Economy

by AKMAR ANNUAR

MALAYSIA must strengthen its policy consistency and focus on long-term industrial goals if it intends to reposition itself as a competitive manufacturing hub, industry leaders said at the Energy Asia 2025 conference.

During a panel session titled “Reindustrialising Malaysia” on Tuesday, speakers emphasised that while the country has the infrastructure and financial capacity to support advanced industrialisation, its progress continues to be hindered by inconsistent policy direction and execution gaps.

MMC Corp Bhd group MD Tan Sri Che Khalib Mohamad Noh said Malaysia had made substantial investments in infrastructure, but frequent shifts in national priorities had slowed industrial growth.

“We had Multimedia Super Corridor (MSC), then we moved to agriculture, and now we talk about high-tech and semiconductors again. We must pick a focus and stay with it,” he said.

Che Khalib also stressed on the difficulty in balancing energy security, sustainability and affordability, particularly when international financiers place restrictions on fossil-fuel-linked industries.

“We are still generating electricity from coal, and banks and insurers are raising financing costs for these assets. Yet the power reaching homes and factories is the same — whether from coal or solar,” he added.

Khazanah Nasional Bhd MD Datuk Amirul Feisal Wan Zahir said the country must build on its strengths in semiconductor manufacturing and invest more in innovation and talent to move up the value chain.

He said Malaysia is known for backend manufacturing — often called wire benders — but the country now needs to focus on advanced packaging, artificial intelligence (AI) and automation to remain globally relevant.

Amirul Feisal also acknowledged past policy shortcomings, including overprotection of national industries, but said more structured approaches — such as the Proton Holdings Bhd-Geely Holding and Touch ’n Go Digital partnerships — had proven effective in driving transformation.

Meanwhile, CIMB Group Holdings Bhd group CEO Novan Amirudin said Malaysia has sufficient liquidity in its financial system, with over RM5 trillion available across equity, bond and banking markets.

“There is no shortage of capital. The challenge is in how we structure investments to match various risk profiles and time horizons,” he said.

He also called for stricter environmental, social and governance (ESG) governance frameworks, noting the risks of greenwashing in sustainability-linked financing.

Malaysian Industry-government Group for High Technology (MIGHT) president and CEO Rushdi Abdul Rahim said Malaysia’s industrial policy must be supported by long-term foresight, systemic understanding and effective implementation.

“We are good at planning but weak in follow-through. Industrial policies need to remain stable across political cycles if we want to build a resilient and future-ready economy,” he said.

All panellists agreed that to successfully re-industrialise, Malaysia must prioritise high-value sectors, strengthen public-private partnerships, and align financing with national development goals — while ensuring policies are not derailed by short-term political or economic shifts.

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MORE than four in 10 Malaysian businesses have turned their attention to the domestic market in response to rising tariffs and volatile trade policies, according to the latest HSBC Global Trade Pulse Survey 2025. 

The survey, which polled 5,750 international firms across 13 markets — including 250 Malaysian companies — reveals a shifting trade strategy as Malaysian enterprises grapple with surging costs and persistent supply chain disruptions. 

The top concern for 55% of Malaysian firms is the rising cost of doing business due to tariffs and related trade challenges. 

To mitigate these pressures, 42% of companies have already pivoted toward serving local customers, with another 40% planning a similar shift.

Simultaneously, 37% have boosted inventory levels to manage disruptions, while nearly half (49%) intend to follow suit. 

Yet, optimism endures. A overwhelming 91% of Malaysian firms expressed confidence in growing international trade — surpassing the global average of 89%. 

Encouragingly, 73% said trade uncertainties have driven their businesses to evolve and explore new opportunities. 

“Despite the challenges posed by the uncertain tariff and trade landscape, businesses in Malaysia are demonstrating resilience and adaptability in the way they operate,” said HSBC Malaysia CEO and head of banking Datuk Omar Siddiq (picture). 

“While supply chains may be further reconfigured, there continues to be strong potential for local companies to leverage on Malaysia’s strong trade ties particularly in Asia.” 

Notably, Malaysian companies are deepening trade relationships within Asia, with 61% aiming to increase business with China, South Asia (55%) and North Asia (44%). 

Beyond the region, 32% of firms are eyeing expanded ties with both Europe and the US. 

Omar noted that “markets like the US remain key trade destinations for Malaysia for high-value sectors such as electronics and semiconductors.” 

The report also highlights an emerging appetite for innovation and operational restructuring. 

About 64% of Malaysian companies have adopted new technology or digital platforms, while 48% have rolled out new products and services. 

Growth initiatives are increasingly centred around regional expansion (57%) and cost optimisation (54%). 

In terms of support, Malaysian businesses cite cash and liquidity management (64%), improved payment terms (56%) and supply chain financing (55%) as the most helpful tools to weather the current disruptions. 

“With over 70% of Malaysian businesses anticipating sustained cost increases from the impact of tariffs and trade uncertainty on the cost of doing business and businesses facing an average 18% drop in revenue, the imperative for strategic adaptation is clear,” Omar noted. 

“Despite uncertainties, the world is also full of opportunities. Navigating this climate requires not only agility, but strong partnerships to ensure sustained growth in a shifting global economy.” 

The HSBC Global Trade Pulse survey was conducted from April 30 to May 12, 2025, and includes businesses with international operations and annual turnovers between US$50 million (RM211.16 million) and over US$2 billion. — TMR

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• This article first appeared in The Malaysian Reserve weekly print edition

The post Malaysian firms pivot to domestic markets appeared first on The Malaysian Reserve.

Industry leaders urge a moral reset in Islamic finance, linking social equity, ethics and real-economy impact 

by AUFA MARDHIAH 

ISLAMIC finance must move beyond formality and reconnect with the real economy to deliver tangible social outcomes, said Bank Negara Malaysia (BNM) deputy governor Adnan Zaylani Mohamad Zaylani Zahid. 

Adnan said finance should not operate in isolation from the public as it is meant to serve. Instead, it should actively promote inclusion, risk-sharing and values-based intermediation. 

“Financial institutions must channel resources in ways that uplift society, not just generate returns,” he said at an Islamic finance conference in Kuala Lumpur last week. 

He added that Islamic finance offers a much-needed corrective to value-neutral economic theories by embedding ethics, fairness and accountability into policy frameworks. 

He also emphasised that many systemic issues in the financial sector arise when profit becomes the sole objective, rather than a tool for broader economic resilience. 

“Islamic finance has the potential to go beyond compliance, to truly reflect compassion and justice in its operations,” he said. 

His remarks set the tone for a broader discussion at the “Reshaping the Future: Islamic Economics for a Humane and Sustainable World” forum organised by International Centre for Education for Islamic Finance (INCEIF) University. 

Fellow speaker Tan Sri Abdul Wahid Omar, the former Bursa Malaysia chairman, supported the call for reform, stressing that Islamic values are compatible with commercial viability. 

He reflected on his time in the corporate sector, where he witnessed how values-driven strategies could deliver both strong financial performance and meaningful social impact. 

Apart from that, Abdul Wahid also reflected on the growing relevance of stakeholder capitalism — a model in which customers, employees, communities and shareholders are all treated as core to corporate success. 

He added that companies must go beyond environmental, social and governance (ESG) checkboxes and embrace a deeper sense of social responsibility. 

“The market increasingly rewards those who integrate long-term societal goals into their strategy,” he said, noting how even conventional businesses are recognising the value of inclusive practices. 

Restore Dignity, Moral Purpose

Tan Sri Azman Mokhtar, chairman of both Malaysia International Islamic Financial Centre (MIFC) leadership council and INCEIF, said Islamic economics must be rooted in a higher moral vision — one that upholds human dignity (karamah) and purpose in both worldly and spiritual terms. 

“Islamic economics must not be a dismal science. It should be a humane system that enables success in both this world and the hereafter.” 

He framed Islamic economics as a response to the hollowing out of ethics in modern capitalism, which has led to widening inequality, environmental degradation and a deepening spiritual crisis. 

“We must return to an economy that serves people, community and the planet — not just capital,” he said. 

Azman further called for a re-evaluation of how “value” is measured, arguing that metrics should extend beyond profit and GDP to include strategic outcomes like technology transfer, job creation and societal cohesion. 

He pointed out Project Kronos as a case study — an initiative aimed at measuring companies’ broader contributions beyond financial returns. 

On that, Adnan said that a humane economy is one where the financial system meets the real needs of people, not just profit targets. 

The central bank views financial inclusion as central to this goal. Over the years, Malaysia’s financial system has been developed to ensure that people across all income levels — from those seeking mortgages and car loans to small and medium-sized enterprises (SME) owners — have access to affordable and reliable financial services. 

This includes expanding access points in rural areas, ensuring basic banking reaches semi-urban communities and strengthening safety and trust in transactions. 

“These are the kinds of humane outcomes we are aiming for,” he said. 

Beyond the financial sector, BNM also advises the government on broader economic policies that support social goals such as poverty alleviation, social protection and access to healthcare. 

According to Adnan, finance plays a vital role in enabling a functioning economy — by connecting producers and consumers and allowing for investment, innovation and fair distribution. 

He cautioned against separating finance from the “real economy,” a trend in many economic theories that treat financial systems as if they can operate in a vacuum. 

He further added that Islamic finance offers a moral alternative to the dominant economic paradigms, which are often value-neutral and lack ethical grounding. Instead of chasing material gains alone, Islamic economics can embed purpose, values and spiritual accountability into economic thinking and policymaking. 

“This is one of the greatest contributions Islamic economics can offer — to return moral clarity to economic development,” Adnan said. 

Social Finance Must Empower

Expanding on the idea of inclusive value, Abdul Wahid said Islamic social finance tools such as zakat and waqf remain underutilised in nation-building. 

He urged policymakers to reframe them as drivers of entrepreneurship and economic agency, rather than one-off welfare instruments. 

“Social finance must not just be about redistribution. It must be about empowerment,” he said. 

Wahid warned that Malaysia’s low wage share of GDP — around 33% — reflects deeper structural imbalances that must be addressed to improve livelihoods. 

He proposed targeted wage reforms and stronger institutional mechanisms to support upward mobility. 

He also suggested that platforms like Bursa Gold Dinar (BGD), which allow for digital gold investments, could serve as ethical, inflation-resistant financial tools for the public — potentially laying the groundwork for future central bank-backed gold e-money initiatives. 

Growth Must Be Matched by Equity

While Malaysia continues to pursue economic growth, the panel warned that numbers alone cannot measure progress. Growth that fails to lift all segments of society — especially low-wage workers, SMEs and marginalised groups — risks entrenching inequality further. 

Azman and Abdul Wahid both noted that any reform of the financial system must go hand-in-hand with labour market adjustments and educational reforms. 

“We need to develop skills that match future industries while ensuring fair opportunities,” Azman said. 

There was also a shared call to reform procurement and regulatory ecosystems to support smaller businesses, which form the backbone of the national economy but often lack access to capital and markets. 

The forum concluded with a unified message: Islamic economics must be an engine for justice, balance and meaningful change. 

Grounded in maqasid al-shariah — the objectives of Islamic law — the system offers a roadmap to rehumanise capitalism and deliver prosperity with purpose. 

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• This article first appeared in The Malaysian Reserve weekly print edition

The post Islamic finance must serve people, not profit appeared first on The Malaysian Reserve.