1989 has been declared "Action Year for the Development of Trade with Southeast Asia" by the Board of International Trade. And Thailand, Malaysia, the Philippines, and Indonesia are employing all types of measures to complement those of the ROC Malaysia could be said to be the dark horse.
Five or six years ago, Malaysia was identified by Business Week magazine as the fifth "Little Dragon." Thailand has since grabbed that distinction, but Malaysia is recharging. With its "Look East" policy, Malaysia understood that Western cuttingedge technology was not appropriate for developing nations. The same for Japan. And Malaysia's "constitution" is not right for Korean-style conglomerates. So the "Taiwan experience" has become the model, and attracting ROC investment an important goal.
Malaysia's positive steps include: (1) The widespread study of Chinese in the largely Malay government; (2) The unprecedented issuance of Chinese-language editions of government documents and data; (3) At the end of last year, Prime Minister Mahathir dispatched Chen Teck Chang as vice-representative, strengthening what is already the largest-scale representation in the ROC of any Southeast Asian country (Chen is to focus on economic relations); (4) Malaysia has held many well-attended investment seminars in Taiwan; (5) Sino-Malaysian investment talks have yielded concrete results (once political guarantees are strengthened, it is estimated that investment by Taiwan in Malaysia could reach M$10 billion).
Malaysia indeed has its attractive conditions, especially abundant natural resources. It is the world's leading producer of tin, palm oil, rubber, and pepper.
Further, its industrial infrastructure may be the finest in Southeast Asia. An investment fact book issued by the ROC Ministry of Economic Affairs includes the following: "Malaysia's communications are rated A by the World Bank. Its transportation network is comprehensive. Free trade zones and registered manufactures warehouses have quite good facilities and minimum interference in the customs tax procedure."
Further, Malaysia's administrative efficiency is second in Southeast Asia only to Singapore, according to former head of the Far East Trade and Travel Center in Malaysia, Kung Ling-sheng.
Because education levels are high, so is worker quality. Also, there are many Chinese there, and Chinese language education is widespread, making it home away from home for ROC investors.
All these factors have spelled increasing investment. Large scale ROC investment began in 1970, mostly in small-scale industry (food processing, plastics), moving to textiles and processing in the 80's. By the end of November, 1988, according to Malaysian government statistics, 96 projects have been approved, second only to Japan. The total amount for 1987 was third only to Japan and Singapore.
The leading problem for investors, points out Chew Bang Chyuan, director of the In vestment Department at the Malaysian Friend ship and Trade Center, is fear of ROC investors of anti-Chinese sentiment in Malaysia. Malaysia's population is 56% Malay, 33% Chinese, and 11% Indian. A state of emergency declared by Prime Minister Mahathir at the end of 1987 is unsettling in Chinese eyes. Further, the "New Economic Policy," begun in 1970 with the idea of putting more national wealth in the hands of Malays by 1990, with guarantees of employment, is hard for Chinese to accept.
Malaysian land policy can also put off investors. All land is owned by the states (Malaysia has a federal system) and cannot be privately owned. Some is reserved only for Malays, and incautious investors can get in trouble buying where they are not supposed to.
Other problems include strict regulations for visas and work permits for ROC business people. Also, the domestic market is small, but exports are not up to world standards.
But things are changing. The New Economic Policy has not flourished. Further, in 1985 Malaysia was a victim of a collapse in international commodity prices. GNP shrank severely in 1986.
Believing that Malaysia needs to escape dependence on volatile commodity markets, Mahathir's government has cleared obstacles and created incentives for foreign investment in manufacturing. Foreign investors could previously own only 30% of a company's stock; for the period 1986-90 those meeting given conditions (e.g., production for export, employment of ethnic Malays, new technology) can own 100%. There are also tax incentives, for example avoidance of corporate taxes for "pioneer status" industries. Malaysia also has nine "free trade zones," similar to Taiwan's export processing zones, with simplified customs procedures and tax incentives to promote exports. The Malaysia Industrial Development Authority assists foreign investors.
There are three ways to invest: setting up an affiliate, buying into a Malaysian company, or setting up a branch company. Investors must register with the appropriate agencies; responses are usually quite rapid.
Although the NEP favors Malays, the Malaysian constitution protects Chinese. The fact that Chinese control over 50% of the economy shows that success is possible. Besides, ROC investors are treated as "foreign" rather than "Chinese."
With Malaysia's extensive forests, opportunities are good for investment by the paper, lumber, and furniture industries. The government is recruiting investment in agriculture, food processing, rubber products, palm oil, chemicals, steel, machinery, electronics, and shoes, among others; but foreigners are excluded from plantations and mining, and welcome in textiles only for relatively high-tech products.
Malaysia's workforce numbers six million. The supply of unskilled labor, with wages of about M$2.00 per hour, exceeds demand, but that of skilled labor (M$3-3.50) is lacking. Malaysia is a Moslem country, and work is interrupted daily for prayers.
The investment climate differs in all four Southeast Asian nations, but all are inadequate in peripheral industries. Malaysia is no exception, and investors must take note. Of course, choosing a good partner is another matter for extreme care.
With the improvement of ROC-Malaysian economic relations, more help and information is available for investors. As for what the business community does with this, the ball is now in their court.
Malaysia: Basic Facts
*Area: 330,000 k㎡ (including the Malay Peninsula, Borneo, Shaba, and Sarawak).
*Population: 16 million.
*Former British colony; Independence 1957; Constitutional parliamentary democracy; Official ruler rotates among the nine sultans (one for each state) every five years; Functional leader is Prime Minister (Mahathir since 1981).
*Ruling Party: "Popular Front" of 11 parties, including United Malay Nationalist Organization and the Malaysian Chinese Association; Opposition includes People's Action Party, Party of Islam.
*Non-aligned (not a member of East or West bloc); Member of ASEAN (Association of Southeast Asian Nations); Domestically anticommunist; Friendly to Islamic nations; Active foreign relations.
*Currency: Ringgit; Floating exchange rate; Little central bank intervention; Current rate: US$1=M$2.6.
[Picture Caption]
(Left) Malaysia's transportation network is in good shape, one of its attractions for the investor. Shown is a corner of the train station in Kuala Lumpur.
(Right) A Chinese shop on the island o Langkawi to the west of Malaysia.
Investors have to pay special attention to the land issue in Malaysia. T aiwan businessman Lien Che-yuan (center) learned his lesson the hard way--with heavy losses.
During the noon break at a factory, a panoply of human colors appears wi th Malays, Indans, and Chinese.
One can often see sights with a Chinese cultural motif in Kuala Lumpur.
A steel mill set up in Kuala Lumpur by Chinese investors.
(Left) Those in terested in the investment climate must pay special attention to local racial, cultural, and lifestyle factors.
(Right) There is much of the unspolied in Malaysia: Investors can enjoy a different leisure lifestyle.
(Right) A Chinese shop on the island o Langkawi to the west of Malaysia.
Investors have to pay special attention to the land issue in Malaysia. T aiwan businessman Lien Che-yuan (center) learned his lesson the hard way--with heavy losses.
During the noon break at a factory, a panoply of human colors appears wi th Malays, Indans, and Chinese.
One can often see sights with a Chinese cultural motif in Kuala Lumpur.
A steel mill set up in Kuala Lumpur by Chinese investors.
(Left) Those in terested in the investment climate must pay special attention to local racial, cultural, and lifestyle factors.
(Right) There is much of the unspolied in Malaysia: Investors can enjoy a different leisure lifestyle.