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OCBC Bank has lowered Malaysia’s GDP forecast for 2023 to 4% from its earlier forecast of 4.4%, this was after the latest GDP figure were reported by Bank Negara Malaysia.

The latest report indicated growth slowed sharply to 2.9% YoY in 2Q23 from 5.6% YoY in 1Q23, which OCBC said was a disappointing expectation. On a seasonally adjusted basis, the economy grew 1.5% QoQ in 2Q from 0.9% in 1Q23.

For 2024, ICBC is lowering the GDP growth forecast to 4.2% from 4.5%.

Drilling down into the data, the contribution of domestic final demand to headline GDP was only marginally lower at 4.2 percentage points (pp) in 2Q23 versus 4.3pp in 1Q23. The public sector, on account of higher consumption and investment spending, played a bigger role in supporting growth in 2Q. Specifically, public sector contribution to growth increased to 0.7pp in 2Q from -0.1pp in 1Q. By contrast, private sector contribution narrowed to 3.4pp in 2Q from 4.4pp in 1Q as private consumption spending slowed to 4.3% YoY from 5.9% in 1Q23. Notably, inventory de-stocking continued and shaved 1.2pp off 2Q GDP growth (1Q: -0.8pp).

Meanwhile, anaemic external demand conditions weighed heavily on exports in 2Q. The contraction in export growth worsened to -9.4% YoY from -3.3% in 1Q while import growth weakened to -9.7% YoY from -6.5% in 1Q. As a result, the net exports contribution turned negative (-0.1pp) in 2Q from +2.1pp in 1Q.

The weakness was more obvious on the supply side. Growth in all major sectors slowed in 2Q23 from 1Q23. These include the agriculture, manufacturing, construction, and services sectors.

OCBC is reducing its 2023 GDP growth forecast to 4.0% YoY from 4.4%, previously. This reflects the weaker-than-expected 1H23 outturn of 4.2%. Its 2H23 growth forecast remains unchanged at 3.7% reflecting a bigger drag from anaemic external demand conditions. Our full year 2023 forecast is now at the low end of BNM’s 4-5% forecast range for the year.

For 2024, GDP growth forecast is lowered to 4.2% from 4.5%, previously, as the drag from global growth is expected to persist. This nonetheless underscores an improvement in growth momentum relative to 2023.

Meanwhile, the banjk noted, the current account surplus widened to MYR9.1bn (1.9% of GDP) in 2Q23 from MYR4.3bn (1.0% of GDP) in 1Q23. This was mainly driven by narrower deficits on the services and primary income balance. The former was supported by higher inbound tourists and while the latter was driven by higher investment income from investments abroad. This more than offset the narrowed goods trade balance of MYR29.5bn versus MYR39.9bn in 1Q23. For 2023, we maintain our forecast for the current account surplus to narrow to 2.4% of GDP from 3.1% in 2022.

On the financial account front, the deficit widened to MYR11.6bn from MYR2.4bn in 1Q. This was driven by higher net outflows on the FDI and ‘other investment’ accounts, which more than offset net portfolio inflows.

OCBC noted the weakness on the external front continued into Q3 as underscored by the July trade data. Export growth remained weak at -13.1% YoY in July (June: -14.1%) while import growth was -15.9% YoY (June: -18.7%). The trade surplus, as a result, narrowed to MYR17.1bn from MYR25.6bn in June. Notwithstanding, the most encouraging aspect was the sustained improvement in electronics exports (7.3% YoY in July from 3.3% in June and 1.5% in May). Indeed, BNM is seeing tentative signs that the global tech downcycle is bottoming out.

From a monetary policy perspective, the bank said it does not think the weak 2Q GDP print will push BNM into considering a shift in its policy stance. As such, it still expect BNM to maintain its policy rate for the rest of 2023 and into 2024. A slowing GDP growth profile was always on the cards given the weak external backdrop. And while the extent of the slowdown in 2Q may have surprised to downside, OCBC expects BNM to remain focused on containing inflationary pressures and keeping financial imbalances in check.

China is ready to work with Malaysia to deepen mutually beneficial cooperation and deliver more tangible outcomes in building the China-Malaysia community with a shared future, reported Xinhua, quoting Chinese Foreign Minister Wang Yi.

During a meeting with Malaysian Foreign Minister Datuk Seri Dr Zambry Abdul Kadir on Friday, Wang, also a member of the Political Bureau of the Communist Party of China (CPC) Central Committee, said China regards Malaysia as a friendly neighbour and a priority of its neighbourhood diplomacy.

This year marks the 10th anniversary of the China-Malaysia comprehensive strategic partnership, and the two countries will mark the 50th anniversary of diplomatic ties next year, Wang added.

The Chinese side supports Malaysia in pursuing a development path suited to its national conditions and playing a greater role in regional and international affairs, he said.

Wang called on the two sides to enhance communication and coordination, increase strategic mutual trust, support each other in safeguarding their core interests and legitimate rights and interests, and jointly uphold the basic norms governing international relations.

As two flagship projects of the Belt and Road Initiative, the construction of the East Coast Railway Link and “Two Countries, Twin Parks” are progressing well, Wang said, adding that China and Malaysia have sound cooperation in automobile manufacturing, digital economy and new energy.

Noting that China encourages more Chinese companies to invest and start business in Malaysia to foster more new growth areas for cooperation, Wang said China is willing to deepen bilateral cooperation in agricultural technology and food security among other fields, and import more quality farm products from Malaysia.

For his part, Zambry said the two countries have enjoyed strong and close relations and witnessed substantial progress in practical cooperation.

Malaysia will continue to support and actively participate in the joint construction of the Belt and Road, make every effort to promote key cooperation projects, and look forward to strengthening ties in all fields and at all levels to expand mutually beneficial cooperation, said Zambry.

Malaysia highly appreciates and supports a series of global initiatives put forward by China, calls for harmonious coexistence of different civilizations, and looks forward to strengthening people-to-people exchanges and mutual learning between civilizations with China, he added.

The two sides also exchanged in-depth views on regional and international issues of common concern. They agreed to strengthen communication and coordination, maintain Association of Southeast Asian Nations (Asean) centrality and promote regional peace, stability and development.

So, why should you consider starting a shipping business here in Malaysia? Well, for one thing, Malaysia is considered a Tiger Cub economy. This means that it is still economically ‘young’, but the potential for development makes it a preferred destination for e-commerce. Furthermore, it has the third-highest Gross Domestic Product (GDP) per capita in ASEAN (the Association of Southeast Asian Nations). Its e-commerce market is projected to reach five billion USD by 2025.

As the leading expert when it comes to company registration in Malaysia, 3E Accounting is in the best possible position to help you launch the shipping business you’ve always wanted. When it comes to starting a business in a foreign country, you need someone who knows the industry inside and out to be on your side. Malaysia is welcoming when it comes to foreign investment, but for those who are not familiar with the local market well, it’s nice to have a helping hand to point you in the right direction.

What Is a Shipping Business?

The term ‘shipping business in Malaysia’ can mean several things. However, in the context of starting a shipping business, it includes, but is not limited to:

A shipping vessel business
A transportation business
Dropshipping business

Essentially, shipping companies deal with the supply, transportation, and handling of goods as necessary. Malaysia has several state and federal ports that are overseen by the Ministry of Transport. These ports include Port Klang, Port of Johor, Port of Melaka, Penang Port, Labuan Port, Bintulu Port, Kuantan Port, Teluk Ewa Port and Kemaman Port. There are also a few ports in Sarawak that are owned publicly by the port authorities, and these include Kuching Port Authority, Rajang Port Authority and Miri Port Authority. If you are running a shipping business, it is likely you will be dealing with one of these ports.

Shipping Business: Not to Be Confused with Dropshipping

Dropshipping is a different kind of business. In this, you sell items from a supplier, and the supplier delivers the items to your customers themselves. Dropshipping requires small capital investment and the risk is low as well. You don’t need office premises, product inventory or even staff. You just need people to buy from your website and provide customer service. For instance, you make money from the price difference between what the customer pays you and what you pay the supplier.

How to Register Your Business in Malaysia

3E Accounting’s Malaysia company incorporation services will make quick work of your company setup process. Once we have helped you gather your documents, we will begin with registering your company with the Companies Commission of Malaysia, known locally as Suruhanjaya Syarikat Malaysia (SSM). Every business in Malaysia must be registered with the SSM to be recognised as a legal entity.

As a foreigner starting a shipping business in Malaysia, you will need a local partner. You will need one local director and one local shareholder on your team for the business registration process. Depending on your business structure, you may also require a Company Secretary for your business. Ask our 3E Accounting team for help with this.

Getting the Licenses and Permits

You will also need to be aware of customs requirements as well as taxes and duties. Things like firearms and cocoa pods are prohibited items while live fish and motor vehicles are considered restricted items. Tax and duties are based on the CIF Method, meaning that they depend on product price and shipping cost. More details and information on import, export and tariffs is available on the Royal Malaysian Customs Department webpage.

If you are considering setting up a business that utilizes a shipping vessel, then visit the Marine Government or Jabatan Laut Malaysia (JLM)’s website. You will need to register your vessel. This will be through either the Traditional Registration or International Registration (MISR). The Malaysian government requires all vessels to apply for the Domestic Shipping License (DSL) as per the Merchant Shipping Ordinance 1952. DSL includes any goods or passengers transported from one port to another in Malaysia or within Malaysia’s Exclusive Economic Zone (EEZ). Application for DSL can be made online via eDSL. The website also lists the documentation needed to apply for the license.

For local distribution, goods are usually stored in Malaysia. In cross-border shipping, the goods will come from another country and will need customs clearance. The business model that works for you will depend on several factors. These factors include where your customer base is located, where your inventory is located, where the most significant volume of your business is, and the time needed to set up a supply chain.