Data centres, external trade revival key FDI supporters

Data centres, external trade revival key FDI supporters

20 Jun 2024

Analysts at MIDF Amanah Investment Bank Bhd (MIDF Research) see a potential rise in foreign direct investments (FDI) for data centres as demand in the tech sector continues to surge.

In a report, it said: “We opine the robust FDI growth in ICT is highly related to data center and 5G rollout projects.”

It predicted the electrical and electronics (E&E) sector would likely remain in radar and in fact contribute higher following the New Industrial Master plan (NIMP) 2030 agenda.

“The blueprint aims to expand Malaysia’s semiconductor industry to Integrated Circuit Design and Wafer Fabrication.

“According to MITI, Malaysia’s strengths for semiconductor are the back-end segments; electronics manufacturing services and assembly and testing. Apart from that, the blueprint targets to deepen the specialty chemical vertical and launch locally made electric vehicles,” it said.

The research team also opined that Malaysia’s industrial landscape is on a promising trajectory, with significant developments across key states.

“Selangor stands out with ambitious projects such as the Selangor IC Design Park, Selangor International Aeropark and the Green Industrial Park. Johor is experiencing robust growth with ventures like the Johor-Shenzen Industrial Park and Eco Business Park VI.

“Negeri Sembilan is positioning itself for long-term success with initiatives like the SPD Tech Valley and Malaysia Vision Valley. Also, Pulau Pinang is enhancing its high-tech sector with the Penang Science Park South and Batu Kawan Industrial Park.

“In East Malaysia, Sabah’s

20,000-acre International Industrial Park and Sarawak’s Bintulu Industrial Park reflect substantial regional advancements.

“These strategic developments underscore Malaysia’s dynamic and forward-looking industrial future,” it highlighted.

Meanwhile, the global trade war between China and US is also expected to be beneficial to exporting countries such as Malaysia.

MIDF Research noted that prior to 2012, the re-exports to total exports ratio stayed below 10.0 per cent.

After one year under former US President Donald Trump, Malaysia’s re-exports ratio hit above 20.0 per cent for the first time in January 2018.

The re-exports grew by 25.3 per cent y-o-y in 2017 and +39.5 per cent y-o-y in 2018. In comparison, domestic exports only expanded by +17.7 per cent y-o-y and +1.5 per cent y-o-y respectively.

“Looking ahead, if there is a change of leadership in the US by end of this year, we expect greater intensity of existing global trade war.

“As for Malaysia, re-exports are poised to rise strongly benefiting from potential increase of global and regional distribution hubs,” MIDF Research opined.

By product, it noted that there are four products that make about 90.0 per cent of the reexports namely Machinery & Transport Equipment, Mineral Fuels, Manufactured Goods and (iv) Chemicals.

Among the four, it pointed out that Mineral Fuels and Machinery & Transport Equipment have the large re-exports rate of 36.5 per cent and 27.8 per cent in 2023 respectively.

“We may see re-exports activity improve above 10.0 per cent for Manufactured Goods if global trade war intensified,” it said.

All in, MIDF Research opined that looking ahead, we might see a stronger pick-up in export-oriented sectors such as manufacturing, mining and agriculture in 2H24 amid improving global trade activities and stable global commodity prices.

It also foresee a stronger pickup in export-oriented sectors such as manufacturing, mining and agriculture in 2H24 amid improving global trade activities and stable global commodity prices.

Source: Borneo Post