This article first appeared in The Edge Malaysia Weekly on February 24, 2020 - March 1, 2020

MALAYSIA is one of the UK’s most important trading partners in Asean, second only to Singapore in bilateral trade volume. Trade volume between Malaysia and the UK rose 6.5% year on year to £5.1 billion in the 12 months ended Sept 30, 2019.

Yet, British High Commissioner to Malaysia, Charles Hay, believes that is not good enough.

“On the one hand, it looks like, whatever the political relations, UK-Malaysia trade ties have been relatively stable,” he tells The Edge in an interview.

“On the other hand, it means there was a lost opportunity because what we should see every year are [big] increases in [UK-Malaysia] trade and investments rather than incremental growth. For me, that means there is more that we can do to boost trade and investments [between the two countries].” Hay, 55, took up his current post last April, about a year after Malaysia’s historic change in government to the Pakatan Harapan coalition from Barisan Nasional. He had earlier served as British ambassador to South Korea from 2015 to 2018.

Over the same period, the UK’s export of goods to Malaysia fell 2.6% y-o-y to £1.4 billion, while its import of goods from Malaysia rose 2.1% y-o-y to £2.1 billion. This tipped the balance slightly in Malaysia’s favour, with the UK reporting a trade in goods deficit of £668 million with Malaysia in the 12 months ended Sept 30, 2019.

Hay blames the UK’s lower selling activity in Malaysia on British companies’ being not good enough in exporting their produce overseas.

“The British government has identified this as being an issue and we have been trying to work out ways of addressing this for a number of years. We need to find ways of encouraging British businesses to export more,” he says.

British companies could take a leaf from their German peers in this regard. “Like Germany, the UK is also a big manufacturing economy. There is no reason we shouldn’t be doing more business with Malaysia, but we just need to create more awareness of the possibilities out here,” he adds.

Hay sees the UK’s exit from the European Union (EU) pushing more British businesses to go global “rather than think they can keep on selling their produce in Europe because that is nice and easy”.

He points out that this was the theme of British Foreign Secretary Dominic Raab’s recent visit to Malaysia. Raab had held meetings with Prime Minister Tun Dr Mahathir Mohamad, Foreign Minister Datuk Saifuddin Abdullah and Datuk Seri Anwar Ibrahim to discuss opportunities in trade and investment. “The real sense on both sides was that we can do more,” says Hay.

To this end, Malaysia and the UK have agreed to set up a Joint Committee on Bilateral Trade and Investment Cooperation, whose focus will be on minimising barriers on imports and exports flowing between the two countries.

He cites UK-based Naylor Farms’ experience as an example. The distributor of premium pre-packed salads had secured a three-year contract to export 10,800 tonnes of Lincolnshire cabbage to Malaysia.

“The initial consignment got held up at Customs at Malaysian ports. Upon negotiation and agreeing on the size of round cabbage allowed into Malaysia, the cabbage were released,” he adds.

At the moment, there is no free trade agreement between the UK and Malaysia.

“Even without an FTA with Malaysia, there are areas in which we can cooperate, reduce barriers to trade and promote closer partnership, for instance, in technology and education. Those things don’t need a complex form of negotiation,” says Hay.

Opportunities aplenty for British exporters in Malaysia

Hay says Naylor Farms’ example shows that there are opportunities for British companies here even in sectors one might not even think of. “I am sure most big farmers in the UK wouldn’t think of Malaysia as being a natural export destination, but, actually, why not?”

The high commissioner points to UK companies such as Dyson Ltd, which, through its plant in Johor, is already using Malaysia as a springboard to export to other countries in Asia-Pacific; and Ideagen Plc, a global software firm that last year made Malaysia its hub for Asia-Pacific.

Hay also believes the UK can do more to push British education in Malaysia. “We are very interested in TVET (Technical and Vocational Education and Training) in the UK and this is something that the Malaysian government is also interested in. The UK has some great models for TVET such as partnerships between TVET colleges and companies,” he says.

Last year, the number of Malaysian students in the UK rose 8.8% y-o-y to 19,341, making Malaysia the fourth-largest source of non-EU/non-UK students in the UK, after China, India and the US.

“There are another 80,000 people studying for a UK qualification in Malaysia,” he adds, pointing to the five British university branch campuses here — Heriot-Watt University, Newcastle University (medicine), The University of Nottingham, the University of Reading and the University of Southampton (engineering).

Brexit’s implications for Malaysian investors

According to Hay, recent dialogues with Malaysian companies reveal concerns over whether the UK will remain a gateway to Europe post-Brexit.

“These companies say they like the UK for its stable policy, predictable and well-entrenched rule of law, a legal system that is familiar to Malaysians and the English language. So, I told them, ‘Which of that is going to change now that we have left the EU?’ Well, none of them. All of these still apply even though we’ve left the EU,” he says.

Nevertheless, Hay concedes that a Malaysian company looking to buy a manufacturing facility in the UK to export to Europe stands to be affected by Brexit. “But how they would be affected is still unclear because that would be part of the deal that we are negotiating now with the EU.”

Still, he notes that many Malaysian companies that invest in the UK are in real estate. They include the Malaysian Battersea consortium of S P Setia Bhd, Sime Darby Property Bhd and the Employees Provident Fund, Eco World International Bhd, IJM Land Bhd and YTL Group.

The UK has entered a transition period until end-December. “The UK prime minister has made it crystal clear to everyone that there will be no extension to the transition period. So, come the end of this year, whatever we have negotiated with the EU will be the future relationship,” says Hay.

He also says there are no plans to change the current visa-free regime between the UK and Malaysia. “We are now developing our own immigration and visa regime that will suit the British economy. After the transition period, there will be no more free movement for people between the UK and the EU. The new points-based immigration system will take effect from Jan 1, 2021.”

Under the new system, the UK will treat EU and non-EU citizens equally and aims to attract people who can contribute to the UK’s economy. “So, whether you are a Frenchman or a Malaysian, you would both be awarded the same number of points for specific skills. You won’t have any benefit from being an EU citizen,” says Hay.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.