Malaysia Country Risk Report

Published 29 April 2015 | Quarterly

  • 52 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Malaysia Country Risk Report

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.

  • Bank Negara Malaysia (BNM) will find itself under increasing pressure to hike interest rates over the coming months as consumer price inflation (CPI) pressures mount following the reduction of fuel and electricity subsidies. However, we expect the central bank to maintain the policy rate at 3.00% amid growing disinflationary signs emanating from weakening money supply growth, which should see CPI pressures ease in H214.

Major Forecast Changes

  • We have revised down Malaysia's current account surplus for 2014 and 2015, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015, rather than the 3.5% and 2.7% previously expected. Even with these revisions, the risks are weighted to the downside as the pickup in domestic investment activity and the still-wide consolidated public deficit pose risks of a current account deficit over the coming years.

Key Risks To Outlook

  • Malaysia's economic outlook remains vulnerable to external shocks. This is compounded by increased public spending on welfare subsidies in recent years. We caution that the government's failure to address its fiscal...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Guilty Verdict Threatens Opposition's Survival
8
Table: POLITICAL OVERVIEW
8
Long-Term Political Outlook
10
Race Relations Still Cloud The Horizon
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Low Oil Prices No Hammer Blow To Overall Economy
14
Table: Economic Activity
14
Fiscal Policy
16
GST: Short-Term Pain; Long-Term Gain
16
Table: Fiscal Policy
16
Monetary Policy
18
Rate Hold To Continue
18
Table: Monetary Policy
19
Currency Forecast
20
MYR: Downside Limited Despite Oil Price Collapse
20
Table: BMI CURRENCY FORECAST
20
Table: Current Account
21
Chapter 3: 10-Year Forecast
23
The Malaysian Economy To 2024
23
Productivity Gains To Support 4
23
Table: Long-Term Macroeconomic Forecasts
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
Table: Operational Risk
28
Legal Environment
29
Table: Asia-Legal Risk
30
Costs Of Labour
33
Table: Asia - Labour Cost
34
Chapter 5: Key Sectors
37
Defence & Security
37
Table: Defence Expenditure
39
Freight Transport
41
Table : Rail Freight
43
Table : Air Freight
43
Table : Maritime Freight
44
Other Key Sectors
45
Table: Oil & Gas Sector Key Indicators
45
Table : Pharma Sector Key Indicators
45
table: Autos Sector Key Indicators
45
table: Telecoms Sector Key Indicators
46
table: Food & Drink Sector Key Indicators
46
table: Infrastructure Sector Key Indicators
46
Chapter 6: BMI Global Macro Outlook
47
Global Outlook
47
Softening Growth Picture
47
Table: Global Assumptions
47
Table : Developed States , Real GDP Growt H, %
48
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
48
Table : Emerging Markets , Real GDP Growth , %
49

The Malaysia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Malaysia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Malaysia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Malaysia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Malaysia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Malaysia, including currency volatility, the commodity price boom and protectionist policies.

The Malaysia Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Malaysia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Malaysia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Malaysia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Malaysia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Malaysia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Malaysia over the next 5-years?

BMI's Malaysia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Malaysia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Malaysia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Malaysia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Malaysia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Malaysia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Malaysia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Malaysia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Malaysia’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Malaysia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Malaysia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express