INTERNATIONAL Trade and Industries Minister Mohamed Azmin Ali proudly stating Malaysia recorded the biggest trade surplus in 2020 in 23 years is an attempt to claim credit, but short on giving the correct picture for the surplus.

Understandably, the MITI minister has to say something in the light of the current negative reports by UNCTAD and the Transparency International Corruption Perception Index.    

The senior minister had attributed this biggest trade surplus to the progressive opening of the economy and gradual recovery of external demand, making his tall tale obvious when the main reason for the surge in trade surplus is because of the big decline in import for 2020.

Furthermore, we are not the only country in Asean recording trade surplus in 2020. Singapore (USD46.6 billion), Thailand (USD23.6 billion), Indonesia (USD21.7 billion), and Vietnam (USD19.1 billion) saw surpluses too.

Total trade for 2020 was RM1.777 trillion, a decline by 3.6% from RM1.835 in 2019. Export was RM980.99 billion, a decline by 1.4% from RM995.07 billion. Import was RM796.19 billion, decline by 6.6% from RM849.01 billion.

The big decline in 2020 imports gave the biggest ever trade surplus of RM184.79 billion, attributable to the partial shutdown of the economy due to the pandemic. Had the import figure for 2020 sustained at 2019 level, the trade surplus would have seen a decline from the 2019 high of RM137.39 billion. For long term economic health, the robustness of the exports is more significant than the decline in imports.  

Our country’s robust exports are due to five major industries – electrical and electronic (E&E) products (RM386.11 billion), petroleum products (RM61.90 billion), palm oil and palm oil-based agricultural products (RM52.33 billion), chemicals and chemical products (RM50.69 billion) and rubber products (RM43.64 billion). The E&E industry alone contributed to 39.4% of the total export, more than twice the combined total of the other three industries.

While the petroleum and palm oil industries have been major contributors to export income, the rubber product industry in the form of rubber gloves has been a chanced contribution for 2020 export. The sudden increase in 68.9% from the 2019 figure of RM25.84 billion, boosted by the coronavirus pandemic, has nothing to do with the ingenuity of MITI opening up the economy.

Going forward, there are lots of uncertainties in the petroleum and palm oil industries in securing export income because of price fluctuation. 

E&E industry, which is our biggest export earner, is a sure bet. Thanks to our national policy starting from the 1970s to attract such industries (again by chance and not because of the ingenuity of the current MITI minister), and also because of a must-have item in the sunrise industry involving industrial revolution 4.0, internet of things, and artificial intelligence technologies – chips.

There is much for our government to do to enhance the E&E industry, to bring it to the next level where design and development (D&D) and generating intellectual property to produce our own high-end products.

Currently our E&E industry is labour-intensive, serving foreign semiconductor manufacturers and integrated circuit fabricators. In short, we are at the back-end manufacturing of the value chain E&E industry.

Our government needs to provide incentives to encourage more local capital expenditure (capex) in the industry. Young talent must be encouraged, nurtured, jealously protected, and not shoo them away where a land further south will welcome with open arms. 

Entrepreneurship, from among our engineers, must be encouraged and supported without the racial barriers, so that whatever intellectual property created belongs to our country and not the foreign companies they work for. There must be no prejudicial support due to selective ethnic leaning because ultimately it is the potential GDP benefits that matter most.     

It is also the potential high income in the labour force that the E&E industry promises when productivity moves up in the value chain. If at all Malaysia is to escape from the decades-long middle-income trap into a high-income nation, it will be a significant contribution through the E&E industry.

Our Budget 2021 does not encourage much in private sector capital expenditure for R&D. Allocation and aids are ethno-centric and negligible for private entrepreneurship, rather than a broad base support based on industrial needs.

It is left to be seen how much tax incentives and government support will provide through the 12th Malaysia Plan, 2021-2025.

The latest UNCTAD report has confirmed an exodus of foreign direct investment (FDI) to the benefit of our neighbouring countries, which is detrimental to our future export earning and trade surplus.

Also, the latest six places dropped in the Transparency International Corruption Perception Index 2020, together with FDI divestment, should sour whatever exuberance expressed by Azmin regarding the trade surplus.

Much has to be done to secure future trade surplus. MITI and our government have to buck up. – February 4, 2021.

* Captain Dr Wong Ang Peng is a researcher with an interest in economics, politics, and health issues. He has a burning desire to do anything within his means to promote national harmony. Captain Wong is also a member of the National Patriots Association.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.