GEOPOLITICAL tensions, the declining ringgit and lack of skilled workers are among the factors that will make 2024 a challenging year, German companies in Malaysia said.

This was revealed in the latest AHK World Business Outlook Fall 2023 survey on the sentiments of German firms operating in the country.

The ongoing Israel-Hamas conflict, Russia-Ukraine war and territorial anxieties in the South China Sea ranked geopolitical tensions high on the list which respondents said will play a crucial part in shaping the progress of 2024. 

Another concern was technical barriers to trade and sanctions, which businesses view as hurdles that will destabilise supply chains.

In the biennial survey, 49% of companies said the outlook for Malaysia next year will remain the same while 34% said local economic development will be favourable.

When asked about the economic risks for companies in the next 12 months, 51% of respondents said demand was a major concern, followed by a lack of skilled workers (46%) and high exchange rates due to the declining ringgit (46%).

Based on current global events, many respondents predicted that high interest rates will remain globally, which will burden new investments and investors. 

The survey was conducted from September 25 to October 20, 2023. In Malaysia, the survey was completed by the MGCC network of companies, which comprise mostly of German and local small and medium-sized enterprises.

Hiring more workers

Fifty-one per cent of German companies in Malaysia also said they hope to increase employment and only 10% intend to lower employment development next year. 

In a statement today, the Malaysian-German Chamber of Commerce and Industry said while this means there would be more job opportunities in the country, it also underscores the crucial need to enhance technical and vocational education and training in Malaysia to bridge the gap between education and industry needs.

The survey also revealed that 66% of companies expect business development to improve in the next 12 months. 

In terms of spending, the majority of respondents (49%) said their investments will remain the same, 39% of respondents intend to ramp up investments, 7% will lower their investments in Malaysia and 5% have no investments planned for the coming year.

However, significant investments are expected to be made in the areas of production and manufacturing (46%), sales and marketing (43%) and services, such as shared service centres (41%).

“Amid the prevailing global uncertainties, Malaysia’s adoption of several mechanisms including the New Industrial Master Plan 2030, the National Energy Transition Roadmap and being part of the Regional Comprehensive Economic Partnership, as well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership free-trade agreements will support the country’s transformation along with the economies worldwide and at the same time ensure Malaysia remains relevant and competitive globally,” said Daniel Bernbeck, executive director at the Malaysian-German Chamber of Commerce and Industry.

“In a rapidly changing global landscape, we remain committed to promoting Malaysia as a favourable investment destination to investors in Germany and we look forward to another year of forging stronger trade ties between the two nations,” he said. – November 22, 2023.