Malaysia could gain from Brexit

KUALA LUMPUR: Malaysia may gain from Brexit by having direct free trade with the UK to enhance more trade, investment and knowledge transfer, according to MIDF Research.

In 2016, 10.2% of Malaysia’s total exports were to the European Union (EU) while only 1.1% to UK. For imports, 9.9% is from EU and 0.9% from UK.

The research house also said Malaysia could be a future investment attraction point for the UK, especially when foreign direct investment flows between Malaysia and the UK have been on an upward trend.

Foreign direct investment (FDI) from UK to Malaysia stood at RM5.2 billion in 2016 while FDI from Malaysia to the UK at RM3.3 billion.

The ringgit traded at 5.4990 against the sterling as at 5pm yesterday.

Meanwhile, International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said Malaysia is open to the possibility of establishing more trade ties with the UK post-Brexit.

“We hope we can work with the UK to achieve some trade integration, whether Malaysia-UK direct or through the Commonwealth platform,” he told reporters at the memorandum of understanding (MoU) signing ceremony between SME Corp and its strategic partners.

Ong said Malaysia is looking at possibilities such as through trade agreements with the country, which is in the midst of formally exiting the EU, as both countries share “close” ties.

The UK, according to Ong, is also on the lookout for measures to cultivate the Commonwealth as a trade platform, adding that he does not see the Commonwealth being shaped into a free trade platform in the near future as it is not feasible given the varied development standards of member nations.

On Tuesday, UK Prime Minister Theresa May triggered Article 50 and signed the letter that upon formally being hand delivered to the president of the EU in Brussels, Belgium marks the start of the two-year process of the country’s formal exit from the EU.

Ong also said that small and medium enterprises (SMEs) are unlikely to be affected by Brexit as ties have traditionally been in the services sectors such as banking and insurance.

On another note, SME Corp CEO Datuk Habsah Hashim said that SMEs’ penetration into e-commerce has been on the uptrend since 2010, rising from 6% to 32% last year.

She said with the likes of the Digital Free trade Zone coming on board, more are expected to infiltrate the e-commerce scene with 50% penetration rate being the target by 2020.

Habsah also said that SME Corp has been working closely with Bursa Malaysia since last year to facilitate listings of SMEs. So far close to 600 companies have been identified as having the potential to list.

She said being on the board will help these companies find opportunities to raise their funding as well as make their management and accounting practices known to potential investors.

Bursa Malaysia CEO Datuk Seri Tajuddin Atan had said that a new market for SMEs is expected to be introduced in the stock exchange by the second quarter of this year.