2017 marks the 60th anniversary of diplomatic ties between Malaysia and Japan. This relationship may have begun as early as the 15th century when the Melaka Sultanate traded with the Ryukyu kingdom. It was reaffirmed when Japan became one of the earliest countries to establish an embassy in the newly independent Federation of Malaya.
Our trade history as a nation with Japan can be traced all the way back to the 1970s. Japan’s industrialization strategy created a high demand for Malaysian commodities then. In the 1980s, our bilateral relationship flourished when policies, incentives and cooperation proposed between both countries set the tone and pace for a healthy affiliation between both nations throughout the years.
Further to this, the “Look East” policy (LEP) and the 1986 Promotion of Investment Act led to an unprecedented inflow of Japanese foreign direct investment into Malaysia. The growth of Japanese business conglomerates, notably in the electrical and electronics sector, facilitated by the favorable business environment in Malaysia, created the momentum to aid Japan’s foray into the Malaysia market. Malaysia benefited not only from the trade perspective but more importantly, it has been a booster in developing Malaysia’s local skilled workforce. Investments were not the only good thing that Malaysia gained from Japan, but also its culture and technical expertise. As a result, Malaysia went through a phase of “Nipponization” by assimilating Japanese culture and best practices. It was during this period that a joint venture between Heavy Industry Corporation of Malaysia and Mitsubishi Motors Corp. successfully produced the very first Malaysian car, the Proton Saga, in 1985.
The bilateral relationship was further enhanced when Malaysia and Japan established the Malaysia-Japan Economic Partnership Agreement (MJEPA) in 2005. Today 97 percent of goods traded are tariff-free. The Malaysia-Japan Automotive Industries Cooperation was one of the notable outcomes under MJEPA, and some of the key programs implemented included the Automotive Skills Training Center, Business Development Program and Cooperation in Exhibitions.
In 2015, Malaysia introduced the Principal Hub incentive, where investors, including Japanese conglomerates, could utilize Malaysia as their regional or global operation hub, with access to a multilingual workforce capable of communicating effectively with most markets in the region. In other words, Malaysia would be Japan’s gateway to other Association of Southeast Asian Nations’ markets. On top of this, Japan stands to also benefit from the numerous trade agreements that Malaysia has signed with other countries.
In the years to come, Malaysia welcomes Japan to continue investing in industries that are high technology, capital intensive and knowledge-based, while being export oriented. Investments and collaboration in these areas would facilitate the development of more innovative and creative Malaysian products and services.
Based on the successful outcomes of the LEP from 1982 to 2012, particularly in the human resource development, Malaysia has continued with its second wave, the LEP 2.0. It shall be even more economically oriented with focus on green technologies, renewable energies and in key areas such as cutting-edge technology and innovation; high-tech skills development; high-end services development, ecosystem management with safe, reliable and renewable energy; small and medium enterprises; and senior citizen programs.
We acknowledge that Japan has been our top source of foreign direct investment since 1980, with the majority of these investments stemming from the expansion or diversification activities of existing or new Japanese companies operating in Malaysia. Japan will be one of our key strategic partners to help achieve our widely known aspiration to be a high-income nation by 2020.
We hope that Japan will continue its support, especially when we are now entering the age of digitalization and “Industry 4.0.” We will continue to build upon the strong foundation of our relationship and forge ahead.