Malaysia benefits from the “derisking” of multinationals with China

Infineon, Airbus, Safran and Thales, Air Liquide and Stellantis: from semiconductors to aeronautics, including automobiles, most of the large European multinationals are present in Malaysia. With its 33 million inhabitants, this small Asian country is no match for the demographic giants of the region, but it has managed to hold its own in the economic game by developing, since the 1970s, a sub-sector industry. recognized contracting.

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Visiting Germany and France in mid-March, Malaysian Investment Minister Aziz Zafrul came to court leading companies from the Old Continent in an attempt to attract additional investment. With a message: having a young, English-speaking and often Chinese-speaking population, Malaysia has the assets to participate in risk reduction efforts (“derisking”) deployed by large companies in order to limit their dependence on China.

Behind Vietnam or Indonesia, the country, strategically located on the Strait of Malacca, north of Singapore, is already benefiting from this trend: its foreign direct investments have jumped by 18% in 2023. “Companies tell us that they are not going to close their operations in China, but that they want to diversify: this is the China + 1 strategy. After the war in Ukraine, we attracted even more interest, both due to geopolitical tensions and increased costs due to energy prices in Europe”, explains Mr. Zafrul to World.

Emergence of local middle classes

For him, it is the return of a phenomenon interrupted by China’s entry into the World Trade Organization in 2001: “Previously, we saw multinationals relocating throughout the region, but from 2001, China started grabbing everything”he remembers.

Another argument from the minister: the dynamism of the region. While China’s economy is slowing, member countries of the Association of Southeast Asian Nations (ASEAN) are experiencing strong growth. Thanks to the emergence of local middle classes, they represent potential relays for major brands.

“Asean is the fifth economic bloc in the world, with a population of 680 million and growth expected to reach 4% to 5%. [en 2024] ». The Malaysian economy grew by 3.8% in 2023, and its growth could be between 4.5% and 5% in 2024, according to several research institutes.

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