KUALA LUMPUR (March 31): Bank Negara Malaysia (BNM) wants the country to trade beyond the US and China, boost ties in Asean, and build skilled workers to become a key hub in global production networks rather than just a participant.
Over half of Malaysia’s exports are linked to global value chains (GVCs). This has helped the country boost trade and secure a key role in regional and global supply networks. But with major economies reshaping supply chains for self-sufficiency, Malaysia now faces both opportunities and risks.
BNM in its box article entitled “Disentangling Malaysia’s Value Chains in the Age of Turbulence” in its Economic and Monetary Review 2025 said Malaysia’s three key policy priorities — diversifying export markets, deepening trade relationships, and strengthening domestic skills — work together rather than independently.
Diversifying markets reduces vulnerability to external shocks, targeted foreign direct investment helps move up the value chain, and a skilled workforce ensures the gains from global value chain participation are sustainable.
Exports remain heavily concentrated in the US and China, leaving Malaysia vulnerable to trade shocks. BNM recommends expanding into the EU, Middle East, Latin America, and Sub-Saharan Africa, where rising industrial activity and middle-class demand are creating new markets.
Imports also need diversification, especially critical minerals for electronics, renewable energy, and advanced manufacturing. Trade agreements like EFTA–Malaysia, Malaysia–UAE CEPA, and CPTPP — and potential new deals like Malaysia–SACU — can strengthen market access and supply chains. Simplifying tariffs, standards, and rules of origin will make Malaysian exporters more competitive.
Asean, the world’s fifth-largest economy, offers huge potential, the central bank said. Gross domestic product is expected to surpass US$5 trillion by 2030, with a growing middle class adding 130 million new consumers. Yet intra-Asean trade and investment remain low — FDI is only 14% of the total compared to 51.6% in the European Union, a major trading bloc. Stronger regional integration through coordinated investment, complementary production networks, and aligned supply chains could make Asean a manufacturing powerhouse. It said the presence of multinational semiconductor firms shows what’s possible.
That said, BNM was clear that Malaysia’s status as an “indispensable middle” depends on skilled workers, particularly in electronics and advanced manufacturing. Labour shortages are a major bottleneck, with competition for specialised talent high globally.
BNM recommends:
- Elevating technical and vocational education (TVET) to match university degrees.
- Aligning training with industry through public-private partnerships.
- Using national plans like the 13th Malaysia Plan, NIMP 2030, and National Semiconductor Strategy to scale programmes.
- Offering competitive pay and incentives to retain talent and attract Malaysians abroad.
Malaysia has increased the domestic value added in exports, boosting jobs and income. But the type of exports is crucial:
- Intermediate goods --> vulnerable to global supply chain shocks.
- Final goods --> sensitive to demand swings in specific markets.
BNM emphasised that strategically placing value in exports — deciding what to produce domestically versus abroad — is key to balancing growth and resilience in an uncertain world.