According to the United Nations Conference on Trade and Development (UNCTAD), there will be a possible significant downward pressure on global FDI flows by -30 per cent to -40 per cent due to COVID-19. This is a potential outcome given the close, intricate inter-dependence of global value chains, directly affecting earnings of large multinational corporations (MNCs).
The Impact of COVID-19 on the Malaysian Economy
In 2019, Malaysia’s GDP grew by 4.3 per cent. Due to COVID- 19, the volatility of global crude oil prices as well as the supply in the commodities sector has continued to be disrupted. Malaysia’s Central Bank (Bank Negara Malaysia) has now projected the country’s economic growth to be between -2 per cent to 0.5 per cent in 2020.
Based on MIER analysis, industrial output is estimated to reduce between 40 per cent and 70 per cent during MCO and projected negative growth of -8.6 per cent of the manufacturing sector. The industries affected by these include tourism, aerospace, automotive, chemical, medical devices, electrical and electronics (E&E) as well as metal, machinery and parts.
Malaysia’s Approach to Combat the Effects of the Pandemic
“The pandemic has indeed created a lot of uncertainties. Malaysia has joint numerous countries around the world in implementing measures to managing the outbreaks and keeping the people safe. The Malaysian Government announced the Movement Control Order (MCO) beginning 18 March 2020 to prevent further spreading of the virus and flatten the outbreak curve. This measure is proving to be effective. With recovery numbers of more than 50 per cent and the number of cases lower than the initial projected, Malaysia is handling the situation relatively well,” said Dato’ Azman Mahmud during the “Dialogue with CEO of MIDA: Sailing Together in Rough Weather” live webinar session, organised by CCI France Malaysia (CCIFM) and MIDA on 21 April 2020.
Several economic sectors have been allowed to operate subject to strict adherence to health and safety guidelines to ensure the balancing of public health, economic sustainability and the livelihood of the people. Ministry of International Trade and Industry (MITI) has provided the necessary approval for companies producing essential products and services to stay in operation during the first two phases of the MCO. MIDA has been actively involved in the approval process by providing pertinent inputs to MITI for the final approvals to companies.
Under the third phase of the MCO, the Government further expanded the scope of the industries, allowing several additional economic sectors to operate namely, automotive industry, machinery and equipment industry, aerospace industry, construction projects, science, professional and technical services, including R&D, social health services including registered traditional and complementary medicine (TCM) practitioners.
Simultaneously, to bolster the national economy and assist the businesses during this challenging time, the Government announced a Stimulus Package valued at USD58 billion (RM260 billion) including allocation of RM100 billion to support business and small and medium enterprises in Malaysia. According to AFP (Agence France- Presse), Reuters, Bloomberg, Nikkei, BBC and the Guardians, Malaysia’s comprehensive stimulus package is estimated to be 18 per cent of our national GDP. It is considered to be the third-largest stimulus package after Germany (32% of GDP) and Britain (19%).
Looking Beyond the Current Uncertainties: Malaysia to Grow in 2021
“While COVID-19 is disrupting all manner of business throughout the world, MIDA would like to assure French investors that Malaysia remains an investorfriendly and strategic location for long term growth. France is a significant investor in Malaysia and the 5th largest investor from EU countries and proud that 30 out of the 40 top French companies listed on the main French index of NYSE Euronext have established their operations in Malaysia,” said Dato’ Azman.
“Malaysia is indeed at a difficult time. However, history has proven that Malaysia is a resilient nation despite multiple challenges faced by the global economy. We are confident that once we overcome this challenging chapter, Malaysia will be stronger in rebuilding Malaysia’s competitiveness,” Dato’ Azman added.
Malaysia’s status as a resilient nation is well supported by the World Bank in its recent statement. According to the World Bank’s lead economist, Mr. Richard Record, Malaysia is more resilient than many other countries. It has, among others, a diversified economic structure and a sound track record of macroeconomic management. While the challenges ahead are unprecedented, Malaysia is well placed to weather the storm.
This is further attested to by the International Monetary Fund’s (IMF) projections of Malaysia’s gross domestic product (GDP) to grow at a rate of 9 per cent next year, a sharp increase from the expected 1.7 per cent contraction in 2020. This positions Malaysia as the fastest growing economy among the ASEAN-5, which, according to the IMF, is likely to expand at an average of 7.8 per cent next year. The ASEAN-5 comprises Indonesia, Thailand, the Philippines, Vietnam and Singapore.
In closing, Dato’ Azman emphasised that MIDA will continue working closely with investors to support the growth of business in Malaysia. The CEO of MIDA said, “Companies are advised to reach out to MIDA officials for any business assistance that required although we are working from home. The war has still not yet ended, and therefore, cooperation for companies to comply with the standard of procedures during COVID-19 is highly important to win this war.”
The Ambassador of France, H.E Frederic Laplanche also joined the live webinar session and delivered his remarks. The session was moderated by Dato’ Zainal Amanshah, Chairman of CCIFM and Mr. Gilles Waeldin, President of CCIFM. Approximately 100 participants, of whom were mostly representatives from French companies operating in Malaysia participated in the webinar.
For more information on MIDA’s facilitation and services, please visit MIDA website at www.mida.gov.my or email to [email protected].