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.

Country Risk

Malaysia Country Risk

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Core Views

  • Malaysia's economy experienced real growth of 5.6% year-on-year (y-o-y) in Q115, slowing marginally from a 5.7% expansion registered in the previous quarter. With the country facing dual headwinds in the form of weak external demand and anaemic domestic conditions, we maintain our forecast for 2015 real GDP growth to come in at 4.2%, below consensus expectations of 4.7%.

  • Malaysia is facing a number of key tests on the political and economic fronts. Economically, the fall in oil and natural gas prices has exposed weaknesses in the country's fiscal accounts by shining a light on Malaysia's growing contingent liabilities. Politically, Prime Minister Najib Razak is facing growing opposition within his party from members still loyal to former Prime Minister Mahathir Mohamad. However, we believe that these challenges are manageable, and that...

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Malaysia Operational Risk Coverage (9)

Malaysia Operational Risk

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BMI View: Malaysia benefits from an abundance of natural of resources, impressive economic growth rates and a reliable and extensive transport network. It also boasts some of the lowest trade costs and most efficient trade procedures in the world. Malaysia is therefore an attractive destination for investors and has established itself as one of the most low-risk, stable and cost-effective locations globally to conduct trade. BMI scores Malaysia an impressive 81.6 out of 100 in our Logistics Risk Index, ranking it first in the Asia region and fifth globally, well ahead of neighbouring countries Indonesia and Singapore, and outperforming regional powerhouses China, Japan and India. The stable nature of its political and trading environment,...

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Malaysia Crime & Security

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BMI considers Malaysia to be relatively safe for foreign workers and businesses, with lower crime rates, fewer threats from terrorism and less of a risk of interstate conflict than in two-thirds of the emerging market countries in the region. In particular, we highlight that Malaysia has a markedly lower impact from terrorist activity than most of its neighbours, including Thailand, Indonesia and the Philippines, while its involvement in the South China Sea disputes has been less confrontational than Vietnam and China. Malaysia is therefore ranked highly overall in the BMI Crime and Security Risk Index, in 10th place out of 30 countries in Asia with a score of 62.0 out of 100. BMI notes that the main risks to foreigners come from petty crimes and scams, and the potential spreading of terrorist activity over the borders from neighbouring states. The limited threat of international terrorist...

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Malaysia Labour Market

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Malaysia's labour force is characterised by a large, healthy and urbanised population, with reasonably good basic skills as well as a large number of specialised graduates. The domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated, and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risk, in eighth place with a score of 62.5 out of 100.

The Malaysian labour market benefits from a high number of adults who have completed secondary and tertiary education, which means there are greater options for businesses looking to recruit skilled labour. The government is also investing...

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Malaysia Logistics

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Malaysia benefits from an abundance of natural of resources, impressive economic growth rates and a reliable and extensive transport network. It also boasts some of the lowest trade costs and most efficient trade procedures in the world. Malaysia is therefore an attractive destination for investors and has established itself as one of the most low-risk, stable and cost-effective locations globally to conduct trade. BMI scores Malaysia an impressive 80.5 out of 100 in the our Logistics Risk Index, ranking it second in the Asia region and third globally, well ahead of neighbouring countries Indonesia and Singapore, and outperforming regional powerhouses China, Japan and India. The stable nature of its political and trading environment, the inexpensiveness of fuel and the large-scale connectivity across the country has aided Malaysia in becoming one of the most competitive countries in the world in terms of trade.

...

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Malaysia Trade & Investment

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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...

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Malaysia Industry Coverage (23)

Agribusiness

Malaysia Agribusiness

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BMI View: Malaysia's agribusiness 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, as the country's grinding sector is facing stiff competition from Indonesia and lacklustre demand for cocoa globally.

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, in terms of product offering if it is to maintain its agribusiness sector afloat. As such, the next challenge for the country resides in the upcoming economic integration within the ASEAN region. The ASEAN Economic Community will present some opportunities, for...

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Autos

Malaysia Autos

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Sales

New vehicle sales in Malaysia fell 1.8% to 57,437 units in June, compared with 58,561 units a year earlier, according to the Malaysian Automotive Association (MAA). Cumulative H1 sales were 3.3% lower at 322,184 units, compared with 333,156 in the same period last year, with the association pointing to weakening domestic sentiment due to tougher lending conditions and rising inflation.

Passenger vehicle sales amounted to 286,533 units in the six-month period, while commercial vehicle sales reached 35,651 units. The association has lowered its full-year market forecast from 680,000 to 670,000 vehicles in view of the weaker second quarter sales, but this still looks optimistic as it requires an much improved second half performance.

Honda has overtaken Toyota to become the bestselling non-national automotive marquee in...

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Commercial Banking

Malaysia Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Malaysia Consumer Electronics

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BMI View: We expect the Malaysian consumer electronics market will contract in US dollar terms in 2015 due to ringgit depreciation exacerbating existing market trends such as the smartphone and tablet slowdown after the initial rapid diffusion of ownership. However, from 2016 we expect relatively strong growth to return as declining device prices combined with strong economic performance, particularly broad based incomes growth, once again become the dominant trend. Meanwhile, increasing competition in the smartphone, tablet and flat-screen TV markets from Chinese vendors will ensure the market continues...

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Defence & Security

Malaysia Defence & Security

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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...

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Food & Drink

Malaysia Food & Drink

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BMI View: We hold an optimistic view on the Malaysian consumer through to 2019, although conditions will remain challenging throughout the rest of 2015. Our Asia Country Risk team forecasts real private consumption growth at 4.0% in 2015, on the back of 4.2% real GDP growth. We expect the combination of increased taxes (GST has been implemented since April 1) a weaker currency and relatively high household debt to weigh on private consumption in Malaysia in 2015 and beyond. As a result, real private consumption will slow down from 7.3% in 2014 to 4.0% in 2015. Over the next five years, it will average 4.9% annually, down from 7.1% in the previous decade. Despite continuing concerns about fuel price hikes, we believe declining global grain prices, subdued money supply growth and benign wage price pressure will keep Malaysia's consumer price inflation moderate as we head through 2015.

...

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Freight Transport

Malaysia Freight Transport

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BMI View: Road freight will continue to be the dominant freight mode in Malaysia, with rail trade seeing the most significant growth over the medium term. Air freight will see little growth going forwards as it is already well established and developed. Overall the sector will benefit from the country's continued economic growth and lower oil prices, which will support domestic consumer demand and domestic production. Malaysia is one of the most attractive markets in Asia for investors due to its healthy business environment and high quality transport infrastructure. However, opportunities will be smaller than previously as economic growth is starting to slow down.

Malaysia's economic outlook is expected to deteriorate in 2015 going forward,...

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Information Technology

Malaysia Information Technology

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BMI View: We made a minor downgrade to the growth forecast for 2015, with ringgit depreciation expected to exacerbate the slowdown from the tablet market plateau and the fact some hardware and software upgrade demand was brought forward to 2014 by Microsoft XP support withdrawal. Even after the downgrade we have a positive outlook for the growth of the Malaysian IT market, and BMI forecasts a CAGR of 6.6% 2015-2019 in local currency terms. In the hardware market, rising incomes and increased access to affordable data connectivity, along with cuts to Windows licensing fees, will boost consumer and enterprise spending. In the enterprise software and services market growth will be also be robust as firms look to harness increasing volumes of data - as well as respond to heightened competition across South E...

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Infrastructure

Malaysia Infrastructure

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BMI View: Strong growth in Malaysia's construction sector will be underpinned by government initiatives such as the Economic Transformation Programme and the 11 thMalaysia Plan, which will provide support for public infrastructure projects. Our positive forecast still represents a slowdown from the past year, as we are factoring in a slowdown in the residential and non-residential segment.

  • We believe the Malaysian federal government's spending on transport and energy infrastructure will be the main driver for construction activity in 2015 and maintain our strong real growth forecast of 10.6% for the overall construction industry.

  • Despite lower oil prices prompting the government to revise its budget, development...

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Insurance

Malaysia Insurance

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BMI View : . Long open to foreign majors, both the life and the non-life segments of Malaysia's insurance sector are substantial and sophisticated. Growth in the life segment should be driven by growth in the number of potential customers, as well as innovation in terms of product development and distribution. Growth in the non-life segment will be driven mainly by the overall expansion of the economy. Malaysia remains one of the most important markets for takaful - Sharia-compliant insurance - globally. However, takaful is growing less rapidly than the sector as a whole and accounts for about one fifth of premiums written in each of the two main segments. The Asean Economic Community (AEC) should accelerate the process of consolidation in the fragmented non-life segment, but is unlikely to result in other major changes.

...

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Medical Devices

Malaysia Medical Devices

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BMI Industry View: Malaysia's strategy of introducing business friendly policies and not least a new set of medical device regulations has seen it continue to attract multinational investment in manufacturing plants in the country. Whilst there has been some change, most local manufacturers tend to specialise in the manufacture of rubber-based consumables, which has resulted in a high reliance on imports. This being a factor, alongside continued investments in healthcare, the medical device market is set to expand at a solid 16.1% per annum. This growth could however be tempered slightly by the introduction of the new GST tax which will affect imported medical devices.

Headline...

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Metals

Malaysia Metals

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BMI View: Malaysia has a well developed metals sector and is a leading global producer of both steel and tin, However, local producers have been met with increasing pressure from other markets in recent years, with a sharp uptick in Chinese output levels, in particular, leading to downwards pressure on prices and hence production volumes. Out outlook for both the Malaysia steel and tin sectors is therefore one of caution with production growth expected to be moderate over the next few years.

2014 saw Malaysia's steel producers experience falling output and revenues as a flood of cheap imports squeeze prices and margins. With much of this extra supply arriving in the form of cheap products from countries such as China, Indonesia and South Korea, local producers have found themselves hit by falling orders for hot rolled coils as well as other heavily imported steel products...

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Mining

Malaysia Mining

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BMI View: Malaysia's mining sector is facing into a more modest growth output than the one seen in recent years. Falling mineral prices have been eating increasingly into the profitability of the country's miners, leading many firms to scale back production as well as exploration and development. That said 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.

We forecast Malaysia's mining industry to reach USD43.25bn by 2019, increasing at a steady clip of 5.0% per annum. Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, a resource boom is unlikely to catch up with the country...

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Oil & Gas

Malaysia Oil & Gas

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BMI View : A low oil price environment will hit short-term investment, particularly into exploration, and longer-term production prospects. Foreign gas demand for Malaysian gas will also be hit by a more competitive LNG market. Consumption, in contrast, will benefit slightly from lower prices.

Headline Forecasts (Malaysia 2013-2019)
2013 2014e 2015f 2016f ...

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Petrochemicals

Malaysia Petrochemicals

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Malaysia is set to end the decade with a major increase in petrochemicals capacity, but BMI's latest Malaysia Petrochemicals Report warns that new plants will be dependent on imported crude oil and be forced to compete with low-cost ethane-based US producers.

The focus of development will be Petronas' refinery and petrochemical integrated development (RAPID) project in Pengerang, which is likely to be completed in 2019. It is set to have around 300,000b/d of refinery capacity and over 7mn tonnes per annum (tpa) of petrochemicals capacity. RAPID has been delayed due to concerns over its economic viability due to rising costs and falling domestic crude oil volumes at a time when the US is planning to boost petrochemicals production using competitively priced ethane derived from shale.

Other Petronas projects include its joint venture (JV) with...

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Pharmaceuticals & Healthcare

Malaysia Pharmaceuticals & Healthcare

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BMI View: Malaysia's epidemiological profile will remain attractive to pharmaceutical companies as the country sees a rising burden of both communicable and non-communicable diseases. This commercial opportunity is further reinforced by the government's commitment to improve healthcare in its FY2015 budget. However, poor intellectual property protection and the implementation of a Goods and Service Tax continue dampen opportunities for innovative drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: MYR7.22bn (USD2.21bn) in 2014 to MYR7.88bn (USD1.97bn) in 2015; +9.2% in local currency and -10.7% in US dollar terms. Forecast in line with last quarter.

  • Healthcare: MYR42.62bn (USD13.02bn) in 2014 to MYR45.85bn (...

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Power

Malaysia Power

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BMI View : The Malaysian power sector is set to grow 4.8% in 2015, following a disappointing expansion of 3.7% in 2014. Growth should accelerate further after 2015 as most of the major thermal projects being developed in Malaysia for completion after 2015 are on schedule.

We forecast electricity generation in Malaysia to grow by 4.8% in 2015, versus an underwhelming expansion of 3.7% in 2014. We also expect growth to pick up further from 2016 onwards, on the back of strong thermal and non-hydropower renewable. We have maintained our long-term forecasts for electricity generation in Malaysia as the major projects we have incorporated into our forecasts after 2015 remain on track. We forecast electricity generation in Malaysia to average 5.2% growth per annum between between 2017-2019, before levelling off at a longer-term growth rate of approximately 4.6% through to 2024...

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Real Estate

Malaysia Real Estate

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BMI View: Malaysia's commercial real estate market benefits from the country's location in Southeast Asia, as well as the government's welcoming attitude to foreign investment and the developed and transparent nature of its business environment. The country has a developed real estate investment trust (REIT) market, although there is room for this to expand. However as the wider economy is facing some reduced growth, the country's real estate market is also experiencing only subdued demand, despite strong potentials in the medium-term.

Following a strong 6.0% GDP growth in 2014, the Malaysian economy is facing some headwind as growth is reduced to an estimated 4.2% in 2015. This trend is expected to continue as growth only gradually returns to levels...

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Retail

Malaysia Retail

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BMI View: A series of economic changes are set to impact the Malaysian retail sector negatively in 2015. Decline of oil price made the government to introduce Goods and Services Tax in April in attempts to diversify its sources of income. Fuel subsidies have been removed, ringgit is on a decline against US dollar and consumers' budgets are becoming tighter. As a result, growth in the Malaysian retail sector will slow down in 2015-2016.

As a highly oil & gas dependent country, Malaysia has been hit by the changing oil price landscape in 2015. Fossil fuels directly contribute to 30% of all government revenues in Malaysia and a 40% drop in oil price in 12 months requires the country to rebalance its budget. First, fuel subsidies were removed allowing petrol price to rise....

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Shipping

Malaysia Shipping

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BMI View : Over the short term, we anticipate Malaysia's main ports will see a varied performance, alternating between large double-digit annual growth in tonnage throughput (29.60% at the Port of Kuantan in 2015) and an 11.42% contraction at the country's largest port and gateway to Kuala Lumpur, Port Klang.

Port Klang has suffered in recent times from increasing congestion and is in dire need of upgrade work to raise the standard of facilities to match others in the region. With that in mind, it is welcome news that the Malaysian government has earmarked some MYR300M to upgrade last-mile connectivity at Port Klang. According to Ruben Emir Gnanalingam, CEO at Westport, the road networks leading to both ports in Port Klang have been badly in need of upgrades for the...

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Telecommunications

Malaysia Telecommunications

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BMI View: Data continues to be a major growth driver in mobile service revenue, driven by rising smartphone adoption rates and the shift in demand towards more data-heavy premium services such as online shopping and OTT video streaming. The highspeed broadband (HSBB) and suburban broadband (SUBB) projects will also improve accessibility and affordability of broadband when they are complete, and BMI believes that we will continue to observe strong growth in data consumption in our five year forecast period, However, the 4G LTE market would benefit from a consolidation licensees, as overcrowding could lead to inefficiency in the use of infrastructure.

Key Data

  • Mobile subscriptions will reach 46.411mn by...

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Tourism

Malaysia Tourism

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BMI View: The Malaysia tourism report examines a range of key indicators in this well established, and growing, tourism market in Southeast Asia. With a range of attractions on offer, and an increasingly attractive foreign investment environment, Malaysia is welcoming greater volumes of inbound visitors and is seeing rapid development of its hotel market. Domestic economic growth is also supporting the expansion of the outbound travel market, leading to steady increases in tourism related expenditure and overall industry value.

Malaysia's tourism market has remained robust in the face of several high profile air travel tragedies which had the potential to impact upon the market in 2014. Arrivals are increasingly steadily, and while 2015 may see a fall in arrivals from some regions, such as Europe...

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Water

Malaysia Water

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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...

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