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Wavering Foreign Trade And Exports
Malaysia Perspective | 25 July 2012

By Yang Ming Wan

The Eurozone crisis is still casting a pall over the global economy. Many economists are predicting that, as overseas demand collapse, foreign trade and exports will most likely be dealt with a severe blow.

To date, the Eurozone debt crisis is yet to be resolved. As a result, Malaysia’s exports has been going through a roller coaster period. Yet, despite the nerve wrecking ride, we have miraculously emerged relatively unscathed.

Foreign Trade Still Standing Firm
Malaysia’s exports dipped this March and April after a stellar showing in February, in the midst of the unfurling Eurozone crisis. Fortunately, it was a marginal slowdown as compared to the same period last year.

As a result of this slight dip, the Bureau of Statistics merely reported that the foreign trade and export figures for those two months were almost flat or registered no growth. Since the extent of contraction was less than 1 percent, it can indeed be considered flat growth for all intents and purposes.

Fast forward to early July, when the Bureau of Statistics reported that foreign trade and exports in May showed no further decline, apart from the slight fluctuations that have been at play for the past two years. Total foreign trade achieved a double-digit growth, while exports shook free from a plateau to register a 6.7 percent growth, which is better than the less than 5 percent expected. Even though export figures did not achieve the double-digit growth of the past, they bore witness to the strength of our foreign trade in the face of some rather wild fluctuations that we have gone through.

Sharp Rise In Capital Goods Import
Apart from a higher exports growth rate than March and April, the main reason why our total trade in May was able to achieve a double-digit growth is the sharp increase in total import by more than 16 percent, of which capital goods shot up nearly 42 percent while consumer goods also increased significantly by nearly 15 percent; in contrast, semi-manufactures, which is a major contributor to future exports, increased by only 6.6 percent.

This is an indication that Malaysia’s grand Economic Transformation Plan (ETP) to strengthen economic growth through infrastructure development has achieved some results. In view of the anaemic foreign demands, the government has resorted to jump start these massive infrastructure developments in order to deflect the undesirable impact of external conditions.

When we look more closely at the export growth in May, we can see that export of agricultural products continue to underperform by falling 4.6 percent. On the other hand, export of mining products, which relies heavily on liquefied natural gas and oil refining, grew by more than 26 percent and continues to be the main pillar that is holding up our exports in these difficult times. After a protracted period of contraction, export of electrical and electronic products export finally managed to return to health, albeit at a growth rate of only 1.1 percent.

With electrical and electronic exports stabilising, manufacturing exports was back in the pink in May, growing by 4.2 percent. Manufacturing export has a vital role to play in deciding whether Malaysia’s foreign trade will continue to remain strong.

Optimistic Outlook
Since the financial crisis in 2008 to the current Eurozone crisis, Malaysia’s foreign trade has been inching forward in lurches and dips. Take last year for example: foreign trade began the year unsteadily, but reached a surprising record of RM61.9 billion in March before continuing with its wild fluctuations until September and October, when it registered sharp increases of 15 percent to 16 percent for two consecutive months, followed by another record of RM63.4 billion in October before retreating in November. By December, trade volume rebounded to RM60.7 billion, which is a record performance for the month of December. Export was down again in January this year, but it went on to set a February record of RM56.9 billion. After two consecutive months of marginal contraction in March and April, it stabilised in May.

Overall, the outlook of our foreign trade is still good. It will not be difficult to find our footing, but as to scaling new heights, I am afraid that is going to be challenging. The overarching prerequisites are a speedy resolution to the debt crisis in Europe, the need for US economy to return to health, and the economies in China and Asia to stabilise. As you can see, these are indeed daunting hurdles to overcome.

Now that Malaysia’s ETP has been launched, our economy can be powered along by domestic demands, so all that is needed is for our foreign trade and exports to hold its ground.

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