What CEO said..Xport Rebound

Malaysia's exports set for rebound
By Rupa Damodaranrupabanerji@nstp.com.my2010/01/04
The outlook for the electrical and electronics sector, which makes up about 40 per cent of total exports, is expected to brighten as global demand picks up.

Malaysian exports are due for a recovery this year, says the national export promotion agency.Malaysia External Trade Development Corp (Matrade) chief executive officer Datuk Noharuddin Nordin said that several factors will be working in favour of exporters this year.For example, the outlook for the electrical and electronics (E&E) sector, which makes up about 40 per cent of total exports, is expected to brighten as global demand picks up."This includes demand for semiconductor products, LCD (liquid crystal display) television and PCs (personal computers)," Noharuddin told the Business Times.

The full implementation of various regional free trade pacts will also benefit the country. Malaysian products will have "privileged access" in areas like Asean and China, for instance. Under free trade agreements (FTAs), Malaysian goods can enter these countries with lower, or even zero, duties.

Asean and China buy almost 40 per cent of Malaysia's total exports.Noharuddin said that Malaysia's exports rose on a month-on-month basis in the first 10 months of last year.October exports of RM54.28 billion was the best monthly performance in that period.

More importantly, the figure was up 1.6 per cent over the same month in 2008, the first year-on-year improvement after 12 months of contractions."Although Malaysia's exports are still 20 per cent lower than in the preceding year, the trend is encouraging," he said.

The improved external demand came from major markets such as Germany, France, the Netherlands, Japan, China, India and the US, whose economies are turning around due to government spending.Last year, the widespread fall in global demand led to plummeting exports in trading nations like Malaysia.In the case of Malaysia, although the financial sector was insulated from the global financial crisis, industries which depended on external demand were less fortunate.

"Malaysia trades with more than 200 nations and almost all of its major markets went through a recession. The exceptions were mainly the new and emerging markets and markets that were able to build huge reserves on the back of unprecedented commodity prices in 2008."Although they provided some cushion, it was not enough to offset the huge loss in the more traditional markets.

Noharuddin said that while all the major export sectors, including manufacturing, were affected, the hardest hit in Malaysia were agriculture and mining.In January-October last year, agriculture exports, dominated by palm oil, fell 37.7 per cent, while mining exports, mainly made up of petroleum and liquefied natural gas, dropped 35.8 per cent.

In contrast, manufactured exports eased only 15.6 per cent.The year-on-year slide was made worse by the fact that Malaysian exports enjoyed a bumper year in 2008 as petroleum, palm oil and rubber prices reached record levels.

Matrade had to ensure that Malaysian exporters not only survived the crisis but also stayed in the international market."We had to scour the shrinking global market to search for niches of opportunities that still exist," Noharuddin said.

Fortunately, the Malaysian exporting community, including small- and medium-scale enterprises, was unwavering in searching for opportunities."We have had no problems getting Malaysian companies to join our programmes, and some of the programmes were, indeed, oversubscribed. These include forays into the more challenging markets of Latin America, Africa and Central Asia."Some went in search of new markets while also busy restructuring operations and renegotiating terms with suppliers, clients and bankers..So, what would be the main risk to exports this year?

Noharuddin warned that economic growth driven by government spending alone would not be sufficient."Trade would only be stimulated if the growth translates into improved consumer confidence and demand.

"In the US, for example, the worst of the crisis in the housing and banking sectors appears to be over, but there are few signs of an upturn in the wider economy.Employment has not picked up, and neither has bank lending nor consumer demand.

An Asian-led recovery is encouraging, but these very economies - China, South Korea, Japan, Taiwan and India - are also closely linked to those of the industrialised West, a level of interdependence that has deepened over the years.

"We can expect, therefore, that the rise of Asia will be constrained by the lack of demand from the US and industrial Europe."Confidence is key to the recovery story, Noharuddin added, referring to confidence levels in the global financial sector, which is still on the mend.