National Trade Blueprint

9 National Trade Blueprint Context Setting Having experienced a slower pace of export performance growth, Malaysia has been losing market share to the rest of the world in the past decade. Being an export-oriented nation, Malaysia has over the years slipped in the annual export ranking. In 2019, Malaysia ranked 26th. Malaysia used to be one of the top 20 exporters in the world in the early 2000s. Since 2010, Malaysia’s global export ranking has hovered between 23rd and 25th position. Further, Malaysia has been slowly overtaken by its neighbours such as Thailand and Viet Nam. In 2019, Thailand ranked 25th whereas Viet Nam was ranked at 22nd. Viet Nam used to rank 50th in the early 2000s. Additionally, the share of SMEs exporting has been stagnant over the past 5 years. In terms of SME export, the average growth over the past 5 years is also slower when compared to the overall country’s export growth and the non-SME export. This suggests that the growth in exports is driven by non-SME companies. Most of the exports are driven by MNCs, with 74.1% of the export-oriented projects approved by MIDA in 2019 originating from foreign investments. The domestic investment contribution to export remains low. While FDI still remains a key pillar of Malaysia’s economy growth, its share of FDI among the ASEAN countries shows decline over time, indicating the country is losing competitiveness compared to Viet Nam, Thailand and Indonesia, all with growing FDI inflow. While the picture on trade performance depicts a challenging situation, a more concerning element related to international competitiveness emerges. Malaysia has dropped in the global competitiveness index to 27th from 25th in 2019, mainly due to weaker performance in aspects of skills, finance and business dynamism. Additionally, Malaysia’s performance falls short in several areas that are fundamental to Malaysia’s economic success. For instance, labour productivity per worker and investment in research, development and innovation (RD&I) are lower than countries like Singapore, Japan and Korea. With the unprecedented global pandemic changing how the world operates markedly, Malaysia’s growth potential is slated to be affected over the longer term. Trade Competitiveness: A Declining Trend