Malaysia offers a sizeable demand market with its population of 32.4 million, a large middle class and over one-third of the population living in urban areas. There has been an accelerated shift towards e-commerce and online-to-offline (O2O) consumer experiences, presenting new areas of opportunities for retail, F&B, and other consumer-facing businesses.
Prominent shopping districts within Malaysia include Kuala Lumpur City Centre (KLCC), Bangsar, Petaling Jaya (Selangor), Johor Bahru, Georgetown (Penang) and more. Beyond traditional retail, e-commerce platforms such as Zalora, Shopee, Lazada, PrestoMall and Lelong.MY have established significant presence and garnered market share amid the pandemic.
Malaysia has always been one of the first international market for many Singapore brands. Well-known local brands like Charles and Keith, BreadTalk and Love, Bonito have made inroads into Malaysia. Malaysians are also generally familiar with Singapore brands and concepts as many have worked, visited or lived in Singapore.
Singapore brands looking to enter Malaysia through the set-up of a flagship brick-and-mortar can consider landing in the Klang Valley area, comprising Selangor and Malaysia’s capital city – Kuala Lumpur. With more than 40 malls of varying scale and size, Klang Valley offers retailers a diverse range of consumers, from the affluent to middle class, as well as visiting tourists. Beyond the Klang Valley region, Singapore companies can also explore states such as Penang (Georgetown) and Sarawak (Kuching), which not only offer a growing domestic middle class but are also key tourism locations in Malaysia.
In addition to brick-and-mortar set-ups, Singapore brands can also explore working with e-commerce platforms to reach a larger pool of consumers. Malaysia recorded a market value of US$3.8 million in 2020, putting it in 3rd place amongst SEA markets for e-commerce penetration among individuals. Companies familiar with prominent platforms such as Lazada, Shopee and Zalora can consider these platforms as first landing points.
7 Santandar Trade, 2020
8 Faveebiz, 2020
9 MDIF Research, 2020
Manufacturing is one of the key GDP drivers for Malaysia, accounting on average one-fifth of its total GDP. In 2020, Manufacturing sector contributed to 22.9% of Malaysia’s GDP (second to Services sector with a 57.7% GDP contribution). The Manufacturing sector also recorded close to US$21.6 million in approved investment, with 66.9% being new projects. The top three sub-sectors are Electrical & Electronics (E&E), Petroleum Products and Basic Metal Products10. There are also increasing opportunities in Machinery & Equipment and Chemicals & Pharmaceuticals.
Malaysia’s manufacturing activities are heavily concentrated in Selangor, Sarawak, Penang and Johor. Notwithstanding, there are also opportunities in up-and-coming states such as Kedah and Negeri Sembilan.
Manufacturing continues to be a key focus for the Malaysian government, particularly as a key driver for Malaysia’s economic recovery. Under the 12th Malaysia Plan (12MP) which outlines Malaysia’s strategic focus from 2021-2025, the government has announced targets for the Electrical & Electronics (E&E) industry to generate up to US$110 billion in export earning by 2025; E&E industry will also be expected to contribute up to US$28 billion to the country’s GDP by 2025.
To achieve the projected goals, the government will be looking into infrastructure and policy reforms, leading to the promotion of new technologies, upskilling of talent and encouragement of more innovation through research and design activities. A E&E Roadmap will also be developed to facilitate growth of key sub-sectors, such as semiconductors, solar photovoltaic, medical devices and other electronics manufacturing activities.
In the upcoming years through 2025, Manufacturing will continue to be a key source of FDI for Malaysia, particularly through incentives and ecosystem support that will attract international MNCs. Businesses can also look forward to FDI-friendly incentives at state-levels, particularly in manufacturing-driven states such as Selangor, Penang and Johor.
To support the government’s call for industrial transformation, Singapore’s industry 4.0 (i4.0) solution providers can also explore collaborations with other complementary solutions to holistically address the need of Malaysian-based manufacturers.
10 Department of Statistics Malaysia, 2020
Malaysia’s digital economy enjoys a head-start in Southeast Asia due to its traditional focus on ICT manufacturers specialising in computers and consumer electronics, which have also anchored related functions such as computer programming, IT consultancies within the country. This has enabled the growth of Malaysia’s digital economy as a whole and also bolstered digital entrepreneurships, particularly in technology start-ups.
The growth of Malaysia’s digital economy has been a key focus for the Malaysian government. With the pandemic accelerating digitalisation needs and technology innovation, Malaysia has made the development of its digital economy a key priority highlighted in the 12MP. The country launched MyDIGITAL in 2020, an initiative comprising of 23 sub-activities which will build up the digital economy to eventually contribute 22.5% of the GDP and create 500,000 jobs by 2025. Correspondingly, financial inclusions through enhanced digital banking infrastructure can also be expected.
Due to the cultural similarity and close geographical proximity between both countries, Malaysia is a natural first port of call for Singapore companies looking to tap into the digital economy of a foreign market. Similarly, Malaysian-based firms may also tend to look towards Singapore for solutions that can address its needs. Notably, renowned names such as Shopee and Liquid Group has made Malaysia its first overseas market.
In 2020, Bank Negara Malaysia announced the awarding of five digital bank licenses, which has thus far attracted 29 applications, indicating a further push for financial inclusion. The developments present opportunities in cybersecurity, payments, wealth management and more.
Businesses can benefit from the help and opportunities provided by institutions like the Malaysia Digital Economy Corporation (MDEC), as well as the Malaysian Global Innovation and Creativity Centre (MaGIC), which have been established to attract investments, provide incentives, facilitate financing, and offer training and opportunities to technology firms.
To enable economic recovery and maintain competitiveness for further growth, infrastructure development and enhancement is a fresh priority for the Malaysian government under its 12th Malaysian Plan (12MP) strategic roadmap. Preliminarily, seven existing projects targeted at enhancing connectivity between modalities and locations have been pegged with revised completion dates, signifying the government’s commitment to see through infrastructure developments. As part of the 12MP, more projects will be progressively introduced.
Malaysia has also announced its commitment to achieve net-zero carbon emissions by 2050. This will be facilitated by the transformation of its energy and water sectors to take on a “green” approach by strengthening environmental governance. To kick-start efforts, US$696 million has been allocated to 277 existing and 74 new environmental and water sustainability projects (with new projects amounting to US$11 billion). Other notable commitments made by the government include the carbon pricing and tax arrangements and the introduction of a comprehensive National Energy Plan which will help the country transition towards cleaner energy, coupled with its pledge to halt construction of new coal plants.
Malaysia has made ambitious targets to increase its renewable energy mix from less than 10% in 2018 to 31% by 2025, with a natural focus on solar energy given its potential from photovoltaic (PV) modelling simulations done for Peninsular and East Malaysia. Singapore companies interested to explore opportunities in solar projects can consider these regions.
A second and notable contributor of significant greenhouse gas emission (GHG) is Malaysia’s large volume of food waste11. Due to the high volume of food waste and correspondingly slower implementation of proper recycling and treatment facilities, a portion of waste eventually ends up in Malaysia’s landfills12. The increased focus on GHG emission issues will present more opportunities in the waste management sector for both domestic and foreign companies.
11 Malaysia produces on average 38,000 tonnes of domestic waste, of which 17.00 tonnes (or 45%) are food waste.
12 A 3-year study by SWCorp in 2019 revealed that food constituted 30% of wastes at landfills.