Potential Silver Linings Behind Ringgit's Decline

There are opportunities in every crisis. The Star reported that Ringgit fell through the 3.9 support level against the US dollar on Thursday. Bloomberg yesterday reported that Societe Generale cut its third-quarter Ringgit forecast to 4.10 from 3.80, and the year-end estimate to 3.90 from 3.70. It appears that there is a chance for a prolonged period of undervalued Ringgit. What does this mean to our competitive advantages in the region, and globally?

Ringgit's continuing decline is such an instance that should require the country to revisit its transformation agenda and strategies. With more than 10% decline this year, all Malaysian strategic arms and think tanks should regroup to address the potential negative repercussions as well as strategies to take advantage of the situation, especially in revamping certain exports. In plain language, how do we take the advantage when Made in Malaysia products are cheaper in foreign markets. Below are some relevant industries and strategies that can be considered:

1. Palm Oil
   In 2011 palm oil accounts for 33% of global market share of cooking oil. Can the production be significantly increase for export? A WSJ article this week discussed red palm oil as a superfood - packed with healthy antioxidants and good for the heart. Perhaps we can start riding a new food revolution with red palm oil, MPOC?

   

   Sample red palm oil from Malaysia. Source: www.carotinausa.com

2. Petrochemical
   Lower Ringgit and lower crude oil price should be a double-bonanza for oil and gas downstream industry. In particular, should the Pengerang project be expedited? The project is intended to add value to imported crude oil by producing "new high-value and high-demand products and by-products, such as polymers, pharmaceutical products and plastics".  

   

   Pengerang Integrated Petroleum Complex (PIPC). Source: www.mprc.gov.my/

   
3. Electronics How about supporting local electronics productions for export especially by Malaysian companies that have been organically developed by Malaysians and through Malaysian government and private equity support. A case in point is Quantum Electro Opto Systems Sdn Bhd (QEOS) to “pioneer the commercial development of high speed, low-cost and power efficient fiber optics communication solutions”. Disclaimer: QEOS' CEO, Dr. Gabriel Walter, covered in The Star in January, was my housemate while studying together in USA.

   

   QEOS' high-speed optical modules. Source: www.qeosystems.com/

4. Halal Food
   What happen to the goal to make Malaysia as the international halal food hub? Perhaps this is the time to rehashing the strategies to reach the goal?

These are just some example of industries and/or sectors that can be expanded to increase export to take advantage of low Ringgit in global markets.

Related article: Transformation Continues