Investing in Japan
Speeches by the Chairman Japan-Malaysia Invest Symposium
March 15, 2016
I just arrived here in Kuala Lumpur last night. And I must say that, after experiencing the aiport service, the hotel service and the fantastic food here, I understand why so many Japanese choose Malaysia as the place to spend their golden years. Malaysia is the most popular destination for Japanese. In fact, it has held the top spot for the last 10 years.
As I will be approaching my golden age in a few years myself, I too am considering settling in Malaysia. Of course, the final decision rests with my wife.
With that, I would like to go into today’s topic: utilization of the TPP and foreign direct investment into Japan.
In anticipation of the TPP going into effect, we at JETRO have been organizing trade and investment seminars within Japan and overseas. Upon hearing that we were planning to do the same in Malaysia, one person said to me: “There is no need to hold seminars about Japanese products in Malaysia. All Malaysians already own a pair of ‘Selipar Jepun’.” Well, I was very surprised at his comment. Most Selipar Jepun are made in China.
As you can see, we still have much work to do.
This January, I had met with Minister Mustapa Mohamed, at the World Economic Forum in Davos, Switzerland. During our conversation, we agreed that the TPP will bring Malaysia and Japan much closer together. Based on this sentiment, we are holding today’s symposium to invigorate bilateral trade and investment involving SMEs from both countries.
Malaysia is an important partner for Japan. What I want to say today is, first, that JETRO will continue supporting Japanese enterprises as they enter Malaysia. Second, JETRO is ready to support Malaysian enterprises as they enter Japan.
Investment Imbalance between Japan and Malaysia
Nearly 70% of Japanese companies which entered Malaysia in 2013 and 2014 have taken advantage of JETRO’s services.
Over the next two years, JETRO is going to support a minimum of 4,000 Japanese companies in expanding overseas. Much of that effort will be toward ASEAN countries including of course Malaysia.
At the end of 2014, stock-based foreign direct investment, or FDI,
from Malaysia to Japan was less than five percent of that from Japan to Malaysia.
However, we are expecting this situation to change. Since 2007, capital outflow from Malaysia began surpassing capital inflow into Malaysia.
And upon enactment of the TPP, Japan will become the second closest market next to ASEAN to share common trade rules with Malaysia.
Abenomics has changed Japan
But why Japan?
You may be asking yourselves “Isn’t growth in Japan slow? Wouldn’t this bring low returns?”
Well, I am here to tell you that Prime Minister Abe has focused on “economic recovery” as Japan’s greatest and most immediate challenge.
Over the last three years, his economic strategy, referred to as “Abenomics,” has improved Japan’s GDP, corporate income, business confidence and employment.
Improved corporate earnings have attracted expanded investment and increased wages. This has expanded consumption and further increased corporate performance. With that, Japan has entered into a virtuous economic cycle.
The key to making this virtuous cycle sustainable is the “growth strategy.” This involves ongoing reform of “bedrock regulations.” For instance, the markets for electricity production and distribution have been opened.
Further, regulations and approval procedures for medicine and medical equipment have been substantially streamlined. As you are probably familiar, the Japanese government has arranged visa waivers for visitors from Malaysia since 2013. Since then, the number of visitors from Malaysia has doubled to 300 thousand. Total visitors from around the world have also doubled to nearly 20 million over the same period.
Abenomics has changed Japan.
Allures of Japan as an investment destination
I would like to introduce four more advantages of Japan as an investment destination.
The first is its massive and sophisticated consumer market. The economic scale and GDP of the Tokyo area alone is equal to that of the United Kingdom. The Kinki region centered on Osaka to that of South Korea. Japan is an immense market.
Further, the sophistication of Japanese consumers is well known worldwide. For example, Prof. Michael E. Porter from Harvard Business School had this to say regarding disposable diapers in Japan: “The reason why P&G tests its new disposable diapers in Japan is because Japanese housewives are the sternest consumers, just as they are toward their own husbands!” If you succeed in Japan, you will succeed anywhere!
Companies from around the world are taking advantage of this fact by making their own “made in Japan” products.
Alban Muller International, a French cosmetics company, has decided to establish a joint venture in Karatsu city, Saga prefecture. They plan on making cosmetics utilizing local agricultural products. Another cosmetics maker, from Taiwan, has been preparing to outsource manufacturing to Japan to strengthen the competitiveness of its products.
The second advantage of Japan is the rapid growth of tourism. Toward the opening of the Tokyo 2020 Olympic and Paralympic Games,
the Japanese government has been relaxing restrictions for visas and increasing the number of tax-free shops.
And while demand has been rapidly increasing in tandem with rising tourism, there remains a deficiency of hotels and tourist transportation. Hence, business opportunities lie therein as well.
Air Asia, a company from which we have a speaker today, is very familiar within Japan. Meanwhile, YTL has been managing Hokkaido Niseko Village since 2010, and Berjaya will open the Four Seasons Hotel Japan in Kyoto this autumn.
For Malaysian companies, multifaceted and lucrative fields await in the Japanese market. Foremost are the fields of tourism and halal foods. I hear that Malaysian people prefer to travel with family. Apple Vacations & Conventions entered Japan’s travel industry to meet this need.
The greatest joy upon visiting Japan is “experiencing Japanese cuisine”.
The scale of the halal food market in Japan is estimated at 600 million dollars.
However, Japan has no authorized halal certification system. Trusted by Muslims worldwide, Malaysian companies have much to contribute here. Harq Food Industry, from which we also have a speaker today, has been operating a halal restaurant in Kyoto this year.
The third advantage of Japan is its stable and convenient “business infrastructure”. The Japanese business environment is regarded as the most sophisticated in the world. Transportation infrastructure, such as airports and railways, spans the entire country.
The fourth advantage is Japan’s safe and comfortable “community infrastructure.” Tokyo is ranked the most livable city in the world, with Fukuoka and Kyoto in the top 15. Further, the OECD has declared Japan the safest country in the world. It’s environment for daily living, such as in terms of security and education, is universally praised by international companies.
Making Japan the most business friendly country in the world
I’ve introduced four advantages of Japan, but I can still read some doubt in your expressions. I suspect you still have concerns about it being a high-cost country. If so, you should throw that notion away.
Prime Minister Abe has committed to making Japan “the most business-friendly country in the world.” The corporate tax rate will be reduced to the 20% level within this year.
As for the cost of real estate, rent for offices and housing, Tokyo is comparatively cheaper than both Mumbai and Jakarta, where Malaysian companies are heavily invested.
And it is not only business cost. For example, “Yoshinoya”, a famous Japanese chain that serves beef and rice bowls, operates throughout Asia.
“The beef and rice bowl index”, which I have arbitrarily named the price of this dish by region, is 3.1 dollars in Tokyo, 2.3 dollars in Kuala Lumpur, 4.6 dollars in Singapore, and 5.1 dollars in Hong Kong.
Only Japan and Malaysia are an affordable country to live.
Talk to JETRO First
Over the last 13 years, JETRO has supported more than 14 thousand overseas companies interested in investing in Japan. About 14 hundred out of those companies successfully invested in Japan. Among those companies, only 11 came from Malaysia. There is significant room for more Malaysian companies to invest into Japan.
Air Asia and Harq Food Industry, who also received support from JETRO, will have more insight on this.
We have also seen joint investment into Japanese ventures by cooperative funds of both Japan and other Asian countries. One example is a PNB-INSPiRE Ethical Fund in Japan, established with joint Malaysian and Japanese capital, which supports Japanese SMEs entering the ASEAN and Islamic markets. JETRO will lend its support to these activities as well.
JETRO provides free one-stop services, information and consultation for companies setting up business in Japan. This includes six Invest Japan Business Support Centers located across the country which provide free office space for 50 working days.
JETRO is the most reliable partner for Malaysian companies.
When is the time to invest? Right now!
The European Business Council,
an association of European companies in Japan which has always cast a shrewd eye upon the Japanese market, had this to say:
“2016 will present a ‘golden opportunity’ for business in Japan.”
I am certain that today’s seminar will demonstrate why.
If you have any requests regarding investment in Japan, “ Talk to JETRO First!” ( datang-lah berjumpa JETRO dulu!)