Malaysia Benefits From Global Supply Chain Shift, Needs Stronger Value-Added Exports
By Rosemarie Khoo Mohd Sani
KUALA LUMPUR, July 30 (Bernama) -- Malaysia's record trade performance in 2025 reflects its position as a strategic trade and manufacturing hub amid global supply chain realignment, although the country needs to strengthen domestic value-added exports to sustain long-term competitiveness, said AmBank Group chief economist Firdaos Rosli.
According to the Department of Statistics Malaysia (DOSM) today, Malaysia's total trade expanded by 6.3 per cent year-on-year, or RM182.4 billion, to RM3.1 trillion in 2025, as exports rose 6.6 per cent while imports increased 6.0 per cent.
Firdaos said one of the clearest structural shifts was the rapid rise in re-exports, which accounted for 22.8 per cent of Malaysia's total exports in 2025, compared with just 5.6 per cent in 2010.
“It appears that Malaysia is establishing itself as a key trade and manufacturing centre in Asia, effectively functioning as a hub for processing, assembly, logistics, and redistributing goods on a global scale.
"This is not only due to trade diversion amid US-China trade tensions but also Malaysia's proactive stance in pursuing various free trade agreements, either bilaterally or plurilaterally," he told Bernama.
However, Firdaos said domestic exports, or exports of goods originating from domestic sources, remained relatively flat, indicating that a large portion of Malaysia's export growth came from the country's intermediary role in global supply chains rather than from the expansion of domestic production capacity.
"Putting the two together, Malaysia is a clear beneficiary in global supply chain diversification that depends less on domestic value-added content as the ones driving such growth are largely the multinational corporations," he said.
On Malaysia's exports to the United States, Firdaos expects growth to continue, supported by sustained demand for electrical and electronic (E&E) products and the global semiconductor upcycle, although the pace of expansion may moderate.
He said the US accounted for 14.5 per cent of Malaysia's exports in 2025, up from 9.5 per cent in 2010, surpassing China as Malaysia's largest export market since 2024.
“Changes in US trade policy will not negatively impact Malaysia's exports to the country due to the entrenched American supply chain network that has already been operating in Malaysia for decades.
“The challenge for Malaysia, however, is to progressively increase its domestic value-added exports to the US and, by extension, to the world as well,” he said.
Meanwhile, the DOSM reported that imports from China increased 19 per cent, or RM56.3 billion, to RM352.8 billion in 2025 from RM296.5 billion in the previous year, mainly due to higher imports of E&E products.
Firdaos said the increase should not be interpreted negatively as imports are an essential component of Malaysia's participation in global trade.
"The most common misunderstood notion about international trade is that imports are bad and exports are good.
"Trade is multilateral; thus, rising imports from China, or any other country, is not a sign of weakness," he said.
China's share of Malaysia's total imports had risen from 12.6 per cent in 2010 to 24.3 per cent in 2025, while its share of Malaysia's machinery and transport equipment imports increased from 15.2 per cent to 28.9 per cent over the same period.
"Malaysia's strategic positioning in global trade also depends on its imports from China.
"Whether or not Malaysia can substitute and become less reliant on imports from China depends on whether there is a perfect substitute to Chinese machinery and transport goods from other countries to reduce the concentration risk, and whether Malaysia can produce them through import substitution policies.
"The latter would require a significant buildup in domestic technological capacity and greater economies of scale than China," he added.
Separately, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia's external sector had performed exceptionally well despite having to contend with trade protectionist measures adopted by the US.
He said Malaysia's diplomatic ties and foreign relations had contributed to the strong performance, enabling the country to record double-digit export growth to the US.
"Malaysia recorded double-digit export growth to the US at 17.1 per cent in 2025, with the market accounting for 14.5 per cent of total exports, making it the country's second-largest export destination after Singapore.
"Our active neutrality stance in foreign relations should help Malaysia navigate an increasingly challenging global trade environment and support stronger external sector performance in the years ahead," he added.
-- BERNAMA