Economy

By SHAHRIN AIZAT NOORSHAHRIZAM

MALAYSIA is positioning itself as an efficient transshipment hub for ASEAN under the “Air Silk Road” initiative, strengthening cargo connectivity with China’s Zhengzhou Xinzheng International Airport to capture growing regional trade flows.

Transport Minister Anthony Loke (picture) said Malaysia’s advantage lies in both its extensive airline network across Southeast Asia and its ability to simplify cargo handling processes, particularly customs clearance.

“When we simplify the process, the efficiency increases so of course, it will reduce the cost. This is what will make us a choice for ASEAN countries to use our airspace as a hub to go to China. 

“If they want to go directly, it may be more difficult and expensive,” he said in a press conference after attending the Zhengzhou-Kuala Lumpur “Air Silk Road” Forum for International Forum on Thursday.

Loke added that Malaysia’s regional connectivity remains its key competitive edge, with carriers such as Malaysia Airlines, Batik Air, and AirAsia operating extensive ASEAN networks that can feed cargo into long-haul routes linked to Zhengzhou.

He noted that goods moving through Malaysia’s cargo hubs are largely for transshipment rather than the domestic market, but still generate significant value by using Malaysian airspace, airlines, and ground-handling services. 

“In a transshipment hub, the goods are not for the local market, they just pass by. But what is important is that when they pass through our borders, there is added value. 

“They will use our airspace, our airline companies, and our ground handlers,” he said.

During the forum, China’s Henan Province Governor Wang Kai said this partnership is a growing opportunity for both Malaysia and China to increase its trade volume through the initiative.

He noted that since last year, the trade volume between the two sides exceeded 16 billion yuan, an increase of 33.5% in the first seven months of this year. 

“Malaysia has set up a total of 70 enterprises in Henan with an investment of more than 10 billion yuan (approximately RM5.9 billion),” he said.

In April, Bernama reported that Malaysia and China agreed to strengthen their aviation ties by accelerating the development of a “twin hub” cooperation between Kuala Lumpur International Airport (KLIA) and Zhengzhou Xinzheng International Airport, in pursuit of a smoother and more efficient Asean-China Air Silk Road.

Loke reportedly said that to ensure the smooth implementation of this initiative, both parties agreed to establish a dedicated working mechanism and plan to organise a high-level forum focused on air logistics cooperation that brings together government and industry stakeholders to explore practical collaboration.

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By SHAUQI WAHAB 

MALAYSIA is committed to strengthening its long-standing ties with Arab nations by deepening economic cooperation in sectors that align with shared strategic interests.

Trade and Investment (MITI) Minister Tengku Datuk Seri Zafrul Aziz (picture) in a keynote speech, delivered by MITI Secretary General Hairil Yahri Yaacob, highlighted the importance of building on centuries of cultural, religious, and trade connections between Malaysia and the Arab world.

“Malaysia is ready to partner with Arab countries in strengthening the global halal value chain, from certification to supply and logistics,” he said during the Arab Malaysian Chamber of Commerce’s (AMCC) 15th Annual General Meeting on Wednesday.

Key areas identified include the energy transition, digital economy, and food security.

He stated that Malaysia is well positioned to contribute expertise in halal certification and logistics, collaborate in renewable energy and carbon markets, partner in fintech and digital infrastructure, as well as explore agricultural ventures to enhance food resilience.

Tengku Zafrul also stressed Malaysia’s strengths as an investment destination, pointing to its strategic ASEAN location, skilled multilingual workforce, comprehensive infrastructure, and strong legal protections.

He assured Arab partners that government agencies such as Malaysia External Trade Development Corporation (Matrade), Malaysian Investment Development Authority (Mida), and Invest Malaysia are ready to facilitate business needs and sustain long-term cooperation.

“While trade and investment numbers matter, it is the trust between our people that forms the bedrock of long-term partnerships,” he said.

Tengku Zafrul acknowledged that the relationship should extend beyond commerce to include education, culture, and technology.

Over the years, the Middle East has become one of Malaysia’s key trading partners, importing products ranging from Proton cars to commodities while also engaging in halal industry ventures.

MITI has pledged to continue its engagement with Arab counterparts to further strengthen these trade relations.

Tengku Zafrul added that Malaysia is also stepping up trade diplomacy with the wider Arab region through formal agreements.

Hairil pointed out that Malaysia had recently concluded a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates, which is expected to enter into force once domestic legal processes are completed.

“At the moment, we have concluded CEPA negotiations with UAE and InshAllah, it will enter into force soon, once both countries have completed the domestic procedures,” he said after delivering the keynote speech.

He also confirmed that Malaysia and the Gulf Cooperation Council (GCC) are preparing to launch Free Trade Agreement (FTA) negotiations, with the first full round expected this December.

“The chief negotiators for both Malaysia and GCC have met physically a couple of months ago, and we will have a full-fledged negotiation in December in one of the GCC countries,” he said.

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by AKMAR ANNUAR

MALAYSIA has placed artificial intelligence (AI) at the core of its trillion-dollar digital economy vision, with the Malaysia Digital Xceleration (MDX) Summit 2025 charting a roadmap to transform the nation into an “AI nation” by 2030.

Digital Minister Gobind Singh Deo (picture) said the shift is not optional but essential if Malaysia is to remain competitive in a rapidly changing technological landscape.

“Technology today is presenting us with opportunities we never thought possible before. The reverse of it is that, if we are left behind, others will move ahead a lot faster. 

“It is not a question of choice. It is something we need to do,” he said at the launch of MDX Summit 2025 at the Kuala Lumpur Convention Centre (KLCC) today.

The three-day summit, organised by Malaysia Digital Economy Corp (MDEC) in partnership with Synapze Sdn Bhd, carries the theme Catalysing Malaysia’s Trillion-dollar Digital Future.

It is expected to draw over 5,000 participants from government, industry and academia, featuring global thought leaders such as London School of Economics and Political Science (LSE) Dr Keyu Jin and technology investor Nicklas Bergman.

Gobind said Malaysia’s strategy rests on building strong infrastructure, enforcing trusted regulations and accelerating talent development.

The government has launched the National AI Office and will unveil government technology (govtech) by the end of the year to spearhead AI-driven public service transformation.

Gobind added that the initiative builds on the prime minister’s (PM) July declaration in Parliament to raise the digital economy’s share of GDP to 30% by 2030. Current estimates place the contribution at 25% in 2025.

MDEC CEO Anuar Fariz Fadzil said MDX serves as a “collaborative stage” for ideas and partnerships that will anchor Malaysia’s digital future.

“MDX Summit 2025 is more than just a showcase of technology, it is a platform for action. By connecting global innovators, local talent, investors and policymakers, we are building the partnerships that will drive Malaysia’s digital economy forward,” he said.

Balancing Innovation With Trust And Security

Gobind stressed that rapid adoption cannot come at the expense of safety.

He cited the Cyber Security Act and the strengthened Personal Data Protection Act as safeguards for citizens while encouraging innovation.

He also warned of scenarios where AI systems, robotics or language models could malfunction or act on inaccurate data, risking financial losses or human lives.

“We must make sure there exists a structure that creates an ecosystem where trust is built. Trust can only be built if we understand what technology we are going to face next,” he added.

MDEC has made “Next-gen Trust” one of five focus areas at the summit, alongside data, computing, creativity and talent.

Together, these priorities are intended to ensure AI acts as a force for good, combining efficiency with ethical guardrails.

A major highlight was the announcement of recipients of the Malaysia Digital Acceleration Grant-AI (MDAG-AI).

The scheme, introduced in July, funds up to 70% of project costs (capped at RM2 million) for AI solutions with strong commercial potential.

Among the 13 recipients are SmartPeep Sdn Bhd, Hexa IOT Sdn Bhd, Macro Kiosk Bhd and Cargo4u Sdn Bhd, spanning sectors from healthcare to logistics.

Gobind said oversight mechanisms are in place to ensure the funds are properly used.

“There is a constant check mechanism to ensure grants are used for their actual purposes and achieve their targets. The same will be applied to MDAG-AI,” he told The Malaysian Reserve (TMR)when asked about measuring project success.

Industry players also expect fresh incentives in the 2026 federal budget to support investment in data centres, cloud computing and AI infrastructure.

Officials indicated that allocations are likely to include resources for govtech and the proposed National Data Commission, with cybersecurity measures a key focus.

Accountability has been central to Malaysia’s AI strategy. MDEC said success will be measured by adoption rates, commercialisation outcomes and the scalability of supported projects.

Internal monitoring mechanisms will track grant utilisation, with outcomes reported to the ministry.

Gobind stressed that AI adoption must also be tangible to the public, whether in education, healthcare or government services.

“It is the see-and-feel that creates the impact,” he said, noting that the simultaneous Smart City Expo showcased over 120 use cases, from smart farming to autonomous medical systems.

On another note, Malaysia’s position as ASEAN chair has given MDX 2025 added prominence.

Anuar Fariz observed that the regional digital economy is projected to reach US$1 trillion (RM4.24 trillion) by 2030, with Malaysia aiming to be a trusted hub for investment and collaboration.

Gobind said conversations with regional digital ministers underscored shared challenges in AI governance, cybersecurity and inclusivity.

“This is a conversation that is global. If we are in a position to create an ecosystem that strengthens us and all of our partners in ASEAN and beyond, then we build strength that prepares not just us, but the entire world,” he said.

Benefitting SMEs

Ensuring small businesses and rural populations benefit has been a recurring theme.

With over one million small and medium enterprises (SMEs) forming the backbone of the economy, MDEC is using MDX to give them visibility and investor access.

Exhibition halls featured startups offering solutions in fintech, cybersecurity and e-commerce, while roundtables discussed how 5G could support rural digitisation.

Gobind recalled Malaysia’s earlier shift from 4G to 5G, stressing that equitable access must underpin the AI era as well.

“We must also be in a position to make sure people have affordable access, because if we tell them there is technology to empower themselves, then they must be able to use it. No one can be left behind,” he said.

Beyond access and infrastructure, concerns remain over how automation and AI could reshape the labour market.

Industry participants highlighted the risk of job displacement in manufacturing and services.

Gobind said the government’s response would focus on reskilling, with the Next-gen Talent agenda equipping Malaysians for future jobs.

Programmes under MDEC and Yayasan Peneraju will provide training opportunities across youth, women and vulnerable groups.

Anuar Fraiz added that while AI could displace some roles, it would also create demand in fields such as quantum computing, immersive content and ethical data governance.

Working Stage

Another challenge is how Malaysia will enforce ethical standards such as transparency, fairness and accountability.

Gobind said governance structures must evolve faster than traditional legislative cycles.

“Traditionally, you had time to look at legislative change to deal with new challenges. Moving ahead, it may be very different. We may need to design new governance structures to deal with problems that occur quickly,” he said.

Experts at the summit also noted the need for dataset certification and algorithm accreditation, ensuring AI systems operate on authentic and accurate information.

As MDX Summit 2025 unfolds alongside SmartGov Malaysia and the Smart City Expo, the government is using the platform to showcase Malaysia’s readiness as an ASEAN digital hub.

Gobind closed his speech by urging participants to treat the event as a working stage rather than a showcase.

“Let’s make the opportunities presented to us work for the betterment of Malaysians, ASEAN and a trillion-dollar digital future,” he said.

The coming months will determine how much of the summit’s momentum translates into real outcomes.

With the 2026 budget expected to prioritise AI infrastructure, data governance and cybersecurity, Malaysia’s AI nation strategy is moving from vision to execution—balancing ambition with trust, inclusivity and global partnership.

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MALAYSIA has the potential to emerge as a regional tuna transshipment hub by strengthening downstream industry activities and improving shipping facilities, an online news portal reported.

Deputy Prime Minister (DPM) Datuk Seri Ahmad Zahid Hamidi (picture) said the strategy is aimed at preventing deep-sea catches such as tuna from being exported in raw form, ensuring that added value and income remain in the country.

“This initiative will strengthen Malaysia’s blue economy sector while enhancing food security, developing human capital and boosting competitiveness in deep-sea fishing industries,” Ahmad Zahid said.

He pointed to the newly launched cooperation between Asia Ocean Resources Sdn Bhd and Penang Port Sdn Bhd, which will see frozen tuna landed at minus 60°C at Penang Port under the premium seafood brand, Shinkai Origin.

The global tuna industry is currently valued at around US$42 billion (RM177 billion) and is projected to reach US$54 billion by 2032.

He urged that Malaysia must actively seize opportunities in this sector.

The launch of Shinkai Origin is also expected to help Malaysian deep-sea brands break into premium international markets including the European Union (EU), Middle East, BRICS nations and the US.

Besides expanding export opportunities, the initiative will generate employment and produce skilled workers through Technical and Vocational Education and Training (TVET) programmes.

Ahmad Zahid also stated the establishment of Maritime TVET to train youth in deep-sea fishing, ship maintenance and tuna processing, could develop into a high-potential cluster.

“Industry players offering practical training for TVET students in shipyards and on deep-sea vessels would accelerate technology transfer from Japan, Korea and Taiwan.

“Penang will play a catalytic role in transforming Malaysia from a landing centre into a hub for processing, research, TVET training and global tuna trade,” he said.

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TECHNICAL and Vocational Education and Training (TVET) must be viewed as a critical frontline solution to equip Malaysia’s workforce with skills for high-growth industries such as semiconductors, renewable energy and electric vehicles, said an economist.

Universiti Utara Malaysia’s Economic and Financial Policy Institute senior associate fellow associate professor Irwan Shah Zainal Abidin said today that this approach can propel Malaysia to emerge as a hub for skilled talent and attract foreign direct investments, making the country an ideal host for global companies.

He said that prioritising TVET is key to meeting industry demand, including that of foreign investors, and in the process, safeguard the country’s growth.

However, he lamented that “employers often struggle to find qualified technicians, engineers and specialists” even as Malaysia continues to attract FDIs, particularly in advanced manufacturing and the semiconductor industry.

He cited how Boeing’s planned facility and support towards making Malaysia a regional aerospace hub, semiconductor expansions by Intel, Infineon and Tata Electronics, and relocations under the “China-plus-one” strategy, would require the right talent pool.

“Investment alone is not enough without the right talent pool as industries such as semiconductors demand precision, discipline and advanced skills,” he said in a statement in response to the rising importance of TVET in Malaysia’s industrial landscape.

“Our technicians, engineers and specialists will be the true backbone of this industry, (and) with the right training, Malaysia can position itself not just as a host to global companies but as a hub for skilled talent,” he said.

Irwan cautioned that the growing mismatch between skilled labour supply and industry demand, especially in high-growth, high-value sectors, threatens to slow Malaysia’s economic progress.

He said the challenge is even more urgent as the nation pushes to climb the value chain and tap into emerging sectors such as the green (low-carbon), blue (sustainable-marine), grey (harmful-related) and orange (creative) economies.

Among other things, these economies aim to achieve growth by reducing environmental risks, sustainably utilising ocean and freshwater resources for economic growth, and fostering a creative economy that generates intellectual growth, all of which would require new skills.

Between 2022 and 2023, Irwan said, a total of 260,000 fresh graduates entered the job market, whereas only 150,000 high-skilled jobs were created, which led to 110,000, or 36 per cent of underemployment in the labour market in those years.

He emphasised that this mismatch is also a wake-up call for Malaysia’s education providers.

Higher learning institutions must urgently shift towards embedding stronger TVET elements into their programmes, ensuring students graduate with industry-ready skills.

Without this transformation, Malaysia risks producing graduates misaligned with future jobs while industries continue to face shortages of skilled workers.

To build a skilled workforce, he said Malaysia’s TVET ecosystem should scale up in three areas, namely capacity, which inculcates more places, labs and industry-grade facilities, quality, including up-to-date modules aligned with technologies and industry needs, and pathways incorporating clear progression into higher TVET, universities and lifelong learning.

Irwan said that the Fourth Industrial Revolution and emerging technologies such as artificial intelligence and the Internet of Things are reshaping industry needs, requiring new skills that traditional education alone cannot provide.

“TVET institutions are better positioned to adapt quickly to these changes, especially in advanced sectors like renewable energy, electric vehicles and semiconductors.

“While cross-border talent can plug short-term gaps, long-term resilience hinges on a demand-driven TVET ecosystem under the MADANI Economic Framework,” said Irwan.

“In the future, Malaysia must not only be a place where goods are made. It must be about ‘Made by Malaysia’ powered by homegrown skills, innovation and talent,” he added. — BERNAMA

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KUALA LUMPUR — Housing and Local Government Minister Nga Kor Ming has called on ASEAN and China to strengthen collaboration in sustainable urban development by combining digital innovation with cultural preservation.

Speaking at the ASEAN-China Ministerial Roundtable on Construction 2025 in Guilin, China, Nga underscored the urgent need to prepare for the region’s rapidly growing urban population.

Nga, who is also president of the UN-Habitat Assembly, cautioned that rising demands for housing, transport, and infrastructure could strain resources and widen social inequalities without proactive measures.

“With crisis comes opportunity. This is our chance to position ourselves as a global leader in building cities that are smart, inclusive and climate-conscious.

“Together, let us build cities that are not only digitally enabled, but also culturally rich. Let us embrace progress without losing the essence of our identity,” he said in a statement issued by the ministry today.

He said that high-quality development must also carry a soul — one that reflects the spirit of its people.

“Our national experience proves that cultural heritage and progress can coexist, thanks to Malaysia’s unique tapestry woven from many threads of culture, faith and tradition. From the majestic wooden structures of the Rumah Melayu to the shophouses of George Town and Melaka, they all tell the story of the people,” he said.

Nga highlighted that Malaysia has already seen tangible achievements in digital transformation, citing the adoption of Industrialised Building Systems (IBS), which has shortened construction timelines, improved quality, and significantly reduced on-site waste in public housing projects.

He said the Building Information Modelling (BIM) is also transforming design and project management by minimising errors and improving coordination, while emerging technologies such as drones, modular construction, and digital project management tools are being explored to further enhance safety and efficiency. — BERNAMA

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KUALA LUMPUR — Malaysia is strengthening its commitment to multilateralism by opening up more markets through trade and investment partnerships, Prime Minister Datuk Seri Anwar Ibrahim said.

Anwar told China broadcaster CGTN anchor Zheng Junfeng in a recent interview that Malaysia’s initial approach to the Shanghai Cooperation Organisation (SCO), following an invitation from Chinese President Xi Jinping, has yielded positive results and fostered further collaboration.

“We have seen the effectiveness, and we look forward to further collaborating with the SCO, but you see the whole strategy now, even from Malaysia, and I encourage my colleagues in ASEAN to open up trade and investment relations and broaden the market base.

“We have ASEAN, and we have ASEAN+, that is with China, Korea, Japan and all the other countries. But it’s more important to have new mechanisms, new engagements such as the SCO, BRICS,” he said.

On the upcoming ASEAN Summit in October, Anwar noted that leaders from Brazil, South Africa, Italy and Canada will be participating, which he described as a remarkable step for the region.

Anwar also reiterated Malaysia’s commitment to discussing the possibility of extending the East Coast Rail Link (ECRL) project by 25 kilometres to Thailand. “We don’t stop in the north, but also to extend to the border of Thailand, hopefully with the new Thai government or the existing one – they are in the midst of change – we will discuss the possibility of extending it,” he said.

Meanwhile, the prime minister said Malaysia is well positioned to benefit from the electric vehicle success in China through Proton’s long-standing collaboration with Geely. He revealed that he has been in discussions with Geely chairman Li Shufu, and with support from both the Chinese and Malaysian governments, will further strengthen cooperation. “We will launch Geely’s major expansion into the automotive city, and Geely would initially have this hybrid and then EV production,” he added. — BERNAMA

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KUALA LUMPUR — Kuantan Port will serve as an important base for trade with China as well as the coastal areas of Thailand, Laos and Vietnam, Prime Minister Datuk Seri Anwar Ibrahim said.

He said the expansion of Kuantan Port is timely as most of Malaysia’s development has been concentrated on the west coast. The project, developed under a twin-city programme with China, is expected to elevate the east coast as a new growth hub.

“Yes, it needs to be expanded. I think it is wise because the traditional ports are already spending,” he told CGTN anchor Zheng Junfeng in an interview recently.

Anwar noted that Port Klang is now ranked among the world’s top 10 ports, while two other Malaysian ports are also climbing in global standings. “For Malaysia, a relatively small country, this is a remarkable feat,” he said. He added that the potential for Kuantan Port is huge, as it will transform an area that was previously marginalised into an important growth centre.

On June 10, 2024, Kuantan Port signed an agreement with Malaysian Rail Link Sdn Bhd (MRL) to collaborate on the East Coast Rail Link (ECRL), enabling freight transport to shift from road to rail through the port. The ECRL spur line, which will connect directly to Kuantan Port, is expected to improve the movement of goods and boost connectivity and efficiency between Malaysia’s east and west coasts. — BERNAMA

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KUCHING – Malaysia’s verdant, river-crossed state of Sarawak is charging ahead with plans to become a regional “green battery,” but its renewable energy dreams could come at serious environmental cost, experts warn.

Wedged between peninsular Malaysia, Indonesia, Singapore and the Philippines, Sarawak’s leadership believes it could become a keystone in a regional energy transition.

Its many rivers and streams offer potentially abundant hydro-electricity and could one day power production of green hydrogen.

It is also installing solar and touting biomass to grow its renewable capacity, with Premier Abang Johari Tun Openg telling investors in Europe last week the state is “committed to a low-carbon and sustainable energy future”.

But environmental groups warn much of this green energy infrastructure contributes to deforestation and the displacement of Indigenous groups.

And for now, Sarawak’s main export is a fossil fuel: liquefied natural gas.

Harnessing hydro power

Sarawak began generating hydroelectricity several decades ago, and is currently building a fourth hydro-power plant.

They currently account for around 3,500 megawatts — enough to light about two to three million Southeast Asian households daily.

Its first floating solar field is already producing around 50 megawatts, and more than a dozen others are planned, Chen Shiun, senior vice president of Sarawak Energy Corporation, told AFP.

With a population of fewer than three million, the huge potential energy surplus is obvious, he said.

By 2030, Sarawak aims to generate around 10,000 megawatts, mostly from hydropower, with solar and natural gas contributing.

It wants to supply neighbouring Sabah state and Brunei, and potentially mainland Malaysia, Singapore and the Philippines.

The state’s ambitions are “bold and promising,” and send “a strong signal for accelerating the region’s energy transition,” Shabrina Nadhila, an Asia analyst at energy think-tank Ember, told AFP.

‘Good example’

Southeast Asia’s power demands have more than doubled in the last decade, and will only grow further as the expanding middle class installs air conditioning and energy-hungry data centres emerge.

Kuala Lumpur is hoping the growing demand will re-energise a long-mooted electricity grid connecting members of the 10-country Association of Southeast Asian Nations (ASEAN).

“Sarawak is a good example that we can learn from, especially when we talk about the APG (ASEAN Power Grid),” top Malaysian energy official Zaidi Mohd Karli told AFP.

Already, a 128-kilometre (80-mile) cross-border electricity connection is bringing hydropower from Sarawak to neighbouring Indonesia.

The state is also learning from other ASEAN countries such as Laos, which launched a similar hydro-powered plan in February, aiming to exchange around 1,500 megawatts of electricity with China by next year.

Environmental fears

But the state’s grand aspirations remain dogged by environmental concerns over the destruction of ancient tropical rainforests for hydropower construction and timber logging.

“Although Sarawak has the lowest emissions grade factor by far of any state in Malaysia, it also has the largest rate of deforestation,” Adam Farhan, of environmental watchdog RimbaWatch, told AFP.

“A large part of that can be attributed to hydropower.”

More than 9,000 Indigenous people were relocated from Bakun to make space for one of Southeast Asia’s largest dams, commissioned in 2011.

Almost 70,000 hectares — an area about the size of Singapore — of forest ecosystem was flooded, according to several environmental organisations and academic studies.

Relocation and compensation issues continue even today and there are fears of repeat scenarios and exclusion of local communities as new hydropower projects launch elsewhere, environmental groups said.

“The expansion of large hydropower infrastructure in Sarawak raises important environmental and social concerns,” Ember’s Nadhila said.

“To address these challenges, it is crucial to enforce strict and comprehensive environmental and social safeguards,” she warned.

Farhan from RimbaWatch added: “Sarawak needs to do a lot more to sort out its Indigenous rights issues and its deforestation issues before I think it could call itself a ‘green battery’ for Southeast Asia.” –AFP

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Expert expects a modest uptick in headline inflation in 2H25 as the SST’s broader reach filters through consumption patterns

by SHAUQI WAHAB & NURNABIHAH DINI

MALAYSIA’S revamped sales tax regime, which introduces a multi-tier structure and broader coverage, has sparked debates across industries.

While aimed at strengthening government revenue, businesses and consumers are calculating its impact on pricing, competitiveness and economic growth.

The government’s decision to cancel the planned High Value Goods Tax (HVGT) and instead proceed with an expanded Sales and Service Tax (SST) has drawn mixed reactions from economists, who note both sectoral impacts and the broader policy implications.

While there is consensus that the overall inflationary effect will be contained, they highlighted differing concerns and structural lessons stemming from the shift.

The government originally set May 1, 2024 to implement the HVGT but it was put on hold after pushback from industry players.

The proposed tax rate would have been between 5% and 10% tax and cover cars above RM200,000, watches over RM20,000 and jewellery beyond RM10,000: It was projected to bring in RM700 million to the government.

Universiti Kuala Lumpur (UniKL) economic analyst Prof Dr Aimi Zulhazmi Rashid stressed that while the immediate revenue impact of cancelling the HVGT may be neutralised through SST expansion and other tax measures, the inflationary dynamics warrant close monitoring.

He expects a modest uptick in headline inflation in the second half of 2025 (2H25) as the SST’s broader reach filters through consumption patterns.

“We might see headline inflation climbing slightly in 2H25 due to the expanded coverage, but it is unlikely to spiral since essential goods remain protected,” he told The Malaysian Reserve (TMR).

Aimi also emphasised the importance of policy clarity to maintain investor and consumer confidence.

“The constant shifting from HVGT to SST could send mixed signals to businesses and the public, so what’s crucial now is consistency in messaging and implementation,” he added.

Meanwhile, International Islamic University Malaysia (IIUM) economic analyst Prof Dr Muhammad Irwan Ariffin said the issue is less about fiscal impact and more about behavioural responses, particularly in cross-border shopping.

He viewed that Malaysia’s proximity to countries offering value-added tax (VAT) refunds may encourage affluent consumers to bypass local retail channels.

“There could be an uptick in cross-border spending for portable luxury items such as handbags or jewellery, as buyers seek value in neighbouring markets,” he added.

Muhammad Irwan further highlighted the uneven impact across industries, adding that not all luxury sectors will be equally affected.

“The food and beverage (F&B) segment may feel moderate pressure, but the automotive sector will remain resilient, as demand there is driven more by necessity and status rather than price sensitivity,” he added.

On the other hand, Universiti Putra Malaysia (UPM) economist Prof Dr Ida Yasin took a longer-term view, suggesting that the government’s reliance on SST expansion over HVGT should not detract from the need to consider a more efficient tax structure altogether.

She argued that while SST can address immediate needs, it remains narrower in scope compared to global best practices.

“The Goods and Services Tax (GST) is globally recognised as more efficient because it captures value-added at every stage, whereas SST still relies heavily on category classifications and can create leakages,” she told TMR.

At the same time, she cautioned against overstating the regional price gap, adding that Malaysia’s luxury goods market is not drastically misaligned with its neighbours.

She added that prices across South-East Asia for high-value items are relatively comparable, so fears of massive shopping outflows may be overstated.

Collectively, the experts’ insights suggest that while the cancellation of the HVGT may not destabilise government revenue, the structural implications extend beyond taxation alone.

Aimi’s caution on inflation highlights the importance of keeping consumer sentiment steady, while Irwan’s remarks draw attention to behavioural shifts in luxury consumption.

Ida’s argument, meanwhile, reopens the debate on whether Malaysia should eventually return to GST for a more comprehensive and efficient revenue system.

The experts saw the cancellation of HVGT not as an end, but as a waypoint in the country’s ongoing search for a tax system that is both effective and equitable.

Reassessing Jewellery Investments

The government’s plan to impose a 5% to 10% luxury and discretionary goods tax, including jewellery, is forcing Malaysians who view gold as both adornment and financial security to reassess their buying decisions.

For younger buyers, the appeal of gold goes beyond fashion. Livestream executive Ziana Sangut@Saleh, 25, began collecting gold in 2023, shortly after completing her studies.

For her, every purchase carries both emotional and financial weight. Beyond accessorising, her jewellery collection has proven its worth during emergencies.

“When I was about to move into a new house, I needed to prepare RM4,500 for a rental deposit.

“I did not have that much as someone who had just finished her studies, but thank God my love for gold helped me. I pawned a bracelet, a ring and three charms to get that amount,” she told TMR, adding that at the time, gold was priced at RM356 per gramme.

Ziana said the new tax is unlikely to change her monthly habit of buying gold accessories.

“I am still going to buy gold every month. I just need to prepare for the higher price per gramme and surveys for shops that sell at lower prices, usually for preloved gold,” she added.

Meanwhile, housewife Norhayati Ghazali, 49, has been buying jewellery for almost a decade, treating it as a form of saving.

For her, gold has always been more than an accessory, it has been a financial safety net for her family.

“I had to pawn my jewellery when my sixth daughter decided to continue her studies in on basic needs like food.”

Norhayati dismissed alternatives like smaller pieces or lower-purity gold, saying she would rather wait and buy larger, high-quality items. She also chose not to buy from abroad due to concerns about authenticity.

“I prefer to buy locally, where I know what I am getting,” she said.

Norhayati urged policymakers to consider the burden on ordinary families.

“The tax only burdens the bottom 40% income group (B40) like us. The government should put a limit on how much it want to impose.”

Meanwhile, Nur Nazwa Alya Azman, 24, a public relation executive, views jewellery mainly as an investment. She began buying in 2019 when gold prices dipped during the Covid-19 pandemic, and has since seen her collection appreciate in value.

“I remember the first time I sold my jewellery. I bought it for around RM1,500 and in just two years, it was worth around RM2,500,” she said.

Nur Nazwa Alya admitted the new tax will affect her purchasing behaviour.

“Yes, I will be affected, but I also invest in gold online. For a long-term investment in about five to 10 years, it still makes sense.”

Unlike Norhayati, she is open to buying overseas if prices are more attractive. While the tax may change how she invests, she understands the government’s reasoning.

“It will affect how I make long-term investments, but for some reason, I feel like it makes sense because most people with money spend on jewellery. So, tax on jewellery does make sense as long as the tax is used in a sensible way.”

Luxury Tax on Jewellery will Burden Consumers

Jeweller Poh Kong has voiced strong reservations over the government’s proposed 5% to 10% luxury and discretionary goods tax, warning that it will weigh on ordinary consumers and dampen Malaysia’s gold and sector.

Director Ermin Siow said the plain gold jewellery, which makes up the bulk of purchases, is not just a luxury item but often an essential purchase for the B40 and middle 40% income group (M40), tied to cultural traditions, weddings and family gifting.

Many people also buy gold as a hedge against inflation and as a liquid form of savings. He also noted that the fluctuating nature of gold prices make implementation of the tax highly problematic.

“If you set a threshold for a certain grammage to levy the tax, it may not hold once the price goes out of range,” he told TMR.

Siow also raised concerns over the impact on Malaysia’s tourism-driven jewellery sales, saying the tax could discourage foreign buyers.

“If tourists are exempted, how do you set the procedures and standard operating procedures so that the exemption is not abused?” he asked.

According to him, countries that introduced similar taxes in the past eventually abandoned them due to enforcement difficulties and limited contribution to government revenue.

He hopes that the government will reconsider its plan to impose the tax.

“The gold and gems industry sincerely hopes the government will drop the idea of this luxury tax,” he said.

Meanwhile, the Malaysia Retail Chain Association (MRCA) told TMR that it is still too early to offer any inputs on the issue, adding that it is best to wait and monitor further developments before providing its views.

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