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While the Johor-Singapore Special Economic Zone (JS-SEZ) deal, scheduled to be signed today, promises job creation and economic benefits, experts say its success will depend on regulatory alignment, strong leadership and seamless cross-border collaboration.

Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said leadership and commitment are the foundational pillars of the SEZ.

“Hopefully, we secure a win-win outcome. Top leadership must be committed and that commitment must cascade down to those driving the SEZ,” he told StarBiz.

Similarly, public policy analyst Adib Zalkapli stressed the importance of regulatory alignment.

“I think one of the most important measures to make JS-SEZ a success is to harmonise existing regulations of the two countries to create a seamless business environment,” he noted.

He also pointed out that strong bilateral relations and political stability in Malaysia would be essential for the SEZ’s long-term success.

Lee highlighted the need to reduce bureaucracy and improve processes for investors and cross-border movement.

“What investors want is reduced bureaucracy, easy entry. For the causeway, you need to make people-to-people movement simple and easy,” he added.

He also stressed the need for seamless collaboration among federal, state, and local authorities for the SEZ to be successful.

“Customs and immigration are federal matters, so federal, state and local councils must work together to coordinate and quickly address areas that need improvement,” Lee explained.

While he acknowledged that the full benefits of the SEZ may not be immediate, Lee is optimistic about its long-term impact.

“In the shorter term, we may not see its full potential. But when investments kick off and create jobs, there will be a lot of spillover effects on the local economy, helping to boost not just Johor’s economy but the nation’s as well,” he said.

Johor’s contribution to Malaysia’s gross domestic product (GDP) has remained steady at around 9.5% in recent years, registering 9.5% in 2023.

This is despite the state accounting for 12.3% of the country’s population, or 4.1 million people and 12.7% of the national labour force, which totals 16.4 million people.In comparison, Selangor leads with a 26% share of GDP, followed by the Federal Territory of Kuala Lumpur, including Putrajaya, at around 16%.

Johor’s GDP per capita has grown from RM30,469 in 2015 to RM41,902 in 2023, according to data from the Statistics Department.

However, this remains below the 2023 national average of RM54,612 and significantly behind Kuala Lumpur at RM131,038 and Penang at RM72,586.

For context, Singapore’s GDP per capita in 2023 stood at S$113,779.

The JS-SEZ spans over 3,500 sq km – four times the size of Singapore.

It stretches across six districts in Johor, including Johor Baru, Iskandar Puteri, Pasir Gudang, Pontian, Kulai, and Kota Tinggi, covering areas from Kulai and parts of Pontian to Pengerang.

According to Johor officials, the JS-SEZ has the potential to generate 100,000 new jobs and contribute US$26bil annually to Malaysia’s economy over the next six years.

Johor’s GDP contribution in 2023 stood at US$37.6bil.

Economy Minister Rafizi Ramli once described the partnership as a “perfect match,” highlighting the synergy between Singapore’s sophistication and Malaysia’s cost and resource advantages.

Source: The Star

Unleashing the potential of JS-SEZ

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The rubber gloves sector is expected to continue to gain traction in 2025, supported by continuous earning recovery, higher volume sales, improving supply-demand dynamics and potential increases in average selling prices (ASPs).

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the stage is set for the rubber gloves sector to see strong earnings recovery in the coming year as there are indications pointing towards a strong demand recovery supported by inventory rebuilding from distributors and faster-than-expected industry consolidation.

“Specifically, there has been an uptick in orders over the past three quarters. The rise in demand comes as the inventories of major distributors across all regions have returned to normal levels,” said the research arm in an analysis.

They pointed out that Hartalega Holdings Bhd (Hartalega) for one is about to set to see their sales volume increase to 2.5 billion pieces per month in the second half of its financial year 2025 (2H25) while Top Glove Corporation Bhd (Top Glove) has continued to see a 10 to 20 per cent month on month (m-o-m) uptrend in its sales volume since Nov 2024 and is expecting to see replenishment activity pick up in subsequent quarters.

The oversupply issue is also expected to be less acute in 2025 as the research arm notes that players have been actively culling production capacity via the decommissioning of selective plants and the exit of new entrants.

“Based on our estimates, the demand-supply situation will only start to head towards equilibrium in 2026 when there is virtually no more net new capacity coming on stream while the global demand for gloves continues to rise by 15 per cent per annum underpinned by rising hygiene awareness,” they opined.

Moreover, the US imposition of tariff ratchets up to 50 per cent in 2025 and 100 per cent in 2026 for Chinese origin gloves will make Malaysian glove makers the prime beneficiaries as US customers look for alternative sources due to the resulting increased ASPs of Chinese origin gloves.

“If we assume a base case ASP of US$19 per 1,000 pieces for Chinese gloves, a 50 per cent tariff hike is expected to raise Chinese glove producers’ ASP to US$25 per 1,000 pieces.

“This compares with Malaysian players’ ASPs which currently sit at US$18 to 21 per 1,000 pieces, and we expect Malaysian glove makers to benefit from the US import tariff hike from 7.5 per cent to 50 per cent on Chinese glove imports in 2025,” the research arm reasoned.

That said, there are concerns that Chinese players will begin to flood other markets in order to offload their stock which may result in mixed effects for local players.

However, Kenanga Research believes that the net effect of the US tariffs will be positive for local players as any volume loss in non-US markets will be able to be offset by higher demand from the US as the US historically accounts for 35 to 40 per cent of Malaysia’s total glove volume.

“We believe that given the current geopolitical tensions between the US and China, and the tariff hike, American buyers are less likely to source most of their supplies from China. As a result, buyers are diversifying their sources, opting to purchase from other countries including Malaysia,” they mused.

“Some buyers have already begun shi ing their purchases to Malaysia as a risk management strategy, which could potentially benefit Malaysian players including Hartalega, Kossan Rubber Industries Bhd (Kossan), Top Glove, and Supermax Corporation Bhd (Supermax),” they added.

Overall, the uptick in demand for rubber gloves is expected to cause local ASPs to inch up gradually, potentially reaching US$20 to US$22 per 1,000 pieces in 2025.

This uptick in demand has prompted local rubber glove players to forecast that ASPs may inch up gradually by US$1.00 and potentially reach US$20 to US$22 per 1,000 pcs in 2025.

In contrast, Kenanga Research’s 2025 ASP assumption is slightly more moderate at US$20 to US$21 per 1,000 pcs.

Overall, Kenanga Research maintains and ‘overweight’ call on the rubber glove sector with their top picks being Hartalega and Kossan due to their more sizeable US sales exposures.

Source: The Borneo Post

Glovemakers will continue to gain traction in 2025

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Malaysia is poised for significant data centre growth this year fuelled by substantial investments from major technology companies, according to Public Investment Bank Bhd (PublicInvest).

The firm sees positive inflows for the various industries in Malaysia following a sharp increase in data centre investments.

“Data centres are a critical component in powering the growing digital economy, and Malaysia can specialise in data services, particularly those related to generative artificial intelligence (AI), which have applications across various industries like healthcare and services, leading to improved service quality and innovative solutions.

“This will help the country to broaden beyond semiconductors and gain from the technology transfer from big tech companies,” it said.

Meanwhile, PublicInvest said that despite various trade concerns over the heightening trade tension, the year of 2025 is touted to be a time of technology breakthroughs, which will see many opportunities to invest, innovate, and develop.

The firm believes AI remains at the forefront of key topics, as did cybersecurity, cloud computing, and robotics.

“We also gather that some local automated test equipment (ATE) makers have started receiving more enquiries in the last 2 months, although the outlook visibility remains short.

“In the local scene, data centre play continues to be in the limelight.

“Overall, we are selectively upbeat on the technology stocks, as certain segments like automotive are still facing a challenging outlook. Maintain overweight on the sector, and our top picks are Cloudpoint Technology Bhd and QES Group Bhd,” it added.

Source: NST

Major tech firms to drive data centre growth this year

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AS an important link in the global semiconductor supply chain, Malaysia has largely benefited over the past eight years from its neutral stance in the US-China trade war.

However, with tensions escalating under Donald Trump’s second term as US president, concerns are growing over Malaysia’s chip future as new challenges may include the potential of BRICS (Brazil, Russia, India, China and South Africa) nations being the target of US tariffs.

As recently as late November, Trump had threatened to impose 100% tariffs on BRICS nations if they were to create a rival currency to the US dollar. For the first time in many years, industry players are genuinely worried that Malaysia could be caught in the crossfire.

Already, the US Commerce Department has imposed high anti-dumping duties of up to 271.2% on solar products from Malaysia, Thailand, Vietnam and Cambodia following complaints from American manufacturers that big Chinese solar panel makers with operations in these countries were flooding the US market with unfairly cheap goods.

Will Malaysia’s semiconductor industry be subjected to similar trade measures?

Adding another layer of complexity, Malaysia is now a BRICS partner country, having joined the bloc in October. A partner country is basically an observer state that receives support from BRICS members, even though it has not yet been officially accepted as a member.

BRICS, originally comprising Brazil, Russia, India and China, was established in 2009 as a cooperation platform for emerging economies, with South Africa joining a year later. Chaired by Russia this year, the trade bloc now collectively accounts for one-fifth of global trade.

For perspective, Malaysia’s semiconductor sector plays a critical role in the global chip supply chain as the world’s sixth largest semiconductor exporter, contributing around 13% to the global chip testing and packaging industry. Globally, about 6% to 7% of semiconductor trade flows through Malaysia.

Malaysia’s strong presence and active participation in the supply chain have historically enabled the country to thrive and strengthen its position, particularly in the wake of the “great decoupling” between the US and China in the tech cold war.

Tariff dispute remains a concern

Will Malaysia’s decision to join BRICS impact its economic ties with the US and its role in the global supply chain? Can Malaysia continue to benefit from the trade war, or is this advantage fading as global trade shifts further?

Pentamaster Corp Bhd co-founder and executive chairman Chuah Choon Bin acknowledges that Malaysia’s economic ties, particularly with China, could expose it to indirect risks from tariffs or trade restrictions, even though it is not a BRICS member.

However, adopting a clear economic strategy — such as advancing the digital economy to promote e-commerce and tech-driven industries, implementing attractive investment policies, fostering global integration and trade, as well as maintaining a neutral diplomatic stance — may help mitigate these risks.

“The possibility of being involved in tariff disputes, particularly within the semiconductor industry, remains a concern if Malaysia continues to play a role as an OSAT (outsourced semiconductor assembly and test) country,” he tells The Edge.

While Chuah expects the country’s semiconductor industry to remain stable in the near future, he warns that the sector could face challenges if technology trade tensions escalate with further heightening of trade sanction policy during Trump’s second term.

Malaysia approved RM254.7 billion in investments during the first nine months of 2024 (9M2024), reflecting a solid 10.7% growth year on year, compared with RM230.2 billion in the same period a year before.

The electrical and electronics (E&E) sector maintained its dominant position as the country’s top manufacturing sector, attracting RM47 billion in approved investments in 9M2024, although it was 18% lower than RM57.3 billion in the same period a year ago.

The semiconductor subsector accounted for over 90% of the E&E investments in 9M2024, demonstrating its pivotal role in advancing the National Semiconductor Strategy towards its RM500 billion target in investments for the sector.

The key priority for Malaysia, says Chuah, is to develop strong foundations in technology and intellectual property (IP), particularly in research and development, such as having our country’s own integrated circuit (IC) design for advanced devices and advanced technology equipment.

“This will help mitigate the impact of trade restrictions, as the global demand for high-tech components and devices continues to grow. By shifting focus towards high-tech products, Malaysia can boost its competitiveness even in the face of tariffs.

“Therefore, it is crucial for the government to support local technology companies with grants and incentives to accelerate investment in development of proprietary Malaysian IP such as IC design and advanced technology equipment,” he stresses.

Additionally, Malaysia must diversify its markets by exploring new opportunities in Europe, Asia and emerging economies. Participating in free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will create alternative export channels for the semiconductor industry, says Chuah.

He opines that Malaysia could reduce its reliance on the US markets by leveraging its BRICS partnership, aligning with technology-driven nations, and strengthening its position in global semiconductor supply chains.

“This approach would help mitigate US tariffs and create new growth and collaboration opportunities within BRICS,” he adds.

High tariffs will be disastrous

QES Group Bhd co-founder and managing director Chew Ne Weng observes that BRICS will potentially welcome a few new members from the region, including Malaysia, Vietnam, Thailand and Indonesia.

“All these Asean nations will focus more on neutrality and trading instead of going into an anti-West stance. Malaysia has stated clearly, we want to be independent and stay neutral in the geopolitical tensions between the US and China.

“With the looming Trump 2.0 coming into power in the next few weeks, I don’t think Malaysia’s semiconductor sector will be his priority target. After all, most of the American and European multinational corporations’ (MNCs) back-end plants are in Malaysia,” he explains.

Chew says imposing high tariffs on these MNCs will be disastrous for the whole ecosystem of test assembly plants around the Southeast Asian region. Therefore, he believes Trump will not act irrationally against the chip sector.

He says Malaysia should continue to aggressively attract semiconductor companies from the US, Europe, Japan and South Korea to expand their operations or invest in the country, by offering attractive incentives, transparent and stable policy, as well as a good pipeline of talent. “Against this backdrop, Trump 2.0 will be risking global isolation if the semiconductor segment in Malaysia is still being targeted by the US for imposing high tariffs.”

Chew predicts that Malaysia will continue to be in a comfortable position for the next three years, if the government stays neutral and “not offending the US too much” in terms of policies on business and foreign affairs.

He reiterates that unlike the solar panel makers, heavy tariffs are unlikely to be imposed on semiconductor manufacturers around the Asean region as they originate from either the US, Europe, Japan or South Korea, with just a handful from China.

“Most of the solar panel manufacturers located in Asean originated from China. The tariffs imposed are targeting China solar panels manufacturers,” Chew observes.

Is Trump bluffing?

TT Vision Holdings Bhd co-founder, CEO and executive director Goon Koon Yin recognises the potential impact of possible US tariffs on the BRICS nations, as it could introduce a new layer of complexity that would hinder the industry player’s business operations and near-term performance.

However, given Malaysia’s significant involvement within the global semiconductor supply chain, coupled with the country’s long-standing partnerships with the US-based firms, he believes this will offer some form of insulation from direct fallout.

“The key challenge will depend on how we are able to maintain this balance, leveraging our relationships with both the US and BRICS nations without being overly reliant on one another. Trump’s claim of imposing tariffs on BRICS is more likely a negotiation posture and we see low likelihood of implementation,” Goon remarks.

Nevertheless, he agrees that the imposition of anti-dumping duties on solar products from Malaysia and other Southeast Asian countries could signal an increasing willingness by the US to scrutinise other industries, including semiconductors.

Goon is of the view that Malaysia could adopt a multi-pronged approach to protect the semiconductor industry from the potential fallout of US tariff implementation. This could include diplomatic engagement, which would require Malaysia to advocate its role as a reliable and neutral partner in the semiconductor supply chain.

Furthermore, the government could also implement certain initiatives to promote enhanced collaboration between the MNCs to further deepen their footprint in Malaysia, which could also help protect the industry from any sudden trade disruptions.

He points out that the narrative of the US-China trade war is evolving. Initially, Malaysia emerged as a key beneficiary of the trade tensions, attracting investments amid diversifying global supply chains.

But with the US’ increasing scrutiny on Southeast Asia as seen with its anti-dumping duties, Malaysia’s semiconductor sector faces growing challenges.

“Malaysia’s ability to maintain neutrality while navigating its BRICS affiliation will prove to be the key in determining the nation’s future trajectory,” says Goon.

As for TT Vision, he says, the group sees the evolving market dynamic as an active opportunity to capitalise on its strategic position within the value chain by fostering stronger relations with companies within the BRICS bloc, particularly those in China and India which may want to mitigate their risks by increasing reliance on Malaysia.

‘Malaysia will continue to be beneficiary’

UWC Bhd deputy group CEO Dr Matin Ng Chin Liang says Malaysia’s “partner country” status in BRICS enables the country to prioritise trading decisions that best serve the nation’s economic interests, while avoiding unnecessary alignment with geopolitical blocs.

“Malaysia’s recent application to join BRICS may have implications for the economic and strategic positioning, particularly in relation to its semiconductor industry’s role in global supply chains.

“Greater engagement with BRICS could offer potential opportunities for market diversification, technological collaboration and trade ties, but any changes in tariffs or trade policies would need to be assessed carefully,” he warns.

Ng adds that Malaysia’s ability to manage its relationships within BRICS alongside existing global partnerships will play a role in ensuring the semiconductor industry remains competitive and integrated within the global supply chain. “Malaysia’s strategic importance in the global semiconductor supply chain, supported by the presence of multiple industry-leading MNCs, minimises the risk of significant exposure to potential US tariffs.

“Unlike countries perceived as direct threats to US interests, such as China — which faces additional tariffs of 10% — or Mexico and Canada with proposed tariffs of up to 20%, Malaysia occupies a crucial supporting role in the supply chain. This positioning ensures Malaysia is viewed as a collaborative and essential partner rather than a competitor.”

Taking these factors into consideration, Ng believes Malaysia’s semiconductor industry will continue to benefit from trade tensions in the coming years. “The tariffs on Chinese exports may redirect US import demand towards other countries, including Malaysia. This trend mirrors what occurred during the initial phase of the trade war in 2020 when Malaysia’s exports to the US rose by 2.4% year on year to RM46.15 billion.

“If the trade war intensifies in the future, we anticipate a similar upward trend in Malaysia’s trade performance, positioning the country as a continued beneficiary of these global shifts in supply chains.”

TA Securities research manager and tech analyst Tony Chan Mun Chun concurs that Malaysia is likely to experience a net positive impact from trade diversion and relocation.

“Although the possibility is there, I think the chance is slim that tariffs will be imposed on the whole bloc. Instead of targeting BRICS as a bloc, I believe the focus will be on specific countries. For example, China and Russia will likely remain the main targets.

“At the end of the day, the US still needs someone to handle the back-end testing and packaging, and Malaysia remains a popular destination due to its political neutrality and well-established ecosystem,” he says.

Chan also believes Malaysia should seek to diversify its export markets beyond the US by strengthening trade relations with other regions.

“One way for Malaysia is to have regular dialogue with US policymakers to gauge where the red line is, and make sure we don’t cross it,” he suggests.

Earlier this month, the US launched its third crackdown in three years on China’s semiconductor industry, restricting exports to 140 companies. The new rules target shipments of advanced memory chips and chip making tools to China.

According to Reuters, the restrictions include limits on shipments of high-bandwidth memory chips used in advanced technologies like artificial intelligence training, as well as new controls on 24 chip making tools, three software tools and equipment made in countries such as Singapore and Malaysia.

The crackdown affects nearly two dozen Chinese semiconductor firms, two investment companies and over 100 chip making tool manufacturers, which will be added to the US entity list. Companies on this list cannot receive shipments from US suppliers without special approval.

The new rules also expand US authority to block exports of chip making equipment from US, Japanese and Dutch manufacturers made outside these countries to certain chip plants in China. Equipment made in Israel, Malaysia, Singapore, South Korea and Taiwan will be restricted under this rule, but Japan and the Netherlands will be exempt.

Following the announcement, Deputy Minister of Investment, Trade and Industry Liew Chin Tong had urged Chinese companies to refrain from using Malaysia as a base to “rebadge” products to avoid US tariffs.

More selective on FDI

Meanwhile, the domestic equity team at Nomura Asset Management Malaysia opines that over the near term, an intensified trade war between the US and China would trigger trade disruptions and a decline in regional trade flows.

“Historical experience from 2018/19 suggests that escalating trade tensions tend to lead to weaker global growth, given the impact on financial markets, consumer and business confidence.

“Similarly, Malaysia also witnessed slower economic growth over 2018/19, given its open economy. Heightened policy uncertainty could also weigh on investment decisions in the immediate term,” the firm says.

Given that Malaysia’s approved foreign direct investment (FDI) only started to see a meaningful step-up from 2021 onwards, Nomura believes the country should continue to benefit from supply chain shifts over the medium-term.

“While Malaysia has broadly benefited from supply chain diversification, plans by the US to broaden the tariff coverage to ‘Made by China’ from ‘Made in China’ could impact investment plans by Chinese firms,” it warns.

To prevent unnecessary scrutiny by the US, the Malaysian government could be more selective in approving FDIs, choosing those where there is genuine value-add proposition, says Nomura.

In addition, it says, the government can provide support to domestic companies to remain competitive despite potential tariffs via improved infrastructure, lower trade barriers, conducive policies and upskilling the labour force.

A key risk to the supply chain diversification narrative into Malaysia and the Southeast Asian region is that Asean is the fourth largest source of imports into the US after Mexico, Canada and China.

“Trump has already announced planned tariffs on Mexico, Canada and China. However, within Asean there is a great divergence between countries, with Vietnam seen as a more vulnerable target given the sharp widening of its bilateral trade surplus with the US since 2018,” says Nomura.

While Malaysia’s semiconductor sector remains resilient and poised for growth, industry players are cautious about the geopolitical complexities.

If Trump returns to power with his tough trade policies, and Malaysia’s ties with BRICS strengthen, the country will need to carefully balance taking advantage of opportunities while avoiding any punitive actions.

For now, industry leaders agree that Malaysia’s neutral stance and strategic importance in the global semiconductor supply chain remain its best defence.

But as geopolitical tensions rise and the US enforces stricter trade measures, Malaysia’s future in the global semiconductor industry will depend on its ability to adapt and handle diplomatic challenges effectively.

Source: The Edge Malaysia

Malaysia’s semicon sector needs to walk a fine line under ‘Trump 2.0’

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THE year 2024 has been a blockbuster one for Malaysia in terms of investment announcements, as global big names Microsoft Corp, Google LLC and more recently Oracle Corp disclosed multiyear billion ringgit investments into the country. The momentum has continued to build up from the news flow in 2023, with YTL Power International Bhd’s planned artificial intelligence (AI) cloud and supercomputer facility powered by Nvidia Corp; Amazon Web Services’ cloud computing infrastructure; and Vantage Data Centre’s data centre campus.

The investments announced in 2024, which are yet to be registered as approved investments by the Malaysian Investment Development Authority (Mida) at this point, are indications of what is to come in the years ahead for the approved foreign investment (FI) numbers.

Notably, Google and Microsoft’s applications are in the evaluation stage and are expected to receive approval by the first quarter of 2025, according to the Ministry of Investment, Trade and Industry (Miti).

For now, Malaysia’s cumulative nine-month approved FI for 2024 (9M2024) looks decent, although some would say it could be difficult for the full-year number to surpass the amount recorded in 2023.

With another quarter left to be accounted for and no guarantee that the numbers for approved FI will look better than the previous year’s, Minister of Investment, Trade and Industry Tengku Zafrul Tengku Abdul Aziz reminds observers to look at the bigger picture.

“What is most important is that the overall investments have increased by 10.7%. These numbers are encouraging as a total of 4,753 new projects have been approved during this period, set to create 159,347 new jobs for Malaysians. This strong performance underscores Malaysia’s enduring appeal to investors, particularly domestic investment (DI), which accounted for a significant 58.1% of the total approved investments, valued at RM148 billion.

“It is good to see increased domestic businesses’ show of confidence in the government’s clear policies, and these businesses’ commendable resilience even in challenging times,” he says, adding that the higher total investment figure is a reflection of overall investor confidence in the government’s economic and reform initiatives, as well as renewed interest in this region’s investment potential.

According to Mida, the 9M2024 approved FI amounted to RM106.7 billion, representing 41.9% of the total approved investments of RM254 billion. The higher proportion of 58.1% is attributed to DI. Note that the 9M2024 approved FI is lower than the RM125.7 billion approved FI recorded for 9M2023, when the total approved investments amounted to RM230.20 billion. Nevertheless, announcements on investments from global players coming into Malaysia created a buzz and gained coverage in the foreign media while contributing to lifting the local bourse.

Where did investment growth come from?

There are two main sectors of approved investment recorded by Mida, being services and manufacturing. The primary sector constitutes a small portion of overall investment.

The services sector makes up the bigger portion of approved investments and is typically driven by DI. On the other hand, the manufacturing sector has made up 30% to 45% of total approved investments each year in the last decade, with the exception of 2021, and is typically driven by FI and investments in the electrical and electronics (E&E) industry.

For 9M2024, services made up 63.1% of the total approved investments, where RM121.5 billion came from DI and RM39.2 billion was derived from FI. The top three service subsectors were information and communications (RM71.1 billion), real estate (RM48.8 billion) and support services (RM10.3 billion).

(Refer to the chart “Manufacturing sector sees more FDI investments than services” on facing page.)

Meanwhile, the manufacturing sector constituted 34.9% of total approved investments for 9M2024, where RM66.9 billion stemmed from FI and RM21.9 billion from DI. The top three subsectors were E&E (RM47 billion), chemicals and chemical products (RM7 billion) and transport equipment (RM7 billion).

The top foreign investors for 9M2024 were Germany, with approved investment of RM30.9 billion, followed by China with RM10.8 billion and the US at RM8.4 billion.

Not at the top, nor at the bottom

It is well documented that the Asean region has been a prime beneficiary of the China-US trade war that started under President Donald Trump in 2018. Businesses — both global and Chinese — quickly moved to diversify geographically, adopting a “China + 1” strategy to mitigate the potential impact from the trade war.

On account of this, foreign direct investment (FDI) inflows into the region have also increased since the start of the trade war. Malaysia ranks fourth in Asean, behind Singapore, Indonesia and Vietnam, according to 2023 data by United Nations Trade and Development (Unctad).

Unctad defines FDI inflows as cross-border investments in the form of financial instruments (equity and debt).

In 2023, Asean FDI inflows increased marginally by US$1 billion to a record US$230 billion against a backdrop of declining global FDI inflows.

Singapore has been a clear leader as a recipient of FDI inflows in Asean. In 2023, the city state’s FDI increased 13% to US$160 billion, accounting for 69% of the FDI inflow. One of the main reasons for the growth in FDI in Singapore is the growth in investments in the finance sector and a significant rise in investments in professional and administrative support services, including family offices, research and development and regional headquarters, according to the Asean Investment Report 2024.

A large part of the rise in the FDI for Singapore stemmed from US firms, which UOB Global Economics and Markets Research opines in a Sept 2 note, it is highly probable some of the flows coming through Singapore to Malaysia originated from American or European companies.

In 2023, Malaysia’s FDI inflows declined to US$8.7 billion from US$16.9 billion in 2022. But on a cumulative basis, FDI inflows for Malaysia jumped 10.6% per annum between 2020 and 2023, compared to a compound annual growth rate of 7.7% between 2014 and 2019, noted UOB.

While not at the top of the league, economists believe that Malaysia continues to be in a sweet spot for attracting and increasing FDI inflows, on account of better economic growth prospects, enhanced investment climate and supportive business ecosystem.

The Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-economic Research Centre executive director Lee Heng Guie adds that the various economic transformation plans under the Madani Economy framework, such as the New Industrial Master Plan (NIMP) 2030, National Energy Transition Roadmap (NETR) and New Semiconductor Strategy (NSS) and Mid-Term Review of the 12th Malaysia Plan, are set to enhance investment opportunities for investments in high-growth high-value sectors.

“Malaysia still needs to constantly enhance her investment climate, maintaining policy consistency and clarity, as well as ensuring good execution of policies to sustain the continued inflows of quality FDI in an era of economic complexities and also contending with stiff competition from regional players such as Indonesia, Vietnam and Singapore,” he says.

While the government has embarked on a series of reforms to address competitiveness issues, Lee also opines that the government needs to redouble efforts to reduce business pain points, address structural impediments and situational challenges.

It is more pressing now than ever to double down on such efforts, given how the Trump administration next year is causing much uncertainty surrounding steep tariffs that it has threatened to slap on China. On the other hand, if blanket tariffs were to be implemented, it could disrupt exports, heighten costs and potentially lead to a new round of currency weakness, notes UOB.

There are also questions surrounding trade surpluses, where countries with big trade surpluses with the US, apart from China, could also be a “target” for import tariffs.

Malaysia’s trade surplus with the US has widened from RM23.4 billion in 2017 to RM72.3 billion in 2023, notes Lee.

Future proofing against external threats

Tengku Zafrul says it is inevitable that Malaysia is impacted by potential tariff hikes on China, given the economic interdependence between Malaysia and China.

Nevertheless, Miti seems prepared to mitigate the effects as much as possible by diversifying the country’s market base. One is by focusing its efforts on attracting investments from other countries apart from the US and China.

He also highlights how Malaysia has been actively expanding its market base, forging deeper ties with countries like the Krgyz Republic, Kazakhstan and Uzbekistan while the 16 signed and implemented Free Trade Agreements and bilateral and regional FTAs would help to diversify the export profile and market and bolster supply chain resilience.

“This multifaceted approach helps create a more stable economic environment less susceptible to external shocks,” he adds.

The minister also says that major manufacturing supply chains take years to be reconfigurated, indicating that there are still opportunities for trade diversification by global companies, as investors favour regions that are seen as neutral — an advantageous position for Malaysia and Asean.

“All these bode well for further reshoring, near-shoring and friend-shoring of supply chains to Southeast Asia, and Malaysia. To retain and enhance these investments, Malaysia’s biggest leverage lies within Asean’s principle of neutrality and centrality.

“The Asean chairmanship will enable Malaysia to further leverage this stance; Asean’s collective advantages and market size; as well as Asia’s current status as the world’s growth engine, accounting for 60% of global growth this year,” he explains.

Malaysia will take on the role of Asean chair for one year from Jan 1.

There is also the country’s participation in major trade blocs such as the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership that can help to cushion against the unilateral imposition of tariffs and open access to alternative markets.

“Moving up the value chain and promoting industries like AI, electric vehicles, and green energy would make Malaysia less vulnerable to global trade disruptions,” Tengku Zafrul says.

What would 2025 look like for investment?

As uncertain as the outlooks for 2025 may be, many are optimistic, albeit cautiously, of the prospects for foreign investment in 2025.

A strengthening economy, financial resilience, stable political conditions, reforms and strategic positioning have been among the reasons touted by Malaysia for foreign investors this year. Investors have bought the idea, evident by the return of foreign inflows into Malaysia, and will continue to make Malaysia an attractive destination for investors in the year ahead.

“Based on approved investment data up to 9M2024 thus far, the outlook for both private FI and DI looks promising. In recent months, many companies have decided to establish Malaysia as their services hub, in line with its rising attraction as a data centre hub for the region.

“Those MNCs (multinational corporations) include Ant International (digital business hub which will tap local tech talent to drive its global operations); Zimmer Biomet (a world leader in medical technology) and the London Stock Exchange Group,” shares Tengku Zafrul.

He adds that these investors have said that Malaysia is not only a strategic location but also has excellent digital infrastructure — a result of the digital investments approved over the years.

“Based on the 9M2024 approved investment figures, coupled with various public announcements by MNCs on establishing Malaysia as their regional or global hub, we can expect a similar level of investor confidence as we head into 2025.

“Miti strongly believes that investor confidence is also anchored on our strong implementation rate of over 82% for approved investments, as well as strong execution of policies such as NIMP 2030, NSS, GIS or NETR,” he says.

However, Mida admits that attracting investment is becoming increasingly challenging in today’s landscape as investors become more discerning and demanding.

“Malaysia’s tax system is undergoing reform to attract quality investments and adapt to globalisation. The Global Minimum Tax framework necessitated re-evaluation of corporate tax structures, and Mida has worked with policymakers to ensure competitiveness while complying with international standards,” says Mida, adding that the country has pivoted to incentives beyond taxes, such as grants, infrastructure support and streamlined regulatory processes to attract investment.

Source: The Star Malaysia

Stories Of The Year: A blockbuster year for foreign investment

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Flagship jobs under NETR, LSS5 programme catalysts

The renewable energy (RE) industry will continue to take centre stage this year with the execution of some flagship catalyst projects under the National Energy Transition Roadmap (NETR) and the fifth round of the largescale solar five (LSS5) programme.

For one, RE players can expect to see earnings recognition from the engineering, procurement, construction and commissioning (EPCC) works on the 800MW Corporate Green Power Programme (CGPP) projects.

Additionally, EPCC awards for the two GW capacity under LSS5 will provide further opportunities for order-book replenishment for RE pure-plays, said Maybank Investment Bank Research (Maybank IB).

“The Energy Commission (EC) recently informed shortlisted bidders for the two GW projects under the LSS5 programme and expects EPCC contracts to be awarded from the second half of 2025 (2H25) onwards with an estimated value of around Rm7bil.

“This will sustain momentum for solar order-book replenishment opportunities for RE pure plays in 2025 and beyond,” the research firm said in a report.

LSS5 projects are slated for commercial operations in 2026 and 2027.

Meanwhile, the oversupply of solar PV modules has kept prices low, boding well for RE players.

Citing data from the International Energy Agency (IEA), Maybank IB said global solar manufacturing capacity is expected to exceed 1,100GW by 2024 – more than double the projected solar PV demand in 2024.

Additionally, the recent United States-imposed tariffs on solar panel imports from China and four South-east Asian countries, namely, Malaysia, Cambodia, Vietnam and Thailand, may create price pressures across the global supply chain.

“Despite this, the IEA expects China to maintain its lead in solar production while continuing to drive demand.

As a result, the IEA anticipates that the average price of the solar modules will remain low in the coming years.

Among solar EPCC players, Maybank IB has Solarvest Holdings Bhd as its top stock pick. “We are optimistic on Solarvest’s prospects for its growing order book and asset base amid strong demand for RE over the medium to long term.

“Solarvest currently trades at 20 times 2025 earnings per share.

“We believe Solarvest deserves a premium valuation due to its leading market share in the solar industry, with the largest order book among solar players,” said the research firm.

Maybank IB, which is confident Solarvest will secure EPCC contracts for new LSS5 projects, given its strong historical win rate, has a RM2.14 target price on the stock.

Solarvest shares closed at RM1.72 last Friday.

Apart from the LSS5, the government had introduced several new policies on RE in 2024, which will serve as the seeding catalysts for significant growth and development in the sector from this year.

This include the new Low Carbon Energy Generation Programme for non-solar renewable resources.

A total quota of 400MW is available with participation on a “first come, first served” basis.

However, since its launch in February 2024, uptake has been limited, with only 0.4MW of the quota applied so far. This maybe due to lower demand for non-solar resources compared to solar energy, said the research firm.

Another significant development was the establishment of the Energy Exchange Malaysia in April 2024, aimed at facilitating cross-border electricity sales to neighbouring countries.

The first phase offers a capacity of up to 300MW using the existing interconnection between Malaysia and Singapore.

Last month, Tenaga Nasional Bhd and Singapore’s Sembcorp Power signed an agreement for Malaysia’s first RE export to Singapore, supplying 50MW of electricity from December.

However, the pricing and additional details remain undisclosed.

“We view RE export as a potential new revenue stream (from RE sales and wheeling charges) and a growth driver for Malaysia’s RE sector, which has traditionally relied on domestic LSS and CGPP schemes,” said Maybank IB.

Source: The Star

Renewable energy to power 2025

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For business groups here, today’s signing of the highly anticipated Johor-Singapore Special Economic Zone (JS-SEZ) agreement heralds better economic opportunities.

“The signing of the SEZ is definitely a positive development. With this, we hope that Johor and Singapore can complement each other further such as in areas of human resources and land,” said South Johor Small and Medium Association president James Tan Tien Chong.

He added that the signing is a major development for Johor and could help strengthen ties with neighbouring Singapore.

“Such cooperation will be beneficial for both sides and will allow us to share a larger market, with the combined population of Johor and Singapore,” he said.The SEZ could also encourage Johoreans working in Singapore to return to the state as there would be more opportunities for them, Tan said in an interview.

The SEZ will encompass an area of 3,505sq km that includes Johor Baru, Iskandar Puteri, Pasir Gudang, Kulai, Pontian and Pengerang.

Among its targets is to get global firms as well as companies based in Singapore and Johor to expand their operations into the area.Prime Minister Datuk Seri Anwar Ibrahim and his Singaporean counterpart Lawrence Wong will sign the agreement today in Putrajaya.

Wisma Putra said in a statement yesterday that Wong would be accorded a welcoming ceremony at the Perdana Putra Complex in Putrajaya.

Besides the joint agreement on the JS-SEZ, there would also be six memoranda of understanding, and one letter of intent on education, women and social welfare, climate change, carbon capture and storage, urban development and fighting transnational crimes, said the statement.

Johor Baru Petty Traders and Small Business Owners Association secretary Mohammad Salezan Mohd Salleh expressed hope that the SEZ would create more jobs for the people.

“We welcome the SEZ as we know it could spur the local economy and provide better opportunities for the public,” he said.

However, he said there were concerns that the economic development would cause a surge in the price of goods in the state, especially in Johor Baru.

“I hope the state and federal governments will keep a close eye on this to ensure that locals benefit from the economic spillover of the SEZ,” Mohammad Salezan added.

Johor Indian Chamber of Commerce and Industry secretary-general Datuk K. Krishnan echoed similar sentiments, noting that inflation is already a major issue.

“The rental rate for shops in Johor Baru has increased fourfold compared to just a few years ago. This is on top of the rising prices of goods and the increase in minimum wage.

“We are concerned about this, though we view the SEZ as a positive step forward for Malaysia and Johor.

“Eventually, the people and businesses would have to adapt but there should be some form of support, at least during the initial implementation period of the SEZ,” Krishnan said.

Source: The Star

Business groups welcome SEZ

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Key domestic factors and a global recovery are expected to drive the anticipated growth this year

The Malaysian economy is set to thrive with renewed green vigour in 2025.

Various industry reports highlight that the country is projected to experience continued growth across several sectors and industries this year.

In its annual economic outlook for 2025, the Mastercard Economics Institute (MEI) forecast Malaysia’s economy to achieve 4.7% growth in GDP, driven by a robust labour market and strengthening investments.

According to MEI, private consumption is expected to be a key driver of growth as household purchasing power improves, propelled by better-quality and higher-paying employment, particularly within the higher-skilled white-collar services sub-sectors.

Meanwhile, MIDF Amanah Investment Bank Bhd’s Market Outlook 2025 projected the economy to grow by 4.6%, despite anticipating possible volatility next year.

Head of research Imran Yassin said the anticipated growth in 2025 will be driven by key domestic factors and a global recovery.

He also projected the FTSE Bursa Malaysia KLCI (FBM KLCI) to reach 1,800 points in 2025, with market consensus forecasting a healthy 9% year-on-year (YoY) earnings growth this year.

“Furthermore, the FBM Hijrah and FBM 70 are projected to register robust YoY earnings growth of 16.1% and 9.7% respectively, this year,” he said.

The job market shows positive trends, with rising employment, wage increases and a growing tourism sector supporting higher consumer spending.

He added that these factors, combined with government initiatives such as salary hikes for civil servants and cash assistance programmes, will provide a solid foundation for economic expansion.

Malaysia is expected to experience continued growth in international trade, driven by high demand for technology products, automotive goods and raw materials.

Although global tensions between China and the US may pose some challenges, Malaysia’s trade is projected to remain resilient.

The recent release of the third quarter of 2024 GDP statistics indicated that the economy expanded by 5.2% overall in the first three quarters of 2024.

Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour said moving forward, the growth of the Malaysian economy will be driven by robust expansion in investment activity, continued improvement in exports and resilient household spending.

Malaysia Committed to Green Agenda

In recent years, the government has introduced numerous initiatives to promote sustainability among industry players and across the nation, aiming to attract more foreign direct investment (FDI) and demonstrate its commitment to combating climate change. Under the Paris Climate Agreement, Malaysia is committed to achieving net zero by 2050.

Recognising that manufacturing is the second-largest source of greenhouse gas emissions in Malaysia — contributing 10% of the nation’s total emissions, second only to the energy sector at 78.5% — the International Trade and Industry Ministry (MITI) has emphasised the importance of implementing robust policies to transition the manufacturing sector towards sustainable practices. These efforts are pivotal in supporting the country’s ambition to achieve its net-zero emissions target.

As such, the New Industrial Master Plan 2030 has made the “Push for Net Zero” one of its four key missions.

The plan aims to decarbonise Malaysia’s industries by accelerating the transition to sustainable practices, shifting to renewable and clean energy, catalysing new green growth areas and advancing green infrastructure.

Malaysia has launched several key initiatives to advance its decarbonisation goals, including three mission-based “kick-off” projects — creating decarbonisation pathway role models, launching a locally manufactured electric vehicle (EV) by Perusahaan Otomobil Kedua Sdn Bhd and deploying large-scale carbon capture, utilisation and storage (CCUS) solutions.

MITI said additional projects aligned with these goals are anticipated in the future.

“The current projects are progressing well, but they are by no means the only initiatives we are focused on,” the ministry told The Malaysian Reserve (TMR).

Hard-to-abate sectors such as iron and steel, cement and chemicals — currently reliant on fossil/coal-based power — must also be addressed.

Collectively, these sectors contribute over 66% to total emissions (including process and fuel emissions for Malaysia’s industrial production under the United Nations Framework Convention on Climate Change).

Other efforts include the establishment of the Independent Steel Committee and the Green Investment Strategy launched last year.

“All these efforts contribute to a decarbonisation push that will create new economic opportunities for Malaysia, particularly in positioning ourselves as a leader in emerging green growth areas such as EVs, renewable energy (RE) and CCUS.

“These new growth areas also depend on the adoption of sustainable practices and technologies, as well as transitioning our power generation to renewable and clean energy — an area we are actively collaborating with the relevant ministries,” MITI added.

As of September 2024, MITI has approved 588 green investment projects across sectors such as bioenergy, circular economy, energy efficiency, green mobility and RE, with a total investment value of RM8.2 billion.

Tenaga Nasional Bhd (TNB) began the development of a utility-scale solar power plant through a competitive bidding process in April 2024, with a total quota of 2,000 megawatt (MW). TNB has also implemented a corporate Power Purchase Agreement (PPA), allowing direct purchase of renewable electricity based on third-party access and has offered special incentives to companies adopting green initiatives, including solar power.

MITI said the government is ensuring economic growth aligns with sustainability goals through a combination of regulatory frameworks, market incentives, investment in green technologies and international cooperation.

These efforts support the transition to a sustainable, low-carbon economy while stimulating innovation, creating jobs and safeguarding the environment for future generations, it added.

Various incentives and funding opportunities are available for sustainable investment projects, such as the Green Investment Tax Allowance (GITA) and the Green Income Tax Exemption (GITE).

Under Budget 2024, the government has expanded the Green Technology Tax Encouragement, including GITA and GITE, to cover green hydrogen activities, EV charging stations and wind energy. These measures are expected to attract more investment from industry players to carry out green and low-carbon activities.

Growth, Reforms and Green Opportunities Await

The economic outlook for this year is marked by expectations of continued robust growth, stable inflation and the implementation of structural reforms aimed at boosting incomes.

Williams Business Consultancy Sdn Bhd director Dr Geoffrey Williams said that domestic demand will remain the cornerstone of the economy, providing a solid foundation for expansion.

However, there is also hope for an improvement in trade and FDI, which could further bolster economic prospects.

He also pointed out that the current economy is in good shape, with strong economic growth, inflation at normal levels and low unemployment.

Williams said the central bank is likely to maintain the Overnight Policy Rate (OPR) at 3%, and that fiscal policy remains stable in line with fiscal responsibility guidelines.

“Next year, we should see the rollout of subsidy rationalisation for RON95 and the progressive wage. There was a rebound in the trade surplus, and hopefully, this can be sustained as global growth and trade improve,” he told TMR.

Commenting on sustainability, Williams pointed out that the sectors which will benefit most from the government’s push towards green technology and carbon neutrality would be the clean energy generation and rare earth industries.

Malaysia’s economic shift towards sustainability and green technology offers certain advantages, particularly in RE, with green electricity exports to Singapore already underway.

He said that Malaysia’s investment in green energy could potentially bear fruit by this year, through growth in income, as “clean energy investment can provide a good source of export revenue” for the country.

“The abundance of rare earth metals will be a useful long-term resource for Malaysia to meet international demand from green industries, especially in EV batteries,” he said.

Williams also believes that investment in sustainable agriculture could yield significant economic benefits by 2025.

“Sustainable agriculture should focus on providing food security for domestic consumers to reduce dependence on international sources,” he added.

In the face of rapid industrialisation and urbanisation, he cautioned the government to strike a balance between economic development and environmental conservation.

“Economic development in Malaysia can benefit from the demand from green industries overseas. The balance to be struck is between the opportunities of the green economy and the benefits to economic growth and rising incomes for Malaysians.

“Environmental conservation has to be a priority, but this requires moderate regulation and enforcement that does not compromise economic benefits.”

Regarding foreign investment, the primary attraction will be access to clean energy and water for data centres.

Beyond this, green initiatives are not expected to have a significant effect on FDI in Malaysia by 2025.

Moreover, Williams believes that green technology will have a minimal impact on Malaysia’s economic diversification efforts by this year.

The country will continue to rely on traditional sectors such as oil and gas, palm oil, electrical and electronics, and services.

Govt Initiatives Support RE Industry

Meanwhile, MK Land Holdings Bhd RE head Kamarulzaman Abu Bakar said the government’s increased emphasis on sustainability and RE targets has positively impacted the company’s operations and investments, particularly through policies that promote green technology and initiatives such as the Corporate Green Power Programme (CGPP), Large-Scale Solar 5 (LSS5) and the Corporate Renewable Energy Supply Scheme.

These initiatives have enabled the company to expand its RE portfolio.

“These shifts have also encouraged the establishment of a dedicated RE division within MK Land, underscoring our commitment to long-term involvement in the sector,” he told TMR.

He added that the company plays a significant role in supporting the country’s RE transition, aligning with national aspirations to achieve 31% RE usage by 2025 and 70% by 2050.

The company has several RE projects at various stages, including a 10.95 MW solar farm at Lembah Beriah, Kerian, Perak, which was completed in May 2023. The farm supplies green energy to TNB under a 25-year PPA.

The company is currently developing a 30 MW solar farm in Kulim, Kedah, under CGPP, in partnership with Total Energies Renewables SAS. This project aims to provide clean energy to corporate consumers.

Looking ahead, the company is also participating in the LSS5 scheme with a proposed 94 MW project, pending approval from the Energy Commission, which is expected to issue a decision in the first quarter of 2025.

“In addition to solar energy, we are exploring opportunities in other RE areas such as biomass, mini-hydro and floating solar systems, aligning with Malaysia’s sustainability goals and global net-zero carbon targets by 2050,” he added.

On the outlook, Kamarulzaman believes that the RE and green tech sectors are poised for significant growth, driven by global net-zero carbon targets by 2050, government incentives and green funding opportunities from financial institutions.

In anticipation of 2025, the company is confident in its preparedness for this evolution, supported by its dedicated RE division, its track record of completed and ongoing solar farm projects, as well as its RE diversification plans.

“Our focus remains on leveraging both local and international partnerships to drive innovation and long-term sustainability in the RE sector.”

However, Kamarulzaman said the company faces key barriers in scaling up its RE initiatives, primarily due to high capital costs and changing regulations.

“The substantial upfront investment required for solar farm development remains a significant challenge.

“(Regarding) regulatory compliance, adapting to evolving regulations and obtaining necessary approvals can be challenging,” he said.

In his view, to accelerate the adoption of RE and green tech in Malaysia by 2025, the government could provide additional policy or regulatory support, such as offering more MW capacity allocations to RE players, thereby expediting the achievement of national targets.

He also suggested that the government create opportunities for more companies to participate in RE projects, fostering a competitive and innovative market landscape.

“The government could provide financial incentives and subsidies to offset high initial capital costs. These measures, combined with clear and streamlined regulatory processes, will support Malaysia’s transition to a sustainable energy future.”

At the same time, he expressed that strategic partnerships, both local and international, are essential in driving the adoption of green tech in the country.

Kamarulzaman emphasised the crucial role of local partners, highlighting their in-depth understanding of local regulatory requirements and processes, which significantly accelerates project approvals and implementation.

On the other hand, international partners, equipped with expertise and experience in green technology, provide valuable insights that local players can adopt and emulate for effective project execution.

For example, he shared its partnership with Total Energies Renewables for the 30 MW CGPP solar farm demonstrates the benefits of combining local insights with global expertise.

Source: The Malaysian Reserve

Economic growth to be sustained in 2025 with focus on green sector

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79% of Malaysian professionals anticipate role changes due to AI

Malaysia is set to experience robust economic growth in 2025, driven by advancements in its digital economy, manufacturing and construction sectors.

According to Randstad Malaysia’s 2025 Job Market Outlook, 59% of employers plan to expand their teams while 41% expect the most hiring activity in technology-related roles.

The rapidly advancing technologies of automation and artificial intelligence (AI) are transforming economies and job markets globally, with Malaysia being no exception.

Randstad Malaysia country director Fahad Naeem noted that as Malaysia’s businesses continue to grow, the demand for talent with specialised skills is on the rise.

“We are seeing a significant need for skilled professionals proficient in technologies such as AI, data analytics, and digital infrastructure.”

He added that digital integration is occurring across corporate sectors, including legal, human resources, shared services, marketing and accounting.

This creates opportunities but also raises hiring expectations, particularly in digital literacy and commercial acumen.

With opportunities and challenges ahead, the country has been proactive in developing policies, fostering collaborations and initiating programmes to ensure its workforce remains competitive in an AI-driven future.

Navigating Workforce Transformation, Policy Development

Malaysia’s workforce is adapting to the growing impact of automation and AI, albeit gradually.

JobStreet by Seek Malaysia acting MD Nicholas Lam shared that Malaysia’s workforce is progressively embracing automation and AI, with significant progress observed in tech-savvy industries.

“The Decoding Global Talent Report 2024 reveals that 79% of Malaysian professionals anticipate role changes due to AI, highlighting their openness to embracing technological advancements,” he said.

To navigate these transformations, the Malaysian Employers Federation (MEF) has been hard at work helping employers.

Its president Datuk Dr Syed Hussain Syed Husman said MEF connects employers and policy-makers, ensuring the regulatory environment supports innovation and protects employers’ interests.

MEF also advocates for policies that facilitate the adoption of automation and AI and enable employers to leverage government incentives for new technology adoption.

These efforts, according to Syed Hussain, are essential in helping businesses remain competitive while aligning with global advancements in technology.

The federal government has implemented several initiatives aimed at upskilling and reskilling the workforce.

Programmes such as the Malaysia Digital Economy Blueprint, MyDigital and the National AI Roadmap 2021-2025 reflect its commitment to preparing the workforce for a digital economy.

WORQ CEO Stephanie Ping mentioned that programmes like the Employment Insurance System and Future Workforce Training Scheme have been introduced to address the challenges posed by automation and AI.

Despite these efforts, there is room for improvement. Lam said policies may be enhanced by offering tax incentives for companies investing in AI training and development, subsidising reskilling programmes for mid-career workers and ensuring equitable access to digital infrastructure in under-served regions.

Subsidising reskilling programs for mid-career workers and ensuring equitable access to digital infrastructure are additional measures that could strengthen the workforce’s readiness.

Such enhancements would not only foster technological adoption but also create a level playing field for businesses of all sizes, enabling smaller companies to access resources necessary for growth.

Challenges, Collaboration Across Sectors

Implementing lifelong learning and training initiatives poses several challenges.

Employers face high financial commitments, tight schedules and employee resistance to upskilling programmes.

Syed Hussain described that micro, small and medium enterprises may lack resources, both financial and human, to develop and implement training programmes.

“Implementing lifelong learning and training initiatives for employees requires high financial commitments and can be a major constraint.

“Employers must balance these costs with other business priorities,” he said.

The government and private sector must work collaboratively to address these barriers and provide flexible learning opportunities.

Ping noted that nearly 300,000 workers have been displaced since 2020 due to automation.

She explained that as of September 2024, the hardest-hit sectors included manufacturing, with 75,615 layoffs, followed by wholesale and retail trade (43,614), professional and scientific services (23,907), as well as information and communication technology (19,931).

Specialised retraining programmes tailored to industry needs could help workers transition seamlessly into emerging roles.

For instance, reskilling workers in manufacturing to operate automated systems can bridge the gap between job displacement and new opportunities.

Collaboration between public and private sectors is essential for workforce transformation.

“These collaborations bridge gaps between talent supply and demand, ensuring workers are equipped with skills that match evolving job market requirements,” said Ping.

Moreover, such partnerships ensure that skills development initiatives are industry-relevant and address real-time workforce needs.

WORQ itself plays an active role in fostering these partnerships. Ping said WORQ’s vibrant community facilitates networking and partnership opportunities.

By connecting government agencies, educational institutions and private sector players, coworking spaces like WORQ allow cohesive and practical workforce development efforts.

These spaces also provide a unique platform for businesses and policymakers to align their goals and co-create strategies supporting workforce readiness for future challenges.

According to Lam, programmes like Microsoft’s AIForMYFuture, which aims to equip 800,000 Malaysians with AI skills by 2025, show the potential of such partnerships.

He said to enhance these collaborations, focus should be placed on scalability to include underserved communities, customisation for industry-specific needs and sustainability through continuous education frameworks.

“Such partnerships can foster local innovation, create jobs, and support Malaysia’s economic growth.”

Education, Lifelong Learning, Industry Alignment

Aligning education systems with the demands of automation and AI is a national priority.

MEF has lauded the establishment of AI faculties in public universities.

Syed Hussain said establishing AI faculties in universities aligns academic offerings with the evolving demands of modern workplaces, particularly in sectors increasingly reliant on AI technologies.

He added that by integrating AI-focused education that emphasises theoretical and practical applications, graduates can enter the workforce with a robust set of skills tailored to contribute effectively to fields like machine learning, data analysis and automation processes.

He said this not only enhances employability but also drives innovation and competitiveness within industries seeking to leverage AI technologies.

Platforms like JobStreet’s Career Hub have also been instrumental in issuing over 3,300 certifications and logging 145,000 minutes of consumed learning content.

These tools provide accessible opportunities for workers to remain competitive.

Additionally, industry-driven training initiatives, such as targeted workshops on data analytics or cybersecurity, can complement formal education and address specific skill gaps.

The impact of automation varies across industries, and in manufacturing, it streamlines processes such as assembly, quality control and inventory management.

“Industries are investing in advanced robotics and predictive maintenance technologies, ensuring their workforce remains competitive,” shared Syed Hussain.

Similarly, retail trade has been transformed through stock management and self-checkout systems.

The healthcare sector has seen advancements in diagnostics and surgeries, while financial services rely heavily on data analysis and fraud detection.

Plantation and agriculture industries benefit from technologies like drones, while hospitality focuses on personalised guest engagement.

By adapting to these changes, businesses are not only improving productivity but also ensuring that workers remain integral to operations despite technological advancements.

Empowering SMEs, Balancing Progress

Small and medium-sized enterprises (SMEs) require targeted support to adopt AI and automation.

Syed Hussain recommended that governments provide grants and subsidies to SMEs for AI adoption and worker training.

He said public-private partnerships and reskilling programmes can further enhance their capabilities.

By combining the above, SMEs will be in a better position to embrace AI and automation while at the same time transforming employees to be more resilient and skilled.

Providing access to affordable digital tools and creating knowledge-sharing platforms can further support SMEs in this transition.

To address fears of job displacement, employers must adopt proactive strategies.

“Employers should communicate their automation plans, reiterating how new technologies may complement human roles rather than displacing them,” Syed Hussain added.

Workforce transformation requires reskilling, job redesign and clear career pathways, while employee engagement builds trust in technology.

Meanwhile, success could be measured through metrics like unemployment rates, retention and career progression.

By integrating advanced technologies with human-centric design, Malaysia can drive economic growth and create better jobs, ensuring automation complements the workforce.

Lam said in the next five to 10 years, critical skills in demand may include data analytics, machine learning, cyber security and AI.

“Beyond technical expertise, human-centric skills like creative problem-solving, leadership and emotional intelligence may also gain prominence as they complement technological advancements.”

To embrace this transition, individuals should proactively pursue learning opportunities through online courses and certifications.

Employers, in turn, can foster a culture of continuous education and innovation, empowering their workforce to thrive in the evolving landscape.

Source: The Malaysian Reserve

Preparing Malaysia workforce for an AI-driven 2025

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David Black, CEO and Founder of Blackbox Research

SOUTHEAST Asia’s digital economy is at an inflection point, with e-commerce driving rapid digital adoption and reshaping consumer habits at an unprecedented pace.

Today, Malaysia sits at the heart of this transformation, uniquely positioned to harness the e-commerce boom sweeping across the region. Yet, to fully capitalise on its potential and not lose ground to its neighbours, Malaysia must confront key challenges, including its logistics infrastructure.

As part of Blackbox Research’s continued commitment to decoding the region’s economic dynamics, I am pleased to introduce our latest whitepaper Grasping the E-Commerce Opportunity in Southeast Asia.

This study zeroes in on Malaysia, not only for its central role in Southeast Asia but also for its untapped potential to become a regional e-commerce powerhouse.

Through 30 hours of in-depth interviews with 17 expert voices within the e-commerce and logistics sector, we explored the critical opportunities and barriers shaping Malaysia’s e-commerce landscape.

Malaysia’s strategic location, strong courier networks, and growing digital consumer base provide a solid foundation for e-commerce success. However, logistical inefficiencies leading to service inconsistencies and increasing delivery costs are major challenges that could hinder the nation’s e-commerce growth.

Malaysia’s strategic position in Southeast Asia’s e-commerce landscape

Malaysia has steadily emerged as a key player in Southeast Asia’s digital economy, ranking second in regional e-commerce performance – narrowly edging ahead of Indonesia and Thailand – according to the perceptions of the experts surveyed in our study. With high mobile penetration and a digitally savvy population, Malaysia is poised to cement its role as a vital hub for the region.

Despite these advantages, Singapore leads the pack, with 59% of experts ranking it first for its advanced infrastructure and strong government backing. Malaysia must close the innovation and logistics gaps to compete at this level.

Strategic initiatives such as the National eCommerce Strategic Roadmap and the Digital Free Trade Zones are already in place to catalyse this growth. But further effort and solutions will be needed including fostering inclusive and consistent dialogues with policies shaped by input from all stakeholders – including e-commerce platforms, sellers, and logistics providers alike.

The logistics sector: A backbone in need of strengthening

Logistics is the critical lifeline of any e-commerce ecosystem, and in Malaysia, it has become a double-edged sword. High logistical costs, especially for shipping between Peninsular and East Malaysia, are major bottlenecks that stifle business growth: only 6 of 17 experts in our study considered Malaysia’s logistics infrastructure as supportive of sector development.

For those who feel the system is hindering progress, the accumulation of costs borne by sellers such as rising logistics expenses, import costs, and taxes, combined with currency fluctuations, is making it increasingly challenging for them to remain cost competitive.

Advanced logistics technologies such as AI-powered route optimisation and real-time tracking, hold the promise of unlocking greater efficiencies. Experts in our study emphasised the need to prioritise the establishment of regional e-fulfillment centres to tackle last-mile delivery challenges and streamline logistics nationwide, a move that could greatly enhance Malaysia’s regional competitiveness.

However, the bare truth remains that rising base costs of logistics pose a serious threat for sellers, creating a ripple effect that erodes already slim profit margins and places smaller players in an increasingly precarious position.

For some, this escalating financial pressure could spell the difference between survival and being forced out of the market, particularly for those already struggling to compete in an intensely competitive landscape.

As businesses grapple with rising operating expenses and consumers face inflated prices, Malaysia risks losing its competitive edge. This underscores an urgent need for targeted measures to reduce delivery costs and bridge the gaps between Peninsular and East Malaysia, as well as underserved areas.

The role of public-private collaboration in driving growth

Insights from the study’s experts highlighted that aligning public and private efforts is key to positioning Malaysia as a competitive e-commerce and logistics hub in Southeast Asia, unlocking new opportunities and shared prosperity for the sector.

This is especially evident as leading e-commerce nations thrive on a symbiotic relationship between public and private sectors.

For Malaysia to achieve a similar transformation, collaboration among e-commerce platforms, third-party logistics providers, and government bodies will be essential to addressing last-mile delivery inefficiencies and cross-border shipping complexities.

Our whitepaper highlights the importance of targeted infrastructure investment in rural regions: our study found that delivery costs could be reduced by up to 60% with the establishment of fulfillment hubs.

These improvements, coupled with ongoing digitalisation initiatives and leveraging established e-commerce trends like social selling and customer-centric services such as same day delivery – practices that are common in neighbouring countries – will position Malaysia’s e-commerce sector to thrive on a global scale.

A call to action for Malaysia’s e-commerce future

Malaysia’s e-commerce story is one of great promise, but the next chapter depends on decisive action. Gross Merchandise Value in Malaysia is expected to double by 2030, but this forecast growth rate lags some of its Southeast Asian neighbours.

It can be said that the stakes have never been higher. The findings in our whitepaper illuminate the path forward: invest in logistics innovation, foster inclusive public-private dialogue, regulate with dexterity and creativity, and build infrastructure that supports both urban and rural markets.

As always, Blackbox Research is glad to contribute to this critical discussion. By addressing logistical inefficiencies head-on, Malaysia has the potential to secure its position as a regional leader, delivering prosperity to businesses and consumers alike.

I invite policymakers, industry leaders, and stakeholders to join this journey of transformation, ensuring that Malaysia realises its e-commerce potential.

Source: The Sun

Unlocking Malaysia’s e-commerce growth: The role of logistics

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Young, dynamic and fast, the region has unique advantages, supported by investment in infrastructure, talent, policy and collaboration.

IN the global race for artificial intelligence development, Southeast Asia is emerging as an unexpected contender. Traditionally, discussions around AI innovation have focused on the United States and China, but South-east Asia’s unique combination of adaptability, dynamism and strategic investments is positioning it as a critical player in shaping the AI landscape.

Characterised by targeted investments in infrastructure, localised innovation and government-backed strategies to foster growth, the region is narrowing the gap by establishing Ai-ready data centres, creating tailored language models and encouraging cross-sector collaboration. Its focus on addressing real-world challenges also makes it a player to watch.

The region is one of the world’s most economically significant, and its young and burgeoning middle class of 200 million people is the driving force behind its rapid digital transformation. Last year, Southeast Asia’s digital economy achieved Us$11bil (Rm49.4bil) in profits, up from Us$4bil just two years before. By 2050, Indonesia is projected to become the world’s fourth-largest economy, while Malaysia and Thailand are expected to have economies exceeding US$1 trillion (RM4.5 trillion) each.

Substantial investments in digital infrastructure underpin this growth. In the first half of last year alone, over Us$30bil (Rm134.6bil) of investments were committed to building Ai-ready data centres in Singapore, Malaysia and Thailand.

These efforts are creating advanced computing capabilities and positioning the region as a global leader in Ai-driven innovation. Fuelled by a digitally adept population, countries and businesses are seeking AI solutions to address societal and industrial challenges.

South-east Asia is carving a unique niche in AI by focusing on both practical applications and collaborative innovation across industries such as logistics, healthcare and education. AI start-ups in the region are working on solutions that can enhance operational efficiency and safety compliance.

One such example is Seewise, an Ai-powered factory monitoring tool that uses computer vision and machine learning to improve productivity and quality in real-time. Similarly, Heyhi, an educational technology pioneer, combines AI and data to deliver personalised learning experiences while automating grading and reporting tasks for educators.

These innovations are not just transforming local markets but also gaining traction globally, with the region being recognised for its ability to move quickly.

A report by Singapore-owned investment company Temasek Holdings, Google and global consultancy Bain & Company found that businesses in South-east Asia can transition from idea to full-scale production in under six months, with 70% of organisations achieving a return on investment within a year of implementation.

This efficiency is not unique to the region. What sets South-east Asia apart is its focus on partnerships between regions and industries, which are key for start-ups. For instance, the Asean committee on science, technology and innovation has an AI cooperation framework to develop and collaborate on AI across the members of Asean.

Private-sector efforts, such as Nvidia’s partnership with the Vietnamese government to establish an AI research and development centre, reinforce these trends and help translate AI research into high-impact solutions.

Strategic initiatives from governments and private-sector stakeholders are fostering innovation through robust governance frameworks and talent development programmes. Asean’s AI governance guide, for example, advocates a coordinated approach to regulatory challenges, while programmes aimed at upskilling talent are laying the foundation for sustainable growth.

Governments are implementing frameworks for responsible AI. For instance, Singapore’s model AI governance framework promotes ethical AI practices, while initiatives like AI Trailblazers, led by Google Cloud and government body Digital Industry Singapore, empower organisations to develop and deploy real-world AI solutions rapidly. This balance between innovation and accountability is enabling South-east Asia to scale up AI solutions effectively, meeting both local needs and global expectations.

Despite its potential, however, South-east Asia still faces several challenges, with talent shortages a significant hurdle. Globally, up to 70% of data, security and development roles are estimated to be going unfilled. This gap is compounded by the region’s demand for both technical expertise in building AI systems and the domain-specific knowledge needed to implement them effectively.

Infrastructural disparities present another obstacle. While Singapore leads with its advanced data centres and frameworks like the national AI strategy, there is uneven digital development and inconsistent regulatory capacities across the rest of the region. Malaysia, Indonesia and Thailand, for instance, is in the bottom half of the AI preparedness rankings compiled by US software company Salesforce on 12 countries across the Asia-pacific – which Singapore tops.

The challenges some nations face in catching up include high adoption costs, particularly for small and medium-sized enterprises, and limited access to localised AI solutions, which are vital in a region with over 1,000 languages and many diverse cultures.

Efforts to address these issues include Ai-driven platforms designed to optimise supply chains and improve productivity in manufacturing and healthcare.

Cross-border hiring is also an emerging strategy, with countries like Indonesia and Vietnam supplying skilled professionals to meet growing demand.

At the same time, localised AI models are being developed to address linguistic and cultural barriers. Sony Research, for instance, has a partnership with AI Singapore to create a Southeast Asian family of large language models.

As AI adoption becomes mainstream, South-east Asia’s potential in the AI race is undeniable. Realising this potential, however, will require sustained investment in infrastructure, talent and policy support.

Collaboration, both within the region and with global partners, will remain critical. By embracing its unique strengths and addressing its challenges head on, South-east Asia is poised to not only catch up with established AI powerhouses but also set a new standard for innovation, regulation and impact.

Source: The Star/ South China Morning Post

Next AI powerhouse: SE-Asia

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■ Malaysia is a strong contender in South-east Asia’s data centre boom

■ Allocation of resources by big tech is still mainly concentrated in Malaysia in terms of value

■ Sectors that could give further upside are construction, property, utitlities, technology and telecommunications

AS Malaysia steps into 2025, the country’s data centre industry is buzzing with activity, spurred by a convergence of artificial intelligence (AI) adoption, robust investments from hyperscalers, and strategic policy frameworks.

Yet, the nation’s position as a prime data centre hub faces mounting challenges from regional players like Thailand and Vietnam, eager to carve their share of the lucrative market.

Despite the increasing competition, Malaysia’s unique proximity to Singapore and its strategic investments in infrastructure continue to position it as a strong contender in South-east Asia’s data centre boom.

Kenanga Research in its recent report notes that Singapore remains the leader in the region’s data centre landscape, boasting over 1.4 gigawatts (GW) of capacity and housing more than 70 facilities.

Global tech giants like Google have committed billions to the island nation, further cementing its status as a hyperscaler hub. However, with limited land and strict sustainability policies, Singapore’s expansion is constrained, creating opportunities for its neighbours.

“Singapore has earmarked 300 megawatts (MW) of additional capacity for data centres that could be brought onstream, with another 200MW reserved for green data centres,” states Kenanga Research, adding that the spillover effect to Malaysia is expected to persist, as companies seek to capitalise on Malaysia’s strategic location, competitive costs and growing infrastructure to meet hyperscale demands.

Malaysia has emerged as a key destination for data centre investments. Notable projects, such as Princeton Digital Group’s (PDG) 52MW green data centre campus in Johor, underscore the country’s appeal. PDG highlights that “hyperscalers make up 80% of its business,” reflecting the demand from major players leveraging Malaysia’s favourable conditions.

Between 2021 and 2023, Malaysia approved an impressive Rm114.7bil in data centre investments. This positions the country as a go-to alternative for hyperscalers seeking scalability without compromising latency-sensitive operations.

New contenders

While Malaysia holds the upper hand, Thailand and Vietnam are not sitting idle.

In Thailand, investments from Oracle, Amazon Web Services, and Microsoft signal a growing appetite for data centre infrastructure.

The Thai Board of Investment reports 38 data centre and cloud service projects valued at 98.5 billion baht, alongside progressive policies like a direct power purchase pilot project and reforms on wheeling charges.

Vietnam is making inroads with regulatory changes, such as lifting foreign ownership restrictions for data centre investors. Nvidia’s recent agreement to establish an AI research and development centre further cements Vietnam’s ambitions.

“All said, at the moment, it appears clear that the existing allocation of resources by big tech is still mainly concentrated in Malaysia in terms of value,” says Kenanga Research, suggesting that the momentum remains in Malaysia’s favour for now.

Beneficiaries

Meanwhile, the data centre boom has spillover benefits for various sectors in Malaysia, from construction and utilities to technology and telecommunications.

Kenanga Research points out that the adoption of AI, particularly generative AI, fuels this demand, with companies racing to establish training and inferencing capabilities. Malaysia’s unveiling of its local large language model, ILMU0.1, and the establishment of a national AI office underscore the country’s commitment to leading AI development in the region.

In terms of sustainability, Malaysia’s regulations encourage innovative practices without being overly restrictive. For example, data centres are now required to avoid areas with a water stress index above 0.8.

This aligns with global trends while ensuring resources are managed responsibly. Green energy initiatives, such as the corporate renewable energy supply scheme, are also gaining traction.

The recent agreement between Bridge Data Centres and Tenaga Nasional Bhd (TNB) to secure long-term renewable energy supply illustrates the growing synergy between the data centre industry and solar energy players.

Kenanga Research notes that Malaysia’s contractors are rising to the challenge of delivering data centres under increasingly stringent requirements. It highlights that Gamuda Bhd, for instance, has started offering “innovative bundled solutions” that integrate water infrastructure and power connectivity into their pitches for data centre projects.

This holistic approach not only addresses sustainability concerns but also enhances the appeal of Malaysia as a destination for data centre investments, it argues.

The brokerage projects that in aggregate, the sectors that could give further upside would be construction, property, utitlities, technology and telecommunications, in that order.

Kenanga Research estimates a potential market of Rm20bil for construction companies involved in data centre projects, based on an assumption of 700MW annual rollout.

Construction players like Gamuda, Sunway Construction Group Bhd, and IJM Corp Bhd could see significant upside, securing up to 50% market share, it adds.

In the property sector, developers like Sime Darby Property Bhd are capitalising on the build-and-lease model, offering steady returns and recurring income. In addition, landowners can monetise their holdings by partnering with data centre operators, with demand for land projected to rise.

Utility companies like YTL Power International Bhd, on the other hand, are poised to benefit from increased energy demand. For TNB, meanwhile, it is estimated that every 0.5 basis point increase in energy demand would improve the counter’s target price by RM1.30.

In the technology sector, Kenanga Research says that firms specialising in data centre equipment, such as switches and servers, stand to gain.

Nationgate Holdings Bhd and PIE Industrial Bhd, for example, are projected to benefit from the fit-out phase of data centres, with contributions to forecast earnings exceeding 30%.

In the telecommunications industry, Telekom Malaysia Bhd remains a key player, leveraging its extensive submarine cable network to support data centre operations.

Under banking, Kenanga Research notes that green financing opportunities are also emerging, with banks like Malayan Banking Bhd and CIMB Group Holdings Bhd actively involved in data centre deals. These green loans align with the broader sustainability goals of the industry.

Overall, with a robust ecosystem in place and strong support from both the government and private sectors, Malaysia’s data centre industry looks set to maintain its lead in SouthEast Asia.

Source: The Star

Riding the data centre wave

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VS Industry Bhd is optimistic about its prospects for the financial year ending July 31, 2025 (FY25), buoyed by a healthy demand outlook and significant capital expenditure (capex) plans.

The electronics manufacturing services (EMS) provider has earmarked Rm150mil for capex, with the bulk allocated to its new facility in the Philippines, acquisition of a new factory in Indonesia, and maintenance for its Malaysia operations.

Managing director Datuk Gan Sem Yam said the group’s positive outlook is supported by sustained order growth, upcoming product launches, and the group’s regional expansion efforts.

“We are upbeat on our prospects as we move into FY25. This is underpinned by the healthy demand outlook from our existing customers and our new manufacturing facility in the Philippines,” Gan said in a statement.

He said the group had secured new orders worth an aggregate Rm1.5bil over the next two years, adding that production at the new Philippine facility is set to begin in the coming months.

“The establishment of the new facility in the Philippines is progressing well with production of two secured models to commence thereafter. Renovation of our new plant is at its tail end, and we target to start production in the coming months,” he noted.

He said the group’s capex strategy reflects its commitment to scaling operations.

“These investments enable us to strengthen our foundation as we advance towards new horizons for the group,” Gan added.

For FY24, VS Industry declared a total dividend of 2.2 sen per share, amounting to a payout of Rm84.8mil, representing a payout ratio of 43.4%, exceeding its 40% dividend policy.

Meanwhile, for the first quarter ended Oct 31, 2024 (1Q25), VS Industry’s bottom line dropped by about 37.5% to Rm30.6mil from Rm49mil in 1Q24, impacted by inventory destocking from a key customer and unfavourable foreign exchange fluctuations.

Despite a slow start to the financial year, UOB Kay Hian (UOBKH) Research expects VS

These investments enable us to strengthen our foundation as we advance towards new horizons for the group. Datuk Gan Sem Yam

Industry to see sequentially stronger quarters in FY25.

“These challenges are largely one-off. Looking ahead, a stronger US dollar, seasonal tailwinds, alongside pipelines of new product launches by key customers, would position VS Industry for a stronger recovery in 2H25 and explosive growth prospects in FY26,” it noted.

UOBKH Research viewed VS Industry’s expansion into the Philippines as a significant step toward strengthening its regional presence and boosting growth prospects.

The research house said the group’s wholly owned subsidiary, VS Industry Philippines (VSIP), had entered into a lease agreement for a 570,000 sq ft factory at the Light Industry and Science Park III in Batangas, the Philippines.

“The group has also secured new orders from its key customer to manufacture selected consumer electronics products on a box-build assembly basis, with expected recurring revenue contribution of Rm300mil for FY25 and Rm1.2bil for FY26, which we believe will entail two lines of products,” it said.

UOBKH Research noted the facility’s full utilisation could generate up to Rm2bil in revenue annually.

“While we are cognisant of the execution risk considering the different market landscapes, we are net positive to the announcement,” the research house noted.

It cited several factors contributing to the positive outlook, including stronger order visibility and VS Industry’s vast experience in supporting its key customers’ sub-operations.

Favourable export tariffs from the Philippines to the United States, opportunities to boost margins by offering new services, and the chance to secure more jobs across multiple sites were highlighted as benefits.

“More so, the adoption of an asset light model could lead to a lower breakeven point for margin accretion,” it added.

UOBKH Research maintained its “buy” call on VS Industry, raising its target price to RM1.50 per share from RM1.35 previously.

“Despite a 17% recovery in its share price since mid-november 2024, VS Industry remains attractively valued at 17.1 times its 2025 price-to-earnings ratio, slightly below its five-year mean, offering a compelling entry point,” the research house said.

The stock closed one sen higher yesterday at RM1.17, marking a year-to-date gain of 3.5%.

VS Industry provides vertically integrated manufacturing solutions, serving as both an original equipment manufacturer and an original design manufacturer, catering to multinational corporations globally.

Its capabilities include high-precision printed circuit board assembly, plastic injection moulding, and tool design and fabrication.

Source: The Star

VS Industry eyes Rm150mil capex

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Malaysia recorded a trade value of RM2.62 trillion from January to November 2024, an 8.7 per cent year-on-year (y-o-y) increase, said Minister of Investment, Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz.

In a Facebook post on Malaysia’s achievements for 2024, Tengku Zafrul highlighted that 50 per cent of the initiatives under the New Industrial Master Plan 2030 (NIMP 2030) have been or are in the process of being implemented since its launch in 2023.

“This includes the National Semiconductor Strategy (NSS) and Green Investment Strategy (GIS),“ he said.

He also noted that approved investments reached RM254.7 billion in the first nine months of 2024, marking a 10.7 per cent y-o-y growth.

“Nearly 160,000 new jobs will be created from almost 4,800 approved projects, representing a y-o-y increase of 76 per cent in job creation and 21 per cent in project approvals,“ he added.

As Malaysia takes on the ASEAN Chairmanship this year, Tengku Zafrul emphasised the Ministry of Investment, Trade and Industry’s (MITI) critical role in driving economic leadership for the region, fully realising the regional bloc’s economic potential.

This aligns with the chosen theme of Inclusivity and Sustainability.

“If we stay truly focused, I am confident the positive impact on the region will extend beyond Malaysia’s ASEAN Chairmanship,“ he said.

Source: Bernama

Malaysia records RM2.62 trillion in trade value for Jan-Nov 2024 – Tengku Zafrul

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Malaysia’s renewable energy sector is gearing up for strong growth ahead in 2025, buoyed by key initiatives under the National Energy Transition Roadmap (NETR), said Apex Securities.

In a research note on Thursday, among the key initiatives are the 800MW Corporate Green Power Programme (CGPP) and the 2GW Large-Scale Solar 5 (LSS5), which are anticipated to unlock RM7.2 billion worth of engineering, procurement, construction, and commissioning (EPCC) projects.

“These developments will enhance order book replenishment opportunities for RE players, ensuring robust earnings visibility for the sector in 2025,” the house added.

Looking ahead, analysts foresee battery energy storage systems (BESS) emerging as a crucial component for the RE sector’s evolution, especially in achieving the nation’s target of a 70% renewable energy share by 2050, through addressing the intermittency challenges associated with renewable energy sources.

According to Bloomberg, Chinese solar companies are grappling with an oversupply, which has driven solar prices to a historic low of US$0.9 per watt, marking an 18% decline in 2024.

While this overcapacity prompted the Chinese government to introduce measures aiming to alleviate oversupply in the medium term, Apex Securities suggests that the short-term impact on local RE EPCC players will be minimal unless stricter policy controls are implemented.

“In the absence of such measures, RE EPCC are likely to benefit from continued access to cheaper modules, supporting solar adoption,” the house added.

Apex Securities, which kept an ‘overweight’ stance on the sector, cited top picks with a ‘buy’ call, including Pekat Group Bhd and Solarvest Holdings Bhd, driven by the growing data centre market and the robust pipeline of renewable energy projects.

Source: The Edge Malaysia

Renewable energy sector braces for strong growth in 2025 — Apex Securities

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As artificial intelligence (AI) and generative AI gain mainstream traction, there is growing enthusiasm about establishing data centres worldwide to store and process the data fuelling these technologies. In 2023, the global data centre market was valued at US$219 billion, and is projected to grow to US$585 billion by 2032. This represents a 2.7-fold increase, with a compound annual growth rate of 12%, making data centres a significant economic catalyst.

Between 2021 and 2023, Malaysia attracted RM115 billion (US$27 billion, based on an exchange rate of 4.32) in investments from prominent stakeholders to establish data centres in the country. These investments are expected to create 2,325 new high-value jobs (for example, data scientists, cybersecurity analysts and network engineers). Once all committed data centres are fully operational, their combined capacity is expected to reach 3,200mw.

However, as the saying goes, “there’s no free lunch”. Let’s delve into what Malaysia needs to trade for these investments and the anticipated high-value jobs.

Our valuable land

Land is an essential resource for building data centres. For example, Yondr Group’s 300mw hyperscale data centre campus will be established in Sedenak Tech Park, a 745-acre site. Similarly, GDS Holdings Ltd’s hyperscale data centre campus and Equinix’s IBX JH1 will be set up in Nusajaya Tech Park, covering 509 acres of land in total. Additionally, the YTL-Nvidia collaboration to develop AI infrastructure will be located in the YTL Green Data Centre Campus, with 275 acres of the total 1,640-acre land designated for data centre development.

If all the data centres in Malaysia were to operate as green data centres powered by renewable energy (for example, solar power), even more land would be required for solar panel farms to supply this energy. For example, at the YTL Green Data Centre Campus, only about 17% of its 1,640-acre site is allocated for data centres, while the remaining 83% (about 1,361 acres) is likely to be designated for the solar panel farm. According to Hisham Mustaffa, a former chief engineer at Tenaga Nasional Bhd, generating 1mw of solar energy requires roughly 10 acres of land (see ESG, The Edge, Issue 1532, July 15, 2024). Therefore, the 1,361 acres of YTL Green Data Centre Campus may be insufficient to support a 500mw solar panel farm.

Assuming all the committed data centres currently under construction in Malaysia — aggregating 3,200mw — were powered by solar energy, about 32,000 acres would be needed for solar farms. For perspective, 32,000 acres is equivalent to 11% of Kuala Lumpur’s total land area.

Our precious water

Both data centres and solar panel farms require substantial water resources for their operations. In this part of the world, air cooling is not feasible, making water cooling the go-to solution for managing server heat.

According to datacentrereview.com, a 500mw data centre consumes around 13 billion litres (or 13 million cu m) of water annually for cooling. Extrapolating from this, data centres with a combined capacity of 3,200mw (that is, assuming all adopt water cooling) would require roughly 83 million cu m of water each year.

Although solar panels do not need water to generate electricity, they require periodic cleaning to maintain efficiency. According to estimates from the 550mw Desert Sunlight Project, each panel requires around 2.5 litres of water per cleaning cycle, with two cleanings needed per year. While the water demand for solar panel farms is considerably lower than data centres, it still adds up.

For perspective, it needs around 10,000 solar panels to produce 1mw of electricity. A 500mw solar farm, therefore, consists of five million solar panels. For a total capacity of 3,200mw, this translates into 32 million panels. These 32 million panels would require about 0.16 million cu m of water annually for cleaning.

While Malaysia benefits from an annual rainfall averaging 3,000mm that provides about 900 million cu m of water, however, this resource is not evenly distributed, with some states experiencing droughts and water shortages. Hence, the water requirements for data centres and solar panel farms must be carefully managed to ensure long-term sustainability.

The promise of high-value jobs

While part of the RM115 billion investment is indeed allocated to construction and development jobs, these are indirect jobs that only last through the construction phase of data centres. The real promise of high-value jobs are those with roles directly related to the operation of the data centres. Specifically, these roles include IT operation personnel such as server managers, network engineers, cybersecurity analysts, software programmers and similar positions.

“So, how many high-value jobs will a data centre create?” A quick answer often given is, “It depends”, largely on the scale of the data centre and the degree of automation implemented. To avoid leaving readers in limbo, additional research was conducted to form pragmatic assumptions. For instance, a 500mw data centre campus could accommodate around 33 operators (that is, assuming a 15mw capacity per operator). In return, these operators would require a collective workforce of about 726 to 1,023 employees. Of this collective workforce, 198 to 330 are in IT operations.

Applying the same assumptions, an aggregate total capacity of 3,200mw could accommodate around 213 operators and create between 1,278 and 2,130 high-value jobs. While these figures fall short of the reported 2,325 new high-value jobs, it is important to note that the calculation is based on an average operator capacity of 15mw, an arbitrary figure. If we adjust the assumption to an average operator capacity of 10mw, the number of operators that the 3,200mw capacity facility can accommodate would rise to 320, thereby increasing the number of high-value jobs. In other words, the anticipated 2,325 high-value jobs in the data centre sector appear achievable under the revised assumption.

In summation

The RM115 billion investment in data centres presents a strategic trade-off. It requires significant resources, including valuable land — particularly for solar-powered data centres — and water, which is essential for temperature control and maintaining the efficiency of solar farms. In return, this investment stimulates the economy during the initial development phase and is expected to create 2,325 high-value jobs to support their operation. While the high-value jobs directly linked to data centres may be limited, the greater potential for job creation lies in the downstream segments of the data centre value chain.

Dr Lim Kok Tiong is a financial economist, credit and climate risk specialist, seasoned project/programme manager and independent researcher

Source: The Edge Malaysia

Data centres: Strategic trade-offs and the promise of high-value jobs

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