THE SILVER LINING
Driving The Malaysian Vision Forward
Political stability is the foundation for economic growth and this is a fact that has been proven and tested over time. There comes a time, however, when the political fracas matters less than the market drivers that are striving to push the nation towards its targets. Malaysia needs to move forward, by hook or by crook.
Faced with soft export demands and contraction over anticipated investments, the World Bank revised Malaysia’s growth forecast for 2020 to 4.5 percent in December 2019, lower than the initial projection of 4.6 percent. In addition, Bank Negara reveals that the country’s GDP skidded to a 10-year low of 4.3 percent in 2019.
With the changes in the nation’s political landscape, it becomes unclear what will be the focus of Malaysian economy in the coming years. However, it is evident that the nation needs to find a way to manoeuvre the subdued global growth and heightened uncertainties.
As the economy awaits directives from the federal government, it is business-as-usual for many corporations. With visions and targets of their own, industries in Malaysia are thriving at its own pace, to ensure not only business gains, but also to cement the country forward in all relevant economic sectors.
International Business Review looks to the future of Malaysia by highlighting some of the key industries that has, or will, elevate the country to new heights – the silver linings.
A Healthcare Marvel
Malaysia has long built a name for itself as the top international tourism destination. By virtue of the country’s natural wonders, ease of communication driven by a multicultural population, medical expertise, technological capabilities as well as affordability position Malaysia as the leading choice for healthcare travellers.
In fact, the country has been recognised by the International Medical Travel Journal (IMJ) Medical Travel Awards 2019 as the Health and Tourism Destination of the Year. The US-based International Living has also hailed Malaysia as the Best Country in the World for Healthcare.
The industry grew exponentially recording 17 percent growth during the three year period between 2015 and 2018. A total of 1.2 million healthcare travellers visited Malaysia in 2018, bringing in a revenue of RM1.5 billion for the industry.
Majority of healthcare travellers are from Indonesia, followed by other countries such as United Kingdom, India, Philippines, Bangladesh, China, Singapore, Australia, Japan and United States.
Malaysia rivals its neighbouring countries, Thailand and Singapore in leading medical tourism in the ASEAN region. Aside from the expertise of our surgeons, healthcare treatments in Malaysia offer cost-savings of 65 to 80 percent.
Owing to the stature and renown of the National Heart Centre (IJN) and the success rates of the country’s in vitro procedures of 55 to 60 percent, Malaysia aims to be Asia’s Fertility and Cardiology Treatment Hub.
In line with this aspiration, the Federal government has allocated RM25 million to boost Malaysia as the preferred destination for health tourism especially for oncology, cardiology and fertility treatment.
Campaigns to promote medical tourism works closely with the Visit Malaysia 2020 target of 30 million visitors for the year 2020. Currently, medical tourism industry contributes 7.6 percent of total tourism revenue.
According to Malaysia Healthcare Travel Council (MHTC), medical tourism industry is set to attract 2 million healthcare travellers, with a revenue of RM2 billion in hospital receipts and contributing RM8 billion to the country’s GDP in 2020.
The World Halal Hub
According to the Halal Development Centre (HDC), the halal market is worth US$3.1 trillion (RM13.74 trillion) in 2018. With year-on-year growth of 8 percent, the market is expected to grow to US$5 trillion (RM22 trillion) by 2030.
While the rest of the world is still demystifying the term “halal”, Malaysia has already established itself as a leader in this lucrative industry. Malaysian halal market is a US$68.4 billion (RM303 billion) industry and by 2030, it is expected to grow to US$113.2 billion (RM501.65 billion).
The industry contributes 7.8 percent to the country’s GDP with export values amounting to RM40.8 billion, leading to the creation of 350,000 jobs to date.
The halal food market alone is projected to reach US$1.9 million (RM8.42 million) by 2021. Malaysia has been at the forefront of enforcing halal certification, widely known as the most stringent and sought-after recognition programme with over 50 international bodies registered.
However, halal covers not only food and beverages (F&B), but is all-encompassing to include the syahriah-compliant manner of producing goods and services. Aside from F&B, the halal industry extends to lifestyle, travel, hospitality, fashion and cosmetics.
Malaysia is the only country with a comprehensive and integrated ecosystem to foster the development of the halal industry. For instance, HDC is the first Government-backed halal industry development corporation which is tasked with the development of the halal industry through creation of opportunities, investments, trade employment, information and technology transfer.
The Global Islamic Economy Report 2018/2019 estimates that Muslim spending on food, pharmaceutical and lifestyle sectors reached US$2.2 trillion (RM9.75 trillion) in 2018 and is expected to increase US$3.2 trillion (RM14.18 trillion) by 2024. With the growing Muslim population globally, coupled with increasing income levels and increasing demand for halal products and services, Malaysia is well positioned to leverage on the growth in demand in the industry.
Moving forward, HDC aims to meet the RM50 billion halal export target by year end as the organisation strives to position the country as the most competitive market leading the global industry forward.
Digitalising the Economy
Digital economy, despite being a term that is wide in its reach and breadth, can be summed up as the adoption of digital technologies to fuel economic activities, connectivity and transactions.
The drive towards a digital economy in Malaysia started in 1996 with the establishment of Multimedia Development Corporation (MDeC) and Multimedia Super Corridor (MSC) which were calculated efforts to promote the nation’s Information and Communications Technology (ICT) industry.
Over the years, Malaysia’s digital economy has experienced on average growth of 9 percent in value added terms between 2010 and 2016, at a faster rate that Malaysia’s overall GDP growth.
The industry generated a revenue of RM472 billion as of 2018 and has led to the creation of 182 thousand jobs. According to the Department of Statistics Malaysia (DOSM), the digital economy sector contributed 18.5 percent to the national economy in 2018, equivalent to RM267.7 billion in revenue.
In a report by Bain & Company, Google Trends and Temasek research, Southeast Asia’s internet economy has breached the US$100 billion mark back in 2019 and is expected to triple by 2025. With a 360 million internet users in the region, the Southeast Asian internet economy has grown from US$72 billion (RM319 billion) in 2018 to US$100 (RM443.15 billion) billion in 2019.
Therefore, it is imperative that Malaysia leverages on this booming industry. With 86 percent internet penetration rate and 28.7 million internet users in the country, there is clearly a demand for digital economy staples such as e-commerce, ride hailing and digital financial services.
The e-commerce sector alone contributed RM115.5 billion or 8 percent to the country’s GDP in 2018, according to DOSM and is expected to only increase in 2020.
However, the e-Conomy SEA 2019 report notes that despite growth in internet economy for Malaysia has been rising led by the thriving e-commerce industry, Malaysia experiences lower levels of funding compared to its counterparts in Indonesia, Singapore and Vietnam.
In comparison, Indonesia and Vietnam are leading the pack with growth rates of 40 percent annually as a result of investments attracted and higher involvement rate of SMEs. Nevertheless, a recent study by FedEx revealed that Malaysian SMEs has a high adoption rate of digital economy platforms, ranking fourth among APAC countries.
Moving forward, the country is looking to further develop its digital ecosystem driven technological trends such as Internet of Thing (IoT) and Big Data.
The National IoT Strategic Roadmap was revealed with the objective to create a conducive IoT industry ecosystem. By 2020, the IoT is expected to create a GNI of RM1.7 billion and create 14,270 jobs.
Waves of Progress
Despite trade tensions and uncertain economic conditions, Malaysia continues to register a trade surplus of RM137.39 billion in 2019, in comparison to RM123.78 billion in 2018. According to MATRADE, this is the largest trade surplus registered by the country since 2009.
A total volume of 793 million TEUs were handled in ports worldwide in 2018, according to United Nations Conference on Trade and Development (UNCTAD). 24.9 million TEUs were handled by Malaysian ports – a 5 percent increase from 2017 numbers. In Southeast Asia, Malaysia lags only behind Singapore, which recorded container port traffic of 36.6 million TEUs.
Malaysian ports have made a name for itself on the global scene. Malaysia is ranked 5th in liner shipping connectivity and 19th in efficiency of seaport services in World Economic Forum (WEF) 2019 Global Competitiveness Ranking Report.
On the other hand, Port Klang is positioned 12 in World Container Ports ranking. As the country’s leading port, it handled a total of 12.3 million TEUs in 2018, a 2 percent increase from the previous year and more than 50 percent of overall TEUs handled by Malaysian ports.
In order to be catch up with the likes of Singapore – the reigning maritime hub of Southeast Asia, Malaysia has to enhance its competitiveness and resilience of its shipping industry.
Currently, the industry is led by the Malaysia Shipping Masterplan 2017- 2022 which aims to formulate a blueprint to realise the potentials of the Malaysian shipping industry as a vital part of the national development.
However, it is evident that Malaysian ports are riding their own waves of progress. By 2040, Port Klang plans to increase its capacity to 30 million TEUs per annum, 50 percent increase from its current capacity. Port of Tanjung Pelepas seeks to increase its capacity to accommodate 30 million TEUs by 2030. Westports RM10 billion expansion will increase its capacity to 30 million TEUs over the next 30 years, having breached its first 10 millionth TEU last December.
The outbreak of novel coronavirus has led to disruption in supply chains across key industries all over the globe. The pandemic adds to the multitude of challenges that await Malaysia, as it also becomes unclear whether the various segments of the economy will achieve their set targets by 2020. In such uncertainties, relevant entities in the country have to take the front seat in ensuring that the country continues with its best foot forward. We are clinging to the light at the end of the tunnel, now more than ever.