Malaysia and India have always maintained a strong trade relationship. The much-accomplished ties are now being backed by an increasing number of trade agreements. In an exclusive interaction with The Dollar Business, H.E. Dato’ Hidayat Abdul Hamid, High Commissioner of Malaysia to India, discusses the ways and means to further strengthen the economic relationship between the two countries.

Interview by Anishaa Kumar | October 2017 Issue | The Dollar Business

TDB: Malaysia and India have always shared strong economic ties. What has been the cornerstone of these ties?

H.E. Dato’ Hidayat Abdul Hamid (HAH): India-Malaysia bilateral trade relations have been developing at a rapid clip. Being amongst the fastest growing nations in the world, India has been an important economic partner for Malaysia. Based on our 2016 records, India was Malaysia’s 7th largest trading partner as well as the 7th largest export destination. In the same year, Malaysia was India’s 11th largest trading partner.

In 2016, India was Malaysia’s largest export destination in the South Asian region, a position it has maintained since 1998. Trade with India accounted for 3.3% of Malaysia’s total global trade in 2016 – amounting to $11.7 billion (RM 48.7 billion), an increase of 4.0% (in RM terms) from 2015. Malaysia and India are also signatories in several bilateral and regional cooperation agreements. The Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) and ASEAN-India Free Trade Agreement (AIFTA) are two important determinants of our trade relations. Soon, we are likely to have another multilateral pact, the Regional Comprehensive Economic Partnership (RCEP). These engagements are crucial to ensure our relations remain healthy.

TDB: Malaysian PM Najib Razak has been vocal about the need for early conclusion of RCEP talks. How do you see RCEP impacting trade relations?

HAH: We have seen an upward trend in trade between India and Malaysia. The implementation of AIFTA in 2010 and MICECA in 2011 are some of the major drivers. Other FTAs will further contribute to the expansion of two-way trade. The conclusion of RCEP will take our trade relations to the next level as the trade agreement is important when we talk about ASEAN-India economic relations, of which Malaysia is a part. Collectively, the 16 RCEP countries account for almost 50% of the global population, with a combined GDP of $22.8 trillion or 30.7% of the world’s GDP. It is hoped that through RCEP, we will achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership. Early implementation of RCEP will enable the business sectors from both countries to tap the huge potential that all 16 partner countries have. Malaysia hopes that the negotiations can be completed this year.

TDB: What are the highlights of MICECA, the treaty that was initiated in 2011 between Malaysia and India?

HAH: The implementation of MICECA has contributed significantly to the expansion of two-way trade and investment between India and Malaysia. However, it is yet to reach its fullest potential. Of course, there are several implementation issues that require both countries to discuss and review in detail – to help make the agreement reach its fullest potential. We believe that officials from both countries are working hard in addressing some of these issues despite their focus being on the effort to conclude the ongoing RCEP negotiations.

TDB: In FY2016 Malaysia-India trade witnessed a sharp decline, which recovered slightly in FY2017. What contributed to this fluctuation?

HAH: Take it as a blessing in disguise. Every challenge offers a new opportunity. In 2016, most countries were hit by falling commodity prices, currency volatility and uncertainty in future trading arrangements – not to mention other external factors such as Brexit, changes in monetary policy of developed nations, etc. And during the unfavourable times, our countries came closer. I think the private sector, including SMEs, played an important role in boosting trade. Initiatives such as a business forum and private sector-led trade missions should be encouraged to promote networking and closer cooperation between business people and companies – this will maintain the upward trend in trade.

TDB: In 2016, World Bank reported that 97% of business establishments in Malaysia are SMEs. India too has a large SME sector. In what ways can the two work together to boost trade?

HAH: SMEs play a very important role in driving the Malaysian economy. I think more collaborative efforts, smart partnerships and cooperation should be initiated between Malaysian and Indian SMEs for them to network and explore the economic opportunities available. Mentorship and regional value chain programmes should be introduced to these SMEs so that they can avail the benefits under MICECA and AIFTA. Relevant agencies in Malaysia and India can also work together in sharing their experience in promoting this segment.

TDB: Do Malaysian companies face any problem while operating in India?

HAH: There are many Malaysian companies that have investments and setups in India. Today, many Malaysian companies have developed expertise and specialisation in many areas – and we could complement what Indians are good at and work together. In the past, some Malaysian companies have faced tough challenges due to bureaucratic delays and other reasons. But, many of them have found the right synergy and good partners. I must mention that Malaysian companies have been attracted to India because of the similarities in laws and governance. Additionally, the way of life as well as culture and tradition of our peoples are quite similar. Indian and Malaysians traders have been doing business together for many years.

"MICECA has contributed significantly toward expansion of two-way trade"

TDB: What assistance does Malaysia provide to foreign companies?

HAH: There are many Indian companies that have invested in Malaysia. The Malaysian government is a pro-business government. We not only facilitate their entry, but also provide all the necessary assistance required. The Malaysian Investment Development Authority (MIDA) is a one-stop agency for foreign investors. Malaysia offers liberal investment policies, stability in politics and economy, a pro-business government, a business-friendly environment, well-developed infrastructure, great connectivity, harmonious industrial relations, excellent MICE facilities and much more. In addition, Malaysia has a huge trained and educated workforce, a sound and resilient banking system and offers strong IP protection.

TDB: The Andhra Pradesh Economic Board and Malaysia-based Might Technology Nurturing Sdn Bhd have signed an MoU to develop a technology park in Amravati. What expertise does Malaysia bring to the table?

HAH: Initiatives like these will broaden India-Malaysia economic cooperation. Malaysia’s experience in building Putrajaya, our new Federal Government Administration Centre and many such modern sustainable townships, technology parks with modern facilities could be shared with India to produce better and grander cities.

TDB: Malaysia adopted GST a couple of years back. How do you see GST impacting India’s economy?

HAH: GST implementation is said to be the biggest economic reform in India. But, every change has its own uncertainties and challenges. We believe it will help improve tax compliance and generate more revenues for the government. Unfortunately, the change will not come overnight and it takes persistent efforts to be implemented effectively. Based on our experience, the benefits of GST will far outweigh the initiation pains.

TDB: Both Malaysia and India are popular tourist destinations. However, tourists flow from Malaysia to India is still very low. How can this be changed?

HAH: India is a popular destination for Malaysians. To encourage visitors, more direct flights should be established. This was seen when Air Asia introduced direct flights to Bhubaneswar and Kochi from Kuala Lumpur. It led to an increase in visitors to Odisha and Kerala.