Indian SMEs looking closely at Malaysia
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With an average annual real GDP growth of 6.5% from 1957-2005, Malaysia’s economic record has been one of the best in Asia. Like most nations, the global financial crisis threw Malaysia into recession and the country reported 4.4% growth in the fourth quarter of 2009. However, its financial system registered significant resilience during the recession due to less exposure to the US sub-prime market.
Robust growth from sectors such as manufacturing , services , construction and agriculture , together with strong domestic expenditure helped the Malaysian economy to bounce back, since 2010-beginning. In addition, the country posted 19.3% rise in exports and 5.4% increase in investments during the first quarter of 2010. Malaysia posted a massive 10.1% growth in the first quarter of 2010, which according to government sources is the highest in the decade.
Furthermore, the New Economic Model (NEM) unveiled on March 30, 2010 aims to transform Malaysia from an ‘upper middle-income economy’ into a high-income nation by 2020. Besides, NEM emphasises on greater private sector initiative, robust infrastructure development, leaner public sector and fiscal sustainability, among others. Such concerted efforts are prompting Indian SMEs to step-up their trade links with Malaysia.
Jump in bilateral trade likely
Indo-Malay bilateral trade posted 29% rise in CAGR over the last 5 years. In 2008-09, total trade between the two nations stood at around US$10.52 billion (bn). Global recession, coupled with drop in prices of major commodities (especially oil) shrunk two-way trade to around US$7.06 bn in 2009. However, both Indian and Malaysian governments expect bilateral trade to double to US$20 bn by 2014.
Emerging opportunities
Currently, there are more than 100 Indian companies in this Southeast Asian nation, including 60 joint ventures (JVs) .
Huge opportunities for collaboration among Indian and Malaysian SMEs exist in sectors such as tourism, ICT (particularly in software development), creative content, education and biotechnology. In addition, defence also seems to be a promising sector for strategic tie-ups.
Opportunities also exist for Indian SMEs in the engineering sector. To tap the Malaysian market, Engineering Export Promotion Council (EEPC) is organising several trade fairs in this country and expects Malaysia to emerge as the leading trade partner of Indian engineering SMEs over the coming years.
In a bid to enhance bilateral trade, India is also inviting Malaysian companies to invest in sectors such as power, infrastructure (especially highways), real estate and power. Consequently, this will open up opportunities for Indian SMEs present in the aforementioned sectors and connected industries.
Special benefits
To facilitate Indian SMEs, the Malaysian government in its Budget 2010 allocated US$6.06 million (mn) to the small-scale Indian entrepreneurs under the Tekun loan scheme. Earlier in 2009, the government allocated US$4.54 mn to the Indian community. Currently, there are around 100,000 Indian SMEs in this Southeast Asian nation.
Furthermore, the country is considering offering duty exemptions and 10-year tax holiday to lure foreign investors.
Recent initiatives
India and Malaysia expects to conclude the Comprehensive Economic Cooperation Agreement (CECA) by 2010-end. Both the nations have also set up a Joint CEO forum, which is likely to be launched when Prime Minister Manmohan Singh visits Malaysia in coming October. Besides, the Indian-ASEAN Free Trade Agreement (FTA) has also been enforced from January 1, 2010. Moreover, both the nations inked over 13 Memorandums of Understanding (MoUs) to enhance bilateral cooperation during the Malaysian Prime Minister Mohammed Najib Tun Abdul Razak visit to India during January 19-23, 2010.
Jeeta Bandopadhyay
Manufacturing sector grew 16.9% in Q12010
Services sector grew 8.5% in Q12010
Construction sector grew 8.7% in Q12010
Agriculture sector grew 6.8% in Q12010
Source: Ministry of External Affairs (MEA)
ICT – Information and Communication Technology
ASEAN – Association of Southeast Asian Nations
Source: http://www.bizxchange.in/u47/S-3P-3A-201006072010060712071272414f38eb4T-3N-/Country-Spotlight.html
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