My Say: Towards a regional investment hub amid Malaysia’s digital transformation (The Edge Markets)

While the Covid-19 pandemic in 2020 is said to have dealt a knockout blow to the global economy unseen since the Great Depression, its repercussions continue to linger on as we move towards the close of the first half of 2021. And no sooner had we thought that the worst of the pandemic was over, than we were pounded with a third wave, where the numbers were staggering indeed with infectivity rates going through the roof and a consequent record number of new cases and increasing number of deaths by the day.

Under these circumstances, the government was presented with the same predicament that confronted it back in March 2020: striking that balance between protecting lives and protecting livelihoods. It is said that in hard times, hard choices have to be made as “close scrutiny will show that most crisis situations are opportunities to either advance, or stay where you are”.

In a world where the only constant is change, staying where you are would mean falling behind. Hence, the government made the hard choice of imposing a full lockdown effective June 1, which has since been extended to June 28.

Nevertheless, in order to advance in our efforts to ensure the sustainability of the micro, small and medium enterprises (MSMEs) as well as the informal sectors that constitute the backbone of the nation’s economy, it was vital that steps be taken to mitigate against disruption to the supply chain for essential products and services.

Indeed, decisions cannot be made on a whim but based on science and data, as well as comprehensive feedback and engagement with the relevant stakeholders, prioritising the welfare of the public at large, while ensuring that the imperatives dictated by the overarching need to fight the pandemic continue to prevail. The health of the rakyat is always paramount.

No doubt, given the pervasiveness of the pandemic, sustainable recovery remains largely dependent on how effectively the mass vaccination rollout is implemented. This in turn would significantly impact long-term economic recovery. Nonetheless, for Malaysia’s economy, the numbers reported for the first quarter of 2021 are indeed encouraging and provide at least a modicum of solace, hope and optimism.

Thanks largely to spikes in manufacturing and export services. Malaysia’s trade performance maintained its strong growth momentum in April 2021 — outperforming March with another record high for trade, exports and imports monthly value. Trade grew by 43.2% to RM190.76 billion compared with April 2020. Exports maintained above RM100 billion for two consecutive months, reaching RM105.62 billion and surging 63%. This was the fastest growth since February 1998 and the eighth consecutive month of year-on-year (y-o-y) expansion since September 2020.

Imports increased by 24.4% to RM85.14 billion and the trade surplus surged by 663.5% to RM20.48 billion. Trade, exports and imports recorded double-digit growth for three consecutive months. Notably, the expansion in exports was sustained by higher global demand primarily for electrical and electronic products, mainly semiconductors in tandem with increasing digitalisation and 5G technology development, rubber products as well as petroleum products. Exports to all major markets namely Asean, China, the US, the EU and Japan registered positive growth.

Malaysia’s leading economic index jumped significantly to 17.3% y-o-y in March, markedly surpassing the 8% registered for January and February and signifying a massive recovery from the March and April 2020 numbers of -3.8% and -6%. Yes, indeed those dismal numbers were the direct consequence of the complete lockdown of MCO 1.0, when all economic sectors were shut.

As reported by the Department of Statistics Malaysia (DOSM), other factors contributing to the stellar performance in the leading index included the growth in the number of housing units approved, the overall impressive performance of the Bursa index, real imports and the number of companies registered.

What do these numbers tell us? While it may be premature to jump to a conclusion, it may not be unreasonable to say that in this resurgence, we sense the working of a Schumpeterian creative destruction, which tells us the world will emerge from the pandemic even stronger and more vibrant on trade and investments.

Nonetheless, creative destruction has its limits. Just as we have been witnessing economic resurgence after the great disruptions in supply chains and business operations, with a full lockdown back in force, we need to be on guard against its recurrence lest we go back to square one. Here again, the ultimate question still hinges on the state of the pandemic and how we are dealing with it.

In this regard, it is a matter of no small significance that the Ministry of International Trade and Industry (Miti) just launched the Public-Private Partnership Covid-19 Industry Immunisation Programme (Pikas) for industry on June 16. This will positively work towards expediting the National Immunisation Programme, where Miti will coordinate the vaccination programme for the manufacturing and services sector. And just a day before that, Prime Minister Tan Sri Muhyiddin Yassin unveiled Malaysia’s exit strategy for the pandemic as outlined in the National Recovery Plan. Undoubtedly, no one is suggesting it will be plain sailing. But with the support of all parties, emboldened by a firm resolve to overcome the challenges, I believe we will emerge triumphant.

Clichéd as it may sound, crisis can always be transformed into opportunity but mere contemplation won’t do. Hence, for economic recovery to be sustainable, a comprehensive approach to reinvigorate the investment ecosystem and respond effectively to emerging challenges is mandatory, given Malaysia’s position as an active trading nation that adopts a market-oriented foreign trade policy. This entails a whole-of-nation approach across a wide spectrum of initiatives, the most recent being the National Investment Aspirations (NIA), which is the nation’s new investment policy to attract quality and technological investments.

The NIA will navigate Malaysia towards being a regional investment hub with a view to increasing economic complexity, creating high-value jobs, extending domestic linkages, developing new and existing clusters, and improving inclusivity. New investment strategies will provide the impetus to pursue high-technology and sustainable investments as well as to intensify innovation, striking a balance between economic and environmental sustainability while reducing our dependence on foreign labour, in line with global benchmarks in environmental, social and governance (ESG) practices.

Naturally, this strategic growth framework will further drive our efforts in making Malaysia the preferred investment destination in the region. The NIA will be central to revitalising Malaysia’s investment climate, attracting further high-quality investments into the country with efforts focused on investing in human capital, creating high-skilled and high-paying jobs. Thriving under a digital economy, the NIA will foster innovation and sophistication through big data analysis, and improve income prospects by targeted data valuation. Miti will assume a leadership role in driving these efforts as well as in the review of the policies of the nation’s investment strategies, as mandated by the NIA.

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The Edge Markets

21 June 2021

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