The industrial base in Malaysia has been steadily growing over the last three decades with an ever-expanding role for the manufacturing and services sectors. Malaysia often acts as a springboard for industries into the Association of Southeast Asian Nations (ASEAN) markets. Free Trade Agreements with nations like Japan are likely to further boost the country’s international reach.

Malaysia’s top political and business leaders are keenly aware of the necessity to keep Malaysia’s trading edge sharp, with major plans afoot to raise its industrial sector higher up on the value chain—a process with wide-ranging implications from educational policy to municipal planning.

Malaysian Industrial Development Authority (MIDA), which had its 40th anniversary last year, plays a vital role as the country’s foremost promotion agency in the international arena.

MIDA’s recent anniversary coincided with ASEAN’s 40 year mark as an organization and Malaysia’s celebration of 50 years of nationhood—all occurred in 2007.

MIDA’s Director General, Datuk R. Karunakaran, gave an interview to The Washington Times, outlining MIDA’s increasingly important and strategic role in the industrialization of Malaysia.

Q: What is your overall perspective on MIDA’s achievements since its inception, and what are its medium- and long-term prospects?

Karunakaran: MIDA’s 40th anniversary was indeed meaningful, as it shared its birthday with ASEAN as well as the nation, which celebrated its golden anniversary.

Over the last four decades, MIDA has assumed a pivotal role in the promotion of the manufacturing and services sectors in Malaysia. In fact MIDA is directly responsible for the transformation of the Malaysian economy, from one that was based on the export of primary commodities to one whose growth is now driven by the manufacturing sector.

Nonetheless, we must gear up and adapt ourselves toward new approaches, with attitude shifts due to changes in government policies brought about by globalization.

Malaysia is now promoting the development of high value-added, technology-intensive, capital-intensive and knowledge-based industries where Malaysia has the competitive edge.

The new initiatives undertaken by MIDA range from the establishment of a Cross-Border Investment Promotion Division as MIDA assumes the role of facilitating and assisting Malaysian companies intending to invest overseas and to opening new offices in developing and developed countries, including one in Houston in the U.S.

Q: What is your view on the global economy for the next 18 months given the economic downturn in the US? And how will it affect Malaysia?

Karunakaran: With the advent of globalization, the global economy is becoming increasingly challenging, especially with the various Free Trade Agreements (FTAs) which have emerged over the last few years. It is therefore of utmost importance that companies become cognizant of these developments and be prepared to adapt themselves in this new economic era.

Malaysia, for its part, is an open economy, with total trade making up more than 80 percent of our GDP. Therefore, the importance of international trade cannot be understated.
The Malaysian economy has sustained commendable growth rates over the years, attributed to its being broadly based and diversified, with the manufacturing and services sectors being the main engine of growth.

An economic downturn in the U.S. will have an impact on Malaysia, as the United States is the largest destination for Malaysian exports (the U.S. is Malaysia’s number one trading partner). Nonetheless, Malaysia has trade links with over 230 countries, and the ASEAN nations as a grouping is currently Malaysia’s largest trading partner.

Q: Will the United States continue to be Malaysia’s number one trading partner?

Karunakaran: Malaysia considers the U.S. as an important business partner and constantly seeks to strengthen that relationship. One of the ways Malaysia achieves these goals is through regular trade and investment missions.

For the tenth consecutive year, the U.S. was Malaysia’s largest trading partner, accounting for 13.4 per cent of Malaysia’s global trade in 2007 or RM149.19 billion. The U.S. was Malaysia’s largest export destination with 15.6 per cent share of Malaysia’s total exports amounting to RM94.51 billion.

American multinational corporations have made substantial investments in Malaysia and have brought with them suppliers and subcontractors to invest in the country. They have contributed to the building up of local supply chains. Investments by American companies have turned Malaysia into one of the most competitive global hubs for electronic components.

Investments from the U.S. increased from RM2.5 billion in 2006 to RM3 billion in 2007, registering a growth of 20 per cent. These investments were in 33 projects, 13 of which were new projects, while 20 were expansion and diversification projects.

I am confident that the U.S. will continue to be Malaysia’s important trading partner. According to the Malaysian American Electronic Industry Association (MAEI) survey in 2006, member companies indicated that they planned to continue investing further in the country. Among the reasons were a good English-speaking workforce and highly skilled workers—key confidence factors.

Q: How successful are the Trade and Investment Seminars that you undertake in the United States?

Karunakaran: The recent Trade and Investment Mission to the U.S., which visited the cities of Baltimore, Dallas and Portland, was a success based on the interest generated and the number of participants who attended the seminar in each city.

During that mission, 239 individual business meetings were held. Potential projects discussed included aerospace, oil and gas, solar cells, renewable energy and biotechnology—in all three cities.

I am happy to note that several participants have already indicated their interest to carry out feasibility studies in Malaysia and to explore business opportunities available in the country.

We are of the view that once a company decides to visit Malaysia, this is a positive indication of their interest in doing business with Malaysia.