The ASEAN Economic Community (AEC) came into being on January 1, 2016.
Malaysia is among the strongest of the AEC member states. It has achieved growth of over 5% year after year and features a rising middle class with growing consumer power. Offering access to ASEAN’s market of 630 million people, the nation is poised to reshape the global economic map.

 

Raising one’s gaze to survey the skyline in the flourishing Golden Triangle district of Kuala Lumpur reveals modern skyscrapers and copious scaffolding and cranes. Construction vehicles move like an ever-flowing river. Although the metro to the Pavilion Kuala Lumpur shopping mall hasn’t yet been completed, tourists from many nations still crowd the intersections of Bukit Bin­tang. Like the throngs that surge forward when the lights change, Greater Kuala Lumpur is moving quickly toward its goals for 2020, when the Malaysian government hopes to bring the city into the ranks of the 20 most livable cities around the world while maintaining its high rate of economic growth. The speed of the city’s transformation dazzles. 

 

Malays comprise more than half of Malaysia’s population. Most are Muslim, and they tend to have happy, easy-going dispositions. (photo by Jimmy Lin)

James Chang, Taiwan’s representative at the Taipei Economic and Cultural Office in Malaysia, notes that human resource exchanges between Taiwan and Malaysia represent the most outstanding accomplishment of the “New Southbound Policy.”

An old friendship with Taiwan

The population of Malaysia comprises three main ethnic groups: Malays (65%), ethnic Chinese (25%), and ethnic Indians (7%). The majority Malays are Muslim, and they abstain from alcohol, regard pigs and pork as unclean, and comply with the other precepts of daily life found in the Quran.

In recent years the Malaysian government has spared no effort to promote Malaysia as an international center of Halal certification of foodstuffs. Under the direction of the Department of Islamic Development Malaysia (JAKIM), Halal certification in the country has gained considerable prestige throughout the Islamic world. Attaining such certification is particularly helpful for marketing.

“Although Chinese have left their imprint in nations throughout Southeast Asia, Malaysia’s record in preserving Chinese culture and its artifacts is second to none,” says James Chang, head of the Tai­pei Economic and Cultural Office in Malaysia.

To preserve Chinese cultural heritage, Chinese-­Malaysians have invested in Chinese elementary schools and independent secondary schools. In earlier years, when the Malaysian government didn’t recognize this curriculum, many Malaysian students elected to attend universities or colleges in Taiwan.

Important allies of Taiwan in their home country, the 70,000 Taiwan-educated Chinese-Malaysians have made outstanding contributions in virtually every field over the last 50-plus years.

Meanwhile, recent educational exchanges between Taiwan and Malaysia are realizing the call for “talent exchanges” outlined in Taiwan’s “New Southbound Policy.”

New business models

Everywhere one can see people using the Internet to meet their needs in daily life. WeChat has long been the dominant messaging app in Malaysia, and netizens there are used to buying and selling goods on Carousell. Many Malaysians are accustomed to flicking their fingers across their cellphone screens to hail a car from Grab, which is Uber’s biggest competitor in Southeast Asia and was developed in Malaysia with Singaporean capital. Although Malaysia’s Internet infrastructure isn’t yet fully mature, major strides will be made to catch up over the next three to five years.

As global capital moves toward Southeast Asia, Taiwan has advantages both in terms of its geography and its human resources as it works to carry out its New Southbound Policy. These strengths especially give Taiwan a leg up when it comes to the Internet.

Brandon ­Chiang, head of investment at the venture capital firm Appworks, notes that Taiwan’s Internet companies have already acquired more than two decades of experience: “With the knowhow accumulated over 20 years, along with personnel that understand the local culture, we can help Malaysian Internet companies quickly upgrade their marketing skills and overall levels of professionalism, allowing them to reach larger markets.”

Nice ­Cheng, secretary general of the Taiwan Internet and E-Commerce Association (TiEA), takes the analysis a step farther: Although e-commerce is within the realm of high-tech, it has already evolved from online sales to a broader range of professional services (such as tele­medicine consultations or provision of manufacturing knowhow). The next step is to directly reach out to consumers. “It is even more important for Taiwan to create new models for creating profit,” he emphasizes. “We should be exporting our high-end professional services, turning our knowhow into digital services.”

Localized service

Huang Chao-jen, director general of the Commerce Development and Policy Research Division of the Commerce Development Research Institute (CDRI), has researched the Go-South Policy—now revamped as the New Southbound Policy—for many years. He notes that firms run by second-generation Taiwanese in Malaysia are familiar with the local customs and language, helping them adjust their operations and provide services that are more localized and attuned to the needs of the market.

For instance, Louis Wu, who is in the precision machining business, turned his manufacturing company into a service provider. And Hiro Wang, whose family runs a furniture factory, created something new with Hill Product, which designs its own hardwood furniture.

Younger entrepreneurs who have more recently come to Malaysia take a similar approach. After graduating from university, ­Hsiao Po-chih was posted to Malaysia by a Taiwanese company. Many years later, he opened his own businesses: an elevator distributorship and a human resources agency. Shawn ­Huang’s field is fashion design. He ended up almost by accident in Malaysia and started a business that provides customized clothing design. Ronald ­Chang opened a branch of his family’s Chinese herbal medicine business. Because these medicines are familiar to Malaysia’s ethnic Chinese and because Malays are also keen on herbal products, the market is poised for future growth.

One common characteristic is that all these firms are well suited to meet local demand for services.

 

Malaysian streets feature a variety of ethnic groups. Apart from Malays, Chinese and Indians, there are also guest workers from Bangladesh and Nepal.

The ASEAN hub

In the 1980s the ROC government advocated its original Go-South Policy. Because of Malaysia’s political stability, abundant natural resources, low-cost labor and the close ties to Taiwan among its ethnic Chinese population, it became a top choice for Taiwanese investors in Southeast Asia.

In 2016 the government launched its “New Southbound Policy,” hoping to move toward mutually beneficial relationships with the nations of Southeast Asia on four fronts: economic cooperation, human resources exchange, resource sharing, and regional links.

In truth, Lee Fang-hsin has been pushing in that direction since 1987 when he first went to Malaysia to found a business. To penetrate the local market, he started with a trading firm importing goods from back in Taiwan. Only after becoming familiar with these channels and gaining an understanding of the market did he open a factory of his own. The company now has branches in Singapore, Myanmar, Cambodia, Vietnam and other nations. Lee reminds Taiwanese businesspeople that successful experiences in Southeast Asia cannot be simply replicated across borders. Taiwanese businesses should adopt a concept of working together as a group, he says. They will only achieve success by forming all-star teams.

Dato’ Allen ­Chiang, president of In­max Holdings, says, “Rather than ‘ASEAN’s Malaysia,’ it’s better to think of it as “Malaysia’s ASEAN.” With a population of about 31 million, the domestic market isn’t all that large, but it is advantageously positioned to serve as the central hub for ASEAN. As an ASEAN member, the country enjoys duty-free trade with other member nations, and its central location amid the group makes it well suited for Taiwanese firms’ ASEAN headquarters.

Enduring in Southeast Asia

Hsu ­Cheng-te, chairman of the Tai­pei Investors’ Association in Malaysia (TiAM), notes that many Taiwanese firms move from country to country as production conditions change. In that respect, they are quite different from European and American companies that have long had major factories in Southeast Asia. Leveraging political and economic power in the region since before World War II, these Western companies have long been selling to and manufacturing in Southeast Asian nations, gaining knowledge about the particulars of their domestic markets. 

“Taiwan ought to regard Southeast Asia as a permanent economic base overseas, developing a sustainable, visionary Southbound Policy,” says Lee Fang-hsin. He suggests that the government serve the role of a matchmaker, inviting various industry groups to establish comprehensive industry directories and then providing these resources to Taiwanese firms overseas, thereby helping them to quickly find suitable partners.

 

The observation deck of the Kuala Lumpur Tower offers views of Malaysian scenery near and far.

Datuk James Lau, president of the Malaysian Chamber of Commerce and Industry in Tai­pei, suggests studying how multinationals use mergers and acquisitions to acquire local talent. “In that manner Taiwanese firms could quickly obtain personnel familiar with Southeast Asian markets.” Furthermore, Taiwanese industrial teams should be organized to participate in large-scale Malaysian projects. Gaining such practical knowledge of a Southeast-Asian nation would help with the entire “Southbound” campaign, which puts an emphasis on relationships and adapting to local conditions.

The Commerce Development Research Institute’s ­Huang Chao-jen says that Taiwan ought to leverage its national strengths to create brands that allow the people of Southeast Asia to become familiar with Taiwan.

He suggests that Taiwanese firms consider working with Malaysian firms to create brands, with the Taiwanese firms contributing technical expertise and the Malaysian firms providing financing and access to local sales and distribution channels. Following that template, it would be easier to establish mutually beneficial joint ventures.

During a period of regional economic integration and national strategic repositioning, Taiwan ought to do its best to gain deep understanding of the ASEAN nations, establishing strong relationships in Southeast Asia that will underpin a mutually beneficial future.