On November 3, 2023, the Marketing Department of China National Textile and Apparel Council (CNTAC), and the Sub-Council of Textile Industry, China Council for the Promotion of International Trade (CCPIT TEX) jointly released the Outbound Investment and Cooperation Guide by Country for the Textile Industry (2023) at the 6th Belt and Road Textile Conference. This report introduces and analyzes the investment environment of 20 countries around the world. It provides information and guidance for textile enterprises to engage in “Belt and Road” cooperation.

Geography:

Malaysia is situated in Southeast Asia, with its territory divided into two parts by the South China Sea: East Malaysia and West Malaysia. Malaysia has a total land area of about 330,000 square kilometers and a coastline of 4,192 kilometers. It has a tropical rainforest climate.

Natural Resources:

Malaysia is abundant in natural resources, including oil and natural gas reserves that fulfill domestic needs and can also be exported. Over the past decade, natural gas production has consistently hovered around 70 billion cubic meters per year, establishing Malaysia as the leading natural gas producer in Southeast Asia. In addition, Malaysia also has significant deposits of iron, gold, tungsten, coal, bauxite, manganese, and other minerals. These rich mineral resources, along with abundant biological and marine resources, provide favorable conditions for Malaysia’s economic development.

Infrastructure:

Malaysia has a well-developed infrastructure, with the government focusing on investing in and building infrastructure like highways, ports, airports, communication networks, and electricity. The country has a well-developed highway network, with the main trunk lines of highways and railroads running through the north and south of the Malay Peninsula. The aviation industry is well developed, with 25 airports in the country, including 7 international airports. The primary mode of water transportation is by sea. 95% of the trade is conducted by sea, but over 80% of sea transportation relies on ocean lane.

Macroeconomy:

As one of the most dynamic economies with the highest level of openness in Southeast Asia, Malaysia has maintained steady economic growth in recent years and is known for having a business-friendly environment within ASEAN. In 2022, Malaysia’s GDP was US$ 343.5 billion, with a per capita GDP of US$ 12,040. Its foreign trade totaled US$ 633 billion, while foreign exchange reserves stood at US$ 115.5 billion. Malaysia's service and manufacturing sectors are more developed and account for a higher proportion of GDP, with the service sector consistently representing more than 50% over the years. The government promotes the growth of industries that process raw materials domestically, with a focus on electronics, automotive, iron and steel, petrochemical, and textile sectors. Malaysia is a foreign trade-oriented country, with this playing a crucial role in the national economy and showing a high level of external dependence.

Status of Textile Industry:

The textile industry has always been a focus of Malaysia’s industrial development. The industry’s supply chain includes spinning, weaving, knitting, printing and dyeing, and apparel. However, there is an imbalance in the development of each sector. The spinning and weaving industry is not as extensive, while the printing and dyeing, and clothing sectors have reached a relatively mature stage. The imperfection of the industrial chain in Malaysia results in the country exporting a wide range of textiles while also needing to import a large quantity of supporting products necessary for production. According to data from the Malaysian Department of Statistics, in 2022, textile sales in Malaysia amounted to 11.65 billion ringgit, while apparel sales reached 9.35 billion ringgit. The textile industry employs more than 70,000 people, accounting for about 3.1% of the total number of individuals in the manufacturing industry, with 28,000 in textiles and 44,000 in garments.

International Trade:

According to data from Malaysia’s Department of Statistics, in 2022, Malaysia’s textile and apparel exports totaled US$ 3.3 billion. Among them, textile exports amounted to US$ 1.95 billion and apparel exports totaled US$ 1.35 billion. These products were mainly sold to countries such as Türkiye, the United States, Japan, China, Singapore, and Indonesia. The main export items included knitted garments and accessories (making up 32% of the total), chemical fiber staples (13%), chemical fiber filament (11%), and knitted fabrics (9%), among others. During the same period, Malaysia imported US$ 4.29 billion worth of textiles and apparel. This consisted of US$ 2.24 billion in textile imports and US$ 2.05 billion in apparel imports. China is Malaysia's primary source of textile and apparel imports, representing 36.8% of the total. Following China are Singapore, Vietnam, Bangladesh, and India. The main imported products include knitted garments and accessories (32%), woven garments and accessories (16%), cotton, cotton yarn and cotton woven fabrics (11%).

Foreign Trade Policy

Malaysia is a founding member of ASEAN and has signed 17 free trade agreements (FTAs), of which 15 have entered into force and are being implemented, including 7 bilateral FTAs with Australia, Chile, India, Japan, New Zealand, Pakistan and Türkiye, and 8 regional FTAs as a member of ASEAN with countries and regions like China, South Korea, Japan, Australia, New Zealand, India and Hong Kong of China. In addition, ASEAN members have signed eight regional FTAs with China, Korea, Japan, Australia, New Zealand, India, Hong Kong, and other countries and regions. In addition, the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which have gained more influence in recent years, have entered into force in Malaysia. Under these Free Trade Agreements (FTAs), Malaysia benefits from reduced import tariffs and exemptions on trade with the respective countries, following the rules of origin.

In May 2022, the United States announced the launch of the Indo-Pacific Economic Framework of Prosperity (IPEF), of which Malaysia is one of the 13 founding members, and Malaysia is in the process of negotiating the Malaysia-European Free Trade Association (EFTA) The Economic Partnership Agreement (EPA) with Europe aims to enhance trade cooperation with developed economies, creating a positive foreign trade environment with tariff preferences.

Summary and Suggestion for Investment

(1) Malaysia benefits from its strategic location and abundant resources, supported by a well-established highway network, efficient railway system, numerous ports, and international airports. These infrastructures enable the swift movement of goods and help maintain low logistics expenses. Malaysia has abundant human resources and raw materials, which can fulfill the requirements of various businesses.

(2) The foreign investment law system is comprehensive, and the government has implemented a range of tax incentives and support policies to attract foreign investment. This aims to encourage the growth of export-oriented and high-tech enterprises. It has established five economic development corridors and free industrial zones to boost the growth of key industries. And the investment and policy environment are generally favorable.

(3) Malaysia values the growth of the textile and garment industry, but there is an imbalance in the development of different sectors within the industry chain. The dyeing and garment industry is mature, while the spinning and weaving sectors are weak. The middle and upper sections of the textile industry rely heavily on imports.

Source: CHINA TEXTILE LEADER Express