German companies will continue to grow their presence in Malaysia, further reinforcing the two countries’ robust trade relations despite a gloomy global economic outlook that has been forecasted for 2023, according to the latest AHK World Business Outlook Fall 2022 survey results.
In the face of multiple headwinds that will challenge businesses around the world including global supply bottlenecks, the new XBB Covid-19 variant and the Russia-Ukraine war, 50% of German firms in Malaysia surveyed said they will increase spending on local investments within the next year to develop their businesses.
54.2% also expect to increase the headcount in their company in the next 12 months, which bodes well for job seekers in the face of a possible economic downturn. German companies named three advantages of doing business in Malaysia namely low labour costs (65.2%), supplier network (60.9%), and the availability of skilled workers (56.5%). The global supply chain disruption will continue to be a hurdle for companies and in order to cushion the impact, 65.2% have rolled out plans to look for new or additional suppliers. 81% said Asia Pacific (excluding China) was their go-to region to source for new suppliers while 61.9% preferred to look within Malaysia specifically.
Companies said they preferred to source from within the region and domestically because of cost reasons (76.2%) and also allows them to diversify or minimise risk in the event of failures (61.9%). This trend in multisourcing can most likely be attributed to the supply and demand shocks brought on by the pandemic and the Russian invasion of Ukraine as a way of developing a resilient supply chain strategy. Additionally, 50% of German companies already operating in Malaysia preferred to remain in the country when asked which regions they have looked at to move their operations to. 87.5% of those companies said they rather stay in Malaysia because of market development while 50% said cost was the main reason.
Daniel Bernbeck, Executive Director of the Malaysian-German Chamber of Commerce and Industry (MGCC)
said,
The AHK Network is supported by the Federal Ministry of Economic Affairs and Climate Action offers German companies an investor-friendly environment, skilled workforce and a broad and strong supplier network.
When asked about the major concerns of German companies for the next 12 months, 58.3% answered labour shortages, followed by rising commodity prices (54.2%) and continued supply chain disruptions (50%). While companies said they would hire more talent and increase expenditure to develop their businesses in 2023, 66.7% expect the economic situation in Malaysia to stay the same.
