Japan looks to restore faith in Malaysia

Miyagawa believes the bilateral tie between Malaysia and Japan is heading towards a revival, with Dr Mahathir as PM and his commitment to the rule of law

by ALIFAH ZAINUDDIN & SHAHEERA AZNAM SHAH / pic by BERNAMA

PRIME Minister (PM) Tun Dr Mahathir Mohamad has made it no secret of his amity towards Japan.

Since his return to power, the nonagenarian leader has made five official visits to Tokyo in what many have come to describe as his pro-Japanese stance — epitomised by his Look East Policy (LEP).

It is no wonder that Dr Mahathir’s comeback has been touted by some geopolitical observers as “good news” for Japan’s diplomacy in South-East Asia. Amid China’s growing influence, Dr Mahathir’s stunning rise as the world’s oldest leader has restored some balance and stability in the region.

His strident rhetoric and unyielding ways have earned him the respect of other world leaders, particularly those in Asia who secretly hope that Dr Mahathir will take helm in resolving many of the region’s contentious issues such as the South China Sea.

For Japan, whose diplomatic relations with its East Asian neighbours are fragile, a partnership built on trust could see opportunities in trade and investment arising.

Japanese Ambassador to Malaysia Dr Makio Miyagawa admitted that investment into Malaysia has declined in recent years, partly due to waning confidence stemming from political instability in the country.

This has forced Japan to shift its attention towards other Asean countries.

However, with Dr Mahathir as PM and his commitment to the rule of law, Miyagawa said there is a good reason to believe that the bilateral tie between Malaysia and Japan is heading towards a revival.

In an hour-long interview with The Malaysian Reserve, the ambassador spoke at length about his views on Malaysia’s new leadership, changing trade patterns and why Japan is willing to wait for Malaysia to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

I have been working towards good collaborations between Japanese and Malaysian industries, says Miyagawa (pic by RAZAK GHAZALI)

Q: You’ve been the Japanese ambassador in Malaysia for five years now. How would you describe your journey so far?

I arrived in Kuala Lumpur as an ambassador in March 2014, just days after Malaysia Airlines flight MH370 went missing somewhere in the southern Indian Ocean. It was a very tragic incident. The Japan Self- Defence Forces and Japan Coast Guard decided to expeditiously send a rescue operation team. They joined the teams from Malaysia and other countries to find the missing airplane.

It was a good opportunity for the Japanese officers and coast guard members to participate in the international engagement of finding the missing airplane. Since then, I have been working towards good collaborations between Japanese and Malaysian industries.

Malaysia has already exceeded US$10,000 (RM42,015) in the GDP per capita, reaching the status of a developed nation.

However, the trap of the middle-income range is approaching and Malaysia needs to overcome this income gap, particularly via infrastructure building.

For instance, the construction of a power station fills the deficiency of electricity supply, among other fundamental necessities such as water supply, public transportation and housing areas.

Malaysian and Japanese companies have been working very diligently in good collaborations to offer such infrastructure.

Malaysia has also successfully transformed its economy from resource-dependent to technology and services sector-driven, but it could be jeopardised by the turbulence in the South China Sea.

Hence, our government has decided to offer a helping hand to strengthen the capability of Malaysia’s armed forces and coast guards, so that they can increase surveillance to protect the sovereignty in the South China Sea. These are the works that I have been engaged in in the last five years.

Q: How do you see the change of administration in Malaysia last year?

The new administration, led by Dr Mahathir, has made it very clear that transparency, good governance and codes of conduct are extremely important for a country like Malaysia — a country with good economic success.

The Japanese hold on to our principle that if one can succeed in business, it doesn’t necessarily ensure respect for the person by the public. The individual also has to be decent and observe the codes of conduct.

From Japan’s perspective, Dr Mahathir is a good leader, in the sense that he is not just raising the Malaysian economy to the current height, but he has been advocating on the importance of values.

Dr Mahathir has once mentioned that as Asian civilisation is very old, Asians should be confident in its value standards. The only problem is that we do not recognise it.

Now that Dr Mahathir is back and advocating the value standards of the Asian civilisation, I think this would help Asia become economically successful and morally confident in becoming a leading region in the world.

Dr Mahathir (left) has emphasised that he would resuscitate the LEP and the 1st request he made to Abe was to have a Japanese university in Malaysia

Q: It is clear that Dr Mahathir has a great fondness towards Japan. How does Japan, in turn, view Dr Mahathir and the “new Malaysia”?

Dr Mahathir has emphasised that he would resuscitate the LEP, which he advocated many years ago.

The first request he made to PM Shinzo Abe was to have a Japanese university in Malaysia.

For this, we have been trying hard to create a new precedent in our higher education institution, which is to set up the first overseas branch campus outside of Japan.

The universities are taking this seriously to respond to Dr Mahathir’s requests to set up a branch campus in Malaysia, which is going to be next year.

We have also doubled the number of Malaysian participants for the youth exchange programme to Japan and increased their stay to 10 months compared to six months in the previous programme.

I think since the commencement of the LEP, the two countries are able to find similar social values and codes of conduct, and hopefully, these value systems would expand not just here, but also in South-East Asia.

In the near future, we hope we will be able to find a common Asian value, civilisation and codes of conduct that will help the region enjoy a high level of decency and grace.

Q: Japan is Malaysia’s fourth-largest trading partner. With the trade war still ongoing, do you see an opportunity between Malaysia and Japan to capitalise on the trade dispute?

As for the trade war between the US and China, I think the relationship between Japan and Malaysia has not been anyway affected by the conflict between the two nations.

Many established Chinese companies have started to shift their base from China to South-East Asia, while Japanese companies have already shifted their businesses to enjoy the South-East Asian hospitality, including Malaysia.

I don’t think the US-China trade war is affecting Malaysia-Japan trade negatively and the Asian economic growth as a whole.

However, we have found a very interesting situation with the trade war. The Chinese economic system is very unique. Other nations would allow foreign companies or investors to purchase shares in their companies.

The Malaysian government, for instance, does not impose any serious restriction on outside companies to purchase or invest some shares in Malaysian companies.

But this is not the case in China. It is not easy for foreign companies to purchase shares in Chinese companies. Among other things, foreign companies cannot purchase land in China whereas the Chinese can purchase land in other countries including Japan.

Not just that, the Chinese government has been imposing the transfer of technology forcefully from foreign companies based in China to Chinese companies or the government.

I don’t think that this difference is sustainable. Their system is not common and is different from the rest of the world.

If it means that this trade war will lead to an accelerated harmonisation of Chinese companies into the global market and system, I think it would be beneficial in the medium and long terms for the whole region in Asia.

Q: How would you describe the change in Japan’s investment approach in Malaysia? It used to be heavily focused on the manufacturing sector but now there is a shift towards the services sector?

I think as the Malaysian economy becomes more technologically driven, the investment areas are shifting to more high-tech industries. There is also a variety of investment from Japan in the services sector, distribution, finance, telecommunications and insurance.

Given that Japanese investors have been focusing on the Asean market, setting up a base in Malaysia has been a priority as the product and services could be exported to other South-East Asia nations.

Asean has been integrating its market by lowering border barriers and harmonising the system, which makes it easier for Japanese companies to target the Asean market as a whole.

As we are going to host the Olympic and Paralympic Games next year, 1 of the main elements in hosting the games is the standard of Malaysian palm oil, says Miyagawa (pic by MUHD AMIN NAHARUL)

Q: Apart from the issuance of the Samurai bond, is Japan looking at alternative ways to extend a helping hand to help Malaysia address its financial issues?

Yes, and it is expressed in the increase of investment from Japanese companies.

One of the Japanese companies, Mitsui & Co Ltd, has already invested in IHH Healthcare Bhd, which used to be shares owned by Khazanah Nasional Bhd, and it could be seen as a helping hand to Malaysia.

Besides shareholding investment in Malaysian companies, the Japanese government has also offered some loans or grants.

In the last few years, Japanese companies have invested in projects such as the power plant in Port Dickson, Negri Sembilan, the Pahang-Selangor raw water transfer tunnel and other big projects, assisted by Japanese government loans to Malaysia with a minimal interest rate.

We had also offered, although not in financial term, two patrol vessels to Malaysia.

Our coast guards decided to transfer two patrol vessels about two years ago and they have been used to protect Malaysia’s sovereignty and fighting against terrorism in the east coast of Sabah.

Q: Japan is importing about 500,000 tonnes of Malaysian palm oil each year. As the Malaysian Sustainable Palm Oil has been recognised by the Japanese Olympic Council, are there plans to increase imports of palm oil in the near future?

Sixty percent of our imported palm oil is from Malaysia and we have been using the vegetable oil for a variety of purposes.

As we are going to host the Olympic and Paralympic Games next year, one of the main elements in hosting the games is the standard of Malaysian palm oil.

Malaysia’s sustainability certification has already been accepted as one of the important standards.

For this, we have already discussed this matter with Primary Industries Minister Teresa Kok and she is considering to visit Japan soon, to discuss further collaboration on palm oil.

Q: The CPTPP has already taken effect, but Malaysia is still considering the ratification of the trade deal. Has Japan spoken to representatives in Malaysia to ratify the agreement quickly? How important is the CPTPP in the context of the trade war?

We believe that the CPTPP is not just beneficial to Japan but to all members, and for that, Malaysia will join the trade pact.

The market is big, and the added GDP of CPTPP members including Malaysia exceeds US$10 trillion, while the trade amounts between the members including Malaysia already exceed US$5 trillion.

It is a huge potential and if Malaysia joins, those are the market that could be extended as potential buyers and investment partners for Malaysia.

If Malaysia opts out and stays away, but decides to join in the future, it will have to renegotiate with all CPTPP members. It is a very complicated process and I don’t think Malaysia should do it again.

We believe that if the World Trade Organisation (WTO) could move like it did 30 years ago, negotiations through the WTO would be the best platform to discuss globalisation, trade and investment liberalisation. However, the WTO has been moving at a slow pace.

Regional trade investment and liberation process are very important to galvanise economic invigoration.

We understand Malaysia’s position very well, so we will wait with patience the day Malaysia can join. Malaysia already signed the agreement; it is only a matter of time.