Dzulkifli Mahmud, CEO, Malaysia External Trade Development Corporation (MATRADE): Interview

Interview: Dzulkifli Mahmud

How is Malaysia looking to enhance and expand its trade relationship with China?

DZULKIFLI MAHMUD: China is a very important market. It is Malaysia’s largest trading partner for the eighth consecutive year, with trade expanding by 11.1% to RM230.89bn ($57.2bn) in 2015 and accounting for a 15.8% share of Malaysia’s total trade. Our strategy to increase trade with China includes reaching out not just to first-tier cities, but also now to second- and third-tier cities. We’re also encouraging Malaysian companies to expand their business to China, especially using e-commerce. E-marketplaces are highly visible in China, and Malaysian companies need to start taking advantage of these avenues to increase their sales. It’s also an excellent method by which small and medium-sized enterprises (SMEs) can grow their business at a far lower cost, while also receiving consumer feedback. In April 2015, Prime Minister Najib Razak launched the Bank of China, Malaysia as the Renminbi Offshore Clearing Bank for Malaysia and the ASEAN region. This new clearing bank is expected to further enhance bilateral trade and investment between Malaysia and China. It will reduce liquidity risk, encourage the growth of premium financial services in both countries, and further promote closer ties between China and Malaysia.

To what extent do you see recent and impending trade agreements affecting Malaysian exports?

MAHMUD: Most recently the Malaysia-Turkey free trade agreement (FTA) came into force in August 2015. Following its implementation, bilateral trade has increased by double digits, having a real and immediate impact, and in 2015 exports to Turkey surged by 54.5%. Looking to the Trans-Pacific Partnership, the only signatories that we don’t already have FTAs with are Canada, the US, Mexico and Peru. When implemented, our products will no longer be subject to tariffs of 6-15% in the US and Canadian markets. The export industries that will reap the benefits include electronics, rubber products and textiles. MATRADE is now preparing a roadmap for SMEs to ensure they can take advantage of the agreement, and prepare them for the opportunities and the challenges that come with expanded markets. We are also very excited about the planned Regional Comprehensive Economic Partnership (RCEP), led by China, and encompassing the ASEAN states, in addition to South Korea, Japan, India, Australia and New Zealand. Based on current data, RCEP will span a united market of more than 3bn people, with a combined GDP of more than $17trn and over 40% of world trade.

Which under-penetrated markets is MATRADE targeting for greater export expansion?

MAHMUD: MATRADE’s programme is very focused on growing our exports to traditional markets. As an example, Thailand is Malaysia’s fifth-largest trading partner globally and second-largest within ASEAN. Four of our states border Thailand – Kedah, Perlis, Kelantan and Perak – with the south of Thailand also requiring a facility to export its goods. Penang is well placed to fill that niche, which will lead to increased interdependence. But at the same time, we also see the immense business opportunities and high potential of emerging markets. For example, Africa currently accounts for only 2.1% of our total trade, and 2.6% of exports, and we are working to expand this significantly. We see an opportunity for Malaysian companies, particularly in the sectors of construction and Islamic finance. Similarly, there are still untapped opportunities in the other regional markets.

Exports to West Asia comprised only a 3.3% share of total exports, Latin America 1.8%, and Central Asia 0.1%. Malaysian companies are also uniquely positioned in the fields of consultancy and market development for other countries’ halal sectors, which are also growing. Japan is helping us expand this segment.