Trade between Japan and Malaysia is expanding. In the first half of 2022, it reached about $20 billion, a 30% increase compared with before the COVID-19 pandemic. In 2021, Japan’s direct investment in Malaysia reached $2.1 billion, the highest since 2015.
Currently, about 1,600 Japanese companies are operating in Malaysia and half of them are manufacturing companies. According to a Japan External Trade Organization survey, about 43% of the Japanese companies in Malaysia would like to expand their business in the next one to two years. Specifically, there are more hoping to expand “sales functions” and “production functions for high-value-added products and general-purpose products” as compared with other members of the Association of Southeast Asian Nations, indicating the diversification of functions.
After the COVID-19 pandemic, most companies have added the concept of risk management to their supply chains, which had been managed mainly by costs. In addition, U.S.-China friction and Russia’s invasion of Ukraine have made economic security a top priority for governments and businesses. From a geopolitical perspective, it can be said that building a resilient supply chain to prepare for unforeseen circumstances has become more important. Environmental, social and governance factors are also beginning to have a significant impact on supply chains. Meeting human rights and decarbonization requirements in supply chains is now seen as a condition of investment, financing and dealing with customers.
It is recognized that responding to sustainability, including ESG factors, is an important management issue that not only reduces risks, but also provides opportunities for profit. From the perspective of medium- to long-term improvement of corporate value, it can be said that consideration is being given proactively in addressing these issues.
The business relationship between Malaysia and Japan in the service industry is deepening. Under Malaysia’s steady economic growth, consumer purchasing power has been increasing. In recent years, there has been a significant increase in the number of Japanese companies interested in markets and companies with potential for growth, including in the halal sector.
JETRO is also strengthening its efforts in the field of digital transformation. There are increasing numbers of successful business developments in Malaysia and other countries under the partnership between Japanese digital companies and Malaysian partners. As a multiethnic country, Malaysia in particular will play an important role as a test bed when Japanese digital companies expand globally.
As a result, the business relationship between Japan and Malaysia is steadily strengthening and diversifying. The year 2022 marks the 65th anniversary of the establishment of diplomatic relations between Japan and Malaysia and the 40th anniversary of Malaysia’s Look East Policy. About 26,000 people have so far been dispatched to Japan to study at universities and companies under the Look East Policy. Malaysians who know Japan well tend to play an active role in industry and have built partnerships. In many cases, companies that have business relationships have a deep mutual understanding.
Collaboration between Malaysian and Japanese companies with such relationships of trust has great potential to overcome new social issues and allow new business opportunities to be seized, including in digitalization, in the post-COVID-19 era. JETRO would like to maintain close dialogue with the Malaysian government, its agencies and industry and support new business opportunities through collaboration between Malaysian and Japanese companies.