricity supply generation agreed by the government and carefully refined taking into account all economic, technical and regulatory aspects.

Fadillah said this approach will ensure the introduction of intermittent solar sources will not affect the capacity and safety of the grid system and infrastructure, provide fair and equitable opportunities and competition while safeguarding the interests of local RE industry players.

Source: Bernama

MIDA, Masdar to determine planning, implementation of RE project

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The Northern Corridor Economic Region (NCER) will be developed into a world-class economic and technological hub, says Prime Minister Datuk Seri Anwar Ibrahim.

Anwar said this will be realised through a focus on three industries, namely advanced services, high-value manufacturing, and modern farming.

“The two catalysts for change that will support this endeavour are environmental, social, and governance (ESG) practices and digitalisation,” Anwar said after chairing a Northern Corridor Implementation Authority meeting.

Anwar said the government aims to realise RM367.8 billion in investments in the NCER by 2030.

Earlier, Anwar said he chaired the NCIA meeting which was also attended by Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi and the Menteris Besar of the northern states including Perak, Kedah, Perlis, and Penang.

The meeting discussed the NCER strategic development plan 2024-2030.

“Between 2021 and 2022, the NCER has realised 34 per cent (RM197 billion) from approved investments.

“The meeting also discussed the “Facilitation@NCER” initiative to further catalyse and realise investments in the NCER,” said Anwar, adding this involved coordination by the Malaysian Investment Development Authority (MIDA).

Source: NST

Northern Corridor Economic Region to be world-class economic and tech hub, says PM

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The Small and Medium Enterprises Association (Samenta) Malaysia has expressed confidence in the ability of the government’s plans for the Northern Corridor Economic Region (NCER) to bolster the economy.

Its national president, Datuk William Ng, said capitalising on Penang’s “lion’s share” of the country’s Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) over the past decade is a strategic move to stimulate growth in neighbouring states.

“With the semiconductor and medical devices sectors spurring growth in Kedah and Northern Perak, and considering the region’s rich natural attractions such as ancient forests, pristine beaches, and archaeological sites, the northern states are poised to become a tourism hub,” he told the New Straits Times.

However, Ng said it is essential to have unity among state governments — especially given their diverse political affiliations — in driving economic progress.

“This entails maintaining policy transparency and continuity, as well as instilling confidence in both local and foreign investors that their investments will be secure, irrespective of changes in administration.

“If successfully executed, the Northern Corridor has the potential to replicate the growth seen in the Klang Valley and stem the outflow of talent to both the Klang Valley and neighboring countries.”

Earlier, Prime Minister Datuk Seri Anwar Ibrahim said the NCER will be developed into a world-class economic and technological hub.

Anwar said this will be realised through a focus on three industries: advanced services, high-value manufacturing, and modern farming.

He said the government aims to realise RM367.8 billion in investments in the NCER by 2030.

Source: NST

Samenta upbeat on govt plans for NCER

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Since the start of the US-China trade war in 2018, companies reliant on China’s manufacturing surge have been actively exploring alternatives to diversify their supply chains. Southeast Asia has emerged as a prime destination for several compelling reasons. The region boasts a youthful workforce, varied industry specialisations, abundant raw materials and a strategic geographical position that facilitates efficient service to both Western and Eastern markets. Notably, media reports highlight that a substantial 60% of Samsung mobile phones are currently manufactured in Vietnam, while Apple has shifted a portion of its latest iPhone production to India.

The momentum behind the relocation of industries away from China is fuelled by a combination of factors. First, the persistent trade tensions between the US and China show no signs of abating, even amid the Covid-19 pandemic. These tensions have expanded beyond traditional trade realms to encompass high-tech, finance, geopolitics and other sectors. Many multinational firms are increasingly concerned about potential high sanction risks that the US might impose on their operations in China.

Secondly, the global supply chain disruptions and shortages experienced by advanced countries during the pandemic have prompted governments and companies to re-evaluate the security of their supply chains, especially those heavily reliant on China. Furthermore, China’s de facto nationwide lockdowns in the latter half of 2023 have intensified the determination of multinational firms to diversify their supply chains rather than solely relying on China. This cautious approach was spurred by the recognition that concentrating all operations in China entails significant risks.

The pandemic also exacerbated the challenges within China’s business environment. In addition to strict human mobility restrictions, Chinese authorities implemented sweeping regulatory measures in 2021, affecting various sectors including real estate, private education, online gaming and financial technology (fintech). This regulatory crackdown has prompted international investors to question the viability of China as a conducive business environment.

What is China + 1, and can Malaysia stand to benefit?

The “China + 1” strategy involves companies diversifying their supply chains by establishing an additional manufacturing or production base outside of China. This strategic approach aims to reduce dependence on China as the sole manufacturing hub, thereby mitigating risks associated with trade tensions, supply shortages and regulatory changes within China.

Is Malaysia well-positioned to benefit from supply chain diversification?

To assess this, we compare Malaysia with its regional counterparts as potential investment destinations for diversification efforts. Among our regional peers actively seeking foreign direct investment (FDI) in the context of supply chain diversification are Indonesia, Thailand and India. According to the International Institute for Management Development World Competitiveness Ranking, Malaysia ranks 27th out of 64 countries. This ranking places Malaysia ahead of Indonesia, Thailand and India, suggesting a favourable environment for investment and business operations.

At a categorical level, Malaysia has the strongest economy and infrastructure among the four countries; however, it trails behind Thailand in government efficiency and records the lowest rank in business efficiency. Government and business efficiency are integral components of soft infrastructure that are crucial for fostering FDI and facilitating business formation. Our shortcomings in these aspects, attributed to regulatory inefficiencies, protectionist policies, brain drain challenges and a lack of local business adaptability to global trends, contribute to our diminished performance in these metrics. These challenges impede our capacity to capitalise on global trends and attract investments seeking destinations beyond China.

A closer examination of the shifts in rankings over the years provides intriguing insights. Despite notable advancements in all fundamental aspects in 2023, our standings in categories, apart from economic performance, demonstrate a decline compared to pre-Covid levels.

This prompts a critical evaluation of the factors influencing our rankings across diverse criteria. While our efforts have evidently improved our economic indicators, strategic reassessment and targeted interventions are needed to address the areas where our performance lags behind pre-pandemic benchmarks.

What builds our past resilience?

This raises the issue of our economic resilience. Our continual strong economic performance today is built upon solid economic foundations that emerge from three key factors.

First, our abundant natural resources have been a significant contributor to our economic prosperity. The oil and gas sector alone constitutes approximately 20% of Malaysia’s gross domestic product and serves as a primary source of government fiscal revenue. This industry has played a crucial role in supporting various aspects of the economy, funding both operational and developmental expenditure. While lucrative, this coffer is threatened by the escalating global concerns regarding climate change, posing the risk of rendering this sector obsolete and unprofitable in the future.

Secondly, during the past era of good governance, we have successfully established a substantial manufacturing hub, particularly focused on electronics. This strategic move has consistently driven economic growth and employment. The current economic prosperity is a testament to past policies that continuously fuelled our economic engine. Nonetheless, this momentum may wane if we fail to keep pace with evolving global trends.

Thirdly, the rise of Malaysia in the past decades happened in tandem with the lacklustre development of our neighbours. In the epoch of the country’s industrialisation, we were one of the most appealing countries in the region. Our strength lay in political and economic stability, coupled with a young and competitive workforce. However, this landscape is evolving. Vietnam, Indonesia, Thailand and the Philippines have emerged as formidable contenders, challenging Malaysia across various dimensions of economic vibrancy. These countries are offering liberalised trade regulations, young and adaptable workforces, streamlined business setups, accessible foreign visas and a notable absence of protectionist policies, among other factors.

Building up economic fundamentals to drive growth

Foremost, we need to acknowledge that our current strong economic performance is an outcome of our historical legacy. In the face of intensifying global competition, we cannot hinge our progress solely on past achievements.

Adapting to a shifting global landscape demands resilience, competitiveness and dynamism. To harness the advantages of supply chain diversification, we must construct a sturdy economic foundation that propels investment and fosters growth. The fundamental building blocks for achieving this are as follows.

1. Enhance investment promotion to attract high-value firms: Elevate efforts to draw top-tier anchor companies to Malaysia, particularly in key sectors such as green technology, digital enterprises, agritech, semiconductor manufacturing and the halal industry. This effort will be complemented by tax incentives such as pioneer status, investment tax allowances and reinvestment schemes.

2. Remove protectionist policies for foreign firms: Tesla’s exemption from the minimum 30% equity ownership by bumiputera should be expanded to include all foreign investments.

3. Ensure governance and policy stability: Uphold consistency and predictability in trade policies to mitigate uncertainty for businesses, particularly during the period of political transition. A stable regulatory environment is crucial to attract foreign investment and nurture a robust trade ecosystem.

4. Streamline regulatory processes: Simplify regulatory frameworks and expedite bureaucratic procedures to eliminate barriers that deter foreign investors. A complex regulatory environment or slow bureaucratic processes deter foreign investors who may find setting up business easier in other Southeast Asian nations.

5. Enhance workforce education and training: Invest in upskilling and reskilling programmes to equip the local workforce with the skills needed for higher-value jobs. Addressing the current reliance on low to middle-skilled labour through broadened educational initiatives will contribute to national workforce development.

6. Facilitate visa requirements: Implement easier visa processes, including long-term stay visas and foreign worker visas, to attract talent from abroad. Encouraging the influx of foreign workers to complement our existing market should be encouraged to address skill gaps, facilitate knowledge transfer and alleviate manpower shortages.

Malaysia’s strategic location in Southeast Asia and its well-developed infrastructure make it an attractive alternative for companies looking to diversify their supply chains. The country’s strong trade ties, especially within the Asean region, provide an excellent platform for companies to access other regional markets.

To capitalise on the potential of supply chain diversification, it is imperative for the country to enhance its economic foundations, aiming not only to match but surpass the benchmarks set by neighbouring countries. This strategic approach will enable Malaysia to assert itself as a prominent trade partner and sought-after investment destination, not only in the US and China but also across various regional markets.

Doris Liew is an economist, public policy thinker and environmentalist at Penang Institute who regularly observes Asean’s economic development, policy frameworks and regional and international trade dynamics

Source: The Edge Malaysia

Positioning Malaysia to receive FDI from global supply chain diversification

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