Malaysia and the broader 10-country Association of Southeast Asian Nations have emerged as the biggest beneficiaries of the supply chain realignment caused by rising US-China tensions, according to Trade Minister Zafrul Abdul Aziz.
(Bloomberg) — Malaysia and the broader 10-country Association of Southeast Asian Nations have emerged as the biggest beneficiaries of the supply chain realignment caused by rising US-China tensions, according to Trade Minister Zafrul Abdul Aziz.
“There are challenges in the longer term, but in the short term we need to be opportunistic,” Zafrul said in an interview with Bloomberg TV’s Rishaad Salamat Thursday on the sidelines of the 10th Milken Institute Asia Summit in Singapore, referring to businesses looking for a neutral supply chain base. “People are looking at re-shoring and friend-shoring.”
As the geopolitical divide between the world’s two biggest economies grow, Malaysia is positioning itself as just that neutral base as it looks to lure the likes of Microsoft Corp. and Alphabet Inc.’s Google. The Southeast Asian nation secured approved investments of 71.4 billion ringgit (about $15 billion) in the first three months of 2023, up 60% from the year-earlier period.
“We’re seeing the realignment of supply chain because of what’s happening — the trade war, the tightening of monetary policy, inflation,” Zafrul said, adding that it “has actually benefited our region, Asean in particular and Malaysia as well.”
Malaysia and Indonesia are the top destinations of companies seeking to enter a new market in Southeast Asia, according to a study by HSBC Holdings Plc. A quarter of the firms surveyed with no presence in Malaysia plan to expand there in the next two years, led by mainland China and the US.
Zafrul cautioned that the slowdown in the world’s No. 2 economy may weigh on the Southeast Asian nation’s activity, given China’s position as Malaysia’s top trading partner as well as a key source of foreign direct investment.
Winning more investments is key for trade-reliant Malaysia to offset the slowdown in demand for goods, which has seen its exports shrink for five straight months through July. That contributed to Malaysia’s economy expanding at the slowest pace in nearly two years in the second quarter of 2023.
Malaysia earlier this month unveiled a 95 billion ringgit plan to grow and transform its manufacturing sector over seven years to boost contributions to its economy. Interventions will focus on high impact areas such as electronics, electric vehicles, aerospace, pharmaceutical, minerals and metal.
–With assistance from Cecilia Yap.
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