WITH Malaysia entering gradual recovery, businesses need to look beyond survival and aim for long-term sustainability.
Over the past year, the government has rolled out various measures and stimulus packages to keep companies in business and has sought to incentivise firms, particularly SMEs, to transform their business models to remain competitive amidst a new economic landscape.
But industry leaders opine that more needs to be done to help businesses rebuild their capacity and tap into opportunities brewing within the region.
Observers note that Malaysia has the potential to be a gateway to the Asean market given its participation in trade deals like the Regional Comprehensive Economic Partnership (RCEP) and local companies stand to benefit should the country be able to capture a portion of the investments that are looking to have a slice of the US$26.2 trillion (RM108 trillion) regional market.
Trade bodies have urged the government to quickly ratify the RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to take early advantage of new trade and investment opportunities, especially in the post-pandemic environment.
In a report titled Pathway for Malaysia 2021, the Asean Business Advisory Council Malaysia (ABACM) highlights that local manufacturers stand to gain from further regional integration as well as from the changes that are taking place in the reconfiguration of regional supply chains.
“Given the adverse impact of the pandemic on trade and supply chains, restoring production networks and supply chain integration is key for Malaysian manufacturers to mitigate the impact of the pandemic.
“Nowhere has this been more crucial than with our Asean or RCEP counterparts, not only as a nearshore source for inputs and Malaysian manufactured exports but also the possibilities of deeper integration through the ongoing initiatives under Asean to promote trade and investments, ” it says.
In a statement yesterday, the Federation of Malaysian Manufacturers (FMM) notes that the signing of the CPTPP and RCEP are significant achievements for Malaysia.
“Once both agreements are ratified, manufacturers are expected to benefit from the diversification of import sources of industrial inputs and components. The CPTPP eliminates tariffs on nearly 96% of products entering the intra-regional trade and the RCEP will likely cover 90% of these products.
“These mega free trade agreements (FTA) will complement rather than compete as RCEP and CPTPP provides structured frameworks for cooperation for the local manufacturing sector to link our strengths in manufacturing and technology with the strengths of our partner countries in agriculture and natural resources, ” says FMM.
The further integration of regional economies under the FTAs, in addition to providing Malaysian exporters with preferential access into growing markets across the Asia Pacific, will also allow for an increase in imports of raw materials and natural resource-based materials from Latin America and Canada.
“At the same time, it will provide strategic nearshore options which will reduce costs and time for companies by allowing them to both import and export products anywhere within the East Asia region without meeting the separate requirements for each country, ” FMM adds.
But as Malaysia looks to leverage its advantage in the region, the need to position the country for competition has also become more apparent as economies start opening up and regional opportunities expand.
ABACM says local companies battered by the pandemic will need to be revived and equipped to balance short-term needs with long-term strategies.
“Finding a way to meet short-term needs without compromising long-term strategy has never been easy for businesses. The uncertainty brought on by Covid-19 has made the task much harder.
“The pandemic has altered the business landscape radically by changing patterns of consumption, production and government behaviour. The pace of change is so fast and its scale so challenging that companies have been forced away from a long-term mindset towards short-term thinking to ensure their survival
“But the signing of the RCEP has highlighted the need for Malaysian businesses to look into internationalisation as a key strategy for business sustainability and growth, ” it says.
Based on the survey conducted by ABACM last February, it was found that 26% of chambers and trade representatives in Malaysia expected businesses to recover within 2021.
Meanwhile, 74% of the respondents expected that businesses will take more than two years to recover, with half of the respondents expecting recovery between three to five years.