The signature of the free trade agreement between Hong Kong and ASEAN is being perceived as an opportunity to further encourage trade and investments to increase between Hong Kong and Malaysia, and as a medium to restore Hong Kong’s position as a middle point between South East Asia and China.
Imports and Exports
From 2014 to 2015 both exports and imports from Hong Kong to Malaysia decreased. Exports decreased by 2.3%. to a total of US$ 3.74 billion, and imports decreased by 7.9% reaching a total of US$ 12.06 billion.
However, Malaysia is still Hong Kong’s 11th most important trading partner, 4th most important among ASEAN countries behind Singapore, Thailand and Indonesia. This is a favourable position that Malaysia has been able to maintain with Hong Kong in the last few years.
The majority of trade is concentrated on three main products:
- Telecom equipment and parts;
- Semi-conductors, electronic valves and tubes; and
These three categories represented around half of the imports and exports from Hong Kong to Malaysia in 2015.
Investments are also a crucial point in the relationship between Malaysia and Hong Kong. Hong Kong is Malaysia’s top 5 source of investments in 2015, exceeding even Mainland China and reaching a cumulative total of US$ 8 billion in 2015. Most of the FDI is concentrated in manufacturing projects in Malaysia.
Hong Kong used to be a trade and investment bridge between Mainland China and South East Asia. However, since the ASEAN group signed a free trade agreement (FTA) with China in 2010, the importance the Hong Kong has decreased. With tariffs reduced to zero the transaction has been carried out directly from ASEAN to China.
Hong Kong ASEAN free trade agreement
Securing its own free trade agreement with ASEAN is seen by Hong Kong as crucial to regain its strength. The negotiations for a Hong Kong ASEAN free trade agreement started in 2014 and are expected to reach a conclusion by the end of 2016. The outcome of such agreements are expected to be positive, with an increase in trade and investments from both sides being expected. According to Hong Kong’s Secretary for Commerce and Economic Development Gregory So Kam-leung, the agreement will “enable goods, services and investments from Hong Kong to enter the ASEAN market in better terms”.
If the FTA brings the expected benefits, trade and especially investments between Hong Kong and Malaysia will be positive and relations between the two countries will be tightened and the potential of the relationship will be multiplied.
Healy Consultants Group is an expert in company registration in both Hong Kong and Malaysia and can help you setting up your business to make the most of opportunities in both countries. To chat to our in-house experts please email us at email[at]healyconsultants[dot]com
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