Special Supplements / Malaysia Special

'Much to gain' for Japanese businesses

The Malaysia Investment Development Authority (MIDA) is Malaysia’s principal investment promotion agency and was established in 1967.

Dato' Azman Mahmud, CEO of the Malaysia Investment Development Authority
Dato’ Azman Mahmud, CEO of the Malaysia Investment Development Authority

MIDA is a one-stop agency for approval and implementation of foreign direct investment projects and helps investors not only in the initial stage of planning, but also through the implementation and post-investment stages of projects.

Dato’ Azman Mahmud, MIDA’s CEO, discussed the investment environment in the Southeast Asian country and what MIDA is doing to help in an email interview with The Japan Times. Responses have been edited for length.

What is the current situation surrounding Japanese investment in Malaysia?

Malaysia and Japan share a mutually beneficial bilateral trade relationship. Japanese companies have long found Malaysia to be a prime location for their activities as Malaysia is a cost-competitive hub for investments in this region. Since the 1980s, Japan has been among the country’s top source of foreign direct investments.

This momentum continued in the first half of 2019, with the approval of an additional 12 manufacturing projects amounting to 2.1 billion Malaysian ringgit ($514.8 million).

These investments are from various industries such as electrical and electronics (E&E) products, chemicals and chemical products, nonmetallic mineral products, transport equipment and basic metal products.

Malaysia welcomes more investments from Japan, particularly in new growth areas involving advanced technologies and research and development activities.

What are Malaysia’s advantages?

Located in the heart of Southeast Asia, Malaysia is at the center of one of the fastest-growing economic regions in the world.

Malaysia’s strategic location and infrastructure, including ports, airports, highways, logistics and telecommunications offer a competitive advantage by lowering the cost of doing business.

Japanese investors have much to gain in terms of capturing growth opportunities and immediate market access by establishing their operations in Malaysia. This includes the extensive network of free trade agreements (FTAs) that Malaysia has signed and implemented over the years. The 14 bilateral and regional FTAs Malaysia has with countries such as India, New Zealand, Chile, Australia and Turkey, create a potential market size of 3.9 billion individuals for Japanese investors in Malaysia.

Moreover, Malaysia’s established local supply chains that are well-integrated into the global value chain are an undeniable competitive advantage.

Our young and easily trainable talent pool is well-versed in English, creating an ideal business environment for foreign investors.

What are the most attractive investment sectors in Malaysia now?

In line with the government’s initiatives to attract quality investments, MIDA is focused on attracting high technology and high value-added projects within the “3+2 industries,” namely, three catalytic subsectors (chemical, E&E, and machinery and equipment — M&E — industries) and two subsectors of high potential growth as well as aerospace and medical devices.

MIDA also continues to target investments in services sectors, R&D, logistics, green technology, business and professional services, education, health, hotels and tourism.

Some areas that Japanese investors can tap into include digital economy, sectors related to “Industry 4.0,” renewable energy, green economy and content industry.

Is Malaysia adapting to changes in technology such as robotics and artificial intelligence, and how is that affecting investment opportunities?

With the launch of the National Policy on Industry 4.0, known as Industry4WRD, by Malaysian Prime Minister Tun Dr. Mahathir Mohamad on Oct. 31 last year, Malaysia looks to transform the local business landscape by not only improving productivity, but also increasing efficiency while reducing costs.

The Industry4WRD initiative is driven by encouraging a robust, innovative climate, focusing on collaboration and technology transfers in high value-added areas. Malaysia is focused on transforming our industrial landscape in line with the country’s digitization agenda.

Japan has a proven track record and economic success in the technological sphere. We welcome strategic collaboration between both countries to spur the growth of Malaysia’s industrial landscape in the era of the “Fourth Industrial Revolution.”

What kinds of dispute resolution mechanisms are in place when investors have complaints or legal issues?

MIDA’s Post-Investment and Infrastructure Support Division (PostInvest) strives to provide proactive support services to the manufacturing and services sectors.

Facilitation programs undertaken by the PostInvest team include Biz Clinic, a one-on-one session for investors to securely and effectively air their grievances and discuss the challenges they face.

Furthermore, the Asian International Arbitration Centre is also a proven world-class institutional support as a neutral and independent venue for the conduct of domestic and international arbitration and other alternative dispute resolution proceedings within the region.

Has MIDA seen any movement of Japanese or other foreign investment out of China and into Malaysia as a result of the U.S.-China trade war?

Malaysia’s strategic location within the region, world-class infrastructure and multilingual talent pool enables us to benefit from potential trade diversion from China.

MIDA continues to promote investments from all countries that meet our national investment agenda through relocation of targeted Chinese investments and foreign investments in China, as well as facilitate the redeployment of investment and production to Malaysia by major companies, who have existing operations, both in affected countries and Malaysia.

To date, MIDA has received 78 applications from companies that are interested in expanding or relocating operations in Malaysia due to the U.S.-China trade war. These companies are mostly from Japan, Singapore, the U.S., China, Canada, Hong Kong and Taiwan.

What are some of the areas MIDA sees as the most promising over the next five to 10 years?

Malaysia is currently moving toward strategic diversification to increase competitiveness, by focusing on complex, knowledge-intensive and high-end products and services.

The country’s flourishing industrial landscape offers exciting avenues for investment in sectors such as advanced electronics, front-end semiconductors, M&E; advanced materials; petrochemicals; pharmaceuticals; medical devices and e-commerce.

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