The Turquands Barton Mayhew alumni share his insights on emerging Malaysia.
One would want to hear what Dato’ Robert Teo, Chairman of RSM Malaysia, has to say particularly when it involves the Malaysian market. The chairman was formerly special administrator to Pengurusan Danaharta Nasional Berhad or Danaharta—the country’s national asset management company. He also dealt with corporate restructuring for his listed clients in the Malaysian bourse.
“ASEAN countries are the best areas to stimulate greater intra-trading activities. Slightly further away, the other markets to focus on are China, Japan, Korea and India,” he said, noting that when Malaysia adopted the ‘Look East’ Policy in 1981, he saw the potential in learning from Korea and Japan on work ethics, discipline business culture which is competitive, transparent, efficient and to learn the secret of Japanese success.
Today, Robert, who has 40 years of experience in the audit, tax and advisory industry, claims RSM Malaysia probably has the widest list of clients from Korea and Japan amongst its competitors. Over the past few years, RSM’s portfolio of clients from China has also increased significantly, reflecting the importance of China as a source of foreign direct investment (FDI) to Malaysia.
In an interview with Singapore Business Review, Robert talks about his early days in starting RSM Malaysia, the opportunities for multinationals, as well as how Malaysia is luring FDI and homegrown companies to expand their operations locally instead of looking elsewhere.
Which particular markets or sectors are your main focus? Can you share with us your work experience or any backstory that has contributed to your professional career?
Markets to focus on
With the prevailing global uncertainty and pandemic environment, it is advisable to focus on those markets which are nearer home. The ASEAN countries are therefore the best areas to stimulate greater intra-trading activities. Slightly further away, the other markets to focus on are China, Japan, Korea and India.
When Malaysia adopted the ‘Look East’ Policy, I saw the tremendous potential in learning from Korea and Japan on work ethics, discipline and their management capability in creating a competitive, efficient transparent environment. As a result of our initial experience in servicing Korean and Japanese clients, we have succeeded in winning the trust of many companies from that part of the world. To them, trust and reliability are very important and the relationship is of a long term nature for mutual benefit.
Today, among our competitors, we probably have the widest list of clients from these two countries. Over the past few years, our portfolio of China clients have also increased significantly reflecting the importance of China as a source of FDI to Malaysia.
Which industries are foreign investors and companies putting their bets on? What’s the situation across industries, particularly for those heavily reliant on multinationals?
We observe that the main focus of foreign companies are in the manufacturing sector especially semiconductor, aerospace, medical devices, electronics, pharmaceutical and other sectors which involve smart manufacturing. In the services sector the focus is in new growth areas such as healthcare, eco-tourism, Green Technology (including renewable energy), ICT such as mobile services and telecommunications, Industry 4.0, fintech, and Big Data services.
In the wake of the Coronavirus pandemic, the world is going full throttle on digital. Businesses are investing in digital transformation, and consumers are also getting more digital, creating an exponential demand for digital tech and services. Companies that are able to offer disruptive solutions in the B2C market is favourable amongst investors, be they in the space of fintech, healthtech, edtech, agritech, proptech, etc.
Malaysia, through its agency, Malaysia Digital Economy Corporation (MDEC), is playing a catalytic role in driving the digital economy agenda, from accelerating digital adoption amongst business through various incentives such as matching grants; to driving foreign and domestic digital investments for ASEAN expansion using Malaysia as the regional digital hub; and developing a robust tech talent ecosystem to meet the industry demand, in the areas of ecommerce, cybersecurity, big data analytics, automation, artificial intelligence, blockchain, dronetech and other emerging technologies. Malaysia is also home to a rich pool of tech startups and scaleups with innovative solutions and eye for regional expansion. For multinationals, this provides new opportunities for potential joint ventures and partnerships to create new sources of growth for their businesses in the ASEAN region. The service sector has in fact been identified as the engine of growth to expand the economy. The plan is to move into the high value and knowledge industry.
The slowdown in FDI is also noticeable as a result of the uncertainty due to Covid-19 and global trade wars between China and US.
Crisis presents opportunities, they say. Where are the opportunities and how does Malaysia fare in all these? How can it catch up with the emerging markets in APAC?
In light of the current crisis, the biggest opportunities are with our largest trading partners, China and Singapore. Many multinational companies which are presently based in China are diversifying their operations into other countries nearby. Because of the proximity, Singapore will continue to be an important source of FDI. Malaysia is an ideal location and has consistently attracted a number of such companies.
In view of the rising costs of labour in Malaysia, foreign investors focus on those industries which are not labour intensive.
Being located in the middle of ASEAN and with its well-established legal structure, good communications and skills in English, Malaysia has a big advantage over most of its neighbouring countries. It is also ideal as a cost-effective location for multinationals to locate their regional operations, such as principal hubs and regional offices, here with Malaysia’s attractive tax incentives and supporting facilities.
With the flow of FDI dropping significantly in recent times, the Malaysian Government is directing its focus in encouraging homegrown Malaysian companies to expand their operations locally instead of investing overseas.
When business conditions are tough, foreign companies tend to relocate their operations to other countries suddenly, which invariably have an adverse impact on the economy. In contrast, local companies tend to weather the storm until business conditions improve and thus provide more stability to the economy.
For homegrown Malaysian companies looking to expand overseas, is this the best time? How can multinationals stand to benefit from the current situation?
Amidst the global uncertainty, there will always be opportunities for homegrown Malaysian companies to expand overseas especially amongst ASEAN countries where the average intra-ASEAN tariffs has fallen to below one per cent. Faced with the need to attract FDI, most countries in the region have come up with very attractive tax and other incentives which make it worthwhile to ‘shop around’ for the ideal location. Attracting FDI is becoming very competitive. In addition, the costs of investing overseas vary from country to country significantly, and this is a good time to reassess the future directions and strategies. This is particularly an opportune time in view of the change in market trends and state of the global economy, resulting in significant shifts in how multinational companies conduct their global businesses.
The growing uncertainty around the spread of Covid-19 and its economic impact has resulted in businesses being increasingly cost conscious with a consequential impact on various industries. The positive impact of this is that inefficient companies will probably be wiped out, thus giving more opportunities for the lean, cost conscious companies to control the market. As the saying goes, “When the going gets tough, the tough gets going!”
Hopefully when Covid-19 is under control, the servicing companies will be more agile as well as resilient and make this region a very competitive market to conduct international business.
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