KUALA LUMPUR: Malaysia has benefitted greatly from the supply-chain shift, but there are still plenty of possibilities that can capture more value.
HSBC regional head of global trade solutions, Asia, Aditya Gahlaut said the structural reconfiguration of Asia’s supply chain saw a real change in how trade travelled particularly due to global disruptions like the Middle East conflict.
“Malaysia has benefited on account of that. But it does have to move up the value chain. The country’s strength in electrical and electronics (E&E) is already significantly backed by data centres, but there are things that need some focusing on,” he said to StarBiz in an interview.
According to him, the question remains whether the growth is broad-based enough or has the industrial depth it needs for it to continue to support the economy.
“There are questions surrounding how we can distinguish the quality of foreign direct investments. Does it really build local capabilities and employment, and how can the country build that supply chain depth beyond just a few industries?” Aditya questioned.
He reckoned that there was a need to ensure incoming investments went beyond capital inflows.
As an example, he said the E&E sector feeds directly into data centres, which have been a big plus point for Malaysia.
He pointed out that right now, the only two economies that are generating a surplus out of data centre-related computer services are Malaysia and Singapore.
“If we look at the amount of investments in data centres as a percentage of gross domestic product (GDP), Asia as a whole is about 1%.
“The United States is around 3.5% to 4%. Malaysia, on the other hand, is at 4.2%, which is higher than even the United States,” he said.
Aditya opined that this has and will continue to play out nicely over time.
“Date centres are interlinked with the E&E sector, and Malaysia is the sixth largest player in the semiconductor market so irrespective of where data centres are being built, there will be a need for semiconductors,” he said.
However, he noted, similarly to many other countries in the region, Malaysia’s challenge will be how to add value, whether it is in the manufacturing sector or others.
Aditya gave an example of how China did this well – they encouraged imports while other countries tried to dissuade this.
“But they chose to learn, and today are manufacturing intermediate goods, which is where the value is captured.
“I feel the manufacturing sector in Malaysia is on its next leg of growth,” he said.
On the broader economy, Aditya said the bank expects Malaysia’s economy to power through and remain resilient this year, while further solidifying itself as the second fastest growing economy in Asean.
In fact, HSBC’s confidence in the country’s GDP growth has surpassed that of Bank Negara Malaysia, which was estimated between 4% and 5% for this year.
Aditya said the bank revised its forecasts for Malaysia to be at 5.2%.
“HSBC thinks the number will be closer to 5.2%, so we clearly think Malaysia has a strong story there. The labour market is strong, wage growth is decent and unemployment slow. Add strong private consumption numbers, and we’ve got some good drivers for the economy,” he noted.
According to Aditya, Malaysia’s operational reliability has become a strong trade advantage.
This means, having a strong depth of supplier networks, talent availability, ports and logistics, policy support and energy availability among others.
As for regionally, Aditya said many are of the view that Asean benefitted from the China Plus One (C+1) strategy– an idea he does not dispute.
However, he acknowledged the structural shift that the region underwent began more than a decade ago.
“If you plot the growth of Asean to the United States corridor in the last 10 years, the compound annual growth rate is close to 13%.
“If I’m right, it would have doubled in the first eight years, and then grown even quicker in the last two years,” he explained.
Furthermore, Aditya said the United States-China conflict saw many in the region benefit from it.
“The region’s push to diversify supply chains is continuing and has helped support resilience. The diversification efforts to build resilience are still on.”
Having the benefit of travelling to 18 different markets around the globe, Aditya said he has come to a realisation that corporates are increasingly comfortable with volatility.
He said many are still committed to making investments, but only with a far more disciplined execution plan.
“Investment decisions are now more risk adjusted for geopolitics and tariffs among other things. Many have also lengthened their investment horizons when they evaluate projects.”
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said prevailing international performance shows that the external demand has been increasingly supportive to the Malaysian economy.
Total exports and imports expanded 29.2% and 19.8% in the first seven months of 2026 respectively.
“This has led the trade surplus balance to jump 138.7% to RM170.5bil. The manufacturing sector especially the E&E industries which accounted for 48.4% of total exports grew strongly by 43.9% in the 7M2026 from 17.4% in the same period last year.
“I think Malaysia’s standing in the technology-related industries has really helped to ensure that the external demand continues to flow as the country is such an important part of the global supply chains,” he said to StarBiz.
He noted that industry players have quickly moved up the value chain which makes them relevant in the key industries.
But, Mohd Afzanizam cautioned there are key risk factors involved.
“Obviously the strength of the global demand and the intensity of the trade protectionist policies adopted by the United States as well as geopolitical risks in West Asia are some of them, as this will have a direct impact on energy supplies and cost of doing business.”
