The EU remains to be an important trade partner for Malaysia in 2013, accounting for 9.1% and 10.8% of the country's total exports and imports, respectively. This places the EU second behind China as Malaysia's top extra-ASEAN trade partner.
The total annual trade volume between the EU and Malaysia amounts to almost MYR145 billion (€36 billion) in 2014 and has grown by 32% in absolute terms since 2004.
Trade between the EU and Malaysia is dominated by industrial products. The EU mainly imports machinery and appliances and mainly exports electrical equipment and machinery (both ways industrial products account for more than 90% of trade). Other sectors of relevance in terms of EU imports from Malaysia are plastics and rubber and animal and vegetable fats and oils and in terms of exports, mechanical products.
Additionally, the EU has a considerable share in the annual amount of Foreign Direct Investment (FDI) in the country. In 2014 the EU was the second largest source of FDI into Malaysia (behind Japan), and invested over MYR8.7 billion €2.2 billion in manufacturing projects. Historically, the manufacturing sector attracts the biggest share of FDI, accounting for almost half of the total FDI inflows, and is expected to see increased activity in research and development, high-knowledge, high value-added and high-technology industries in the near future.
The high return on investments have turned Malaysia into a popular spot for foreign investors. According to the Investment Report 2013 prepared by United Nations Conference on Trade and Development (UNCTAD), Malaysia was ranked 11th among top 20 countries with highest inward FDI rates of return (17%).
Putting the pieces together, one can find about 2000 European companies operating in Malaysia, ranging from SMEs to MNOs of all sizes. Hence, the EU has emerged as a key strategic partner in Malaysia's development ambitions.
In 2010, negotiations were launched for a Free Trade Agreement between the EU and Malaysia, and there are also ongoing negotiations for a Partnership Cooperation Agreement (PCA) and timber trade Voluntary Partnership Agreement (VPA).
Sources: AEC Chartbook 2014, European Commission, Malaysian Department of Statistics, MIDA, UNCTAD