Malaysia attracts a number of our clients with its large, literate, young and largely urban population, which equates to a healthy labour market. Foreign workers and businesses are relatively safe as Malaysia has lower crime rates than most other emerging market economies in Asia. Companies also benefit from the country’s high quality transport network, with well connected ports via inland transport to major economic hubs and neighbouring countries.
Our coverage, using our unique Total Analysis model, ensures that our clients make sound, risk-assessed decisions in Malaysia. We keep our clients informed of the latest market moves and political developments, supported by our interactive data and forecasting. Clients also benefit from in-depth analysis of 23 of Malaysia’s most important industries, as part of our 'top-down' and 'bottom-up' perspective. We aim to keep you, as one of our clients, always one step ahead in Malaysia.
Malaysia Country Risk
Ongoing weakness in the Chinese economy and domestic headwinds will continue to weigh on Malaysia's economic growth. However, we expect accommodative monetary and fiscal policies to lend some support to the economy, and we forecast 2016 real GDP growth to come in at 4.5%.
The relatively successful implementation of GST in April 2015 and ongoing efforts to strengthen the revenue collection system bode well for Malaysia's fiscal position even as petroleum revenues continue to fall. With GST's share of government revenue increasing slowly, we maintain our forecast for the country's 2016 fiscal deficit to come in at 3.1% of GDP, and note that Malaysia remains on the path of gradual fiscal consolidation.
In line with expectations, BNM kept its OPR steady at 3.25% during its May 19 monetary policy...
Malaysia Operational Risk Coverage (9)
Malaysia Operational Risk
Malaysia Operational Risk
BMI View: Malaysia is among the most attractive countries in the Asia region as a location for investment and a base of operations. Economic growth is set to slow in the medium term; however, the fundamentals are looking strong, and we expect a buoyant economy to drive trade flows and increase the attractiveness of the country as an investment location. This will be further supported by the fact that the government adopts a welcoming attitude towards foreign direct investment (FDI) into most sectors and has established policies that have lowered the burden of bureaucracy, promoted ICT activity and intellectual property rights (IPR) protection, and generally created a healthy business environment. Malaysia is therefore ranked highly in the Asia region in the BMI Trade and Investment Risk Index, in third place out of 38 states in Asia, just behind Hong Kong and ahead of Taiwan. Its high score of 77.5 out of 100 also places...
Malaysia Crime & Security
Malaysia Crime & Security
BMI View: Malaysia's crime and security risks mainly stem from the presence of criminal and terrorist groups in the country, some of which are linked to Islamic State. While Malaysia's counter-terrorism capabilities are relatively strong, the risk of political violence remains high due to tensions between ethnic groups. Financial and organised crime is present in Malaysia, but has a limited direct impact on foreign businesses. The threat of cybercrime is growing, however, and companies must ensure they have sufficient cyber protection. Malaysia therefore receives a score of 64.8 out of 100 for its overall Crime and Security Risk, placing it in eighth...
Malaysia Labour Market
Malaysia Labour Market
BMI View: Malaysia's labour market provides an attractive prospect for labour-intensive industries that require many low-skilled workers. A high level of worker productivity, widespread literacy and a large migrant population increase the availability of low-skilled workers within the country's labour market. Flexible labour regulations and low unionisation rates also lower the risk of labour disputes. Government policies that favour the employment of ethnic Malays are having a detrimental effect on the availability of tertiary educated labour for highly skilled positions, and thus costs associated with hiring...
BMI View: Malaysia exhibits a strong performance in terms of the low likelihood of businesses facing logistics problems within the country. The country performs better than all of its ASEAN counterparts, largely on the back of its wealth of natural resources that provide widespread access to cheap fuel and electricity. The strong levels of connectivity between Malaysia's major transport hubs via good quality road and rail networks also contribute, with the efficiency and low cost of transport processes being further boosted through fluid trade processes and regulations. Potential future risks include high levels of industrialisation and urbanisation which are putting pressure on the country'...
Malaysia Trade & Investment
Malaysia Trade & Investment
BMI considers Malaysia to be among the most attractive countries in the Asia region as a location for investment and a base of operations. Economic growth is set to slow in the medium term; however, the fundamentals are looking strong, and we expect a buoyant economy to drive trade flows and increase the attractiveness of the country as an investment location. This will be further supported by the fact that the government adopts a welcoming attitude towards foreign direct investment (FDI) into most sectors and has established policies that have lowered the burden of bureaucracy, protected ICT activity and intellectual property, and generally created a healthy business environment. Malaysia is therefore ranked highly in the Asia region in the BMI Trade and Investment Risk Index, in third place out of 30 in Asia, just behind Hong Kong and ahead of Taiwan. Its high score of 75.0 out of 100 also places it favourably on a...
Malaysia Industry Coverage (23)
BMI View: Malaysia's agribusiness sector is experiencing challenging times, as its most emblematic sector, the palm oil industry, is undermined by low prices and growing structural challenges. The cocoa sector is in an even worse position, suffering a severe decline after the stellar performance of the 1990s. The cocoa processing sector is facing increasing competition from Indonesia and is losing market share at a fast pace. The medium term outlook is brighter, amidst strong growth prospects in the poultry sector and opportunities for value added palm based oleochemical exports. Malaysia will have to remain ahead of its biggest competitor, Indonesia, if its ...
BMI View: Tighter lending conditions, weak private consumption and a slowdown of the Malaysian economy will see subdued growth in passenger vehicle sales over our 2016-2019 forecast period. Forecasted passenger vehicles sales growth in 2016 will reach 2.5%, and domestic vehicle production will outperform domestic sales growth over our forecast period.
|Passenger Vehicle Sales Experiencing Subdued Growth|
|Passenger Vehicle Sales, Units|
|f = forecast. Source: MAA, BMI|
Malaysia Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Malaysia Consumer Electronics
BMI View: The Malaysian consumer electronics market was hit hard by ringgit depreciation and wider economic uncertainty in 2015, with a sharp contraction in US dollar terms, but the outlook is considerably brighter over the medium term. As the ringgit stabilises and confidence strengthens we expect all three device segments to return to growth from 2016 onwards, with an added boost from deferred purchases during 2015. Our bullish outlook is based on our Country Risk team's forecast for household income growth, which will translate to an expanding middle and upper middle class. This will present an opportunity for volume growth as well as an easing of price sensitivity that vendors can...
Defence & Security
Malaysia Defence & Security
BMI View: Defence Spending in Malaysia will be ramped up in 2015, with a 10% budgetary increase announced in October 2014. We expect a slight increase in procurement activity while the majority of the development budget will be dedicated to expanding existing projects. The release of a new five year development plan and a review of Malaysia's defence offsetting programme could yield changes for the indigenous defence sector when unveiled in 2015. Malaysia enjoys peace and stability with regards to internal and external security threats. Key concerns include continued incursions by Filipino groups and rising piracy in regional waters.
We expect import volumes to grow in 2015 in line with the 10% year-on-year (y-o-y) defence budget increase, announced in October 2014, with development expenditure for 2015 set at USD1.0bn compared to USD0.8bn in 2014. The government has yet...
Food & Drink
Malaysia Food & Drink
BMI View: Malaysia's food and drink industry will continue to show positive growth over 2016, although spending growth has slowed significantly since 2015. Slower growth can be attributed to softened consumer demand for discretionary goods following the implementation of the goods and services tax .
|Food and Drink Spending|
|f = BMI...|
Malaysia Freight Transport
BMI View: We expect strong growth for trade in Malaysia over the coming years, boosting freight volumes for all modes. Rail will experience the biggest increase, catering for construction material transfers while road freight will dominate in terms of tonnage with industries utilising the country's extensive road network for their cargo transfer needs. Air freight will experience slow, steady growth limited by functional and cost constraints. Rising consumer demand in the growing economy is also contributing to our positive outlook with the recently agreed Trans-Pacific Partnership presenting further growth potential over the medium to long term.
Malaysia has enjoyed economic growth since 2010 and we forecast growth to continue over the medium term, although at slightly lower rates than previous years. For the years 2010-2014 real GDP average is estimated to have reached 5.7%, while we...
Malaysia Freight Transport
BMI View: Underpinning our positive annual growth forecasts across the freight modes in Malaysia over our medium-term forecast period will be the relatively advantageous agreement that the country managed to obtain with regard to the recently signed Trans Pacific Partnership. Due to the relatively open nature of Malaysia's economy, the impact of the TPP provisions are set to be mostly positive, partly due to the presence of existing trade agreements between Malaysia and several of the TPP countries.
Key Updates and Forecasts
We envisage y-o-y total trade growth in real terms to come in at 4.1% in 2016, a trend we expect to continue over the medium term (2016-2020) with growth also pencilled in to average 4.1%. Over this period, imports are set to outperform exports in annual growth...
Malaysia Information Technology
BMI View: After a challenging 2015, when ringgit depreciation and wider economic uncertainty held back IT market growth, we expect the Malaysian IT market to move to a stronger growth trajectory over the medium term, with a CAGR of 5.1% over 2016-2019 in local currency terms. In the hardware market, rising incomes and increased access to affordable data connectivity will boost consumer spending in volume terms and through an easing of price sensitivity. Meanwhile, in the enterprise software and services market growth will be robust, with cloud computing and Internet of Things application adoption...
BMI View: The 2016 federal budget reinforces the government's commitment to infrastructure development and supports ongoing developments plans such as the 11 thMalaysia Plan and the Economic Transformation Programme. We note that the weakening residential and non-residential buildings segments will be a drag on overall growth.
Latest Updates And Structural trends
We maintain our positive outlook for Malaysia's construction sector, and forecast real growth of 10.6% and 7.6% in 2015 and 2016 respectively.
The federal budget for 2016, which was announced in November 2015, underscores the government's commitment to infrastructure development, and public projects will continue to drive construction activity.
BMI View: Although premiums in both the non-life and life segments of Malaysia's insurance sector are increasing at single-digit rates, there remain good prospects for profitable growth by the leading insurers. Most of the major insurers have strengths that they are able to leverage such as ability to innovate, multi-channel distribution, access to global capital markets and well-established brands. Many are providing takaful solutions.
Malaysia Medical Devices
BMI Industry View: The new GST tax and exchange rate fluctuations will temper the performance of imports and market growth. The Trans-Pacific Partnership (TPP) agreement is unlikely to result in a dramatic rise in imports as most already have a zero percent tax duty. We expect the Malaysian medical device market to expand by a CAGR of 6.3% in US dollar terms to 2019.
|Total (USDmn)||Per Capita (USD) ...|
BMI View: Malaysia's mining output growth will remain weaker than seen in previous years due to continued mineral price weakness. Despite this, the continued presence of major miners across the gold and tin sub-sectors will ensure that output from both segments continues to grow over the forecast period, albeit at a slower rate to that seen in recent years.
Oil & Gas
Malaysia Oil & Gas
BMI View: Malaysia's long-term crude oil production will be hit as investment in deepwater exploration and production is curtailed amid low oil prices. A more competitive Asian LNG market will reduce foreign gas demand in the short term.
The Malaysian petrochemicals sector is seeing dynamic growth, with the government having stated its intention to become a leading petrochemicals hub in Asia. However, the country will require an increase in raw material imports as domestic resources are in decline.
There is evidence to suggest that Malaysia has been moving up the value chain, with exports of petroleum products (including petrochemicals) increasing from 12.0mn tonnes in 2010 to 22.4mn tonnes in 2014. We believe this will continue over the coming years, with the start-up of the Refinery and Petrochemical Integrated Development (RAPID) project further propelling this trend.
The USD16bn RAPID project in Johor is due to start in 2019. It will include a 300,000 barrels per day refinery and several downstream petrochemicals plants with the total capacity of 7.7mn tonnes per annum (tpa). The complex is the largest single investment in Malaysia and aims to...
Pharmaceuticals & Healthcare
Malaysia Pharmaceuticals & Healthcare
BMI View: We maintain a positive outlook for Malaysia's pharmaceutical and healthcare market. The evolution of the country's medical tourism sector will see the agglomeration of private healthcare providers along key geographic hubs. Government efforts to develop Johor, Melaka and Penang into key centres will perpetuate this trend. This will be supported by private healthcare providers, the majority of whom have articulated their aim of leveraging the growth of medical tourism. The establishment of these places as hubs will shape the sales force strategies for multinational drugmakers as international patients represent a segment that has, on average, spent more than locals on...
BMI View : The Malaysian power sector is set to grow 6.1% in 2016, following an estimated expansion of 5.3% in 2015. Growth in 2016 will be powered by the completion of major thermal projects.
Malaysia Real Estate
BMI View : Malaysia's location in South East Asia and its welcoming attitude to foreign investment are major attractions to overseas investors. The real estate market is affected at present by slower economic growth, but the medium-term prospects are good. An expanding service sector as well as rising incomes and improving trade indicate a more positive outlook for all three sub-markets we cover.
Following a strong 6.0% GDP growth in 2014, the economy has been facing some challenges in 2015 and growth is expected to be lower, at 4.7%. This trend is expected to continue in 2016, with GDP growth predicted at 4.5%. This is partly explained by the impact of tighter monetary policy and...
BMI View: Malaysia's retail sector bore the brunt of the introduction of Goods and Sales Tax in 2015 and we believe this, combined with external headwinds slowing down Malaysia's economy, will continue to weigh on consumer demand throughout the rest of 2016 and into early 2017. Nonetheless, rapidly rising household incomes, strong labour market as well as accommodative monetary policy will support sustained expansion of the retail sector.
|Headline Household Spending|
BMI View : The 2016 growth picture at Malaysia's ports is slightly mixed, with tonnage and box gains differing between the facilities. The Port of Kuantan is set to be the outperformer once more in terms of tonnage growth (just under 10%) as the port is smaller than others and so there is spare capacity at the facility. Meanwhile, the box throughput outperformer is set to be Port Klang with growth of 8.46% pencilled in for 2016.
Looking at the macroeconomic picture, although we estimate that export growth is enduring a...
Latest Updates & Industry Developments
Malaysia's three leading mobile network operators experienced a net loss of 339,000 subscriptions in the first nine months of 2015. This is based on data reported by Maxis and DiGi and on estimates for Telenor-backed Celcom, Despite this, we maintain that the total number of mobile subscriptions reached 46.411mn by the end of 2015, equivalent to a penetration rate of 151%. This view is based on the belief that the three established operators lost customers to the smaller players, a trend which coincided with the continued p hasing-out of unused prepaid subscriptions.
By the end of 2019 we expect the number of mobile...
BMI View: We have a highly positive outlook for Malaysia's tourism industry. Awareness of the country's many attractions is improving and international transport connections are expanding, making Malaysia much more accessible to potential visitors. As visitor numbers increase over the forecast period we expect to see greater investment in the hotel and accommodation sector, where the mid-range and high end sectors are attracting considerable interest, particularly in up and coming tourism regions where real estate opportunities are plentiful.
Overall, we hold a positive view of the country's water sector, which benefits from large volumes of available water and a moderately strong project pipeline, offering opportunities to infrastructure companies. However, supplies can vary from region to region, and this, in conjunction with an incoherent water management structure, can pose risks to water utilities companies, as can the high levels of water losses and non revenue water consumption.
As with many of its Asian peers, rapid urbanisation is creating environmental degradation as flooding, water pollution, sedimentation and squatters establish themselves along rivers. These issues are compromising the quality of drinking water supplies and are contributing to higher water shortage frequency. However, overall Malaysia offers large volumes of surface freshwater in most states, with good mains networks and a comparatively strong project pipeline offering advantages for...