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 once-bloated current account surplus is coming under pressure from a combination of income account outflows and a dwindling trade surplus. We expect the narrowing of the surplus to continue, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015. However, the risks are weighted to the downside, with the emergence of a current account deficit over the next few years increasingly likely.

  • Over recent years Malaysia's fiscal accounts have exhibited some worrying trends, with spending rising as a share of GDP, subsidy spending rising as a share of total spending, and indirect tax revenues declining. Going forward we are optimistic that these trends will be halted as subsidy spending is reduced and a Goods & Services Tax (GST) is implemented, which should help stabilise Malaysia's debt metrics and support private sector real GDP growth....

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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: Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. Palm oil will remain the key agribusiness sector for Malaysia, although production growth will slow down in the coming years. 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 example in terms of poultry exports. However, it also poses risks to the future of the sugar refining sector.

Key Forecasts

  • Palm oil production growth to 2018/19: 7.6% to 21.7mn tonnes. Growth will be supported as companies replant mature...

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Autos

Malaysia Autos

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Sales

New vehicle sales in Malaysia rose 14.2% year-on-year (y-o-y) to 67,314 units in March, compared with 58,919 units a year earlier, according to data released by the Malaysian Automotive Association (MAA). Sales of passenger vehicles during the month increased 13.8% to 59,318 units, while commercial vehicle sales rose 17.6% to 7,996 units. The association attributed growth to strong promotional activity in March, as dealers cleared stocks before the implementation of the goods and service tax. Overall sales in Q115 stood at 168,306 units, representing an increase of 5.2% from the same period in 2014.

Honda has overtaken Toyota to become the bestselling non-national automotive marquee in Malaysia, based on sales data in the first quarter of 2015. Honda sales jumped 41.7% y-o-y to 22,145 units in the first three months of this year - driven by...

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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: The Malaysian economy's strong real GDP growth during 2014, which we estimate reached 5.8% for the full-year, was driven by strong exports and increased domestic consumption. Proposed changes to the country's fuel subsidy scheme and the introduction in April 2015 of a 6% goods and services tax (GST) are likely to produce a slowdown in domestic consumption. However, these changes will have a positive impact on long-term fiscal discipline by reducing expenditure and increasing government revenue. BMI maintains its view that, across the forecast period, inflation should remain manageable and continued strong real GDP growth is...

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Freight Transport

Malaysia Freight Transport

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BMI View: We expect road freight will continue to dominate freight in Malaysia, although rail will benefit from increasing inter-regional trade and improving infrastructure and see the strongest growth over the medium term. Meanwhile, the highly developed air freight sector, profiting from Malaysia's role as a transhipment hub, will see little growth going forwards, as it is already mature and well established. Overall, the sector will benefit from the country's continued economic growth and lower oil prices, which...

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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: While we expect the construction sector to see a slight slowdown from 2015 due to a weakening property market, we maintain our bullish growth forecast of 10.9% for 2015. Our outlook is underpinned by the government's commitment to expenditure on infrastructure and we see opportunities in the transport (road and rail) as well as energy sector.

  • 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 10.9% for the overall construction industry.

  • Despite lower oil prices prompting the government to revise its budget, development expenditure has been maintained at MYR50.5bn (USD13.4bn), highlighting commitment to infrastructure development.

  • We expect the...

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Insurance

Malaysia Insurance

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BMI View : We have a positive outlook for the Malaysian life and non-life insurance segments throughout our forecast period. On the back of ongoing economic growth, improved consumer awareness and demographic changes, we forecast healthy growth in both segments and fruitful opportunities for future investment. These opportunities will also particularly pertain to foreign firms seeking to enter the Malaysian non-life insurance market, which are likely todo so by acquiring less-capitalised local insurers.

Malaysia's life insurance segment constitutes the larger segment of the country's overall insurance sector, as it will account for 68% of total written premiums in 2015. In terms of growth potential, however, we expect that both life and non-life insurance will share...

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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: Despite the decline in oil prices impacting government spending, we believe the Malaysian government will be able to maintain its commitment to the country's healthcare sector as it continues diversification of its revenue base. Moreover, healthcare provision remains critical to the government which will limit reductions that affect medical services. However, commercial opportunities for innovative drugmakers continue to be weighed down by low levels of intellectual property protection, the implementation of a Goods and Service Tax (GST) as well as the preferential treatment of local drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: MYR7.22bn (USD2.21bn) in 2014 to MYR7.88bn (USD2.13bn) in 2015; +9.2% in local currency and -3.4% in US...

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Power

Malaysia Power

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BMI View : The Malaysian power sector is set to grow in 2015, following a disappointing expansion of 2.4% in 2014. We expect sector growth to improve to 7.3% in 2015 before accelerating in future 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 7.3% in 2015, versus an underwhelming expansion of 2.4% in 2014. This growth rate is significantly higher than Malaysia's five-year historical average growth for power generation, which is 4.9%, according to our estimates. Nevertheless, we expect growth to pick up further from 2016 onwards. We have maintained our long-term forecasts for electricity...

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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 South East Asia, as well as the government's welcoming attitude to foreign investment and the developed and fairly transparent nature of the business environment. The country has a developed real estate investment trust (REIT) market, although there is room for this to expand. Indeed over the medium term we see increasing interest in Malaysian commercial real estate from international investors, as well as increasing investment overseas by Malaysian firms.

Over the short and medium term we have some concerns about the Malaysian economy. Although we forecast a good rate of GDP growth, at 5.8%, in 2014, for the rest of our forecast period, to 2018, we see growth slowing to as little as 4.1% a year. Monetary tightening and potential interest rate rises could affect domestic demand, and with exports equating...

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Retail

Malaysia Retail

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BMI View: 2015 will not be a particularly strong year for retailers in Malaysia due to two main developments: the weakness of the ringgit compared to the US dollar and the introduction of the Goods and Services Tax which will make goods and services more expensive for consumers, putting them off from making purchases in the short term. However overall, Malaysia shows strong signs of growth and a positive environment for retailers to operate successfully. The largely urban population of Malaysia are more increasingly falling into the middle-class income bracket, and with the increase in affluence among the...

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Shipping

Malaysia Shipping

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BMI View : Malaysia's main ports will see volume growth broadly in a 2-4% range this year, lagging slightly behind the growth of the wider economy. Port Klang and Port Tanjung Pelepas continue to benefit from expansion projects and developments that have been completed over the last two years.

We are maintaining our existing outlook for the Malaysian economy, which sees GDP growth decelerating from 5.8% in 2014 to 4.2% in 2015. This comes on the back of various factors. Data still coming through from last year shows exports performed particularly strongly, lifted by good demand for electronics and semi conductors. But going into H214, there were signs of weakening consumer demand caused by the combination of monetary tightening and high levels of household debt. Coming into 2015, the fall in international oil prices is an important external...

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Telecommunications

Malaysia Telecommunications

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BMI View: Data and other non-voice applications and services drove growth in Malaysia's mobile market in 2014, as demonstrated by increased revenues from such services and continued strong uptake of 3G/4G subscriptions. Although in the ascendancy, data cannot yet outpace the rate of decline in income from voice and messaging. Telekom Malaysia 's purchase of Packet One (P1) and its launch of TMgo have returned the incumbent wireline operator to the mobile arena, but it is as yet too soon to tell how potent the revitalised TM has become. The alternative 4G licensees have yet to launch and BMI believes this may be because of crowded market conditions and the high cost of building networks....

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Tourism

Malaysia Tourism

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BMI View: Malaysia's tourism market is in a strong position to take advantage of the solid growth trends in the wider Asia Pacific region. With a well-developed transport network in place and an extensive range of attractions across the country, Malaysia is attracting greater volumes of tourists, which in turn are leading to increased investment by leading global hotel groups. The government is highly supportive of the tourism industry, and a range of investment incentives will very likely encourage more developers to focus on Malaysia's potential in the coming years.

Malaysia's inbound tourism market is already substantial, benefiting from the...

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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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