• Since 2022, Selangor has contributed more than 25.0% to Malaysia’s GDP
• Fast & furious Selangor’s economic growth
• Rancangan Selangor 1 (RS-1): Envisioning a smart, liveable, and prosperous state by 2025
•  RS-1: Four themes with 261 initiatives

One quarter of Malaysia’s economy. Since 2022, Selangor has contributed more than 20.0% to Malaysia’s GDP and reached high of 25.4% in 2022. A year after the ratio surged to a new high at 25.9% in 2023. The better-than-expected economic development of Selangor has outperformed Midterm Review of 12th Malaysia Plan (MTR-12MP) target which set at only 25.1% of national GDP by 2025.

Fast & furious Selangor’s economic growth. Under the MTR-12MP, Malaysia’s annual growth of 2021-2025 is predicted at 6.2% while Selangor government target 6.5-7.0% growth per annum. Based on 2021-2023, the Selangor’s GDP growth recorded at 7.5% per annum, higher than the MTR-12MP and RS-1 targets.

Rancangan Selangor 1 (RS-1): Envisioning a smart, liveable, and prosperous state by 2025. RS-1 is a development plan for the state of Selangor to chart its path towards achieving a smart, liveable, and prosperous state for the next five years from 2021. The blueprint has four strategic themes (1) Economy, (2) Social, (3) Sustainability and (4) Governance with 261 initiatives.

Services and manufacturing sectors the main supporters. More than 60.0% of Selangor economy is generated by services sector. Utilities, Transport & Storage and ICT, Distributive Trade and Finance & Insurance and Real Estate are among the key services industries in the state. We believe Selangor benefits from Global Services Hub (GS-Hub) Scheme under Budget 2024 to attract multinational companies (MNCs) to set up their Global Services Hub in Malaysia. Hence, this scheme is among contributors for the expansion of the Finance & Insurance, Real Estate and Business Services in Selangor.

Almost one-third of the state economy from manufacturing sector. The sector well diversified across industries. The expansion of EV manufacturing and aerospace activities are expected to boost the Transport Equipment industry moving forward. Also, the creation of IC Design Park in Puchong is predicted to solidify semiconductor industry in the state. If the second IC Design Park in Cyberjaya materialised, hence this will add more growth for the manufacturing sector of Selangor.

Fast & furious Selangor’s economic growth. Based on annual growth rate, Selangor’s economy expanded faster by 6.4% during 2015-2019 against Malaysia’s 4.4%. After the pandemic, Selangor’s GDP grew by 7.5% while Malaysia’s economy only up by 3.2% during 2021-2023. Under the MTR-12MP, Malaysia’s annual growth for 2021-2025 projection is 6.2% while Selangor government target via RS-1 is 6.5-7.0% per annum. Selangor has been growing its economy faster than expected and remains higher than Malaysia’s GDP expansion rate.

Selangor champions for national services, manufacturing, and construction sectors. By national GDP levels, Selangor is a champion for manufacturing, construction, and services sectors. Automotive, gloves, semiconductor and processed food products are mainly produced in Selangor. Mega public-infrastructure projects such as LRT3, ECRL and MRT are also taking place in the state. Also, construction of residential and non-residential are growing which in tandem with the size of population and income level. Following that, national services sector is highly concentrated in Selangor and Kuala Lumpur.

Consumer demand resilient amid better job market and higher income in Selangor. From job market perspectives, Selangor has lower unemployment rate as compared to Malaysia’s average rate. Labour force participation rate in the state registered at 77.4% in 2023, higher by 7.4% than national average. By median salary, Selangor has recovered from pandemic era as 2023 salary was reported 8.1% higher than 2019-level. For Malaysia, the 2023 salary was still 0.7% lower than 2019-level. Despite of higher inflation rate 4.2% last year, Selangor recorded positive real wage growth of 6.6% against 4.4% of national wage growth. We opine consumer demand in Selangor is resilient underpin by better job market and income growth.

Port Klang handles about 30.0% of Malaysia’s external trade flows. Almost one-third of Malaysia’s external trade flows were through Selangor, by both air and sea. All external trade points handle more imports than exports. We foresee Selangor to remain pivotal for Malaysia’s external trade activities especially a new plan to develop a mega port in Carey Island. According to Port Klang Authority (PKA), the Carey Island port is predicted to handle 36 million shipping containers. For comparison, Port Klang handled about 13.2 million twenty-foot equivalent units (TEUs) in 2023.

Selangor among attraction points for data centres due to water access. Electricity & internet are adequately supplied in Malaysia, including Sabah and Sarawak. The difference between state and region could be in terms of water access. Adequate water access is crucial for cooling and humidification systems to maintain optimum atmosphere for the server devices to operate properly and steadily. Judging on the non-revenue water ratio, Selangor and KL have high chance to attract more data centres. Also, we view Johor and Perak to gain attention of data centre players due to their low NRW ratio.

RS-1: Four themes with 261 initiatives. The blueprint has four strategic themes (1) Economy, (2) Social, (3) Sustainability and (4) Governance with 261 initiatives. Under Theme-1 Economy, there are nine focus sectors including ports & logistics and aerospace. Carey Island development and Selangor Aerospace Park are among gamechangers set in the development plan under the first theme. Under Theme-2 Social, there are six focus areas including affordable housing. Under Theme-3 Sustainability, there are five focus areas among others low carbon state, water management and resilience & disaster management.

Game-changer 1 - Carey Island Special Economic Zone (SEZ). Carey Island is proposed to be a special economic zone, comprising of industrial area, commercial, logistics, port, and leisure. The land size approximately 6,000 hectares, focusing on three main activities which (i) Manufacturing, (ii) Sea port and (iii) Logistic and distribution hub. The timeline of this project is 2025-2060. By 2060, the new port is predicted to have an additional capacity of 35.5 million TEUs of containers with 23.9 million tonnes of dry bulk and 15.5 million tonnes of liquid bulk.

Game-changer 2- Integrated Development Region in South Selangor (IDRISS). IDRISS is a private investment development in Sepang and Kuala Langat districts. Among others, the state government has identified Sepang for a 2000 acre for Selangor Aerospace Park (SAP). Thru SAP and NIMP 2030, these will turn Selangor as a global aerospace hub mainly for Southeast Asia. The park will be equipped with various aerospace engineering facilities.

Game-changer 3 - Sabak Bernam Development Area (SABDA). SABDA is aimed for agriculture and aquaculture activities. This is a game-changer for the state economy especially in driving up agriculture output. Five core activities to be focused on, (i) Adoption of agriculture technology to produce high value-added products, (ii) Develop industrial chain, (iii) Agrotourism & Ecotourism, (iv) Develop downstream activities and (v) Develop infrastructure & public facilities. In June 2023, the state government announced two largescale of fisheries projects in Sabak Bernam. These projects are meant for long-term food security agenda. The projects are; (i) Malaysia’s first tuna and deep-sea fish processing & packaging plant and (ii) First integrated fish landing port in Sekinchan. The phase one of the fisheries and processing plant is expected to be completed by 2027.

Made in Malaysia, Designed in Selangor. In tandem with NIMP 2030 aspirations, Selangor is exploring the high-end of semiconductor supply chain which is the IC Design segment. Newly launched on 6th August 2024, the Selangor IC Design Park which located at the Puchong Financial Corporate Centre (PFCC) is already at full capacity. The state government is exploring for IC Design Park 2.0, potentially in Cyberjaya.

Shah Alam Sport Complex (KSSA) and construction activities will persist. A state of art, vibrant and sustainable stadium to be built in Shah Alam, replacing the current one. KSSA project timeline is 2022-2026 in accordance to RS-1 blueprint. Apart from KSSA, Selangor will be kept busy with construction activities. Mega infrastructure projects such LRT3, MRT, ECRL and Subang airport expansion. Also, residential projects such as Rumah Selangorku & Rumah Idaman as well as non-residential namely new industrial parks like Selangor Aerospace Park and Carey Island port will contribute to the construction output in Selangor as well as Malaysia.

Source: BIMB Securities Research - 26 Aug 2024