Why the Malaysian state of Selangor is emerging as a prime Asean business hub
- A base for many multinational corporations, Selangor offers a strategic location around Kuala Lumpur, with 2 major airports and a busy container port
- Amid the pandemic, initiatives were introduced to keep businesses running, support digital transformation and attract investments in key industries
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It’s no secret that foreign direct investment (FDI) flows into Asean countries have dropped significantly since the Covid-19 pandemic began last year. FDIs into Asean shrank 31 per cent from the previous year to US$107 billion, according to the United Nations Conference on Trade and Development (UNCTAD).
Malaysia and Thailand were among the most affected, with FDI declining 68 per cent and 50 per cent, respectively. However, things are beginning to look up again, despite the ongoing pandemic.
Moving forward, some experts see Asean’s potential to lead the regional FDI recovery due to its solid fundamentals and steady progress towards intra- and inter-regional economic integration. Another factor is the continuing US-China standoff over trade and technology. Asean members now have an opportunity to position themselves as a viable alternative for manufacturing investment.
This is where Malaysia, and in particular the state of Selangor, present several compelling reasons for becoming the choice of multinational corporations (MNCs) looking for a stable base from which they can grow and expand their operations to Asean and beyond.
What makes Selangor a preferred investment destination?
Selangor is the primary state in Malaysia. Its contribution of over 22 per cent to the country’s gross domestic product (GDP) has been consistent over the years, showcasing its credibility as the economic powerhouse not only within the country, but also in the region. In fact, Selangor’s economy continued to record growth in 2020 at a rate of 2.09 per cent – albeit slower due to the pandemic – amid the overall national GDP contraction of 5.6 per cent.
FDI has remained one of the major boosters to the state’s economic growth over the years. Selangor is home to many MNCs such as Ikea, Airbus, Toyota, Lee Kum Kee (M) Foods Sdn Bhd, ND Paper Malaysia (Selangor) Sdn Bhd, Jingxing Holdings (M) Sdn Bhd and Wistron Technology (Malaysia) Sdn Bhd.
In 2020, Selangor attracted a total of 18.4 billion ringgit (US$4.42 billion) worth of foreign investments out of the total 64.2 billion ringgit (US$15.43 billion) received by Malaysia, making it the country’s top investment destination for three years in a row.
This healthy inflow of investment projects into the state affirms Selangor’s status as a preferred destination among investors, despite the various challenges posed by the pandemic, thanks to the already matured ecosystems within the state in which industries can set up their operations.
On top of Selangor’s notable rankings, as well as its economic and investment achievements, MNCs’ growing interest in setting up regional operations in the state is largely due to the continuous efforts of Invest Selangor. This one-stop agency provides information, advisory services, and start-up and expansion support to potential and existing investors in order to promote the state as a promising investment destination.
In addition, Selangor’s strategic location – with two major international airports in Kuala Lumpur and Subang; Port Klang, the world’s 12th busiest container port; and several advanced domestic rail, road and air links to economic centres around Malaysia – makes the state one of the most attractive business hubs for connecting investors to Asean and global markets.
Another advantage that Selangor offers is the availability of about 3.6 million multilingual and skilled talents in the state. This presents a major advantage for MNCs, especially those that are servicing the regional market from Selangor.
Initiatives that help businesses thrive and evolve
To maintain an investment-friendly climate in Selangor amid the challenging environment created by the pandemic, the Selangor state government introduced several initiatives and efforts to manage the coronavirus while still allowing businesses to operate, such as the Prevention of Outbreak at Ignition Sites (POIS) programme as well as complimentary state-wide screening and proactive efforts to ensure that work stoppages are carried out with minimal costs to manufacturers.
To ensure that the whole business ecosystem in Selangor remains resilient amid the pandemic, the state government also put in place several measures to help microbusinesses and small and medium-sized enterprises (SMEs) accelerate their efforts to transition to digital models.
State-led initiatives include Selangor Advance, a financing programme to ease the cash flow of SMEs affected by the pandemic; Selangor E-Bazaar, a training programme that helps upskill MSMEs – micro, small and medium-sized enterprises – and petty traders to use e-commerce; and Platform Selangor (PLATS) 2.0, a collaboration with regional tech giant Grab to help traditional businesses market their products online.
These initiatives have benefited tens of thousands of participants and helped generate hundreds of millions of ringgit worth of trade to help revive, grow and sustain their businesses.
Technology-driven foreign investments will also support Selangor’s industrial advancement and development. Therefore, Selangor has developed a comprehensive plan to identify and attract investments in key industries that will garner the highest returns in terms of developing the whole supply chain and ecosystem, in order to enable these industries to grow in the state.
The state is focused on attracting investment and developing the ecosystems of five core industrial clusters – electrical and electronics (E&E), life sciences, food and beverages (F&B), transport equipment, and machinery and equipment – to strengthen its economy.
In addition, Selangor is laying a digital foundation to empower the population, the business community and the government with technology and innovation via its Smart Selangor initiative, launched in 2015.
With an aim to position Selangor as the gateway to Asean, the state is organising its annual regional trade and investment forum, the Selangor International Business Summit (SIBS), for 2021. Planned for October 7 to 10 at the Kuala Lumpur Convention Centre, SIBS 2021 will gather business communities and key officials from around the region.
Multiple programmes will be held concurrently during the four-day forum, which will include several exhibitions for F&B, medical supplies and equipment, research and development (R&D), and innovative products, as well as regional conferences and business talks on topics such as vaccination programmes, digitalisation and innovation.
Learn more about investing in Selangor here.
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