Malaysia set to avoid tech price war against China

PENANG: "Malaysia, one of Asia's top emerging technology hubs, will avoid a price war against lower-cost China but build alliances with it instead", says a senior regional official here.

"We will minimize head-on, all-out competition especially in labour-intensive, low cost products and services," Koh Tsu Koon, chief minister of northern Penang state, told a conference to mark the island's 30th anniversary as a technology site.

Penang is the centre of Malaysia's electrical and electronics industry, which accounts for more than 60 percent of total exports and inspite of this, some large foreign firms warned about a possible migration to cheaper sites like Shanghai. To parry this, Koh said that the government would promote a "China plus One" (China and Penang) policy where Penang will be geared up for the spotlight.

In recent months, U.S. giants such as Intel, Dell Computer, and Motorola have forecast that for year 2002 capital investment in Malaysia would come down to 1.5-2.0 billion ringgit ($395-526 million) from 2.3 billion ringgit in 2001.

Addressing the same conference, chief operating officer of Agilent, Bill Sullivan, said, "The reason why U.S. businesses came to Malaysia 30 years ago was for its low labour costs. But Penang has come a long way, and there is still a long way to go but the future is bright."

Koh said it was time for Penang to rethink its strategy and announce plans to explore new markets and alliances reduce business costs, raise quality and productivity. While applications for capital investment to establish electronics projects in Malaysia fell 7.3 billion ringgit in 2001 from 18.6 billion ringgit in 2000, though the figures partly reflected a global slump in the technology sector.

"We will fly with the big dragon and build smart partnerships with China," Koh said. "We also plan to tap into ASEAN, India, the Middle East and African markets." Bill Davidson, chairman of international consulting firm Mesa Research, said the multicultural Malaysia was well positioned to make inroads into China and emerging India.

Malaysia, where Islam is the official religion, has a population of 23 million. Malays account for the majority while Chinese and Indians together make up more than a third. "China and India are two of the most populous nations in the world," Davidson said at the sidelines of the conference. "Because of its background, Malaysia has a unique advantage in bridging these two markets."

Note: ($1 = 3.8 ringgit)