Malaysia’s Challenges and Opportunities in 2025

Lai Cheng February 6, 2025 0 Comments

After welcoming 2025, the Consumers’ Association of Penang (CAP) anticipates a challenging year ahead. Inflation, food shortages, and geopolitical uncertainties may dominate the coming months due to climate change. However, there are positive developments, such as the much-awaited passing of the Lemon Law in Parliament and the transition to adopt cleaner renewable energy sources.

Climate Change and Its Impact

Annual rainfall averages are no longer reliable indicators, as extreme bouts of intense rainfall and droughts have become more frequent. Existing drainage systems are inadequate, and rising sea levels may cause flooding in previously unaffected areas. The government should consider incorporating rain harvesting systems into new housing projects and offering subsidies for older homes to adopt the system. Harvested rainwater can be used for non-drinking purposes, reducing waste and mitigating flash floods.

Droughts will further strain water resources due to growing populations and industrial demands. Malaysia’s population grew from 33.2 million in 2020 to 34.7 million in 2024. Irregular weather patterns will disrupt agriculture, leading to increased food prices. Predictions indicate Malaysia will experience higher rainfall, cooler temperatures, and a more intense Northeast Monsoon until at least March.

Food Production and Security

Malaysia remains highly dependent on food imports, with 70% of its food supply sourced from abroad. As much as 90% of red meat is foreign-sourced, making the country vulnerable to inflation and food shortages. CAP has consistently highlighted rising food prices, yet progress in addressing the issue has been slow. The Ministry of Agriculture and Food Security (MAFS), the Malaysia Competition Commission (MyCC), and law enforcement agencies should urgently investigate claims of low-quality seed supplies and cartel activities. Additionally, disruptions in the food distribution chain contribute to waste and inflation, requiring immediate intervention.

Geopolitical Uncertainties and Their Economic Impact

Regional geopolitical uncertainties pose significant risks. Tariff implementations may lead BRICS (Brazil, Russia, India, China, and South Africa) exporters to pass higher costs to local consumers, causing inflation. Tariffs could reduce export revenue, weakening BRICS currencies against the U.S. dollar. A weaker currency increases the cost of imported goods, such as fuel and machinery, adding to inflationary pressures. Food prices may rise if trade disruptions make agricultural inputs more expensive. However, increased trade within the SEA region could help mitigate food price inflation.

Green Energy Transition

Malaysia has strong solar energy potential, averaging 4.5 – 6.5 kWh/m²/day. The government should continue promoting rooftop solar adoption through incentives like Net Energy Metering (NEM 3.0) and tax exemptions, especially for new buildings. Stronger tax incentives for electric vehicle (EV) purchases and fleet conversion are necessary.

Concerns remain regarding EV battery recycling, as current technology is still evolving. Malaysia must establish battery recycling facilities but may face challenges in maintaining processing capacity if insufficient batteries are available for recycling. Unrecyclable materials could end up in landfills, posing environmental risks.

Household Debt Crisis

Malaysia’s household debt rose from RM1.53 trillion in 2023 to RM1.57 trillion by mid-2024, equating to 83.8% of GDP. Housing and car loans were the main contributors, accounting for 74.5% of total household debt.

Household debt will continue escalating unless underlying causes are addressed. Constructing low- and low-medium-cost flats is not a solution if people must take on massive debt to afford them. Otherwise, these flats risk becoming overhang properties, especially if financial institutions reject loan applications. This is the reason why we advocate for Rent-to-Own housing schemes.

Car ownership in Malaysia is often seen as a necessity rather than a luxury due to inadequate public transportation. To encourage public transit usage, the government must ensure it is:

  • Reliable (minimal breakdowns and regular service intervals)
  • Affordable (accessible to low-income groups)
  • Convenient (easy to access, for example without crossing highways)
  • Punctual (enabling commuters to plan their trips effectively)

Malaysia faces significant challenges in 2025, from climate change impacts to economic uncertainties and rising household debt. However, with proactive policies and strategic investments in green energy, food security, and public infrastructure, the country can mitigate these risks. Strengthening governance, enforcing competition laws, and enhancing sustainability measures are crucial in ensuring a resilient future for Malaysia.

 

 

Mohideen Abdul Kader
President
Consumers’ Association of Penang

Letter to the Editor, 6 February 2025