Focus on the Second Vietnam and Malaysia

[Asia Economy Reporter Hwang Yoon-joo] About half of Korean companies' expansion into ASEAN is concentrated in Vietnam, prompting calls for diversification of strategies toward Malaysia, which is emerging as the second Vietnam.

According to "Vietnam+1, Focus on Malaysia," released on the 9th by the Korea International Trade Association's International Trade and Commerce Research Institute (Director Choi Yong-min), 50.7% of South Korea's ASEAN exports and 46.8% of its foreign direct investment last year were concentrated in Vietnam. Additionally, with the recent U.S. currency investigation on Vietnam opening the possibility of tariffs, Malaysia is gaining attention as part of the "Vietnam Plus One" strategy to diversify exports, investments, and supply chains beyond Vietnam.

The report states that Malaysia's projected economic growth rate for next year is 7.8%, the highest among ASEAN countries, and it ranked 12th out of 190 countries in the World Bank's business environment rankings. Moreover, Malaysia is an attractive market with a per capita income exceeding $10,000.

In particular, from 2010 to 2019, Malaysia's imports of premium consumer goods grew at an average annual rate of 9.1%, and by last year, consumer goods imports accounted for more than 10% of Malaysia's total imports. In a survey conducted in August by the Trade Association targeting 302 Malaysian export companies, the most promising export item was identified as "consumer goods" (42.1%). The report noted, "It will be important to increase premium products centered on processed foods and daily necessities to meet the consumption demand of the middle class and above."

Malaysia's imports of intermediate goods also showed a high proportion of high-tech items such as electronics and semiconductors, accounting for 37.5% last year. However, the market share of Korean products in this sector declined from 8.7% in 2010 to 4.7% in 2019. The report stated, "In sectors like petroleum and chemical products, plastics, and rubber products where price competition with China is intensifying, it is necessary to develop highly technical products such as high value-added synthetic resins and superabsorbent polymers."

The report further emphasized, "In the investment sector, a strategy to increase investment in services rather than focusing solely on manufacturing is needed," adding, "As cases of Korean companies performing well in the Malaysian market, such as car-sharing and water purifier rental services, are increasing, latecomer companies should actively consider entering."

Jo Eui-yoon, a researcher at the Trade Association, said, "The Malaysian market has high market attractiveness, making entry through consumer goods exports and service industry investments advantageous," and added, "It is necessary to strengthen investment in the 4th industrial sector, such as ICT and smart cities, where bilateral cooperation synergy is high."

This content was produced with the assistance of AI translation services.