Malaysian bid for business in the downturn.

Malaysia is taking its place as an exporter of value electronics, despite falls in global demand for IT consumer units.

There's huge interest for cheap components for which Chinese mainland companies are becoming less competitive internationally. That's largely due to changes in the Chinese re-valuation and upgrading of export industries such as electronics over the past year.

The Malaysian electronic component supply sector has developed thanks to China's own consumer demand and a strategic stimulus package from the Malaysian government.

China is Malaysia's fourth largest export destination and could help sustain Malaysia's outward trade performance this year, said officials from the Malaysia External Trade Development Corporation (MATRADE), the country's trade promotion agency.

"We have enjoyed double-digit growth annually in export demand from China and we expect that to continue through this year, although the level could be in the lower teens," said Deputy Chief Executive Officer, Dr Wong Lai Sum, speaking with the local media.

Over the past four years, China has moved up the rankings of Malaysia's top 10 export markets to become number four, after the US, Singapore and Japan.

China is also the biggest importer of palm oil from Malaysia, whose companies have benefited from tariff concessions under the free trade agreement between the two countries.

Last year, electrical and electronics exports to China contributed 47% of total exports while palm oil contributed another 19.6%.

MATRADE has been monitoring the flow of orders received by various companies since October last year.

Electronics and electricals form a big chunk of the exports from Malaysia. Securing sectoral orders outside Singapore would also be a better indication of fresh growth in exports. MATRADE is to back its new markets by organising several trade promotional events.

Following the annual Asia Trade Promotion Forum (ATPF) in Xiamen, Malaysian officials confirmed that its services sector is expected to become a major contributor to the country's gross domestic product.

"For example, at the upcoming China-ASEAN Expo in Nanning in October this year, we will focus on Malaysian services particularly tourism, tying up with hotels and providing golf packages as well as the property segment," said one senior official.

SMEs receive package of assistance schemes

The government has budgeted one fifth of the US$18.8 billion stimulus packages for SME-related programmes.

Some US$3.5 billion is earmarked for small and medium enterprises (SMEs). They can use the money to fund working capital, expand business and train their staff, among others, said Small and Medium Industries Development Corporation (SMIDEC).

Besides cash, the allocation also includes incentives like tax breaks and loan guarantees.

For matching grant schemes, SMIDEC has approved 21,208 projects, involving US$165 million in soft loans.

Under the second stimulus package or mini-budget announced in March the government allocated a total of US$3.2 billion for small and medium enterprise (SME) sector for this year and 2010.

The initiatives include a working capital guarantee scheme guaranteeing 80% of working capital, an industry restructuring loan guarantee scheme, a micro-credit programme and an accelerated capital allowance scheme.

These and other assistance programmes are aimed at allowing small- and medium- sized companies to continue to expand and diversify despite the tough economic conditions.

from Chan Lay Khoon and Sue Chong, Kuala Lumpur Office

(Image courtesy of Xinhua News Agency)