Malaysia is currently taking a relaxed stance in its international economic relations, exercising excessive caution by placing a few eggs in as many baskets as there exist. This attitude can only achieve something — if it achieves anything at all — by default.
This is in stark contrast to former Prime Minister Mahathir’s ‘Look East’ policy, which ran against the mood of the time. The ‘Look East’ policy sought to inculcate productivity and hard work as core values that would drive the economy. The Far East was also a viable option that could be depended upon to drive Malaysia’s economic growth. It was a collaborative partner, and was a source of foreign direct investment and technology transfers for Malaysia.
Japan contributed, to an extent, to the development of the automotive industry in Malaysia. Through agencies like the Japan External Trade Organization, Japan also contributed to capacity building in the country, and Japanese multinational corporations played a huge role in the growth of Malaysia’s electronics sector. But Japan’s current economic reality will not support a ‘Look East’ policy as well as it once did. Japan is in a state of stagnation that it will not recover from in the immediate future. Even in the medium term, Japan will not have the same robustness that it once exuded.
In the rapidly changing global economy, China and India stand out as the two giants that Malaysia will have to contend with. Prime Minister Najib has made official visits to both states, during which he expressed his enthusiasm to pursue economic relations with both countries.
It is not clear how Malaysia wishes to place itself within this matrix. Malaysia’s international economic policy, judging from the many free trade agreements it has signed, indicates a cautious, undirected policy. It is as if Malaysia wants to fill in all the gaps, covering not only current sources of opportunity but also any that may arise in the future. Since Malaysia’s resources are extremely limited such an approach is hardly meaningful. It is certainly not a sharply focused strategy.
Malaysia’s approach toward its economic relationships with China and India is particularly lacking in any clarity. Perhaps Malaysia wishes to maintain an equidistant position from both economies. China’s economy is moving rapidly at present, and is likely to continue to do so in the foreseeable future, notwithstanding its current slowdown. But India cannot be ignored. Although its economy is lumbering along, it holds much promise in the future.
Malaysia will not want to disrupt the delicate balance between both countries by aligning itself economically with India in order to contain any threats from China. China may not be a security threat to Malaysia, but the economic pull China has over ASEAN may not be to the latter’s comfort.
Alternatively, Malaysia could tilt toward Japan since Japan has its own economic interests in Malaysia. But this also may not be to Malaysia’s best interest, as Japan will not allow Malaysia to take advantage of the opportunities that will arise in China.
The prevailing perception among policy makers in Malaysia is that India can be ignored, at least for the moment. But ignoring India will not be sensible in the long term. The poor infrastructure, unhelpful bureaucracy, vitriolic democracy and the untamed labour unions in India persuade many to keep India at arm’s length. Despite these issues, however, US, Korean and Singaporean companies have found India to be a good base for growth.
Malaysia may be reluctant to pursue China and India for fear of being seen to favour either of the ethnic communities in Malaysia, which owe their origins to both countries. The parochial sections of the Malay population may read misconceived messages into any government-sponsored move at establishing closer economic ties with either China or India. Any such move will be intentionally misconstrued as appeasing the relevant non-Malay community in Malaysia and will be conveyed as a betrayal of Malay rights.
As a result, Malaysia will pursue neither China nor India. Nor will it strengthen its current links with both China and India. Very conveniently, however, Malaysia will allow the private sector to determine its choices, as the government will not want to be seen to be leading the way.
A government must take bold steps in establishing the pathways for vibrant economic relations with neighbouring countries. Malaysia, however, has too often shown that it will just as likely choose to close its eyes and face the wall when difficult decisions have to be taken.
Shankaran Nambiar is an economist who consults for national and international agencies. He lives in Kuala Lumpur.