Russia-Ukraine conflict will not impact Malaysia’s trade directly but supply chain disruptions could pose problems, Dewan Rakyat told

PETALING JAYA: There will be minimal direct impact on Malaysia’s trade from the Russia-Ukraine war, says Deputy International Trade and Industry Minister Datuk Lim Ban Hong.

He said Malaysia’s trade with the two countries did not exceed 0.5% of its total volume.

Last year, for example, he said the country’s total exports to Russia was 0.3% and to Ukraine, 0.1%.

Imports amounted to to 0.5% (Russia) and 0.1% (Ukraine), he added.

“If we look at these numbers, any direct impact is minimal.

“But we also need to look at the indirect impact especially in other sectors such as the electrical and electronic devices (E&E) sector in Malaysia that contributes to around 13% of the world’s chip testing and packaging, an important process in the production of semiconductors used by the automotive and smartphone industries among others.

“As such, with the disruption to the ongoing global supply chain, weak export demand from European markets and countries involved in the same supply chain in the semiconductor industry will have indirect impact on our trade,” he said when winding up ministerial replies on the motion of thanks in the Dewan Rakyat on Monday (March 14).

Lim said Malaysia was a leading country in global semiconductor trade, accounting for 7% of the total.

“This clearly shows that the government’s policy has succeeded in strengthening the competitiveness and resilience of the country’s semiconductor industry.

“In fact, local companies are becoming part of the global value chain through cooperation and integration programmes with multinational companies that chose Malaysia as their regional centre of operations,” he added.

Separately, Lim also said the government always prioritised domestic direct investment (DDI) as the main contributor to the country’s economy, not just foreign direct investment (FDI).

He said this was proven through DDI’s performance from 2017 to 2021.

“The total investment approved in the manufacturing, services and key sectors during that period was worth RM1.1 trillion.

“The investment involved 25,234 projects and created a total of 613,108 new jobs.

“DDI was the largest contributor with RM598.1bil (54.9%), while FDI contributed RM492.2bil (45.1%),” he said.

On the status of the Malaysia-EU Free Trade Agreement (MEUFTA) and the ratification status of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Lim said the government was taking steps to restart MEUFTA discussions that were halted on Aug 14, 2019.

Lim said in the latest MEUFTA communication on Dec 23, Malaysia and the European Union took note of current issues and were working towards resuming negotiations.

“The decision to resume this negotiation will be made after taking into consideration the interests of all parties,” he added.

As for the CPTPP, he said a cost-benefit analysis had been completed and would be presented to the Cabinet soon.