Dr Ong Kian Ming
KUCHING: Malaysia has the internal resiliency to withstand some of the ongoing global economic challenges as proven by its economic growth which is driven by its domestic markets, Deputy Minister of International Trade and Industry (MITI) Dr Ong Kian Ming observes.
Referring to remarks by prominent economist Dr Jomo Kwame Sundaram, Dr Ong said he concurred with Dr Jomo’s view that the external economic circumstances continue to be very challenging, especially in the light of recent developments in the US-China economic relationship.
He also agreed that many of these challenges are caused by factors beyond the control of the Malaysian government.
However, he pointed out: “There are signs that our diversified economy can withstand some of the global challenges ahead.”
He added: “After two months of negative year-on-year growth, exports for the month of April 2019 increased by 1.1 per cent to RM85.2 billion. For the months from January to April 2019, exports decreased marginally by 0.2 per cent to RM321.26 billion.
“Despite the US-China trade war, our exports to China from January to April 2019 still grew by 2.8 per cent to RM42.7 billion. I am cautiously optimistic that the overall export figures for the first half of 2019 will show a positive growth.
“In terms of investment approvals, we can also be encouraged by the figures announced for the first quarter of 2019 (1Q19). Overall, investment approvals increased by 3.1 per cent for the first three months of 2019 from RM52.3 billion to RM53.9 billion.
“Foreign investments, which comprise 54.4 per cent of total approved investments, increased by 73.4 per cent from RM16.9 billion to RM29.3 billion, driven largely by increased approved investments in the manufacturing sector.
“At the same time, realised investments, according to the 1Q19 Balance of Payment Figures, for FDI, increased to RM21.7 billion as compared to RM12.9 billion in 4Q18. These FDI were largely channelled to the Services, Manufacturing, Mining & Quarrying sectors.”
Dr Ong also explained that Malaysia’s Manufacturing and Industrial Production Figures for April 2019 are also encouraging as manufacturing sales in April 2019 grew by 6.8 per cent on a year to year basis to RM69.8 billion driven by increases in the sales of non-metallic mineral products (7.5 per cent), E&E products (6.7 per cent) and petrochemical, chemical rubber and plastic products (5.8 per cent).
“Overall, for the period from January to April 2019, total manufacturing value increased by 6.2 per cent on a year to year basis to RM280.6billion. The Industrial Production Index (IPI) grew by four per cent on a year to year basis in April 2019 with the manufacturing sector growing by 4.3 per cent,” he said.
He also highlighted the importance of spurring domestic direct investments (DDIs).
“At the same time, we cannot deny that FDIs, whether in the manufacturing or services sector, can increase the value added contributions and hence, the number of higher paying jobs available to Malaysians.
“These FDIs will also have spillover effects, for example, in integrating domestic firms into the larger global supply chain. Many Malaysian companies have become globally competitive players as a result of the supply chain linkages formed via the multinational corporations which have made long term investments in Malaysia,” he added.
He noted that when the US-China trade war was restricted to the area of tariffs on goods and services, Malaysia could at least benefit from some short-run trade and investment diversions.
“This can mitigate some of the longer term negative consequences of the trade war. For example, NOMURA has estimated that Malaysia will be the fourth largest beneficiary of the US-China trade war as a result of trade diversion.”
However, Dr Ong said, when the US government threatens to prevent US companies from doing business with Chinese companies such as Huawei, the impact on countries like Malaysia can only be negative. He noted that the ripple effect on Malaysia, especially in the Electrical and Electronics (E&E) industry could potentially be significant.
“My ministry, together with our investment promotion agencies, MIDA and InvestKL, will continue our efforts in attracting good quality FDIs to come to Malaysia. We will also continue to encourage DDIs by, for example, providing matching grants through schemes such as the Domestic Investment Strategic Fund (DISF),” he said.
“Looking ahead, there are some positive signs of regional economic resilience. The Asean Manufacturing Purchasing Managers’ Index (PMI) increased from 50.4 in April to 50.6 in May. Although this is a small increase, it is still an encouraging sign given the global economic narrative.
“At the same time, the Caixin China General Manufacturing PMI remained at 50.2 in May 2019, signalling that fears about China’s impending slowdown have been perhaps somewhat exaggerated.
“One should not underestimate the internal resilience of China’s domestic economy. It provided a much needed boost to the global economy during the financial crisis in 2008. 10 years later, China is a much bigger and more diversified economy.
“It is also better integrated with the Asian economies from a trade and investment standpoint. Hence, China, hopefully, is in a better position to absorb the pressures arising from the trade tensions. This will minimise the negative economic impact for the rest of the region, including Malaysia.
“Similarly, with our well-diversified economy and continued foreign interest in investments, we are hopeful that Malaysia is also in a better position to weather the coming economic storms,” he concluded.