Deputy Prime Minister Muhyiddin led a delegation to visit Japan recently. The main purpose of this trip was to invite more Japanese firms to invest in Malaysia. One of the notable results of Muhyiddin's visit to Japan is that the Japanese carmaker, Toyota, has now expressed its willingness to set up factory in Malaysia to produce Toyota vehicles for the local market as well as to allow Malaysia to become Toyota's main auto exporter country.
Malaysia-Japan Trade Volume
The Malaysia-Japan trade volume fell by 25 percent during the first nine months of 2009 because of the impact of the global economic slowdown. However, from 2004 to 2008, the overall Malaysia's exports to Japan did increase yearly, and in 2008, it was a trade surplus for Malaysia.
However, 90 percent of products that Malaysia imported from Japan are mainly electrical and electronic products, machinery and equipment, intermediate materials and components. It reflects Malaysia's high dependency on Japan for these critical industries.
Economic Activity Perspectives
From economic activity perspectives, we can say that Malaysia's key industries, including electronics, information technology, automobiles, motorcycles, machinery and the like, as well as Malaysia's advanced production technology have to rely on the Japanese firms such as Sony, Panasonic to supply. In term of Malaysia's joint venture or joint technical cooperation with Japan we can find such joint venture with Japan everywhere in Malaysia. These include service industries, wholesale, retail, catering, hotels and others.
The relationship between Malaysia's large-scale infrastructure and technological engineering projects and Japan's technical cooperation is even more intimate and close. For examples, in the fields of drainage and sewage projects, in the developmental projects in the Iskandar economic zone in southern Johor, in palm oil research and development for bio-fuels, in green technology and renewable energy, we can sense the strong involvement of Japanese firms. This is especially obvious if we take note to observe that certain financial groups in Malaysia have very closely link with some of the Japanese financial groups. We can even claim that some financial groups in Malaysia have to depend on the support of certain Japanese financial groups in order to grow economically strong. From here, we can gauge Malaysia's strong and extensive dependency on the Japanese economy.
Japan's Technological Cooperation
In order to depend less on Japan's technological cooperation and support, Malaysia has repeatedly stressed the need to improve the standard of the country's technology and to create Malaysia's own product brands. Malaysia has also tried to decentralize its import from Japan. However, Malaysia's achievement in these areas is limited. Over the past years, Malaysia's effort in trying to depend less on Japan did not work. In retrospect, several fundamental causes are particularly important for us to take note if we want to make change in the way we do business with Japan.
First, Malaysia's reliance on the Japanese trade is an economic issue is not merely a technological issue. We will take the case of how Malaysia managed to build its own the KD Perak petrol vessel as a case study. Although Malaysia did not have the technological expertise to build a navy patrol vessel, since Malaysia has a comprehensive plan to develop it, Malaysia was able to break the bottleneck technology to build higher-grade patrol vessel for use by the Defense Ministry. The reason was that the government was willing to pay high cost to get it done. However, the criteria for the production of high quality goods in the private sector are different. In addition to rely on technical skills, we must also consider the market factors. The Malaysian economies have to depend on international trade repercussions; the private sector cannot keep upgrading its technology without considering the cost for doing it. Moreover, in the international market, technology changes very fast. By the time Malaysians firms come out with what they consider high technology, it might not become the top-notch technology in the global market, after all. As such, it is important for the Malaysian firms to narrow down the technology gap by getting a balance between cost and benefit. This will be a new challenge for the Malaysian firms.
Second, when the Malaysian enterprises work with the Japanese firms for joint venture projects, many Malaysian enterprises have to depend on Japan for support and help. The volume of this kind of lopsided joint venture is not small. Traditionally, Malaysian consumers also have a special liking for the Japanese goods. For these two reasons alone, we can say Malaysian firms are happier to depend and work with Japanese firms to earn their money than take a new approach to compete with the Japanese firms in Malaysia. We are afraid that after Malaysia signs the ASEAN-Japan Economic Partnership Agreement, direct investment of Japan in Malaysia will grow exponentially within a short period. It will again be a critical test for Malaysia to try to achieve economic independency without having to depend on Japan's technical support very heavily.
Third, from the time former Prime Minister Mahathir put forward the "Look East" policy, the Malaysian Government began to glorify Japan's success. The government wanted to learn everything from Japan. From industrial development model, to public infrastructure construction, the Malaysian Government wanted to follow the Japanese experience closely. If Malaysia continues this Look East policy and allows even the country's economic construction to follow Japan's lead, it will not be easy for the private sector to break free from the heavy dependence on Japan's corporations.
Look East Policy
To be able to break free from Malaysia's economic dependence on Japan, Malaysia must reflect on the reasons why it has failed to do so in the past. Malaysia must adopt a pragmatic attitude in the development of advanced industries. Malaysia must choose a number of key projects for major breakthroughs that the country can do within our capability without going all ways out to stress on all fields of technology for industrial application. Malaysia must also strengthen economic development with other countries, including Europe, China, South Korea, and Taiwan and Hong Kong in order to establish pragmatic bilateral and multilateral economic and trade relationship to depend less on Japan.
If Malaysia wants to continue its Look East policy and to learn from Japan's technological expertise, Malaysia must learn to adopt Japan's technology and make them Malaysia's own unique models. In the past Japan learned from the US technology, but Japan has improved on the US technology and in many fields, Japan's technology has even become better than that of the United States. Similarly, when South Korea learned from Japan, it also did not forget the need in wanting to do it better than Japan. When Malaysia learns from Japan, Malaysia should also take the same attitude to seek better technological improvement for long-term advantage.
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