Malaysia fishing for Indian
investment By Arun Bhattacharjee
NEW DELHI - In the past decade,
more than 19 trade delegations from Malaysia
have visited India, including one led by the
present prime minister, Abdullah Ahmad Badawi, mostly to
negotiate palm-oil prices, road-construction contracts or tariff
reductions on products imported from Malaysia - but never
seeking serious investment. For the first time, a Malaysian
delegation last week made the journey to India with the
intent of wooing private investors.
Despite India's push for Malaysia to become a
member of the Non-Aligned Movement (NAM) - a grouping
of 115 countries representing the interests of developing
nations - at the eighth NAM summit in Zimbabwe in
August, and Malaysia's reciprocal effort, recommending
that India be granted observer status in the Association
of Southeast Asian Nations (ASEAN), relations between
the two countries have witnessed more troughs than
crests. Even India giving the Jawaharlal Nehru
Award for international understanding to former prime
minister Dr Mahathir Mohamed, who ruled Malaysia for more than 21 years, did
not change the relationship for the better.
India's industry organizations feel that
Malaysia's desire to take bilateral relations to the
investors' level has been influenced largely by India's
close relations with Singapore and the country's growing
economic strength. But a senior official of the
Confederation of Indian Industry (CII) says there is a
lack of confidence among Indian industry about investing
in Malaysia, pointing out that few ASEAN countries have
made any major investments in Malaysia - although their
trade relationships have improved considerably.
That is perhaps one of the
reasons the delegation first went to Chennai and used
the Tamil ethnic card to invite investors from southern
India, where information-technology, engineering and auto-component
industries have proved to be of global standard.
Malaysia has a sizable Indian population, which along
with the Chinese and various other ethnic groups,
accounts for 50% of Malaysia's 24 million people.
Led by Tan Ah Yong, director of the
Malaysian Industrial Development Authority, the nodal agency
for promoting investment, the delegation asked Indians
to invest directly or through joint ventures in
sectors such as machine tools, plastic-injection machines,
robotics and industry automation equipment, stressing
that with Malaysia as a gateway, India would have access
to a market of 500 million people among the 10 ASEAN
member countries.
Although India's
private investment in Malaysia was first made in 1968 by
a premier Indian company, Godrej, government
involvement increased through joint ventures in Malaysia during
the 1970s and early 1980s, in the areas of palm-oil
refining, power generation and supply, the development
of railway tracks and civil construction, as well as a
50:50 joint venture between the Indian Oil Corp
(IOC), a government-owned Fortune 500 company, and
Malaysia's Petronas.
But
commercial relations between the two countries touched an all-time
low in 2003 when then-new Prime Minister
Abdullah Badawi scrapped a US$121 million railway contract
given to India's IRCON after two years of
frustrated progress in building and doubling fast-railway tracks in
the north of Malaysia near the border with Thailand, as part
of the Trans-Asian Railway.
This has
contributed to the reluctance of Indian investors to put their
money into Malaysia. An Indian Industry Ministry source
says that in the past decade, when India really
needed foreign investment, only five of the 135 joint-venture
memoranda of understanding signed by Malaysia actually
took off, accounting for only 0.80% of the total number
of joint ventures agreed on between 1991 and 2000, and
less than 1% of the capital - mostly invested in fuel,
power generation, oil refining and telecom.
In May 2000, IOC and Petronas signed an agreement
to import 1.5 million tons of Malaysian "sweet crude"
for $300 million, but the deal was killed by a lack of
terminal facilities in Malaysia. Meanwhile, two major
private companies from India are willing to sign joint
ventures for oil and gas in Malaysian waters, but are
not sure how much freedom they will have. An Indian
diplomat earlier posted in Malaysia, who does not wish
to be named, says the cost of capital in Malaysia is
almost as high as 30%, because the Malaysian partner who
will be holding a mandatory minimum of 30% equity, would
prefer to have that 30% without investing a penny. This
happened in many cases, with Taiwan suffering the most.
The most recent fiasco was a
joint venture between the private arm of the India's
Space Research Organization, Antrix, and Maxstar, a
Malaysian private company that develops micro-satellites for Malaysia's
broadcasting networks. After some initial progress, the
project was axed, as Malaysia preferred another
technology, in spite of the joint venture.
But
a senior official of India's Investment Promotion
Board says foreign investment is more often than not
reciprocal, and increases with confidence. Singapore has
already committed $3 billion in investment in India over
the next five years, and Thailand is making moves toward
New Delhi as well. Naturally, Indian industries are keen
to invest in Singapore, Thailand, Indonesia and China,
but not in Malaysia, in spite of its having better
infrastructure support than any of its ASEAN
counterparts, barring Singapore.
Indo-Malaysian
trade in 2000 was $2.49 billion, of which $2.05 billion
was made up of Malaysian exports to India. This figure
has come down, as there are more competitors in the
palm-oil segment today, which constitutes the bulk of
Malaysian exports to India, besides crude petroleum and
natural gas of recent origin.
On the other hand,
if India really wants to enter ASEAN as a major trading
partner and meet its ASEAN trade target of $30 billion
from the current $10 billion by 2007, investment in the
region could prove to be a sound policy. China is aiming
for $100 billion in trade with ASEAN countries by the
end of 2005.
Sources in the Indian
Foreign Office say New Delhi expects an improvement in
relations with Malaysia now that Mahathir has retired,
as Abdullah Badawi is unlikely to be under the same kind
of pressure that Mahathir was under to balance his
relations with India against strong nationalist Malay
sentiments, mostly because of his part-Indian origin.
But in spite of
his grandstanding against India, Mahathir did get Malaysian
air force pilots trained on MiG-29s by India, and continued to
support a defense-cooperation agreement that involves training
of the army, navy and air force, besides the supply of
equipment and spares for its MiG fleet.
Arun Bhatttacharjee, post-graduate in mass
communication from the University of Calcutta and University
of Minnesota, authored Indian Press from Profession to
Industry, Dateline Mujibnagar (Indo-Pak war of
1971), Chasing the Missing Link,
Communication Technologies, and
Gender Bias in Reporting: A Journalist's
Handbook.
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