Malaysia’s Industrial sector heads into the new year with a firm footing.
KUALA LUMPUR: The Regional Comprehensive Economic Partnership (RCEP) Agreement, a free trade agreement among 15 Asia-Pacific nations, is anticipated to stimulate growth and investments across the region to unlock bigger opportunities for businesses and countries alike.
The agreement, which came into force on Jan 1 this year, will augur well for the industrial sector as the new growth area in the real estate industry.
“With the economy entering into a recovery phase from the height of the pandemic, the industrial realm within Malaysia and its neighbouring countries is entering into a new chapter of revolution.
“Whilst e-commerce growth will continue to underpin the thriving industrial real estate market performance, the new growth areas will be heavily influenced by factors driven by the Regional Comprehensive Economic Partnership (RCEP) Agreement, automation as well as Environmental, Social and Governance (ESG) agenda,” said Knight Frank Malaysia capital markets for industrial executive director Allan Sim.
The main benefit of the RCEP is extensive market access and integration into the supply chain with opportunities to reduce tariffs. Participating countries are also looking to maximise economic gains from the free trade agreement through increased market openness, investment opportunities, and logistics coordination.
The main benefit Malaysia can reap from the RCEP is the integration of the typical by-product of a free trade arrangement into a more levelled playing field amongst countries.
“On this, we anticipate an accelerated push and adoption of smart factory and manufacturing processes as a means for differentiation. Investments in robotics, manufacturing AI (artificial intelligence), advanced tech and systems enabled by 5G connectivity will generate operational efficiencies in line with the aim of most businesses to reduce the impact posed by global supply chain disruption as well as labour and raw material shortages. We foresee these digital investments to come in the form of both greenfield and brownfield developments by manufacturers,” Sim added.
Malaysia has seen a significant boost in e-commerce business following the onset of the Covid-19 pandemic. The country is currently at the forefront in the e-commerce sector amongst the participating RCEP members.
“RCEP is one of the important catalysts for Malaysia to strengthen its bond and ties with neighbouring countries. The country continues to benefit from its strategic location and positioning along the Straits of Malacca, one of the busiest shipping lanes in the world – a gateway to Asean and beyond,” Sim said.
“We foresee these digital investments to come in the form of both greenfield and brownfield developments by manufacturers,” Sim.
“The prolonged periods of Covid-19 lockdowns and restrictive movements have triggered digital transformation and e-commerce boom. Malaysia’s e-commerce market is at an inflexion point, and in 3Q2021, its income by establishments grew 17.1% year-on-year to RM279 billion,” said Knight Frank Malaysia research and consultancy executive director Judy Ong.
The government is committed to reviving the economy with digitalisation and aims to attract new high-quality, high-tech and green-tech investments as well as prioritising e-commerce development as part of the country’s economic recovery plan.
According to Knight Frank Malaysia’s The Real Estate Highlights 2nd half of 2021 report, the country’s Industrial Production Index (IPI), which was at 114.1 points in 3Q2021, has continued to remain above the 100-point threshold since June 2020, supported by strong performance in the manufacturing and electricity sectors.
During the first nine months of the year, the manufacturing index grew by 9.6% year-on-year to 124.8 points while the mining and electricity indices experienced expansions of 2.3% and 1.6% to register 90.3 points and 115.8 points respectively.
The gradual easing of strict containment measures to curb the spread of infections has been positive to the country’s economy. The IHS Markit Malaysia Manufacturing Purchasing Managers Index (PMI) at 52.2 points in 2021, above the 50-point threshold, reflects improving business and manufacturing conditions.
The index reflects improving business and manufacturing conditions.
Meanwhile, Penang’s industrial sector remains positive as the expansion of Intel Penang, part of Intel Corp’s US$7bil (RM30bil) planned investment in Malaysia, augurs well for the electrical and electronic sector. Adopting new, innovative and advanced technologies will help supporting industries flourish.
“In addition, the Penang State Government through Penang Development Corporation (PDC) is planning to expand/open up more industrial parks - 2,000 to 3,000 acres in Batu Kawan Industrial Park 2 in Byram, Nibong Tebal and 600 acres for Batu Kawan Industrial Park 3.
“This, coupled with plans to set up two more Global Business Services (GBS) facilities at Bayan Lepas Industrial Park and Bayan Baru, augur well for the state’s economic growth,” said Knight Frank Malaysia Penang executive director Mark Saw.
“We expect to see positive demand in well-planned and mature industry developments. Industry land prices are likely to trend upwards, driven by growth in the logistics and e-commerce sector, supported by new requirements and space expansion from e-commerce players as well as last-mile logistics service providers.
“However, we believe all eyes should be on RCEP, ESG and smart manufacturing, which are anticipated to bring about a paradigm shift to the industrial landscape as we know it”, Sim said.
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