Exploring business opportunities in Southeast Asian country offers a route
into more ASEAN markets, as Bao Chang reports in Malacca.
Across the blue Strait of
Malacca, there will be a man-made island, that is poised to become a new travel
hub of Malaysia, and is set to appear in 2020.
Northwest China's Gansu Chamber
of Commerce, along with Malaysia's Mestika and IEPU, have invested 1.3 billion
yuan ($206 million) to establish the island as a new landmark in Malacca that
engages in the travel, entertainment, commerce, culture and resort businesses,
most of which will involve Chinese investors.
"Walking through Malacca,
the legendary ancient city, I feel little exotic atmosphere, because the major
business street is full of shops and hotels with a glittering array of Chinese
billboards," said Song Liuming, a Chinese tourist.
Linking the Pacific and Indian
oceans and located at the crossroads of Asia and Oceania, the Strait of Malacca
has been a trading passage since the days of Zheng He, China's most famous
navigator, who visited it five times during the Ming Dynasty (1368-1644).
Today, Chinese people are
enthusiastic about investing this ancient city, which has many historical
connections to China.
According to the market
researcher MYC MM2H SDN BHD, most of the investment in the 607-hectare island
is from Chinese investors.
In this traditional economic hub
of Malaysia, the most active businessmen are undoubtedly Chinese. Chinese
companies are also the country's biggest trading partner.
Song, an entrepreneur from
Jiangsu province, said that he saw business opportunities in the travel
industry and was sure it would be very profitable to invest and set up a
tourist agency in the country.
"There are a lot of
beautiful resorts in Malaysia that are attracting more and more Chinese
tourists. But the travel service is still not as developed as that in the
Chinese market," Song said.
China has become Malaysia's
third-largest source of tourists, following Indonesia and Singapore. In the
first half of the year, 758,300 Chinese tourists visited Malaysia, up 34
percent year-on-year, according to the Malaysia Tourism Bureau
Li Liping, general manager of
Zhejiang Tonghui Investment Company, said he plans to invest in Malaysia's
catering industry.
"Our company has set up a
comprehensive network in China's catering industry and our next plan is to go
abroad," said Li.
Li revealed that Malaysia will be
the company's first overseas investment destination, where it will open a
Chinese restaurant, to take advantage of the two countries' linguistic and
cultural similarities.
Active investors
Ong Chong Yi, minister counselor
for economic affairs at the Malaysian embassy in China, told China Daily that
over the past three years, Chinese investors have been active in the
construction sector in Malaysia but have less presence in the service sector.
The liberalization of the
country's service sector gives Chinese companies opportunities to explore new
areas of business, Ong said.
"We concentrate on
attracting high technology, knowledge and capital-intensive investment tailored
to economic growth and development," he said.
While private companies are
trying to grasp investment opportunities in Malaysia, China's State-owned
enterprises have tapped into the market, which is China's largest trading
partner among members of the Association of Southeast Asian Nations, or ASEAN.
In a move to gain a greater
market presence in Southeast Asia's steel industry, China's State-owned
steelmaker Shougang Group launched a project in December 2011 to build a 1.8
billion yuan ($288.3 million) integrated steel plant in Malaysia through a
joint venture with the local steelmaker Hiap Teck Venture Berhad.
Built in Terengganu State in
northern Malaysia, the project results from the largest Chinese foreign direct
investment in Malaysia so far.
Once the plant is fully
operational, it will have an annual production capacity of 3.5 million metric
tons of steel slabs. The first stage of the project will be finished by the
middle of 2013, when its annual production capacity will reach 1.5 million tons.
"China's steel industry is
suffering from overcapacity and that is why we are venturing abroad," said
Hu Bin, president of Shougang Group, one of China's largest State-run steel
companies.
"ASEAN is a huge and
developing market. I think the bloc has great potential and we are tapping into
it via Malaysia," Xinhua News Agency quoted Hu as saying.
"We decided to invest in
Malaysia because we find it economically stable," he added, pointing out
that the plant is strategically located next to a deepsea port for exports.
Around 40 percent of the products
from the new plant are expected to be shipped to neighboring ASEAN countries,
especially Indonesia and Thailand, which consume more than 4 million tons of
steel slabs annually.
Since 2009, Malaysia has been
China's largest trading partner among ASEAN members, and China has surpassed
Singapore to become Malaysia's largest export market.
"Due to its advantageous
geographical position and stable political and economic conditions, the
Malaysian market is a gateway for Chinese investors to enter other ASEAN
markets," said Ong from the Malaysian embassy.
YBhg Tan Sri Datuk Mustafa
Mansur, chairman of the Federation of Malaysian Manufacturers, said that
Chinese investors could seek investment opportunities in eight industries in
Malaysia, including oil and gas, sustainable energy, water, hydroelectric power
and food processing.
New targets
Tan Sri Dato' Haji Muhyiddin,
deputy prime minister of Malaysia, has vowed to provide Chinese investors with
a profitable investment conditions.
Muhyiddin said that apart from
the traditional fields, infrastructure including real estate has become Chinese
investors' new target in Malaysia.
The Construction Industry
Development Board of Malaysia has also called on Chinese companies to increase
their investment in the industry.
The Malaysian government has
budgeted a total of 230 billion ringgit ($75 billion) for its investment plan.
And 60 percent of this government development expenditure is allocated for
physical infrastructure development, while the rest will be spent on
non-physical infrastructure development.
According to the board, domestic
market participation by foreign contractors in Malaysia accounted for 16
percent of the total project value in 2011, compared to 10 percent in 2010.
The number of projects awarded
decreased by 22 percent but the monetary value increased by 34 percent. This
indicates that foreign contractors are securing fewer but higher value
projects.
Foreign contractors undertake
projects that require specialized expertise or those financed by foreign
investors, the report said.
According to the Ministry of
Commerce, Chinese contractors completed contracted construction valued at $21.5
billion in ASEAN markets.
China Harbour Engineering Co Ltd
is building a 22.5-km bridge connecting Penang to peninsular Malaysia.
Construction of the bridge began in 2008, and 90 percent of the project has
been completed so far.
The Export-Import Bank of China
has so far offered loans totaling $286 million to the project.
Many Chinese construction
contractors have already started to invest in projects in the country.
"As the biggest market among
ASEAN countries, we will seek business opportunities there to deepen our
presence in emerging markets," said Zha Changmiao, a spokesman for China
Communication Construction Co Ltd, the parent company of China Harbour
Engineering Co Ltd.
China and Malaysia have boosted
their investment ties in recent years. In 2010, China's investment in Malaysia
reached $65.97 million, up 22.7 percent year-on-year.
Ong said that Malaysia is taking
measures to boost Chinese investment in Malaysia, as it's still in its infancy,
compared to Malaysian investment in China.
By the end of 2011, Malaysia had
invested nearly $6 billion in China, while China's investment in Malaysia stood
at just $800 million, according to the Malaysian embassy in China.
"The establishment of two
economic cooperation zones will further boost bilateral investment and trade
between the two countries," Muhyiddin said.
The China-Malaysia Qinzhou
Industrial Park in the Guangxi Zhuang autonomous region is the third industrial
park created through a partnership between China and a foreign government. The
park serves as the latest symbol of the friendship between the two nations and
a platform for cooperation.
A second industrial park between
China and Malaysia will be opened at the end of the year in Kuantan in the
Malaysian state of Pahang.
"There is no doubt that the
Qinzhou and Kuantan industrial parks will create many trade and investment
opportunities for both countries," Ong said.
"We are expecting to attract
7 billion yuan in investments and create 5,500 jobs upon its full completion by
2020."
Datuk Seri Liow Tiong Lai,
vice-president of Malaysian Chinese Association, said the 607-hectare park was
expected to boost economic growth and generate downstream activities for the
local business community.
Liow said the project would not
have materialized without the full support and commitment of the state
government led by Mentri Besar Datuk Seri Adnan Yaakob.
"The federal and Pahang governments
share a close working relationship and mission to bring about economic
prosperity and lift up the well-being of the people," Liow said.
After the completion of Kuantan
Industrial Park, Malaysia's iron ore could be exported from Kuantan port to Qinzhou
port to support the development of the shipping and automobile industries in
the China-Malaysia Qinzhou Industrial Park, according to Ong.
Meanwhile, Kuantan port will
become a container terminal hub in Southeast Asia, establishing smooth interaction
with the Qinzhou tax-free port.
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