KUALA LUMPUR – 78% of Middle East firms regard Malaysia’s market their primary target for ASEAN market expansion, according to survey.
The survey was commissioned by Standard Chartered and produced a strategic report titled ‘Borderless Business: Middle East – ASEAN Corridor’ done in August 2021. The report explores high-potential opportunities for cross-border growth potential in this corridor.
Similarly, the bank also conducted another survey ‘Borderless Business: India-ASEAN Corridor’ in September 2021 for Indian firms looking to expand in the ASEAN region.
This poll showed Malaysia tied with Singapore for third place among the top three chosen destinations in ASEAN that Indian enterprises are focusing on.
Standard Chartered Malaysia managing director and chief executive officer, Abrar A. Anwar, stated that ASEAN is a rapidly growing trading bloc with growing economic and financial significance where there are continuous prospects for businesses in the region.
He said that the bank’s presence in all 10 ASEAN markets gives them the advantage to assist companies from the Middle East and India in venturing into Malaysia’s markets and help clients in leveraging the growth prospects that both Malaysia and ASEAN has to offer.
“We are committed to providing sustainable trade finance solutions to our clients as we foresee these trade corridors will growth substantially in coming years due to government support and a discernible shift in consumer demand towards clean technology,” he added.
Middle East-ASEAN Corridor
The report cites increased collaboration through multiple regional and country-level alliances between the Middle East and ASEAN having enabled greater participation of Middle East companies in Southeast Asia.
In particular, the ASEAN-GCC Joint Vision has served as the foundation for pursuing closer economic and cultural cooperation between the regions, while bilateral partnerships between individual countries, such as the Malaysian Investment Development Authority’s (MIDA) memorandum of understanding with the Investment Promotion Agency of Qatar in 2019, serve a notable example of how growth opportunities are being explored to expand business and innovation partnerships in this corridor.
Key growth sectors for Malaysia in the report’s growth watch-list that are attractive to Middle East companies are refining and petrochemicals, renewable energy, and retail and consumer goods.
In this regard, Malaysia has established integrated petrochemical zones that offer centralised utilities, storage services and a comprehensive transportation network, to help reduce capital and operations costs for companies. The country has also emerged as a major hub for solar photovoltaic (PV) production and is a key market for halal goods as it works towards building a stronger halal ecosystem between ASEAN and the Middle East.
Senior executives of the surveyed Middle East companies regard factors such as access to the large and growing ASEAN consumer market (60%), access to a global market enabled by a network of Free Trade Agreements (58%) and diversification of production footprint (51%) as the most important drivers for expansion into the region. All surveyed Middle East companies expect business growth over the next 12 months, with over 80% of them projecting an annual increase in both revenue (82%) and production (81%) of over 10%.
Government-led programmes continue to play a key role in facilitating business activity in the India-ASEAN corridor as India views ASEAN as an important growth partner under its ‘Act East Policy’. Economic ties between ASEAN and India have been facilitated through various multilateral and bilateral initiatives such as the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) that continue to drive corridor trade and improve market access for Indian companies.
Key growth sectors in the report’s growth watchlist that are drawing Indian companies to Malaysia are digitalisation, renewable energy and electric vehicles. India-based technology companies have made inroads into Malaysia as part of the national MyDIGITAL initiative and the country’s response to the pandemic that included measures to boost digital payments and e-commerce. Malaysia has also emerged as a major destination for the manufacturing of PV systems. Such expansion plans are creating new opportunities for Indian businesses seeking to invest or provide solutions to help attain ASEAN’s sustainability objectives. As ASEAN governments start offering incentives and building support infrastructure to facilitate growth, such as Malaysia’s tax incentives to EV buyers under its National Automotive Policy (NAP 2020), new economy Indian companies have expressed plans to expand their footprint in Southeast Asia in the coming years.
Broadly, Indian companies look to access to the large and growing ASEAN consumer market (90%), availability of abundant and skilled workforce (51%) and access to a global market enabled by a network of Free Trade Agreements (44%) as the most important drivers for expansion into the region. All surveyed Indian companies expect their business to increase production in ASEAN while more than 90% of them project growth in revenue (93%) over the next 12 months.
The Regional Comprehensive Economic Partnership (RCEP) is also expected to attract more investments into the 10-nation bloc from both corridors. All Middle East respondents agreed that the ratification of the RCEP agreement will lead to more investments from their company, while some 63% of Indian respondents indicate that their company will increase investments into ASEAN over the next 3-5 years, on the back of the ratification of the RCEP agreement.
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