Wednesday, September 02, 2009

1st Ambassador Series of Young Corporate Malaysians

Live Blogging of The 1st Ambassador Series of Young Corporate Malaysians by His Excellency Boyd McCleary, UK High Commissioner to Malaysia at Menara Integriti.

High Commissioner started by saying that it is great to see many young faces here, despite the fasting month. High Commissioners explained that High Commissioners are those diplomats sent to Commonwealth countries, whereas Ambassadors are those diplomats sent to other countries.

If we look back at colonial period, it was not trade that brought Britishs to come over to Malaya back then. It was trade that brought them here. "Trade goes before the flag".

It all started in 1592, when the first Englishman landed his ship on Penang and loaded it with pepper. Penang was the first of the Straits Settlement, where treaty with the Sultan of Kedah was signed in 1791. Then, Singapore was established by Raffles in 1819 and then finally Malacca exchanged for Bencoolen in Sumatra in 1824.

The main initial driver for Penang was spices. The treaty was singed not with the British Government, but with the East India Company, and later other forms of commercial agriculture.

The other driver was the need to secure ports to protect British shipping lanes between India and China.

In 1860s/1870s, initially British was looking for more opportunities for agriculture, but later on tin, and hence British turned to Perak. There was 1874 Treaty of Pangkor, where a British Resident was appointed in Perak, followed later by Selangor, Johore and Sungai Ujong (Negeri Sembilan).

In 1896, Federated Malay States (FMS) was started with the seat of Government in Kuala Lumpur. For other states, there were less commercial interest and less interest, and those states were "unfederated".

Commercial agriculture in Federated Malay States expanded first into coffee, sugar, pineapples and gutta percha. However, the most significant development for British Malaya was the invention of the pneumatic tyre in 1899, which led to rapid expansion of rubber.

By 1929, almost half of all cultivated land was planted in rubber. And then came the development of oil palm, again with British investors, including a Mr. Sime and a Mr. Darby).

To make oil palm working in Sabah, they actually had to go to Africa to get a certain insect, to make the growing of palm oil working.

Right through the colonial period, the British saw Malaya primarily as a key source of raw materials. So, it was scarcely surprising that it was the (predominantly British) planters who were the target of the Communists during the Emergency (when one in ten planters were killed by insurgents).

At independence, Malaya was the world's largest exporter of natural rubber, tin and palm oil. Agricultural production accounted for 40% of the country's GDP. And the main destination for good exported was the UK.

While it is absolutely fair to note that the development of British Malaya's economy was in the interests of the "mother country", we should perhaps not forget that the bulk of the technology, much of the finance and the investment itself was from the UK.

Another major positive legacy of the colonial period was the rule of law, that has initially been established primarily to enable the trade to flourish.

At independence, the following British companies were already well-established in Malaya: Unilever, Shell, HSBC, Standard Chartered, Sime Darby, Harrison & Crossfield, Boh Tea, Boustead, Jardines, Level Brothers (later on Unilever), Commercial Union Insurance Co, Castrol and GEC.

But the investment did not stop at Independence. Examples from the 1950s, 1960s, 1970s.

Glaxo became the first company in Malaysia to open a factory for the local manufacture of pharmaceuticals in 1959. Shell's investmnet in Sarawak in exploration for oil and gas. Shell is the biggest employer in Sarawak, and Shell has developed a number of corporate leaders, including Datuk Seri Idris Jala and Tan Sri Zarinah Anwar.

Inchcape began the manufacture of cosmetics, pharmaceutical products and timber mouldings. Harrisons and Crossfields and Guthries (both in the plantation business) set up companies to manufacture rubber goods and edible oils. Lever Brothers began making soaps, cooking fats, ice cream etc.

Blue circle's investment in cement. ICI became involved in the promotion of plastic products and set up a plant to manufacture titanium dioxide pigment for paint.

Guinness (first brought to Malaya on sailing ships) established a brewery on the site of an old tin mine in Sungai Way in Selangor. GEC became the first company to be involved in the manufacture of consumer electronic products. Coats Viyella set up a factory in Prai to produce silk thread.

And over the past 10-20 years, investment hasn't stopped. BP investmnets in petrochemicals and Shell in exploration, LNG/distillates. British Telecom established an ICT research center in KL. Alphabilogics in Penang and Spirit Aerospace in Subang on high value manufacturing.

In financial services, Prudential and Friends Provident, HSBC and StanChart has invested in Islamic Finance.

In back office processing, one third of the jobs in Cyberjaya are provided by UK Firms.

In retailing, Jardines invest through Giant, Cold Storage and Guardian, as well as Tesco invests heavily in Malaysia too.

In education, University of Nottingham are based in Semenyih, and Newcastle University is building a campus in Malaysia.

There is no clear indication of how much is the true investment by UK.

Some questions to ask, include what nationality is an investment. For example Shell is it a Dutch company, but it is incorporated in British. How do you count an investment? Is it the financial figure invested or jobs created or some other values?

When did the investments take place and what about disinvestment? Management buy-out, take-overs, nationalizations etc. For example, BP Petrol Stations, ICI, Sime Darby and Unilever.

In other examples, how to differentiate trade and investment. For example, BAe System, CTRM and Airbus.

If we look into the future, then there might not be much investment in the manufacturing, especially in the low end manufacturing. However, investment in the service sector, especially education and training would remain strong. There is growth in the business processing centers too. It is the UK hope that UK can play a part in supporting Malaysia's Prime Minister's hope to bring Malaysia out of the middle income trap.

UK does not just belong to EU and Commonwealth, but also including NATO etc. EU is a great organization, where a lot of people wanted to become member. EU is a good thing for British and for Europe.

Not many Malaysians know exactly on what Commonwealth does. Last month, UK just launched Commonwealth Conversations. There is a plan to have a Commonwealth Conversations in KL in 2nd half of October 2009, to get young Malaysians to talk on Commonwealth. It is the hope to get Commonwealth to do fewer things, but to do it better, and get it delivered.

Commonwealth is not as popular in attracting new members, compared to EU. Mozambique who is a Portugese colony, just joined Commonwealth not too long ago. And Rwanda also just applied to join Commonwealth.

On HE Boyd McCleary's personal view, he is very impressed by the way that the new Prime Minister stimulates demand. Malaysia is a country which heavily depends on exports. Malaysia has been able to maintain the high domestic demand.

Another thing that HE impressed about our new Prime Minister is that Malaysia is moving towards open economy, and not moving towards protectism. The biggest problem that Najib that might faced would be that he has to get all those promises delivered.

Most countries have some form of immigration control. It exists in every country, including US, Australia etc. UK is now introducing new system, where it is a point system. Australia had a point system for some time already.

For Tier 2 visa, which is a highly skilled staff, it needs to show that the particular skill is not highly available in UK, and the applications would need to apply online.

For student visas, if one has a valid offer from UK Universities and also show proof of their financial status, they will get the 40 points needed. And they need to apply online.

In terms of foreign exchange, it is moving quite volatile. For Pound Sterling vs Ringgit, it is now RM5.80 to 1 Pound, but compared to 1 year ago, it was RM4.80 to 1 Pound.

When Euro was first introduced, Pound has grown quite a lot, but recently Euro has strengthened and it is getting closer to 1 Euro to 1 Pound.

If we look at the economy of the last 10 years, UK economy has grown by 30%, whereas German economy has grown by 10%. So, the correlation between currency and economic growth is not that solid.

The quality of Malaysian English is actually somewhere in the middle, where it is not too good, and yet not too bad.

High Commissioner also commented that most of the committee members of Young Corporate Malaysians are UK graduates and these are important links back here.

And looking at Malaysia's competitiveness, then Malaysia's population of 26 million could be much smaller than countries like Indonesia. So, those could be areas that Malaysia may not have the upside.

However, there are a number of companies that set up operations here and have a lot of investment at stake here.

Mobility of investments need to be there, to impress the investors. The government bureaucracy and tax regime are also considered. Malaysia's government is getting some of those right, and some are working on it through Pemudah. And setting of KPI is a good step.

Malaysia has the best cost quality balance ratio currently. However, if it is not moving forward fast enough, then it might get caught up by others.

UK was in similar situations some time back, where UK was previously good at attracting foreign investments, but at one point, investments were leaving UK. But UK managed to turn around and today, it is an important destination of foreign investment. What UK has done is that it is very agile.

Malaysia has to focus on the high end education, and grow on it. UK has been inventive and adaptive.

Most of the investments look at medium to long term. At current term, there is no investor in Malaysia pulling out, but there are some who have pulled up from Thailand.

There are some funds for Small Medium Companies to do research and development. From the Trade Commissioner of UK's view point, there are a number of funds in Malaysia, including from MOSTI.

The crucial element for Malaysia over the next 1 year would be the direction of the National Economic Action Panel. Prime Minister Najib has appointed a number of top people from all over the world to help to chart the direction of Malaysia's economy.

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