Malaysia

Market overview

The Malaysian Government is very keen to re-open trade to its pre-pandemic levels. Prime Minister Muhyiddin Yassin unexpectedly announced the easing of lockdown restrictions in the Movement Control Order, effective until 9 June. The change, now a "Conditional Movement Control Order", allows almost all economic sectors to open, with conditions.

The move came as a surprise to many, with confusion around the new rules. Public opinion on the shift is mixed, with some locals concerned the move is premature, while others have been out on the streets celebrating the end of what has been a very strict stay at home order.

However, nine of the thirteen Malaysian states, announced that they would not implement the changes, or would only do so with caveats, concerned by the current level of virus control. There are no changes to Malaysia's border settings at this stage and inter-state travel within the country remains restricted.

During a press conference on 4 May, the Defence Minister, and co-chair of the special Cabinet Committee overseeing the Malaysian Government's COVID-19 response, Dato Sri Ismail Sabri Yaakob, announced that as part of the reopening, businesses would be required to test all foreign workers for COVID-19 at their own expense.

This announcement will impact on New Zealand businesses operating in Malaysia. However, it is unclear how businesses will achieve this, given the significant number of foreign workers in Malaysia and current testing capacity.

From 1 June, all people entering Malaysia will bear the cost of mandatory quarantine and are to sign a letter agreeing to pay before they may commence their travel. Malaysians are required to pay half the cost of quarantine services while non-citizens, including spouses and family members of Malaysian citizens, will pay the full cost.

The Government of Malaysia has developed a COVID-19 self-monitoring app for citizens (MySejahtera). This app is directly linked to the local health services and can assist Malaysians to connect to the right health services at the right time.

Video insights

Export support
Video
9:29
Last updated: 18 May 2020
COVID-19 Market Realities: Malaysia overview, 14 May

NZTE Trade Commissioner for Malaysia, Simon Hearsey, speaks with BDM Fizal Fauzi and Beachhead Advisor Andrew Goodwin about the situation in Malaysia.

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Export support
Video
7:16
Last updated: 14 May 2020
COVID-19 Market Realities: Malaysia Food & Beverage, 14 May

NZTE Trade Commissioner for Malaysia, Simon Hearsey, NZTE BDM, MiYee Ching, and Beachhead Advisor, Jeremy Ng, discuss Malaysia's F&B market.

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Economy and trade

Malaysian Banking BHD (Maybank), the country's biggest financial services group, has forecast the Malaysian economy to shrink 3.3% this year due to the pandemic and the lower price of crude oil.

The Mayalsian economy grew at its slowest pace in more than ten years over Q1 of 2020, but at a rate better than forecast. According to the Central Bank of Malaysia, GDP grew 0.7% year-on-year January to March, compared with 3.6% growth the previous quarter. However, analysts expect the full effects of the virus to be felt in the second quarter, as Malaysia only went into lockdown from the middle of March.

The International Monetary Fund (IMF) has projected Malaysia's real gross domestic product (GDP) to grow at a rate of 9% next year.

Malaysia's central bank cut its benchmark interest rate by 0.5 percentage point to 2% in early May. The policy rate of 2% is the lowest since 2010 and was the third rate cut this year following cuts in January and March.

All private firms have been ordered to close their business premises, except those involved in providing essential services. Any business able to function using work-from-home facilities can operate legally.

All export activities will be allowed to continue. The Minister reiterated that it is vital to ensure supply chains are not severed and countries that need Malaysia's exports will be able to continue receiving them.

In late March, the Malaysian Prime Minister announced a total allocation of MYR1.6 billion for the Malaysia Health Ministry to increase resources by purchasing equipment, including personal protection equipment, and boost capability by hiring medical experts and contract staff; particularly nurses, to handle COVID-19.

It is worth noting that one New Zealand medical device manufacturer that receives component parts from Malaysia experienced delivery delays as a result of the lockdown in Malaysia, which in turn caused a delay in manufacturing in New Zealand. NZTE assisted by investigating the status of the producer of the component part.

With the relaxation of movement control orders, most manufacturing operations, especially those linked to medical supplies and devices, are operating at full capacity again. However, should any other New Zealand company face this issue, they should not hesitate to contact NZTE.

Supply chain, logistics & freight

Direct commercial flight links to Malaysia have ceased until (likely) July. Some indirect Air Cargo options remain, however, New Zealand exporters must now focus freight transport on shipping options.

Clearance of ports

Port clearance is open and fully operational. As the definition of non-essential business continues to ease, additional focus has been provided by the Malaysian Government on the clearance of any container backlogs in Malaysian ports.

If issues are encountered both at port clearance or with acceptance of certification, exporters are requested to connect with NZTE for assistance.

Government support

The Prime Minister of Malaysia has announced a 'PRIHATIN Rakyat Economic Stimulus Package' worth RM250 billion. Of this, almost RM128 billion will be channelled to preserve welfare, RM100 billion to support businesses including SMEs, and RM2 billion to strengthen the economy. Meanwhile, RM20 billion has been announced in the earlier stimulus package.

The Government's immediate priority now is to curb the spread of the COVID-19 outbreak. For this, the PM has announced an allocation of RM500 million to the Ministry of Health (MOH). To further enhance the MOH's capabilities, the Government will allocate an additional RM1 billion to purchase equipment and services to contain COVID-19. This includes obtaining medical expertise from private healthcare services.

The Government will increase the special allowance for medical personnel from RM400 to RM600 per month effective 1 April 2020 until the outbreak ends. At the same time, the Government also agreed to extend a special allowance of RM200 a month to military, police, customs, civil defence and RELA (Government Volunteer) members who are directly involved in enforcing Malaysia's Movement Containment order. This allowance will also be paid beginning 1 April 2020 until the COVID-19 outbreak ends.

Locally, economists are reporting that the second stimulus package (SP2) of COVID-19 amounting to RM250 billion (17% of GDP, with 1.7% of GDP as direct fiscal injections) should support growth and provide much-needed support in areas like liquidity, consumption and employment, without putting too much strain on the fiscal deficit. This is within a context of national revenue being further impacted by other external factors. The oil price war between Russia and Saudi Arabia has forced the Government to lower the oil price projection to US$35–US$40 per barrel for Brent crude oil (still high against current market rate), which would translate to an oil revenue loss of between RM6.6bil and RM8.1 billion.

SMEs and micro-businesses make up two-thirds of the workforce and contribute 40% of the GDP in Malaysia. Unlike the 2008 global financial crisis (GFC) where shops and restaurants could still rely on social interaction and foot traffic for business, COVID-19 has stripped that advantage away.

The latest additional stimulus measures worth RM10 billion (announced 6 April) to soften the impact of the movement control order (MCO) on SMEs and micro businesses have been largely welcomed.

Many businesses are experiencing tight cash flow due to zero or minimal sales revenue. Demand is expected to be weak for some time due to travel aversion and social distancing. Not every small business is equipped to survive this downturn. The drop in consumer and corporate spending will intensify the adverse chain reaction that will fuel the collapse of micro businesses, especially the younger and smaller businesses due to their highly vulnerable situation.

Exports and import demand will stay weak from lockdowns. Commodity prices will be soft. Many SME businesses have been forced to close their doors, and some may not reopen. With the additional measures, plus the increasing focus on micro businesses, which make up a big share of the SMEs, the support will more likely help reduce bankruptcies and bad loans.

There could be some relief on job losses, which remain a major concern, although these are expected to vary considerably according to the age and size of the small businesses.

The Government has allocated an additional RM500 million to the Health Ministry to contain the spread of COVID-19. The Prime Minister also announced that to increase the Ministry of Health's capacity, the Government will channel an additional allocation of RM1 billion to buy equipment and services, which includes procuring specialist services from the private sector.

Travel

Direct commercial flight links between New Zealand and Malaysia have now ceased. Resumption of services is not currently scheduled, though Malaysia Airlines has indicated this is likely to be sometime in July.

Air cargo into Malaysia via additional countries remains a possibility, although more reliable shipping routes are likely to be preferred. Linking closely to third party logistic providers to connect to the most efficient supply chain options is a key action for New Zealand exporters at this time.

From 1 June, all people entering Malaysia will bear the cost of mandatory quarantine and are to sign a letter agreeing to pay before they may commence their travel. Malaysians are required to pay half the cost of quarantine services while non-citizens, including spouses and family members of Malaysian citizens, will pay the full cost.

Useful links

Advice to exporters

Air linkages via Malaysia Airlines will be reopening, if temporarily. New Zealand companies should look to take advantage of this market access opportunity.

New digital sales platforms and channels are appearing. Exporters should be in close communication with existing distributors seeking these platforms for additional distribution and listing.

Malaysia remains heavily dependent on the importation of food for the population. New Zealand is a key provider of 'fresh', 'chilled', 'organic' and 'healthy' produce into this market. These categories are selling particularly well as people seek foods with positive health connotations.

Jeremy Ng, NZTE Beachhead Advisor for Malaysia, says:

"I think for now and for the coming few months, it would not be the right time for companies to launch any new products. With new product launches, sampling programmes will be needed. I think it will take quite some time before shoppers will want to taste food sampling after this crisis subsides.

Retailers have reported a surge in demand for healthy foods. If you go to the retailers these few days, you will notice that the snack aisles are still full. Products considered impulse purchase products have not done well, and we do not expect them to do well until this COVID-19 crisis is over."

Dr. Azrin Zubir, an NZTE Beachheads Advisor from Malaysia specialising in health, says: “With a surprise new government taking over in early March and the focus on the COVID-19 pandemic, New Zealand companies will need to wait to see if or when initiatives started by the previous Government under Malaysia’s health technology transformation plan, such as the EMR and Critical Care projects, will be carried forward.

General indications suggest that key projects already initiated will proceed. For now, no non-COVID-19 related health strategies and projects have been announced by the new Minister of Health."

Tradeshow and event information

Numerous international tradeshows and events are being postponed or cancelled in response to the COVID-19 pandemic.

Make sure you proactively check with organisers for any tradeshow or event you're scheduled to attend – conditions and regulations are changing rapidly overseas, and events may be postponed or cancelled at short notice.

Below is the status of major Malaysia tradeshows and events that NZTE's teams are aware of.

If you have questions about an event not listed here, please contact the organisers in the first instance or get in touch with NZTE for further advice.

  • Mihas 1 – 4 April, 2020 is postponed to 1 – 4 September 2020.

  • The 26th TCE Baby Expo, 4 – 6 April has been postponed until further notice.

  • The APHM International Healthcare Conference & Exhibition 2020 postponed from 2-4 June to 17-19 August 2020.

  • The Malaysia Cloud & Datacenter Convention 2020 postponed from 27 February to October 2020.

  • The Malaysian International Food & Beverage Trade Fair (MIFB), 22 – 24 July 2020 is postponed until further notice.


Sector insights

As is to be expected, numerous sectors have been impacted by the COVID-19 pandemic. Below you'll find information on any COVID-19 effects across important sectors and industries in Malaysia.

E-commerce

According to the Malaysia Digital Economy Corporation (MDEC), the e-commerce growth rate will surpass the 20% growth forecast by the National e-commerce Strategic Roadmap. The initial estimate was RM170 billion; but due to swift changes in consumer behaviour brought on by movement control orders, rates have been higher - and experts predict rates to stay high after the controls end. As a result, e-commerce's contribution to Malaysia's gross domestic product (GDP) is also expected to rise this year with the increase of consumer confidence in digital transactions.

Delivery companies are posting a large surge in demand, with some recording a more than 30% jump in orders. Consequently the number of marts and restaurants eager to participate in delivery platforms has also increased significantly. DeliverEat.my saw restaurant requests rise by 300%.

Foodpanda has signed up more than 18,000 restaurants nationwide, with 14,000 delivery riders, but is looking to sign up more 'mom-and-pop' serviced restaurants. The company has also opened two cloud kitchens, and a takeaway-only outlet for food that can be ordered via the Foodpanda app. It is also trialling services such as the delivery of groceries, flowers and convenience goods.

E-commerce platform company Shopee continues to see a higher demand for daily necessities and household items such as disinfectants, hand sanitisers and surgical masks.

Shopee has launched a campaign with Pos Laju, the courier arm of Pos Malaysia Bhd, called 'Stay Home Essentials', where customers may purchase from a line of 20,000 essential products through Shopee and have their goods delivered to their doorstep.

Supermarket chains such as Tesco, Mydin, Jaya Grocer and grocery delivery service HappyFresh saw the largest jumps in sequential traffic in the third week of March, with growth up by 600%, compared to the first two weeks of March. Online traffic to hypermarket chain Mydin grew more than 540% in sequential traffic, while Tesco's online visits rose by more than 45%.

Tesco Malaysia has since imposed a temporary quantity limit to a maximum of three units of each item on Tesco Online purchases to maintain efficiency in delivering and serving customers. Delivery slots for Tesco Online is almost maximised, and Tesco Malaysia is working on opening more new slots for the weeks to come.

Some e-commerce sites have opened up lines in completely new territories to take advantage of the surge in food retail. Zalora, a clothing fashion site, has introduced a range of 'essential supplies' (grocery retail items) to meet demand and utilise existing delivery networks.

After reports of farmers having to dump stock due to roadblocks, shorter operating hours and lack of manpower to offload trucks, several companies have found new ways to work directly with farmers. Online shopping website Lazada has created a new online sales and delivery service to help farmers from Cameron Highlands sell their vegetables to customers.

Lazada Malaysia is launching a fund with RM10 million to help small and medium enterprises sell products online. The initiative is targeted to help an estimated 50,000 local SMEs, especially those in the fresh food and groceries categories.

SME retailers that are new, or have little experience in e-commerce can expect 100% of their costs of selling online covered, and be able to quickly diversify revenue streams beyond traditional bricks-and-mortar models on a platform where one in three Malaysians are Lazada users.

Lazada competitor, Shopee, launched the Shopee Seller Support Package, which will aid local SMEs and businesses in various sectors including retail, fresh produce, food and beverage and more by driving digitalisation of traditional businesses and bringing them online. The package will support sellers by creating sales and growth opportunities, reducing operational costs and facilitating sustainable development through funding, subsidies and education.

What this means for New Zealand exporters:

For New Zealand companies to compete at the forefront of the new business environment in Malaysia, it is advisable to build internal e-commerce readiness, to strengthen e-commerce foundations, and to leverage e-commerce knowledge.

To grow in the new environment, New Zealand companies should be prepared to think outside the box and challenge their current models in distribution and marketing.

Additional resources

Below you can find information and contact details for other New Zealand government and international agencies regarding their response to COVID-19.

New Zealand Government agencies

Covid19.govt.nz
COVID-19 helpline for businesses
Business.govt.nz
New Zealand Customs
Ministry for Primary Industries (MPI)
New Zealand Export Credit (NZEC)
MFAT Export Helpline
MFAT Safetravel
Callaghan Innovation
Immigration
Ministry of Health
WorkSafe New Zealand

Global agencies

World Health Organization (WHO)
Centers for Disease Control and Prevention (CDC)

Contact NZTE

We're available to talk to you about any issues your export business is facing due to COVID-19.

For existing NZTE customers, please contact your New Zealand-based Customer Manager.

If you're unsure who to contact or haven't worked with us before, you can call NZTE on 0800 555 888 or email below and one of our Customer Advisors will help you.