Malaysia calls for end of trade war — despite being its fourth biggest beneficiary

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KUALA LUMPUR (June 7): Finance minister Lim Guan Eng says Malaysia hopes that the Sino-US trade conflict will come to an end — despite being among the major beneficiaries of the economic standoff between the world's largest economies — as there will be "no winners, only losers".

"... Malaysia hopes that the trade war will end because eventually there will be no winners, only losers. All parties should instead enhance cooperation at the regional and global levels to allow the global economy to grow sustainably," he said in a statement today.

Citing Japanese bank Nomura, which identified the country as the fourth biggest beneficiary of trade diversion — after Vietnam, Taiwan and Chile — Lim said Malaysia is likely to enjoy not only higher exports thanks to trade diversion, but also higher foreign direct investment (FDI) due to investment diversion from the reconfiguration of the global supply chain.

In fact, the impact of the investment diversion arising from the trade war is already apparent in higher approved FDI figures which rose 48% to RM80.5 billion from RM54.4 billion, said Lim.

Meanwhile, the minister said Malaysia's export and import statistics, which exceed market consensus, prove Malaysia's competitiveness at the global stage despite the continued trade conflict between the global superpowers.

In April, exports grew 1.1% to RM85.2 billion, from RM84.2 billion a year ago, primarily due to greater foreign demand for electrical and electronics (E&E), along with petroleum products, chemical products and liquefied natural gas (LNG).

The improvement in exports enabled Malaysia to record a trade surplus of RM10.9 billion in April, bringing total trade surplus for the first four months of 2019 to RM47.8 billion — enough to shield the country from excessive volatility caused by external events, said the ministry.

"Just as important is the 4.4% year-on-year rise in April imports, which is better than Bloomberg's market consensus survey of a 0.3% contraction.

"Imports reflect domestic demand, and its increase suggests private consumption as well as the gross domestic product (GDP) are on course for a healthy second quarter growth.

"The April increase in imports suggests an increase in domestic demand, and it came after the first quarter Malaysian GDP expanded by 4.5% from a year ago, again besting Bloomberg market consensus of 4.3%.

"Furthermore, April 2019 imports for intermediate goods ballooned by 20.3% year-on-year after inching up by only 3.2% in March. Intermediate goods are used to make end products. The strong expansion of both consumption and intermediate goods imports indicate that the second quarter GDP growth will be robust," Lim added.

Total trade rose to RM159.5 billion in April, increasing by 2.6% from RM155.5 billion a year ago.