New investment from Japan to Malaysia may slow down
October 26 2006
NEW foreign direct investment (FDI) from Japan to Malaysia may trickle down from now since many major Japanese corporations have already established their operations in the country and the tough competition from low-cost production countries like Vietnam could be another deterrent.
Tsuneo Tanaka, managing director of the Japan External Trade Organisation’s Kuala Lumpur office, said some 1,300 Japanese companies have already invested in Malaysia since the 1980s.
“All major companies have already invested in Malaysia. Looking back at the last five or six years, the (local) market is saturated. It is difficult to have new Japanese FDI increasing as rapidly as before,” Tanaka said in an interview in Kuala Lumpur.
However, he said Japanese companies have continued to expand their existing business operations in Malaysia and there has been significant re-investment in their expansion programmes.
“Last year, there was a healthy increase in Japanese FDI to Malaysia compared with the year before, increasing by 20 to 30 per cent,” he added.
Unless there are new business opportunities, it could be tough to attract Japanese investors to Malaysia, which was their favourite investment destination even before the launch of the Look East Policy in 1981.
While Malaysia has become an expensive production base due to rising labour and land costs, Vietnam is now turning into an attractive port of call for Japanese businessmen.
“Japanese companies are quite interested in the potential of Vietnam and this is quite understandable because up to now they do not have much presence in Vietnam,” Tanaka explained.
Vietnam, he said, was developing quite rapidly and this meant that there was potential in increasing business opportunities there.
“As far as the investment environment is concerned, especially in terms of labour costs, currently Malaysia has become a middle developed country.
Naturally its labour costs are less competitive compared to Vietnam and other Asean countries,” he said.
Tanaka said labour-intensive companies will naturally opt for cheaper production markets like Vietnam. – Bernama
What if the “may slow down” came out to be a reality? Meaning, Malaysia market will need a facelift in order to be more competitive and gain more foreign investors?