'Sang Kancil' spirit vital to Malaysia's economy: Khazanah

KUALA LUMPUR: Malaysia must bolster its economic resilience in the face of escalating global pressures, according to Khazanah Nasional Bhd managing director Datuk Amirul Feisal Wan Zahir. The country, a relatively small economy, cannot depend solely on its domestic market and capital depth, which are comparatively smaller than those of larger economies like the United States, Europe, and China.

Khazanah's managing director emphasized that Malaysia needs to emulate the resilient nature of the mythical Malay mouse deer, Sang Kancil, by diversifying its sources of capital, export destinations, and supply-chain relationships. This breadth of resources would enable Malaysia to better withstand global disruptions.

Amirul highlighted that global economic conditions are increasingly influenced by conflicts over energy, technology, and security. Countries are striving for greater control over critical resources and supply chains. He noted that the technology contest is particularly pertinent to Malaysia, as the nation is home to a growing share of the global artificial intelligence (AI) and data centre build-out.

The year has seen global indices, including those of the United States, Europe, Korea, and Taiwan, hit record highs, driven by significant investments in AI (nearly US$770 billion in capital expenditures) and concentrated profits among a few dominant players. However, Amirul cautioned that strong financial market performance does not necessarily indicate a robust real economy.

He cited a Massachusetts Institute of Technology study, which found that 95% of enterprise AI pilots had yet to generate measurable financial returns. This uncertainty about the sustainability of AI investment, coupled with ongoing supply-chain disruptions and rising debt levels, has led countries to prioritize resilience over pure returns.

Amirul pointed to the rising US debt, which has surpassed US$40 trillion (about 126% of the country's GDP), as a significant risk. These financial challenges compel nations to focus on building a stronger domestic economic foundation. For Malaysia, this means developing more mid-tier companies capable of competing internationally. Currently, these mid-tier companies, which represent only around two% of all firms, contribute approximately 40% of the country's GDP and 16% of its employment.