KUALA LUMPUR (Jan 28): Malaysia stands to lose foreign business activity to Vietnam if it does not ratify the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), says The Economist Intelligence Unit (EIU).
“Companies that are encouraged by the prospect of immediate profits may look at the CPTPP and decide Vietnam is a better place to be,” said Pamela Qiu, associate director of The Economist Corporate Network.
While Malaysia still has the upper hand in terms of skilled labour, Vietnam’s edge includes the incentives for multinational corporations (MNCs) under the CPTPP. The latter also has the advantage of lower labour costs, Qiu said at InvestKL’s 2019 economic outlook conference today.
This is in light of the shift in operations to Southeast Asia from China that MNCs are considering due to the uncertainty and potential fallout from the US-China trade war.
The EIU, which is the global research arm of UK-based The Economist magazine, does not expect a peaceful resolution of the trade war this year and in fact foresees the additional 25% tariffs to be slapped by both the US and China.
Malaysia is still expected to be a net winner, particularly in the automotive and information and communications technology sectors, said Qiu.
That being said, the Government must still work on its institutional reforms and policy clarity in order to lure more investments to the country, she said.
The EIU’s data showed that despite the positivity investors had concerning the change in government last year, they were not yet ready to commit more money to grow their businesses here in the next year.