malaysia international trade and industry ... report/miti...table 1.3: leading exporters and...

Ministry of International Trade and IndustryMalaysia

YSIAINTERNATIONAL TRADE AND INDUSTRY

REPORT2005

MALA

MALAYSIAINTERNATIONAL TRADE AND INDUSTRY

REPORT2005

Ministry of International Trade and IndustryMalaysia

ISSN 0128-7524JUNE 2006

Copyrights Reserved

For sale of copies and further technical information refer to:

Senior Director,Strategic Planning,Ministry of International Trade and Industry, Malaysia12th Floor, Block 10,Government Offices Complex,Jalan Duta, 50622 Kuala Lumpur.Tel: 603-6203 4750 Fax: 603-6201 2573MITI Homepage: www.miti.gov.mye-mail: [email protected]

Design, layout and publication services by:

Information Broadcasting Network (M) Sdn BhdTel: 603-2163 0176/8 Fax: 603-2163 0182e-mail: [email protected]

Printed by:

Ampang Press Sdn BhdTel: 603-9284 9448 Fax: 603-9284 9105

Price: RM60.00

iii

In 2005, the world economy recorded a growth rate of 4.8 per cent(2004 : 5.3 per cent), amid rising oil prices, occurrence of naturaldisasters and outbreak of avian influenza. The growth was attributedto increases in global industrial production and trade, resilience of theservices sector and improvement in global market conditions.

In respect of Malaysia's external sector, total trade increased by 9.9 percent to RM967.8 billion in 2005. Exports recorded a double-digit growthof 11 per cent to RM533.8 billion, while imports grew by 8.5 per cent toRM434 billion, resulting in the trade surplus widening to RM99.8billion, the highest recorded since November, 1997. The robust exportperformance was driven by the sustained external demand fromMalaysia's major trading partners, increasing intra-ASEAN trade, as wellas double-digit growth of exports to its fast expanding non-traditionalmarkets.

Output of the manufacturing sector expanded by 5.1 per cent, withexport- and domestic-oriented industries recording growth of 5.7 per centand 3.2 per cent, respectively. The Government continued to facilitate thedevelopment and growth of the sector. New incentives were introduced,which included the reduction of import duties on required raw materialsand inputs, and group relief to all manufacturing companies undertakingselected activities, such as food production and biotechnology.

In this Report, a new chapter on the performance of the services sectorhas been included. The sector is a major contributor to the growth of theMalaysian economy. MITI, through its agency, MIDA, has developed adatabase on investments in the services sector for the period 2003-2005.The database will provide information to the Government for theformulation of policies and measures to enhance further the growth of thesector.

In 2005, Malaysia continued to attract a significant level of investments,both foreign and domestic, into the manufacturing sector. Investmentstotalling RM31 billion were approved, the second highest level recordedsince 1996, involving 1,026 projects. Of the total investment, RM17.9billion or 57.7 per cent were from foreign sources, while RM13.1 billion

FOREWORD

(42.3 per cent), domestic sources. Of significance, 454 projects wereexpansion/diversification projects and 659 projects were approvedwithout incentives. This indicates that the decision by investors to remainand continue to invest in Malaysia is not based solely on the availabilityof incentives, but more on the conducive and business friendlyenvironment prevailing in the country.

At the multilateral level, Malaysia continues to participate in WTOnegotiations in the effort to ensure that the outcomes will be beneficial toMalaysia's export interest and provide flexibility to Malaysia inpromoting its strategic industries. In addition, Malaysia is also engagedin negotiations with developed and developing countries, both at regionaland bilateral levels, to secure better market access for the export ofproducts and services, as well as expand opportunities for Malaysia'soutward investments. In 2005, Malaysia concluded its first bilateral freetrade agreement with Japan. MITI has been and will continue toundertake consultations domestically with all stakeholders, in particular,the private sector, on issues of concern to Malaysia in the free trade areanegotiations.

DATO' SERI RAFIDAH AZIZMinister of International Trade and IndustryMalaysia

16 June 2006

iv

v

CHAPTER 1WORLD ECONOMIC, TRADE AND INVESTMENT DEVELOPMENTS . . . . . . . . . . 1

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Economic Developments by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Trade Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Investment Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

CHAPTER 2MALAYSIA'S EXTERNAL TRADE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Trade Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Direction of Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Trade Practices Affecting Malaysia's Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

CHAPTER 3POLICY INITIATIVES AND MEASURES IN MANUFACTURING ANDMANUFACTURING-RELATED SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Initiatives for Enhancing Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Developing Malaysia as a Regional Hub for Halal Products and Services . . . . . . . . . . . . . . . 35Development of Small and Medium Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Trade Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Development of Manufacturing-Related Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Development of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Human Resource and Skills Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

CHAPTER 4INVESTMENTS IN THE MANUFACTURING SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Approved Projects by Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Approved Projects by Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

CONTENTS

Approved Projects by Incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Implementation of Approved Manufacturing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

CHAPTER 5PERFORMANCE OF THE MANUFACTURING SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Electrical and Electronics Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Transport Equipment Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72Chemical Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Iron and Steel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87Machinery and Equipment Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90Non-Metallic Mineral Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93Textiles and Apparel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Wood and Wood Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101Rubber Products Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105Palm Oil Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109Processed Food and Beverages Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

CHAPTER 6PERFORMANCE OF THE SERVICES SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Performance of Selected Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

CHAPTER 7DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES . . . . . . . . . . . . . . . . . . . . .137

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137Issues and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140Programmes for SME Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140Performance of Financial Assistance Schemes for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145Outreach Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

CHAPTER 8PRODUCTIVITY - MANUFACTURING AND SERVICES SECTORS . . . . . . . . . . . . .151

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151International Comparison of Productivity Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153Productivity Performance of Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153Total Factor Productivity of Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157Productivity Performance of Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158Total Factor Productivity of Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

vi

CHAPTER 9WORLD TRADE ORGANISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163Doha Development Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163Other Doha Development Agenda Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166Accession to the World Trade Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170Trade Policy Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

CHAPTER 10ASEAN ECONOMIC COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180Sectoral Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180Facilitation Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184Regional Cooperation within ASEAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186Regional Linkages with Dialogue Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

CHAPTER 11DEVELOPMENT IN REGIONAL GROUPINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Asia Pacific Economic Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195Organisation of Islamic Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204Other Regional Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

vii

CHAPTER 1

Table 1.1: World Real GDP Growth...................................................................................... 3Table 1.2: Merchandise Trade Performance, 2005................................................................ 5Table 1.3: Leading Exporters and Importers in World Merchandise Trade, 2005................ 6Table 1.4: Leading Exporters and Importers in World Commercial Services Trade, 2005.. 7Table 1.5: World FDI Inflows, 2004-2005............................................................................ 8

CHAPTER 2

Table 2.1: External Trade ...................................................................................................... 11Table 2.2: Top 15 Trading Partners ....................................................................................... 11Table 2.3: Exports by Sector ................................................................................................. 12Table 2.4: Top 20 Export Destinations.................................................................................. 13Table 2.5: Imports by End-Use ............................................................................................. 14Table 2.6: Top 20 Import Sources ......................................................................................... 16Table 2.7: Trading Partners with which Malaysia Recorded Trade Surpluses ..................... 16Table 2.8: Trading Partners with which Malaysia Recorded Trade Deficits ........................ 16Table 2.9: Malaysia's Trade with ASEAN............................................................................. 17Table 2.10: Malaysia's Trade with the European Union ......................................................... 20Table 2.11: Fast Growing Potential Markets, 2005 ................................................................ 21

CHAPTER 3

Table 3.1: Halal Certifications Awarded to Companies, 2005.............................................. 36Table 3.2: Malaysian Standards, as at December 2005......................................................... 41

CHAPTER 4

Table 4.1: Approved Manufacturing Projects ....................................................................... 46Table 4.2: Approved Manufacturing Projects by Industry, 2005.......................................... 48Table 4.3: Approved Manufacturing Projects with Malaysian Majority Ownership by

Industry................................................................................................................. 50Table 4.4: Approved Projects with Foreign Participation..................................................... 53Table 4.5: Approved Manufacturing Projects by State, 2005 ............................................... 57Table 4.6: Projects Approved with Incentives, 2005............................................................. 59

CHAPTER 5

Table 5.1: Manufacturing Sector Performance, 2005 ........................................................... 63Table 5.2: Production Indices of Selected Manufacturing Industries ................................... 64Table 5.3: Sales of Selected Manufacturing Industries......................................................... 64Table 5.4: Employment in Selected Manufacturing Industries............................................. 65Table 5.5: Export Performance of Manufactured Goods ...................................................... 66

viii

Tables

Table 5.6: Imports by End-Use ............................................................................................. 66Table 5.7: Production Index for Selected E&E Products...................................................... 67Table 5.8: Sales of Selected E&E Products .......................................................................... 68Table 5.9: Employment in Selected E&E Segments............................................................. 68Table 5.10: Productivity Indicators of Selected E&E Segments ............................................ 69Table 5.11: Exports of Selected E&E Products ...................................................................... 70Table 5.12: Imports of Selected E&E Products ...................................................................... 71Table 5.13: Malaysian Standards for E&E Products Introduced in 2005 ............................... 71Table 5.14: Production of Motor Vehicles by Segment .......................................................... 72Table 5.15: Capacity Utilisation in Automotive Sub-Sector................................................... 72Table 5.16: Sales in Automotive Sub-Sector........................................................................... 73Table 5.17: Productivity Indicators of Automotive Sub-Sector .............................................. 77Table 5.18: Exports and Imports of Automotive Sub-Sector .................................................. 77Table 5.19: Total Production and Capacity Utilisation of Motorcycle Sub-Sector ................ 78Table 5.20: Production Indices of Petroleum and Plastic Products Sub-Sector ..................... 81Table 5.21: Sales of Selected Petroleum and Plastic Products ............................................... 81Table 5.22: Employment in Petroleum and Plastic Products Sub-Sector ............................... 82Table 5.23: Productivity Indicators for Chemical Industry..................................................... 82Table 5.24: Exports of Petroleum and Plastic Products Sub-Sector ....................................... 83Table 5.25: Imports of Petroleum and Plastic Products .......................................................... 83Table 5.26: Production Indices of Basic Industrial Chemicals and Chemical Products

Sub-Sector ............................................................................................................ 84Table 5.27: Sales of Basic Industrial Chemicals and Chemical Products Sub-Sector............ 84Table 5.28: Employment in Basic Industrial Chemicals and Chemical Products Sub-Sector 85Table 5.29: Exports of Basic Industrial Chemicals and Chemical Products Sub-Sector........ 85Table 5.30: Imports of Basic Industrial Chemicals and Chemical Products Sub-Sector........ 86Table 5.31: Exports and Imports of Pharmaceutical Products ................................................ 87Table 5.32: Production of Selected Iron and Steel Products................................................... 88Table 5.33: Productivity Indicators of Iron and Steel Industry............................................... 89Table 5.34: Exports and Imports of Iron and Steel Products .................................................. 89Table 5.35: Production Indices of Selected Machinery and Equipment Industry .................. 90Table 5.36: Sales of Selected Machinery and Equipment Products........................................ 90Table 5.37: Employment in Machinery and Equipment Industry........................................... 91Table 5.38: Productivity Indicators of Machinery and Equipment Industry .......................... 91Table 5.39: Industrial Production Index of Selected Non-Metallic Mineral Products ........... 94Table 5.40: Installed Production and Capacity Utilisation of Clinker and Cement................ 94Table 5.41: Sales of Selected Non-Metallic Mineral Products ............................................... 95Table 5.42: Employment in Selected Non-Metallic Mineral Sub-Sectors.............................. 96Table 5.43: Productivity Indicators of Non-Metallic Mineral Industry .................................. 96Table 5.44: Exports of Non-Metallic Mineral Products.......................................................... 98Table 5.45: Imports of Non-Metallic Mineral Products.......................................................... 98Table 5.46: Malaysian Standards for Advanced Ceramics Published in 2005 ....................... 99Table 5.47: Productivity Indicators of Textiles and Apparel Industry .................................... 100Table 5.48: Production Indices of Wood and Wood Products Industry .................................. 102Table 5.49: Sales of Wood-Based Products............................................................................. 102Table 5.50: Employment in Wood and Wood Products Industry............................................ 103Table 5.51: Productivity Indicators of Wood and Wood Products Industry ........................... 103Table 5.52: Exports of Selected Wood and Wood Products ................................................... 104Table 5.53: Imports of Selected Wood and Wood Products Industry ..................................... 105Table 5.54: Production Indices of Rubber Products Industry ................................................. 106Table 5.55: Sales of Rubber Products ..................................................................................... 106

ix

Table 5.56: Employment in Rubber Products Industry........................................................... 106Table 5.57: Productivity Indicators of the Rubber Products Industry .................................... 107Table 5.58: Exports of Rubber Products ................................................................................. 108Table 5.59: Imports of Rubber Products ................................................................................. 108Table 5.60: Production of Palm Oil Products ......................................................................... 109Table 5.61: Exports of Palm Oil Products............................................................................... 110Table 5.62: Imports of Palm Oil Products............................................................................... 111Table 5.63: Production Indices of Selected Processed Food and Beverages Products........... 112Table 5.64: Sales of Selected Processed Food and Beverages Products ................................ 112Table 5.65: Employment in Processed Food and Beverages Industry.................................... 113Table 5.66: Productivity Indicators of Processed Food and Beverages Industry ................... 113Table 5.67: Major Exports of Processed Food and Beverage Products.................................. 114Table 5.68: Imports of Selected Processed Food and Beverage Products .............................. 115

CHAPTER 6

Table 6.1: Accredited Professional Services ......................................................................... 123Table 6.2: Contribution of Accredited Professional Services to Gross Domestic Product... 123Table 6.3: Profile of Distributive Trade Services Sub-Sector, 2001..................................... 126Table 6.4: Profile of Construction Services Sub-Sector, 2002.............................................. 129Table 6.5: Performance of Construction Sector 1990, 1996 and 2002 ................................. 129Table 6.6: Private Healthcare - Number of Establishments and Workers, 2001................... 132Table 6.7: Healthcare Sector - Key Indicators, 2004 ............................................................ 132Table 6.8: Economic Indicators by Type of Transportation Services, including

Storage and Communication ................................................................................ 134Table 6.9: Freight Traffic by Port, Airport and Rail, 1990-2005 .......................................... 135

CHAPTER 7

Table 7.1: Distribution of Small and Medium Enterprises in Services Sector, 2005 ........... 137Table 7.2: Distribution of SMEs in Manufacturing Sector, 2005 ......................................... 139Table 7.3: Contribution by SMEs in Manufacturing Sector ................................................. 140Table 7.4: Approval of Soft Loans by State, 2005................................................................ 145Table 7.5: Approval of Grant Schemes by State, 2005......................................................... 147

CHAPTER 8

Table 8.1: Productivity Level and Growth for Selected Countries, 2005............................. 153

CHAPTER 10Table 10.1: Intra-ASEAN Trade, 2005.................................................................................... 175Table 10.2: Products in the Inclusion List of CEPT for ASEAN 6 ........................................ 175Table 10.3: Malaysia's Exports under CEPT........................................................................... 176Table 10.4: Malaysia's Main Exports Items under CEPT in 2005.......................................... 177Table 10.5: Intra-ASEAN Investment Flows, 2004 ................................................................ 178Table 10.6: Country Coordinators for Specific Areas Under the Strategic Plan of

Customs Development, 2005-2010 ...................................................................... 186

CHAPTER 11Table 11.1: APEC Capacity Building Projects Organised in Malaysia, 2005 ........................202

x

CHAPTER 4

Chart 4.1: Investments in Projects Approved, 1996-2005 .................................................... 45Chart 4.2: Approved New Projects by CIPE Ratio, 1990-2005 ........................................... 47Chart 4.3: Approved Projects with Foreign Participation by Major Industry, 2005............. 51Chart 4.4: Foreign Investments in Approved Projects Approved by Major Country ........... 54Chart 4.5: Approved Manufacturing Projects by State, 2005 ............................................... 56Chart 4.6: Status of Implementation of Approved Projects, 2000-2005............................... 61

CHAPTER 5

Chart 5.1: Investments Approved in Machinery and Equipment Industry, 2005 ................. 92Chart 5.2: Exports of Machinery and Equipment, 2005 ....................................................... 92Chart 5.3: Imports of Machinery and Equipment, 2005 ..................................................... 93Chart 5.4: Approved Investments in Non-Metallic Mineral Industry................................... 97

CHAPTER 6

Chart 6.1: Contribution of Services Sub-Sectors to Real GDP, 2005................................... 119Chart 6.2: Employment in Services Sub-Sectors, 2005 ........................................................ 120Chart 6.3: Services Account (Net), 2000-2005 ..................................................................... 121Chart 6.4: Approved Multimedia Supercorridor Companies by Sector as at 2005 .............. 122

CHAPTER 7

Chart 7.1: Profile of Small and Medium Enterprises by Sector ........................................... 137Chart 7.2: Approval of Soft Loans and Grants, 2005 ........................................................... 145Chart 7.3: Approval of Soft Loans, 2005.............................................................................. 146Chart 7.4: Approval of Soft Loans by Sector, 2005.............................................................. 146Chart 7.5: Approval of Grant Schemes, 2005 ....................................................................... 147Chart 7.6: Approval of Grant Schemes by Sector, 2005....................................................... 148

CHAPTER 8

Chart 8.1: Productivity Growth by Major Economic Sector, 2005 ...................................... 151Chart 8.2: Productivity Growth for Selected OECD Countries, 2005.................................. 152Chart 8.3: Productivity Growth for Selected Asian Countries, 2005.................................... 152Chart 8.4: Productivity Growth of Manufacturing Sector in Selected Asian

Countries, 2005 .................................................................................................... 154Chart 8.5: Productivity Growth of Selected Services Sector in Selected Asian

Countries, 2005 .................................................................................................... 154Chart 8.6: Sales Value per Employee of Manufacturing Industries, 2005............................ 155Chart 8.7: Contribution of Sub-Sectors to Total Manufacturing Sales Value, 2005............. 156Chart 8.8: Growth in Sales Value per Employee of Manufacturing Industries, 2005 .......... 156

xi

Charts

Chart 8.9: Growth in Labour Cost per Employee of Manufacturing Industries, 2005......... 157Chart 8.10: Changes in Unit Labour Cost of Manufacturing Industries, 2005....................... 158Chart 8.11: Contribution to TFP Growth, 1996-2005............................................................. 158Chart 8.12: TFP Growth of Manufacturing Sub-Sectors, 1996-2005..................................... 159Chart 8.13: Productivity Growth of Services Sector, 2005..................................................... 159Chart 8.14: TFP Growth of Services Sub-Sectors, 1996-2005 ............................................... 160

CHAPTER 2

Box 2.1: Malaysia and Free Trade Area Agreements ......................................................... 29

CHAPTER 5

Box 5.1: National Automotive Policy ................................................................................. 74

CHAPTER 7

Box 7.1: Adoption of Standard Definition for Small and Medium Enterprises ................ 138Box 7.2: Census on Establishments by Department of Statistics, Malaysia in 2005 ........ 138

CHAPTER 10

Box 10.1: ASEAN-China Free Trade Area .......................................................................... 189

CHAPTER 11

Box 11.1: Trade Facilitation Initiatives in APEC and ASEAN ............................................ 198Box 11.2: Revised European Union Generalised System of Preferences ............................ 209

xii

Boxed Articles

Appendix 1: Organisations and Groupings - Membership ....................................................... 217Appendix 2: Statistical Tables - Trade ...................................................................................... 219Appendix 3: Bilateral Agreements on Trade and Investment ................................................... 247Appendix 4: Import Licensing .................................................................................................. 251Appendix 5: Temporary Exclusion and Sensitive Lists for Investment under the

Asean Investment Area Agreement ...................................................................... 257Appendix 6: MITI and its Agencies- Organisation Charts and Addresses ............................... 275Appendix 7: Abbreviations And Acronyms .............................................................................. 297

xiii

Appendices

1

OVERVIEW

In 2005, the world economy continued toremain resilient, growing at 4.8 per cent,despite high oil prices and adverse effects ofthe avian flu pandemic and several naturaldisasters. The growth momentum acceleratedin the second half of 2005, followingsignificant increases in global industrialproduction and trade, resilience of the servicessector, strengthening of consumer and businessconfidence, and improvement in marketconditions.

Economic expansion was broad-based. Theeconomy of the United States of America(USA), which grew by 3.5 per cent, remainedan important contributor to world economicgrowth. While the Japanese economyexpanded by 2.7 per cent, the Euro-area hadrecorded a more sustained recovery, at 1.3per cent. Robust growth was recorded inmost emerging and developing countries,particularly the People's Republic of China,at 9.9 per cent, India (8.3 per cent) and Russia(6.4 per cent).

World merchandise trade grew by 13 per centto US$20.6 trillion in 2005. In comparison,world trade in commercial services increasedby 11 per cent to US$4.8 trillion. Theexpansion of merchandise trade was attributedmainly to higher oil and commodity prices.This development had contributed to highexports revenue for the African and West Asianregions. Trade in commercial services wasled by increases in both the travel andtransportation services sub-sectors.

In 2005, global foreign direct investment(FDI) flows increased by 29 per cent, withflows mainly to developed countries, thusreversing their four-year decline in FDI

inflows. The United Kingdom (UK) was theleading recipient of world FDIs for the firsttime since 1977.

ECONOMIC DEVELOPMENTS BY REGION

AsiaAsia, excluding Japan, continued to sustainhigh growth, expanding by 8.6 per cent in2005 (2004: 8.8 per cent). Early in the year,Asia recorded a slowdown in growth, butit recovered in the second half, as a resultof a rebound in corporate investments inindustrialised countries and recovery of theglobal semiconductor industry, as well asincrease in exports of information technology(IT) products. The high economic growth ofthe People's Republic of China, at 9.9 per cent,and India (8.3 per cent) continued to drive thegrowth of other economies in the Asian region.

The overall economic growth of the SoutheastAsia region expanded by 5.5 per cent in 2005(2004: 6.4 per cent). Amid rising fuel pricesand the increase in inflation and interestrates, Indonesia sustained a growth of 5.6 percent, attributed mainly to increases in privateconsumption and fixed capital formation.Singapore's economy expanded by 6.4 percent, with growth attributed to the reboundin the exports of electronics and the recovery ofdomestic demand in the final quarter. Growthin the Philippines was supported by remittanceinflows, however, it softened to 5.1 per cent,due to the decline in agriculture output. TheThai economy slowed to 4.4 per cent, as aresult of rising oil prices, weakening of thetourism industry and unrest in its southernprovinces.

The Malaysian economy grew at 5.3 per centin 2005. The growth was driven by strongerelectronics exports, following the recovery

Chapter 1World Economic, Trade AndInvestment Developments

in the global electronics industry during thefourth quarter of 2005, and activities in thewholesale and retail trade, as well as businessrelated sub-sectors.

In Japan, economic activities accelerated inthe fourth quarter and the Japanese economyexpanded by 2.7 per cent in 2005. The growthmomentum was supported by strong exportgrowth to the USA and the People's Republicof China, more competitively priced exportsdue to the depreciation of the yen, and recoveryin domestic demand, underpinned by risingemployment and buoyant corporate profits.

The Indian economy grew by 8.3 per cent in2005. The high growth was led by the strongexpansion in the manufacturing and servicessectors, as well as driven by broad-baseddomestic demand and expanding businessactivities. The rebound in the agriculturesector from the weak performance in 2004also contributed to the growth.

Taiwan's economic expansion deceleratedto 4.1 per cent in 2005 (2004: 6.1 per cent).The decline was attributed mainly to weakerexports of electronics in the first half of theyear. The rebound in the global electronicsindustry in the fourth quarter had contributedto the growth.

West Asia's economy grew by 5.9 per cent in2005. The growth continued to be contributedby oil exporting countries in the region, whichbenefited from high export earnings, for a thirdconsecutive year, arising from higher world oilprices and export volume.

North AmericaThe growth of the US economy moderatedto 3.5 per cent in 2005 (2004: 4.2 per cent).The growth decelerated in the fourth quarterof 2005, reflecting weakening privateconsumption expenditures, due to thecontraction in the purchase of automobiles,corporate fixed investments and net exports.However, increases in industrial productionand orders of capital goods towards the end ofthe quarter contributed to a rebound.

The Canadian economy, in 2005, sustainedthe same rate of growth, at 2.9 per cent, asin 2004. Canada's growth was driven byhigh energy and commodity prices, healthycorporate profits and business investmentsand increase in private consumption, supportedby rising employment and asset prices.

EuropeThe economy of the Euro-zone grew by 1.3per cent in 2005 (2004: 2.1 per cent). Thedeceleration was a result of a slower growthin the final quarter, due essentially to thevolatility of oil prices, decline in globaldemand and low consumption spending,particularly in Germany, and softening ofnet exports. The Euro-area continued toface difficulties in harmonising reforms insensitive areas, such as the labour market,business takeovers and social system, whichhave a bearing on the growth.

In 2005, growth in Germany moderated to0.9 per cent (2004: 1.6 per cent). The economicgrowth of France decelerated to 1.4 per cent(2004: 2.1 per cent), while the Netherlandsdeclined to 1.1 per cent (2004: 1.7 per cent).Growth in the UK slowed to 1.8 per cent,due primarily to the decline in the performanceof the property market and increases ininterest rates and energy prices. Businessinvestments and export growth remainedsteady for the UK.

Australia and New ZealandBoth Australia and New Zealand sustaineda slower GDP growth in 2005. The Australianeconomy grew by 2.5 per cent (2004: 3.6 percent), while New Zealand expanded by 2.2per cent (2004: 4.4. per cent). The slowergrowth in Australia was attributed to the poorperformance of the property market and risingprice of oil. The appreciation in the exchangerate of both countries had affected adverselyexports revenue, as exports became lesscompetitive.

AfricaThe African economy grew by 5.2 per centin 2005 (2004: 5.5 per cent). Low prices of

2

agriculture raw materials, decline in foodproduction and poor demand for cottonwere among the factors contributing to theslower growth. Growth, however, continuedto be sustained by robust economic activitiesin sub-Saharan Africa, as a result of high globaloil and commodity prices.

With the exception of Chad and EquatorialGuinea, growth continued to expand in mostoil exporting countries, such as Angola, at15.7 per cent, and Sudan (8 per cent).Following the expansion in Nigeria's oiland non-oil sectors, the Nigerian economygrew by 6.9 per cent (2004: 6 per cent).High world prices for metals also contributedto the growth of exporting countries, includingMozambique, at 7.7 per cent, Zambia (5.1 percent) and South Africa (4.9 per cent). A numberof textiles exporting countries, namely Coted'Ivoire and Zimbabwe, were affectedadversely by the removal of textiles quotas,which caused a significant reduction inoutput.

Latin AmericaIn 2005, the Latin American economy grew by4.3 per cent (2004: 5.6 per cent) and continuedto record two consecutive years of currentaccount surplus, supported by rising exports offuels, metals and agriculture produce. The paceof growth in the Andean region, at 6.3 per cent(2004: 7.8 per cent) was also faster, comparedwith that of Latin American Southern ConeCommon Market (MERCOSUR), at 4.2 percent (2004: 6 per cent).

Venezuela's economy, which continued to beinfluenced mainly by oil exports, grew at alower rate of 9.3 per cent in 2005 (2004: 17.9per cent). Rising domestic demand acceleratedthe growth of Peru's economy to 6.7 per centin 2005 (2004: 4.8 per cent). The expansionof the Argentine economy by 9.2 per cent, andUruguayan economy by 6 per cent, wassupported by increasing domestic demand androbust export growth, mainly agriculture. TheChilean economy, which benefited from risingprices of metals, grew by 6.3 per cent. Growthin Brazil slowed to 2.3 per cent (2004: 4.9 per

cent), due to the decline in investments,tightening of monetary policy and softening inconsumer sentiments.

3

Table 1.1:World Real GDP Growth

Countries 2005 2004

Change GDP Value1 Change(%) (US$ billion) (%)

World 4.8 5.3

USA 3.5 12,485.7 4.2

East AsiaPeople's Republic

of China 9.9 2,224.8 10.1Taiwan 4.1 346.1 6.1Republic of Korea 4.0 793.1 4.6Japan 2.7 4,571.3 2.3

EUUK 1.8 2,201.5 3.1France 1.4 2,105.9 2.1Germany 0.9 2,797.3 1.6Netherlands 1.1 625.3 1.7Italy 0.1 1,766.2 0.9

ASEANSingapore 6.4 117.9 8.7Indonesia 5.6 276.0 5.1Malaysia 5.3 130.8 7.1Philippines 5.1 97.7 6.0Thailand 4.4 168.8 6.2

Canada 2.9 1,130.2 2.9Australia 2.5 708.0 3.6New Zealand 2.2 108.5 4.4

South AsiaIndia 8.3 775.4 8.1Pakistan 7.0 118.5 7.1Bangladesh 5.8 61.2 5.9

West AsiaSaudi Arabia 6.5 307.8 5.2Iran 5.9 196.4 5.6Egypt 5.0 93.0 4.1

Latin AmericaArgentina 9.2 181.7 9.0Chile 6.3 114.0 6.1Brazil 2.3 792.7 4.9Mexico 3.0 768.4 4.2

AfricaNigeria 6.9 99.1 6.0Ghana 5.8 10.7 5.8South Africa 4.9 239.1 4.5Kenya 4.7 19.2 4.3

Source: International Monetary Fund, World Economic Outlook, April2006

Note: 1 GDP value at current price

TRADE DEVELOPMENTS

In 2005, world merchandise trade startedwith sluggish growth, but gained momentumin the second quarter and ended the yearwith global trade growing by 13 per cent(2004: 21.5 per cent) to US$20.6 trillion.In comparison, world trade in commercialservices increased by 11 per cent to US$4.8trillion in 2005.

The expansion of merchandise trade wasattributed to the strengthening of the globalmanufacturing base and continuing rise inprices of crude oil and refined products andcommodities. As a result, the share of fuels andother mining products in world merchandisetrade rose by 16 per cent, the highest levelsince 1985. The development in the oil marketbenefited Africa and West Asia, as indicated bytheir high share in world merchandise exports.They accounted for 6.9 per cent of the worldmerchandise exports in 2005, the highest sharein two decades. Trade in commercial serviceswas led by increases in the travel andtransportation services sub-sectors, whichgrew by 10 per cent and 12 per cent,respectively.

The removal of quota restrictions on exportsof textiles and clothing, following the fullimplementation of the Agreement on Textilesand Clothing in 2005, provided substantialmarket access for competitive global suppliersin Asia, particularly the People's Republicof China and India, into developed markets,such as the USA and the EU. In 2005, in valueterms, the market share of the imports oftextiles from the People's Republic of Chinain the USA increased to 12.1 per cent(2004: 7.9 per cent) and clothing, to 22 percent (2004: 13.8 per cent). The market shareof the imports of textiles and clothing fromthe People's Republic of China in the EU roseto 30.7 per cent (2004: 23 per cent). Othertextiles and clothing exporting countries, suchas Bangladesh, Cambodia, Indonesia, Pakistan,Sri Lanka and Viet Nam, also recordedincreases in their market shares in the USA andthe EU.

In 2005, Malaysia's exports of textiles andapparel expanded by 6.2 per cent to US$2.7billion. Exports to the USA remained atUS$772.5 million, as in 2004, while exports tothe EU increased by 4.5 per cent to US$447.8million.

Trade Developments by Region

AsiaIn 2005, Asia's merchandise trade decelerated,with exports growing by 15 per cent toUS$2,773 billion (2004: growth of 25 per centto US$2,411.3 billion), and imports expandingby 16 per cent to US$2,599 billion (2004:growth of 27 per cent to US$2,240.5 billion).Although the People's Republic of Chinacontinued to be the world's third largest sourceof exports and market for imports, there was adeceleration. In 2005, exports from thePeople's Republic of China declined by 7percentage points to 28 per cent to US$762billion, while imports decreased by half to 18per cent to US$660.1 billion. Japan retained itsranking as the fourth largest exporter.However, the growth of its exports moderatedto 5 per cent (2004: 20 per cent) to US$595.8billion. Japan was the fourth largest importmarket in 2005.

In 2005, ASEAN, as a region, accounted forUS$653 billion or 6.5 per cent of the globalmerchandise exports, and US$593 billion or5.7 per cent of world imports. ASEAN'smerchandise exports and imports in 2005declined by 6 percentage points and 9percentage points to 14 per cent and 16 percent, respectively. Singapore was ranked 14thlargest exporter and 15th largest importer in2005, accounting for 2.2 per cent of worldexports and 1.9 per cent of the total import,respectively. As the 19th largest exporter and24th largest importer, Malaysia accounted for1.4 per cent of global exports and 1.1 per centof world imports.

West Asia continued to benefit from risingglobal demand for oil and high prices oil in2005, resulting in the exports of the regionincreasing by 6 percentage points to 36 per cent,

4

valued at US$529 billion, which accounted for5.2 per cent of world exports. Growth in importswas slower, at 19 per cent (2004: 26 per cent).

In 2005, Asia accounted for US$543 billion or22.5 per cent of global exports of commercialservices and US$595 billion or 25.2 per cent ofworld imports of commercial services. In Asia,Japan led in the world export of commercialservices, with a share of 4.4 per cent, and wasranked the fifth largest exporter of commercialservices. This was followed by the People'sRepublic of China, with a share of 3.4 per cent,India (2.8 per cent), Hong Kong (2.5 per cent),Singapore (1.9 per cent) and the Republic ofKorea (1.8 per cent).

Asia's imports of commercial services werealso led by Japan, with a share of 5.8 per centof world imports, followed by the People'sRepublic of China (3.6 per cent), India (2.9 percent), the Republic of Korea (2.5 per cent),Singapore (1.9 per cent) and Hong Kong (1.3

per cent). In 2005, Malaysia was ranked28th largest exporter and 27th largest importerof commercial services.

North AmericaThe USA continued to be the largest importmarket for both trade and commercial servicesglobally in 2005, with imports of merchandisetrade growing at 14 per cent to US$1,732.7billion and commercial services, at 10 per centto US$288.7 billion. The USA was also thelargest exporter of commercial services,with exports growing at 10 per cent toUS$353.3 billion, and second largest exporterin merchandise trade, with exports increasingby 10 per cent to US$904.3 billion.

In 2005, Canada was the ninth largestexporter in merchandise trade and 15th largestexporter of commercial services. Exports ofmerchandise grew by 14 per cent to US$359.6billion, while exports of commercial servicesexpanded by 9 per cent to US$50.6 billion.

5

Exports Imports

2005 Change 2004 2005 Change 2004(US$ billion) (%) (US$ billion) (US$ billion) (%) (US$ billion)

World 10,121.0 13.0 8,956.6 10,481.0 13.0 9,275.2

Asia 2,773.0 15.0 2,411.3 2,599.0 16.0 2,240.5Peoples' Republic of China 762.0 28.0 595.3 660.1 18.0 559.4Japan 595.8 5.0 567.4 516.1 14.0 452.7

ASEAN 10 653.0 14.0 572.8 593.0 16.0 511.2Singapore 229.6 16.0 197.9 200.0 15.0 173.9Malaysia 140.9 11.0 126.9 114.6 9.0 105.1Thailand 110.1 14.0 96.6 118.2 25.0 94.6Indonesia 86.3 20.0 71.9 68.7 25.0 55.0Philippines 41.2 4.0 39.6 46.3 9.0 42.5

West Asia 529.0 36.0 389.0 318.0 19.0 267.2

USA 904.3 10.0 822.1 1,732.7 14.0 1,519.9

Mexico 213.7 14.0 187.5 231.7 12.0 206.9

Europe 4,353.0 8.0 4,030.6 4,521.0 9.0 4,147.7EU-25 3,988.0 7.0 3,727.1 4,120.0 8.0 3,814.8

Latin America 351.0 25.0 280.8 294.0 22.0 241.0MERCOSUR 163.0 20.0 135.8 113.0 18.0 95.8

Africa 296.0 29.0 229.5 248.0 16.0 213.8

Source: World Trade Organisation, 2006

Table 1.2:Merchandise Trade Performance, 2005

As the 10th largest import market formerchandise and 12th largest import market forcommercial services in 2005, Canada's importsof merchandise and commercial services roseby 14 per cent to US$320.1 billion and 10 percent to US$62.3 billion, respectively.

European UnionIn 2005, Europe recorded the lowest growthin the export and import of merchandiseand commercial services among the regions.Europe's exports of merchandise andcommercial services grew by 8 per cent and7 per cent, respectively, and imports expandedby 9 per cent and 8 per cent, respectively. Theslower growth was attributed to the fiscalproblem in Europe.

The EU-25 accounted for 39.4 per cent ofworld merchandise exports (2004: 41.6 percent) and 39.3 per cent of global merchandiseimports (2004: 41.1 per cent) in 2005.Germany was the largest exporter ofmerchandise and third largest exporter ofcommercial services, with both exportsgrowing at 7 per cent to US$970.7 billionand US$142.9 billion, respectively. Germanycontinued to be the second largestimport market for both merchandise, valuedat US$774.1 billion, and commercialservices (US$198.6 billion), after the USA.In the UK, negative growth of 1 per centwas registered for exports of commercialservices, due mainly to the increase ininsurance claims.

6

Rank Exporters US$ billion Share Annual Rank Importers US$ billion Share Annual(%) Change (%) Change

(%) (%)

1 Germany 970.7 9.3 7.0 1 USA 1,732.7 16.1 14.02 USA 904.3 8.7 10.0 2 Germany 774.1 7.2 8.03 People's Republic 3 People's Republic

of China 762.0 7.3 28.0 of China 660.1 6.1 18.04 Japan 595.8 5.7 5.0 4 Japan 516.1 4.8 14.05 France 459.2 4.4 2.0 5 UK 501.2 4.7 6.06 Netherlands 401.3 3.9 12.0 6 France 495.8 4.6 5.07 UK 377.9 3.6 9.0 7 Italy 379.7 3.5 7.08 Italy 366.8 3.5 4.0 8 Netherlands 357.9 3.3 12.09 Canada 359.6 3.5 14.0 9 Belgium 320.4 3.0 12.0

10 Belgium 329.6 3.2 7.0 10 Canada 320.1 3.0 14.011 Hong Kong 292.3 2.8 10.0 11 Hong Kong 300.6 2.8 10.012 Republic of Korea 284.7 2.7 12.0 12 Spain 277.6 2.6 7.013 Russia 245.3 2.4 34.0 13 Republic of Korea 261.0 2.4 16.014 Singapore 229.6 2.2 16.0 14 Mexico 231.7 2.2 12.015 Mexico 213.7 2.1 14.0 15 Singapore 200.0 1.9 15.016 Taiwan 196.6 1.9 8.0 16 Taiwan 185.9 1.7 10.017 Spain 186.1 1.8 2.0 17 India 131.6 1.2 35.018 Saudi Arabia 178.8 1.7 42.0 18 Australia 125.3 1.2 15.019 Malaysia 140.9 1.4 11.0 19 Russia 125.1 1.2 28.020 Sweden 129.9 1.3 5.0 20 Austria 124.7 1.2 4.021 Switzerland 125.9 1.2 6.0 21 Switzerland 121.2 1.1 9.022 Austria 123.3 1.2 4.0 22 Thailand 118.2 1.1 25.023 Brazil 118.3 1.1 23.0 23 Turkey 116.4 1.1 19.024 United Arab 24 Malaysia 114.6 1.1 9.0

Emirates 112.5 1.1 36.025 Thailand 110.1 1.1 14.0 25 Sweden 110.6 1.0 10.026 Ireland 109.5 1.1 5.0 26 Poland 100.5 0.9 12.027 Australia 105.8 1.0 22.0 27 Brazil 77.6 0.7 17.028 Norway 103.3 1.0 25.0 28 United Arab 29 India 89.8 0.9 19.0 Emirates 77.0 0.7 25.030 Poland 88.9 0.9 19.0 29 Czech Republic 76.9 0.7 10.0

30 Denmark 76.5 0.7 12.0


Table 1.3:Leading Exporters and Importers in World Merchandise Trade, 2005

AfricaAfrica's growth of exports, which continuedto be robust in 2005, eased slightly by1 percentage point to 29 per cent, whileimports declined by 13 percentage pointsto 16 per cent. The growth of exports ofthis region continued to be supported byhigh exports of fuel by oil exporting countries,such as Angola, Sudan and Nigeria, andexports of metals by, among others,Mozambique, Zambia and South Africa.Consistent with the increasing global demandfor fuel oil, exports of oil exporting countriesgrew by 45 per cent (2004: 41 per cent) toUS$166 billion. The increase in exportsrevenue, however, did not stimulate the growthof imports, as the growth of imports of oilexporting countries slowed to 17 per cent in2005 (2004: 34 per cent).

Latin AmericaThe Latin American region continued torecord robust growth in the export and importof merchandise and commercial services in2005. Exports of merchandise grew by 25 percent (2004: 29 per cent) to US$351 billion,

while imports expanded by 22 per cent(2004: 28 per cent) to US$294 billion.Improved economic performance, favourablecommodity prices and exchange rateappreciation were among the factorscontributing to the growth.

Growth in commercial services trade wasthe highest among the regions, with exportsand imports growing at 20 per cent (2004: 16per cent) and 22 per cent (2004: 14 per cent),respectively. In 2005, Brazil's exports ofcommercial services grew by 28 per cent(2004: 21 per cent), while imports expandedby 38 per cent (2004: 12 per cent). Inmerchandise trade, Brazil was ranked as the23rd largest exporter and 27th largest importer,accounting for 1.1 per cent of world exportsand 0.7 per cent of world imports, respectively.

INVESTMENT DEVELOPMENTS

World Foreign Direct InvestmentInflowsAccording to United Nations Conference onTrade and Development (UNCTAD), in 2005,

7

Rank Exporters US$ billion Share Annual Rank Importers US$ billion Share Annual(%) Change (%) Change

(%) (%)

1 USA 353.3 14.6 10.0 1 USA 288.7 12.2 10.02 UK 183.4 7.6 -1.0 2 Germany 198.6 8.4 4.03 Germany 142.9 5.9 7.0 3 UK 150.1 6.4 4.04 France 113.7 4.7 4.0 4 Japan 135.9 5.8 1.05 Japan 106.6 4.4 12.0 5 France 102.9 4.4 7.06 Italy 93.4 3.9 13.0 6 Italy 92.3 3.9 15.07 Spain 91.2 3.8 8.0 7 People's Republic8 People's Republic of China 85.3 3.6 19.0

of China 81.2 3.4 31.0 8 Netherlands 69.2 2.9 1.09 Netherlands 75.0 3.1 4.0 9 Ireland 67.5 2.9 5.0

10 India 67.6 2.8 76.0 10 India 67.4 2.9 73.011 Hong Kong 60.3 2.5 11.0 11 Spain 65.3 2.8 15.012 Ireland 54.7 2.3 5.0 12 Canada 62.3 2.6 10.013 Austria 53.8 2.2 11.0 13 Republic of Korea 58.0 2.5 17.014 Belgium 53.4 2.2 6.0 14 Austria 51.7 2.2 12.015 Canada 50.6 2.1 9.0 15 Belgium 51.2 2.2 6.016 Switzerland 45.2 1.9 9.0 16 Singapore 44.0 1.9 9.017 Singapore 45.1 1.9 10.0 17 Russia 37.6 1.6 15.018 Republic of Korea 43.5 1.8 9.0 18 Denmark 36.0 1.5 8.019 Sweden 42.8 1.8 12.0 19 Sweden 35.2 1.5 7.020 Luxembourg 39.6 1.6 20.0 20 Hong Kong 31.6 1.3 5.0


Table 1.4:Leading Exporters and Importers in World Commercial Services Trade, 2005

FDI inflows increased significantly by 29 percent (2004: 9 per cent) to US$896.7 billion.Developed countries were the major recipientsof world FDIs, accounting for 63.9 per centshare and reversing their four-year continuousdecline in FDI inflows. In 2005, FDI inflows to

developed countries rose by 38.2 per cent toUS$573.2 billion (2004: declined by 6.1 percent), while developing countries registereda lower increase of 12.5 per cent to US$273.5billion (2004: 41.3 per cent). Increases in FDIinflows were recorded among all regions.

8

Region/Economy 20052 20041

US$ billion Share (%) Change (%) US$ billion Change (%)

World 896.7 100.0 29.0 695.0 9.0

Developed Countries 573.2 63.9 38.2 414.7 -6.1

Europe 449.2 50.1 74.0 258.2 -28.1EU-25 445.3 49.7 71.9 259.1 -23.8

EU-15 407.7 45.5 76.2 231.4 -29.4UK 219.1 24.4 182.3 77.6 183.2France 48.5 5.4 99.6 24.3 -42.8Luxembourg 13.4 1.5 -80.1 67.2 -19.8Italy 13.0 1.4 -22.6 16.8 2.4Germany 4.9 0.5 112.7 -38.6 -241.4

New 10 EU Member States 37.7 4.2 35.6 27.8 122.4Czech Republic 12.5 1.4 177.8 4.5 114.3Poland 8.7 1.0 -31.0 12.6 173.9Hungary 6.0 0.7 30.4 4.6 119.0

USA 106.0 11.8 10.5 95.9 68.8

Japan 9.4 1.0 20.5 7.8 23.8

Developing Countries 273.5 30.5 12.5 243.1 41.3

Africa 28.9 3.2 54.5 18.7 8.7South Africa 7.2 0.8 800.0 0.8 14.3Egypt 4.1 0.5 215.4 1.3 550.0Sudan 2.1 0.2 40.0 1.5 15.4Morocco 1.2 0.1 33.3 0.9 -60.9

Latin America and the Caribbean 72 8.0 4.5 68.9 43.5Mexico 17.2 1.9 -3.9 17.9 39.8Brazil 15.5 1.7 -14.8 18.2 80.2Chile 7.0 0.8 -7.9 7.6 72.7Colombia 4.5 0.5 45.2 3.1 72.2Argentina 4.2 0.5 2.4 4.1 141.2

Asia and Pacific 172.7 19.3 11.1 155.5 45.5West Asia 26.5 3.0 50.6 17.6 47.9

Turkey 4.8 0.5 77.8 2.7 50.0

South, East and South-East Asia 146.2 16.3 6.1 137.8 45.5People's Republic of China 60.3 6.7 -0.5 60.6 13.3Hong Kong 39.7 4.4 16.8 34.0 150.0Singapore 15.9 1.8 -1.2 16.1 73.1India 6.0 0.7 13.2 5.3 23.3Republic of Korea 4.5 0.5 -41.6 7.7 102.6Malaysia 4.2 0.5 -8.7 4.6 84.0Thailand 3.7 0.4 164.3 1.4 -26.3Indonesia 3.5 0.4 250.0 1.0 266.7

South-East Europe and the Commonwealth of Indepandent States 49.9 5.6 34.0 37.2 55.0

Source : UNCTAD and UNCTAD's own estimatesNotes : 1 Revised data

2 Preliminary estimates

Table 1.5:World FDI Inflows, 2004-2005

Foreign Direct Investments inDeveloped CountriesThe bulk of FDI inflows to developedcountries in 2005 were concentrated in theEU, valued at US$445.3 billion, or 77.7 percent of the total world FDI inflow to developedcountries. FDI inflows to the EU also expandedsignificantly by 71.9 per cent (2004: declinedby 23.8 per cent). The UK emerged as theleading recipient for the first time since 1977,with FDI inflows totalling US$219.1 billion,an increase of almost three-fold from 2004.Other countries in the EU, such as France,Czech Republic, Hungary and Germany, alsorecorded high FDI inflows. The increase ininflows in the new EU states was due mainlyto high rates of reinvestment earnings.

All other developed countries recordedincreases in FDI inflows. The USA registeredan increase of 10.5 per cent to US$106 billion,while inflows into Japan expanded by 20.5 percent to US$9.4 billion. The increase in FDIinflows to developed countries in 2005 wereattributed mainly to rising profits, due to thefavourable business environment, increasingactivities in cross-border mergers andacquisitions, which grew by 40 per cent toUS$2.9 trillion, and higher share prices inmajor financial markets.

Foreign Direct Investments inDeveloping CountriesIn 2005, the Asia and the Pacific, and the LatinAmerica and the Caribbean regions were thetop destinations for FDI inflows for developingcountries, accounting for 63.1 per cent and26.3 per cent, respectively, of the total FDIinflows to the developing countries.

FDI inflows to Asia and the Pacific regionincreased by 11.1 per cent (2004: 45.5 per cent)to US$172.7 billion in 2005. The FDI inflowsto Asia were associated mainly withinvestments in the oil sector and relatedactivities, telecommunications and realproperty.

Main destinations for FDIs were thePeople's Republic of China, at US$60.3

billion, Hong Kong (US$39.7 billion),Singapore (US$15.9 billion) and India (US$6billion). Collectively, these countries attractedUS$121.9 billion or 70.6 per cent of the totalglobal FDI inflow to this region. FDI inflowsto Malaysia amounted to US$4.2 billion,registering a decline of 8.7 per cent. For WestAsia, FDI inflows in 2005 expanded by 50.6per cent to US$26.5 billion.

In 2005, FDI inflows to the Latin America andthe Caribbean region expanded at a slowerpace, by 4.5 per cent (2004: 43.5 per cent)to US$72 billion. Main recipients of FDIinflows were Mexico, at US$17.2 billion,Brazil (US$15.5 billion), Chile (US$7billion), Colombia (US$4.5 billion) andArgentina (US$4.2 billion). The increase ininflows was due mainly to the economicrecovery in the region, stronger growth in theglobal economy, higher commodity prices,and activities in cross-border mergers andacquisitions.

FDI inflows to Africa increased by 54.5 percent to US$28.9 billion in 2005. All major oilexporting countries, as well as Egypt and SouthAfrica, recorded increase in FDI inflows.Investments were mostly in the oil and naturalresources industries.

OUTLOOK

The global economy is expected to remainresilient in 2006, despite high oil pricesand interest rates. Economic activities, whichaccelerated in the second half of 2005 andearly 2006, are expected to be sustained,with economic expansion continuing to bebroad-based. International Monetary Fund(IMF) projected that the world GDP in 2006will grow by 4.9 per cent. The continuedgrowth in the USA, rapid recovery in Japanand robust economic development in Asia,particularly in the People's Republic ofChina and India, and Russia, are among thefactors expected to contribute to globalgrowth. The anticipated recovery in theEuro-area will be subdued, unless its fiscalproblem resolved.

9

World trade is expected to grow by 7 per centin 2006. It will be supported by strongereconomic growth, increased demand forsemiconductors, resulting from the recoveryof the global electronics industry, andhigh prices for fuel, commodities and rawmaterials. Based on estimates by WTO, theshare of the People's Republic of China inworld trade had risen consistently to 6.9 percent in 2005 from 4.1 per cent in 2001.Continued steady growth is expected for thecountry in 2006. The global economicdevelopments, particularly in the USA and theEU, will continue to have a bearing on globaltrade growth.

Following the rebound in 2005, global FDIflows are expected to increase further in2006, given the stronger economic growth andbroad-based expansion, greater corporaterestructuring, sustained growth in profits andcontinuing expansion of new markets. Thecompetitive pressure on firms, continued off-shoring of services, on-going liberalisationinitiatives and growth of MultinationalCorporations from developing countries, willbe among the major factors leading to increasein FDIs. In view of the robust economicdevelopments in Asia and Latin America, theprospects for FDI flows to these regions willremain positive.

10

11

OVERVIEW

Continued growth of exports and importsled to further expansion of Malaysia's totaltrade, which increased by 9.9 per cent toRM967.8 billion in 2005. Malaysia registeredits eighth consecutive year of trade surplussince November 1997, with a record tradebalance of RM99.8 billion.

Driven by economic expansion in bothindustrialised and developing countries, aswell as strong external demand in 2005,Malaysia's merchandise exports grew by 11 percent to RM533.8 billion. Imports increased by8.5 per cent to reach RM434 billion.

From the regional perspective, Malaysia'smajor trading partners were the Association ofSouth East Asian Nations (ASEAN), NorthEast Asia, North America and the European

Union (EU). In 2005, trade with thesefour regions accounted for 87.2 per cent ofMalaysia's global trade.

The most significant expansion in tradewas with ASEAN, which grew by 13.8 percent to RM246.2 billion in 2005. Thecomplementarities of industries and growing

Chapter 2 Malaysia's External Trade

Table 2.1:External Trade

Description 2005 2004

RM billion Change RM billion(%)

Total Trade 967.8 9.9 880.8

Exports 533.8 11.0 480.7Imports 434.0 8.5 400.1

Trade Balance 99.8 23.7 80.7

Compiled by Ministry of International Trade and Industry

Table 2.2:Top 15 Trading Partners

Country 2005 2004

RM billion Share Change RM billion Share(%) (%) (%)

Total Trade 967.8 100.0 9.9 880.8 100.0

USA 161.0 16.6 8.7 148.1 16.8Singapore 134.2 13.9 15.0 116.7 13.2Japan 112.9 11.7 0.5 112.3 12.7People's Republic of China 85.1 8.8 19.1 71.4 8.1Thailand 51.6 5.3 14.8 45.0 5.1Hong Kong 42.0 4.3 6.2 39.5 4.5Republic of Korea 39.6 4.1 7.7 36.7 4.2Taiwan 38.8 4.0 3.7 37.4 4.2Germany 30.5 3.2 7.6 28.4 3.2Indonesia 29.1 3.0 5.5 27.6 3.1Australia 26.2 2.7 16.1 22.6 2.6Netherlands 20.8 2.1 8.4 19.2 2.2Philippines 19.7 2.0 8.8 18.1 2.1India 19.1 2.0 17.3 16.3 1.9UK 16.0 1.7 7.0 17.2 2.0


intra-regional linkages were the primaryfactors that had resulted in the expansion oftrade with ASEAN. Significant growth in tradewas also recorded with other regions, such asWest Asia, which expanded by 23.1 per cent,Latin America (23 per cent), Africa (20.7 percent) and South Asia (16.3 per cent).

In terms of trade with individual countries,Malaysia's top four trading partners remainedunchanged in 2005. They were the UnitedStates of America (USA), accounting for 16.6per cent of Malaysia's total trade, followedby Singapore (13.9 per cent), Japan (11.7 percent) and the People's Republic of China(8.8 per cent). Collectively, trade with thesefour markets accounted for 51 per cent ofMalaysia's total trade.

In 2005, among the top 15 individual tradingpartners, movements were observed in therankings of certain countries. For example, theRepublic of Korea moved from eighth position

in 2004, to seventh position. Similarly, Indiamoved to 14th position, one notch above lastyear's ranking.

EXPORTS

Robust growth in exports, which continuedfrom the previous year, had driven Malaysia'stotal export to RM533.8 billion, up fromRM480.7 billion in 2004. The 11 per centexport growth registered for 2005 was higherthan the world merchandise export growth of6.5 per cent estimated for that year by theWorld Trade Organisation (WTO).

In 2005, export growth was recorded in allsectors. The composition of exports wasrelatively unchanged during the year, withmanufactures being the major contributor toexport, accounting for 77.4 per cent of totalexport. Manufactured exports grew by 9.6 percent to reach RM413.1 billion, from RM376.8billion in 2004. Exports of mining goods

12

Table 2.3:Exports by Sector



Total Exports 533.8 100.0 11.0 480.7 100.0

Manufactured Exports 413.1 77.4 9.6 376.8 78.4Electrical and electronics products 264.7 49.6 9.6 241.5 50.2Chemicals and chemical products 26.3 4.9 5.4 24.9 5.2Machinery, appliances and parts 18.1 3.4 16.4 15.6 3.2Wood products 14.6 2.7 4.0 14.1 2.9Optical and scientific equipment 12.3 2.3 6.5 11.6 2.4Manufactures of metals 10.8 2.0 12.7 9.6 2.0Textiles and apparel 10.3 1.9 6.2 9.7 2.0Iron and steel products 7.0 1.3 -3.2 7.2 1.5Rubber products 7.0 1.3 13.0 6.2 1.3Manufactures of plastics 6.7 1.3 19.8 5.6 1.2Processed food 6.5 1.2 7.9 6.1 1.3

Agricultural Exports 41.2 7.7 0.2 41.1 8.6Palm oil 22.9 4.3 -8.3 25.0 5.2Saw logs and sawn timber 6.6 1.2 18.8 5.6 1.2Crude rubber 5.8 1.1 11.3 5.2 1.1

Mining Exports 70.2 13.2 26.9 55.3 11.5Crude petroleum 30.2 5.7 32.7 22.8 4.7LNG 20.8 3.9 21.7 17.1 3.6Refined petroleum 17.5 3.3 26.4 13.8 2.9


expanded by 26.9 per cent to RM70.2 billion,while agricultural exports increased marginallyby 0.2 per cent to RM41.2 billion.

Within the manufacturing sector, almost allsub-sectors registered expansion in exports in2005. The main increases were for electricaland electronics (E&E) products, whichexpanded by 9.6 per cent to RM264.7 billion,followed by chemicals and chemical products(increased by 5.4 per cent to RM26.3 billion),machinery appliances and parts (increased by16.4 per cent to RM18.1 billion), manufacturesof metals (increased by 12.7 per cent toRM10.8 billion) and manufactures ofplastics (increased by 19.8 per cent to RM6.7billion).

Malaysia's textiles and apparel industryremained resilient despite the removal ofquotas under the Agreement on Textiles andClothing in January 2005. The export oftextiles and apparel expanded by 6.2 per centlast year to reach RM10.3 billion. Export to

the mainstay market, the USA previouslysubjected to quotas, remained unchanged atRM2.9 billion in 2005, while export to theEU increased by 4.5 per cent to RM1.8 billion.

Crude and refined petroleum, as well asliquefied natural gas (LNG), were the principalexports within the mining sector. Collectively,these exports contributed to 12.9 per cent oftotal export and 97.6 per cent of mining exports.

The top four agricultural exports were palm oil,saw logs and sawn timber, crude rubber andseafood, accounting for 6.9 per cent of totalexport and 90 per cent of agricultural exports.Despite registering 7.2 per cent increase inexport volume, the value of palm oil exportswas lower. Exports of palm oil amounted toRM22.9 billion in 2005, compared with RM25billion in 2004. The lesser value in exportswas primarily due to the lower average priceof palm oil in 2005. However, double-digitgrowth was recorded for the other three majoragricultural exports.

13

Table 2.4:Top 20 Export Destinations

Country 2005 2004


Total Exports 533.8 100.0 11.0 480.7 100.0

USA 105.0 19.7 16.5 90.2 18.8Singapore 83.3 15.6 15.5 72.2 15.0Japan 49.9 9.4 2.8 48.6 10.1People's Republic of China 35.2 6.6 9.6 32.2 6.7Hong Kong 31.2 5.8 8.8 28.7 6.0Thailand 28.7 5.4 25.1 23.0 4.8Australia 18.0 3.4 14.3 15.8 3.3Republic of Korea 17.9 3.4 6.6 16.8 3.5Netherlands 17.5 3.3 10.7 15.8 3.3India 15.0 2.8 31.2 11.4 2.4Taiwan 14.8 2.8 -6.0 15.8 3.3Indonesia 12.6 2.4 7.7 11.7 2.4Germany 11.3 2.1 7.4 10.5 2.2UK 9.5 1.8 -10.3 10.6 2.2Philippines 7.5 1.4 1.5 7.4 1.5United Arab Emirates 7.0 1.3 18.5 5.9 1.2France 6.9 1.3 -2.4 7.1 1.5Viet Nam 4.4 0.8 1.3 4.3 0.9Canada 2.9 0.5 -5.5 3.0 0.6Pakistan 2.8 0.5 5.2 2.7 0.6


14

Table 2.5:Imports by End-Use



Gross Imports 434.0 100.0 8.5 400.1 100.0

Intermediate Goods 308.3 71.0 7.2 287.7 72.0

Parts and accessories 163.7 37.7 2.7 159.3 40.0Semiconductors, printed circuits and parts 102.5 23.6 1.9 100.5 25.0Parts for office machines 24.3 5.6 4.6 23.2 5.8Electrical apparatus and resistors 15.2 3.5 8.3 14.0 3.5Parts for checking instruments 1.4 0.3 35.8 1.0 0.3

Processed industrial supplies 87.7 20.2 6.5 82.4 21.0Iron and steel 14.2 3.3 17.6 12.1 3.0Plastics in primary forms (excluding scrap) 8.5 2.0 10.0 7.8 1.9Organic chemicals 8.5 2.0 10.3 7.7 1.9Copper products 5.5 1.3 15.0 4.7 1.2Paper and paperboard 4.0 0.9 1.9 3.9 1.0Manufactures of base metals 3.4 0.8 9.2 3.1 0.8Inorganic chemicals (excluding spent fuel 2.6 0.6 6.3 2.5 0.6

element of nuclear reactors)Fertiliser, excluding crude fertilisers 2.4 0.6 1.6 2.4 0.6Plastics in non-primary forms 2.2 0.5 1.6 2.1 0.5Dying, tanning and colouring materials 1.5 0.3 1.9 1.5 0.4

(excluding artists' colours)Residual petroleum products 1.1 0.3 -12.0 1.2 0.3

Primary fuels and lubricants 15.2 3.5 61.0 9.5 2.4Parts and accessories for transport equipment 12.2 2.8 34.8 9.1 2.3Other processed fuels and lubricants 12.3 2.8 24.3 9.9 2.5Primary industrial supplies 8.9 2.0 1.6 8.8 2.2Processed food and beverages, mainly for industry 4.6 1.1 -9.6 5.1 1.3Primary food and beverages, mainly for industry 3.7 0.9 -0.1 3.7 0.9

Capital Goods 60.7 14.0 9.5 55.5 14.0Capital goods (except transport equipment) 53.9 12.4 10.0 49.0 12.0

Automatic data processing machines 10.8 2.5 25.1 8.6 2.1Electrical machinery and apparatus 7.7 1.8 22.5 6.3 1.6Telecommunications equipment (excluding parts) 5.6 1.3 2.8 5.4 1.4Other machinery specialised for particular industry 4.2 1.0 8.4 3.9 1.0Transformer and other electric power machines 2.7 0.6 8.9 2.5 0.6Rotating electric plants and parts 2.4 0.6 10.1 2.2 0.6Measuring, checking and analysing equipment 1.2 0.3 -21 1.6 0.4Medical, dental and surgical instruments 1.0 0.2 10.3 0.9 0.2

Continued ...

15

Major markets for Malaysia's exports remainedunchanged in 2005. The USA, Singapore andJapan were the top three export destinations,accounting for 44.7 per cent of total export,compared with 43.9 per cent in 2004.

Higher exports to India and Australia in 2005had shifted their rankings in Malaysia's topexport destinations. India became Malaysia's10th largest export destination from 12thposition previously, while Australia moved upone notch to the seventh position.

IMPORTS

Similar to exports, Malaysia's imports in 2005also registered expansion. Growing by 8.5 percent, imports increased to RM434 billion,from RM400.1 billion in the previous year.Growth in imports was mainly attributed tohigher demand for intermediate and capitalgoods to sustain increased manufacturing andinvestment activities. Intermediate and capitalgoods formed the bulk of imports, accountingfor 85 per cent of total import.

In terms of composition, intermediate imports,valued at RM308.3 billion, comprised mainly

components for down-stream production inthe E&E, machinery and appliances andchemical industries. These included, amongothers, semiconductors, printed circuits, partsof machines, electrical apparatus, iron andsteel and plastics in primary and non-primaryforms. Imports of capital goods, with a valueof RM60.7 billion, comprised mainly E&E,machinery and apparatus, and transportequipment.

Major import sources in 2005 wereJapan, the USA, Singapore and the People'sRepublic of China. The most significantincrease in imports was from the People'sRepublic of China, registering an increaseof 27 per cent to RM49.9 billion, comparedwith RM39.3 billion in 2004. Althoughlower imports were recorded from Japan,it continued to be Malaysia's major sourceof imports for 2005, accounting for 14.5 percent of total import. Lesser imports fromJapan was a result of changes in sourcingpatterns over recent years, with Malaysiaimporting more from other countries, suchas the People's Republic of China,Singapore, Taiwan and the Republic ofKorea.



Transport equipment for industries 6.8 1.6 5.3 6.5 1.6Consumption Goods 24.6 5.7 5.9 23.2 5.8

Non-durable consumer goods 6.8 1.6 10.2 6.2 1.5Processed food and beverages for household 5.9 1.4 5.2 5.6 1.4

consumption Semi-durable consumer goods 4.7 1.1 0.4 4.7 1.2Durable consumer goods 3.5 0.8 12.3 3.1 0.8Primary food and beverages for household 3.4 0.8 1.9 3.3 0.8

consumptionTransport equipment for non-industries 0.3 0.1 -4.9 0.3 0.1

Dual Purpose Goods 11.3 2.6 21.5 9.9 2.3Processed motor spirit 6.4 1.5 35.4 4.7 1.2Passenger motor cars 4.9 1.1 7.0 4.6 1.1


TRADE BALANCE

Stronger export performance and reductionof trade deficit with selected tradingpartners, such as Japan, contributedto the widening of the trade surplus toa record level of RM99.8 billion in2005. Trade surplus expanded by 23.7

per cent, from RM80.7 billion in the yearbefore.

Large surpluses were registered with the USA,Singapore, Hong Kong and the Netherlands,while high deficits were recorded with thePeople's Republic of China, Japan, Taiwan andGermany.

16

Table 2.6:Top 20 Import Sources

Country 2005 2004


Total Imports 434.0 100.0 8.5 400.1 100.0

Japan 63.0 14.5 -1.2 63.7 15.9USA 55.9 12.9 -3.4 57.9 14.5Singapore 50.8 11.7 14.3 44.5 11.1People's Republic of China 49.9 11.5 27.0 39.3 9.8Taiwan 24.0 5.5 10.7 21.7 5.4Thailand 22.9 5.3 4.1 22.0 5.5Republic of Korea 21.6 5.0 8.7 19.9 5.0Germany 19.3 4.4 7.8 17.9 4.5Indonesia 16.6 3.8 4.0 15.9 4.0Philippines 12.2 2.8 13.8 10.7 2.7Hong Kong 10.8 2.5 -0.6 10.9 2.7Australia 8.2 1.9 20.3 6.8 1.7UK 6.5 1.5 -1.8 6.6 1.7Saudi Arabia 5.9 1.4 56.5 3.7 0.9France 5.7 1.3 2.1 5.5 1.4Italy 4.7 1.1 29.8 3.6 0.9Switzerland 4.7 1.1 21.8 3.9 1.0India 4.2 1.0 -15.0 4.9 1.2Viet Nam 3.9 0.9 75.3 2.2 0.6Netherlands 3.4 0.8 -2.4 3.4 0.9


Table 2.7:Trading Partners with which MalaysiaRecorded Trade Surpluses

Country 2005 2004

RM billion RM billion

USA 49.1 32.3Singapore 32.5 27.7Hong Kong 20.4 17.8Netherlands 14.1 12.3India 10.8 6.5Australia 9.9 9.0Thailand 5.8 1.0United Arab Emirates 4.2 4.2UK 2.9 3.9Pakistan 2.6 2.5


Table 2.8:Trading Partners with which MalaysiaRecorded Trade Deficits

Country 2005 2004

RM billion RM billion

People's Republic of China 14.7 7.1Japan 13.1 15.2Taiwan 9.2 5.9Germany 8.0 7.4Philippines 4.7 3.3Saudi Arabia 4.1 1.9Indonesia 4.0 4.3Switzerland 3.9 3.2Republic of Korea 3.7 3.0Italy 2.0 0.7


DIRECTION OF TRADE

ASEAN, as a grouping, was Malaysia's largestand fastest growing trading partner in 2005.Trade with other major trading partners,namely the USA, Japan, the People's Republicof China and the EU, had also expanded.Significant increase in exports was alsorecorded for certain fast growing potentialmarkets for Malaysia, such as Finland, Turkeyand Myanmar.

ASEANIn 2005, total trade with ASEAN countriesgrew by 13.8 per cent to RM246.2 billion,compared with RM216.4 billion in 2004.Exports to ASEAN expanded by 15.4 per centto RM139.2 billion, from RM120.6 billion in2004, while imports increased by 11.6 per cent,from RM95.8 billion to RM107 billion. Withexports to ASEAN outpacing imports fromthe region, trade surplus widened to RM32.2billion in 2005, from RM24.8 billion in2004.

Singapore was Malaysia's largest tradingpartner within ASEAN, accounting for 54.5 percent share. This was followed by Thailand andIndonesia, with 21 per cent and 11.8 per centshare, respectively.

Malaysia's exports to all ASEAN countriesexpanded in 2005, with the most significantgrowth of 63.7 per cent recorded to Myanmar,Cambodia (30.3 per cent), Thailand (25.1 percent) and Singapore (15.5 per cent).

Within ASEAN, Singapore continued to beMalaysia's major market, accounting for 59.9per cent of its total export to ASEAN. This wasfollowed by Thailand with 20.6 per cent shareand Indonesia (9 per cent).

For the fifth consecutive year, Malaysia wasthe leading exporter to Singapore, accountingfor 14.4 per cent of its total import. In 2005,Malaysia continued to be the fourth largestsource of imports for Thailand, accounting for6.9 per cent of its total import, compared with5.8 per cent in the previous year. For Indonesiaand the Philippines, Malaysia was their ninthlargest exporter in 2005.

Export growth was recorded for all sectors in2005. Major exports to ASEAN were E&Eproducts, which expanded by 7.2 per cent in2005, to RM59.7 billion, or 42.9 per cent oftotal export to the region. This was followed byrefined petroleum products (56.5 per centgrowth to RM12.3 billion), crude petroleum(63 per cent growth to RM12 billion),

17

Table 2.9:Malaysia's Trade with ASEAN

Country 2005 2004

Total TotalExports Imports Trade Exports Imports Trade

RM million Share Change RM million Share Change RM million RM million RM million RM million(%) (%) (%) (%)

ASEAN 139,207.9 26.1 15.4 106,975.9 24.6 11.6 246,183.8 120,601.1 95,816.5 216,417.6

Singapore 83,333.4 59.9 15.5 50,827.0 47.5 14.3 134,161.4 72,176.4 44,477.0 116,653.4Thailand 28,722.9 20.6 25.1 22,889.2 21.4 4.1 51,612.0 22,953.9 21,996.5 44,950.3Indonesia 12,579.7 9.0 7.7 16,565.7 15.5 4.0 29,145.5 11,677.2 15,936.2 27,613.3Philippines 7,475.9 5.4 1.5 12,192.0 11.4 13.8 19,667.9 7,362.4 10,710.4 18,072.7Viet Nam 4,392.1 3.2 1.3 3,865.6 3.6 75.3 8,257.7 4,333.9 2,204.6 6,538.4BruneiDarussalam 1,337.1 1.0 11.2 49.1 0.1 -8.9 1,386.2 1,202.8 53.9 1,256.7

Myanmar 929.2 0.7 63.7 506.1 0.5 24.6 1,435.4 567.5 406.1 973.6Cambodia 413.7 0.3 30.3 31.3 neg. -0.5 445.1 317.5 31.5 349.0Lao PDR 23.8 neg. 149.5 48.9 0.1 8,659.0 72.7 9.5 0.6 10.1

Compiled by Ministry of International Trade and IndustryNote: neg. - negligible

chemicals and chemical products (9.7 percent growth to RM9.1 billion), machinery,appliances and parts (18.8 per cent growth toRM7.7 billion), manufactures of metals (4.2per cent growth to RM4.2 billion), iron andsteel products (18.7 per cent growth to RM3.2billion), and transport equipment (5.7 per centgrowth to RM2.9 billion).

In 2005, Malaysia's exports under the CommonEffective Preferential Tariff (CEPT) Schemegrew by 28.4 per cent to RM11.1 billion.Major exports under this Scheme were plasticproducts (RM1.5 billion), E&E products(RM1.3 billion) and organic chemicals (RM1.1billion). Thailand, Indonesia, the Philippinesand Viet Nam were the major exportdestinations under this Scheme.

ASEAN was Malaysia's second largestregional source of imports, accounting for24.6 per cent of Malaysia's global import.Imports from ASEAN grew by 11.6 per centin 2005 to RM107 billion. The mainsources of imports were Singapore, Thailand,Indonesia and the Philippines. Collectively,these countries accounted for 95.8 per centof Malaysia's imports from ASEAN.

Major imports from ASEAN were E&Eproducts, valued at RM41.9 billion or 39.2 percent of Malaysia's imports from ASEAN. Thiswas followed by refined petroleum (RM14.7billion), chemicals and chemical products(RM9.5 billion), machinery, appliances andparts (RM5.6 billion), and manufactures ofmetals (RM3.8 billion).

In 2005, Malaysia's total import under theCEPT Scheme increased by 54.7 per cent toRM3.8 billion. As in 2004, Thailand was thelargest source under the CEPT Scheme, withimports totalling RM2.7 billion.

The United States of AmericaFor the USA, Malaysia was its 11th largesttrading partner and its 10th largest source ofimports in 2005. Among ASEAN countries,Malaysia is the top supplier to the USA,accounting for 2 per cent of its total import.

For Malaysia, the USA continued to be itslargest individual country trading partner,accounting for 16.6 per cent of Malaysia'sglobal trade, that is, 19.7 per cent of totalexport and 12.9 per cent of total import. In2005, exports to the USA surged by 16.5 percent to RM105 billion. Imports, however, werelower by 3.4 per cent to RM55.9 billion.

The major contributors to Malaysia's exportgrowth to the USA in 2005 were the expansionin its economy and higher demand forconsumer E&E products. Consequential to thisincrease, convergence of computing functionswith the digital media and greater utilisation ofwireless applications, consumer demand forproducts such as cell phones, digital camerasand other hand-held gadgets continued to grow.As a result, exports of E&E products to theUSA grew by 19.3 per cent to RM82 billion.Malaysia was the fourth largest source of E&Eimports for the USA. Other major exports tothe USA included wood products (increasedby 9.1 per cent to RM3.3 billion), textilesand apparel (decreased by 0.3 per cent toRM2.9 billion), optical and scientific products(increased by 13.4 per cent to RM2.8 billion)and rubber products (increased by 9.6 per centto RM2.1 billion).

As in 2004, the USA was Malaysia's secondlargest source of import by country, with ashare of 12.9 per cent of Malaysia's totalimport for 2005. Imports from the USAconsisted mainly of E&E products (decreasedby 4.3 per cent to RM34.3 billion), machinery,appliances and parts (increased by 8.1 per centto RM5.6 billion), chemicals and chemicalproducts (increased by 2 per cent to RM3.1billion) and optical and scientific equipment(decreased by 13.6 per cent to RM3billion).

JapanIn 2005, Malaysia's trade with Japan increasedmarginally by 0.5 per cent to RM112.9 billion.Exports increased by 2.8 per cent to RM49.9billion, while imports were lower by 1.2 percent, with a value of RM63 billion. In 2005,Japan sustained its position as Malaysia's

18

third largest trading partner and its thirdlargest export destination. From Japan'sperspective, Malaysia was its 11th largestsource of imports.

E&E products remained the major export toJapan, accounting for 33.5 per cent of totalexport, valued at RM16.7 billion in 2005.Compared with 2004, E&E exports to Japan in2005 were lower by 6.5 per cent, due mainly toJapan importing more from other sources, suchas the People's Republic of China and Taiwan.Other major exports to Japan included LNG(increased by 28.4 per cent to RM13.1 billion),machinery, appliances and parts (increasedby 17.7 per cent to RM1.1 billion), wood(declined by 3.6 per cent to RM3.6 billion),and chemicals and chemical products (declinedby 2.8 per cent to RM2.4 billion)

Growing imports from lower cost producingcountries, in particular, the People’s Republic ofChina, for products such as E&E parts andcomponents contributed partly to the 1.2 per centdecline in imports from Japan for the year. Thetop five imports from Japan included E&Eproducts (decreased by 3.1 per cent to RM24.3billion), machinery, appliances and parts(increased by 8.4 per cent to RM9.1 billion),transport equipment products (decreased by 2 percent to RM6.5 billion), iron and steel products(decreased by 0.4 per cent to RM5.3 billion) andchemicals and chemical products (increased by6.2 per cent to RM4.3 billion).

The People's Republic Of ChinaIn 2005, the People's Republic of Chinaremained Malaysia's fourth largest tradingpartner. Malaysia's total trade with the People'sRepublic of China expanded by 19.1 per centto RM85.1 bil

malaysia international trade and industry ... report/miti...table 1.3: leading exporters and...

Documents