BERLIN: Malaysia's loss of previous advantages - such as cheap labour – to neighbouring countries including Thailand, Indonesia and Vietnam do not necessarily signal the death knell for its industries.
Instead, International Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said Malaysia still holds distinct advantages over some of its regional neighbours.
Speaking to the Malaysian media here today in conjunction with Prime Minister Datuk Seri Anwar Ibrahim's visit to Germany, Tengku Zafrul said Asean as a whole has benefited massively.
To a question on whether Malaysia is facing a challenge from other Asean countries in terms of securing major investments from abroad, including Europe, Tengku Zafrul replied in the affirmative.
He acknowledged that Asean neighbours such as Vietnam, Thailand and Indonesia now offer what Malaysia previously did, such as cheap labour.
However, he believed that Malaysia is still an attractive proposition to investors.
"Yes, we have competition in the region. The good news is that Asean as a region has benefited from the redirection of flows especially investment flows given the realignment of the supply chain.
"If we look at the global FDI (foreign direct investment) in line with the slowing down of the global GDP (gross domestic product), global FDI has gone down 12 per cent whereas the FDI into Asean has gone up five per cent. As such, Asean is actually bucking the trend and of course, Malaysia stands to benefit from that being one of the Asean countries.
"But at the same time within Asean, we are competing."
Tengku Zafrul however does not believe that it is a zero-sum game.
"Even if let's say Vietnam or Singapore next door secures an investment, there will be a spillover to Malaysia if we have the right ecosystem to support that. For example, we've seen the advancement of data centres supporting AI (artificial intelligence), where because of Singapore, the spillover effect is being felt in Malaysia.
"Similarly, when we talk about the EV (electric vehicles) ecosystem, we have a very established E&E (electrical and electronics products) sector in Malaysia with over 50 years now. We have a strong global market share as well, where the E&E share in semiconductors, especially in testing and assembly, is over 12 or 13 per cent of global market share" he said.
Tengku Zafrul said Malaysia still holds three distinctive competitive advantages.
The first, he said, were strong ecosystems in place in sectors such as E&E, which has helped convince companies to come to Malaysia.
The second, he said, was talent, which companies in Malaysia, including multinationals, have built in the country over the years.
The third, he said, was Malaysia's strength in green economy and digital economy, key sectors which are hoped to drive growth and spillover effects to Malaysians and Malaysian companies.
"This is where we have strong natural resources. We have land and the right policies as well as incentives that have remained consistent over the years," he said.
However, Tengku Zafrul noted that Malaysia has to be mindful that "the gap is narrowing, and that Malaysia will be competing with others with similar advantages in the future."
Tengku Zafrul is among the ministerial delegation accompanying the prime minister in the latter's six-day official visit to Germany.
Apart from programmes in Berlin and Hamburg with potential and existing German investors, Tengku Zafrul will also travel to Munich to discuss potential business opportunities with automotive giants BMW as well as aircraft manufacturers Airbus.
Germany has been Malaysia's largest trading partner among European Union member countries since 2000, while Malaysia is the largest trading partner for Germany among Asean member states.
In 2023, Malaysia's total trade with Germany rose by 5.9 per cent to RM63.45b (US$13.90 b) compared to RM59.87b (US$13.62 b) in 2022.