Malaysia unlikely to enter recession despite global headwinds: Bursa Malaysia chairman

MALAYSIA is unlikely to enter a recession, said Bursa Malaysia chairman Wahid Omar on Wednesday (Sep 14), even as he expects that some countries may see slower growth and potentially go into recession due to interest rate hikes and soaring inflation caused by global supply chain disruptions.

Speaking at the Invest Malaysia 2022 conference in Kuala Lumpur, he noted that Malaysia has a diversified economic structure with less of a dependence on commodities, as well as pragmatic and responsive policies that can mitigate the risks.

Wahid noted that gross domestic product (GDP) growth last year was mainly driven by the services and manufacturing sectors, which contributed 57 per cent and 24.3 per cent to GDP respectively. The agriculture and mining sectors contributed only 14 per cent.

“The diversity of our trading partners, where we are not overly dependent on one particular country, would add to our economic resilience,” he added.

Also contributing to Malaysia’s resilience is its stable financial system, with Malaysia’s banks being well capitalised, liquid, better managed and effectively regulated and supervised by the central bank, he said.

“The financial system is complemented by well-functioning debt and equity capital markets totalling RM3.5 trillion (S$1.08 trillion) as of end-June this year, made up of RM1.8 trillion in the debt capital market and RM1.7 trillion in the equity capital market,” he added.

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Speaking on Malaysia’s growth potential at the conference, JP Morgan head of Asia Pacific equity research James Sullivan said that escalating concerns over geopolitical conflicts and the United States-China trade war have driven investors to look for other places to invest in Asia – and Malaysia has offered “interesting” opportunities.

“Investors are very thirsty for growth in this region and Malaysia has a very unique opportunity to step up and provide regulatory certainty, reduction in perceived risk profile as well as (a window) to invest in Asean,” he added.

Highlighting the recent global reshoring trend, as well as the US Chips Act that encourages semiconductor companies to return to the country, Bank Negara Malaysia assistant governor Fraziali Ismail noted an urgent need for Malaysian businesses to take heed of these developments and “make sure Malaysia remains plugged in”.

“In some circumstances, we are net beneficiaries of the US-China trade war – we are well-poised to take advantage of this situation as we have strong ancillary support from the entire (semiconductor) industry and high adaptability to production changes to cater to this (reshoring trend),” he added.

Lee Heng Guie, executive director of the Socio-Economic Research Centre, noted that the global supply chain no longer depends on economic efficiency and is instead being shaped by geopolitical fragmentation. Malaysia’s manufacturing industries – especially its semiconductor industry which has over 7 per cent of global sales – are in a good position to attract foreign investors, he added.

However, labour could be a limitation, he added: “The government’s incentives offered to existing and new companies could attract companies which are looking for reshoring or onshoring (their operations), but the question is, do we have enough manpower?”

The authorities need to be open-minded in attracting talents, he added: if the country lacks local talent and cannot attract Malaysians who are working abroad, then the government should consider welcoming foreign talents to fill the void.

According to the Small and Medium Enterprises Association of Malaysia, SMEs in the country are short of 1.5 million workers, with Penang’s semiconductor industry alone needing an additional 50,000 engineers to support its growth.

Fraziali noted that despite a rise in local job opportunities, Malaysia has a ‘brain drain’ problem: “The lure from outside Malaysia is too great and this has fueled the mobility of Malaysian young talents.”

Citing Department of Statistics Malaysia data, Fraziali noted that around 500,000 high-skilled Malaysian workers aged above 25 are living abroad in 2022, up from an estimated range of 280,000 to 450,000 persons in 2010.

Another report by think-tank Emir Research showed that Malaysia’s diaspora is estimated to be slightly over 2 million persons globally, half of which are highly-skilled individuals.