As the world’s most developed economies are
caught in financial headwinds, the members of the Association of Southeast
Asian Nations are benefiting from comparatively strong regional growth.
With a population of more than 600 million
and important agricultural goods, minerals and oil reserves, the prospects for
ASEAN are better than ever as they witness rising inward investment and
envision further economic integration among their 10 members by 2015.
Yet Malaysia, which is ranked by the World
Competitiveness Center in Lausanne, Switzerland, as among ASEAN’s top five
economies, is nervous that it may fall behind once again.
“We have a sense of urgency that we need to
move up,” Mukhriz Tun Mahathir, the deputy trade minister, at Malaysia’s
Ministry of International Trade and Industry, told GlobalAtlanta.
During an interview in his office in the
country’s Parliament, he added, “Our heads are reaching the ceiling. We don’t
want to fall into the trap of complacency. But it’s easier said than done.”
With a parliamentary election to be held at a
still to be determined date in the near future, the government is rallying all
of its efforts behind its Vision 2020 plan to raise its status from a “middle
income” country of $6,700 per capita to a higher status.
While being in such straits is not shameful,
he said that to maintain its current status is to fall behind as other ASEAN
countries, particularly Indonesia, Thailand and Vietnam, are moving ahead
steadily.
It happened to Malaysia once before in the
1960s and 70s when it was on a par with Singapore, South Korea and Taiwan,
which shot past it to become formidable global economies.
Mr. Mukhriz is the son of Malaysia’s longest
serving prime minister, Mahathir Mohamad, who from 1981-2003 pushed the country
through a period of rapid modernization and economic growth.
Like his father, Mr. Mukhriz is bent on
seeing the realization of the government’s Economic Transformation Program
aimed at raising the average per capita income to a level of $15,000 by 2020.
This goal is based on an annual growth rate
of 6 percent, which would enable it to resemble other developed nations with a
shift to a service-based economy, It also calls for the creation of more than
3.3 million new jobs.
Mr. Mukhriz said that Malaysia’s new economic
model places more emphasis on innovation, creativity and high value-added
activities and has identified 12 key economic areas with the potential to
generate high income.
These include Malaysia’s traditional economic
drivers such as oil, gas and energy, palm oil, tourism, electronics and
agriculture.
Additionally there is to be a greater focus
on supporting the growth of its retail sector, education, business and
financial services, infrastructure development and health care.
There also is to be a special emphasis on
Kuala Lumpur, Malaysia’s capital, as a global business center.
Reduced global demand for goods and services
has hurt its ability to maintain the 6 percent rate – in 2010 it experienced a
7.2 percent growth rate, which declined last year to 5.1 percent.
But strengthening markets in its ASEAN
neighbors enabled it to increasingly shake off dependency of its exports on
U.S. and eurozone markets and increase its inter-regional trade to more than 50
percent.
Atlantans, who had trouble stomaching a
1-cent transportation tax to fix its transportation woes, would probably be
skeptical of such a top down approach to economic growth.
There is no questioning, however, the
commitment of the Malaysian government to its Vision 2020 scenario, which it
developed in conjunction with the country’s business and civic communities.
Lee Yip Cheong, a senior analyst based in the
Performance Management and Delivery Unit of the prime minister’s office, joked
that the economic plan was developed to the strains of the Eagles’ hit “Hotel
California.”
Once guests were called into the meetings, he
said, the government officials made it exceedingly difficult for them to leave
like visitors to the hotel in the Eagles' song.
These meetings took place over the course of
two months in 2010 and included representatives from more than 200 companies
and 425 local officials who were invited to give their inputs into the plan.
Among the participants were representatives
of Royal Dutch Spell plc, Exxon-Mobil Corp., Malaysia’s state-owned oil and gas
company Petronas and other heavy hitters that have provided Malaysia’s economic
clout based on its oil and gas resources.
Mr. Mukhriz stressed that Malaysia’s
dependence on energy and other primary resources including palm oil and rubber
alone would not enable it to reach the plan’s goals.
Its future, he said, is based on its ability
to “raise the economy up the value chain.” The government is to intensify its
efforts to identify and attract investments in new growth areas and emerging
technologies, he added.
More specifically, it has identified a wide
range of technologies ranging from biotech to renewable energies.
Meanwhile, the World Bank gave Malaysia a
good report card, raising it to 18th from 23rd in 2011 among 183 economies in
its Ease of Doing Business ranking.
Malaysia also moved up this year to 21st out
of 142 countries in the World Economic Forum’s Global Competitiveness Report.
Historically, one of the country’s strongest
cards has been foreign direct investment. Dating back to the early 1970s some
of the founders of the largest global microchip manufacturers visited the
island of Penang, off the northwest coast of the Malaysian peninsula, to set up
shop.
Known as the Pearl of the Orient, Penang has
attracted visitors for centuries. But the likes of Andrew Grove, a co-founder
of Intel Corp., came not so much for pleasure as for business drawn by an
educated, low-cost workforce.
Penang’s streets are lined with the
facilities of a long list of multinationals such as Dell Corp., Philips
Electronics NV, and many others.
Unlike other Asian countries where large
homegrown conglomerates rule the domestic landscapes, Malaysia’s big companies
are generally foreign-owned.
More recent investors like the German semiconductor
manufacturer Infineon Technologies AG, which has announced major expansions
this year to service the automotive and power transmission industries, are more
than welcome.
But Mr. Mukhriz said the Vision 2020 plan
also calls for encouraging local entrepreneurs. “An important part of the plan
is to have companies leverage off what has come before,” he said. “There will
be spin offs from the multinationals. This ecosystem for new investors puts us
ahead of other countries.”
Penang-based ViTrox Corp. Behad, a
manufacturer of automated vision inspection systems and equipment for the
semiconductor and electronic packaging industries, is a perfect example.
Its president and CEO, Chu Jenn Weng, who was
awarded the Asia Pacific Entrepreneurship Award last year, told GlobalAtlanta
that he was inspired to help launch his company after working at
Hewlett-Packard Co.’s facility there.
“Most graduates of our universities want to
join the big companies,” the 42-year-old president and CEO said. “That’s not
healthy for the country. We really can’t depend on the multinationals to grow
new technologies. If the local people can’t build our technologies we have
nothing.”
This view isn’t necessarily antithetical to
those of the multinationals’ executives, most of whom in U.S. firms are
Malaysian.
Lim Wei Khoe, director of finance at Advanced
Micro Devices Export Sdn. Bhd., the Penang operations of Sunnyvale,
Calif.-based Advanced Micro Devices Inc., said that he welcomed the emergence
of homegrown companies. “There is a need for local companies to support the
ecosystem,” he said.
That ecosystem continues to attract foreign
investment. According to government reports, private investment was up 19.4
percent in 2011 over 2010.
To expand its service sectors, however, the
government needs to encourage them to liberalize. Already under the new plan
foreign banks can own bigger stakes in local institutions.
During the course of this year, 17 service
subsectors are to be liberalized, allowing up to 100 percent foreign equity participation.
Officials at Malaysia’s Board of Engineers
told GlobalAtlanta that there was fierce resistance from some professional
groups such as architects, lawyers and surveyors who don’t want to compete at
home with foreign firms.
The engineers themselves, however, have no
problem with the ability of foreign engineers to practice in Malaysia as long
as they pass the country’s exams and earn proper certification.
The government also has implemented programs
to attract professionals from overseas, especially Malaysians who have been
successful abroad.
Additionally, the engineers said, they
supported allowing Malaysian engineering firms to be 100 percent foreign owned.
They hoped that such liberalization of their profession would attract capital
to help their firms grow.
This capital, they added, would provide the
necessary funds for them to become globally competitive in all aspects of their
profession ranging from aerospace and automotive to nuclear and renewable
energy practices.
“Malaysian consultancy firms are well poised
to venture overseas since they have embraced leading edge technologies and
lower cost solutions that have been provided by well-established design and
engineering consultants from developing countries,” reads a press release the board
recently issued.
“Furthermore, the growing markets are at our
own backyard in China, the Indian sub-continent, Southeast Asia, Africa and the
Middle East."
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