On how the market is adjusting to new trade and technology trends
Where do you see opportunities for Malaysian exporters to benefit from the US-China trade war?
WAN LATIFF WAN MUSA: The US and China together account for 25% of Malaysia’s global trade, thereby making the ongoing dispute a concern. Although we have yet to observe a major negative impact on business conditions, we are closely monitoring the international effects of the trade war. Since we trade with over 200 countries, any impact on global demand will impact exports from Malaysia.
On the other side of the coin, we have identified several opportunities for Malaysia to fill gaps in regional and global supply chains if either country imposes import duties on the other. Among the products that we have identified are electrical and electronics (E&E), which was our largest export item in 2018 and accounted for over 38% of total exports. Another major export is palm oil: in March 2019 Malaysia agreed to supply an additional 1.6m tonnes of palm oil to China over the course of the year.
In what ways can Malaysian exporters with high exposure to the US market mitigate the threat of protectionism?
WAN LATIFF: In the case of E&E, it accounts for a larger proportion of total exports to the US, at 52%, than it does for China, at 39%. Both destinations are irreplaceable for this segment, so any decline in demand will impact Malaysia negatively. This challenge means there is a need for us to diversify our export destinations across all segments and it is important that we continue to do so.
In particular, we need to target the countries with which we have existing free trade agreements (FTAs) that can be leveraged, which include ASEAN countries as well as emerging markets in Eastern Europe, Central Asia, South Asia and Africa.
How do you assess the risk-reward balance for domestic manufacturers in relation to Malaysia’s participation in the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?
WAN LATIFF: From the perspective of widening global market access for our companies, FTAs are most welcome. However, we must also consider risk during the process of ratifying these agreements. At the national level, Malaysia believes that inclusivity is key for making informed decisions in the national interest. Thus, government consultation with stakeholders is important before engaging in any new FTAs. Inter-governmental and inter-business cooperation helps ensure the decisions related to international trade will benefit the business community, consumers and the government.
The objective of RCEP is to streamline FTAs between ASEAN and its Dialogue Partners into a single regional trade agreement that can strengthen regional value chains and improve market access for small and medium-sized enterprises (SMEs).
The level of progress achieved to date demonstrates how complex and challenging the negotiations are, involving 16 countries with varying levels of development and ambition. It is important for current and future FTAs to be balanced, taking into consideration these different levels of economic development.
Meanwhile, entering into the CPTPP will require the modification of some domestic laws. There are several countries involved in the CPTPP with which we do not yet have FTAs, including Peru, Mexico and Canada. The government is reviewing its commitments made under the CPTPP, which was signed by the previous government. All laws, regulations, policies and practices of the Malaysian government at all levels have to be consistent with the provisions under the CPTPP. Therefore, before ratification, we need to ensure our domestic regulations and practices are in line with CPTPP commitments.
The decision by any company to invest is not just based on market access considerations afforded by an FTA. Other considerations would include market size and growth, availability of infrastructure and resources, connectivity, the talent supply pool, as well as political certainty and stability.
To what extent are Malaysian export-oriented manufacturers prepared for the opportunities and challenges posed by the Fourth Industrial Revolution (4IR)?
WAN LATIFF: Bigger players are prepared for the 4IR, but SMEs are generally not yet ready. The extent to which manufacturers are prepared also varies by industry. Sectors that are more advanced as far as Industry 4.0 is concerned include aerospace and automotive manufacturing, as well as E&E. Industries in which only the big players are ready include food processing and furniture making. These sectors would benefit from Industry 4.0, such as increasing the use of robotics for productivity and utilising big data analytics to form business development plans and targeted marketing strategies. First, however, there must be a change in attitude towards the use of technology, after which we can turn our attention to knowledge transfer and skills development.