Culprit of Malaysia Balance of trade surplus drop

Malaysia, while registering faster economic growth in the second quarter of this year, saw its current account surplus narrowed substantially to RM2.6bil – the lowest since the 1997/98 Asian financial crisis – from RM8.7bil in the preceding quarter. On a year-on-year basis, the surplus fell by over 67%.

This is largely tied to the balance of trade, the component of the current account which has drawn the most scrutiny since late last year as the surplus dropped. Malaysia is reliant on such large surpluses, given its structure as an exports-reliant economy.

Essentially, the balance of trade is what a country earns on exports minus the import costs.
The lower goods surplus of RM18.7bil (from RM24.7bil in the previous quarter) shows the drop in exports, largely due to lower commodity prices (crude palm oil prices have been down since reaching a high of RM3,613 per tonne on April 10 last year) and the weak demand for consumer-electronics products.

There has also been a sustained services account deficit, which widened to RM3.7bil (from RM3.4bil in the previous quarter) as well as outflows in the income accounts, which widened to RM4.1bil (from RM3.8bil previously).

The current account surplus woes are amplified by the weakening ringgit, which has fallen by more than 10% since early May versus the US dollar, making imports more expensive.

Are the above the only reason for drop in export? Only lower commodity price and weak demand for consumer-elctronic product? What other factor beside above that cause the balance of payment drop by 67% .

Pos Malaysia Berhas has increase international postage rate on 15 May 2013. This has cause some Ecommerce operator scale down their operation by reducing low value item to high value item.  some have move their services to nearby country like Singapore. Some has effectively kill by Pos Malaysia by leaving the trade altogether.

File of complaint on Pos Malaysia Berhad violated  section 14 of Price Control and Anti-Profiteering Act 2011 has been move from  Domestic Trade, Cooperatives and Consumerism Ministry to  Malaysian Communications and Multimedia Commission (MCMC). This mean government no longer investigate Pos malaysia Berhad breach of section 14 of Price Control and Anti-Profiteering Act 2011 as that is not under jurisdiction of MCMC. MCMC might assess it impact on E-commerce operator.

As Malaysia Balance of trade surpus has been narrowed to RM2.6bil to from RM8.7bil. MCMC should be careful when drawn conclusion on it investigation. It is not sure Bank Negara have statistic on E-commerce from Paypal and other credit card merchant provider.

India's rupee has been devalue over pass few years but no increase in it export. thus, Malaysia should not be complacent that export will improved after a devaluation of Ringgit.

Nevertheless, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says the current account is not likely to go into deficit due to the recovery in external demand and sequencing of large investments with high import content while the ringgit is likely to moderate versus the greenback in the medium term.

Malaysia should be proactive by leveraging on devaluation of currency to provide a competitive environment to E-commerce operator.

Update : Better external trade ahead?.