Article

By: Peter Kane, Austrade Senior Trade Commissioner, Kuala Lumpur
Date: 1 November 2006

An Australian company looking for new opportunities beyond a home market of only 20 million has an  apparent myriad of options. A global marketplace in excess of 200 countries and many markets within markets - the State of California, even the city of Los Angeles - may seem more than enough to satisfy some would-be exporters. But realistically, more far-flung markets, such as Anguilla, Benin and Comoros, are for a select and adventurous few.

Enter Malaysia.

Just five hours from Perth and less than eight hours from East Coast capitals, Malaysia is already home to 4,000 Australian exporters. After Singapore, Malaysia is the most developed economy in Southeast Asia. Per capita income approaching US$5,000 and growth of 5-6 per cent pa provide an excellent platform for the introduction of diverse Australian products.

Impressive national income figures and strong economic growth are just part of the attraction of Malaysia - consider, too, universal English language competence in the international business community, Common Law, familiar legislative structures for business and a strongly pro-business Government. Of special relevance to Australian business, especially investors, is that the political climate is now very healthy indeed. More on investment later.

Australia's exports to Malaysia now total about AUD3.5 billion, with the share of services approaching AUDI billion. As in most of Australia's other major markets, commodities are strongly represented - wheat, sugar, dairy, aluminium, copper and zinc. However, prospective exporters across the spectrum of Australian industry should be alert to what Malaysia has to offer. SMEs working with Austrade's Kuala Lumpur office in recent months have succeeded in selling everything from livestock, groceries and wine to mobile content, communications systems and business training services, automotive tooling, refractory products and waste water technology.

Companies often have several market entry options. Many are attracted to trade shows as both an entry option and as a tool to consolidate a market presence. Management of trade shows is therefore a high priority for Austrade staff in Kuala Lumpur. Over the next few months, our trade show calendar includes Study in Australia (education) in October, MAHA (livestock and related agricultural products and services) in November, and the Malaysia Jewellery Festival, in March.

And it is not just shows within the Malaysia market that can be exploited. Often, an easier and very effective option for exporters is to work with Austrade to bring buyers to Australian shows. Good examples of that co-operative approach were Wine Australia in August and Fine Foods Australia in September.

In yet another variation of this, we can take buyers to third countries where specialist shows are often bigger than in Malaysia – such as Food and Hotel Asia (Singapore) and Cosmoprof (Hong Kong).

While Malaysia is an excellent market for Australia, the Malaysians are doing even better in our market, running a hefty bilateral surplus. They have also built an impressive stock of investment in Australia. Not so Australia's investment record in Malaysia. At best, it could be described as modest - under-performance would be more apt*. Past political differences played a part in this. So, too, has the rise of China and India. At the expense of the smaller players like Malaysia, these two giants have captured the attention of global investors.

But the reality is that Malaysia has plenty to offer Australian investors - political stability, economic growth, a "right-size" market for Australian business, a very welcoming Government and low costs. A recent survey of global living costs showed Kuala Lumpur ranked 117th most expensive amongst 144 cities. Tokyo was first (that is, most expensive) and Sydney 20th.

Fortunately, signs of renewed Australian investment are emerging - IAG in insurance, Macquarie in stockbroking and property, and Monash University in a medical faculty are among new ventures. Led by newly-listed WA company, Mission Biofuels, Australian companies are also making "green" investments in palm oil-based biodiesel projects.

Malaysia also has the attraction of a central location in Southeast Asia and its proximity to South Asia, the Gulf and China. Australia's Leighton has been established in Malaysia since 1982, and is the leading international contractor here. From its Kuala Lumpur headquarters, Leighton Asia (Southern) is now winning major contracts in India and the Gulf. A recent deal to build an equestrian centre in Qatar is worth US$ 407 million.

Through its investment attraction agency, the Malaysian Industrial Development Authority (MIDA), the Malaysian Government offers exceptional incentives - five-year and longer tax holidays are available. Malaysia is a "good news" business story, and the prospect of  a bilateral free trade agreement makes an already very positive story even more compelling.

Australia's FTA objectives are ambitious, but very achievable. We want a comprehensive,  high-quality outcome which sees tariffs eliminated. Certainly, much of the merchandise trade between Australia and Malaysia already takes place at low or zero tariffs. But there are impediments in areas such as processed foods and agricultural products, and in some manufacturing - including motor vehicles and steel.

We are keen to improve access for Australia's large and growing services industries, including Australian lawyers, accountants, architects, and engineers. We also want to explore the scope for liberalisation of telecommunications, financial and educational services, improve the climate for investment, and provide greater access to Government contracts. Should the FTA proceed to a successful conclusion, Australian business can be expected to respond with the same enthusiasm that has greeted the deals done in recent years with Singapore, Thailand and the United States.

*This article was published in November 2006. Australia has since risen to second place as a source of FDI into Malaysia.