Exclusive interview with 100 Most Inspirational LinkedIn Icons in Malaysia 2019, Abu Bakar Yusof, Senior Director, Export Promotion & Market Access Division of Malaysia External Trade Development Corporation MATRADE.
Trading Economics analysts recently reported that Malaysia’s economy expanded 4.9 percent year-on-year in the second quarter of 2019, following a 4.5 percent growth in the previous three-month period and beating market expectations of 4.8 percent.
In anticipation of threat of global supply trade disruptions, with likely new tariffs being imposed on China goods, Malaysia, with a population of only 32 million people, is taking a cautious view on the global economy and is going forward.
A young country, which only gained its independence in 1957, is immersed in a strong heritage of productivity, enterprise, and flourishing international trade.
Malaysia is the 3rd largest in Southeast Asia after Indonesia and Thailand, which currently ranks the 35th largest economy in the world. It is the 25th most competitive country in the world in 2018–19 according to the Global Competitiveness Report 2018 .
Malaysian lifestyle is much more affluent compared to its peers in upper-middle-income countries, and the purchasing power of the Malaysians is one of the highest in Asia.
The E of Things
Malaysia has approximately 26 million active internet users (78% of the population). The past decade saw a vast proliferation in the use of social media sites, by both individuals and businesses alike. Apart from texting, visiting social networking sites were also common amongst internet users (74%). There were about 21.9 million social media users in 2016, of that 97.3 % claimed that they owned a Facebook account. Ownership of Instagram accounts (56.1%), YouTube (45.3%), Twitter (26.6%), LinkedIn (9.1%) and Tumblr (4.8%) saw an increase as compared to the previous year.
E-commerce is snowballing in Southeast Asia, now representing about 2% of all sales in Malaysia but expected to grow to double digits in the coming years, according to Aseanup. The Malaysian market is one of the most attractive in the region, as e-commerce in Malaysia is more mature than in all other ASEAN countries except Singapore.
Malaysia boasts 19.8 million online shoppers, who are motivated by price advantages, product range, and availability of reviews. The most popular e-commerce sectors are fashion and accessories (16%), home and living (15%) and health and beauty (13%).
B2B e-commerce is one of the fastest-growing sectors for small and medium-sized enterprises. There is an expansion in e-commerce as more SMEs take advantage of higher disposable income of the Malaysian population, better broadband service, and the proliferation of mobile devices in the country.
Many may not know the following. Malaysia External Trade Development Corporation (MATRADE) is the only government agency mandated with the mission to drive Malaysia’s international trade through the development of Malaysian exporters and export promotion activities over the last 26 years.
Malaysia’s trading, a country being at the confluence of the Indian Ocean and the South China Sea, goes back centuries. However, its trade promotion organization was introduced by deputy prime minister and minister for trade and industry Tun Dr. Mahathir Mohamad in the late 1970s.
Strategic planning and tactical moves to support businesses in exploring opportunities in the global marketplace eventually led to the enactment of the Matrade Act 1992 and the formation of Matrade in 1993 when total exports of the country were just over RM121bil.
Malaysia, a country with over 234 markets, now benefits from a diversified economy with services accounting for 54.5% of our Gross Domestic Product. Manufacturing accounts for more than 80% of the country’s total exports.
Matrade published an excellent guide entitled Beginner’s Guide to Exporting. You can download it on the Matrade website under documents/eBook. Forty-four pages of “HOW-TO” and “Why.”
This eBook suggests that the reasons companies export are to expand sources of revenue, diversify markets, reduce risk, enhance competitiveness, and achieve economies of scale and utilise access capacity. Before venturing into export markets, companies should consider production, finances, human capital, marketing, export requirements and compliance, and legal matters.
SME and Matrade
SMEs are vital demography of Malaysia.
SMEs, which employ over 65% of the Malaysian workforce, account for a large segment of Malaysia’s economy with over 98% of the registered companies in the Companies Commission of Malaysia database.
In 2019, the digital transformation of global supply chain systems, logistics as well as the financial transaction mechanism is changing the way international business is done. As Malaysian SMEs are more prepared for the new wave in international trade, Matrade ventures into the next phase of its mission.
I asked Abu Bakar Yusof, one of the 100 Most Inspirational LinkedIn Icons in Malaysia 2019, who is the Senior Director at the Export Promotion & Market Access Division at Malaysia External Trade Development Corporation (MATRADE), to give some insider information about this dynamically growing young country.
MR: Can you tell us a bit more about your background?
ABY: I started my career with MATRADE 26 years ago and held various positions and departments ranging from strategic planning, export development, and export promotion. I had the opportunity to serve at MATRADE’s overseas trade office in South Korea and China for 11 years. Currently, I am heading the Export Promotion and Market Access Division, where I am overseeing ten sectoral and market sections with about 80 workforces.
MR: Malaysia’s second-quarter gross domestic product is on the rise. Malaysia’s economic growth for the second half of this year is set to be healthy and driven by the ongoing mega projects, despite the current global economic uncertainties, and economist state. What is your observation so far in 2019?
ABY: According to Malaysia’s Central Bank, Malaysia’s GDP rose 4.9% in the second quarter of 2019 despite the ongoing global economic complexity. This growth was supported by the substantial private sector expenditure, recovery in commodity, and higher net exports. Besides, the manufacturer has improved marginally while the service sector continued to expand and growth amid sustained growth in wholesale and retail subsectors. The Central Bank has also projected the Malaysian economy to grow between 4.3% and 4.8% for the whole year of 2019.
Against the backdrop of increasing protectionist measures and ongoing China-US trade tensions, the performance for 2019 is expected to remain steady. Malaysia would be able to cushion the impact as it has multiple engines of growth and a full export base.
Malaysia used to rely significantly on primary industries like mining, rubber, and timber but through economic transformation agenda over the last 30 years. The nation has placed greater emphasis on manufactured and downstream industries which encompass resource-based products such as oleo-chemicals, lubricants, biomass, building materials, and furniture. Other sectors such as electrical and electronics, aircrafts’ components and parts, and medical devices are also gaining momentum in exports. A balanced composition of industries has led to well-diversified trading, without relying on a single industry.
MR: As the lifestyle and life sciences director at Malaysia External Trade Development Corp (Matrade), you are very often in the business spotlight for the region and across the globe. How do you see lifestyle and life sciences adjust to and shape the current economic global landscape? Why has the Far-East got so much to offer when it comes to this segment?
ABY: Before my current position, I was heading the Lifestyle and Life Science Section. The coverage of the industry is quite comprehensive where Lifestyle covers industries like fashion, beauty and personal care, jewellery, furniture and gifts, and premium. While Life Science encompasses, among others, include medical devices, pharmaceuticals, and biotechnology.
Lifestyle products, which are mainly the fast-moving consumer goods (FMCG), requires ample marketing and promotion as it relates to the masses or target segment of customers. Thus, branding is utmost necessary for a particular consumer good. This phenomenon perhaps requires us in MATRADE to have more visibility through a broad series of promotional events and activities that MATRADE organize or support.
On the other hand, Life Sciences relates heavily to technology-based products that require a long gestation period to bear results. Medical devices, for instance, requires stringent compliance of requirements and standards imposed by healthcare authorities as these products would directly affect the wellbeing of public and community.
The industry players in Lifestyle and Life Sciences industries need to embrace the current disruptions that are mainly technology-based for them to remain competitive. The disruptions have also somewhat changed the customers’ behavior, and this also requires industry players to adapt accordingly.
MR: It was reported in 2017 that Matrade was also providing financial assistance to qualified small and medium enterprises (SMEs) in the form of e-Vouchers for reimbursement to companies. Could you elaborate more, please?
ABY: MATRADE introduced a programme called e-Trade Programme to encourage local Small & Medium-sized Enterprises (SME) companies to promote their products and services internationally through online/e-commerce platform. Under this programme, companies that are selected are given e-Vouchers to cover certain expenses which include listing or subscription fees on the chosen e-commerce marketplace, photography, translation, and shipping fees.
To date, about 3,000 Malaysia’s SMEs have joined the programme which has produced excellent outcomes of them being able to sell their products. For this e-Trade Programme, MATRADE partner with 20 e-commerce marketplaces including Alibaba, eBay, Amazon, and Avana.
MR: Lifestyle is so much more than the interest, opinions, behaviours, and behavioural orientations of an individual, group, or culture. How do you define lifestyle?
ABY: Lifestyle is a ‘Way of Life’ where consumers treat it as essentials for enhancing and complementing their wellbeing from a different perspective like social status, health, and comfort. Due to rising awareness of health and sustainability as well as due to rising disposable incomes, consumers will consume more products and services that accommodate these needs.
MR: Your expert focus is on emerging markets with regards to boosting furniture exports. Could you elaborate on markets such as India, China, Indonesia, Japan, S. Korea, Saudi Arabia, and Myanmar?
ABY: Malaysia is one of the world’s biggest exporters of furniture with exports to more than 100 countries; both developed and emerging markets.
i. India is increasingly sourcing furniture from Malaysia as the construction and property market thrives and as consumers looking for more varieties of designs and high standard furniture.
ii. China’s sourcing of furniture from Malaysia is primarily focused on the furniture components and parts which has seen steady growth over the past recent years. China is the world’s biggest producer of furniture and demand may originate from both local and international consumption.
iii. Japan and South Korean market for furniture cater to the growing preference for multifunctional and creative designs as space is limited, and consumers get trendier.
iv. Saudi Arabia’s furniture industry is expanding with the ever-increasing real estate development and growing demand for residential property as well the government’s increasing investment in social infrastructure.
The strength of furniture manufacturers in Malaysia lies in its ability to accommodate the needs of international buyers in terms of designs, materials, production as well as pricing. There has also been a gradual shift of production from OEM-based to ODM and OBM-based as the industry moves up the value chain by offering higher value and higher standard furniture.
MR: What is the correlation between the rejuvenation of consumer sentiment, ringgit’s appreciation, and improved tourist arrivals?
ABY: The disruption in consumers’ behavior nowadays has been very much influenced by the advent of technology. For instance, the rising popularity of online and e-commerce platforms has somewhat driven consumers’ taste and preferences and hence evolve spending pattern.
Amid the global economic uncertainty, which is affecting the domestic economy and businesses, local consumers have been more cautious spenders and becoming more selective of things to purchase. The depreciation of Ringgit currency has also somewhat influenced the pricing upward and caused pressure to both domestic spenders and businesses.
On the other hand, foreign tourists have been benefitting from the depreciation of local currency as travelling in Malaysia becomes cheaper. The technology platform has also made it more convenient for tourists to explore a diverse range of exciting places and things. Malaysia is a shopping paradise.
Source: The Economist Intelligence Unit, CNBC
MR: Some predict Malaysia will not be spared the China-US trade tensions. Any thoughts?
ABY: The ongoing China-US trade tensions are affecting globally, including Malaysia. The effects on the global supply chain arising from the pressures will have both adverse and positive impacts on Malaysia’s economy. Malaysia has to be ready to mitigate the adverse effects and also to tap into opportunities.
Malaysia’s industries that contribute to exports are quite balance in nature. Exports are spreading to all parts of the world and no single market reliance. This would be able to assist Malaysia to embrace the disruptions and trade tensions.
SME CEO FORUM 2019
MR: You were invited as VIP speaker to the prestigious SME CEO Forum along with Matrade CEO YBhg. Dato’ Wan Latiff Wan Musa. What were the highlights of this year’s gathering, and what were the highlights for you?
ABY: This year’s gathering at SME CEO Forum was primarily focused on the topic of global market access which is one of the key roles of MATRADE. Leveraging on MATRADE’s global network of 46 trade offices, local enterprises would be able to carry out necessary due diligence and market research while they embark on export business. MATRADE’s overseas network would be able to provide the market intelligence and the recommendations on potential clients in their respective markets of coverage.
The forum was also a platform for me to impart my knowledge and experiences over a 26-year career with MATRADE. About one million enterprises in Malaysia are Small and Medium-sized Enterprises (SMEs), and they need a lot of guidance in understanding the international markets. They also need to be well prepared to gain market access. An export plan needs to be incorporated into the company’s business plan to enable the company to go through the proper process of doing export business.
MR: What is your advice to entrepreneurs who want to excel in lifestyle and life sciences?
ABY: I have explained some of them above concerning doing export business. Among preparations include:
– to shift the mindset from doing local business to export business, which means it requires different skillsets and knowledge.
– investment in fulfilling the requirements to export; it may involve money, time and energy
– doing proper research and due diligence; it can encompass potential international partners, compliance with international import rules and regulations, customers’ preferences, marketing, and promotion.
– cooperating closely with relevant government agencies and industry stakeholders in Malaysia to make them ready to venture international markets.