KUALA LUMPUR (April 23): Malaysia still has the advantages for the “China plus one” (China+1) strategy, despite facing rising competition from its neighbouring countries, according to the Socio-Economic Research Centre (SERC).

“While Indonesia, Thailand, Vietnam and the Philippines will rival Malaysia to be one of the prime beneficiaries, Malaysia still has the right ingredients and advantages by presenting itself as an attractive alternative location for multinational companies (MNCs) and businesses looking to diversify their production and sourcing activities,” said SERC executive director Lee Heng Guie at a briefing on the SERC Quarterly Economic Tracker report on Tuesday.

Malaysia was ranked 27th in the 2023 World Competitiveness Ranking. The rank has placed Malaysia behind Singapore at 4th place, but leading other regional countries like Thailand (30th), Indonesia (34th), and the Philippines (52nd).

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However, Lee said that those Asean countries with lower ranking as compared to Malaysia are now catching up to be prime candidates for global manufacturers.

“The approach (China+1 strategy) has gained more traction in recent years and will accelerate further, given tectonic shifts in the global economic landscape and economic security,” noted Lee.

The China+1 was long mooted since 2013, as MNCs seek to diversify their sources of supply and production from over-dependence on China.

Among Malaysia’s advantages for the China+1 strategy is its strategic geographical position as a shipping and logistics hub; diversified economic sectors, products and markets; as well as political stability and good governance.

Additionally, Malaysia has a conducive business and investment ecosystem, rich natural resources and land, as well as trainable manpower, according to SERC.

Notwithstanding the advantages, Lee flags that the government should address structural challenges that could impede Malaysia’s competitiveness and attractiveness as an investment destination.

“These include enhancing the efficiency and effectiveness of [Malaysia] as a one-stop centre, streamlining bureaucratic complexities, [as well as] removing regulatory hurdles, skills mismatch and lack of clarity in public policies,” he added. 

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