Malaysia: An Economy Transformed

Speech to the launch of Department of Foreign Affairs and Trade's Economic Analytical Unit Report, Parliament House, Canberra.

Introduction

Distinguished guests, ladies and gentlemen.

It gives me great pleasure to welcome you here to launch my department's new report, Malaysia: An Economy Transformed.

I congratulate Nicholas Coppel and the Department of Foreign Affairs and Trade's Economic Analytical Unit on producing another high quality report. And I thank Monash International for their sponsorship.

Malaysia's transformation

The average income of Malaysians today is two and a half times higher than it was 15 years ago. Malaysia's impressive economic performance has pushed poverty down to levels lower than most other developing countries in South and East Asia.

Australian companies have contributed to and benefited from Malaysia's rapid economic growth. My Department's report finds that the commercial trading relationship between Australia and Malaysia has gone from strength to strength.

In 2003-04, Malaysia was Australia's tenth largest goods trading partner. And in 2003, Australia was Malaysia's 14 th largest goods trading partner.

The report I am launching today will help Australian companies understand Malaysia's economic success...

...and benefit from its strong future growth prospects.

The Australian and Malaysian Governments are committed to building upon the already strong and broad-ranging bilateral relationship. Malaysian Prime Minister Dato' Seri Abdullah Badawi has accepted an invitation to visit Australia and we look forward to welcoming him.

In July last year, Malaysia's Minister for International Trade and Industry, Dato' Seri Rafidah Aziz and I agreed to conduct parallel scoping studies of a free trade agreement between our two countries. These studies reflect the importance and strength of the bilateral commercial relationship and recognise the likely benefits that would flow from increased trade and economic ties. I am pleased to note that the APEC Studies Centre will hold a Conference on the possible Australia-Malaysia FTA on 10 March in Melbourne.

In the area of trade policy, Australia and Malaysia share similar objectives and have a close working relationship. The Australia-Malaysia Joint Trade Committee, which I co-chair with Trade Minister Rafidah, provides an important vehicle for our governments and the private sector to raise and advance bilateral trade and investment interests. Malaysia and Australia are strong advocates for a robust rules-based international trading system as a means of ensuring a predictable and stable trading environment. Our two countries work together to support multilateral liberalisation goals in the World Trade Organization and regional fora such as the Asia-Pacific Economic Cooperation.

Relationship will only get stronger

There are good reasons to expect this close relationship will strengthen as Malaysia's economy continues to grow and diversify.

As my Department's report points out, strong economic growth since the 1970s has transformed the Malaysian economy. Tin, rubber and palm oil remain important, but have been overtaken by new industries. Malaysia is now one of the world's largest producers of electronics and electrical products. It is the fifth-largest exporter of semi-conductors in the world.

Like Australia, Malaysia is a relatively open economy which recognises the importance of international trade for its prosperity.If we look at trade as a share of output, Malaysia is the fourth most open economy in the world. This openness to trade has brought substantial benefits to Malaysia. However, as with any growing economy, Malaysia faces challenges as it continues along the development path. These include the emergence of China as an industrial powerhouse, improving government service delivery and lingering business wariness from the 1997 Asian Financial Crisis. The Malaysian Government is responding to these challenges by focusing on education, strengthening the financial system and reviewing the way government services are delivered.

The Government is also placing greater emphasis on economic diversification, encouraging growth in the service sector, strengthening the agricultural sector and encouraging movement up the value-added chain. This should give Malaysia a solid grounding for continued growth in the years to come.

Investment not as strong

The investment relationship is not as strong as the trading relationship. Malaysia directly invests around $3.2 billion in Australia. By contrast, Australian foreign direct investment in Malaysia is estimated at only $263 million. This is despite many rules and regulations in Malaysia being similar to those in Australia.

Examples include tax, company and securities laws...

...listing rules on Bursa Malaysia and the Australian Stock Exchange...

...and financial reporting frameworks for companies.

Education

Similar legal, accounting and corporate systems have made study in Australia a popular choice for Malaysians.

Australia is Malaysia's first choice when it comes to studying in international institutions. Nearly 200,000 Malaysian students have graduated from Australian Universities.It is clear that educational linkages are a cornerstone of Australia's relationship with Malaysia. Monash University was the first international university to establish a campus in Malaysia. Of the five private international universities in Malaysia, three are Australian.

In recognition of the significance of education in Australia-Malaysia relations, the Economic Analytical Unit's report has a chapter focused on this sector. The education relationship is evolving, particularly as Malaysia plans to establish itself as a regional educational hub, and there are good prospects for growth in education services.

Conclusion

Malaysia is an economy on the move. As Malaysia embarks on the next stage of development the complementarities between our two economies will generate even greater economic integration.

The Economic Analytical Unit report is an important contribution to the understanding of the opportunities and challenges facing Malaysia. It is a valuable resource for business and government alike. I hope that it will encourage Australian business to look more closely at Malaysia as a potential trading partner.

It gives me great pleasure to launch the report today. I commend it to you.

Thank you.