| Executives seeking to
keep their companies competitive must keep two mantras
running through their minds at all times: cut costs
and increase market share.
Asia’s exploding population growth makes it the
apple of many growing companies’ eyes. The 10
Association of Southeast Asian Nations (ASEAN) countries
have a combined population base of over 500 million.
Add India and China’s figures, and the Asian
region’s market swells exponentially. Not only
is the sheer market size attractive, but such an enormous
supply of laborers leads to inviting labor costs as
well.
With such a range of choices, the question in many
minds becomes, “Where should one locate to take
advantage of these attractive qualities?”
“I believe that companies looking for footprints
in Asia should have a closer look at us,” says
Tan Sri Datuk Zainal Abidin Sulong, Chairman of the
Malaysian Industrial Development Authority (MIDA),
the Malaysian government’s investment promotion
and investor assistance agency. “We have been
a good investment for a lot of American companies.
We offer a profitable environment.”
And from what the American companies operating in
Malaysia say themselves, that couldn’t be truer.
U.S. Ambassador to Malaysia, Marie T. Huhtala reports
having gotten the same reaction from every American
executive she’s met. “They are happy and
are having a good experience here,” she says.
“Companies are very pleased with the advantages
given to them to invest here.”
Aside from the cutting-edge physical, financial and
telecommunications infrastructure which facilitates
the flow of goods manufactured in Malaysia to all
parts of the world, companies enumerate countless
other pros.
Manufacturers are attracted by the availability of
inputs. Malaysia is a raw materials-based economy
with excellent land resources, and numerous supporting
industries providing linkages for their components.
The country’s political, economic, and monetary
stability offers predictability in executives’
decision making. Transparency is coupled with a solid
rule of law and British-based judicial system, similar
to that practiced in the over 60 commonwealth countries.
Malaysia works continuously to upgrade its productivity
and efficiency, and to improve the quality of its
products, services, and facilities, and the labor
skills of its workforce.
Under the “Manufacturing ++” scheme, MIDA
is fostering a more robust environment for R&D
and design-based offerings, while also looking towards
continually improving marketing, distribution and
packaging capabilities.
The government is conscious of the effort that needs
to be made to produce the right people for the right
jobs. As a result, all math and sciences curriculum
is taught in English.
American companies will find a multi-lingual workforce
full of qualified English speakers. Two hundred and
fifty thousand Malaysians enter the workforce each
year, providing a strategic base of highly-skilled
labor.
“Education is valued,” says Stuart Dean,
President of General Electric Southeast Asia. “People
want to continuously learn throughout their careers.
They are anxious to participate in training initiatives,
whether for technical or leadership skills.”
In Malaysia, one finds a “highly motivated staff
with a high degree of loyalty,” says Datuk Wil
Fluit, Vice President, Managing Director and Country
Manager of Infineon Technologies.
“The workforce here is disciplined and committed,”
adds Mohana Krishnan, Vice President Worldwide Operations
of Force Computers.
The government continues to liberalize rules and
regulations and regularly reviews and improves investment
incentives to ensure competitiveness and ease of
use.
Some American companies still enjoy pioneer status,
even after many years of operation. In August 2002,
a celebration was organized for 30 years of foreign
investment, honoring the American companies like Intel
and Hewlett Packard who had invested in Malaysia in
the 1970s and are still there today.
Malaysia has investment guarantee agreements with
60 countries, and avoidance of double taxation agreements
with 50 countries, both of which include the U.S.
One hundred percent foreign ownership of companies
is allowed.
Just this past February, the Malaysian government
implemented new measures to further encourage foreign
direct investment (FDI) in the manufacturing sector.
One of the measures will fast-track the process through
which licenses for non-sensitive industries are approved
to within seven days.
“The government is very business-oriented, especially
in import-export, licensing, and employment issues,”
attests Datuk John F. Coyne, Senior Vice President
Worldwide Operations of Western Digital, which has
re-invested over $300 million in its Malaysian manufacturing
facility over the past five years.
Many feel that some of the most positive elements
to working in Malaysia are intangible, citing the
eagerness of the government to engage in public-private
sector dialogue.
“Throughout the Far East, I’ve never found
an environment in which it’s easier to communicate
with the government, to meet with the highest echelons,”
says Stewart Forbes, Executive Director of the Malaysian
International Chamber of Commerce and Industry (MICCI),
which represents 1,000 member companies of 33 nationalities.
“Overall there are very clear laws. All our projects
over the past five years were on schedule. There were
no delays caused by the government,” agrees Y.Y.
Wong, Business Manager for Bechtel.
Another reason may be because of the “strong
connection with industry” fostered among the
research community and companies, explains Professor
Syed Ahmad Hussein of Penang’s Universiti Sains
Malaysia.
Nearly every high-tech company in Silicon Valley has
a major manufacturing presence in Penang.
“People have come here because it’s the
right place to be,” says Ali Dabier, Vice President
and Managing Director of Komag.
Dell is one such company. Ninety-six percent of Dell’s
notebooks supplied worldwide are manufactured and
shipped out of Penang.
Some companies operating in Malaysia have dabbled
in China but have found Malaysia to be more productive.
“The herd mentality takes people to China,”
says Forbes. Nonetheless, the savings there “may
not be so great as one would suggest. In terms of
cost of production and export capacity, Malaysia has
the advantage.”
There is a huge disparity of labor costs, depending
on where in China you locate, explains Forbes. The
more remotely you locate, the lower the labor costs.
“But you won’t be located in a commercially
viable area.”
“Dollars and cents are not the entire equation,”
he reminds potential investors. Cash benefits can
be offset by other factors, citing non-English speakers
and foreign legal systems and tax schemes as examples.
All of these factors “diminish the viability
of your operations.”
Many companies have been burnt by some of Asia’s
unstable political and economic regimes. Malaysia,
he says, after years of experience, is different.
“You can concentrate on business, not administrative
paraphernalia.”
Nonetheless, Malaysians are fully aware that China
will remain an attractive market for many. For those
determined to conquer the Chinese market, having a
partner with cultural insight can make the difference
between a successful venture and a burnout. “Local
Malaysian firms have insight into the market, needs,
demands, and cultural nuances necessary to succeed,”
says Zainal.
Because of Malaysia’s long-standing history of
successful intra-ASEAN trade, its companies are experienced
in synergizing with other Asian partners, particularly
members of their supply chains.
“Malaysia may be small, but its network is wide,”
explains Datuk Salleh Ismail, President and CEO of
Technology Park Malaysia. Its multi-ethnic, multi-lingual
population speaks four of the top five most common
languages globally: Chinese-based, Hindu-based, English,
and Bahasa Melayu, which is nearly identical to the
languages spoken in Indonesia, Brunei and the southern
Philippines.
There is a consistent trend toward using Malaysia
as a regional center, a move that is becoming ever
more attractive due to the ASEAN free trade agreement.
ASEAN is experiencing 7 to 9 percent growth per year.
Compared to the mature economies in the U.S. and Europe,
these growth rates are unbeatable.
Over the next 10 years, duties on goods traded among
the original six ASEAN members (Brunei, Indonesia,
Malaysia, the Philippines, Singapore, and Thailand)
will be phased down to 0 percent. There is already
a 5 percent maximum import duty on many goods. Another
free trade agreement, between ASEAN and China, is
currently in the “early harvest” stage in
which certain sectors are being pinpointed as early
targets for removal of duties.
“Companies looking abroad for the first time
need to set their sights on an area that is user-friendly,”
advises Forbes.
“Look at the track record of businesses who have
invested in Malaysia,” recommends Timothy Garland,
President of the American Malaysian Chamber of Commerce.
“We see them continuing to invest in Malaysia.
When there’s an evaluation made, visit Malaysia,
set foot here. Perceptions will change. Once you land
in Malaysia, you’ll see how advanced it is.”
For more information visit:
www.mida.org
|
