Nurturing Prosperity: Delving Into Malaysia-Japan Partnership

As Malaysia and Japan pioneer this joint trajectory, their story unfolds as an inspiring narrative of cooperation, innovation, and a shared commitment to shaping a better future.

Japan and Malaysia recently marked the 66th anniversary of their diplomatic and economic ties, highlighting a robust relationship built on beneficial trade agreements, economic collaboration, technical exchanges, and social cooperation. This enduring partnership has created a diverse tapestry of programs and strategies aimed at fostering regional stability and cultivating one of the world’s most productive bilateral relationships. The celebration underscores the positive outcomes of their collaboration, spanning economic growth, technological advancements, and social development, contributing to global harmony and prosperity.

 

Historical Background

Economic and diplomatic ties between modern-day Malaysia and Japan have roots dating back to the 15th century, notably between the Malacca Sultanate and the Ryukyu Kingdom. However, the relationship gained significant depth after Malaysia gained independence in 1957 and Japan liberalized its foreign investment rules in 1969.

A pivotal long-term strategy, Malaysia’s Look East Policy (LEP), emerged as a joint effort over 40 years, with Japan actively supporting its implementation through official development assistance (ODA). This combination has played a crucial role in building Malaysia’s industrial base, enhancing technological capabilities, and developing key infrastructure, including highways, airports, and water treatment plants.

The LEP has also facilitated the exchange of knowledge and skills, with approximately 26,000 Malaysian students and government officials studying and training in Japan. The expertise gained abroad has been instrumental in driving Malaysia’s progress. Additionally, around 1,500 Japanese companies operating in Malaysia have benefited from LEP support for their investments and expansions in the country.

A significant milestone in their collaboration is the Malaysia-Japan Economic Partnership Agreement, signed in 2005. This historic agreement, the first of its kind for Malaysia, covers a wide range of areas, including trade in industrial and agricultural goods, trade in services, investment, rules of origin, customs procedures, intellectual property, and competition policy. This agreement has further solidified the economic and trade relationship between Malaysia and Japan, fostering mutual benefits and cooperation.

 

Peace and Security Cooperation

Both nations have emphasized their dedication to promoting peace, stability, and prosperity on a global and regional scale, emphasizing their commitment to upholding international law, especially the United Nations Charter.

To enhance security cooperation, both countries recognize the importance of sharing strategic perspectives and have decided to establish a Strategic Dialogue. This initiative aims to encourage a collaborative approach to addressing various regional and international challenges.

In reaffirming their commitment to security, both parties have agreed to continue engaging in dialogues between their defence authorities. Additionally, there is a commitment to advancing training and exchanges between the Self-Defense Forces and the Malaysian Armed Forces. Ongoing collaboration under the Agreement concerning the Transfer of Defense Equipment and Technology, particularly in Humanitarian Assistance/Disaster Relief (HA/DR) capacity building is a necessity for both countries.

The recent signing of the Exchange of Notes for the Official Security Assistance (OSA) grant aid for the benefit of Malaysia’s armed forces has been positively received. The mutual intention to strengthen cooperation between the Japan Coast Guard and the Malaysian Maritime Enforcement Agency, with a focus on collaborative efforts in maritime security, is emphasized. These initiatives underscore the shared commitment of both nations to enhancing security and addressing challenges through coordinated efforts and strategic partnerships.

 

Trade and Economy

In 2022, Malaysia and Japan sustained a robust economic relationship with trade valued at RM181.51 billion (USD41.21 billion), representing 6.4% of Malaysia’s total trade and making Japan Malaysia’s fourth-largest trading partner for eight consecutive years. Japan has been a significant source of Foreign Direct Investment (FDI) in Malaysia, particularly in manufacturing projects since the 1980s. As of June 2023, 2,778 manufacturing projects have been implemented, amounting to a total investment of RM91.89 billion (USD27.43 billion).

Malaysia has played a crucial role as a primary exporter of resources to Japan, encompassing lumber, rubber, and liquefied natural gas. Over time, Malaysia’s exports to Japan have evolved to include value-added products like furniture and surgical instruments.

The Malaysia External Trade Development Corporation highlights the significant contribution of Japanese solution providers, including Fujitsu, Hitachi, and NEC, to the development of Malaysian small and midsize enterprises. This collaboration has notably enhanced the production and export of semiconductors, leading to increased productivity, improved quality, and the development of valuable employee skills. Additionally, MATRADE recognizes emerging export trends in the services sector, particularly in areas such as fintech, e-commerce, gaming, and digital content.

The enduring and mutually supportive relationship between Japan and Malaysia serves as a model of cooperation. Initiatives like the Look East Policy (LEP) have played a pivotal role in fostering economic and social benefits for both nations. This partnership continues to exhibit great potential, growing in sophistication and expanding its reach, contributing to the ongoing success and collaboration between Japan and Malaysia.

The Malaysian Investment Development Authority (MIDA), the primary agency for investment promotion and development in the country, has reported impressive approved investments in the first quarter of 2023, totalling 71.4 billion ringgits ($16.19 billion) across various sectors. This includes 14 projects with Japanese participation valued at $46.99 million under MIDA’s oversight, expected to generate employment opportunities for hundreds of individuals.

A more recent development involves Malaysia’s mid-2023 Trade and Investment Mission to Tokyo and Osaka, which successfully secured potential investments amounting to $5.23 billion. These investments are directed towards sectors such as carbon capture and storage, electric vehicles, and electrical parts. Notable companies involved in these ventures include Omron Corp., NHK Spring Co., and Japan Petroleum Exploration Co.

To facilitate business and attract both foreign and domestic investment, the Malaysian government, in July, introduced three special passes for strategic investors, digital nomads, and other skilled professionals. This move aims to streamline processes and create a more favourable environment for talent, fostering increased investment in the country.

 

Environment and Science

Both nations underscored the significance of advancing science, technology, and innovation as catalysts for economic growth and job creation. They praised diverse programs in these domains and reiterated their commitment to furthering cooperation in science and technology, drawing on experiences like the Strategic International Collaborative Research Program (SICORP) as well as Science and Technology Research Partnership for Sustainable Development (SATREPS). Notably, ongoing support was affirmed for the Malaysia-Japan International Institute of Technology (MJIIT), recognized as a hub for Japanese-style engineering education in the ASEAN region. The establishment of the Malaysia-Japan Linkage Office at MJIIT was acknowledged as a step to fortify the strategic synergy of this collaboration.

Furthermore, a shared dedication to promoting sustainable development and addressing climate change was emphasized. Japan recognised Malaysia’s National Energy Transition Roadmap and dedicated it to collaborative efforts within the “Asia Zero Emission Community” platform. This collaboration aims to achieve decarbonization while balancing economic growth and ensuring energy security, encompassing stable LNG supply and potential cross-border transportation of carbon dioxide (CO2) for carbon dioxide capture and storage (CCS), adhering to relevant international agreements. Additionally, the cooperative initiatives between the Japan Organization for Metals and Energy Security and PETRONAS in this context were commended.