Do not rely on weaker Ringgit, cheap labour to boost exports

KUALA LUMPUR: Malaysia should not rely on a weaker ringgit and cheap foreign labour to boost export competitiveness, says an analyst.

Phillip Capital Management Malaysia senior vice-president (investment) Datuk Dr Mohd Nazri Khan Adam Khan said the current reliance on these two factors is not healthy.

“Export competitiveness should be driven by productivity, not the other way around,” he said during a panel discussion organised by the Malaysian Economic Association (MEA) held in conjunction with the Bank Negara Malaysia (BNM) 2018 Annual Report released on Wednesday.

The country’s exports are expected to grow at 3.4 per cent this year compared with 6.8 per cent in 2018, mainly due to US-China trade tensions and moderating demand from major economies.

On foreign investment, Nazri said Malaysia, as well as BNM, should focus on nurturing the small and medium enterprises (SMEs) as it would be able to attract investments.

“These SMEs could be the future government-linked companies, and could create the right jobs for Malaysians,” he added.

He urged authorities to look into the matter in order to attract more investment into Malaysia.

Yesterday, BNM announced further liberalisation in the foreign exchange administration (FEA) framework aimed at providing greater hedging flexibility for residents to better manage their foreign exchange (FX) risk.

This includes allowing SMEs with net import obligations to receive payment in foreign currency from resident exporters.

In recognising SMEs’ limited hedging capabilities, BNM said SMEs, which are net importers within the global supply chain of goods and services, are allowed to receive foreign currency payment from resident exporters for their domestic trade in goods and services.

The central bank also said that alternative finance, which includes venture capital, equity crowdfunding, angel investments, leasing, factoring and peer-to-peer financing, currently accounts for less than three per cent of total SME financing in Malaysia and is fragmented with numerous players.

BNM also identified the need to establish a secured transaction framework to finance SMEs, which contribute 37.1 per cent of Malaysia’s gross domestic product. — Bernama