Japanese firms’ business confidence in Malaysia falls in first half of year

A Japanese factory operating in Penang.

KUALA LUMPUR: Business confidence in Malaysia among Japanese companies operating here continued to decline in the first half of 2019 (1H19), but the second half is expected to be better.

These are the findings of a survey conducted by the Japanese Chamber of Trade and Industry, Malaysia (Jactim) and Japan External Trade Organisation (Jetro) from Jan 14 to March 31, covering 278 valid respondents.

Based on the poll, the business condition diffusion index fell 13.7 points to negative 18.9 points from the 2H18 level of negative 5.2 points. This is the lowest level since the second half of 2016.

However, an improvement is expected in the next six months to negative 11 points.

Jactim vice-president Daiji Kojima said the global impact of the US-China trade war was affecting Malaysia’s economy.

“The electrical and electronics industry is impacted, including steel manufacturing. However, exports are still good,” he told reporters at the presentation of business survey results here today.

“A reversal in (business confidence) trends is expected in the next period. A close watch will be kept over future trends,” he said, adding that the poll was conducted twice a year.

On Malaysia’s trade and investment attractiveness among Asian countries, it maintained sixth position, after Vietnam, Indonesia, Myanmar, Thailand and India, weighed down mainly by labour cost factors.

However, on future business plans in Malaysia, 35.4% of Japanese companies said they would expand their business, a 1.4-percentage point decline from the previous survey.

“Stable growth and an increase in orders were the main reasons for expansion, with some planning to make Malaysia their hub,” said Kojima.

The expansion trend in the non-manufacturing sector is higher (43.9%) than manufacturing while those maintaining the status quo fell by 2.7 points to 58.8%.

“Malaysia’s strongest attraction as an investment destination is the English proficiency of its workers and people (68.7%), as Japanese companies increasingly appreciate this English prowess.

“Other positive points are Malaysians being pro-Japanese (58.6%), few natural disasters experienced by the country (56.8%), and political stability (19.1%),” said Kojima.

There are 1,400 Japanese companies in Malaysia, of which about 700 are in the manufacturing sector with 40% focusing on electrical and electronics, and the rest in the services sector.

About 600 companies are registered under Jactim.