Our comprehensive assessment of Malaysia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Malaysia, as well as the latest industry developments that could impact Malaysia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Malaysia before your competitors.

Country Risk

Malaysia Country Risk

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Core Views

  • Malaysia's once-bloated current account surplus is coming under pressure from a combination of income account outflows and a dwindling trade surplus. We expect the narrowing of the surplus to continue, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015. However, the risks are weighted to the downside, with the emergence of a current account deficit over the next few years increasingly likely.

  • Over recent years Malaysia's fiscal accounts have exhibited some worrying trends, with spending rising as a share of GDP, subsidy spending rising as a share of total spending, and indirect tax revenues declining. Going forward we are optimistic that these trends will be halted as subsidy spending is reduced and a Goods & Services Tax (GST) is implemented, which should help stabilise Malaysia's debt metrics and support private sector real GDP growth....

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Malaysia Operational Risk Coverage (9)

Malaysia Operational Risk

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Malaysia's labour force is characterised by a large, healthy and urbanised population, with reasonably good basic skills as well as a large number of specialised graduates. We note the domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated, and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risk, in eighth place with a score of 62.5 out of 100.

The Malaysian labour market benefits from a high number of adults who have completed secondary and tertiary education, which means there are greater options for businesses looking to recruit skilled labour. The government is also...

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Malaysia Crime & Security

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BMI considers Malaysia to be one of the safest countries in Asia for foreign workers and businesses, with lower crime rates, fewer threats from terrorism, and less of a risk of interstate conflict than in most other emerging market countries in the region. In particular, we highlight that Malaysia has a markedly lower impact from terrorist activity than most of its neighbours, including Thailand, Indonesia, and the Philippines, while its involvement in the South China Sea disputes has been less confrontational than Vietnam and China. Malaysia is therefore ranked highly overall in the BMI Crime and Security Risks Index, in tenth place out of 29 countries in Asia, with a score of 61.8 out of 100. BMI notes that the main risks to foreigners come from petty crimes and scams, and the potential spreading of terrorist activity over the borders from neighbouring states.

Malaysia'...

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Malaysia Labour Market

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Malaysia's labour force is characterised by a large, healthy, and urbanised population, with reasonably good basic skills, as well as a large number of specialised graduates. We note the domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risks, in ninth place out of 29 countries, with a score of 60.2 out of 100.

The lack of labour market regulations, combined with laws which restrict the activities of trade unions, have led to greater flexibility for businesses in Malaysia with regard to their workforce. Although the...

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Malaysia Logistics

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Malaysia's logistics network is one of the most efficient and well developed in the world, which is a significant advantage for supply chains and businesses operating in the country. Malaysia's geographic location on a key international shipping route has enabled it to develop an integral role in the global supply chain, with high-quality port infrastructure and well-developed road, rail and air connections both internally and to neighbouring countries. Additionally, the use of Malaysia as a direct port of call for international shipping companies means that the costs of trading are reduced, while the development of modern and efficient trade procedures has lowered the burden of bureaucracy. The country has also been able to establish a widespread utilities infrastructure, and subsidies keep the cost of fuel, electricity and water low. As a result of these factors, Malaysia scores high in the BMI Logistics Risks Index, with 82.4 out of 100,...

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Malaysia Trade & Investment

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BMI considers Malaysia to be ranked among the most attractive countries in the Asia region as a location for investment and doing business. The government adopts a generally welcoming attitude towards foreign direct investment (FDI), and has established policies which have lowered the burden of bureaucracy, protected ICT activity and intellectual property (IP), and generally created a healthy business environment. Malaysia is therefore ranked highly in the Asia region in the BMI Trade and Investment Market Risks Index, in fifth place of out 29 countries, just behind Australia and ahead of Taiwan. It's high score of 73.1 out of 100 in this regard also places it favourably on a global scale, in 23 rd place out of 170 countries, and ranked above all the BRICS states (Brazil, Russia, India, China, and South Africa), which are currently seen as the most attractive emerging markets.

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Malaysia Industry Coverage (23)

Agribusiness

Malaysia Agribusiness

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BMI View:   Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. We see conditions being particularly favourable for sugar, poultry and cocoa production on the back of strong investment. However, we highlight that changing consumption patterns, disease outbreaks, sudden change s in policy and resource shortages could dent growth potential in the sector in the medium and longer term.

Key Forecasts

  • Palm oil production growth to 2017/18: 10.1% to 21.3mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology. 

  • ...

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Autos

Malaysia Autos

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According to the Malaysian Auto Association (MAA), auto production grew 5.6% in 2013, to 601,407 units. While passenger car production registered healthy growth of 6.7%, to 543,892 units, output in the commercial vehicle (CV) segment contracted 4.1%, to 57,515 units. For 2014, we expect growth in both CV and passenger car production, and forecast overall auto production growth to come in at 4.9%, to 630,590 units.

Auto sales in June 2014 grew 9.2% year-on-year (y-o-y) to 58,561 units, bringing sales for H114 to 333,142 units, an increase of 6.3% y-o-y.

We are maintaining our 2014 passenger car sales growth forecast of 4.0%, to 600,000 units, as high base effects will temper growth in H214.

Slowdown In Construction To Weigh On CV Segment

The weakness in CV sales has been more pronounced than we envisaged. Sales in the segment declined 3.0% y-o-y over...

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Commercial Banking

Malaysia Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Malaysia Consumer Electronics

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BMI View:   T he consumer electronics market in Malaysia has expanded rapidly in value and volume terms in recent years as declining device prices combine with   strong economic performance and   r ising   incomes to drive demand growth . Broadly speaking, we expect this dynamic we expect to remain in place in the medium term. I ncreasing competition in the smartphone, tablet and flat-screen TV markets from Chinese vendors will ensure the market continues to deepen , but as the market becomes saturated intense price...

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Defence & Security

Malaysia Defence & Security

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BMI View:   As Malaysia enters a new financial year, we expect to see an upward trend in military and defence procurement. 2014 saw very little activity in the defence sector as the government reviewed its defence procurement strategy. The release of a new five year development plan and a review of Malaysia's defence offsetting programme could yield changes for the indigenous defence sector in 2015. However, we forecast a marginal rise in defence spending, which remains a low priority for the government which is trying to address a budget deficit. Meanwhile, Malaysia enjoys peace and stability with regards to internal and external security threats. Key concerns include continued incursions by Filipino groups and rising piracy in regional waters.

...

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Food & Drink

Malaysia Food & Drink

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The Malaysian economy's strong real GDP growth during 2014, which we forecast reaching 4.4% for the full-year, was driven by strong exports and increased domestic consumption. Proposed changes to the country's fuel subsidy scheme and the introduction in April 2015 of a 6% goods and services tax (GST) are likely to produce a slowdown in domestic consumption. However, these changes will have a positive impact on long-term fiscal discipline by reducing expenditure and increasing government revenue. BMI maintains its view that, across the forecast period, inflation should remain manageable and continued strong real GDP growth is to be expected.

Headline Industry Data

  • 2014 total food consumption sales growth (local currency): +3.0%; compound annual growth rate (CAGR) 2013-2018: +3.1%.

  • 2014 per capita food consumption sales growth (...

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Freight Transport

Malaysia Freight Transport

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Good Freight Outlook For 2015

Activity levels across Malaysia's different freight modes will grow moderately-to-strongly in 2015, generally picking up pace compared to our estimated levels for 2014. As infrastructure investment plans are advancing, Malaysia will be gradually expanding its freight capacity to match. Airfreight, potentially affected by the crisis felt by  Malaysia Airlines, will nevertheless notch up growth in the low single digits, while railfreight will do a little better. In shipping, gross tonnage and container volume growth will pick up as both exports and imports continue to grow, despite a slight easing of domestic consumption.

The Malaysian economy surged ahead in 2014, driven by strong export demand and dynamic domestic consumption. Although we remain positive in our outlook for 2015, we believe one of those two engines of expansion - the domestic...

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Information Technology

Malaysia Information Technology

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BMI View: G rowth is expected to slow slightly in 2015 compared to 2014 b ut, nonetheless , we believe the Malaysian IT market has a bright medium - term outlook, due to a supportive economic environment and a government policy framework encouraging the development of the market . In the hardware market , rising incomes and increased access to affordable data connectivity, along with cuts to Windows licensing fees ,...

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Infrastructure

Malaysia Infrastructure

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BMI View:   The potential for greater transport and energy infrastructure development has improved our outlook for Malaysia's construction sector in 2015, despite our expectations that near-term construction growth will moderate from levels seen in Q114.   This outlook is due to three factors: greater fiscal spending on fixed   asset investment and a restocking of the company's project pipeline.

Key Trends And Developments

  • In October 2014, Malaysia's Prime Minister Najib Razak announced plans to invest USD23bn on the country's transport infrastructure. Razak said the government would build a 1,663km Pan-Borneo Highway in eastern Malaysia. The estimated USD8.3bn highway would stretch from Sabah in...

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Insurance

Malaysia Insurance

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BMI View : The life segment, despite being larger in size, will underperform growth in Malaysia's insurance sector over the 2015-2018 period due to a rather saturated market. On the other hand, the non-life segment will see benefit from the removal of statutory tariffs on certain non-life lines which will increase competition and drive growth in the sector.

We forecast total gross premiums to grow 5.9% in Malaysian ringgit (MYR) terms in 2015, the same growth rate that was achieved in 2014. However, in USD terms, growth will accelerate to 11.9% due to our expectation for the MYR to appreciate versus the US dollar over the course of the year. We forecast gross life premiums to rise by 11.5% (in USD terms) and gross non-life premiums to increase by 12.6% (in USD terms) in 2015.

Over the 2015-2018 period, we forecast gross premiums to grow at an annual average of 8.8% (in...

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Medical Devices

Malaysia Medical Devices

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Espicom Industry View: Malaysia's strategy of introducing business friendly policies and not least a new set of medical device regulations has seen it continue to attract multinational investment in manufacturing plants in the country. Whilst there has been some change, most local manufacturers tend to specialise in the manufacture of rubber-based consumables, which has resulted in a high reliance on imports. This being a factor, alongside continued investments in healthcare, the medical device market is set to expand at a solid 16.1 % per annum.

Headline Industry Forecasts

  • In US dollar terms, the medical device market is projected to expand by a CAGR of 16.1%, which should see it rise from an...

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Metals

Malaysia Metals

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BMI View: Malaysia has a well developed metals sector and is a leading global producer of both steel and tin, However, local producers have been met with increasing pressure from other markets in recent years, with a sharp uptick in Chinese output levels, in particular, leading to downwards pressure on prices and hence production volumes. Out outlook for both the Malaysia steel and tin sectors is therefore one of caution with production growth expected to be moderate over the next few years.

2014 saw Malaysia's steel producers experience falling output and revenues as a flood of cheap imports squeeze prices and margins. With much of this extra supply arriving in the form of cheap products from countries such as China, Indonesia and South Korea, local producers have found themselves hit by falling orders for hot rolled coils as well as other heavily imported steel...

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Mining

Malaysia Mining

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BMI View: Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, Malaysia's mining sector is unlikely to witness a resource boom over our forecast period to 2018. Depleting reserves and falling ore grades will continue to impede growth in the tin sector, while falling gold prices remove the shine off investment in the gold mining industry.

We forecast Malaysia's mining industry to reach USD41.2bn by 2018, increasing at a clip of 5.0% per annum. Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, a resource boom is unlikely to catch up with the country anytime soon. In contrast to the relentless pursuit of volume growth over the past decade, mining firms are focusing on the development of their core brownfield assets on the back of the economic...

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Oil & Gas

Malaysia Oil & Gas

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BMI View : Malaysia is a stable oil and gas producer. Over the next 10 years, it will see its oil production decline as new fields fail to offset declining production. The government lifting the subsidies for diesel and petrol will also see consumption of oil products grow at a slower pace than forecasted in the previous report, although expansion of the refining capacity towards the end of the forecast period will see oil demand grown exponentially. Gas production is set to grow gradually over the forecast period.

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Headline Forecasts (Malaysia 2012-2018)
2012 2013

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Petrochemicals

Malaysia Petrochemicals

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Malaysia is set to end the decade with a major increase in petrochemicals capacity, but BMI's latest Malaysia Petrochemicals Report warns that new plants will be dependent on imported crude oil and be forced to compete with low-cost ethane-based US producers.

The focus of development will be P etronas' refinery and petrochemical integrated development (RAPID) project in Pengerang, which is likely to be completed in 2019. It is set to have around 300,000b/d of refinery capacity and over 7mn tonnes per annum (tpa) of petrochemicals capacity. RAPID has been delayed due to concerns over its economic viability due to rising costs and falling domestic crude oil volumes at a time when the US is planning to boost petrochemicals production using competitively priced ethane derived from shale.

Other Petronas projects include its joint venture (JV) with...

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Pharmaceuticals & Healthcare

Malaysia Pharmaceuticals & Healthcare

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BMI View: Malaysia's 2015 budget reinforces our upbeat outlook on the country's pharmaceutical market. Rising healthcare expenditure plans to improve medical access and efforts to mitigate the impact of the Goods and Service Tax on medicine prices will provide companies with significant revenue - earn ing opportunities. However, downside risks to our outlook include further economic slowdown forecast for 2015, worries of an increasing number of imitation drugs and growing political differences within both the o pposition and ruling coalitions.

Headline Expenditure Projections

  • Pharmaceuticals: MYR6.60bn (USD2.10bn) in 2013 to MYR7.22bn (USD2.25bn) in...

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Power

Malaysia Power

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BMI View :   The Malaysian power sector is set to grow at a slower rate in 2015 than in preceding years as we expect no thermal projects to be completed in that year. However, we expect sector growth to accelerate after 2015 as most of the major thermal projects being developed in Malaysia for completion after 2015 are on schedule.

We forecast electricity generation in Malaysia to grow by 1.9% in 2015. This growth rate marks a significant slowdown from previous years, with the five-year historical average growth for power generation at around 8.0%, according to our estimates. We do not expect the slowdown in 2015 to continue in 2016 and over the long term. We have maintained our long-term forecasts for electricity generation in Malaysia this quarter as the major projects we have incorporated into our forecasts after 2015 remain on schedule. We forecast electricity...

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Real Estate

Malaysia Real Estate

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BMI View : The outlook for Malaysia's commercial real estate sector has been somewhat clouded over recent months, which has been due to a slowing economy and export sector as a result of China's economic slowdown. However, with signs that the economy is back on track as external demand picks up, we remain confident that demand will continue to grow across the commercial real estate market into 2015.

The Malaysian commercial real estate market has become a focal point for international investors in recent years as developers look to take advantage of the country's fast-growing and increasingly affluent population and growing levels of demand from both the private and public sectors. In particular, the market has seen an inflow of foreign direct investment (FDI) from neighbouring Asian states, including Singapore and China.

However, H213 saw a shift...

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Retail

Malaysia Retail

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BMI View:   We have upgraded our full-year GDP forecast for Malaysia from the previous 4.5% to 5.8% on the back of increased domestic consumption, which bodes well for the continuing health of the retail market - particularly areas such as furnishing & home. However, the retail market is expected to temporarily soften with the implementation of the Goods and Services Tax on April 1.

Our Malaysia retail report provides a comprehensive forecast of various retail indicators including household spending and headline total spending across each retail subsector; household income and employment forecasts; demographic forecasts; and a detailed breakdown of household and per capita spending across a large number of retail areas, including food & drink, clothing & footwear, household goods, and a number of other subsectors.

Hypermarkets,...

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Shipping

Malaysia Shipping

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Strong Growth Rate Set To Ease In 2015

Activity levels at Malaysia's main ports will grow moderately in 2015, on the back of continuing economic expansion and a good trade performance. Gross tonnage and container volume growth will pick up as both exports and imports continue to grow, despite a slight easing of domestic consumption. Port Klang and Port Tanjung Pelepas will also benefit from expansion projects and developments over the last two years. Tonnage growth at both will lag slightly behind GDP, with box traffic growth leading GDP and, in the case of Port Klang, exceeding 7%.

The Malaysian economy surged ahead in 2014, driven forward by strong export demand and dynamic domestic consumption. Although we remain positive in our outlook for 2015, we believe one of those two engines of expansion - the domestic consumer market - is going to lose some of its vigour. GDP grew by 6.2% in Q114 and...

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Telecommunications

Malaysia Telecommunications

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Although the mobile penetration in Malaysia is high, BMI believes that there is still scope for growth. Strong competition between the operators on the telecommunications sector will erode ARPU, but value-added product offerings, such as data heavy bundles, will add buoyancy. Wireless and wireline non-voice services account for an increasingly large proportion of operators' revenues, and this is encouraging them to reinvest heavily in next-generation infrastructure, including fibre-to-the-home and 4G LTE.   However, unlike at other relatively mature market, operators such as Digi , have managed to increase their subscriber base by bundling their data offers in with prepaid SIM-cards.

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Tourism

Malaysia Tourism

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BMI View: The Malaysia tourism report examines a range of key indicators for this rapidly expanding market in the midst of the highly competitive Asia Pacific region. We are forecasting healthy growth in inbound and outbound travel throughout our forecast period to 2018, leading to high rates of tourism related expenditure and a steadily improving industry value. Along with domestic economic growth, this indicates a very positive potential investment environment.

Malaysia was targeting arrivals of 28mn in 2014 - we expect that the country will fall a little short at 27.1mn though this is still healthy growth of 5.2% compared to 2013 arrivals. The government is highly supportive of tourism, and is targeting annual arrivals of 36mn by 2020 (with tourism related income of MYR168bn). Effective marketing campaigns are raising the country's global profile, including the new '2015 Year of Festival'...

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Water

Malaysia Water

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B MI View : In an effort to force operators to focus on minimising wastage and improving efficiency, an asset holding company was established to acquire state operator s ' assets and liabilities. Whil e this is a work in progress, the regulatory sector still remains opaque and disjointed, acting as a significant deterrent to private sector players. W e have an overall positive view for the Malaysian w ater sector ,   however the government budget , with   declining federal...

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