Malaysia and ASEAN Collaborate to Strengthen Economic Resilience

India's trade reliance on China and the European Union (EU) is increasing as global trade undergoes a significant shift along geopolitical lines [e0e9e995]. The United Nations Conference on Trade and Development (UNCTAD) estimates, based on national statistics, show that India's dependence on China and the EU has grown by 1.2%, while its reliance on Saudi Arabia has decreased by 0.6% [e0e9e995]. This trend of increasing trade reliance on China and the EU is in line with the broader changes in global trade patterns. The Boston Consulting Group (BCG) report previously highlighted a shift towards emerging markets and regional collaboration, with Africa's trade projected to grow faster than the global average [fed79721]. Additionally, the report identified a decrease in US-China trade, slower growth in EU-China trade, and significant trade growth in the Association of Southeast Asian Nations (ASEAN) [fed79721]. These changes are reshaping the global economy, with a focus on regional trade corridors and a decrease in traditional routes between China, the US, and the EU [2bdabd7a].

China's trade relations with the Middle East are also strengthening, with trade volume nearly doubling to US$507.2 billion in 2022 from 2017. Chinese electric vehicle (EV) makers are increasingly investing in other markets, easing trade tensions and supporting employment growth [82b16908]. However, trade tensions between China and the West are expected to persist and could worsen, with concerns about excess production of EVs, batteries, and solar panels. Despite this, China will remain the world's top manufacturing hub and a major exporting country due to its size, efficiency, speed, and innovation [82b16908].

India's increasing trade reliance on China and the EU reflects the complexity of global supply chains and the challenges of finding alternative markets that offer the same scale and efficiency. Despite ongoing debates around decoupling and diversifying supply chains, the report indicates a clear preference among international businesses to maintain operations in China [51cccf50]. However, the UNCTAD report also highlights the need for countries to diversify their trade relationships and reduce dependence on specific regions or countries [e0e9e995].

The global trade landscape is undergoing significant changes, with geopolitical factors playing a crucial role. The DHL Global Connectedness Report emphasizes the importance of adapting to these changes and leveraging regional trade dynamics. While some countries are reevaluating their trade relationships and supply chains, globalization remains resilient, and the benefits of global trade continue to drive economic growth and development [e29a425b].

Despite the shifting trade patterns and geopolitical tensions, China remains a key trading partner for many countries. The Asian Development Bank (ADB) highlights that China's engagement and importance in the global value chain have not diminished, and it continues to rely on foreign demand and exports for growth. However, the ADB warns that China's stymied growth recovery poses a risk to Asia's trade environment [ae23b995].

The United Nations Conference on Trade and Development (UNCTAD) forecasts a rebound in global trade, with an expected growth rate of around 3% this year. Rising demand for container shipping and the integration of some East Asian and Latin American economies into affected supply chains are expected to contribute to this rebound. However, uncertainties persist, and caution is advised [3ed6805f].

Malaysia is also adapting its trade strategies in the face of an uncertain future. The country is pursuing a strategy of courting major economies on both sides of the prime meridian, with strategic partnerships and free-trade agreements. However, Malaysia recognizes the need to diversify its trade partners and export products to reduce reliance on major powers. It is also championing greater South-South cooperation as a growth opportunity, building economic bridges with developing countries. Malaysia aims to strengthen trade links and forge broader economic ties with frontier economies, assuming a leading role in the developing world [0fdac5ff].

Malaysia's economy has the potential to move into the production of electric and autonomous vehicles, establish artificial intelligence hubs, build more smart factories, and enhance decarbonization efforts. The country's semiconductor industry success can be emulated in other sectors. Structural reforms are needed to strengthen the nation's fiscal position, promote catalytic investments, build a highly skilled workforce, and enhance the overall industrial ecosystem. Malaysia's commitment to freer international trade and cooperation is demonstrated through its participation in regional and global trade agreements. The country must act fast to implement international requirements related to climate change [a4c1bc81].

South Korea is enhancing its supply chain resilience by intensifying collaborations with ASEAN countries, particularly Malaysia, in response to the escalating United States-China economic rivalry [cccf4048]. South Korea's special envoy for Indo-Pacific affairs, Chung Kee Yong, stated that they are actively collaborating with ASEAN partners, working with countries like Malaysia, to develop robust regional supply chains. The MoU between South Korea and Malaysia for Strategic Cooperation on Critical Supply Chains is currently being discussed. South Korea is investing in domestic production capabilities in sectors like semiconductors and batteries to strengthen its position within global supply chains. South Korea's Indo-Pacific strategy aims to promote freedom, peace, and prosperity through a rules-based order. South Korea is also strengthening existing free trade agreements (FTAs) and pursuing new FTAs with promising partners like Malaysia. South Korea sees the potential of local currency settlements (LCS) in strengthening regional economic stability and reducing dependence on the US dollar. South Korea recently renewed its bilateral currency swap arrangement with Bank Negara Malaysia. In 2023, total trade with South Korea amounted to US$24.3 billion (RM111.1 billion), and Malaysia was South Korea's third-largest trading partner in ASEAN [cccf4048].

The Regional Comprehensive Economic Partnership (RCEP) can be a crucial stabilizer for Malaysia's economy amid escalating geopolitical tensions in the Middle East. RCEP, the world's largest free trade agreement, includes 15 Asia-Pacific nations and covers about 30% of the world's population and economic and trade volume. Malaysia can benefit from RCEP by diversifying its trade and exploring alternative markets to ensure a steady supply of essential commodities. From January to March, exports to RCEP countries comprised 29% of Malaysia's total exports. Malaysia can enhance its economic position within RCEP by elevating product standards, investing in sectors likely to see increased demand from RCEP countries, fostering technological collaborations, and developing human capital to compete effectively in new markets [1d97eee3].

Malaysia and ASEAN need to enhance their economic resilience in the face of challenges. The article emphasizes the importance of diversifying the economy, investing in technology and innovation, and promoting regional cooperation. It mentions the need for Malaysia to focus on sectors such as digital economy, renewable energy, and healthcare. The author also highlights the significance of strengthening supply chains and improving connectivity within ASEAN. The article suggests that Malaysia should leverage its position as the chair of ASEAN in 2022 to drive economic recovery and resilience in the region. The author concludes by emphasizing the need for proactive measures and collaboration to ensure a sustainable and resilient economy. [add8c981]