A RISE in world demand for semi-conductors, integrated circuits and palm oil products are among the factors Malaysia is counting on to boost trade in a challenging global environment this year.

Semi-conductors make up 59.5% of Malaysia’s electronic and electrical (EnE) exports, said the Malaysia External Trade Development Corporation (Matrade) and demand is projected to grow by 5.9% in 2020.

EnE products made up the largest chunk of exports in 2019 at 37.8%, or RM372.67 billion, Matrade said.

Export of palm oil products, meanwhile, which accounted for RM43.10 billion in 2019, is expected to grow due to higher demand and lower supply, said the agency.

Matrade told The Malaysian Insight it is looking to strengthen exports to Asean, which as a region made up more than a quarter, or 26.6%, of the country’s total trade, at RM488.91 billion.

Matrade is looking to arrest a 4.4% decline in trade with Malaysia’s nine neighbours last year, which was due to lower export of EnE, petroleum and rubber products.  

The agency is also pushing exports to emerging economies such as Mexico, Nigeria, Bangladesh, Sri Lanka and Qatar to diversify Malaysia’s markets.  

These projections from Matrade come as the world struggles to contain the spread of Covid-19, which economists have warned will lead to a global economic slowdown in the first quarter of the year.

Deputy International Trade and Industry Minister Dr Ong Kian Ming said it was still too early to estimate the epidemic’s impact on Malaysia’s trade with China, which last year totalled more than RM315 billion.

This is because the virus had hit during the Chinese New Year holidays, a period which has traditionally been slow because factories would be shut down for one to two weeks.

Ambank Research has said that even without the virus outbreak, Malaysian exports are expected to grow by only 1 to 2% this year due to concerns over the ongoing US-China trade war.

Ong, in a recent presentation, also spoke of the risks posed by increased tensions between the United States and Iran, and the United Kingdom’s exit from the European Union on January 31.

“The ministry has met and is currently negotiating with the UK government concerning both countries’ trade relations post-Brexit. We are still confirming the details and will announce them in due time.”

Surplus and decline

Trade surplus rose by 11% to RM137.39 billion due to higher exports, but overall trade declined by 2.5% to RM1.835 trillion.

The decline was due to reduced global demand as a result of trade tensions and a slower world economy, said Matrade.

Higher trade was recorded with the United States, the United Arab Emirates, the Philippines, Cambodia, Mexico and the UK.

But trade fell with Singapore, Hong Kong, France, Thailand and Japan.

China remained a significant trading partner and accounted for 17.2% of total trade at RM315.19 billion, a marginal 0.2% increase from 2018.  

But Asean as a region remained Malaysia’s largest trading partner and Matrade said it wants to reverse the 4.4% decline in 2019.

“Singapore, Thailand and Vietnam remained Malaysia’s top three export destinations, accounting for 80% of Malaysian export to Asean,” Matrade said.

“Matrade together with other ministries and agencies will be organising and participating in more than 50 trade promotional programmes in Asean in 2020, mainly in Indonesia, Philippines, Singapore and Vietnam.

“We will also be promoting Malaysian products and services, focusing on food and beverage, construction and building materials, professional services, EnE, lifestyle products, pharmaceuticals and medical devices as well as ICT-related products and services.”

Emerging markets

Matrade wants to also increase trade with emerging markets such as Mexico which amounted to RM9.05 billion in 2019, Bangladesh (RM9.7 billion), Sri Lanka (RM3.56 billion) and Nigeria (RM16.6 billion).

Although those markets are small compared to Malaysia’s other trade partners, trade with some of these countries in 2019 recorded double digit growth of between 28.1% and 75.1%.

“Apart from diversifying markets, we are also diversifying Malaysian export in terms of products and services,” Matrade said.

Among the emerging products are medical devices, lifestyle products and aerospace products as well as services such as ICT, creative content, construction and infrastructure services.

There are also strong prospects in halal and palm oil-based products. – February 13, 2020.