It’s all about China now, but Japan was once Malaysia’s East

Japan was Malaysia’s first Asian role model, but China has quietly displaced its importance


Fifteen years ago, Ahmad welcomed four special guests from Japan into his home in the suburbs of Bandar Utama, just outside Kuala Lumpur, where he lived with his parents. The visitors had travelled all the way from Tokyo just to meet him.

Ahmad was a 26-year-old executive at a multinational company, where he had been working for three years, taking home RM6,000 per month. He played guitar and supported the Liverpool Football Club. A Liverpool poster in his house drew remarks from his Japanese visitors.

His visitors’ interest in his interests continued when Ahmad brought them to his office in Ampang where they also noted the model of the Ferrari 360 on his desk, along with the snapshots on his wall and even what he wrote on his calendar.

If this close scrutiny of Ahmad’s habits and interests seemed like a group of scientists observing a laboratory subject, it was because the visitors were, in fact, scientists doing market research for their company’s next big product.

They came from Honda Motor Co Ltd, and Ahmad was what they call a “personagraph sample”. He was among a few others in South-East Asia who had been carefully selected as assessment subjects to conceptualise a new generation of the Honda Civic.

The eventual product — the seventh generation Honda Civic — launched in 2003, sold over 58,000 units in Malaysia within its first few years, and has since been recognised as the market dealer in the non-national mid-sized sedan segment.

This attention to minutiae, is Japanese precision.

A New Economic Order

Japanese ingenuity continues to be a marvel for the island nation. Home to the Shinkansen bullet train, the latest robotics technology and Pokémon, Japan’s hi-tech prowess is recognised the world over.
Despite its revered credentials,

Japanese technology is not a proven selling point. When pitted against a more cost-effective product that serves the same purpose, it has instead — on more than one occasion — backfired.

Across the world, the award of mega infrastructure contracts to Chinese corporations in Indonesia, Nigeria and Malaysia point towards a new Mecca in the East.

As cash-strapped developing economies race towards high-income status, China’s economical persona seems more appealing than Japan’s venerable work ethic. Cost is where Japan loses in these multibillion dollar bids. In desperate times, quality does not always matter if the price isn’t right.

Between 2005 and 2013, Chinese foreign investments expanded from just eight countries to nearly 40 countries, from New Zealand to Chile. In 2000, five states considered China as their largest trading partner; today, over 100 countries do — including Malaysia.

China’s rapid expansion may have affected Japan’s odds of opening up to new markets, especially in Africa and Asean. However, not all is lost for the Abe administration.

Data from US-based risk consultant firm Kroll Inc showed that while China was the top bidder in Asean between 2014 and the first-quarter of 2017 with 86 deals worth US$15.3 billion, by volume, Japan led with 182 deals worth US$11.8 billion.

In short, China may be getting all the attention, but Japan still has strings to pull.

Changing Game Plan

The Japanese have too much pride in their advancements to bow down to cost pressures. The China-Japan bidder rivalry has been largely focused on mega project deals, which often puts China on the winning end.

But a more comprehensive observation of both countries’ tactics reveals two separate minds playing a common game — and from this view, Japan has every chance of victory as the Chinese do.

In Malaysia, the number of Japanese foreign direct investments (FDIs) into Malaysia have eased due to the rise in domestic demand in neighbouring economies such as Thailand, the Philippines and Vietnam.

Data from the Japan External Trade Organisation (JETRO) showed that Japan’s FDI to Malaysia fell 51.3% to US$1.41 billion (RM6.03 billion) in 2016 from US$2.9 billion in 2015, while investments into Thailand, the Philippines and Vietnam grew by 3.5%, 52.1% and 28.9% respectively.

The focus of Japanese FDIs into the country has also shifted from a major tilt in the manufacturing sector to a balance between the manufacturing and services segments.

To date, 50% of the 1,400 Japanese companies in Malaysia are in the industrial sector, while an increasing percentage of them are in services.

Casual wear retailer Uniqlo Malaysia strikes as a prime example of this Japanese swing.

When its first flagship store opened at Fahrenheit 88 in 2010, Uniqlo MD for Asia and Japan Naoki Otoma said the company plans to have 10 stores by 2014 — an average of 2.5 stores a year. Today, Uniqlo boasts 40 outlets, bringing its average outlet opening per year to 5.7 stores.

Its unique take on modest fashion, with Malaysian-sweetheart Yuna as ambassador of its Hana Tajima collection, seems to blend well with the young hijabis in the country.

“Uniqlo does not sell those kinds of products elsewhere, only here, in Muslim countries,” JETRO Kuala Lumpur MD Akira Kajita told The Malaysian Reserve when met recently.

Japan’s interest in the Muslim market does not stop there. Kajita went on to talk about Japan’s interest to bring in its flavourful halal wagyu beef into the local market.

This is in line with Prime Minister Shinzo Abe’s vision to lift Japan’s agricultural exports to ¥1 trillion (RM40 billion) by 2019.

“At the moment, it is at ¥850 billion, so we still need to increase it by ¥150 billion.

“Usually, the share of Japanese exports to Malaysia is 1% so by that time, we expect to increase our agricultural exports to Malaysia to ¥10 billion,” Kajita said in an assuring manner.

The Verdict

The value of investments may have declined in recent years, and Japan may not be Malaysia’s top pick as it once was, with China in the way.

But the Japanese, with their meticulous manner and innovative minds, will strive on as they have done so frequently.

“Of course, we are worried [by Chinese investments into Malaysia] but we have to compete by offering better products and services.

“Ultimately, it is Malaysia’s decision, but we are confident in the quality we have to offer,” Kajita said.