Malaysia’s strengthening ASEAN trade ties

As a founding member of ASEAN, Malaysia is pivotal to the continued development of regional trade and economic cooperation in the region, with many characteristics that make it a highly attractive hub. The country’s own trade volumes are running at record levels: total January-July 2024 trade was up 10% to a record RM1.65 trillion (USD377 billion), with both exports and imports rising.¹

The ASEAN region is Malaysia’s biggest trading partner, accounting for 30% of the country’s exports and 24% of imports in January-July 2024. Exports to ASEAN rose 16% in July and imports were up 18%.²

The trade boom is no accident. Among Malaysia’s many attractions for domestic and regional businesses are its strategic location, its modern, efficient and well-functioning infrastructure, and its manufacturing capabilities. A banking partner with strong trade finance expertise can help businesses extract the full benefit of these advantages.

Malaysia’s own strong economic performance means that it plays an increasingly influential role at a regional level too. It has signed up to important trade agreements, including the Regional Comprehensive Economic Partnership (RCEP), which is expected to enhance cross-border trade and investment flows in the region. Bringing together 15 countries in the Asia Pacific region, the RCEP was ratified by Malaysia in 2022³. With its member states accounting for about 30% of global GDP, it is the biggest global free trade agreement by that measure.⁴

Emerging sectors like e-commerce, renewable energy and digital services present new opportunities for Malaysian businesses as the country deepens its trade and economic links with ASEAN. E-commerce in Malaysia has grown substantially in recent years, with total income in the sector at RM1.15 trillion in 2023⁵, a rise of about 5% from 2022, 11% above 2021 and nearly 30% up from 2020.⁶

Driving that growth is an increasing preference for online shopping across Southeast Asia but Malaysian government initiatives have also been helping to give the sector a lift. Malaysia’s National E-Commerce Strategic Roadmap is intended to grow the sector while also strengthening its regulation, and ambitiously targets an e-commerce market of RM1.65 trillion by 2025.⁷

The Malaysia Renewable Energy Roadmap (MyRER) is focused on the decarbonisation of the country’s electricity supply sector, and aims to increase the renewable share of installed capacity from 23% in 2020 to 31% by 2025 and 40% by 2035 – cutting electricity sector emissions by 60% over that period.⁸ As of December 2023, the government had approved RM54.7 billion of green investments, mostly in renewable energy.⁹

The ongoing digital transformation of Malaysia’s economy has the potential to further strengthen the country’s position as a key player in the ASEAN economic landscape. The MyDIGITAL programme aims to transform Malaysia into a high-income digital economy pioneer, an effort that is an integral part of broader national development policies like the Shared Prosperity Vision 2030.¹⁰

Digital infrastructure has emerged as a strong growth sector, with investments in data centres and related infrastructure reaching RM76 billion from 2021 to March 2023.¹¹

The Malaysian Digital Economy Blueprint targets six themes that cover everything from the digital transformation of the public sector to building a digitally-skilled workforce across the nation. The plan is divided into three phases running to 2030, and hopes to raise Malaysia to the status of a regional leader in digital content and cybersecurity.¹²

“Malaysia continues to make strong progress in moving its economy up the value chain,” said Karel Doshi, Head of Commercial Banking at HSBC Malaysia. “The growth of higher-value manufacturing and consumer spending is creating a range of opportunities for local and international businesses with an eye on expansion.”

Malaysia is also taking important steps to bring regulations and standards into line with global norms, as well as implementing initiatives that will smooth the functioning of the logistics sector – a critical enabler of successful trade. As of the end of May 2024, approximately 42% of the nearly-5,000 Malaysian standards were identical to international standards, and about 47% were ‘aligned’ with international standards.¹³

The freight and logistics market in Malaysia is predicted to grow from USD28.1 billion in 2024 to USD38.3 billion in 2030, a compound annual growth rate (CAGR) of more than 5%.¹⁴

Malaysia’s strategic location within Southeast Asia makes it a vital hub for the movement of goods throughout the whole of the ASEAN region. And its logistics industry is further supported by its highly diversified economy, stretching from manufacturing to agriculture to electronics.

The growth of e-commerce is also helping to drive demand, a consequence of the need for warehousing and delivery services. Government promotion of automation and digitisation is another catalyst.

Manufacturing, which accounts for nearly 40% of the logistics market in Malaysia, is benefiting from the country’s New Industrial Master Plan (NIMP) 2030, which is slated to contribute USD133 billion to the economy by 2030.¹⁵

Benefiting from its 140-year presence on the ground in Malaysia, HSBC can deliver a suite of innovative solutions to help businesses achieve their full trade potential within the country and in the broader ASEAN region. HSBC TradePay is a digital trade finance solution that allows clients to draw down trade loans to make immediate just-in-time payments to suppliers. This solution is expected to be made available in Malaysia in Q4 2024. We also provide comprehensive trade solutions, including Bank Guarantee, Letter of Credit, Documentary Collections, Supply Chain Finance, Receivables Finance, and Trade Financing, to support client’s business in both local and global market. These solutions are also available in Shariah Compliant format under HSBC Amanah, a fully fledged Islamic bank wholly owned by HSBC Malaysia since 2008.

We can help with e-commerce needs too. HSBC Omni Collect is a one-stop solution for in-store and e-commerce, and can improve the customer experience through offering multiple electronic payment modes. And by deploying sophisticated analytics through transaction monitoring, it allows our clients to spot new sales trends.

HSBC has always been passionate about supporting and facilitating trade. Malaysia’s initiatives to create an environment in which regional trade can flourish offer many opportunities for us to accompany clients as they establish themselves or expand in this dynamic market.