KUALA LUMPUR: A research think tank says Malaysia can reap some benefits from the ongoing trade war between the US and China but warns that Putrajaya will need to act quickly to facilitate trade diversions and the relocation of businesses.
At a press briefing today, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said the electric and electronics sector could especially benefit from the trade war.
But he said this would depend on whether there is a potential for substitute products affected by the trade war and the constraints faced by companies, such as the shortage of labour.
He said investors in China and the US would be strategising on long-term diversification as the trade war passes the one-year mark.
“The lesson we can learn from the trade war is that we cannot put all our eggs into one basket.
“We have to continue to diversify sources of investments, suppliers, markets and products so that we are not at the mercy of the trade war.”
He advised Putrajaya to focus on strengthening its economic fundamentals and leveraging Malaysia’s strategic location, not just as a production centre but as a transhipment hub as well.
“It can consider an export credit scheme for SMEs to build their export capacity, reduce export duty on raw materials, assist in the exploration of new markers and provide incentives to attract multinational companies to establish principal hubs in Malaysia,” he said.
Lee urged the government to clarify the ongoing negotiations for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and expedite the Regional Comprehensive Economic Partnership.
He also urged the government to draw up plans to stimulate higher domestic investments and attract more quality foreign direct investments (FDI).
“We have attracted a lot of approved FDI but our approved domestic direct investments (DDI) continue to contract in the first quarter of the year by almost 30.5%.
“We need to balance the contribution between FDI and DDI.”
He suggested that the government look into ways to ease the costs of doing business, reduce regulatory requirements, review investment incentives and expedite incentives announced in Budget 2019.