MALAYSIA: More companies use Malaysia as bridgehead for ASEAN expansion

By Kim Jae-kyoung

South Korea has a small, open economy with heavy dependence on external trade.

Over the past decades, its economic growth has been powered by robust exports to China, Korea's largest trading partner.

However, with China losing growth momentum, Asia's fourth-largest economy is seeking a breakthrough in the ASEAN region as the launch of the ASEAN Economic Community (AEC) brings huge infrastructure opportunities for Korean firms.

As the first step, Korea is paying keen attention to the multibillion-dollar Malaysia-Singapore high-speed railway project before an international tender early next year. In July, the two nations signed a memorandum of understanding to develop the 350km line.

Since the $15 billion railway deal is the first mega-size project in the region following the AEC launch, whoever wins the lead role will seal an advantage to strengthen a foothold in the growing market.

"The Malaysia-Singapore high-speed railway project is now a top priority for the Korean government," Korea's Land, Infrastructure and Transport Minister, Kang Ho-in, said in a recent interview.

"President Park Geun-hye has a keen interest in the project. That's why the government has taken the initiative to get the contract and our consortium has been joined by various state and private enterprises."

According to sources, Park personally plans to have direct talks with Malaysian Prime Minister Najib Rajak on the project, which is scheduled to start in 2017 and be completed by 2022.

In June, Kang had a four-day visit to Malaysia with a Korean delegation to pitch Korea's strengths ― safety and advanced technology. Korea plans to transfer key technology and know-how if it wins the railway project.

"Unlike other countries, Korea is able to transfer key technology more easily because the public sector has secured most of the technology through state-led R&D," Kang said.

According to the European Railway Agency, Korea ranked top in high-speed railway safety, with the accident rate per 1 million kilometers the lowest at 0.073 in 2014, followed by Italy at 0.09, the Netherlands at 0.119 and Germany at 0.166.

Korea's model would be a choice most beneficial to Malaysia because it can provide the best services not only in construction but also in maintenance, according to the transport ministry.

Strengthening biz ties

On top of efforts to win the lead role in the railway project, more Korean firms ― not only builders but consumer goods producers ― are stepping up efforts to gain a foothold in Malaysia as a bridgehead for ASEAN expansion.

On Sept. 5, AmorePacific, Korea's top cosmetics producer, decided to establish its new production base in Nusajaya, Malaysia, by 2020, to speed up expansion in the ASEAN region. It is its third overseas factory, following production lines in France and China.

"We decided to build a new production base in Malaysia in order to meet the growing demand from ASEAN nations," an AmorePacific official said. "We aim to become a global cosmetics brand by spurring growth in the promising market."

CJ Korea Express recently bought a 31.5 percent stake in Malaysia's No. 2 logistics company, Century Logistics Holdings Bhd, for 47.6 billion won ($43.5 million), to become the Malaysian firm's largest shareholder.

Medium-sized companies ― such as Coway and Cuckoo ― are also strengthening their footholds in Malaysia.

Coway, which started its business in Malaysia in 2006, has posted average annual sales growth of 118 percent over the past decade. In 2015 alone, the company recorded 100 billion won in sales.

Cuckoo is also enjoying robust growth in the market, with the number of its rental accounts rising to 25,000 only a year after its debut. It aims to increase the number to 200,000 by 2017.

More Korean firms have expanded in Malaysia after President Park had talks with Malaysian Prime Minister Rajak in November 2015 ― during her visit to Kuala Lumpur ― on the sidelines of the 27th ASEAN Summit and related summits, chaired by Malaysia.

Korea established diplomatic relations with Malaysia in February 1960. Malaysia is Korea's second-largest trading partner in ASEAN, with two-way trade reaching $119.5 billion in 2014.

Source: The Korea Times