Textile FDI shifting from China to M’sia

The Edge Daily | 23 January 2007

Textile FDI shifting from China to M’sia

By Kevin Tan

Foreign direct investments (FDIs) are shifting back to Malaysia from China, at least in the textile industry, with some multinationals planning to relocate their operations ahead of the signing of the Malaysia-US Free Trade Agreement (FTA).

According to the Malaysian Textile Manufacturers Association (MTMA), the multinational textile makers are relocating parts of their China operations to Malaysia and are ramping up production to take advantage of the impending FTA.

“I know of a company that is adding a new factory building (to increase production capacity) while another is moving its cutting division from China to Malaysia,” MTMA executive director Andrew Hong told FinancialDaily in an interview recently.

The factory that was relocating its cutting division back to Malaysia would potentially create 2,000 new jobs, he said.

“That is just one company.”

While declining to name the companies, he said they were multinational corporations. “This is how FDI will flow back to Malaysia and new ones are created.”

MTMA is the national body representing all sectors of the textile and apparel manufacturing industry, with its members accounting for more than 80% of the total equity of the textile industry in Malaysia.

Malaysia exported RM10.3 billion worth of textile products in 2005, with more than 20% of them going to the US, which is the Malaysian textile industry’s biggest market.

Hong said the FTA would have a “huge impact” on the industry as Malaysian textile products to the US were currently slapped with a tariff of between 12% and 32%.

“With the FTA, this import duty will be abolished,” he added.

Coupled with Malaysia’s image in the US as a producer of high quality products and its timely delivery of goods, Hong said Malaysia’s textile exports to the US would increase.

Meanwhile, Malaysian Knitting Manufacturers Association (MKMA) executive secretary Rebecca Chiang said the textile industry would benefit the most from the FTA.

“Compared with other industries, we are most involved in the negotiations. In the first and third rounds of negotiations held in Penang and Kuala Lumpur respectively, the industry hosted dinners for the US and Malaysian negotiators to attend,” she added.

Chiang also said the textile industry was the only sector which sent representatives to monitor the second round of negotiations in Washington DC.

Malaysia’s textile exports are expected to expand by between 5% and 7% in 2006 in tandem with a 7% growth seen during the January to September period.

Malaysia’s textile exports grew 6.2% year-on-year in 2005 despite stiff competition from countries such as China, Hong said.

“Looking at the sub-sector, there was already an increase of 13% for the export of apparel between January and September (2006),” he added.

He also said the industry’s outlook for the medium term remained the same in 2007 with an export growth of between 5% and 7%.

source: The Edge Daily