What new initiatives is the MICCI involved in to promote international relationships?
FORBES: Well, with regard to MICCI’s international initiatives, having been founded in 1837, we have essentially seen the entire development of Malaysia from its beginning as a commercial centre. We have been through the stages of its outgoing efforts with regard to moving into a middle income economy and going beyond that. Today, the new initiatives genuinely in the country are to try and break out of that middle income economy model and join the very few countries that have managed to transition to a high income economy. In order to do that, there has been a new focus on the types of business we do, and the amount of exports that we do. That includes the move towards services, as they are a more important part of our economy. Over the last probably seven or eight years, the Chamber has been increasingly focused on services. With the new service platform, the Coalition of Service Industry Malaysia being formed in 2006 by the Chamber, we have now started to develop new initiatives with our services platform partners around the world to try and drive this increasing focus on services. Probably the newest initiatives that we are making these days are to strengthen and establish a global network of interest in service liberalization and service development.
Who are your main collaborators in terms of geographical regions?
FORBES: As far as geographical regions are concerned for MICCI, the world is our oyster in that sense. Malaysia is very much an export driven global economy, a small country that needs a large amount of exports to sustain its growth. The Chamber, as an active part of that economic process, has relations throughout the world. We are a member of the International Chamber of Commerce, which has a National Committee in Malaysia; and we are a member of the ICC Paris; and also we are a member of the Word Chambers Federation. At a more regional level, we are a very active member of Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI), which covers twenty seven nations in the Asian basin. As I mentioned previously, our services groupings also cover the world. Everything is covered, but given the current strong position of Asia in the global business environment, it is probably true to say that our strongest relationships are those that we are building at the moment within the Asia Pacific region.
How does the MICCI work to encourage business?
FORBES: MICCI functions primarily through its engagement with the government. Like any other Chamber of Commerce, who is owned by its members, we are responsible to our members and of course we are there for the micro nature on behalf of individual members of the Chamber. But on a larger scale, essentially we see ourselves as a strong voice for international business here in Malaysia. Our engagement with the Malaysian government is to improve the business environment and to strengthen that environment in terms of greater export, and greater investment. We operate through a series of National Councils, which cover the broad areas of importance to the economy: finance, human capital, energy, and environment. Those Councils are made up of members and experts in those areas. We either follow government movement in new legislation or we may take a proactive role and make suggestions to government in areas which we think they should be moving forward in order to generally improve the business environment in the country.
How would you describe the level of public sector engagement in the development of commerce and industry?
FORBES: The engagement process with the Malaysian government is on the whole very good. Obviously, this varies from ministry to ministry. Some ministries are willing to discuss issues, others are slightly more closed. Generally speaking, Malaysia actually has a long tradition of a close co-operation and engagement between the public and private sectors which was initiated by the Government in the early 1990s through a formal approach within the civil service to engage with the private sector. At that time, we called that Malaysia Incorporated. As a private sector organization, we do have very good ability to call on the government for discussion, and the government in turn has sufficient confidence in the private sector to involve us in their discussion on new legislation. There are areas within that where we would like to have even more engagement with the government. But on the whole, our access both to the civil service and to the political level of the government is extremely good and better than many other countries.
What can be done to increase the number of Malaysian SMEs doing business internationally?
FORBES: This is a difficult question because within Malaysia, with over 90% of the number of business entities being SMEs, there is a very wide spectrum of capacities within the SMEs. Some of our larger SMEs have already made that transition into global players. Perhaps at a modest level, but they are now trading internationally. To get a larger number to participate in the global economy, and this is critical for Malaysia’s continued development, I think largely there is an issue of capacity building. A lot of Malaysian SMEs, I suspect this is not unique to Malaysia, spend all their time largely in day-to-day survival, especially when there are uncertainties in business generally. They do not take the time to look at capacity building for themselves, gaining new skills, exploring new markets, or even investing in training of their staff to reach higher levels. This needs to be done. We have to bring these SMEs up to a level of professionalism and competitiveness, otherwise they cannot survive outside of Malaysia. Through governmental agencies such as the Malaysia External Trade Development Corporation (MATRADE) and the Malaysian Investment Development Authority (MIDA), there is a quite a strong awareness of external opportunities for these companies. MICCI and the other Chambers of Commerce also make it known what it is available out there. But to take advantage of that knowledge, the company must reach a minimum standard of competence and competitiveness if they are to survive in a global environment. I think capacity building for those SMEs is one of the critical factors and some of that involves a mindset change. Some companies are too comfortable in their domestic environment. They do not want to go through the effort of raising the bar of benchmarking against international companies and the work necessary to take them overseas. If we can encourage them to do that, and make capacity building easier for them, than there would be more Malaysian SMEs who would be capable of functioning in the international environment.
What opportunities exist for foreign investors in Malaysia?
FORBES: There are many opportunities at the moment for foreign investors in Malaysia. By virtue of the work being done through the government’s Economic Transformation Programme, which is designed to break us out of the middle income type of environment into a high income economy, there is a very substantial amount of growth required in our economy. Over the ten years from 2010 to 2020, we have to double our Gross National Income (GNI) per capita. Now that means a lot more business, it means a lot more jobs, it means a lot more higher paid type of businesses, so that the value added can contribute to the GNI and an increasing GDP. As a result, the government has kick-started some of that by injecting projects into the business environment, roads, rail, and links of this nature. A number of private sector projects have taken place as well, or are in the process of taking place. At the same time, out of the twelve National Key Economic Areas that the government has identified as being the main contributor to the new GNI that we will require by 2020, nine from those come from the services sector. As a result, to compliment growth in those sectors, the government has unliterary started to liberalize sectors such as health tourism, education, ICT, supply chain, and logistics. In those areas the previous limitations on foreign investment are being or have been removed, either partly or completely. That generates a whole range of new opportunities. As things stand today, I would say there are three areas of particular value to potential foreign investors. One is participation in large scale infrastructure projects. The second one is the introduction of new high technology manufacturing into Malaysia. We are a big export country and a manufacturing country, but a lot of our manufacturing is still traditional assembly line type manufacturing. In order to increase the value of that manufacturing to the country’s economy, we have to move up the value chain so that we have a more value added economy. Lastly, the whole services area will provide the largest component of growth over the next ten, fifteen, twenty years.
You can probably find individual countries that can beat us on one item or another, but when you bring the pieces together, and when you see the efforts that the government takes to meet the needs of its investors, it is very hard to find a business environment in ASEAN that is superior to that which can be found in Malaysia.
What are the biggest challenges for foreign investors when doing business in Malaysia?
FORBES: I think the challenges stem from the process of transformation that we are going through. Malaysia has its sights set on becoming a high income economy and achieving developed nation status in the future. However, the fundamental infrastructure units such as education, human capital creation, financial taxation in a distributed financial system, labor laws, all of those have to reflect that new economy. A number of our institutions are more reflective of our more historic assembly line manufacturing extractive business model. These challenges are being addressed, but at the moment, it does create a little bit of a restriction for some of our members who would like to be more competitive, but find anachronistic labor laws making it more difficult for them to do that. The government needs money to run, but we have a very narrow tax base that needs to be distributed. At the moment, I think there are some institutional impediments to the speed at which new business can be done and generated in Malaysia. On the brighter side, however, I think is fair to say that the government knows that these impediments exist. At least it is not something that they deny. We have moved from a denial syndrome into one in which we recognize the impediments that exist and action is being taken. Of course, action can always be taken faster. The business community will encourage the government to actually move faster on these reforms. But at least the recognition is there and progress is being made in removing some of these obstacles.
What are the reasons foreign investors should look to establish themselves in Malaysia as opposed to other ASEAN countries?
FORBES: Clearly, like any ASEAN country, from a purely practical point of view, the logistics and the location offer as good an entry point to ASEAN as anywhere else in the ASEAN region. Choosing Malaysia over, shall we say Thailand, or Singapore, or Indonesia, is a slightly more complicated process. While we are very clear in our own mind in the private sector of where the advantages lie, it is sometimes not very easy to put them into words. The reason for that is that what Malaysia offers, and I am tempted to say that this is almost unique within ASEAN, is a comfort composite that creates an environment in which business can do business. Malaysia is no longer the cheapest country within ASEAN, but we are still very cost competitive. We are still relatively cheap. We have a well-developed physical infrastructure. We have to all intense and purpose a stable political system, which has been running for over fifty years now. We have a multi-national, multi-lingual population. We have a high quality of life in Malaysia, which is important for our investors these days, more so than in the past perhaps.
When you add the pieces together, when you try to combine that jigsaw into a single image, Malaysia generates an extremely effective comfortable environment for doing business. Investors worldwide are very risk averse. Investors can live with almost any kind of rules and regulations, but they like consistency, they like certainty, and they like to avoid unannounced change. In that case, Malaysia is a very stable environment. All the pieces, when they are brought together, create an environment for doing business that allows companies to do just that. They can do their business here without having to worry if the army will be on the streets next week, without having to worry if the inflation will go to 10%. All the parts are there that, individually by themselves may not be number one, but together they create a very strong and positive climate for doing business and allowing companies to do business. You can probably find individual countries that can beat us on one item or another, but when you bring the pieces together, and when you see the efforts that the government takes to meet the needs of its investors, it is very hard to find a business environment in ASEAN that is superior to that which can be found in Malaysia.