Malaysia Says Asean is a Winner From Shifting Supply Chains


Malaysia and the broader 10-country Asean have emerged as the biggest beneficiaries of the supply chain realignment caused by rising United States-China tensions, according to Malaysia’s Minister of Investment, Trade and Industry Tengku Zafrul Tengku Abdul Aziz.

“There are challenges in the longer term, but in the short term we need to be opportunistic,” Datuk Seri Zafrul said in an interview with Bloomberg TV’s anchor Rishaad Salamat on Thursday, referring to businesses looking for a neutral supply chain base.

“People are looking at re-shoring and friend-shoring,” he said on the sidelines of the 10th Milken Institute Asia Summit in Singapore.

As the geopolitical divide between the world’s two biggest economies grow, Malaysia is positioning itself as that neutral base as it looks to lure the likes of Microsoft Corp and Alphabet Inc’s Google.

The South-east Asian nation secured approved investments of RM71.4 billion (S$20.75 billion) in the first three months of 2023, up 60 per cent from the year-earlier period.

“We’re seeing the realignment of supply chain because of what’s happening – the trade war, the tightening of monetary policy, inflation,” Mr Zafrul said, adding that it “has actually benefited our region, Asean in particular and Malaysia as well.”

Malaysia and Indonesia are the top destinations of companies seeking to enter a new market in South-east Asia, according to a study by HSBC Holdings. A quarter of the firms surveyed with no presence in Malaysia plan to expand there in the next two years, led by mainland China and the US.

Mr Zafrul cautioned that the slowdown in the world’s No. 2 economy may weigh on the South-east Asian nation’s activity, given China’s position as Malaysia’s top trading partner as well as a key source of foreign direct investment.

Winning more investments is key for trade-reliant Malaysia to offset the slowdown in demand for goods, which has seen its exports shrink for five straight months through July. That contributed to Malaysia’s economy expanding at the slowest pace in nearly two years in the second quarter of 2023.

Malaysia earlier this month unveiled a RM95 billion plan to grow and transform its manufacturing sector over seven years to boost contributions to its economy. Interventions will focus on high impact areas such as electronics, electric vehicles, aerospace, pharmaceutical, minerals and metal. 

Source: The Straits Times