Matrade expects 1%-2% export growth in 2016

Dzulkifli: ‘We are looking at striking new FTAs with countries such as Iran and Sri Lanka.’

It sees similar growth this year despite sluggish global economy

KUALA LUMPUR: The Malaysia External Trade Development Corp (Matrade) expects export growth of around 1% to 2% for 2016 amid the challenging market conditions for trade internationally.

Matrade outgoing chief executive officer Datuk Dzulkifli Mahmud is optimistic that exports will remain positive, with similar growth for this year even though global economic growth remains sluggish.

“At the moment, an export growth of about 1% to 2% is acceptable due to the poor global business environment and the sluggish economic growth of our trading partners,” said Dzulkifli.

The recently announced Leading Index (LI) for the month of November by the Statistics Department showed the steepest contraction in seven months. Year-on-year (y-o-y), Malaysia’s LI declined by 1.4% in November.

MIDF Research said in a report that real imports of other metals and expected manufacturing sales also trended lower, indicating a more subdued domestic demand and production ahead.

It added that most sub-components of the LI deteriorated during the month.

“KLSE Industrial index declined by 7.1% y-o-y and 3.7% month-on-month respectively, amid less upbeat earnings and foreign funds attrition. Real imports of other metals, housing permits and expected sales of manufacturing also trend lower, potentially signalling a more subdued domestic demand and production ahead.

“However, we think that the heavy weightage placed on the KLSE index could have put a slight bias towards the negative on the LI. Thus, with foreign attrition on the emerging markets and Malaysian capital market continues in December, we expect the LI to remain in negative,” said MIDF Research.

LI monitors the economic performance in advance, across a series of indicators such as KLSE Industrial Index, expected sales value of manufacturing and real imports of semiconductors, among others. The contraction in LI predicts poor economic performance.

Responding to questions on Malaysia’s next course of action following the withdrawal of the United States from the Trans-Pacific Partnership trade pact, Dzulkifli said Malaysia would continue to negotiate better trade arrangements with other countries to improve Malaysian companies’ market access abroad.

“We are also looking at striking new free trade agreements (FTA) with countries such as Iran and Sri Lanka. Such a move will enable domestic companies to venture into other markets without much restrictions, apart from reducing tariff and non-tariff barriers,” he said,

He added that the Regional Comprehensive Economic Partnership (RCEP) will be a good alternative in pursuing better free trade and allowing domestic companies to grow regionally.

RCEP, now under negotiation, comprises Asean and the six countries that Asean has existing FTAs with – Australia, China, India, Japan, South Korea and New Zealand.

The trade pact will cover a total population of about 3 billion people, has a combined gross domestic product of approximately US$23 trillion and accounts for nearly 30% of the world trade.

Dzulkifli, who will be retiring this Friday, assumed the responsibilities as Matrade CEO in June 2015 following the retirement of his predecessor Datuk Dr Wong Lai Sum.

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