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
Malaysia's Q315 real GDP grew by 4.7% y-o-y, reflecting the economy's slowest growth rate in nine quarters. We maintain our forecasts for 2015 and 2016 real GDP growth to come in at 4.7% and 4.5% respectively, as we expect the both the domestic and external sectors to face continued headwinds over the coming quarters.
Although most of the measures raised in Malaysia proposed 2016 budget are largely aimed at tackling short-term problems, the country has retained its commitment to fiscal consolidation, informing our forecast for the deficit in 2016 to come in at 3.1% of GDP.
The decision by BNM to keep its Overnight Policy Rate (OPR) steady at 3.25% during its November 5 monetary policy meeting was in line with our expectations and we forecast interest rates to remain unchanged through H116. The central bank will...
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 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...
Malaysia Labour Market
Malaysia Labour Market
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...
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.
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 grow during 2016, on the back of rising private consumption levels. However, the effects of lower oil prices, weakening exports and the implementation of a 6% goods and services tax have yet to filter through to the economy. Therefore, industry growth will be constrained over the short term.
|Food And Drink Spending|
|e/f = BMI estimate/forecast. Source: BMI, national sources|
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 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: In spite of the maturity of some products in the life segment, the impact of price competition in the motor vehicle sub-sector and the challenges posed by a sluggish economy, the prospects for Malaysia's insurance sector remain bright. In both segments, there is evidence of innovation, productive distribution partnerships and growth through insurers reaching new users.
Latest Updates And Forecasts
We look for growth in gross life insurance premiums to slow over the course of the forecast period from well over 5% in 2015 to just above 4% in 2019. A better indication of the substantial opportunities is the 8% or so rise in overall sum insured within the life segment, which accounts for about two thirds of all premiums written in Malaysia. Life insurance is well established as a...
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 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...
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...
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: Although the 2016 health budget assigned to the ministry of health comes in lower than in 2015, we believe the government remains committed to expanding healthcare access. The construction of more health clinics under the 1Malaysia brand and the increased number of zero-rated drugs under the Goods and Service Tax will help make medicines and services more affordable for low-income patients. However, the fall of the ringgit may have a negative impact drug costs in the coming months as well as hospitalisation fees in the longer term.
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 unchanged from last quarter....
BMI View : The Malaysian power sector is set to grow 6.1% in 2016, following an estimated expansion of 5.1% 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: The retail market will begin to bounce back in 2016 after a rough year during 2015, characterised by the weak ringgit, removal of subsidies and the lowest consumer confidence levels seen in 10 years. The short-term outlook is bearish and we expect that it will take a number of years to alter spending habits away from saving and paying down high levels of consumer debt, back towards retail spending.
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. Consumers and businesses are facing higher transportation costs, and due to...
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...