Malaysia's export gains to China most notable, but challenges remain: UOB

TRADE tensions and the Covid-19 pandemic have benefited Malaysia's exports to its top three trade partners (China, Singapore, and US) with export gains to China the most notable, said UOB economists Julia Goh and Loke Siew Ting in a note on Tuesday.

Exports to China rose by RM60 billion (S$19.7 billion) or 9.3 per cent compounded annual growth between 2016 to 2020 while exports to the US grew RM28.6 billion (8.1 per cent). Exports to Singapore expanded by RM27.7 billion (5.6 per cent).

Key export products that rose markedly include electrical and electronics, mineral fuels, machinery and transport equipment. Exports of optical and scientific and rubber products also saw increasing demand from both the US and China following the pandemic.

Looking ahead, a recovery of global macro conditions will be the prime driver of actualised investments over the next two to three years. Other potential catalysts include the technology upcycle with the rollout of the 5G network and accelerated digital transformation.

The note also highlighted four emerging trends:

1. Regionalisation, localisation and near-shoring which will further decelerate globalisation.

2. Acceleration of digitalisation. This is fuelling strong, durable demand for semiconductor equipment, whereby Malaysia's exports of electrical and electronics products posted persistent gains even during the pandemic year.

3. Continued demand for critical medical supplies, devices and equipment. Malaysia's rubber products and optical and scientific equipment exports recorded higher exports to major trading partners over the past three years while exports of chemicals and chemical products (including pharmaceuticals) held at pre-trade tension level of around RM48 billion in 2020, despite the global recession last year.

4. Rise of green consumerism.

The report noted that challenges remain to strengthen Malaysia's investments and trade linkages and that policies should be aligned to the shifting global trends. "A holistic investment plan that engages investors to understand the issues hindering investments, improve investor services, and enhance the administration of investment incentives would help improve the investment climate," it added.