Foreign direct investment from CEE nations to grow

Foreign direct investment from CEE nations to grow

12 Jun 2023

Foreign direct investment (FDI) from central and eastern European (CEE) countries into Malaysia is set to get a boost as more businesses and consumers from these countries become more aware of the potential strength of Asian economies amid the growing difficult global economic landscape.

International strategic communications company Rothman and Roman Intelligence Unit (RRIU) lead researcher Nora Hajdu told StarBiz that in 2019, FDI from CEE into Malaysia stood at €24.3bil (US$26bil or RM120bil) and this value is expected to grow significantly over the next few years.

She said not only would FDI get a boost but trade between Malaysia and CEE countries would also expand.

Hajdu said based on the latest Consumer Reputation Survey (CRS) survey conducted by RRIU, the growing awareness and interest in Asian economies among consumers in CEE countries could present new market opportunities for Malaysian businesses. This may help to diversify the country’s export market and strengthen its economic ties with CEE nations, she said.

“As the perception of Asian economies shifts towards being more innovative and technologically advanced, Malaysian businesses may need to adapt and innovate in order to remain competitive in the global market.

“This can encourage businesses in Malaysia to invest in research and development, and to focus on developing high-quality products and services which would attract more CEE countries to invest in the country,” she noted.

On the aspect of trade, Hajdu said there are several factors that could potentially contribute to an increase in trade between Malaysia and the CEE region in the coming years.

This includes the signing of trade agreements between Malaysia and individual CEE countries or the European Union (EU) as a whole which could facilitate and boost bilateral trade.

Lower trade barriers, tariff reductions, and improved market access could encourage businesses to explore new opportunities and expand trade relationships, she said.

Economic growth in both Malaysia and the CEE region could create demand for goods and services, she added.

As CEE countries develop and increase consumer spending power, she said Malaysian exporters would have the opportunity to tap into these markets.

“The confluence of economic growth in Malaysia and the CEE region augurs well for trade expansion, as rising affluence and increasing consumer purchasing power in CEE countries present a favourable opportunity for Malaysian exporters to penetrate these burgeoning markets.

“Enacted by the governments of Malaysia and CEE countries, strategic policies and initiatives are being orchestrated to bolster and invigorate trade and investment.

These comprehensive endeavours encompass a spectrum of measures, including trade promotion activities, dynamic business forums, enticing incentives for exporters, and the optimisation of trade procedures for seamless transactions,” she said.

On the whole, the EU, which include CEE nations, imports from Malaysia increased by more than 50% in the last six years, and were US$37.02bil (RM171bil) in 2022, according to the United Nations Comtrade database on international trade, threefold the value of exports from the EU to Malaysia

The EU is Malaysia’s fifth largest trading partner after China, Singapore, South Korea and the United States, accounting for 7.4% of the country’s total trade. In 2020, Malaysia became the EU’s 20th largest trading partner in goods.

The CRS, which was conducted three times between January 2021 and January 2023, among others, revealed that the perceptions of consumers from the CEE region towards Asian economies have undergone significant changes.

Hajdu said this could be attributed to the growth of Asian economies, such as China, Japan, and South Korea, which have become major players in global trade and investment. Consumers in CEE countries are increasingly exposed to Asian products, brands, and cultural influences, which has helped to shape their perceptions of Asian economies.

“Evidently, there has been an increase in awareness and interest in Asian economies among consumers in CEE countries. In the past, there was a perception that Asian economies were primarily low-cost producers of basic goods and services.

“However, as Asian economies have developed and diversified, this perception has changed. Consumers in CEE countries are now more likely to view Asian economies, including Malaysia as innovative, technologically advanced, and competitive in a range of industries,” she said.

The survey encompasses 10,000 respondents from 10 CEE nations. They are Austria, Poland, Czechoslovakia, Slovakia, Hungary, Romania, Slovenia, Serbia, Croatia, and Bulgaria.

Source: The Star