Exporting to Malaysia - Market OverviewMalaysia - Market Overview
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For centuries, Malaysia has profited from its location at a crossroads of trade between the East and West, a tradition that carries into the 21st century. Geographically blessed, peninsular Malaysia stretches the length of the Strait of Malacca, one of the most economically and politically important shipping lanes in the world.
Capitalizing on its location, Malaysia has been able to transform its economy from an agriculture and mining base in the early 1970s to a relatively high-tech, competitive nation, where services and manufacturing now account for 74 percent of GDP (52 percent in services and 22 percent in manufacturing in 2016). Malaysia’s 2017 GDP growth is expected to be between 4.3-4.8 percent, while its 2016 GDP growth was 4.2. Prior to this, Malaysia’s GDP growth in 2015 was at about five percent, six percent in 2014, and 4.7 percent in 2013. Malaysia is an oil and gas producing country and has been facing economic headwinds from declining oil and gas prices.
Malaysia’s currency, the Ringgit has experienced downward pressure over the past few years. In 2013, the average exchange rate for the Malaysian Ringgit against the US Dollar was US$1=RM3.12. In 2014, US$1=RM3.30. In 2015, it was US$1=RM3.90. For 2016, it averaged around RM4.12. The exchange rate for the month of May 2017 hovered around RM4.30 to US$1. The lower exchange rate has impacted Malaysia’s economy and the government has been taking financial policy steps to strengthen its currency. The weaker ringgit and slower growth have dampened consumer sentiment and spending throughout 2016 and into early 2017. In Q2 2017, the Malaysian Ringgit strengthen slightly against the US dollar.
Despite the fact the Malaysian economy is facing some turbulence; it is worthwhile to note that according to the International Monetary Fund World Economic Outlook Projection (Oct 2016), Malaysia’s per capita income was US$9546 (world ranking 66/189 economies) and its Purchasing Power Parity (PPP) was US$27,234,080 (world ranking 48). Its purchasing power per capita is among the third highest in ASEAN, after Singapore and Brunei.
Malaysia’s level of economic development drives both consumer and business demand for products and services. Its consumers, though price sensitive, are accustomed to several decades of strong growth. Thus, they are attracted to and are familiar with international branded products, better education, quality healthcare products and services, as well as ecological lifestyle offerings.
By December 2016, Malaysia reported it population size to be 31.7 million. According to Bank Negara Malaysia (Malaysia’s Central Bank), Malaysia’s 2016 GDP is RM1,230,121 million (US$298,573 million); while in 2015 it was valued at RM1,062,805 million (US$272.5 million); whereas its 2014 GDP was RM1,012,506 million (US$306,820 million). The World Bank classifies Malaysia as an upper-middle income nation. The average foreign exchange rate for 2014 was US$1=RM3.3; 2015 was US$1= RM3.90. For 2016, foreign exchange was RM4.12. Malaysia’s total trade for 2016 was $358 billion. This is a 4.5 percent decrease in value compared to 2015.
Malaysia’s top trading partners:
|United States||9.2 percent|
|South Korea||4 percent|
|Hong Kong||3.4 percent|
According to the Bureau of Economic Analysis, there was a 154 percent increase in Malaysia’s Foreign Direct Investment (FDI) into the United States between 2010-2015. In 2015, Malaysia’s the cumulative FDI into the United States was US$1,613 million.
In 2014 (latest available data), U.S. affiliates of Malaysian-owned firms employed 2,700 U.S. workers. In 2014, U.S. affiliates of majority Asian and Pacific-owned firms spent US$10.5 billion on research and development (R&D), and contributed US$116.9 million to U.S. goods exports expansion. The top six industry sectors of the Malasyian FDI are from financial services, metals, hotels & tourism, semiconductors, and electronic components.
Top reasons why U.S. companies should consider exporting to MalaysiaThere are numerous reasons why U.S. companies should consider exporting to Malaysia. These include the widespread use of English, the ability to repatriate capital and profits, a well-established legal framework, excellent infrastructure, and an affinity for United States products. In addition, a high rate (approximately 96 percent) of U.S. visa approvals and a 10-year maximum validity visa make it easy for your business partners to travel to the United States.
The U.S. has formally withdrawn from the Trans-Pacific Partnership Agreement (TPP). There are indications that the remaining eleven signatories of TPP plan to move forward with TPP without the United States. The remaining eleven signatories of the TPP are: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and Japan.
The United States is in favor of bilateral trade agreements over multilateral and it will continue to engage with the Asia-Pacific Economic Cooperation (APEC) countries.
Malaysia is negotiating a Regional Comprehensive Economic Partnership (RCEP), which is a free trade agreement (FTA) between the ten ASEAN members and six countries where ASEAN have existing FTAs. The goal of the RCEP is a more comprehensive regional economic integration among its members. The RCEP also aims to simplify and harmonized the RCEP member countries’ respective bilateral FTAs.
The RCEP members are: Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam.
Malaysia’s trade to the RCEP parties represents 62 percent (USD221.7 billion) of the nation's global trade in 2016. The RCEP agreement negotiation is expected to be finalized by the end of 2017. If the RCEP is accepted, it will be Malaysia’s largest multilateral agreement.
Malaysia Trade Development and Promotion