Editorial
Continuing with our series on Free Trade Agreements (FTA), we wish to acknowledge and thank Datuk Dr. Rebecca Fatima Sta Maria, Secretary General of the Ministry of International Trade & Industry for yet another article in this series. The ASEAN-China Free Trade Agreement (ACFTA) signed in 2004 was ASEAN’s first free trade agreement and it marked a major milestone in ASEAN-China Economic Relations. Trade in goods expanded exponentially as the issue on tariffs was no longer a hindrance. Trade in services was also given a boost with the signing of the ASEAN-China Trade In Services Agreement in 2007. Additionally, 2009 saw the inking of the ASEAN-China Investment Agreement that paved the way for Chinese FDIs to flow to ASEAN and vice versa.
Complementing this article, we present readers with information on Changshu City in Jiangsu Province, People’s Republic of China. This is an emerging city that is logistically well connected and endowed with natural resources and competitive labour resources that can provide a launchpad for Malaysian enterprises that wish to penetrate the growing and affluent Chinese market. The ASEAN-China SME Trade Center (CASMETC), developed by the Low Yat Group, is also located in Changshu and offers business enterprises the facilitation they need to launch their presence in China.
MATRADE has acknowledged that second-tier cities in China account for 51.3% of China’s global imports. Malaysia’s trade with China grew 13.9% to RM166.86 billion in 2011 compared to 2010. A trade surplus amounting to RM15.63 billion was recorded last year. These statistics say a lot and we encourage members not to overlook China and to certainly consider Changshu and CASMETC as their possible launchpad.
We also give members an account of Showcase Bangladesh 2012 that was successfully held in July 2012. MASSA continues to stay engaged with Myanmar and we will endeavour to provide continuous updates on the trends and economic outlook unfolding in this emerging economy.
The Editorial Committee would also like to take this opportunity to wish all MASSA members and readers “Selamat Hari Raya Aidil Fitri” and “Maaf Zahir Batin”.
Fatimah Sulaiman
Editor
President’s Message
As we approach the fourth quarter of 2012, we continue to witness mounting challenges and economic uncertainties on the global front. Europe is in a renewed state of distress, political instability continues in the Middle East and the expectations of a slowdown in China are going to remain, going forward. Indeed the world is undergoing profound change. With this change, Asia is also witnessing significant spillovers from Europe and USA. Over the last decade, the Asian economies have been building on their strong economic foundations characterised by steady growth, low unemployment, strengthening financial systems and rising disposable incomes fuelling domestic demands. We can see Asia transitioning from being global producers to becoming global consumers, as a result of leveraging on the complementarities arising from the diversity in Asia. This diversity will present significant opportunities in the form of large and growing markets across a wide spectrum of goods and services.
Malaysia is well placed in Asia to catch the rising and emerging trends. Over the last two decades, our Malaysian government had encouraged Malaysian businesses to look “South-South” and build networks, ties and linkages. These efforts have borne fruit, as reflected in the increased cross-border production networks and increased intra-regional trade and investments. Such closer economic linkages in the region will continue to underpin our growth path. This is confirmed from the fact that Malaysia’s GDP for the second quarter ended 30 June 2012 rose by 5.4%, underpinned by an expansion in manufacturing and robust domestic demand.
We acknowledge the efforts of our government, particularly the Ministry of International Trade & Industry, for their meticulous work to ink out the framework for closer economic co-operation for Malaysia and its trading and investment partners, bilaterally, within ASEAN, and with greater Asia. The Malaysian business private sector will be the ultimate beneficiaries.
So let us, as a member of the Malaysian business private sector, navigate through the myriad challenges armed with knowledge, effective network linkages, integrity and our business competencies to add value and profits to the respective business entities we operate in.
I take this occasion to wish all members and readers “Selamat Hari Raya Aidil Fitri” and “Maaf Zahir Batin” this festive season.
TAN SRI AZMAN HASHIM
President
Diary of Events
Meeting with H.E. Ntsebe Kokome, High Commissioner of the
High Commission of the Kingdom of Lesotho to
Malaysia on 28 September 2012
H.E. Ntsebe Kokome, High Commissioner of the High Commission of the Kingdom of Lesotho to Malaysia visited ACCCIM’s office. YBhg Tan Sri Dato’ Soong Siew Hoong, Executive Adviser of ACCCIM and EXCO member of MASSA and Ms Ng Su Fun, Executive Secretary of MASSA met Her Excellency to discuss joint collaboration on events and activities for ACCCIM and MASSA members.
Courtesy Call on H.E. Khamphan Anlavan, Ambassador of the Embassy of the Lao People’s Democratic Republic at the Lao Embassy on 28 September 2012
YBhg Tan Sri Dato’ Soong Siew Hoong, EXCO member of MASSA and Executive Adviser of ACCCIM and Ms Ng Su Fun, Executive Secretary of MASSA paid a courtesy call on H.E. Khamphan Anlavan, Ambassador of the Embassy of the Lao People’s Democratic Republic at the Lao Embassy. Amongst other discussions, ACCCIM and MASSA raised the proposal to organise a Trade and Investment Mission to Vientiane, Laos for MASSA and ACCCIM members in December 2012.
6th International Trade Malaysia 2012 (INTRADE Malaysia 2012) from 27 to 29 November 2012 at Menara MATRADE, Kuala Lumpur
MASSA, as one of the supporting organisations, also participated in the 6th International Trade Malaysia 2012 (INTRADE Malaysia 2012) organised by Malaysia External Trade Development Corporation (MATRADE) with the support of the Ministry of International Trade and Industry (MITI), Malaysia at Menara MATRADE, Kuala Lumpur.
YB Dato’ Jacob Dungau Sagan, Deputy Minister of the Ministry of International Trade and Industry (MITI), Malaysia officiated the Opening of INTRADE Malaysia 2012 which carried the theme “Energising Export Growth”.
A total of 435 exhibition booths were taken up by 377 companies participating in INTRADE Malaysia 2012. Approximately 8,500 trade visitors attended this exhibition.
Participants comprised 282 Malaysian companies and 102 foreign participants from 15 countries, namely Bangladesh, Ecuador, Hong Kong, India, Indonesia, Japan, Korea, Nigeria, Philippines, South Africa, Spain, Sri Lanka, UAE, USA and Vietnam.
Four specific industry sectors were the focus of this year’s exhibition, i.e. Automotive, Electrical & Electronics (E&E), Information & Communication Technology (ICT) and Manufacturing Support and Lifestyle.
Other programmes which ran concurrently during the exhibition included the Incoming Buying Mission (IBM), FTA @ INTRADE and KL International Trade Forum (KLITF). Business matching sessions were also organised for participating business people and trade visitors.
Ministry Of International Trade And Industry ASEAN: Deepening Regional Integration
The 10 leaders of the ASEAN member states met in Phnom Penh for the 21st ASEAN Summit, from 18 to 20 November 2012, to mark yet another milestone in the region’s journey towards greater economic integration. We witnessed the region taking a lead role in expanding regional economic integration through the launch of the negotiations of the Regional Comprehensive Economic Partnership Agreement, RCEP.
The RCEP is ASEAN’s initiative to leverage on the strengths of the region, and drive regional economic growth, counter-balancing the lethargy in the EU and the USA. RCEP is envisaged as an open economic integration agreement, initially involving ASEAN’s FTA partners, namely Australia, China, India, Japan, Korea and New Zealand, and later, expanding to include other Dialogue Partners.
Obviously there are questions about the rationale for such an initiative, given that the ASEAN Economic Community is still a work-in-progress. Why start on RCEP? What’s in it for ASEAN?
In essence, it means there is no letting up on the work that ASEAN is doing. Yes, ASEAN’s own internal economic integration is important and should, at all times, take priority. However, ours is an open economic region that is dependent on trade and foreign direct investment. We have to be pragmatic. The AEC cannot be the end game. ASEAN has to continue playing a key role in regional economic assimilation, so that we can commonly shape our individual economic destinies.
So what is RCEP? One, it is an initiative driven by ASEAN. Two, it builds on the existing ASEAN FTAs with our Dialogue Partners. Three, it has an open accession clause, which means that in the first phase Dialogue Partners with FTAs with ASEAN, willing and able to take on the commitments, can sign on; later, RCEP may be open to other Dialogue Partners. Four, economic and technical cooperation will be an integral part of the agreement to support ASEAN Member States. And, five, it shall provide for special and differential treatment for ASEAN Member States, especially Cambodia, Lao PDR, Myanmar and Vietnam.
ASEAN and its six Dialogue Partners have decided on the Guiding Principles and objectives for negotiating the RCEP. The negotiations are expected to cover trade in goods; trade in services; investments; economic and technical cooperation; Intellectual property rights; competition policy; dispute settlement; and, new and emerging issues.
In short, RCEP brings together the leading economies in Asia. It is one of the most ambitious regional economic integration initiatives. Upon realisation, it could see an alliance of a region populated by more than 3 billion people, with a combined GDP of more than US$17 trillion, and over 40% of world trade.
RCEP aside, this ASEAN Summit also recorded the important economic deliverables of 2012, including:
- the entry into force of the ASEAN Comprehensive Investment Agreement (ACIA), which provides for the progressive liberalisation of the investment regimes in ASEAN, protection of investments and joint promotion of the region as an integrated investment area;
- the completion of the 8th Package of Services liberalisation under the ASEAN Framework Agreement on Services (AFAS) covering 80 services sub-sectors;
- the conclusion of the ASEAN Agreement on Movement of Natural Persons (MNP), which will enable the increased mobility of skilled persons, service providers and professionals within the region;
- a new framework on ASEAN banking sector integration to enhance the liberalisation of banking services in the region, including the establishment of Qualified ASEAN Banks in each member state by 2020; and
- the ASEAN Infrastructure Fund (AIF) which has been operationalised, and lending activities are expected to commence later this year.
Clearly, the 21st ASEAN Summit was not just another photo opportunity for the 10 leaders and their counterparts. It helped set the stage for another important phase in the growth of the region and underscored the significance of ASEAN on the global economic stage.
Ministry Of International Trade And Industry
Block 10, Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur, Malaysia.
Tel: +603-6200 0000 • Fax: +603-6201 2337 • Email: webmiti@miti.gov.my
Website: http://www.miti.gov.my
Country Feature: Lao People’s Democratic Republic
An Undiscovered Land Of Opportunities
Recognised internationally as a high-growth emerging market, the Lao People’s Democratic Republic, or Laos for short, offers Malaysian businesses and entrepreneurs many exciting opportunities with its liberalised market-oriented economy and growing consumerism.
Overview
Laos is a land-locked country that is bordered by Myanmar and China to the northwest, Vietnam to the east, Thailand to the west, and Cambodia to the south. It boasts a population of approximately 6.6 million, dispersed unevenly across a land area of 236,800 sq km. The average temperature in Laos is 28°C, and rises to a maximum of 38°C in April/May. The overall climate is hot and humid with two distinct seasons: the rainy season runs from May to September and the dry season from October to April.
The most densely populated area is Vientiane, the country’s capital and premier urban centre. It is served by the Wattay International Airport, which features international connections to other Asian countries. Other noteworthy cities and towns in Laos are Savannakhet, Luang Prabang, Champasack and Khammouane. Luang Prabang is the former capital and a UNESCO World Heritage Site as well as Champasack province.
Three quarters of the population live in rural areas where subsistence farming, fishing and hunting are the main activities. Laos’ population is remarkably young with more than half of the population under 20 years of age.
The Economy
Since the government of Laos initiated gradual economic and business reforms in 1986, the country has been growing at a steady pace. According to the Asian Development Bank, Laos is one of Asia’s fastest growing economies, expanding 7.9% in 2012 with double-digit growth in exports and imports.
Although the country lacks conventional energy resources such as oil and natural gas, it has an abundance of renewable energy resources such as biomass, hydropower and solar energy. A boom in construction for mining, hydropower and similar projects is currently driving the country’s rapid economic growth.
Subsistence agriculture accounts for about 30% of GDP and 75% of total employment. Economic growth reduced official poverty rates from 33.5% in 2003 to 26% in 2010.
Inflation decreased from 7.7% year on year in December 2011 to 3.4% in August 2012, largely because of a better rice harvest, restrictions on rice exports, and moderating fuel price inflation.
International Organisation Membership
Both Laos and Malaysia belong to the following international organisations: the United Nations, ASEAN, International Monetary Fund, and World Bank, among others. Additionally, it was recently announced that Laos will be officially admitted to the World Trade Organisation (WTO) on 2 February 2013.
Business Reforms
The opening of the Lao Securities Exchange in 2011 was a landmark event that reflected the exciting potential of the country’s emerging economy. It also underscored the commitment of the Lao government to implement measures to attract investors and create a business-friendly investment and operating environment.
Bilateral Relations
Bilateral trade between Laos and Malaysia expanded from US$1.3 million in 1996 to US$19.2 million in 2005. Malaysia ‘s exports to Laos in 2005 amounted to US$6.3 million, while imports amounted to US$12.9 million.
Malaysia ‘s major exports to Laos (2005): Refined petroleum products, textiles and clothing, electrical and electronic products, beverages and palm oil.
Malaysia’s major imports from Laos (2005): Copper, sawn logs, sawn timber, textiles and clothing.
Business And Investment Opportunities
The country is blessed with a wealth of natural resources, low labour costs, low cost of living, preferential market access into Europe and the United States, and good infrastructure. Construction will continue to be a major force for economic development in Laos. This sector offers Malaysian companies many rewarding business opportunities, especially in the construction of hydroelectric dams and related facilities. Hydropower is an important source of income for Laos with the region’s increasing demand for energy. There are many other sectors still untapped in Laos which present vast opportunities for Malaysian investors, namely the tourism, banking, casino, plantation and manufacturing sectors. Products that Malaysian manufacturers can supply to Laos include computer components and parts; food processing machinery; autoparts; canned drinks, biscuits and confectioneries; cooking oil; and household electrical items.
Key Contacts For Investment And Information
Embassy of the Lao People’s Democratic Republic
No. 7, Jalan Mesra, Off Jalan Damai, 55000 Kuala Lumpur.
Tel: 603-2148 7059 • Fax: 603-2145 0080
Email: embassylao_kualalumpur@hotmail.com
Ministry of Planning and Investment
Investment Promotion Department (IPD)
Souphanouvong Road, Vientiane, Lao PDR.
Tel: +856 21 218377, 222690, 223002
Fax: +856 21 215491 • Website: http://www.investlaos.gov.la
Malaysian Economic Outlook: 4th Quarter 2012 (Update)
| The U.S. economy continued to expand in the third quarter, growing 2.5% yoy (2Q2012: 2.1% yoy). The Conference Board’s Leading Economic Index (LEI) for the U.S. meanwhile increased 0.2% in October to 96.0 (2004 = 100), after rising 0.5% in September and declining 0.4% in August. The Conference Board says this suggests that the U.S. economy will expand modestly in the next few months. In November, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) rose to 52.4 from 51.0 in October to indicate a moderate expansion in manufacturing overall. This is the strongest improvement in U.S. manufacturing business conditions in five months. The IMF, in its World Economic Outlook October 2012 Update, projects the U.S. economy to grow 2.2% in 2012 and 2.1% in 2013.In the third quarter, the eurozone economy contracted 0.6% yoy, following a 0.4% yoy contraction in the previous quarter. It has not grown in three straight quarters and the third quarter decline in GDP was the second straight decline. Technically already in a recession, the eurozone is offering little hope for the worsening global environment, with rising unemployment and fiscal austerity undermining the region’s economic fortunes. According to flash estimates, the November Markit Eurozone PMI Composite Output Index was little changed, up fractionally to 45.8 from 45.7 in October. As October’s reading had been the lowest since June 2009, PMI data suggests that, for the fourth quarter of 2012 so far, eurozone’s contraction of output is at its strongest since the second quarter of 2009. The IMF projects the eurozone economy to contract by 0.4% in 2012, and to expand by 0.2% in 2013. These updated forecasts are -0.1 and -0.5 percentage points below its WEO July 2012 Update.Third quarter GDP growth of the Chinese economy moderated again to 7.4%, its seventh consecutive quarter of yoy declines in output. However, there are signs that the Chinese economy may have halted the momentum of its slowing down. Unexpectedly higher retail sales and fixed-asset investment in October, compared to a year earlier, have added to recovery hopes. And in November, the China HSBC Flash Manufacturing PMI hit a 13-month high of 50.4, up from 49.5 in October, crossing for the first time in a year the neutral level of 50.0 to signal an overall improvement in business conditions. The survey’s forward-looking indicators also suggest that output will continue to increase in December. The IMF meanwhile expects the Chinese economy to expand 7.8% in 2012, and by 8.2% in 2013.
The Malaysian economy remains surprisingly resilient. In 3Q2012, its GDP growth moderated to a still commendable 5.2% yoy from a revised 5.6% in the second quarter. The growth was driven by strong domestic demand, with impressive albeit slightly slower yoy growth in private consumption and private and public investment outlays. Net exports had meanwhile contracted further due to the deterioration in external demand for manufactured goods and commodities. The services sector expanded at a higher pace of 7.0% yoy in the third quarter compared to 6.6% in the previous quarter. The manufacturing sector is obviously feeling increasingly the heat of negative developments overseas as its third quarter pace of growth moderated somewhat significantly to 3.3% yoy compared to the second quarter’s 5.6%. The construction sector, which is benefitting from the on-going implementation of infrastructure projects, expanded a still staggering 18.3% yoy (2Q2012: 22.2% yoy). In terms of percentage point contribution towards real GDP growth, services contributed 3.8, manufacturing contributed 0.8, while construction contributed 0.6. Quarterly economic indicators up to September 2012 indicate that Malaysia’s industrial production could face headwinds in the quarters ahead. On a quarterly basis, the third quarter Industrial Production Index (IPI) rose 2.4% yoy, a sharp pullback from the previous quarter’s 4.9%. Consumer confidence is still holding up and is expected to continue holding up going forward, as indicated by the results of MIER’s Consumer Sentiments Survey. The Consumer Sentiments Index (CSI) ended the third quarter at 118.3 points, 3.4 points higher qoq. Two of the three components that make up the CSI – Current Financial Position and Expected Financial Position – registered qoq gains of 1.1 and 9.0 points respectively while the other – Expected Availability of Jobs remained unchanged from the previous quarter. Business conditions in the manufacturing sector, however, have deteriorated somewhat and could deteriorate further, according to the results of the third quarter MIER Business Conditions Survey. The third quarter Business Conditions Index (BCI) fell 15.5 points qoq to 96.0 points, which is below its 100-point neutral level. The Expected Production component of the Business Conditions Index (BCI) fell a significant 18.6 points qoq while the Expected Export Sales component fell 6.2 points. Of the four MIER sectoral indices – Automotive Industry Index (AII), Retail Trade Index (RTI), Tourism Market Index (TMI) and Residential Property Index (RPI) – three came in higher while one came in lower. The AII, RTI and TMI all rose qoq. Only the RPI ended the quarter lower. All four sectoral indices were above their 100-point neutral level. Inflationary pressures remain benign. The latest Consumer Price Index (CPI) figures showed that Malaysia’s October headline inflation grew 1.3% yoy (September: +1.3%). That’s less than half the year’s high of 2.7%, which was achieved in January 2012. On balance, taking into account the results of MIER surveys, the fact that domestic demand has continued to pick up the slack created by weak external demand, as well as the upward revisions of the 1Q2012 and 2Q2012 GDP growth figures to 5.1% and 5.6% respectively, we are upgrading our full-year 2012 growth forecast to 5.1% from 4.9%. We are also upgrading our 2013 GDP growth forecast to 5.6% from 5.4%. The inflation rate for full-year 2012 is expected to settle at 1.7% while that for 2013 is expected to rise to 2.5%. As for the unemployment rate, it is expected to settle in at around the 3.0% level for both 2012 and 2013. |
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The Malaysian Institute of Economic Research (MIER) For more information, please contact Mr Quah Boon Huat |