Speech by Dato' Seri Rafidah Aziz, Minister of International Trade and Industry, Malaysia

 Welcome to our foreign participants. Hope you will see as much of Malaysia as possible, particularly the opportunities to do business in Malaysia and with Malaysia.

Also you can witness for yourselves how the Malaysians of Chinese origin have integrated well into the Malaysian social fabric and economic structures, with many Malaysian Chinese entrepreneurs and enterprises assuming key roles in the dynamic sectors of the economy.

Such integration has enabled the Malaysian Chinese business community to contribute towards national economic growth and the expansion of domestic investments into trade and industry.

Certainly the early Chinese immigrants into Malaysia, reflected the outflow of Chinese from the original homeland, into various parts of the world, motivated by new economic and business opportunities in those new places.

Today, the existence of economically vibrant "Chinatowns" from Vancouver to New York, to the cities of Australia is symbolic of the global Chinese economic and business presence, in a diverse range of activities.

Long before the concept of foreign direct investments became familiar, Chinese entrepreneurs had undertaken the first generation of investments abroad; and today, this global entrepreneurial and business network is an economic force by itself.

Increasingly, the profile of Chinese entrepreneurs and businesses has changed, with generational changes. While many still maintain footholds in traditional business and trade, the new generation Chinese abroad, are now part and parcel of the new bread of entrepreneurs and technopreneurs. They are exposed to and are familiar with, new technology and new business models. They are far from being confined to the "Chinatown" business profile of previous generations. They are the "Silicon Valley" generation of technopreneurs, understanding the challenges of globalisation and market opening. The new generation Chinese entrepreneurs are perhaps, the descendents of the early generation Chinese who pioneered cross border trade and who saw markets beyond the parameters of the China market.

Today, mainland China has become a key factor in the framework of the global market, with its integration into the global trading community under the ambits of the WTO. China is now both at once an attractive and huge market, as well as, a strong competition for many countries.

Certainly, the emergence of mainland China as a rapidly growing economic power, and business hub, would have also aroused the interest of the Chinese-origin entrepreneurs all over the world.

It is not likely that this interest is spurred by emotional stirrings for the original motherland, but rather, it is motivated by the business potential that China provides. China is certainly too obvious an opportunity to miss. In fact, Malaysian Chinese entrepreneurs have also been drawn to China, to benefit from operation in China, in areas where there are obvious cost competitiveness and cost advantages.

In this context, the Malaysian entrepreneurs and companies can undertake synergistic collaboration with the global Chinese entrepreneurial and business network, in order to more effectively make inroads into China.

For the global overseas Chinese, their sights should not be focused only upon China, and the Chinese potential.

China is a neighbour to the East Asian nations, in particular to the 10 member ASEAN grouping and efforts are on-going to formalise economic partnership arrangements, with possible Free Trade Area agreement between ASEAN and China. This means that China itself sees the potential of close economic collaboration with her ASEAN neighbours, with focus upon trade and investment facilitation and the proactive role of the business community.

Thus, the global business community need not, and should not be unduly "sinocentric", to the exclusion of the dynamic region within which China itself operates.

Malaysia is strategically located within the ASEAN region, with a quarter of her global trade being done with ASEAN member countries.

In 2002, Malaysia has overtaken Singapore to emerge as China's largest trading partner in ASEAN, and China's largest source of importers amongst the ASEAN countries, accounting for 3.2% of China's global imports.

Malaysia's bilateral trade with China has been growing steadily, with average growth of exports of around 20.1% and imports at around 28.9%, for the period 1995-2002. Total trade for the same period recorded average annual increases of around 23.9%.

These trade trends reflect the fact that China and Malaysia have complementary strengths in particular industries and sectors, with Malaysia having built up a strong foundation in key industries which now serve the global market.

Thus, Malaysia continues to provide a wide range of investment opportunities for foreign investors, particularly in the manufacturing and related sectors.

The government has put into place the necessary infrastructure and administrative support, to ensure a cost competitive and profitable business environment, as well as attractive fiscal and non fiscal incentives, for promoted manufacturing and related activities.

Investors can be given 100% equity in their projects, without any conditions such as export requirement.

During the 5 year period 1998-2002 alone, 2,203 new manufacturing projects have been approved with total capital investments from both foreign and domestic sources of RM73.8 billion.

In addition another 1,891 projects were approved, to expand and diversify existing operations in the country, with total capital investments of RM46.8 billion.

Out of the total investments approved for both new projects and for the expansion and diversification of existing operations, RM75.7 billion were from foreign sources. It is also heartening to note that for the first 6 months of 2003, a total of 487 projects for manufacturing and related activities have been approved with total capital investments of RM8.0 billion, of which RM3.9 billion are from foreign sources.

The major foreign investments for the period 1998-June 2003 are from USA, Japan, Taiwan, Singapore, Germany, Republic of Korea, United Kingdom, Netherlands, France and China.

Many of these investments are in export oriented projects, to take advantage of Malaysia's strategic regional location, competitive operation environment, and trade links with more than 230 countries globally.

Certainly Malaysia will continue to be a major contributor to intra ASEAN trade, and a beneficiary of the ASEAN Free Trade Area.

The bringing down of tariffs and non-tariff barriers in the ASEAN Free Trade Area has effectively extended Malaysia's domestic market, and investors can profitably use Malaysia as the ASEAN regional manufacturing and operating base. By fulfilling the ASEAN cumulative local content requirement of 40% investors can operate in Malaysia to access into the ASEAN market, with the tariff preference being accorded by the other ASEAN countries.

Today, with the completion of the ASEAN Free Trade Area or AFTA, Malaysia and the other 5 original members of ASEAN i.e. Singapore, Indonesia, Thailand, Philippines and Brunei, have already transferred 98.86% of their tariff lines into the AFTA Common Effective Preferential Tariff or CEPT Scheme.

Out of this, 99.5% are with tariff rates of only between zero to 5%. Malaysia, Singapore and Brunei have already brought down to zero, tariffs on at least 60% of products. Malaysia has 99.2% of the products in the CEPT schemes at tariffs of 5% and below, and 60.8% of those CEPT products at zero tariff.

Certainly, Malaysia is well placed to host a wide range of manufacturing and related projects which seek to serve both the regional and global markets competitively. In this context potential investors should look at the possibility of making Malaysia a regional base for their global business activities, taking advantage of the support facilities available, and the cost factor. For Chinese entrepreneurs, there would be the added advantage of familiarity of culture and language, which can facilitate the integration of the Malaysia operations into their international network.

Certainly the common thread of race, which runs through the global Chinese entrepreneur community, can be a catalyst and a facilitating factor, for business collaboration, and mutually beneficial business linkages. However, the common factor of racial origin alone, cannot guarantee business success, or the forging of viable arrangements.

The process of globalisation, and the new dynamics of market competition, dictate that business decisions be guided by the bottom line, and by the need to be ahead of the competition.

Being Chinese origin does not mean guaranteed success operating in China, or in any place where there are Chinese customers and clients, such as in Malaysia. Market competition is about the survival of the fittest, in the market. There are the questions of good management and product quality and market acceptance to be addressed, as well as to keep up with technological advancements, which require companies to adjust and accommodate fast.

The advancements in Information and Communications Technology or ICT has been a prime mover in industrial development, and in the globalisation of business operations. Increasingly knowledge, particularly new knowledge, is catalysing growth and expansion of business globally. Increasingly, economies and societies are becoming more knowledge-based and access to new knowledge, can directly enhance business efficiency and competitiveness.

In this context, the community of Chinese entrepreneurs globally would represent a large grouping with a diversity of knowledge and skills, particularly among the new generation. These are skills and knowledge relevant for the newly emerging industries, which are characterised by nano-technology, biotechnology and other areas of advancements.

For Malaysia, the focus for now and the future, is on knowledge and skills intensive, manufacturing and related activities, as Malaysia can no longer be a competitive location for labour intensive business operations. There is already a strong foundation for the continued development of skills and knowledge intensive industries, which feature capital and technology inputs, rather than purely labour.

The priority of the Malaysia government is to ensure that Malaysia can continue to be a competitive manufacturing and export base, for these industries, by providing an efficient public-sector delivery system, and monitoring the cost of doing business in Malaysia on an on-going basis.

The government has also recognised the new developments in the ICT related industries and the potential that Malaysia has to provide the location for a wide range of ICT related and Multi Media activities to global investors.

The development of the Multimedia Super Corridor is an example of Malaysia's integration into the age of ICT, and it is hoped that participants to this convention will avail themselves of the opportunities of investing in the MSC.

There are certainly opportunities for viable investments and business in Malaysia.

The country has a good track record of having hosted several thousands of foreign companies in a wide range of economic activities, particularly in manufacturing and relatd activities. Many companies have continued to undertake multiple investments and have undertaken integration of activities also the manufacturing value chain. Malaysia will continue to be a competitive business location to serve the regional and global markets.