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5 things to consider before launching a business in Taiwan

You’ve decided to live and work in Taiwan and begin mapping out your path to launching a business in Taiwan. But before you go any further, here are some things to think about.

Knowing if your business is a good match for Taiwan
As a hardware manufacturing hub, Taiwan is an obvious choice for multinationals like Apple, Google, and HP looking for partners and suppliers.

But zero-to-one companies may have a harder time identifying the best ways to leverage Taiwan’s capabilities. Since Taiwan’s strengths lie mostly in tech manufacturing, an SME that produces physical products, say, electric bicycles or 3D printers would have the greatest chance of success.

On the other hand, enterprises that are consumer-facing or predicated on a scale, e.g. selling a new elixir (kombucha or handcrafted beer) to Taiwan may need to rethink their plans or businesses that hope to use Taiwan as a stepping-stone to China may encounter more challenges.

Acquiring a government grant in Taiwan
Taiwan has done a great job advertising government support for start-ups. We have encountered many entrepreneurs upon their face visit to Taiwan inquiring about government grants for their startups.

It is important to understand that government grants are awarded not to individuals but to companies registered in Taiwan, so if you’re a foreign entrepreneur with a foreign company, then you need to establish a Taiwanese entity to qualify for a government grant.

Branch offices and representative offices are not eligible for grants. And while foreign workers with Taiwanese residency (ARC) are allowed to receive such subsidies, remote workers located outside Taiwan aren’t eligible. We cover this in greater detail on the process of applying for a government grant in Taiwan here.

Understanding accounting practices in Taiwan
It’s easy to assume that accounting practices are the same at home and abroad, but some aspects of Taiwan’s accounting procedures may come as a surprise.

Take business expenses as an example. In the US, business accounting operates within an “innocent-until-proven-guilty” framework, which means you can write off a business expense on your tax return with a receipt, even if it is written on a paper napkin.

But Taiwan’s business accounting framework is the opposite: you’re guilty until proven innocent. So to claim a business expense, you need to receive a Fa-Piao (發票) or a Uniform Invoice, but in order for it to be an expense deduction, you need to give the vendor your tax ID number, which needs to be typed or written on the official receipt you obtain from them.

Elsewhere, particularly in the context of start-ups, this accounting framework means that a payment you’ve made to a company registered outside Taiwan for a SaaS subscription or to a freelancer in Chiang Mai won’t be recognised by the Taiwanese government as a valid business expense. These are only two examples of how accounting practices in Taiwan can be completely different from other places.

Navigating the regulatory environment in Taiwan
Startups today are built for a digital, cross-border world, but managing cross-country jurisdictions can be a real huge headache from an administrative standpoint. Taiwan may be a liberal and open country, but when it comes to business practices it’s still relatively conservative.

The government in Taiwan oversees much of daily business. Taiwanese labour law, for example, takes precedence over any agreement that may be signed between a company and its employees, so employers and employees can’t enter into any private agreements as they would be able to, say, in the US.

And since the Taiwanese government plays a big role in business, foreign business owners will likely find themselves having to talk to multiple agencies to get answers to their business questions. This is where a service like 11th Fleet can help simplify the process.

11th Fleet’s outsourced CFO/COO solution can help avoid many missteps for entrepreneurs and companies that are new to Taiwan. Most importantly, 11th Fleet can help stave off trouble by helping its clients anticipate any problems that may arise along the way, saving its clients valuable time and money by avoiding detours.

Overcoming the language barrier in Taiwan
Taiwan is closer to Japan and South Korea in terms of English fluency than it is to Singapore or Hong Kong, where English is spoken as an official language.

Although the Taiwanese government is committed to making the country bilingual by 2030, business in Taiwan is still largely conducted in Mandarin, and business contracts and documents are written in Chinese.

This means foreign investors who aren’t fluent in the local language must take the extra step to have their official documents and contracts translated when registering their businesses in Taiwan.

Moreover, when you are ready for business, you should have someone on your team who can help you navigate the language and cultural barriers.

Source: e27

Govt announces full reopening of Laos starting May 9

The government has announced that all international border crossings will reopen, so that Lao and foreign nationals, well as stateless people, can enter and exit Laos freely.
The Prime Minister’s Office on Saturday (May 7) issued a notice declaring that borders would reopen.
The reopening of Laos and the lifting of restrictions under Notice No. 627 will come into effect on May 9, Head of the Secretariat of the National Taskforce for Covid-19 Prevention and Control, Mrs Thipphakone Chanthavongsa, told a press conference on Saturday.

Citizens of countries that have signed a bilateral or unilateral visa waiver agreement with Laos can enter without applying for a visa.

Citizens of countries that have not signed visa waiver agreements with Laos can apply for a visa at Lao embassies or consulates in foreign countries. Visitors can also apply for a visa online or on arrival at border crossings where such service is available.

Lao and foreign nationals and stateless people aged 12 and older who have not been fully vaccinated are required to take a Covid-19 ATK test within 48 hours of their departure for Laos. However, they are no longer required to have a Covid test upon arrival. People who have a certificate indicating full Covid vaccination can enter Laos without needing to have a Covid test in either their departing country or upon arrival in Laos.

Visitors who contract Covid-19 during their stay in Laos are responsible for all expenses involved if treatment is needed. Treatment can be obtained at state and private hospitals, while self-isolation and self-care is other options.

Vehicles will be allowed to enter and exit as normal, the same as before the pandemic was declared. The Ministry of Public Works and Transport will issue instructions concerning the changes in this regard.
The government has called on state departments, business operators and all sectors of society to be ready to welcome and offer warm hospitality to tourists.

In addition, the government will allow entertainment venues including karaoke clubs to reopen, on condition that staff and customers comply with standard Covid control measures.

The taskforce will monitor the situation closely and revise virus control measures as needed, Mrs Thipphakone said.
“In the case of any changes (to measures), the government will inform the public,” she said.   

Deputy Minister of Health Dr Snong Thongsna told reporters the decision to fully reopen Laos was made in light of the declining number of Covid cases, both worldwide and in Laos.

The average number of new infections reported in Laos each day has plummeted tenfold, from almost 2,000 a day in February and March this year to less than 200 a day at present.

“The rate of infection is declining daily,” Dr Snong said. The Omicron variant is the dominant form of Covid currently circulating in Laos, with a few cases of the Delta variant also being recorded. As of May 7, a total of 208,715 infections had been reported, including 746 Covid-related deaths.

HLBCAM boosts Cambodia’s SME growth prospects

Boosting the business and investment prospects of the small and medium enterprises (SMEs) in Cambodia and Malaysia, Hong Leong Bank (Cambodia) Plc signed a memorandum of understanding (MoU) with the SME Association of Malaysia on Thursday.

The MoU intends to establish a collaboration to jointly share knowledge and expertise, as well as provide advisory and business matching opportunities aimed at supporting the growth of SMEs in Cambodia. The MoU also aims to facilitate business and investment potentials between Cambodian and Malaysian SMEs.

Terrence Teoh, Managing Director and Chief Executive Officer of HLBCAM signed the MoU with Ding Hong Sing, National President of SME Association of Malaysia during a ceremony at the Hyatt Regency in Phnom Penh. It was witnessed by H.E. Eldeen Husaini, Malaysia Ambassador to Cambodia and H.E. Cheuy Vichet, Cambodia Ambassador to Malaysia.

As a bank that recognises the vital role of SMEs in Cambodia’s economic growth, Teoh reaffirmed HLBCAM’s commitment to supporting SMEs to strengthen their business resiliency during the next phase of the pandemic recovery and help them to rebuild stronger and more sustainably through various trade and investment opportunities. SMEs in Cambodia account for 98 percent of businesses, contributing 73 percent to employment and 58 percent to the gross domestic product (GDP).

While pointing out the significance of the MoU, Teoh said, “With SMEs as a key contributor to Cambodia’s economic growth, we share the same goal as Cambodia to help spur the enterprise spirit and boost economic development. Through this MoU, I believe our joint capabilities and deep insights into both markets can help our Cambodian and Malaysian SME customers navigate mutual business matching opportunities. We are also able to help them connect with a broader range of business and financial solutions, especially in digital innovation to drive business performance and greater sustainability.”

Representing the SMEs community in Malaysia, Ding Hong Sing said that the MoU would open up beneficial opportunities for SMEs from both countries to foster collaboration. “Our common aim is to share industry expertise and know-how through study visits, workshops, and seminars with relevant business partners. By combining forces, we are able to help SMEs realise the full potential and opportunities to be harnessed from the growing Cambodian and Malaysian SME sectors.”

For full article, please read here


Author: Adur Pradeep

Source: Khmer Times 

Cambodia welcomes Malaysian SME trade delegation

The SME Association of Malaysia touched down in Phnom Penh on Wednesday to kick off its four-day mission to discover the investment opportunities and framework that post-Covid Cambodia has to offer, led by various ministers and supported by the ambassador to Malaysia.

The delegation left to the Ministry of Foreign Affairs and International Cooperation (MFAIC) and was welcomed by Prak Sokhonn, Deputy Prime Minister with warm words about the opportunities that await both nations.

“Now is the right time to re-connect our businesses, it is the right time to re-connect our economies and it is time to explore opportunities as to how we can develop together post covid. This year marks the 65th anniversary of the establishment of our diplomatic relations – so what better way to celebrate this anniversary than to join hands and recover together.”

Despite the bumpy curtailment of Covid-19 pandemic, last year’s trade volume with Malaysia was recorded at $500 million, up 30 percent compared to 2020. As of February, 162 Malaysian investment projects worth $3.2 billion had been approved by the CDC, ranking Malaysia among the top investors of Cambodia in 2022.

After the welcome at the MFAIC, the delegation was taken to see the Royal palace, followed by a trip along the Riverside before departing for dinner. During this time, Chin Chee Seong, national secretary general of the SME Association of Malaysia, told Khmer Times, a bit more about the makeup and intentions of the delegation.

“We brought in three different categories of business: food and beverage manufacturing, construction and travel services. Some of these companies are experiencing a shortage of manpower in Malaysia, and one possible solution we are exploring is to move our factories and processing facilities into new territories. For me, Cambodia is an attractive destination due to the combination of stable politics and sustained growth, in addition to the fact that many Malaysians already abode here – so it feels like we’re close to home.”

For full article, please read here



Author: Josh Down 

Source: Khmer Times 

Cambodia’s top three export destinations are Vietnam, China and Thailand

The RCEP trade deal gives a big boost to Cambodia’s economy, with export to the member countries of the mega-pact up 11 percent in Q1. The top three export destinations are Vietnam, China and Thailand.

Cambodia’s total export to the Regional Comprehensive Economic Partnership (RCEP) member countries amounted to $1.95 billion in the first quarter of 2022, up 11 percent from $1.75 billion  over the same period last year, a Ministry of Commerce’s data showed on Thursday.

During the January-March period this year, Cambodia’s top three export destinations are Vietnam, China and Thailand, the data said, adding that the kingdom shipped products worth $759 million to Vietnam, $322 million  to China and $318 million to Thailand.

Penn Sovicheat, Cambodian Ministry of Commerce’s undersecretary of state and spokesman, attributed the export growth to the RCEP free trade agreement, which entered into force on January 1, 2022.

“It’s just the start. The RCEP trade deal will give a big boost to our economy in the long term,” he told Xinhua. “Under this mega-pact, Cambodia is projected to see a year’s export growth at 9.4 percent to 18 percent, which will contribute to the national economic growth from 2 percent to 3.8 percent.”

The regional trade pact comprises 15 Asia-Pacific countries including 10 member states of the Association of Southeast Asian Nations (ASEAN) — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and their five trading partners, namely China, Japan, South Korea, Australia and New Zealand.

It will eliminate as much as 90 percent of the tariffs on goods traded between its signatories over the next 20 years.

“For Cambodia, China is a huge market for us, especially for our potential agricultural produce such as rice, bananas, mangoes, and cassava as well as industrial products, and processing goods,” Sovicheat said.

For full article, please read here 


Author: Xinhua

Source: Khmer Times

Labour, strategic location, FTAs give Cambodia edge in electronics sector

The Kingdom has a young and highly cost-competitive workforce ideal for manufacturing various types of electronics components. Sixty-four percent of its 16 million population is under 35 years of age, with minimum wages in the country currently set at $194 per month, which is at least 10-20 percent lower than other major manufacturing hubs in the region.

Cambodia has already identified the potential of the electronics sector in exports as well as attracting foreign direct investments into the country.

It has also prepared a roadmap for the sector, highlighting the goals to be achieved in the future. While looking at the various aspects of developing the industry, the roadmap also earmarks the country’s competitive advantages.

Its major advantages in the electronics sector include a cost-competitive labour workforce, strategic location, and favourable trade agreements with top electronics export markets. The country has FTAs with Asean, China, Japan and the US.

“Cambodia has a young and highly cost-competitive workforce ideal for manufacturing various types of electronics components. Sixty-four percent of its 16 million population is under 35 years of age, with minimum wages in the country currently set at $194 per month, which is at least 10-20 percent lower than other major manufacturing hubs in the region,” the Cambodia Electronics Roadmap (Draft) pointed out.

Besides, the adult literacy rates have also improved rapidly from 78 percent in 2008 to 88 percent in 2019, indicating a clear advantage for the country in selecting the workers for the industry. The literacy rate is even higher among the younger generation of workers.

Another major advantage is its workers’ considerable experience in working in the textile and garments industry, catering to the export market.

“Cambodia also has the advantage of hosting a major textile and garments industry, which employs a million workers whose dexterity and work ethic are transferrable to manufacturing micro-components in the electronics sector,” it said.

For full article, please read here


Author: Adur Pradeep

Source: Khmer Times 

Laos promotes renewable energy to achieve carbon neutrality

Laos is committed to further promoting renewable energy and investments in low-carbon sectors to achieve carbon neutrality by 2050.

Strong foreign private investment inflows are expected to support the development and supply of low-carbon electricity and grid connectivity in Laos for export markets, according to the latest report from the Asian Development Bank (ADB).

“Wind farm investments of 1.6 gigawatts are planned, including a 600-megawatt (MW) Monsoon Wind project in Xekong and Attapeu provinces that will export energy to Vietnam,” stated the ADB’s Asian Development Outlook 2022.

These investments are expected to become one of the world’s largest wind farms and provide over 90 million tonnes of carbon saving over their life.

The Lao government plans to increase the share of solar power in its energy mix to almost 25 percent by 2025, from under 1 percent at present.

In July last year, the government and shareholders in the Nam Theun 2 hydropower plant signed a Project Development Agreement to develop Nam Theun 2-Solar, the largest hybrid floating solar project in the world.

With an installed capacity of 240MWp, the solar project will be built on the Nam Theun 2 reservoir in Khammuan province.

In addition, Keppel Electric and Électricité du Laos are putting together a joint venture to import renewable hydropower from Laos as part of Singapore’s Green Plan 2030, according to the ADB.

“Completing 11 additional hydropower projects of state-owned enterprises in 2022 and 2023 with a total installed capacity of 1,820MW will help meet the demand for Laos’ renewable energy in the Southeast Asia region,” the report stated.

Deputy Minister of Energy and Mines Dr Sinava Souphanouvong said Laos has the capacity to produce 10,000-15,000MW of solar power and about 100,000MW of wind power.[read more...]

Source: The star

Competition to Publicise High Quality of Lao Coffee

The quality of the coffee produced in Laos will be demonstrated and promoted to local and international markets through the second Lao Green Coffee Competition and online Auction. The event will take place this month and the winning grower will be announced later next month, according to the Coffee Quality Institute (CQI).

The coffee program is part of a larger, multi-year intergovernmental effort to strengthen Lao PDR’s agricultural sector while promoting economic growth and international trade. CQI is applying its coffee connections and expertise to the coffee project, which is part of the United States Department of Agriculture-funded CLEAN project, being implemented by the nonprofit Winrock International in coordination with the Ministry of Agriculture and Forestry, the Department of Agriculture, and the Laos Coffee Association (LCA).

The inaugural Lao PDR green coffee competition last year saw coffees that scored well into the mid-80s, including both arabica and robusta varieties. This year, an auction component is being made possible through the Arise Plus Laos PDR project, funded by the European Union and implemented by the International Trade Centre.

“The institute anticipates 50 specialty arabica and fine robusta samples this year and wants this competition to shine a spotlight on the coffee produced by Lao farmers. They produce great coffee, but it is almost unknown outside of Laos. It’s time to change that,” Ms Conway said. Director-General of the Department of Agriculture, Mr Bounchan Kombounyasith, said “In line with the Lao Coffee Sector Export Roadmap (2021-2025), this competition supports the development of the coffee sector as a specialty coffee source and will help to ensure that activities sustain quality standards and phytosanitary measures for export to the US, Europe and Asian markets and provide farmers with better incomes.”

Source: ECCIL 

Malaysia looks to emulate Thailand's digital park

BANGKOK (April 26): Malaysia is looking to emulate Thailand's True Digital Park in Bangkok to drive the development of start-up and innovation ecosystems.

Spanning over 200,000 square metres in the heart of Bangkok CyberTech District, the campus is Thailand's first and Southeast Asia's largest tech and start-up campus, which is primarily driven by the private sector.

The campus is an interconnected ecosystem for start-ups and tech entrepreneurs, tech companies, investors, accelerators, incubators, academies, and government agencies to co-exist in Bangkok that help drive Thailand to become a global hub for digital innovation.

Minister in the Prime Minister's Department (Economy) Datuk Seri Mustapa Mohamed said the campus with its state-of-the-art facilities would build a complete start-up ecosystem to drive the regional digital economy forward.

"The concept is good as it is funded by the private sector and facilitated by the government. If possible, we would like to duplicate the model to encourage start-up and innovative companies in the country," he told Bernama.

Mustapa was very impressed with the campus during his visit to the True Digital Park in the heart of the Bangkok CyberTech District in Phra Khanong on April 22. He was given a briefing by the president of the True Digital Park, Thanasorn Jaidee, to be followed by a tour of the digital park.

The digital park consists of the innovation area (academies, labs), lifestyle area (retail, food and beverages, and wellness) and residential area (three high-rise condominiums), event space, co-working spaces, flexible office spaces, and government digital one-stop services.

The park currently boasts over 1,000 ecosystem players that include 900 start-ups, 52 corporate tenants and partners, 29 universities and academies, and 17 government agencies and associations. Among the big names in the park are Google, Mitsubishi, Huawei, UOB, Bosch, and Ricoh.

The Digital Economy Promotion Agency (DEPA), another government agency, is also present in the park. It is responsible for developing Thailand's digital manpower and promoting the industry. Foreign tenants can apply for smart visas through DEPA's office in the True Digital Park.

The agency also acts like an investor because it is "the only government organisation" that can hold equity from start-ups. The agency assists start-ups from "the moment they're born until they become a unicorn" and in various other ways such as providing industry connections and mentorship.

On Malaysia emulating the True Digital Park, MyDigital Corp chief executive officer Fabian Bigar said the private sector will definitely need to evaluate the merits of such a venture.

"The minister was very impressed with the campus which was totally developed by the private sector and commented that this type of development should be emulated in Malaysia.

"MyDigital Corp is ready to implement any decision of the cabinet," he said.


Boosting trade and investment will fuel Malaysia's recovery and growth

ALTHOUGH not spared from the brunt of the economic impact as a result of Covid-19, Malaysia has remained resilient in its underlying economic fundamentals supported by the various measures introduced by the government to cushion the economic fallout. 

The country's medium-term prospects also remain intact. But to ensure sustainable growth, Malaysia needs to boost its trade and investment connections.

Ongoing government trade and investment reform will be critical to paving the way to facilitate further tariff removals or simplifying non-tariff barriers, and removing investment thresholds.

Ratifying the Regional Comprehensive Economic Partnership (RCEP) agreement is a step in the right direction as it can help to reduce trade costs for businesses by seeking to eliminate many of the barriers within the region, whilst simultaneously opening Malaysia up to more trade activity across some of its major trade partners.

RCEP itself with its 15-member country composition, accounts for about 30 per cent of the world's population and 30 per cent of global GDP, and is the first free trade agreement among the largest economies in Asia, comprising Australia, New Zealand, the Asean bloc, China, Japan and South Korea.


As a strategic hub in Asean with strong economic fundamentals, Malaysia is ideally positioned to bolster its cross-border trade and economic ties with RCEP partners.


The country's access to a wider RCEP market presents businesses here with opportunities to grow their presence across the region and will also facilitate enhanced access for RCEP members who are looking to invest in Malaysia.

Ramping up Malaysia's efforts to magnetise foreign direct investment (FDI) will also be critical, particularly against a backdrop of shrinking global FDI supply and an increasingly competitive landscape.

Significant progress has been made with Bank Negara Malaysia further liberalising foreign exchange policy support, facilitating a more conducive environment for domestic and cross-border economic activities.

But more needs to be done to Malaysia's investment frameworks to make it easier for MNCs to invest in the country. Examples of how this can be carried out include making revisions to negative investment lists, providing tax incentives for certain sectors, streamlining processes to hasten investment approvals and bureaucratic roadblocks and accelerating the development of the country's talent and workforce.

While these issues have been raised in the past and are being considered by the relevant departments, there is a very strong impetus for the proposed reforms to be converted into reality.

At the same time, companies that are looking to invest in Malaysia are finding themselves in an environment very different from the one prior to the outbreak.

How to adapt and what to prioritise in these new conditions are pressing strategic questions that will affect how these organisations position themselves for the future.

From a banking perspective, some of the most critical areas that are seen to affect companies include access to financing, enhancing the integration of technology into business and adopting sustainable financial solutions.

Access to financing

The Malaysian capital market is one of the most liquid and developed in the region. The heightened demand for good quality bond and sukuk issuances, and increasingly green and sustainable financing options, reinforces the accessibility and efficiency of the country's capital market along with the strong interest of the investment community even against challenging market conditions.

The Securities Commission's Capital Market Masterplan (CMP3) will play a critical role in leveraging the strengths and potential of the Malaysian capital market to accelerate economic growth that is sustainable and inclusive. This will be critical to supporting banks as they look to raise the funds required by corporates to finance their business growth and investments.

Enhancing the integration of technology into business

Over the last two years, we have seen how Covid-19 has turbo-charged the integration of technology into business, enabling organisations to build resilience as well as presenting new opportunities for growth – particularly in areas such as capitalising on a growing e-commerce consumer population and taking advantage of supply chains which have been revolutionised by technology.

The accelerated digitisation of financial services has been a crucial factor in enabling corporates to expand their business both into and beyond Malaysia's borders. This has fuelled an increased demand for digital banking solutions, and platform-enabled seamless cross border solutions.

Intensified investor appetite for sustainable financial products

The awareness of environmental threats has permeated the financial sector with capital market decisions now being based on risk, return and impact. Simultaneously, the rise of social and sustainability-linked instruments has expanded the scope of funding to a broader range of environmental and social benefits.

Additionally, investors are demanding for more information about company performance, risks, opportunities, and long-term prospects than before. Raising capital will be more difficult for companies who do not have a clear sustainable transition plan. All this has resulted in intensified investor appetite for green and sustainable financial products.

The fundamental building blocks of Malaysia's economic success are not only still intact; in many ways they have been strengthened by the pandemic. But if the country is to reap the full benefits and opportunities for recovery and development, it will have to regain its traditional growth drivers of trade and investment. This will include focusing on strategic growth areas to attract overseas investment.

Robust Malaysia trade momentum seen, exports up 10%

Malaysia's trade momentum is expected to be robust with economists projecting exports growth at 9.2-10 per cent this year.

Amid some headwinds, they noted that exports would be driven by electrical and electronics (E&E) and commodity-based products. Bank Negara Malaysia, the central bank, has forecast exports rising by 10.9 per cent this year.

RAM Rating Services Bhd economist Nadia Mazlan expected exports to remain strong due to the high commodity prices as well as ongoing semiconductor supercycle.

The higher prices of crude oil and crude palm oil will likely lend support to exports in the short term, offsetting some of the slower demand arising from the continued supply chain issues.

“Export activity will also expand as E&E exporters continue to fulfil backlogged orders,” she told StarBiz.

In March, E&E exports surged 32.8 per cent year-on-year leading to a stronger-than-expected total export growth of 25.4 per cent year-on-year, double that of the Reuters consensus of 12.5 per cent.

Imports would move in tandem with export performance, largely supported by the demand for intermediate parts and supplies to fulfil export orders, particularly for E&E goods, she added.

However, Nadia said while exports and imports would remain strong this year, growth would likely moderate this year due to the high base in 2021 as well as dampening demand arising from the Russia-Ukraine conflict.

Bank Islam (M) Bhd chief economist Mohd Afzanizam Abdul Rashid, who is forecasting a 10 per cent growth for exports this year, expected export growth be driven by E&E products and commodity-based products this year.

He said: “The proliferation of technology will continue and this will effectively create demand for microchips that will involve integrated circuits and parts. This will also benefit the nation’s oil and gas [O&G] and plantation sector exports. In a way, Malaysia is in a sweet spot.”

OCBC Bank economist Wellian Wiranto said domestic exports would broadly benefit from the twin engines of commodities and semiconductor demand.

However, he said the pace of growth may be curtailed compared with last year given the spectre of slowing demand in major economies, as illustrated by the considerable downgrade of global growth forecast by the International Monetary Fund (IMF) recently.

“Lingering labour shortage issues that affect corners of Malaysia’s production, including palm oil, for example, may act as hindrance to further upticks in exports growth this year,” Wellian added. OCBC Bank is projecting exports to grow by 10 per cent this year.

IMF has trimmed its global growth forecast to 4.4 per cent from 4.9 per cent for this year due to increasing uncertainty in global demand. Global growth was 5.9 per cent in 2021.

In March, higher commodity prices had led exports to expand for the second straight month, surpassing market expectations.

Exports grew by 25.4 per cent year-on-year to a record level of 131.64 billion ringgit ($30.3 billion). The market had predicted a growth of 10.4 per cent.

Meanwhile, the country’s imports also grew by 29.9 per cent year-on-year to an all-time high of 104.93 billion ringgit. Following the higher exports value than imports, Malaysia’s trade surplus widened to 26.7 billion ringgit, 10.3 per cent higher than a year ago.

Domestic exports were valued at 106.9 billion ringgit, contributing 81.2 per cent to total exports, picking up strongly 22.8 per cent year-on-year. Re-exports amounted to 24.7 billion ringgit, expanding by 38 per cent as compared to March 2021.

MIDF Research said the continued expansion in global demand for E&E and commodities would support the overall export outlook. Moreover, the reopening of economies will facilitate growing trade activity this year, it added.

With concerns over the near-term outlook, MIDF Research has maintained its growth forecast for exports and imports at 7.8 per cent and 9.6 per cent, respectively, for 2022.

TA Research said Malaysia’s trade sector would continue to grow this year.

“While the moderation in external trade has been in line with our expectations, the pace of growth for both exports and imports has been stronger than our projections.

“As a result, we have revised our growth projection higher for both exports and imports to 9.2 per cent year-on-year and 9.9 per cent year-on-year, respectively,” it said.

Commenting on the headwinds which would impact export growth, Nadia said given the country’s limited direct trade links with Russia and Ukraine, the repercussions of the conflict would materialise in Malaysia mostly through second order effects.

The ensuing supply chain disruptions and surge in inflation from sanctions against Russia would dampen global economic growth and in turn impact export demand.

“Thus, if the magnitude of the [conflict’s] impact on Malaysia’s key trading partners is sizeable, this could significantly slow down exports.

“The prolonged lockdowns in China amid its zero-Covid-19 policy also risk worsening supply chain disruptions. As the world’s largest exporter, a slowdown in Chinese trade would have a ripple effect on global trade and subsequently Malaysian trade activity,” Nadia noted.

Sharing a similar view, Bank Islam’s Afzanizam said the disruption in the global supply chain would be one of the key downside risks.

“The zero-Covid strategy implemented in China has a serious implication, especially in areas relating to ports like Shanghai, Ningbo-Zhousan, Shenzhen, Guangzhou and Qingdao.

“We know that Shanghai is the busiest port in the world and given the close linkages of China’s economy with the rest of the countries globally, it could potentially delay production activities,” he added.

Malaysia recession unlikely for now, economists say

Sentiment on the Malaysian stock market has been weighed down by a couple of factors, including the fear of a recession.

The ringgit has weakened quite a bit while the Russia-Ukraine conflict is expected to pose a drag on Malaysia’s nascent export-led recovery.

Cautiousness over future economic outlook is building as the prices of commodities and metals linked to manufacturing have eased from their peaks.

Malaysia is an exporter of oil, crude palm oil (CPO) and electrical and electronics (E&E) components, which has been a great beneficiary to the trade balance as countries emerge from the pandemic.

While the hit on commodities may impact Malaysian exports to a certain extent, a recession is unlikely for now, said economists.

“We may see a slowdown due to supply-chain disruptions but recession is not likely,” said AmBank Group chief economist Anthony Dass.

According to him, the Russia-Ukraine conflict is likely to hit advanced economies harder compared with developing Asia.

“There is still sustainable growth from China, which is our largest trading partner.

“We are looking for a growth of about 4.8 per cent for the country in 2022, which is conservative versus 5.3 per cent as projected by others,” he told StarBiz.

He added that Malaysia will continue to benefit from commodity prices and the E&E segment, as demand for these products and merchandise are still on the high side compared to what was projected at the start of the year.

“In 2022, we are looking at an average of $90 for oil, while CPO at around 5,000 ringgit [$1,150] versus 3,500 ringgit at year-start,” Dass said.

For context, Budget 2022 was designed based on an estimated oil price of $66 per barrel.

“For this year, our base-case [growth] projection is at 5.6 per cent, with the downside at 4.8 per cent and upside at six per cent, which is still higher than 2021’s 3.1 per cent growth,” added Dass, who is more concerned about the impact of China’s zero-Covid policy than the Russia-Ukraine conflict.

“China is the global manufacturing powerhouse, so every time there is a sporadic shutdown, there is an impact on the supply chain.

“For Malaysia, recovery will be skewed, driven by export-led factors such as semiconductors and resource-related.

“The economy will also get an uplift from a rise in consumer spending and there would be a positive spillover effect from tourism and tourism-related activities with the reopening of international borders,” he added.

On the other hand, the construction sector will be slow until the big projects are rolled out.

That said, he added that there could be more downward revision to the economic growth projection.

Meanwhile, economist Manokaran Mottain said downside risks on the global economy remain due to geopolitical tensions, spiking inflation and potential interest rate hikes in advanced economies, which could crimp growth this year.

“Fears [of the world heading for another recession] may be overblown. It is relatively unlikely but you cannot rule it out, given the growing list of risks clouding the global economic outlook.

“However, for Malaysia, inflation is still manageable. The only thing not in our favour is the exchange rate but the perception is that local interest rates are likely to go up slowly as compared to the United States.

“So there has been an outflow of funds from the country in search of better yields,” he added.

Bank Negara Malaysia, the central bank, has projected the local economy to grow by between 5.3 per cent and 6.3 per cent this year.

Earlier this month, the World Bank lowered its gross domestic product (GDP) growth forecast for Malaysia for 2022 to 5.5 per cent from 5.8 per cent previously.


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