Authors: Geetha Govindasamy and Mohammad Danial Azman*
Malaysia, as a small country in Southeast Asia, has always maintained a pragmatic foreign policy that caters for complex domestic as well as external interests. Thus far, it has avoided being trapped in China-Japan competition for influence in the Southeast Asian region. Nonetheless, Malaysia’s foreign policy continues to display shifts and continuity in policymaking. While Kuala Lumpur has consciously taken the position of balancing its relations with both Beijing and Tokyo, certain administrations have given more attention to a particular state at one time or another. Against this backdrop, Malaysia’s relations with Japan has consistently continued uninterrupted for six decades albeit with some fluctuations along the way. Despite having been colonized by Japan between 1941 and 1945, Kuala Lumpur established relations with Tokyo in 1957, right after obtaining its independence from the British in the same year.
For the first three decades, bilateral relations were uneventful, mostly concentrating on economic interactions. It can be assumed that both states, one newly independent and the other severely damaged by World War Two focused more on economic building and recovery respectively. For Malaysia, efforts to develop the economy in the 1970s saw Japanese companies working together with government linked agencies like the National Corporation Limited (Pernas), Majlis Amanah Rakyat (MARA) and Federal Land Development Authority (FELDA). The formation of the Malaysia-Japan Economic Association (MAJECA) in Malaysia and Japan-Malaysia Economic Association (JAMECA) in Japan in 1977 further enhanced bilateral relations. Despite these developments, Japan was still considered to be at the peripheral in Malaysian foreign policy.
Malaysia’s perception changed dramatically when Japan developed rapidly, particularly in the 1980s making it the second largest economy in the world. Malaysian policymakers were taken up by the ability of Japanese companies to penetrate world markets. Prime Minister Mahathir Mohamad (1981-2003) attributed the success to Japanese ethics, work culture and value system. Mahathir began to warm up to Japan not only to acquire technological know-how or draw investments but to inculcate a sense of Asian identity that was relatable to the Malaysian mindset. Not surprisingly, in 1982, Mahathir announced the Look East Policy (LEP) during the fifth annual joint conference of MAJECA-JAMECA meeting. This policy which was a major turning point played an important role in shaping Malaysia-Japan relations in the subsequent years. Groups of select Malaysian students were placed in universities in Japan with the expectation that those graduates would immerse themselves in Japanese value system and management style so as to be able to contribute effectively to the productivity and innovation of their home country.
At the same time, Mahathir was especially interested in the Japanese style of cooperation between public-private partnerships in targeting overseas investments. Therefore, Malaysia established the concept of Malaysia Incorporated, similar to that of Japan Incorporated which highlighted a system where the government and businesses were cooperative and not confrontational in nature. After the establishment of the LEP, investors’ confidence in Malaysia increased and this in turn saw a rapid expansion of Japanese investments from companies like Toray, Hitachi, Sony and Panasonic in the manufacturing sector. Since LEP became one of the main policy drivers in attracting Japanese investments, this eventually made Japan a dominant player in the Malaysian industrialization process.
Though Malaysia-Japan relations has shown continued resilience, nonetheless the gradual rise of China impacted Malaysian foreign policy orientation, especially under the administration of Prime Minister Najib Razak (2009 -2018). While Malaysian leaders in the 1970s and 80s perceived China as a threat, Mahathir Mohamad took a different view in the 1980s by recognizing the Chinese market as a valuable access for local goods. The gradual rise of China saw subsequent Malaysian leaders taking the same stance. Three decades later, with China’s Belt and Road Initiative gaining a foothold in Malaysia, Chinese investments in major infrastructure projects such as deep-sea ports and railway lines became quite prevalent under the administration of Najib Razak. This led to a perception of Najib being pro-China, more so after he agreed to procure Chinese-made military equipment amidst rising tensions in the South China Sea. Such a perception also contributed to the notion thatMalaysia- Japan relations have become secondary to that of Beijing-Kuala Lumpur ties.
However, the unexpected regime change after the 2018 general elections in Malaysia, coupled with nonagenarian Mahathir Mohamad becoming the prime minister (2018-2020) for a second time saw the immediate revival of Malaysia-Japan relations. The Pakatan Harapan government commandeered by Mahathir elevated bilateral relations as the prime minister’s belief system was defined by a fondness for Japanese values and management style. As expected, Japan was the first country Mahathir visited after being sworn in as the prime minister. In order to stimulate the economy with Japanese capital and technology, the LEP was revived and renamed LEP 2.0. Not surprisingly, the policy became a hallmark of Mahathir’s second term.
Policymakers acknowledged that Malaysia needed to learn the extent to which Japan had encouraged collaboration between government, research and academia in its manufacturing industry in order to create viable long term solutions and innovations. If Najib Razak coveted Chinese investments, Mahathir turned to Japanese companies involved in high-tech and high-end service industries.With the Malaysian government’s assistance, after decades of focusing investments in the electrical and electronics sectors, Japanese companies increasingly began investing in medical device manufacturing, digital technology and halal food industries. This diversification was in line with the Mahathir’s national industry policy which took into account the ongoing Industrial Revolution (IR) 4.0. Predictably, Japan became one of the top sources of foreign direct investments into Malaysia during the Pakatan Harapan government.
Overall, the waxing and waning of Malaysia-Japan relations has much to do with the leadership of the country. In early 2020, Malaysia experienced another dramatic change of government less than two years after the country’s landmark May 2018 election that ousted the 60 year old Barisan Nasional government. Even though Japan is still viewed as a strategic trading and investment partner, it is apparent that domestic concerns have become the immediate priority to the new government under Prime Minister Muhyiddin Yassin.
The arrival of COVID 19 pandemic at a time when Muhyiddin is at his most vulnerable due to political infighting means that domestic issues will override foreign policy considerations. Against this backdrop, it is more likely that newer Japanese investors will adopt a ‘wait and see attitude’ before investing. Such a scenario is detrimental to Malaysia which needs more Japanese investments to assist in restructuring local companies to apply digital and innovative technologies that will enable them to migrate to IR 4.0. systematically.
As before, Muhyiddin, should recognized the LEP as a tool that can serve to shore up investor confidence that will translate into larger Japanese investments into the country. Since Malaysia’s debt is predicted to rise while the government struggles with the Covid-19 pandemic, the government could request for Japanese capital in the form of yen-denominated bonds with no strings attached (commonly known as Samurai Bonds) for much needed development expenditure. In the event Muhyiddin revitalizes LEP 2.0 and chooses to acquire Samurai Bonds which is a government-to-government (G2G) arrangement, Kuala Lumpur-Tokyo relations will indubitably continue to strengthen and Japan will remain a valued partner in the ongoing efforts to transform Malaysia into a “fully developed country” through the IR 4.0. benchmark.
*Both Dr Geetha Govindasamy and Dr. Mohammad Danial Azman are Senior Lecturers at the Faculty of Arts and Social Sciences, University of Malaya, Kuala Lumpur, Malaysia.This research was sponsored by a 2019/20 Sumitomo Grant.