Asean stocks can compete with China’s
The research looks at Malaysia, which, like Indonesia, is a member of Asean and one of the so-called “new tigers”.
These burgeoning economies have on the whole been pursuing the same export-driven policies favoured by the original tigers – Taiwan, Singapore, Hong Kong and South Korea – which enjoyed a sustained boom from the early 1960s.
In the 1970s it was these first tigers that received foreign direct investment (FDI) from the multinationals of developed economies such as the US, Japan and European countries. In the mid-1980s the focus moved to Asean, and in the late 1990s it switched to China and, to a lesser extent, Vietnam.
Thus, Asean’s share of direct investment from overseas has decreased as China’s has rocketed, with Malaysia’s proportion falling most of all. The familiar conclusion is that Malaysia has therefore lost out to China in the race for foreign direct investment, but GEP’s survey of multinational enterprises in Malaysia – although partly confirming this inference – uncovers a more complex set of changes.
In reality, the flow of foreign direct investment into China is not entirely a diversion from Malaysia. Rather, multinationals are rationalising their activities in such a way as to gain from common governance of geographically dispersed activities. Effectively, Malaysia has assumed a position that is complementary to China’s, serving as a source of managerial talent and regional coordination.
How might Malaysia take full advantage of this situation? As the research suggests, if its policymakers keep pace with multinationals’ business objectives by upgrading the workforce to fill more knowledge-intensive jobs – an important consideration in view of the intense competition for talented ‘human capital’ in the region – Malaysia could maximise the benefits of its new place in an increasingly well organised trade nexus.
We should not be remotely surprised, especially given the brittleness of western economies and their interrelationships, that Chinese premier Wen Jiabao’s speech at November’s China-Asean Summit, held in Bali and marking the 20th anniversary of the first constructive dialogue between China and the new tigers, was a veritable paean to the spirit of collaboration.
He said: “Many leaders of Asean countries have told me Asean’s relations with China are the most practical, most extensive and most fruitful. I couldn’t agree more. China and Asean countries are all developing countries. We pursue economic development and improvement of people’s lives as the most urgent and important task and place top priority on bringing tangible benefits to our peoples and our region.