Malaysia-Japan ties set to grow

MALAYSIA’S outward looking foreign and trade policies have always embraced all countries, regardless of size, power or wealth.

With poorer countries, Malaysia practises a “prosper thy neighbour” policy for security and improved trade prospects.

With richer countries, the purpose is mutually enriching trade and investment arrangements.

In the context of Asian regionalism, this has taken the form of the “Look East” policy, the East Asia Economic Grouping and Asean + 3.

Each of these covers comprehensive links abroad that span trading, financial, industrial and strategic relationships.

Since Japan is the most economically developed country in Asia, much of Malaysia’s regional economic policymaking has centred on Tokyo.

But the global emergence of China has also meant that relations with Japan serve as a barometer of other likely arrangements elsewhere in the region.

One example of this is the free trade agreement (FTA) instrument, which correspondingly is more developed with Japan.

The embryo of the Japan-Malaysia Economic Partnership Agreement (JMEPA) idea took shape in December 2003, comprising several bilateral elements including an FTA.

Although the JMEPA is sometimes seen as a diplomatic prelude to the FTA, it acts as the mother of Malaysia-Japan agreements for the 21st century.

Beyond that, the JMEPA also serves as a step-parent for subsequent FTAs elsewhere in the region.

Malaysia’s Look East policy has thus come of age.

Phase one of the JMEPA’s gestation period was a full 17 months, until last Sunday when Putrajaya and Tokyo agreed on all its terms and conditions for formalisation in Tokyo yesterday.

Phase two is another seven months until December, when the JMEPA will be signed and announced jointly in Putrajaya.

The two most difficult areas of negotiation concerned automobiles and steel, which Japan, as a developed industrial nation, was anxious to pursue.

Malaysia in turn wanted an expanded role for Japanese industry in Malaysia, to include siting research and development (R&D) centres here.

If anything, these past months and years of laborious negotiations prove that Malaysian industry has developed beyond just another overseas location for Japanese assembly plants.

Malaysia has had to make the point of establishing R&D centres besides manufacturing bases in the country while at the same time having to bargain with Japan on motor vehicles.

Evidently, Malaysian heavy industry is here to stay.

Yet Malaysia had not forgotten that Japan contributed much to the development of the auto sector in this country. This is why the bilateral negotiations, however businesslike, have been more between friendly partners than rivals or competitors.

For its part, Japan understands that Malaysia remains a competitive investment destination, even if some of the terms or forms of investment have changed.

While China and the newer Asean members offer lower labour costs, Malaysia boasts other attractions.

The Malaysian investment landscape offers political stability, established institutions, good infrastructure, reliable utilities, plentiful resources and a productive workforce with an experienced, business-friendly administration at relatively low costs.

So, while the less developed countries of East Asia may seem more attractive in parts assembly and lower-tech industries, Malaysian industry still holds its own in other areas.

Japan’s economic and technological edge over the rest of Asia is sufficient to continue making the most of what Malaysia’s edge over much of the region offers.

Japan’s bilateral relations with Asean countries grew dramatically alongside its industrial development, as investments and jobs flowed into the region from the 1970s.

From all indications, the business link continues to determine broader cultural, diplomatic and other relations.

But beyond all the dry factors and objective considerations, personal familiarity still counts for much in Asian business.

And when it comes to that, few other countries enjoy the familiarity shared by Malaysian and Japanese leaders in both government and industry.

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