Greater Kuala Lumpur offers ideal nearshoring hub for firms focused on Southeast Asia
- Malaysia’s innovative upper-middle-income economy and young, skilled workforce help companies keen to relocate closer to their key markets
- Capital city’s vibrant business centre provides competitive operating and labour costs alongside digital advances and a supportive technology ecosystem
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Geographical location is important when companies divide their business processes across the supply chain. Depending on business needs, firms can opt for onshoring within their borders to reduce delivery times or offshoring to distant countries to benefit from lower labour costs.
Another sensible option for companies is nearshoring to help them find the right balance between cost, efficiency and quality. The disruptions to the global supply chain caused by challenges such as border closures, trade wars and the Covid-19 pandemic have made companies rethink their supply chain strategy. Companies need to decide if a nearshoring hub can add value to its supply chain.
For capital-intensive products that require automation and high-precision machinery, such as the manufacturing of electronics and motor vehicles, relying on a supplier in a distant, low-wage country does not make business sense and nearshoring is definitely a good strategy.
Nearshoring also allows companies to move their operations to a location closer to their important markets, such as the Association of Southeast Asian Nations (Asean) – an economic union comprising 10 Southeast Asian countries, including Singapore, Indonesia and Malaysia.
The Malaysian capital’s Greater Kuala Lumpur is seen as an ideal nearshoring hub for Asian companies interested in tapping this economic bloc.
In the International Institute for Management Development World Competitiveness Yearbook 2021, Malaysia was ranked 25th among 64 countries for its global competitiveness.
In the World Intellectual Property Organisation's Global Innovation Index 2021 study, the country was rated third among the 34 most innovative upper-middle-income economies.
In the same year, the KPMG Technology Innovation Hubs report ranked Kuala Lumpur ninth among Asia-Pacific's cities considered to be leading technology innovation hubs, thanks to its growing appeal as a digital, financial and business location.
Kuala Lumpur was also rated one of the world's most attractive cities for digital talent last year, in a study by Boston Consulting Group and The Network.
The World Economic Forum reported last year that rising income levels in Asean will provide 140 million new consumers by 2030, representing 16 per cent of the world’s consumer class. The region will offer a wealth of opportunities as new consumers look to buy their first cars, luxury goods and other innovative items.
 (1).jpg?itok=RU68xGru "The World Economic Forum predicts rising income levels within the Association of Southeast Asian Nations, which includes Malaysia and Singapore, will provide 140 million new consumers by 2030 - 16 per cent of the world's consumer class. Photo: Pexels")
As a gateway to Asia, the metropolis’ main ethnic groups of Malay, Chinese and Indian set it apart as a bridge for cultural compatibility in other emerging markets.
Greater Kuala Lumpur is a unique, vibrant business centre offering competitive operating and labour costs alongside digital advances and a supportive technology ecosystem. In addition to the city’s highly educated and skilled workforce and impressive infrastructure, its high quality of living also attracts talent from around the world.
Official 2021 figures published by the Department of Statistics Malaysia showed the nation has a largely young and skilled workforce, with 51 per cent aged between 29 and 34, 29.6 per cent viewed as skilled, and 57.7 per cent as semi-skilled.
.jpg?itok=XI4VnSzG "More than half of Malaysia's total workforce is aged between 29 and 34, with 29.6 per cent viewed as skilled. Photo: iStock")
This human capital advantage means companies that set up operations in Greater Kuala Lumpur can recruit suitable staff in business areas such as fund management and treasury, legal advisory, risk management, contract management, talent development and technical training.
The economic impact of the pandemic will reverberate for years to come, with the International Monetary Fund predicting in January this year that there will be an overall global loss in business output of US$22 trillion between 2020 and 2025.
The lengthy trade disputes between the United States and China have undone between three and five years of growth among global value chains in affected areas, a United Nations Development Programme report said.
However, recent global challenges have also created opportunities, with notable rises in the number of e-commerce and fintech businesses.
.jpg?itok=ZgL5y2bW "Global challenges, such as the Covid-19 pandemic, have created business opportunities, leading to notable rises in the number of fintech and e-commerce companies. Photo: iStock")
Businesses are also improving their digital capabilities to cater to fast-changing customer needs, especially in industries such as information technology, health care and renewable energy.
Companies need to be ready to thrive during these turbulent times, as the business world faces increasing volatility, uncertainty, complexity and ambiguity, or VUCA. Relocating operations to a nearby country that offers the right level of business support is another important strategy.
Greater Kuala Lumpur provides a stable business environment thanks to Malaysia’s independent, principled and pragmatic foreign policy and its safe geographical position outside the Pacific Ring of Fire area known for natural disasters such as earthquakes and volcanic eruptions.
If you are a high-growth and high-impact company in Asia, visit InvestKL to discover the nearshoring opportunities in Greater Kuala Lumpur and unlock new business potential.