Change in Malaysia, opportunity for India

When Narendra Modi met his Malaysian counterpart Datuk Seri Mohammad Najib Bin Tun Abdul Razak — who has just been ousted from power in an upset election defeat — on April 1 last year, they spent 20 minutes of their one-on-one meeting discussing Goods and Services Tax (GST). 

The GST has been an albatross around Najib Razak’s neck ever since he introduced it in Malaysia in 2015. That the difficulties the GST posed for Malaysians played a significant part in the historic defeat of the ruling party, the United Malays National Organisation (UMNO) on May 10 was obvious from one of the main campaign promises by the opposition to abolish it if they won the general election.

The UMNO has been in power since Malaysia’s first general election in 1959, initially on its own and later, as the main partner in a coalition called the Barisan Nasional (BN). The resurgent, new Prime Minister, Tun Dr Mahathir Mohamad, reiterated on Thursday soon after taking office, that he would scrap the GST within his first 100 days in office.

When Modi and Najib met last April, India was precisely three months away from introducing its own version of the GST. Modi was keenly aware of the political risk in Malaysia’s implementation of the GST and Najib had been forewarned to expect questions on the controversial tax, officials from both sides had then told this writer.

Indian officials insist that of all the heads of state and government that Modi has met across the world, Najib is among those whose work he has closely followed and often sought to emulate. When the two men met for the first time in Myanmar in November 2014, Modi surprised Najib by asking about a unit in his office known by its acronym of PEMANDU which stands for Performance Management and Delivery Unit.

New in office, familiarly impatient and brimming with new ideas then for the transformation of India, Modi wanted to set up something in the mirror image of PEMANDU in his own Prime Minister’s Office (PMO). The unit in Putrajaya, the administrative capital of Malaysia, is tasked with overseeing the implementation, assessing the progress and facilitating the delivery of government programmes similar to the ones Modi has launched in the last four years. 

Impressed, Najib immediately deputed Devamany S Krishnasamy, a Malaysian Indian, then speaker of the Perak State Legislative Assembly, who had helped set up PEMANDU in Malaysia’s PMO in September 2009 to work with the Indians. That Modi did not quite have his way in setting up a Malaysian model accountability unit in his office is the story of turf battles and myopia in India’s babudom. 

Illustration by Binay Sinha
Since then, the economic content of Malaysia-India relations has grown exponentially. Malaysia has swiftly moved beyond photo-ops of signing of agreements in New Delhi in the presence of VIPs and has reached out to states to begin business-to-business activity on the ground. During multiple visits, this writer found Andhra Pradesh Chief Minister Chandrababu Naidu to have a highly favourable rating in Malaysia among those who want to collaborate with India.

Reflecting that confidence in Andhra Pradesh, a technology park spread over 250 acres in Amaravati, bringing in Malaysian investment of $100 million in the initial phase, is being developed. Malaysian companies are engaged in negotiations for a greenfield airport in Nellore and development of an aerotropolis there. Malaysia’s statutory Construction Industry Development Board (CIDB) has been advising the federal and state governments to get involved in water, sewage, monorail and road construction projects in Andhra Pradesh.

Rajasthan wants Malaysian companies to build gold courses in the state and CIDB officials have visited Uttar Pradesh to look at irrigation projects. The award of a project to IRCON International to double track a railway line connecting Seremban to Port Klang in Malaysia is in the final stages of negotiation. Another agreement to put up a urea and ammonia manufacturing plant in Malacca for dedicated consumption by India make these deals two-way and mutually beneficial.

The two-way tourist flows and consequent business opportunities between India and Malaysia have increased after the two countries renewed their bilateral air service agreement during Najib’s visit to New Delhi last year. The new agreement allows airlines in Malaysia an additional capacity of 1,861 seats per week to lift passengers to and fro.

Because many Malaysians of Indian origin travel to their native Chennai regularly, it is not very well known nation-wide that every week an average of 22,000 people travel between the two countries following the new agreement. That makes for a potential business from tourism for both sides involving 1.1 million people annually. 

Such a brisk level of bilateral economic activity which has outpaced similar relations with many countries make it imperative that India should immediately reach out to the new government of Dr. M, as the new Prime Minister is popularly referred to in his country. For the better part of Mahathir’s earlier tenure as Prime Minister from 1981 to 2003, he along with Singapore’s Lee Kuan Yew had written off India as a loser on the economic front. 

Both Mahathir and Lee had lamented often that India’s economic record has been one of wasted opportunities which compared unfavourably with the successes of the South East Asian “Tiger” economies. The new Prime Minister, who has created history in his country must be convinced that the India he will be dealing with now is very different from the one he dismissed in the 1980s and the 1990s.
K P Nayar is a frequent visitor to Malaysia and has reported on India-Malaysia relations from Kuala Lumpur since 2015

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel