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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 Future Outlook of Malaysia’s Export PerformanceExport Performance
OUTLINE
Present status
• Short-term outlook
• Medium- to longer-term horizon
• Conclusions
Future Outlook of Malaysia’s Future Outlook of Malaysia’s Export PerformanceExport 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 Future Outlook of Malaysia’s Export PerformanceExport Performance
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
373
334
357
398
481
534
589
601(e)
0 100 200 300 400 500 600 700
2000
2001
2002
2003
2004
2005
2006
2007
RM bn
TOTAL EXPORT VALUE, 2000-2007(e)
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
265.236.4
33.1
32.8
25.9
22.7
22.3
Electrical & electronic products
Palm oil
Chemicals & chem. products
Crude petroleum
Liquified natural gas
Refined petroleum products
Machinery appliances & parts
RM bn
MAJOR EXPORTS, 2007(e)
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
J apan9%
EU13%
US16%
ASEAN25%
Others 12%
China9%
Korea4%
Hong Kong5%
West Asia4%Australia
3%
MAJOR EXPORT MARKETS, 2007(e)
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
ASEAN
US
EU
Japan(RHS)
China(RHS)
Korea(RHS)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2000 2001 2002 2003 2004 2005 2006 2007
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
GROWTH OF MAJOR EXPORT MARKETS, 2000-2007(e)
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 Future Outlook of Malaysia’s Export PerformanceExport Performance
SHORT-TERM OUTLOOK
Future Outlook of Malaysia’s Future Outlook of Malaysia’s Export PerformanceExport Performance
Share of Intra-Regional Mfg in
Total Regional MfgExports + Imports
Share of Intra-Regional Mfg in Total Regional Mfg Trade
Exports Imports 1993 2005 1993 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
SHORT-TERM OUTLOOK
Future Outlook of Malaysia’s Future Outlook of Malaysia’s Export PerformanceExport Performance
Share of intra-regional inTotal trade
(Exports + Imports)
Share of intra-regional trade
Parts andComponents
FinishedGoods
1993 2005 1993 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
SHORT-TERM OUTLOOK
Future Outlook of Malaysia’s Future Outlook of Malaysia’s Export PerformanceExport Performance
• 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.
SHORT-TERM OUTLOOK
Future Outlook of Malaysia’s Future Outlook of Malaysia’s Export PerformanceExport Performance
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
Structural Factors Likely to Affect Malaysian Exports
Producers Consumers Markets• Industrial restructuring• Business outsourcing• Distribution• Technology• Knowledge, design• New entrants• Corporate social responsibility
• Lower consumer choice• Cost conscious• Time sensitive• Quality, performance, value• Information, services• New consumers• Environment, security, politics, etc.
• Imperfect competition• Globalised• Borderless• Convergence• Trade in services• New trade hubs & regimes• Government regulations
MEDIUM- TO LONGER-TERM HORIZON
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
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
MEDIUM- TO LONGER-TERM HORIZON
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
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)
MEDIUM- TO LONGER-TERM HORIZON
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
MEDIUM- TO LONGER-TERM HORIZON
Economic Union
Common Market
Free Trade Area
Preferential Trading Arrangement
CustomsUnion
Free Trade Area Plus
Most Favoured Nation
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
MEDIUM- TO LONGER-TERM HORIZON
Regional Trading Arrangements• ASEAN Free Trade Area ~ 2010/2015
• ASEAN - China ~ 2010/2015
• ASEAN - Japan ~ 2012/2017
• ASEAN - Korea ~ 2012/Unstated
• ASEAN Economic Community ~ 2015
• ASEAN – India ~ ?
• ASEAN – Australia/New Zealand ~ ?
• East Asian Free Trade Area ~ ?
• Comprehensive Economic Partnership in East Asia (CEPEA) ~ ?
• European Union ~ ?
Future Outlook of Malaysia’sFuture Outlook of Malaysia’sExport PerformanceExport Performance
• 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
CONCLUSIONS
