Tuesday, Oct 24, 2017
Industry & Trade | Asia-Pacific | Malaysia

A major mind-set change in Kedah


3 years ago

State of Kedah, Malaysia
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Dato' Seri Mukhriz bin Tun Dr. Mahathir

Chief Minister of the State of Kedah

Dato' Seri Mukhriz bin Tun Dr. Mahathir, Chief Minister of the State of Kedah, met with PM to discuss the impact of the ASEAN Economic Community on Malaysia, Kedah’s economic transition from rice bowl of Asia to a hub of aerospace and high-technology, Kedah’s tourism industry and relations with the UK

ASEAN is one of the fastest growing regions in the world. What do you think will be the impact of the single market that will be established next year on Malaysia?

By next year, the ASEAN market opens up to each of its members. Malaysia which has 30 million people will suddenly have access to market of 600 million people. The process of opening up and liberalising trade structures has been on-going for a number of years. A number of products are already duty free when exported within the boundaries of ASEAN. We opened up gradually in many ways and market liberalisation seems to be working. 2015 will come without much surprise. Having said that, we are still in the process of trying to make our own entrepreneurs understand the importance of this development. Many worry that our market will be swamped by imported goods. Many of our Asian neighbours have the benefit of lower labour cost compared with us, so there are concerns. We are fully aware though that our locals have other advantages.

Do you think British or European companies could build on the Malaysian relationship for further trade in the region?

I have spoken with European companies in my previous capacity as Deputy Minister of International Trade and Industry. Some European businessmen said that because fiscal policy does not contribute towards the creation of a conducive environment, they feel they have to move elsewhere. Exciting growth is coming from these parts of the world. Having said that, they don’t necessarily want to be in China or India, the two main drivers of the economic growth in Asia.
Here in Malaysia, we cost less than Singapore. They can do more manufacturing in Malaysia, and English is widely spoken here. We are a multiracial country, so we understand China, India, and Indonesia. They are many reasons for investors to come to Malaysia; we have a business friendly government, and many indexes rank Malaysia as one of the top countries in terms of ease of doing business. Many different factors indicate that Malaysia is the place to be in terms of investment and access to the regional market.

What is your perspective on the economic transition of Malaysia and how has it impacted Kedah?

We have been somewhat trapped in the middle-income bracket for quite some time. We felt that our heads touched the ceiling and we were not able to break through. New government initiatives came into place with the intention to get us on a different gear. One of the main points was to stop focusing on labour-intensive industries. Of course, when we started our industrialisation process we focused mainly on those activities because we wanted to provide jobs. Malaysia’s unemployment rate is at 3%, which is considered to be the natural unemployment rate, or put it simply, full employment. Besides our nationals we also employ approximately 2 million foreign workers in the country.
So now we have to maximise our resources to benefit the country and the people. This is where capital and foreign investment have a role to play. We are targeting to double our per capita income by 2020. We are on the right track, and the key enabler is education.

Kedah is going through considerable economic diversification and the State indeed went from being the ‘rice-bowl’ of Malaysia to a hub for the aerospace and high-tech industries. How would you describe this shift, and what are Kedah’s competitive advantages?

We had to have a major mind-set change in Kedah. We were known as the rice-bowl of Malaysia for so long, because we needed to contribute to food security for the country.
However, the trend has changed; we set up for instance Kulim High-Tech Park, which is considered one of the best technology parks in the country. Since its inception, it has succeeded in attracting billions of dollars worth of investment in semi-conductors, solar industry, and other cutting edge technologies. KHTP has showed us that we can move forward from agriculture to high-end sectors. Up north, we already have an existing aerospace company belonging to Boeing that manufactures composite parts for aircraft wings. Many of the Boeing aircrafts have at least some parts coming from that factory. Moreover, we already have an automotive and motor industry and we have more potential for growth in that sector.

According to the latest statistics, Kedah has recently recorded an economic growth above the national average, at 6.1%. What would you say are the main factors of this economic success, and what policies were put in place in order to promote inclusive development?

I have to admit that we are performing this well because we are starting from a lower base. Therefore, we have more room to grow compared to other States. I see this as an incredible opportunity. Now, we want to attract more industries to Kedah in more technology-based activities, so we must provide them with the right infrastructure. We’d like to go into clustering, and we are doing all that planning now. We will allocate certain areas for specific purposes. In the North East we are making a rubber city, which is in the middle of the rubber belt. That is an area that starts in the southern part of Thailand and goes all the way down to the south of Kedah with rubber plantations. We are right in the middle of that rubber belt, and would like to start up new R&D institutions involving rubber technology. In the UK, Malaysia owns TARRC, the Tun Abdul Razak Research Centre that has been producing a large number of patents. It would be great if they could open up a branch in rubber city. Rubber has been coming up with a lot of innovation. Rubber bearings are used in bridges and buildings, to mitigate earthquakes or tsunamis. It is really a ground-breaking, state-of-the-art technology on the rise. 

Malaysia is extremely rich culturally. What would you say are the main cultural features of Kedah that make it unique?

Kedah is the oldest state in the country and perhaps in the region as it dates back to approximately 300 BC. The Sultanate of Kedah is only slightly younger than the Tudor dynasty. The present Sultan, who is also the King (we have a rotation system in which every 5 years one of the 9 Sultans becomes King of the country), is the first to ascend to the throne for the second time in his life. The present Sultan is the 28th Muslim Sultan. We come from the first Muslim Sultanate in 1136.
We have a long history. Kedah has been known as a place that produced very high quality iron. We have been trading with India, the Middle East, and China since 300 BC. The geography of the area was much different then. The sea was against Jerai Mountain, and now it is 10 km away; so big ships went into the valley.
We had a mining industry, international trade, and because of that, an administrative centre. We have historical annals stating that the best iron in the world was from Kedah and two other places.
I feel that this has tourism potential. We are developing the excavation site as a place that people can visit. Many people are interested in archaeology, and it will also help remind ourselves of our roots.

Tourism is an important contributor to Malaysia’s GDP. What is the tourism trend in Kedah?

First of all, Langkawi has always been the jewel in Kedah’s crown. It will continue to grow. It has got very strong branding, and many repeat visitors. We don’t have enough rooms, so we are looking at expanding our supply in terms of capacity. More and more international events are being organised in Langkawi, so we are excited about that. At the same time, we want not only to have some spill over from there to mainland Kedah, but we also want to develop touristic attractions on the mainland, by taking advantage of our lakes - in terms of ecotourism and historical sites. Tourism has great potential to be a contributor to our State GDP. We have to develop different aspects and make a name for Kedah in its own right.

What is your perspective of the current status of UK-Malaysia relations, and where do you see the main opportunities in the next few years?

It was in my father’s time when we shifted. Europe and the UK still have much to offer as a source of investment. UK-based companies will find ASEAN and Malaysia very profitable as a place to invest. It has access to ASEAN, China and India. We are very open to the kinds of technology that they have; we learn quickly, and adapt fast to different markets. Our people are found everywhere in the world because we are very skilled. That is good for Malaysia as a destination for investment. Having a long history with the UK is also a good advantage. I think that what we are interested in is know-how, especially when it comes to hi-tech. We have the advantage of being a “late-comer” in industry and technology and therefore we can skip intermediate steps by taking advantage of what has happened in other States. This is a great opportunity we offer to our investors, as we can customize and adapt better to their needs.

What is your personal vision for Malaysia? How do you imagine Malaysia by 2040 Dato' Seri Mukhriz:

2020 is only 5 years from now. It is getting more and more difficult to have a long term strategy because the pace of change and transformation is much more rapid nowadays than it was just twenty years ago. Vision 2020 was a 30-year plan. That was as far as we could go. To do another 30-year plan would be very daunting. It was probably easier before when technological change was slower. The pace of change around the world is so fast that it makes planning very difficult now. Sometimes you have to, literally, create something out of nothing.

Again, being a bit late in the game, we could learn from the mistakes made by others, and then improve on that. Maybe with someone from the UK, we could discover what the next megatrend is.

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