News Room - Business/Economics

Posted on 17 Nov 2009

Malaysia buoyant on 2010 export growth

Asia's rise as an economic powerhouse driving global growth will likely benefit investors who may want to use Malaysia as their production hub.

Various trade agreements should spur positive export growth in 2010 after this year's sharp contraction.

Dato' Mustapa Mohamed, minister of International Trade and Industry, said regional demand for Malaysian goods and services should result in next year's exports rising by about 3 percent after a contraction estimated at nearly 20 percent in 2009.

Malaysia's export decline over the past 15 months was in line with other economies, he said.

The country's total trade value increased by 6.8 percent to 1.19 trillion ringgit (US$323.37 billion) in 2008, while exports expanded by 9.6 percent to RM663.5 billion and imports recorded an improvement of 3.3 percent to RM521.5 billion.

Full recovery from recession typically takes years, he said. But as Malaysia moved quickly to protect its economy, trade should see improve next year.

"Initially, we hope to see small recovery by 3 percent in export value next year," the minister said.

Total trade in the first nine months was worth RM702.78 billion, a 23.2 percent decline from the same period last year, according to the Malaysian External Trade Development Corporation (Matrade). Exports fell 23 percent to RM394.34 billion while total imports contracted in value by 23.5 percent to RM308.44 billion.

Most experts expect Asia to lead the global recovery, said Dato' Mohamed.

"Now, the challenge is to ensure that this recovery is sustained," he said. "The stimulus package must be allowed to work its way through the system to give the economy the ballast it needs."

"Given the connection between nations today, we can expect that the rise of Asia will be constrained by the lack of demand from the United States and industrial Europe."

Malaysia will focus its expansion of international trade on open markets and diversifying its trading partners, he said.

The country is committed to the World Trade Organisation's existing multilateral trading system. As part of its efforts to integrate with the world economy, Malaysia will negotiate regional and bilateral free trade agreements (FTAs) with major trading partners, he said.

"The Asean Free Trade Area will be effective in the next year and tariffs will no longer be an issue," said the minister. "In 2015, the Asean Economic Community will be established and it will allow for the free flow of goods, services, and investment within the region, and significantly reduce existing restrictions on the flow of capital and skilled workers."

Asean countries accounted for 26 percent of international trade with Malaysia in 2008. Singapore is the country's single largest trading partner at 15 percent of total trade.

China, India, and the Middle East and Asean countries offered high trade potential for Malaysia, he said.

Despite the global downturn, Intrade 2009, an annual Malaysian trade and investment exhibition held in November, drew buyers from more than 60 countries, while arranged some 8,000 business meetings between local companies and international investors in its business matching programme.

The government is also supporting local SMEs because they play a key role in innovation, the minister said.

Regulations on foreign investment in the capital and financial markets would also be eased, he said, adding that the government expected FDI to improve next year as a result.