Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on June 11, 2018

KUALA LUMPUR: The government’s fight against corruption, led by Prime Minister Tun Dr Mahathir Mohamad, is expected to lead to an improved business environment with heightened transparency, and Japanese investors are already taking notice, said the Japan External Trade Organisation’s (Jetro) Malaysian office managing director Akira Kajita.

“This quality will improve dramatically compared with other Asian neighbours through increasing the transparency of government works and systems. That’s a huge benefit for foreign investors. I think some Japanese investors have already turned to be a positive stance (sic) to invest in Malaysia,” he said in an email interview with The Edge Financial Daily over the weekend as Dr Mahathir arrived in Japan on his first official visit abroad as Malaysia’s seventh prime minister.

Reuters wrote that Malaysia’s cash-strapped government could look to tap Japan’s vast pool of low-cost capital, while potential stake sales in Malaysian state-linked companies could be investment targets of Japanese companies, quoting bankers involved in cross-border deals.

The visit came amid Malaysia’s renewed interest in the Look East Policy (LEP), under which Japan served as an economic model for Malaysia, that was introduced by Dr Mahathir in the 1980s, as several Chinese-linked contracts signed under the previous Barisan Nasional administration came under scrutiny.

While in Tokyo, Dr Mahathir will be attending the 24th International Conference on the Future of Asia that is to be held today and tomorrow, and will be delivering a keynote address entitled “Keeping Asia Open — How to Achieve Prosperity and Stability”.

Dr Mahathir makes it a point to go to Japan each year for the event, organised by Nikkei Inc’s flagship publication Nihon Keizai Shinbun, now known as Nikkei. He indicated last week that he would be touching "a little bit more" on the LEP this year.

According to a statement from the foreign affairs ministry, Dr Mahathir will also be meeting his counterpart, Japanese Prime Minister Shinzo Abe, on the sidelines of the conference, as well as representatives from the Japan Chamber of Commerce & Industry, Jetro and Japan-Malaysia Economic Association.

Meanwhile, Kajita said his country hopes to collaborate with Malaysia in areas of high-quality technologies, such as biotechnology, agri-food and the halal sector, nanotechnology, Industry 4.0, robotics, artificial intelligence and electric vehicles.

“The other areas include renewable energy, waste management, traffic control, security system, medical equipment, aerospace, healthcare service and e-commerce. Of course, please do not forget about HSR (high-speed rail) project,” he said, indicating Japan’s interest should Malaysia revive its HSR project with Singapore, which Dr Mahathir had announced would be dropped as the country battles its debt issue.

Kajita believes Dr Mahathir’s return as prime minister and his renewed interest in the LEP may open up avenues for Japan to take part in some of Malaysia’s major projects that had been dominated by China previously, though he was quick to point out that Japanese investors are interested not in securing more projects, but rather high-quality ones.

But it is not about Dr Mahathir favouring Japan over China, said Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, though Lee thinks the premier "certainly has a soft spot" for the country.

“There is a lot of significance in Dr Mahathir’s reintroduction of the policy, now dubbed Look East 2.0. He found that after World War Two, the Japanese got to work. They have a disciplined work culture, and are masters in technology and human development,” Lee told The Edge Financial Daily.

Japan has also contributed to Malaysia via its expertise in electrical and electronic and heavy industries. Not forgetting also the instrumental role Mitsubishi Motors Corp played in 1985 which led to the birth of Malaysia’s first national car, Proton Saga, and later Daihatsu Motor Co Ltd’s role in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), noted Lee.

He added that before the rise of South Korea, Japan was the main investor in the region and Malaysia took the opportunity to attract investments from Japan, while benefitting from soft loans to develop its industries, construction and infrastructure.

Some of these Japanese investments went into the construction of the Dayabumi Complex and the Umno headquarters, thanks to a joint venture between Takenaka Komuten Co Ltd and Kumagai Gumi Co Ltd.

In return for his appreciation, Kajita said many Japanese are big fans of Dr Mahathir today.

According to a close aide of Dr Mahathir, the premier would be touching on Japan-Malaysia relations in his meeting with Abe, with a focus on investments and trading. They will also discuss regional issues, including the security of Malaysian waters.

But the scrapped HSR and the RM55 billion East Coast Rail Link that Malaysia now wants to renegotiate with China are unlikely going to be on the table, the aide said.

The aide also explained that Dr Mahathir’s revival of the LEP does not signify a move away from China. “Dr Mahathir will also visit South Korea and Taiwan, countries that have grown by leaps and bounds despite being poor at first. This includes China. Not everything about China is bad,” the aide added.

SERC’s Lee believes Malaysia will balance out the reintroduction of the LEP with the participation of other countries, instead of only focusing on Japan.

According to Bernama, Japan is Malaysia’s largest foreign direct investment (FDI) contributor. Last year, its FDI stock to Malaysia was about US$13 billion.

Former transport ministry secretary-general Tan Sri Ramon Navaratnam, who served the government in 1986, said the Japanese are known for their fair dealings. “Japan has a natural affinity for harmony and they are fair in their dealings. Contracts should not be lopsided, unfair or unreasonable. There must be mutual benefit,” he added.

Navaratnam said an investment relationship with Japan, and the way business is done, could become a benchmark in the region. “If Japan can give good, fair and reasonable deals with no suspicion, why can’t others?” he said.

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