How would you assess the breakdown between foreign and domestic investment in Malaysia today?
JALA: We encourage foreign investors to come into Malaysia, but at the same time, we are also giving a lot of incentive for local players to invest. The split between foreign and domestic investment that we want is for domestic investors to be 70%, more or less, and then 30% for FDI, or foreign direct investment. There is a part for both types of investors to play. So far, in the last year and a half, it is been very clear that we have a lot of interest from foreign investors in Malaysia. However, we do turn some away. The ones we turn away are when the quality of investment is not as high as we would like it to be.
When I refer to quality investment, there are three things we look at to judge whether investments are ones we want to encourage. First, we want them to contribute to Gross National Income. If the investments do not generate a lot of GNI, we are not really interested. Secondly, we want them to bring their own investments in, rather than raise money from the domestic market. Thirdly, we want those that create a lot of high paying jobs. For the types of investors that bring those characteristics, we give them a lot of incentives. These incentives are granted for those types of investors. However, if the investors want to come in on their own accord, we welcome them with our hands open. But if they want incentives, they have to meet the hurdles ahead.
What are some initiatives that can still be implemented to further trade activity, increase investment, and bring the level of investment up to the 70/30 level?
JALA: The thing that we hear from investors, and that we are still working on, is improving our act on crime. We have begun a lot of work to reduce overall crime as well as street crime. Our present program has been able to reduce overall crime in 2010, the first year, by close to 15%. Last year we managed to bring it down by a further 11%. Street crime has been reduced by nearly 39%, so that is a big one. We need to work on this within the city because investors want us to address crime, and we are making tremendous progress in that area. The other area that investors have asked us to focus on is to make sure that we level the playing field. We need to get rid of competition and that we do not have so much encroachment from government. The government is acting as a catalyst to make life easy for investors to come in.
We are also working on bureaucracies. We are trying to bust bureaucracies so that life will be easy for businesses when they come here. We have checked the number of business licenses that are required in the country, and something like 750 licenses are required. We have now gotten rid of 50% of them. We have simply said these licenses are not required, and you can come in without needing to apply for those licenses. The remaining 50% that we kept we have worked to cut the time taken for approval and to reduce the bureaucracies.
These are some examples of the ease of doing business in Malaysia. At the same time, we in the government set up a problem solving committee that is chaired by the various ministers. There are problems that are encountered by companies that participate in our ETP, and on a monthly basis we solve these problems. Then, twice a year, the problems that cannot be resolved in the Ministerial level get channeled to the top, and we have a Putrajaya Inquisition. This is chaired by our Prime Minister. All the ministers that are involved gather in the room, together with the private sector, and we resolve this problem on the spot. If it is a problem with money, money is granted. If it is a problem with bureaucracy, we remove the bureaucracy. We call it the Putrajaya Inquisition because the Prime Minister asks very difficult questions to those who are standing in the way. So we are working on a full array of activities from the big, to leadership, to bureaucracies, to crime. When we put all of this together, I believe these are the catalysts for further investments to come into Malaysia.
What areas of the world do you think have the most potential to increase trade volumes?
JALA: For us, it is very important that we continue on the path to make sure our products are well positioned in the markets. China is a very big market for us because of proximity. We also look to Europe and the USA as very big markets. Of course, within the ASEAN region, there is a lot of trade flow. The thing that we continue to do in Malaysia is make sure that the companies here adopt the best practices for the quality for products and services. We have around 600 standards in Malaysia, and we encourage as many companies in Malaysia to adopt these best practices. The reason for this is very simple. The theme for future growth is to make sure Malaysian companies, or companies operating in Malaysia, produce products and services that meet the best of the best international standards. If you can do that you can command a premium in pricing. If our product is good and we meet the best of the best standards, we can put a premium on it.
Our costs, input and production costs, are lower in Malaysia, so we can afford to lower the cost in our prices to be competitive. For future trade we are ensuring that our products and services, in terms of export prices, are good value for money. For us, we will continue to import. I always believe that, as a country, we import what we need. We need imports to come into Malaysia that are of high quality and value for money. We look at countries that are pursuing the same things as us and countries that provide products and services that are value for money, and we want to import those. At the same time, we want export value for money with commodities and products and services. This is our strategy moving forward for growing our trade.
When I refer to quality investment, there are three things we look at to judge whether investments are ones we want to encourage. First, we want them to contribute to Gross National Income. If the investments do not generate a lot of GNI, we are not really interested. Secondly, we want them to bring their own investments in, rather than raise money from the domestic market. Thirdly, we want those that create a lot of high paying jobs. For the types of investors that bring those characteristics, we give them a lot of incentives.
How have the Western debt crises impacted investment flows?
JALA: The crisis in the Eurozone, and the difficulties they are having there, for us in Malaysia has positioned us as a country where we do not have those problems. Therefore, it opens the doors for a lot of investment. I believe in the last couple of years we have seen a lot of foreign investors looking to Malaysia as a place to invest. What we are telling them now is that we would like them to invest in very specific areas. We want investments in what we call our National Key Economic Areas (NKEAs). These are areas such as oil and gas, financial services, wholesale and retail, tourism, agriculture, health, and education.
We want to encourage investors to come and place investment there because concentration of investment with help from the government will make sure we have focus on those sectors to become world leaders. Then, the companies operating inside there become world leaders as well. In the past, we tended to place investment in all sectors. We believe this is not necessary for real success going forward. This is why we want focus, even with investment. We want the government’s help to focus, and we also want focus with talent. When we start doing this is when we will get champions coming from companies operating out of Malaysia.
How important is industry on Malaysia’s path to becoming a high income nation?
JALA: The private sector is absolutely the engine for growth the way we see our economy moving forward. Ronald Reagan used to say the most frightening sentence in the English language is, “We are from the government, we are here to help,” because he believed in small government. We are aiming to have the government change its role to be the controller of the economy, but we want the private sector to be the engine for growth. The government’s role is then to be the catalyst and facilitator. This is what we are doing now, for example, getting rid of bureaucratic rules and unnecessary licenses. These were removed so that things would be much easier for investors here. At the same time, we want to work with them so that we will get the pipeline of talent throughout the education system. This will provide quality human resource and leadership to help companies that operate in Malaysia. Our economic transformation will not succeed if there is no partnership as I have just defined between the government and the private sector. This means the private sector and industry becomes the engine for growth. We in the government, are just the catalyst and the facilitators for the economic transformation.