Published February 13, 2009

M'sia Q4 exports fall 18.3%

For full year, manufactured export growth slows to only 1.8%, hit by collapse of global trade

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA'S exports shrank 18.3 per cent in the fourth quarter of 2008, with December the weakest month as the collapse in global trade continued to take a toll.

Bracing for downturn: Agriculture exports, mainly palm oil, rose 32% last year, but commodity prices have since buckled. Mining exports, mainly crude and refined petroleum and natural gas, expanded 42%

Shipments that month totalled RM46 billion (S$19.2 billion) - a drop of almost 15 per cent year on year and 11 per cent month on month - underscoring the challenges ahead.

In the first nine months, however, export growth was 16 per cent. And despite the softer Q4, all key sectors registered full-year expansion.

Manufactured exports were hit by the global slowdown most, expanding only 1.8 per cent from 2007. Because they account for about 70 per cent of total monthly exports - and because more than half of them are electrical and electronic (E&E) products - the sharp fall in world demand has led many factories and businesses to slash production or even retrench workers. E&E exports were hit hardest, shrinking 3.4 per cent to RM254 billion in 2008, from RM263 billion in 2007.

Mining exports, mainly crude and refined petroleum and natural gas, expanded 42 per cent. And agriculture exports, primarily palm oil, rose 32 per cent. But commodity prices have since buckled as economies cooled.

A continuing slide in exports appears inevitable, with those to China 17.5 per cent lower last month than a year ago. Initially optimistic that Malaysia would largely escape the effects of the global slowdown, the government has since acknowledged that a second stimulus package is needed to fend off a recession.

Some officials have privately conceded the economy could contract this year. Even so, the official growth forecast of 3.5 per cent has not been revised, despite more bearish projections from private economists, including one by CLSA of minus-5 per cent.

A mini-budget exceeding RM10 billion - expected to be tabled by Deputy Prime Minister and Finance Minister Najib Razak next month - is likely to include fiscal, monetary and structural reforms to boost the economy.

Still, with the first stimulus package of RM7 billion announced in November 2008 yet to be disbursed, businesses are concerned that such an apparent lack of urgency will do little to mitigate the deteriorating economy and rising unemployment.

Some concessions have been made in the past few months to facilitate businesses, including the automatic issue of manufacturing licences, soft loans to small and medium enterprises and a cut in power prices. But business chiefs say more drastic action is needed, especially as domestic consumption has crumbled.

Malaysia attracted a record RM63 billion in manufacturing investments last year - almost 75 per cent of it from foreigners. But a sharp fall is expected this year, as half of the developed economies are already in recession.

Significantly, domestic investors have not been re-investing as much as they were. Local investments in manufacturing totalled RM16.7 billion in 2008, down from RM26.5 billion in 2007.

The call for the government to review the New Economic Policy - particularly less investor-friendly elements such as the requirement for bumiputras to hold 30 per cent of corporate equity - has been growing louder, with many fingering it as one of the biggest obstacles to greater investment and competitiveness.

Total trade last year expanded almost 7 per cent to RM1.185 trillion. Exports grew almost 10 per cent to RM663.5 billion and imports 3.3 per cent RM521.5 billion. December's trade surplus was almost RM12 billion, as imports declined 23 per cent year on year and 14.5 per cent month on month.