The United Kingdom sees huge trading opportunities in Southeast Asia and seeks to build a “new modern and dynamic” relationship with the region’s ten nations.
According to Dominic Raab, the Foreign Secretary of United Kingdom, Malaysia is a key partner in the Association of Southeast Asian Nations (ASEAN) and that “global Britain is open for business” following its contentious split from the European Union (EU).
Business Today talks to Charles Hay, High Commissioner of the United Kingdom to Malaysia on trade, immigration regulations and defence links post-Brexit.
How would describe the current state of Malaysian and UK relations?
Very positive. Recently, our Foreign Secretary was here on his 1st official visit since the UK’s departure from EU, indicates a powerful signal the importance of Malaysia and the whole of APAC region to the UK. There are strong and deep ties between both countries towards a modern forward-looking relationship.
The current trade numbers of the UK’s exports and imports are at GBP2.5 billion and GBP2.6 billion respectively, mainly from the goods and services sectors, and an increase of 6.5 percent y-o-y. Where are the other opportunities besides these sectors?
For the last ten years, the growth in bilateral trade has been relatively slow which is not how it should be. I would like to see an increase in trade investments. There are many opportunities for both countries in this trade relationships. The establishment of the joint trade working group is very important to identify ways on how to improve trade investments. UK companies need to focus on Malaysia as the potential market. There are so many other sectors which we can explore further, and it’s the same for Malaysia too. When you look across the sectors, the Malaysian government is very keen to promote aerospace. In my opinion, Malaysia is increasingly being look at as a destination for high value-added manufacturing investment in the engineering space.
Our government has been pushing the country towards digital transformation, and the UK is known for its advance technology. Will we see more UK technology companies investing in Malaysia?
Malaysia has a growing reputation for being highly skilled and high value added which is what our UK companies are looking for. A UK medical device manufacturer, Smith and Nephew, is set to break ground on its first manufacturing plant in Southeast Asia in Penang. The plant will create up to 800 new jobs over the next five years. Last year, Ideagen, one of the world’s leading software companies, setup their regional hub here in Malaysia. In Malaysia, there’s an excellent pool of highly skilled talent in software writing whom they can train and develop.
The major Malaysian investments in the UK is very property skewed. Why is that so?
That is not entirely true. YTL which owns Wessex Water is doing extremely well. But, yes, the message I get is Malaysian property investors want to continue looking for investments in the UK. We are encouraging them to invest outside London such as to the Midlands and the north of England which are recognised as significant economic blocs. Our government has announced to proceed the high-speed rail link between the south and north of England. despite the heavy costs.
There is an appetite for Malaysian firms to seek different investments in the UK which we are in favour, if you look at economic findings, whenever a foreign investor comes in, productivity and unemployment improve.
Now, with post-Brexit, will there be changes to the trade negotiations between UK and the rest of EU. What can you share to the Malaysian investors who want to expand their business in the UK or use the UK as a gateway to Europe?
The UK has been a good place to invest. We have a stable investment environment, a rule of law, and a common law legal system similar to Malaysia and the English language. If, the UK has been a good gateway into Europe, it will remain so.
Our prime minister is clear what he wants to negotiate with the EU, there will be no extension during the transition period. The details on the future trading negotiations with Europe will be agreed by the end of the year. Many of the uncertainties are clear. Investments which were put on hold are coming back in – no reason to hang back.
In your opinion, what are the differences you expect post-Brexit?
There will be some impact. My government made it very clear that the UK will neither accept a high level of alignment with the EU or the European Court of Justice having a voice. We want to negotiate a good deal with them but as equal sovereign partners.
There will be changes with respect to the goods and service trade between UK and EU. My government said they will accept some friction in relation to trade because that’s the other side of the coin of not accepting the regulatory alignment.
It is possible we might change to new UK requirement, but we will not do it overnight.
Has immigration regulations been discussed during the negotiations?
Presently, we have different regimes for EU and non-EU countries. Beginning next year, there will be a new visa regime in the UK – a point base system. The government will look at the requirements of the British economy to decide on the apportionment of the visa applications accordingly. Hence, more equality between EU and non-EU visa applicants.
What are your thoughts on Malaysia being a springboard for UK companies to expand their market into ASEAN, especially Malaysia being lower cost than Singapore?
We are looking at ASEAN as a bloc and, are interested in regional trade deals. From a government perspective, we have appointed our first ever UK ambassador to ASEAN and he was here recently with the foreign secretary.
We would want to be “as closely aligned with Malaysia as possible” so, the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) is a “priority” to Britain. Our foreign secretary has raised this with his Malaysian counterpart. We will wait to see what Malaysia decide to do on ratification.
British companies see ASEAN as a key region and Malaysia as a potential hub being lower cost than Singapore. InvestKL and other entities are doing a great job attracting, promoting and supporting companies wanting to move here.
Currently, there are five British university campuses in Malaysia. Do you see any further expansion?
The education is a very important sector. The campuses are working well, and some are looking to expand further. But the model is changing slightly, we are seeing different agreements and arrangements between universities which don’t require the establishment to have a physical campus.
What is the state of the Five Power Defence Arrangement (FPDA), how do you see it moving forward?
For the UK, it has always been very important since its establishment. Next year is the 50th anniversary, and I expect it to be marked by special exercises.
The defence links between both countries are very significant. The UK has always been a major supplier of defence equipment to the Malaysian arm forces and I hope it will continue to do so in future years.
Last year, the RAF Typhoons conducted a Royal Malaysian Air Force (RMAF) joint exercise as part of the annual FPDA.
How can the UK and Malaysian diplomatic ties be improved further?
We have very good bilateral relations. Both countries have good trade investments, educational and cultural links and a thriving defence relationship. To sum it all, we have a very nice combination, not only a strong historical link but also a very forward-looking element as well.