By Santhia Panjanadan

KUALA LUMPUR, July 19 (Bernama) -- Malaysia should look into further liberalising the services sector, licensing issues and foreign equity limitation to ensure continuous influx of Japanese investments.

These are crucial issues to address to stem Japanese investments from going to other Asean countries offering attractive investment packages, said Misako Takahashi, Counsellor and Economic Section Chief at the Japan Embassy, here.

Given the intensifying competition from other Asean members to woo Japanese investments, there was a need for Malaysia to look into aspects to create a "win-win" investment trend, she said.

"In a wider perspective, Malaysia receives lesser Japanese investments after China, Thailand, India and Indonesia.

"The Japanese are more interested in these countries due to their large domestic market and it makes sense to invest more in the larger domestic market.

"So, in this case, competition arrives as Malaysia's domestic market is not enough to sustain a longer period.

"So, it is important for Malaysia to have more strategic tools to attract foreign direct investments as other Asean members are drawing more Japanese investors as they are equally attractive," she said in a talk entitled "Recent Japanese Investment Trend in Malaysia."

To date, Japanese investments in the electrical and electronics (E&E) sector in Malaysia has sealed a "win-win" situation for both countries, which has resulted in Malaysia emerging as one of the global production hubs.

However, Malaysia has become less attractive in non-manufacturing sectors, food, transportation and distribution businesses.

"Japanese companies are ready to invest in Malaysia given its stable economy, political environment and satisfying incentives.

"Limited liberalisation in the services sector, particularly in distribution business, transportation, insurance, procurement costing, currency fluctuation and labour shortage are the impediments that need to be addressed," Takahashi added.

Meanwhile, Malaysia Investment Development Authority (MIDA) says Japan ranked first among the top five investors in Malaysia, with investments totalling RM10.108 million, followed by South Korea and the United States.

The E&E accounted for 34 per cent of Malaysia's exports last year, with Japanese investments in that sector supporting a substantial portion of the exports. There are about 1,400 Japanese companies in Malaysia.

Speaking to Bernama later, Takahashi said the Malaysian Islamic financial sector and the halal industry are seen as the most progressive and attractive in the world.

Therefore, concerted effort must be made to turn the Islamic finance and the halal industry business more investor-friendly to attract investors keen to use Malaysia as a "springboard" to penetrate the Middle East market, she said.

"This is another advantage for Malaysia as compared to other countries, especially the country's halal certification, which has gained global players' recognition and appreciation.

"There's a lot of potential in this country and tapping the Islamic market is another emerging trend among Japanese investors," she added.

-- BERNAMA