Investment, Trade, and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz - BERNAMA
While trade tensions between the US and China are bringing more investments to Southeast Asia, including Malaysia, worries over slower global growth and higher costs loom, according to Malaysia’s trade and investment chief.
In the short term, US, European and even Asian companies based in China have been looking to relocate their supply chains or open new plants in Southeast Asia, Malaysia’s Trade and Investment Minister Tengku Datuk Seri Zafrul Abdul Aziz told Bloomberg Television’s Lisa Abramovicz on Thursday in Lima, Peru. That has led to higher investments into the region and into Malaysia, he said.
"But in the longer term, I think, it is going to be a concern,” Zafrul said on the sidelines of the Asia-Pacific Economic Cooperation meetings, discussing the US-China rivalry as the two nations play outsized roles in world trade and investments. "For global economies we’re going to see slower growth. Consumers may end up paying higher prices for the same goods,” he said.
The Malaysian official underscored the importance of bilateral and multilateral trade deals and sustained engagements among policymakers and companies to shield economies from uncertainties that may arise from the policies of President-elect Donald Trump. Staying neutral on foreign policy will also be key, he said.
The Southeast Asian nation has long positioned itself as a neutral haven for investment, with electronics hub Penang state emerging as a major winner during Trump’s first term. More recently, tech giants including Microsoft Corp., Nvidia Corp. and Amazon.com Inc. have pledged to invest billions of dollars in the country’s infrastructure amid Malaysia’s booming artificial intelligence sector and improved political stability.
Foreign direct investments into Malaysia is expected to rise as firms seek stable manufacturing bases in the region, according to Vincent Loo, an analyst with CIMB Securities in a Nov. 7 research note. The trade-reliant nation could also see increased export demand from US companies looking to source products outside China, he added.
Still, Zafrul conceded that it has become increasingly tougher to stay neutral.
"It has always been more difficult over the last five years. I can’t deny that fact,” he said. Malaysia saw investment in semiconductors rise by 18% in the first half of this year, mainly from the US, according to Zafrul.
Policymakers have to monitor the sector "very closely” as technology is a key aspect of trade tensions, he said.
Higher tariffs and worsening US-China tensions risk lowering investor appetite and accentuating capital outflows in emerging markets such as Malaysia.
A rally in the greenback and fears over higher tariffs on imports into the US already started to weigh on the ringgit, which slid to its lowest level since August this week. - Bloomberg
