Malaysia Opportunities And Chanllenges

AEC Economic Bloc on the Rise

A population of over 600 million spread over 4.46 million square kilometres and a total economic production of USD 2.5 trillion. Do these figures sound like that belonging to a major nation that have nothing to do with Malaysia?

Think again as the figures above is the scale we are talking about under the ASEAN Economic Community (AEC). AEC is the economic integration of ASEAN by 31 December 2015 to create a single market and production base which will result in a highly competitive economy region of equitable economic development and full integration into the global economy.

Crisis Awareness

After experiencing the devastating losses of the 1997 Asian financial crisis, ASEAN countries recognised the need to strengthen regional cooperation so as to enhance the region’s resilience to external shocks. After years of negotiation, ASEAN leaders finally decided to adopt 3 major pillars of cooperation – the AEC, APSC (ASEAN Political and Security Community) and ASCC (ASEAN Socio-Cultural Community).

What this means is that ASEAN will function effectively as a single body in the global community in the political and economic arenas.

Unity is strength and the collective AEC is home to 8% of the global population as well as the world’s fourth largest exporting region. It is also the world’s second largest economic bloc after the European Union.

However, the AEC is not without its host of challenges and the widely different economic, social, cultural and political characteristics have resulted in very different societies amongst the component nations. Take Singapore for example, its GDP is 14 times the average of its ASEAN neighbours, while Indonesia houses 40% of the total ASEAN population. These disparities make synchronous growth a huge challenge for the region.

Boom in Cross-border Real Estate

Lifting of trade restrictions will bring host of economic benefits which will ultimately spill-over to the real estate market. One segment of the real estate market that is expected to see a huge boom will definitely be the commercial properties as market activities expands.

In fact, we have already seen significant transaction volume between the ASEAN neighbours, particularly for Singapore as it is considered a safe haven in terms of real estate investment. Investors from outside ASEAN will also benefit tremendously from the economic bloc and will generate huge opportunities for all the markets.

While the greater market is expected to benefit tremendously from decreased trade barriers, investors and real estate insiders must also be aware that the freer market necessarily comes with more competition and challenges, The local real estate market needs to grasp the situations and opportunity or risk falling behind its peers in this period of growth

Neighbours Awareness Rising Real estate development has always been closely linked to the economic development and the Malaysian government needs to be more proactive in taking on a cross-regional perspective in managing the market.

Countries such as Myanmar, Cambodia, Laos and Thailand have already implemented pragmatic policies in line with emerging ASEAN bloc.

The development of the real estate market will directly affect the confidence of the people and result in wider impact. It is also noteworthy that the current real estate market has changed significantly and specialised real estate developments such as tourism and medical real estate will have huge room for growth.

No Place for Complacency

Malaysia must not be complacent at its head start in these areas as the competitors are hungry and they have the advantages Malaysia once enjoyed such as low wages and cheap land.

Decades ago, Malaysia was actually ahead of South Korea and Taiwan in terms of economy, but decades of highly effective policies meant that they have since surpassed us. This should serve as warning to Malaysia of how we cannot afford to be complacent this time to avoid falling behind our counterparts in ASEAN.

Infrastructure development is the cornerstone to economic development and this is where Malaysians can enhance their competitiveness as many local companies have the technical know-hows and resources to branch into other ASEAN markets to bid for development projects. In other words, investors must not only look at how the greater market can “benefit” Malaysia, but also look at how Malaysia can take its advantages outside our shores.

Holistic Approach Needed

It is also important for Malaysian companies to adopt a more holistic approach to the current developments in the home market. For example, it is not merely enough to develop a water front real estate project as most of the ASEAN countries have beautiful shorelines that can easily compete with what we may offer. Instead, investors can look back at our history and culture to shape our advantage and offer projects that cannot be replicated by other countries.

It is also imperative to strengthen the identities of the different cities and towns to tap into the internal comparative advantages. Major tourist attractions such as Kuala Lumpur, Penang, Malacca, Kota Kinabalu, etc must further enhance their distinctive flavours.

For the individual investors, the increase in the market meant a huge increase in demand for properties across the board. As the regions become stronger economically, there will definitely be a surge in demand and there can be no doubts on the long term prospect of the real estate market in Malaysia as well as ASEAN as a whole.

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