MALAYSIA INTERNATIONAL TRADE AND INDUSTRY REPORT 2010 Ministry of International Trade and Industry Malaysia ISSN 0128-7524 June 2011 © Ministry of International Trade and Industry Malaysia 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission in writing of the Publisher. Facts & figures/content are correct at the time of printing. To purchase this publication or for other information, please contact Senior Director Strategic Planning Division Ministry of International Trade and Industry Malaysia 15th Floor, Block B Government Office Complex Jalan Duta, 50622 Kuala Lumpur Tel: +603-6203 4571 Fax: +603-6201 2573 MITI Homepage: www.miti.gov.my Email: [email protected] Design, layout and printing by Sasyaz Holdings Sdn. Bhd. (219275-V) 29, Jalan PJU 3/48 Sunway Damansara Technology Park 47810 Petaling Jaya, Selangor, Malaysia Tel: +603 7803 3754 Fax: +603 7804 8245 Email: [email protected] Price: RM60.00 2 MALAYSIA INTERNATIONAL TRADE AND INDUSTRY REPORT 2010 The Malaysian economy grew by 7.2% in 2010, (5.9%) than in manufacturing (5.7%). Bank Negara Malaysia demonstrating once again its underlying strength and further projects that the country’s trade surplus this year will resilience. 2009 was a challenging year, as the global top RM144 billion (2010: RM110 billion). financial crisis continued to be felt and the economy contracted by 1.7%. However, strong domestic demand and The private sector will continue to assume the main role FOREWORD a steady recovery in global trade helped to deliver a strong in driving economic growth. To facilitate private sector turnaround in 2010. participation, MITI will redouble its efforts to improve Malaysia’s business environment by introducing more During the year, trade volume grew by 18% to reach pro-business policies and reviewing and updating existing RM1.2 trillion, which was equal to the 2008 pre-crisis level. business rules and regulations. The private sector, too, needs Investor confidence also improved, and foreign direct to stay competitive by continuously improving its products investment grew 500.3% to reach US$8.58 billion compared and processes, and by being innovative and efficient. to US$1.43 billion the previous year. The UNCTAD Global Investment Trends Monitor 2010 affirmed that Malaysia Under the Economic Transformation Programme (ETP), was one of the economies that registered the highest which is a comprehensive effort spearheaded by the improvement in foreign direct investment inflows among Performance Management and Delivery Unit (PEMANDU), 153 economies surveyed. 12 National Key Economic Areas (NKEAs) have been identified to transform Malaysia into a high income nation Growth in trade and investment are key objectives of by 2020. The NKEAs which include electrical and electronics, national economic policy and the Ministry of International business services, and wholesale and retail trade are Trade and Industry (MITI) will continue to explore expected to make substantial contributions to Malaysia’s opportunities in new markets to support domestic-based economic performance. To that end, MITI will continue to industries, including small and medium enterprises. steer the nation towards a high income economy that is knowledge-driven and high technology industry-based. Free trade agreements are an effective mechanism to The focus will be on attracting quality investments and expand market reach and to date, Malaysia has concluded encouraging existing industries to shift from lower value- eleven such agreements: six regional agreements with added products and services to reinvesting in higher value- countries such as the People’s Republic of China (PRC) added and knowledge-intensive products and services. The and the Republic of Korea (ROK) through the Association emphasis will be on creating quality jobs, linkages with local of Southeast Asian Nations (ASEAN), and five bilateral suppliers and contribution to export growth. These efforts agreements with Japan, Pakistan, New Zealand, India and are in line with the National Economic Model (NEM) aiming Chile respectively. to transform the Malaysian economy to become one with high incomes and quality growth by 2020. In 2010, Malaysia further expanded its trade engagement by starting negotiations on the Trans-Pacific Strategic Economic Going forward, improving the nation’s overall economic Partnership (TPP) Agreement, the Malaysia-European Union competitiveness remains our highest priority. Both the Free Trade Agreement (MEUFTA), and the Malaysia-Turkey Government and the private sector will have to continue to Free Trade Agreement (MTFTA). These agreements offer work together to ensure that we remain viable players in the additional avenues for cross border trade and investments, global economic market place. and our exporters, including members of the small and medium enterprise community, should work aggressively to take advantage of the benefits of broader market access provided by these agreements. The outlook for 2011 is positive. According to Bank Negara Malaysia, GDP is expected to grow by 5% to 6%. Growth DATO’ SRI MUSTAPA MOHAMED is expected to be marginally higher in the services sector Minister of International Trade and Industry, Malaysia 3 CHAPTER 1 7 WORLD ECONOMIC, TRADE AND INVESTMENT DEVELOPMENTS CHAPTER 2 15 MALAYSIA’S EXTERNAL TRADE CHAPTER 3 23 INVESTMENTS CHAPTER 4 35 PERFORMANCE OF THE MANUFACTURING SECTOR CHAPTER 5 53 PERFORMANCE OF THE SERVICES SECTOR CHAPTER 6 59 PRODUCTIVITY AND COMPETITIVENESS CONTENTS CHAPTER 7 67 SMEs: PIONEERING BUSINESS TRANSFORMATION CHAPTER 8 77 ENTREPRENEURIAL DEVELOPMENT CHAPTER 9 87 REGIONAL AND BILATERAL FREE TRADE AGREEMENTS CHAPTER 10 95 ASEAN ECONOMIC COOPERATION CHAPTER 11 105 DEVELOPMENTS IN THE MULTILATERAL TRADING SYSTEM CHAPTER 12 111 DEVELOPMENTS IN REGIONAL GROUPINGS CHAPTER • 3.6% growth in global economy • 7.2% growth in Malaysia’s economy • ASEAN total trade reached US$1.6 trillion • Malaysia’s total trade reached US$362.9 billion 1 • FDI into ASEAN increased by 89.6% WORLD • FDI into Malaysia increased by ECONOMIC, more than 500% TRADE AND INVESTMENT DEVELOPMENTS OVERVIEW All major economies in this region registered positive growth with The global economy came out of recession into a phase of uneven recovery in Singapore recording a double-digit 2010. Advanced developing countries like the People’s Republic of China (PRC), growth of 14.5%. Malaysia rebounded Singapore and India bounced back to high growth whereas the developed with a 7.2% growth as compared to a economies like Japan, the European Union (EU) and the United States of America contraction of 1.7% in 2009. (USA) experienced sluggish economic performances. Malaysia, on the other hand, recorded a more moderate and sustainable growth of 7.2%. According to the International Monetary Fund (IMF), ASEAN The global economy, which contracted 2.4% in 2009, turned positive with 3.6% comprising 10 Member States growth. Government intervention boosted demand and reduced uncertainty registered a total of US$1.9 trillion GDP and systemic risks in the financial markets, resulting in a 14.5% increase in exports in 2010 compared with US$1.5 trillion from the 2009 level. in 2009, showing an increase of 23.9%. The average growth rate in 2010 was Growth was not evenly distributed across countries. Lower income countries 7.3% compared with 1.5% in 2009. The averaged 6.3% growth, while higher income countries averaged 2.8%. Among the average economic growth forecast for fast-developing economies, the PRC, Chinese Taipei and India recorded growths ASEAN is 5.5% for 2011. of 10.3%, 9.3%, and 9.7% respectively. However, slower growth was recorded in developed economies, namely Japan (3.9%), the USA (2.8%), and the EU (1.8%). ASEAN’s total trade amounted to US$$1.6 trillion compared with Global unemployment continued to escalate, reaching 8.8% in 2010. Global gross US$1.5 trillion in 2009, an increase of fixed investment stabilised at around 23.0% of Gross Domestic Product (GDP), 7.3%. The largest trading economy was after a significant drop in 2009. World trade appeared to be returning to pre-2009 Singapore with total trade amounting patterns, with current account surpluses or deficits rising for most countries, and to US$661.6 billion, followed by world external debt dropped to 5.0%. Malaysia with US$362.9 billion and Thailand with US$337.7 billion. REGIONAL AND COUNTRY PERFORMANCE The Association of Southeast Asian Nations (ASEAN) The United Nations Conference on According to the Organisation for Economic Co-operation and Development’s Trade and Development (UNCTAD) (OECD) Southeast Asian Economic Outlook 2010, the six major ASEAN countries projected that global inflows of foreign (Singapore, Thailand, Viet Nam, Malaysia, Indonesia and the Philippines) had direct investment (FDI) would reach rebounded with medium-term growth prospects. more than US$1.1 trillion in 2010. FDI to ASEAN increased 89.6% to Table 1.1: GDP Growth for Six Major ASEAN Countries US$69.6 billion compared with US$36.7 billion in 2009. Malaysia Country 2009 (%) 2010 (%) recorded the strongest growth of Indonesia 4.5 6.1 500.3% to US$8.58 billion from Malaysia -1.7 7.2 US$1.43 billion in 2009. Indonesia’s FDI Philippines 1.1 7.3 increased by 146.1% to US$12.8 billion Singapore -0.8 14.5 from US$4.9 billion in 2009 while Thailand -2.3 7.8 Singapore’s FDI increased by 122.6% to US$37.4 billion from US$16.8 billion Viet Nam 5.2 6.5 in 2009. Average 1.3 7.3 Source: Selected National Statistical Office and OECD Development Centre 8 MALAYSIA INTERNATIONAL TRADE AND INDUSTRY REPORT 2010 To realise an ASEAN Economic Community (AEC) by 2015, it is imperative that The People’s Republic of China (PRC) Member States cooperate and become increasingly integrated.