Transcript The future of Malaysian exports

Future Outlook of Malaysia’s
Export Performance
2nd NATIONAL EXPORT FORUM 2008
Steven C.M. Wong*
Institute of Strategic and International Studies
(ISIS) Malaysia
* The opinions expressed are solely those of the speaker
Future Outlook of Malaysia’s
Export Performance
OUTLINE
Present status
• Short-term outlook
• Medium- to longer-term horizon
• Conclusions
Future Outlook of Malaysia’s
Export Performance
PRESENT STATUS
• Strong growth in export value since 2001
• Manufactured products account for more than 75%, and electrical and
electronics about 45%, of total exports
• ASEAN countries, particularly Singapore, Thailand, Indonesia and Vietnam,
represent a quarter of the total export market
• The US is the largest single market (16%), followed by the EU countries (13%)
and Mainland China (9%) and Japan (9%)
• Fastest growing markets have been those of ASEAN, Northeast Asia and the
South
• Exports to US, comprising mainly E&E products, have been tapering off and
begun to show decline
Future Outlook of Malaysia’s
Export Performance
TOTAL EXPORT VALUE, 2000-2007(e)
601(e)
2007
589
2006
2005
534
2004
481
2003
398
2002
357
2001
334
373
2000
0
100
200
300
400
RM bn
500
600
700
Future Outlook of Malaysia’s
Export Performance
MAJOR EXPORTS, 2007(e)
Machinery appliances & parts
22.3
Refined petroleum products
22.7
Liquified natural gas
25.9
Crude petroleum
32.8
Chemicals & chem. products
33.1
Palm oil
36.4
265.2
Electrical & electronic products
RM bn
Future Outlook of Malaysia’s
Export Performance
MAJOR EXPORT MARKETS, 2007(e)
US
16 %
EU
13 %
J a pa n
9%
C hina
9%
A SEA N
25%
O t he rs
12 %
A us t ra lia
3%
H o ng Ko ng
5%
Ko re a
4%
We s t A s ia
4%
Future Outlook of Malaysia’s
Export Performance
GROWTH OF MAJOR EXPORT MARKETS, 2000-2007(e)
50,000
16,000
45,000
14,000
40,000
12,000
China
(RHS)
Japan
35,000
(RHS)
10,000
30,000
ASEAN
25,000
20,000
8,000
US
15,000
6,000
Korea
(RHS)
EU
4,000
10,000
2,000
5,000
0
0
2000
2001
2002
2003
2004
2005
2006
2007
Future Outlook of Malaysia’s
Export Performance
SHORT-TERM OUTLOOK
Exports to the US look increasingly vulnerable, with high risks (not certainty) of
an economic recession
• The combined impact on Malaysian exports could be substantial taking into
account parts & component (P & C) trade with the US as the final destination
market
• Compounding the uncertainty is the price-quantity effect of appreciated Asian
currencies on US demand
• De-coupling scenarios only work if domestic absorption is substantially and
simultaneously increased in the Rest of the World
• East Asian countries are investing too much and consuming too little Economic
integration of East Asia is production-oriented and not consumption-based.
Future Outlook of Malaysia’s
Export Performance
SHORT-TERM OUTLOOK
Share of IntraRegional Mfg in
Total Regional Mfg
Exports + Imports
1993
2005
Share of Intra-Regional Mfg in
Total Regional Mfg Trade
Exports
1993
Imports
2005
1990
2005
East Asia
47.3
54.0
40.0
44.4
46.9
68.9
NAFTA
40.0
40.7
46.9
51.5
34.8
33.7
EU-15
66.2
59.0
66.9
58.2
65.5
59.8
Future Outlook of Malaysia’s
Export Performance
SHORT-TERM OUTLOOK
Share of intraregional in
Total trade
(Exports + Imports)
1993
2005
Share of intra-regional trade
Parts and
Components
1993
Finished
Goods
2005
1990
2005
East Asia
47.3
54.0
51.0
67.1
46.2
47.5
NAFTA
40.0
40.7
45.0
44.3
38.1
39.5
EU-15
66.2
59.0
64.7
56.3
66.5
59.7
Future Outlook of Malaysia’s
Export Performance
SHORT-TERM OUTLOOK
• Intra-regional trade is concentrated. Just 30 exports account for 50% of total
trade, primarily office machinery, telecommunications, electronics, textiles and
clothing.
• Intra-regional trade is parts and components-driven and China-centred.
International production sharing has driven intra-regional trade, with Japan,
Korea and Taiwan being major suppliers and China being the production
platform.
• Studies show before there is a sharp increase of East Asian exports to the US,
intra-regional trade rises. An increase in Japanese exports to the region also
leads to higher exports to the US.
Future Outlook of Malaysia’s
Export Performance
SHORT-TERM OUTLOOK
Future Outlook of Malaysia’s
Export Performance
MEDIUM- TO LONGER-TERM HORIZON
Structural Factors Likely to Affect Malaysian Exports
Producers
• Industrial restructuring
• Business outsourcing
• Distribution
• Technology
• Knowledge, design
• New entrants
• Corporate social
responsibility
Consumers
• Lower consumer choice
• Cost conscious
• Time sensitive
• Quality, performance,
value
• Information, services
• New consumers
• Environment, security,
politics, etc.
Markets
• Imperfect competition
• Globalised
• Borderless
• Convergence
• Trade in services
• New trade hubs &
regimes
• Government regulations
Future Outlook of Malaysia’s
Export Performance
MEDIUM- TO LONGER-TERM HORIZON
Specific Factors Likely to Affect Malaysian Exports – (1)
• Trade creation from China, India, Vietnam & other rapidly growing economies
(+ve)
• Regional economic integration via Asean Economic Community and Plus One
(and possibly Plus Three, Plus Six) countries (+ve)
• Displacement effects in third markets as a result of competition from emerging
economies (-ve)
• Spill-over/exclusion effects from third-party regional trading arrangements (?)
• Stable exchange rate and macroeconomic regime (+ve)
• Integration of export-sector with domestic economy
Future Outlook of Malaysia’s
Export Performance
MEDIUM- TO LONGER-TERM HORIZON
Specific Factors Likely to Affect Malaysian Exports – (2)
• Generating investments in targeted growth areas (IMP3)
• Integrating Malaysian companies into regional and global networks (IMP3)
• Sustaining the contribution of manufacturing sector to growth (IMP3)
• Positioning services as a major source of growth (IMP3)
• Facilitating development and application of knowledge-intensive technologies
(IMP3)
• Developing innovative and creative human capital (IMP3)
• Creating a more competitive business-operating environment (IMP3)
• Strengthening the role of private sector institutions (IMP3)
Future Outlook of Malaysia’s
Export Performance
MEDIUM- TO LONGER-TERM HORIZON
Most Favoured
Nation
Preferential Trading
Arrangement
Free Trade
Area
Customs
Union
Free
Trade Area Plus
Economic
Union
Common
Market
Future Outlook of Malaysia’s
Export Performance
MEDIUM- TO LONGER-TERM HORIZON
Regional Trading Arrangements
• ASEAN Free Trade Area ~ 2010/2015
• ASEAN – India ~ ?
• ASEAN - China ~ 2010/2015
• ASEAN – Australia/New Zealand ~ ?
• ASEAN - Japan ~ 2012/2017
• East Asian Free Trade Area ~ ?
• ASEAN - Korea ~ 2012/Unstated
• Comprehensive Economic
Partnership in East Asia (CEPEA) ~ ?
• ASEAN Economic Community ~ 2015
• European Union ~ ?
Future Outlook of Malaysia’s
Export Performance
CONCLUSIONS
• Challenging short-term environment
• Total de-coupling scenario is unlikely
• Exact depth and duration of impact will depend on individual & collective
actions
• Longer-term structural changes also require attention
• National and regional supply-side strategies and initiatives are in place
and hinge on implementation effectiveness
• The extent to which they respond to demand-side changes, including
those of importing country governments, remain to be seen
• Given speed of change, policy action deficits should be felt quickly on
national welfare