Japan FDI plays pivotal role in Malaysia’s economic success: Grant Thornton - MIDA | Malaysian Investment Development Authority
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Japan FDI plays pivotal role in Malaysia’s economic success: Grant Thornton

Japan FDI plays pivotal role in Malaysia’s economic success: Grant Thornton

22 Jan 2024

Japanese foreign direct investment (FDI) has played a pivotal role in Malaysia’s economic success with 2,778 manufacturing projects worth a total of RM91.89 billion implemented as of June 2023.

Grant Thornton Malaysia PLT Specialist Japanese coordinating director Toshihiko Takagi said the positive impact for Malaysia includes job creation, technology transfer and infrastructure development.

“Japan needs to grow together with other countries as it is currently experiencing a low birthrate and an ageing population. Malaysia has a high GDP (gross domestic product) growth rate of 8.7% in 2022, making it a leading investment destination,” he told SunBiz in an exclusive interview.

Currently, he said, there are 1,602 Japanese companies in Malaysia, comprising 764 manufacturing firms, primarily specialising in electrical and electronic product manufacturing.

“Toyota cars established UMW Toyota Motor with UMW Holdings and others in 1982. In addition, Daihatsu Motor, a subsidiary of Toyota, operates Perodua. Perodua employs about 11,500 employees and 70,000 people in total at suppliers and authorised dealers.

“As a retail company, Malaysian people are also familiar with Aeon. It has over 17,000 employees and the Aeon group consists of many stores including 34 merchandise stores, and 28 Aeon Malls,” he said.

Takagi said the bilateral relationships forged have played an important role in supporting Malaysia, particularly in areas such as employment and the development of living infrastructure.

He said Malaysia is an attractive destination for Japanese investment due to among others its political stability, robust legal and regulatory frameworks, access to skilled labour, and market potential.

“As mentioned, Malaysia has a high GDP growth rate of 8.7% in 2022. The market is expected to grow as the middle-income group is increasing,” he added.

Additionally, Takagi said the level of education in Malaysia is high, and the quality of human resources is considered to be excellent, making it easier to attract talented people in technical fields.

“Malaysia has an advanced logistics environment. In particular, Kuala Lumpur, with its concentration of airports, ports and railways, is strongly positioned as a logistics hub in the Asia-Pacific region, making it a very attractive environment for manufacturing and logistics companies,” he added.

Notably, the Johor Singapore Special Economic Zone (JS-SEZ) announced recently will be attractive for foreign companies, Takagi said.

“Detailed information on this is not available, but it is hoped that the system will be attractive to foreign companies, including Japanese companies,” he added.

He mentioned specific industries that are particularly attractive to Japanese investors and how they align with the country’s development goals and comparative advantages.

“In Japan, AI and IoT are considered major investment opportunities. In Malaysia, industry4WRD has been announced and the environment is conducive to cooperation and growth with Japan.

“One example is Hitachi’s acquisition of a Malaysian company for AI and SaaS to expand our IoT business in 2020. Further companies are expected in the form of collaboration, JV and M&A,” said Takagi.

He said Malaysia offers incentives such as pioneer status, investment tax allowance and the upcoming Global Services Hub Tax perk (which offers companies that establish global service centres in Malaysia a reduced income tax rate for up to 10 years).

The Principal Hub (Global Services Hub tax incentive after 2024), he remarked, is likely to become even more attractive in the future as Asean is expected to grow.

Malaysian Investment Development Authority’s presence in Tokyo and Osaka also provides support for Japanese businesses, said Takagi.

Furthermore, he added, Malaysia addresses sustainable and responsible investment, including environmental considerations, social impact, and corporate governance practices which aligns with Japan.

“Disclosure of sustainability information became mandatory in Japan on 31 January 2023. Listed companies are required to disclose proactively, and sustainability has become an extremely important issue in terms of dealing with business partners and securing human resources,” Takagi said.

Source: The Sun