This article first appeared in Forum, The Edge Malaysia Weekly on November 20, 2023 - November 26, 2023

The recent visit to Malaysia, on Nov 4 and 5, by Japanese premier Fumio Kishida is a good reminder of the importance of the Malaysia-Japan relationship from a socioeconomic perspective.

Japan ranks third among all countries in terms of total foreign direct investment (FDI) inflows to Malaysia (RM9.6 billion), which covers manufacturing, services and financial instrument investments. It ranks behind the US (RM37.8 billion) and Singapore (RM11.3 billion). In terms of FDI position or FDI stock, which is the accumulated investment of a country into Malaysia, Japan ranks fourth after Singapore, the US, and Hong Kong. This is a reflection of the long history of Japanese investments into Malaysia.

I had the opportunity to visit the Konica Minolta factory in Ayer Keroh, Melaka, in 2019 when I was deputy minister of international trade and industry and I was impressed by how the company invited its local suppliers such as Guppy Industries, a plastics manufacturer, and Pacestar, a precision engineering components manufacturer, to locate themselves in the same area to increase manufacturing efficiency.

Japan’s investments in Malaysia go beyond the manufacturing sector. Recently, Daiso, the Japanese household products supplier, announced an investment of RM1 billion to build its largest global distribution centre (GDC) in Port Klang, Selangor. This is Daiso’s second international hub after China.

Malaysia will continue to benefit from Japanese FDI inflows in terms of physical investment as de-risking strategies continue to take place.

Japanese investments in Malaysia are also flowing in through the service sectors. JCB, the largest Japanese international payments service provider, made an investment of US$5 million (RM23 million) and entered into a partnership with Soft Space, a Malaysian fintech company based in Kuala Lumpur, that focuses on various payment solutions, including white label e-wallet systems and its flagship “Tap to Phone” technology for secure payments via PIN. Given the high savings rate in Japan, and the need to deploy some of this capital to seek higher returns outside Japan, Malaysia would be an attractive destination for some of these investments, including in the private equity (PE) and venture capital (VC) space.

Japan was Malaysia’s fifth-largest export market at slightly over US$18 billion in 2022, with electrical and electronics and oil and gas products leading the way. The market for Malaysian food continues to grow at a healthy rate. The Bangi Golf Resort, in my former parliamentary constituency, provides vacuum-sealed rendang and other varieties of curry to Isetan in Japan. Such opportunities will grow with better business matching and improved marketing on the part of Malaysian companies.

Given the high level of automation and extensive use of robotics in the manufacturing sector in Japan, its companies in Malaysia are set to play key roles in the “tech-up” mission in the New Industrial Master Plan (NIMP) 2030. The recent memorandum of understanding signed by Japan’s Ministry of Economy, Trade and Industry (METI) and the Japan Organization for Metals and Energy Security (JOGMEC) with Petroliam Nasional Bhd to strengthen collaboration on cross-border CO2 transport for the purpose of carbon capture and storage (CCS) projects is part of a long-standing relationship between Malaysia and Japan in energy security and now, the sustainability and energy transition fronts.

The Japanese business community in Malaysia is a very vibrant one with a long history in the country. The Japanese Chamber of Trade & Industry (JACTIM) is celebrating its 40th anniversary in Malaysia this year.

In the education space, Japan continues to provide undergraduate and postgraduate scholarships to Malaysians under the Monbukagakusho programme. The number of yearly scholarships of 20 to 30 may not be large, but accumulated over a long period of time, this scholarship has managed to produce many distinguished alumni, including Datuk Seri Mukhriz Mahathir, the former menteri besar of Kedah. The Alumni Look East Policy Society (ALEPS), comprising Malaysian students who have studied in Japan, has over a thousand members and it celebrates its 35th anniversary this year.

In the social space, the Bon Odori cultural festival remains one of the most popular festivals in Malaysia with thousands of eager participants every year.

This is not to say that there are no challenges in the relationship on the socioeconomic front. Operations of some Japanese companies, such as Panasonic and Sony, have been scaled down because of the global strategy of these firms. The release of treated water from the Fukushima Daiichi nuclear plant was the subject of viral fake news to the extent that some people were refraining from eating sushi even though the release of the treated water had been approved by the International Atomic Energy Agency (IAEA) and Malaysia gets very little of our raw fish from Japan.

I am optimistic that these are minor bumps in the road to a closer relationship between the peoples and the companies of both countries as we navigate an increasingly complex global landscape.

Personally, I am grateful for the presence of Books Kinokuniya at KLCC, arguably the best bookstore in Malaysia, and closer to where I live, the Tsutaya bookstore at Pavilion Bukit Jalil.

Professor Dr Ong Kian Ming is director of the philosophy, politics and economics programme at The School of Law and Governance, Taylor’s University. He can be reached at [email protected].

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