Is your manufacturing disrupted by COVID-19 or trade war? Ever considered Malaysia as your manufacturing destination in Southeast Asia?
To mark the 63th Independence Day (or in Malaysian, “Hari Merdeka”) from British rule, we bring to you some points on why Malaysia should be your next manufacturing destination in Asia. We wrote about Manufacturing in Malaysia some two years back, and everything still holds true today.
Today we share more on Malaysia and it’s trading relationship with the rest of the world.
Malaysia: always a trading nation, even before its inception
For a few hundred years, the strategic location of Malaysia (today) has always been heavily influnced by trade from east to west and vice-versa. Key to this is the Straits of Malacca, The World Economic Forum has called it the second busiest waterway and one of the most important. These straits act as a natural chokepoint for shipping traffic between the Far East and the Old World. This natural chokepoint means the ports in the region are some of the world’s busiest.
Before the inception of Malaysia, various Sultans ruled the land and was heavily involved in trading. The Straits of Malacca, has brought people of many nations together for hundred of years. Hence today, Malaysia is home to a population of 32 million multi-ethnic, multi-lingual and multi-skilled people. In many cases, people can speak some combination of English, Malay, Mandarin or Tamil, so communication isn’t an issue for international customers.
International trade is an important driver of the Malaysian economy. Malaysia imports and exports a large amount of goods (and services) and in that regard, has signed many bilateral and multilateral trade agreements.
Manufacturing destination in Southeast Asia
By its membership in ASEAN (Association of Southeast Asian Nation), Malaysia is able to trade with all Southeast Asian countries through the ASEAN Free Trade Agreement (AFTA). This allows all ASEAN countries to trade amongst each other without tariffs. AFTA’s objective is clear:- To create a global manufacturing base comparable to the Far East in South East Asia. AFTA has made many ASEAN countries like Malaysia the manufacturing destination of choice for customers worldwide.
Trade agreements
As a trading nation, Malaysia hasn’t shied away from signing numerous trade agreements. Malaysia has Free Trade Agreements (FTA) signed with other countries directly (and indirectly through its ASEAN membership). Malaysia is always looking to sign more trade agreements and is in negotiations with more countries / region for FTA. Malaysia has been a member of the WTO since its creation in 1995.
Malaysia, having a small domestic economy, relies heavily on international trade. Open trade, fair foreign investment regime and effective governance are some key policies that the Malaysian government adopts. Naturally, Malaysia does also have its competitive advantage to be part of the global supply chain. Malaysia is rich in natural resources and hence key source of raw materials for global industries.
Access to raw materials
Malaysia has a thriving oil & gas industry and has numerous agricultural produce like palm oil. Historically Malaysia has relied on rich and boyant upstream activities, but since independence development has focused on mid & downstream activities, e.g. semi-processed goods and in recent decades, high-tech electronics. These advantanges mean that certain material can be procured with better leadtimes and cost. Having a developed petrochemical industry for example, means Malaysian companies can access plastic resin locally.
Becoming a manufacturing destination of choice does not happen overnight. Malaysia has for years been on a journey to develop itself and be part of the global value chain (GVC) by developing downstream activities like processing and manufacturing. The corrosponding supply chain network and supporting industry and systems is a result of years of investments and technological development leading to its maturity today.
Leading in electronics & medical devices manufacturing today
Malaysia has been the manufacturing destination to many well-known brands for many years. This has created competitive advantages as certain niche and supply chain network is established. Today, approx 25% of Malaysian GDP is driven by manufacturing. Industrialization started as soon as Malaysia achieved independence, and further accelerated in the 1970s/80s with supportive government policies to attract multi-national global brands.
Most raw materials, parts and components can be imported into Malaysia without any issues, as Malaysia has good trading relationship with all major nations.
Manufacturing destination in Southeast Asia
Malaysia also ranks high for ease of doing business, political stablility and transparency. This makes it the perfect destination for companies choosing the next manufacturing hub, whether to set up shop or to select a manufacturing partner.
About Ge-Shen Corporation Berhad
Ge-Shen Corporation Berhad (www.gscorp.com.my) is a contract manufacturer that specializes in plastic injection moulding, sheet metal fabrication and assembly services in 3 locations across South East Asia. GSCORP has years of experience helping product owners bring their ideas to life. Ge-Shen Corporation Berhad is listed on the main market of Bursa Malaysia Securities Berhad.
Contact our experts today to discuss how we can manufacture your products!