CE exclusive interview with Mr. Ong Chong Yi, Minister Economic Counselor of the Embassy of Malaysia
By Li Hongmei
The economic and trade relations between China and Malaysia may be traced back to antiquity. One of the results of Zheng He's voyages during the early Ming dynasty was the growth of trade between China and South and Southeast Asia.
With the formalization of diplomatic relations, bilateral economic and trade relations entered a new phase of development. Since then, the progress of bilateral economic ties has been increasingly discernible.
Mr. Ong Chong Yi, Minister Economic Counselor of the Embassy of Malaysia, accepted the exclusive interview with China Economic Net on April 22 (Monday).
Mr. Ong has a very good command of the Chinese language. To show his friendliness to the Chinese audience, he insisted on being interviewed in Mandarin Chinese.
Still, to facilitate the communication between the ASEAN nations, as the interview, along with other ASEAN interviews, acts as a prelude to the program of "Close Engagement with ASEAN" launched in 2013 by China Economic Net, we will also provide the interview transcription in English for your reference.
Below is the English version of Q and A of the interview:
1. Malaysia is one of the major trading partners of China in Southeast Asia. There is a long history of trade relations between the two countries. Since the establishment of diplomatic ties in 1974, bilateral economic and trade relations have developed considerably. Could you please brief us some data about value of bilateral trade at present, and bilateral investment size market over the past years, and what are primary fields for the bilateral investments?
- Historically, trade between Malaysia and China has been going on for several centuries. The cultural links that have developed between the two countries are well established. Malaysia is strategically located in the heart of ASEAN. It is also one of the region's most progressive economies. The two countries share many areas of common interest and the leaders of both countries are giving high priority to the development of trade and investment relations between China and Malaysia.
- China has been Malaysia's largest trading partner since 2009, and Malaysia has been China's largest trading partner in ASEAN since 2008. According to Malaysian statistics, trade between the two countries in 2012 increased by 8% compared with 2011, and accounted for 13.8% of Malaysia's total trade.
- On the investment side, several well-known financial institutions such as the Bank of China and the Industrial and Commercial Bank of China are already operating in Malaysia. Many Chinese contractors are also successfully and actively undertaking infrastructure projects.
- However, China's investment especially in Malaysia's non-financial sector is relatively modest. Chinese investment data indicate that Malaysian investment in China up to 2011 totaled US$ 6 billion while China has invested only about US$ 800 million in Malaysia. As such there is much scope for bilateral investment exchanges.
- Manufacturing projects implemented by China's companies in Malaysia were mainly in fabricated metal products, rubber products, machinery and equipment, plastic products, textiles and textile products and transport equipment.
2. Sino-Malaysian economic and trade relations have benefited from complementarity. In what way do you think the complementarity between the two economies showcases and how could we bring the complementarity to a new height?
- On trade, Malaysia has been exporting many types of commodities and high end products to China. Increasingly, more and more Chinese consumers are appreciating Malaysian food products such as the Ipoh White Coffee as these suit well in terms of taste and quality.
- Moving forward, both countries should explore more investment and economic complementarities in the context of Malaysia's Economic Transformation Programme (ETP) and China's Going Out policy.
- Chinese companies have achieved significant progress in a number of high technology and advanced manufacturing industries. There is much Malaysia can learn from China as Malaysia continues to emphasise high technology manufacturing. Malaysia can, in turn, share with China its expertise in areas such as the development of halal products and services where Malaysia has advantage.
- Both countries should continue to encourage their respective enterprises to actively participate in trade and investment fairs that provide a platform for business matching and strategic partnership in the private sector.
- Even as we speak, at the official level, a special task force known as the Malaysia-China Economic Cooperation Working Group (ECWG) is finalizing a bilateral five year programme to map out trade and economic cooperation between Malaysia and China in the next five years. Malaysia and China had signed a bilateral Agreement on Expanding and Deepening Bilateral Trade and Economic Cooperation in 2011. Malaysia also has a Trade Agreement with China signed in 1988 and a bilateral Investment Guarantee Agreement with China in 1988.
3. On a regional basis, Malaysia plays a key role in the economic integration of the ASEAN region. How can China and Malaysia deepen their economic ties within the framework of the ASEAN and work together to promote the construction of the ASEAN Economic Community (AEC)?
- ASEAN is on track to realise a single market and production base with freer movement of goods, services, investment, skilled labour and flow of capital by 2015.
- Once the AEC is realised, China and ASEAN could leverage on the friendly relations and economic strengths of the region to drive regional economic growth and counter-balancing the global economic lethargy.
4. Both Chinese and Malaysian enterprises have a stake in each other's market. For Chinese enterprises seeking to expand in Malaysian market, in particular, for the private sector investment, what advantages could Malaysian government provide and what are the problems and pitfalls the Chinese enterprises seeking to hit Malaysian market should avoid?
- Malaysia is a diverse and welcoming society, accepting and friendly towards foreigners. Malaysia came twelfth in the World Bank's ease of doing business rankings in 2012, particularly in protecting investors where it's ranked fourth.
- Foreign investors in promoted industries enjoy benefits that include the following:
- Pioneer Status- 70% or 100% income tax exemption for 5 to 10 years
- ITA- 60% to 100% investment tax allowance for 5 to 10 years based on qualifying capital expenditure;
- Import duty exemption on raw materials/components;
- Import duty and sales tax exemption on machinery and equipment.
- Foreign companies that set up regional office, global purchasing center and regional distribution center could also enjoy income tax exemption of up to 100% for 10 years.
- However, Chinese companies planning on doing business in Malaysia are advised to familiarize themselves with ethnically diverse country. It would be useful for them to get advice from the embassy and business associations or even talk to the Malaysian business community. Since mandarin and some major dialects are widely spoken by the Malaysian Chinese community it is relatively easier to communicate.
- Malaysia has a strong and transparent legal system. The Kuala Lumpur Regional Arbitration Centre is internationally acknowledged in facilitating trade disputes.
- Under MITI, we have several agencies like MIDA, MATRADE and HDC ready to assist and facilitate if you intend to start a company in Malaysia.
What problems have Malaysian enterprises encountered when they enter the Chinese market?
- Malaysian companies too face problems when doing business in China. Like many foreign companies in other host countries, most of these issues were caused by a lack of knowledge of the local laws, and without conducting proper due diligence before making business decisions.
5. Malaysia has been China's top trading partner within ASEAN for five years in a row since 2008. What potential opportunities could be further explored to expand bilateral economic linkages?
- It is interesting to note that our bilateral trade has grown more than five-fold in the last decade. For the period 2002 to 2012, Malaysia's trade grew steadily with average annual growth rate of 15.7 percent.
- To keep the momentum moving, Malaysia will we should take advantage of Chinese consumers by promoting more Malaysian products with high value added. Malaysia produces high quality jewelry, furniture, rubber and food products that suit the needs of the fast growing purchasing power of Chinese consumers.
- Greater attention will be given to second and third tier cities as the trade and industrial complementarities in these cities are also relatively strong.
- MITI offices in China will also establish closer relationship with relevant business councils, associations and governmental organisations in China to facilitate business matching between companies from both countries.
6. We have noticed that in China, Malaysians are doing business not only in the big cities of Beijing, Shanghai and Guangzhou but in many other smaller provinces and cities. What do you think of the investment environment in China's second or third-tiered cities and what's your expectation in that direction?
- Over the past two decades, we have witnessed sound and rapid development in China, most notably in the Pearl River Delta and Yangtze River Delta Economic zones. Those areas are now almost fully developed and it might be a bit late for Malaysian enterprises to enter now.
- This was one of the reasons why we have chosen to invest in the China-Malaysia Qinzhou Industrial Park. We see great potential in the QIP due to its strategic location in the center of the Beibu Gulf Development Zone-a potential growth area in China, which provides a strategic platform for businesses who seek to gain market access to China on the one hand, and develop a larger footprint in South East Asia on the other.
- It was also because of the QIP that both countries decided to develop another sister park in Kuantan. The "Two Countries Twin Parks" collaboration is the first-of-its-kind between China and a foreign country, which marks an important milestone for economic relations between Malaysia and China. On the selection of industries for MCKIP, we will take into consideration the economic complementarities between both countries and make sure that we will plan for the needs of the future. The expansion of Kuantan Port which is expected to be completed by 2016 would establish a shorter sea route to Qinzhou port and affirm MCKIP's position as a strategic gateway to ASEAN. For the Kuantan Industrial Park, we are expecting to attract RM10 billion in investments and the creation of 7,500 job opportunities upon its full completion by 2020.
- Besides Guangxi, Malaysia has also been in close contact with other provinces/autonomous region including Ningxia, a Hui (Muslim) Automonous region to explore opportunities in Halal products and services. Given the huge potential of Halal market, Ningxia could use Malaysia as a gateway for Chinese Halal products to penetrate the South East Asian market and other international markets, while Ningxia can serve as a platform for Malaysia to gain market access to China via the region.