Newsletter No. 570
News-Analysis
April 3, 2007

 

The following newsletter is a round-up of stories associated with Japan-Malaysia relations, and has been contributed by Sandra R. Leavitt (Shingetsu Member No. 55) of Georgetown University.

JAPAN CO-SPONSORS KUALA LUMPUR SYMPOSIUM ON MARITIME SHIPPING SAFETY

In mid-March, Japanese shipping and marine officials joined counterparts from Malaysia, Indonesia, and Singapore for a two-day symposium in Kuala Lumpur to discuss ways to better manage Malacca Straits traffic. They produced a proposal for the establishment of a “Malacca Straits Fund” that would help finance safety and environmental protection efforts for the busy waterway that carries 65,000 ships per year and has been subjected to piracy. Funding would be generated through user fees at a rate of one US cent per dead-weight tonnage of cargo. It is unclear whether these fees would be voluntary or mandatory.

The symposium was co-organized by the Japan International Transport Institute, the Maritime Institute of Malaysia, the S. Rajaratnam School of International Studies in Singapore, and the Center for Southeast Asian Studies in Indonesia. Funding for the event was provided in part by the Japan Foundation.

The consensus document released at the end of the conference noted that the funds would be “disbursed for maintenance efforts such as promoting safety as well as environmental protection of the Straits of Malacca.”

The symposium grew out of a concern by Malaysia, Indonesia and Singapore that they were “shouldering the main responsibility of maintaining the straits,” said Najib Razak, Malaysia’s Deputy Prime Minister and Defense Minister. Other users of the straits, he said, benefited commercially while contributing to pollution and maintenance problems, but bore little of the costs of policing it. While not wanting the sovereignty of the littoral states to be compromised, Mr. Razak called on other users to share technological know-how and financial resources. Contributions “can be in the form of technical assistance, training, and the exchange and sharing of information,” said Malaysian Transport Minister Chan Kong Choy at the symposium.

The Law of the Sea, the international convention governing issues related to international waterways, stipulates that user states should cooperate with the littoral states, but that the latter have primary responsibility for waterway safety, resources, and maintenance.

The future of the recommended Malacca Straits Fund is uncertain. It must first be endorsed by the symposium’s member governments. The Singapore Shipping Association (SSA) has since indicated its resistance to any mandatory cost-sharing arrangement, stating that their ships already pay port and dues. According to the SSA, the Law of the Sea stipulates that passage through international waterways should be free and open.

ECONOMIC COOPERATION GROWS, PROBLEMS REMAIN

The 27th Malaysia-Japan Economic Association-Japan Malaysia Economic Association (Majeca-Jameca) Conference was held in Kuala Lumpur on March 20, 2007. Figures released at the conference indicate strong economic ties between the two countries. In 2006:

--Japan was the largest source of foreign investment in the manufacturing sector.

--Japan remained Malaysia's third-largest trading partner, with 10.8 percent of Malaysia's total trade.

--Japan was Malaysia's largest source of imports.

--There are more than 1,400 companies with Japanese interest in the Malaysian manufacturing sector, mainly in E&E products, scientific and measuring equipment, non-metallic mineral products, plastic products and transport equipment.

The EPA that came into effect between Malaysia and Japan in July 2006 has been credited with turning around a few years of stagnant Japanese FDI in Malaysia. “Following the successful conclusion of the Japan-Malaysia Economic Partnership Agreement (JMEPA) there was a surge in Japanese FDI into Malaysia during the second half of 2006,” according to Stephen Leong, director of the Centre for Japan Studies at the Institute of Strategic and International Studies in Kuala Lumpur.

Dr. Leong said that between July and December 2006, there was 203 billion yen (US$1.7 billion) worth of FDI from Japan, a five-fold increase compared to the corresponding period of the previous year.

The chairman of the trade and investment committee of the Japanese Chamber of Trade and Industry Malaysia (JACTIM), Naoya Ikegami, described Malaysia as one of the most important destinations for Japanese investment. Mr. Ikegami said that JACTIM’s recent business survey revealed that more than 90% of its member companies would want to continue and expand their operations in Malaysia.

At the same time, Mr. Ikegami stressed that Malaysia’s government and private sector still needed to resolve issues related to labor laws, cargo hijacking, electricity and gas infrastructure, and increasing demand for natural gas. If natural gas supply stagnates as expected, “this will pose a serious challenge in attracting FDI as well as in expanding existing businesses,” he said.

JAPANESE RETIRING TO MALAYSIA IN INCREASING NUMBERS

Under Malaysia’s “Malaysia My Second Home” (MM2H) Program, Japanese and other foreigners are encouraged to retire in Malaysia. MM2H agent Shotaro Ishihara recently said “the number of Japanese staying in Malaysia under the program [will] double from the current 700 people to 1,400 in three years.” Approximately 8,000 people total have taken advantage of the program that offers 10-year, multi-entry renewable visas and other aids to settling in Malaysia permanently or for several months of the year.

These numbers appear too low, given other figures recently released by MM2H. For instance, Malaysia is said to be the second-most preferred retirement home of Japanese after Australia. Mr. Ishihara reported that “there are about seven million baby boomers retiring this year and statistics show that 20% of them, or 1.4 million people, will seek a retirement home outside Japan.”

In any case, settling in Malaysia by Japanese is growing in popularity given its relative safety, warm weather, diversity of food, and heath care facilities. And Malaysia welcomes the spending of retirees, where the yen goes further than back home. Retirees also promote tourism as family and friends visit resettled Japanese.

HIGHER EDUCATION COOPERATION STRESSED

Japan and Malaysia are hopeful that the Malaysia-Japan International University of Technology (MJIUT) in Kuala Lumpur will open this year. Six years in the making, the MJIUT is expected to develop “outstanding human resources for the industrial sector” and serve as a “center of excellence for human resource development in ASEAN” more broadly, according to various MOFA reports.

The importance of the university was stressed in 2003 at the Japan-ASEAN Commemorative Summit; in July 2006 during economic cooperation meetings between Japanese Foreign Minister Taro Aso and his Malaysian counterpart Datuk Seri Syed Hamid Albar; and in March 2007 in meetings between Mr. Aso and Malaysia’s Deputy Prime Minister and Minister of Defense Dato Sri Najib. During the latest meeting, FM Aso said that he expected “Malaysia to work more actively to achieve the opening of a Malaysia-Japan International University of Technology, whose establishment has been prepared by experts of both countries, including securing the necessary budget.”

Japanese business executives are keenly interested in the success of the university and its potential to help supply skilled labor for their FDI in Malaysia’s electronics sector.