Making Malaysia great in trade

KUALA LUMPUR: Time passes by so fast that it almost feels like a year has passed in a blink of an eye and we are just days away from the new year. Looking back, the year 2022 was truly an outstanding milestone for Malaysia's trade. As Malaysia’s trade promotion organisation, Malaysia External Trade Development Corporation (MATRADE) is proud of the country’s achievement in international trade, and with a comprehensive understanding of how Malaysia’s trade has transformed through time, we will continue progressing the nation’s economic resiliency.

Our nation, a trading nation

Malaysia has always been historically associated with international trade. Our potential as a trading nation has been evident since the era of the Malaccan Sultanate. After Malaya gained its independence in 1957, our international trade continued to flourish through exports, thanks to our enormous resources in the commodity sector, particularly tin and rubber. It was in the 1960s that the commodity sector was acknowledged as the foundation of the economy, enabling Malaysia to progress economically and better realise the goals of the National Economic Policy, which had been put in place in the early 1970s.

We cultivated the capabilities of our local Micro, Small and Medium Enterprises (MSMEs) through the transfer of knowledge and technology as we welcomed more foreign direct investments since the early 1970s, particularly in the Electrical & Electronic (E&E) sector, strengthening the already burgeoning entrepreneurial culture among Malaysians. Undoubtedly, this spurred a major impetus for our reputation as an economic tiger of ASEAN at the time being one of the founding members of the regional grouping.

MATRADE was founded to capitalise on the surge in global trade and was established in March 1993 to assume responsibility as the national trade promotion agency in promoting Malaysian products and services into the international market. MATRADE’s origin actually stemmed from the Malaysian Export Trade Centre or MEXPO - an International Trade Division of the Ministry of International Trade and Industry (MITI), with a permanent exhibition centre located at the PKNS building in Jalan Raja Laut, Kuala Lumpur in the mid 80’s. The creation of a trade promotion organisation similar to JETRO in Japan is urgently needed given the high demand in introducing our ‘Made in Malaysia’ brands into the global markets.

Throughout the 1990s, Malaysia’s export grew steadily and became one of the major global exporters of E&E components as well as other manufactured goods such as value-added products of rubber, timber, palm oil and chemicals.

Creating homegrown export champions

In the current context, considering various political and geopolitical situations including market conditions and of course, the pandemic, Malaysia is among the world’s top-25 trading nations and ranked in the top-5 for ASEAN countries. As other developing countries become more competitive and Malaysia is no longer seen as a manufacturing hub with inexpensive labour, Malaysia’s trade ranking has undoubtedly declined compared to 20 years ago. Despite this, we have made great strides in our capabilities, making history in 2021 when Malaysia’s trade reached the RM2 trillion mark for the first time, barely a year after the COVID-19 epidemic.

This year, according to the latest figure published by the Department of Statistics of Malaysia, for the period of January to November 2022, Malaysia’s trade has expanded by close to 30% to RM2.613 trillion. Within this period, exports increased by 27.2% to reach RM1.42 trillion while imports rose by 33.3% to RM1.193 trillion. Trade surplus edged up by 2.6% to RM227.89 billion.

However, this is not a reason to rest on our laurels. We must continue our concerted efforts to ensure Malaysian MSMEs remain a part of the global supply chain and be prepared for any adverse changes in global economic conditions. MATRADE is placing a strong emphasis on high-value industries, developing access into new and emerging markets and creating partnerships that are in line with MATRADE’s key pillars - digitalisation, adopting values of sustainability and to be guided by the National Trade Blueprint (NTBp). We should be proud that we have strengths in high-value industries like E&E, Machinery & Equipment, Aerospace, Halal, Medical Devices, Pharmaceuticals, Healthcare, Construction, Chemicals, and Energy, to name a few, for a country with only 33 million people.

As I mentioned earlier, foreign investments in Malaysia played a significant role in the growth of Malaysia's trade over the last few decades. This is still very much the case, but it is also important to highlight that our own MSMEs contributed 37.4% of Malaysia’s GDP and 11.7% to overall Malaysia’s exports for 2021. Nonetheless, we still need to pursue the goal of a 25% contribution by MSMEs to the nation’s export by 2025 as set under the 12th Malaysia Plan and the National Entrepreneurship Policy (DKN).

Along with the advancement of technology, cross-border e-Commerce opportunities are also growing. Hence, it is vital for Malaysian MSMEs to adopt digitalisation to be more competitive globally. In 2021, Gross Value Added of eCommerce amounted to RM201.1 billion, an increase of RM37.2 billion in 2021 with a growth of 22.7%.

In the same vein, we must also recognise our Mid-Tier Companies (MTCs) significant efforts in contributing 30% of the GDP and 22% of our Malaysian workforce. Despite making up only 1% of businesses in Malaysia, MTCs play an important role in developing a competitive domestic supply chain, where 75% or more than 7,000 SMEs are involved in the MTCs export supply chain.

These achievements are testament to the success of MATRADE’s programmes in both capacity-building and trade promotion. These capacity-building initiatives generate a pool of exporters that are later promoted into the international markets through various export promotion programmes abroad led by MATRADE’s network of 46 trade offices around the world.

In the first 11 months of 2022, MATRADE has facilitated 2,266 companies through its Market Development Grant; 486 companies through the eTRADE 2.0 programme; trained 7,999 individuals through its exporters training programmes; assisted 2,681 companies to access into the global markets through various export promotion activities implemented namely participation in trade fairs, international sourcing programmes, eBizMatch as well as eBizLink programmes. MATRADE also produced countless market intelligence reports gathered from its global networks. These reports can be accessed by myExport registered users.

World-renowned trade promotion organisation

As a testament to the success in pivoting the impact of the pandemic, the 17th edition of MATRADE’s flagship annual event – the Malaysia International Halal Showcase (MIHAS) in 2021 had earned its first World Trade Promotion Organisation (WTPO) Award under the “Best Use of Information Technology” category, for MATRADE’s innovative approach in organising a fully virtual showcase. MIHAS 2021 was also recognised at the Malaysia Public Relations Awards (MPRA) 2021, clinching the Gold Award in the Best “Pandemic Pivot” or “COVID-19 Communications” campaign category adding another feather to the cap.

The 18th edition of MIHAS in 2022 once again delivered a record-breaking showcase, generating a total of RM2.36 billion in sales, surpassing its original target of RM1.9 billion. It was organised in a hybrid approach, following the reopening of borders whilst adhering to the COVID-19 safety measures.

Through MIHAS, MATRADE continues to fortify Malaysia as the heart of the global Halal hub. In this regard, businesses must realise the vast opportunities available in the international halal market and strive to capitalise on them. MATRADE is ready to assist Malaysian exporters to tap into the opportunities of the global Islamic economy, which is estimated to reach USD2.8 trillion by 2025.

The upcoming edition - MIHAS 2023 - will be held from 12 to 15 September 2023 at the Malaysia International Trade and Exhibition Centre (MITEC), Kuala Lumpur. Close to 400 booths have already been reserved by this year’s exhibitors, which reflects MIHAS’ positive rapport as a trade event.

Future-proofing Malaysia’s trade

The requirement to compete in international markets has changed significantly over the past few years. Buyers no longer base their decisions on price solely. Policymakers, numerous stakeholders, and consumers now have different expectations and are more concerned about the significance of adopting sustainability measures. Our exporters must invest in developing sustainable export strategies that promote and adopt ESG principles in their production process and global supply chains to meet changing market requirements.

Therefore, it is imperative that MSMEs development programmes are catered to help MSMEs become globally competitive. Business governance and operations including community care must be centred on socioeconomic trends. Our MSMEs need the relevant certifications, standards, labelling and global endorsement in order to compete on a global scale and in high-value markets. To do this, we must keep up our effective facilitation while pragmatically modifying some programmes to fully realised our global potential in the current economic climate.

Our MSMEs must be prepared for the digital age, which goes beyond simply having websites and includes exposing them to cutting-edge technology like the metaverse. Another key area is eCommerce marketing, which is fast becoming a necessity for companies to remain relevant. At MATRADE, we have long introduced a programme called the eTrade Programme (now eTrade 2.0) to expedite the learning and adoption of eCommerce marketing as a tool to export among our MSMEs.

We must develop new capabilities in order to further diversify our strengths. With regard to international trade, MATRADE urges all relevant parties to work with us to develop new areas of strength such as the services sector and environmentally friendly and highly innovative sectors. Currently, MATRADE has forged high-value partnerships with industry players across various segments namely, Google, DHL Express, CIMB, MGTC, SIRIM and Bank Islam, among many others.

As a way to acknowledge the contributions of Trade Associations and their crucial responsibilities as a conduit for information between the public and private sectors, MATRADE launched the Empower Trade Association Programme (ETA) this year. Trade associations actually have played a major role in encouraging exports among their members. In addition to exploring new markets, we offered support and incentives through the ETA for the promotion of high-tech, high-value and sustainable industries to help more Malaysian businesses access the global value chain. We believe the ETA will also expand bilateral or regional ties between Malaysia and our partner nations and will build extensive networks between Trade Associations in Malaysia and its counterparts overseas.

As Malaysia endeavours to strengthen existing partnerships and forge new ones with nations in the region, our nation’s commitment to free trade and open economies will bolster Malaysia's capabilities to compete in the international market and ensure economic prosperity for years to come.

Pragmatic moves ahead

Malaysian businesses have proven their agility and tenacity by adapting their production and export strategies in response to shifting market conditions. Malaysia has a number of advantages that have helped it rise to the top, most notably a robust manufacturing sector and a prime location between East and South-East Asia. The presence of Malaysian businesses in the global supply chain contributes to its stability and Malaysia can undoubtedly continue to solidify its position as a strong and reliable trading nation. Malaysia can benefit from opportunities brought about by greater globalisation and regional economic integration through Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by utilising its strategic location.

Additionally, globalisation has immense potential for Malaysia, offering wider access to markets, investment and resources to facilitate Malaysia’s economic growth. MATRADE will continue to take the lead in helping Malaysian companies to access international markets and capitalise on the benefits of globalisation.

As Malaysia continues to pursue greater international trade, there are many opportunities that can be leveraged over the next three to five years. Malaysia will see a surge in demand for its products and services, provided we address the readiness of our companies and be pragmatic in our market access approach. Malaysia’s move to position itself at the forefront of the digital economy, by leveraging its expertise in technology, communications infrastructure and local knowledge will be a key catalyst to the country’s export growth.

Most initiatives in Malaysia are focused on providing better access to resources such as finance, technology, skills and talent, and these efforts help to improve Malaysia's infrastructure and connectivity to the global economy. We must continue to strengthen our presence in international trade through the World Trade Organisation (WTO) and other regional organisations as well as encourage the use of Free Trade Agreements (FTAs) as an instrument to boost market access.

Malaysia must also be ready for changes in the nature of international trade, such as growing tariffs, protectionism and production costs. We must work concertedly to make sure that its trade laws are adaptable to these developments and that Malaysia is in a good position to take advantage of emerging opportunities in global trade, such as the digitalisation of processes, blockchain technology and eCommerce platforms.

Finally, our companies must continue to invest in their human capital and foster innovation through education and training. Investments in upskilling its workforce will help Malaysian companies remain competitive by developing innovative skills and technologies to strengthen its position in both the domestic and international markets. Malaysia must also keep its commitment to sustainable development, which is essential for the country's long-term development and success in the rapidly evolving global trade environment.

I wish to reassure our Malaysian companies that MATRADE will continue to help them access the world markets while also facilitating them in adapting to and benefitting from new market opportunities and conditions. We are confident that our exporters will be the best bridge to articulate Malaysia’s value propositions that resonate with world demands. I am also sure, with all the strategies and tactical approaches in place, we can make Malaysia great in trade.

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** Datuk Mohd Mustafa Abdul Aziz is the Chief Executive Officer of MATRADE

** The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.