Newsletter No. 1074
News-Analysis
July 11, 2008

 

MALAYSIAN LEADERS PROMOTE BILATERAL TRADE AND INVESTMENT

Both Prime Minister Datuk Seri Abdullah Ahmad Badawi and International Trade and Industry Minister Tan Sri Muhyiddin Yassin have made visits to Japan in the past week with their focus set on expanding Japan-Malaysia trade relations.

Abdullah was in Yokohama yesterday to attend the 28th Japan-Malaysia Economic Association (JAMECA) and the Malaysia-Japan Economic Association (MAJECA) Joint Annual Conference. It will be recalled that his last visit to Japan was less than two months ago (see Shingetsu Newsletter No. 1032). Abdullah told the gathering: “It is my hope that MAJECA and JAMECA will continue to perform their important roles in encouraging continuous investment into Malaysia from Japan which has always been a major player in the Malaysian industrial sector.”

The visit by Minister of International Trade and Industry Tan Sri Muhyiddin Yassin lasted fully six days and thus was quite substantial. The Malaysian mission included thirty-four officials from the Ministry of International Trade and Industry; the Malaysian Industrial Development Authority (MIDA); the Malaysia External Trade Development Corporation (MATRADE); the State Government of Malacca, and officials from ten other government agencies. A total of twenty-eight private businessmen also accompanied the mission.

Muhyiddin delivered the keynote address at the 28th MAJECA-JAMECA Joint Conference and also spoke at a seminar on “Business Opportunities in Malaysia” held in Osaka. He announced that, in 2007, Japan was the largest investor in the Malaysia economy with a 19.5% share of Foreign Direct Investments worth US$1.9 billion. Malaysian officials hope to expand Japan’s role even further. Major areas of current investments by Japanese companies in the manufacturing sector include electrical and electronic products; transportation equipment; wood products; fabricated metal products; chemical products; and machinery. Malaysian officials are hoping that Japan will expand its investments into the fields like advanced electronics; industrial materials; information and communication technologies; and biotechnology.

Muhyiddin also made a point of inviting Japanese banks to collaborate with Malaysian banks in the area of Islamic financial services. He told an audience of Japanese businessmen: “It is envisaged that by the year 2010, Islamic banking will constitute more than 20% of the global banking industry… I understand that Japan has an interest in Islamic financing, an area which Malaysia possesses considerable experience and expertise… Of particular interest in this field is the Islamic bond market, also known as sukuk. This market is becoming an increasingly important avenue for fund-raising and investment activities and has vast potential in the global market.”

Japan, it will be recalled, has shown interest in Islamic banking and finance, but the government agencies such as the Japan Bank for International Cooperation (JBIC) have been moving more slowly than expected. It has been suggested that Japanese officials are concerned about how Islamic financing would hold up during a financial crisis and that they simply have too many problems to face in the domestic Japanese banking industry to spare much attention for Islamic financing. Some private companies like Toyota and Aeon Credit, however, have already made some initial moves into the Islamic banking industry in Malaysia. Malaysia has by far the largest market share in the issue of sukuks, or sharia-compliant bonds, in the world, with a cumulative market share of 50.8% worth some US$29 billion.

Another area that International Trade and Industry Minister Tan Sri Muhyiddin Yassin tried to promote during his visit was solar energy. He announced: “Malaysia’s climate is conducive for generating solar energy… Malaysia has the infrastructure and the necessary support facilities to attract investments in solar photovoltaic manufacturing projects.” We’ll have to wait and see any significant Japan-Malaysia cooperation develops in this sphere.

Generally speaking, Japan-Malaysia trade relations are said to be developing rapidly, in part because of the bilateral EPA that came into force in July 2006.