Malaysia Country Report presented during 10th ARCE

Malaysia Country Report presented during 10th ARCE

Cover areas such as "Performance of the Malaysian Economy", "The Malaysian Retail Scene", "Trends & Development in Retail Industry", etc...

PERFORMANCE OF THE MALAYSIAN ECONOMY GDP Growth 1.7% for 1st Half of 2001 Malaysia experienced its 1st recession in 13 years, registering a negative 6.7% growth in the GDP in 1998. However, the economy rebounded strongly to register a positive growth of 5.8% and 8.5% in 1999 and 2000 respectively. In 2001, the prolonged decline of economic activities in the US has led to economic suffering among the Asian countries, including Malaysia. The country registered a 1.7% GDP growth for the 1st half of this year, and the economists are expecting a moderate 3% to 5% growth this year.

part of the participants at the 10th Asian Retailers Convention & Exhibition in Jakarta

Unemployment Rate at 3% Unemployment rate remains low at 3% at end-2000. However, about 15,000 people lose their jobs during the 1st six months of the year as a result of retrenchment. Even though these displaced workers were able to find new jobs quickly as there were still many vacancies in the market, the frequent news of retrenchment has dampened the consumer sentiment.

CSI Dropped 8.5% in 1st Quarter of 2001 The Consumer Sentiment Index for the 1st quarter of this year showed a significant fall of 8.5%, indicating a drop in confidence owing to a weaker labour market and slower growth in real income. Thus, despite economic growth measures now being tilted towards stimulating consumption, many are opting for cautious spending and are refraining from incurring more debt.

THE MALAYSIAN RETAIL SCENE

Retail Sale at US$11.6B in 2000 During 2000, the retail market was a mixed bag of performance. Consumer spending that increased in the 1st half, continued to grow but at a slower pace following the weak stock market. The size of the Malaysian retail sector was estimated to be about RM44 billion in 2000, or about US$11.6 billion.

10.4% Growth in 2000 On a year-on-year comparison, the retail sales dropped by an estimated 20% in 1998, then recovered by 7.4% in 1999, and then grew further by 10.4% in 2000. It is expected to reach the pre-crisis level of RM46.75 billion this year.

OVER SUPPLY OF RETAIL SPACE

Dropping Profit & Productivity One of the major challenges facing Malaysia's retail industry is the over-supply of retail space. Abundant supply of retail space, coupled with the easy entry nature of the industry has encouraged many new players into the market. In some cases, the property owners themselves were forced to operate retail outlets in order to fill up their complexes. This has resulted in keen competition to an unhealthy level, with productivity in therm of sale and profit dropping.

Average Occupancy Rate of 74% The average occupancy rate for shopping complexes was at 74% at end-2000, with many complexes managed only 30% to 40% occupancy.

New Retail Space Emerging New retail supply has continued to emerge in and around the capital city area. There are 23 shopping complexes under construction that will add a further 0.69 million sq meter of retail space, to the existing 2.4 million sq meter. What is more, another 36 shopping complexes, offering a further 0.75 million sq meter, has been approved for development.

TRENDS & DEVELOPMENT IN RETAIL INDUSTRY

Hypermarket Hypermarket sector is where the action is. Tesco, a British retail chain, has teamed up with a local partner to invest some RM1.2 billion in 15 hypermarkets in Malaysia. The 1st outlet is targeted to open by next year. Dairy Farm International acquired a local hypermarket operation last year, and had also announced a RM80 million-expansion plan to open 5 more hypermarkets by next year. Despite the intense competition in the market place for the greater market share, Carrefour has announced the opening of its latest store at the end of this year with a RM30 million investment, and plan to add one new store each year.

New Players British retailers Ms Selfridge, Topshop, Topman and Dorothy Perkins have made entry into the country, and Debenhams is expected to open its 1st outlet in mid-2002.

Alfresco Dining Concept Over the last two years, many popular shopping centres had refurbished their complexes to include outdoor alfresco dining concepts. It is also becoming a standard feature for new complexes.

Proliferation of Service Providers in Shopping Complexes There has also been a proliferation of service providers demanding retail space normally filled by traditional independent retailers. While banks, foreign currencies traders, travel agencies and beauty saloons are not new to shopping centres, newcomers, include dry cleaners, specialised medical facilities, day-care centres, business centres, and even post offices. Service tenants offer significant benefits to the shopping centres, with their drawing-power; they create increased customer traffic to less prominent locations in a centre.

E-commerce According to a study released by International Data Corp., the Malaysia e-commerce market is expected to generate revenues exceeding US$1 billion by 2003. The Malaysian government has provided the right environment in the form of the Multimedia Super Corridor, cyber-laws, the e-commerce and k-economy master plans, as well as keeping the internet connection costs low. Various efforts were initiated to increase the computer density to the world average of 35%, from the existing 10%, and to increase internet subcribers to over 1 million by 2003. Many Malaysian retailers have set up their web-sites offering on-line shopping. However, other on-line services such as B2B portals and retail exchanges are slow in gaining momentum.

Impact of Asean Free Trade Area (AFTA) The industry is also preparing for the impact of the AFTA on local traders and consumers following the removal of tariffs by member countries of the regional grouping after 2003. By then, goods will become much cheaper, as the government would no longer be in a position to impose tariffs to protect local industries. Goods that were previously not price-competitive may now become affordable, and cheaper sources would be available. As such, retailers are exploring the new sources of merchandising as well as make adjustment to the merchandising mix to take advantage of AFTA.

Promoting Malaysia as a Shopping Destination

The Malaysian tourism authority has undertaken efforts to position Malaysia as a leading international shopping destination. Other than promoting our resorts, rain forest and the beaches to the foreign tourists, we have started to aggressively promote the other fascinating features of the country, such as the colourful cultural and festival events and the excellent shopping opportunities. Mega Sales Carnivals were held on a nationwide basis, and were successful in attracting more shoppers. Each mega sale has managed to attract additional half a million foreign visitors and day-trippers from the neighbouring countries, on top of the normal tourist arrivals. The effort facilitated the growth in tourism expenditure and consumer demand, which enhanced the growth of retail trade.

1ST MALAYSIAN INTERNATIONAL Retail CONFERENCE & EXHIBITION (MiRCE) 2000

MRA hosted its 1st biennial MiRCE in September 2000. The event was conceived to provide an avenue for retailers to get a right footing for the success of their business in the new millennium. It aimed to provide comprehensive information on the challenges of the new economy and at the same time leverage the industry in the region. We are pleased to report that the show was a success, in terms of exhibitors, visitors, the conference speakers and conference participants. Members of FARA have given us their strong support and encouragement. They either endorsed our shows or traveled all the way to address our participants. Thank You all FARA members, and barring any unforeseen circumstances, we wish to inform that the 2nd event is planned for June 2002.