Saturday, January 18, 2014

Look East Policy of Malaysia

Mahathir Mohamad
Asia in 1980’s was the image of rapid economic growth. Many Asian nations starting with Japan, followed by the Five Asian Tigers, showed to the world rapidly growing economies. Malaysia was among the industrializing nations during those days wanted to emulate the miracles of these Asian nations, especially Japan. And with a new Prime Minister in 1981, he launched a new slogan that would direct his close relation to Japan and other Asian countries.

The Look East Policy was the brain child of the Malaysian Prime Minister, Mahathir Mohammad, in 1981.  It was aimed in emulating some characteristics of other neighboring nations. But the principle goal was a shift in focus of relation from the West, in particular, Britain, towards the new rising Asia, specifically, Japan. It economic influence to Malaysia was profound both positively, and also negatively.

The Policy was announced few months after Prime Minister Mahathir Mohammad came to power in 1981. The true inclination of the policy was towards Japan. However, because of the World War atrocities, Mahathir choose the word “East” so as to incorporate Korea and Taiwan. The announcement of the policy brought shock and confusion. Many saw it as vague. In particular to those that saw it vague the Ministry of Foreign Affairs. The Ministry was unaware and not consulted about the move of the Prime Minister. It seemed that Mahathir authoritarian style of rule played a role. Because of their unawareness of the move, they did not knew how to implement the said policy.

The Prime Minister then pointed out that it was a slogan for a new closer ties with Asian nations, especially, his admired country of Japan. It appeared to be in support of his other policy known as the “Buy-British Last Policy.” It was to turn away from Britain and a paradigm shift to their neighbors. It also was a statement that he wanted Malaysia to emulate some of the East Asian characteristic both economically and ethically.

Economically speaking, he wanted Malaysia to adopt some principles from Japan. He believed that Malaysia should follow the example of Japan Inc. and create the Malaysia Inc., where both government and the private sector worked together to achieved a common economic goal. He wanted also Malaysians to inculcate the idea of in-house unions and the sogo shosas. He believed that having in-house unions would create a strike free economy and perceived an idea of a working environment.

One of the main focuses of Mahathir on the policy was the Malaysian emulation of East Asian ethics. Japan was popular for its Bushido code; Korea having the same version under Hwarang-do. And both of this came from or similar from the Confucian thoughts. The Look East Policy push Malaysia to follow the East Asians in becoming diligent, hardworking, loyalty, communal spirit, and perseverance to achieved the same development of these countries. To teach the young Malaysian generation, the government initiated a program of sending students to study in Japan and Korea to learn the discipline of their people. To teach their workers, Malaysia also sent workers to training institute and companies in Japan and Korea to learn from the East Asian way.

Because of the Look East Policy, East Asian investments to Malaysia increase. The contracts for construction projects given to Japanese companies increased. One example was the Dayabumi Complex constructed by the Takenaka-Kumgai. Another was a cement plant that was constructed with a contract with Mitsui. Then in 1982, the Korean construction company, Hyundai Engineering and Construction Company, was awarded with the contract to construct the Penang Bridge.

The Look East Policy also coincide with the ambitions of Mahathir industrialize Malaysia. One good example of benefits of the Look East Policy and Mahathir’s ambition was the National Car Project. The Proton or the Perusahaan Otomobil Nasional Sendirian Berhad was founded by a joint venture of the Heavy Industry Corporation of Malaysia and the Japanese automaker, Mitsubishi. The result was the creation of the first Malaysian made car, the Proton Saga. Later on, Daihatsu entered to a joint venture with other Malaysia companies to establish another Malaysian automaker of minicars, the Perodua. Beside the car manufacturing industry, another focus of Mahathir was steel. His venture for steel became the biggest and the most controversial of all of his pet projects. The Perwaja Steel was established under the joint venture between Nippon Steel and the Terengganu State Economic Development Corporation. However, the Perwaja Steel never made profits and even became embroiled in a scandal that almost causes a default on loans that could destroy the financial institution of the country. The Perwaja Steel was a complete opposite of another Nippon Steel venture in past, the Pohang Steel Corporation or POSCO of Korea.

After the ventures, Mahathir then unveiled in 1986 a formal plan for Malaysia’s industrialization – the Industrial Master Plan. The plan had Japanese involvement. Two Japanese, Kasumaza Suzuki and Keniche Omahe, advised the Malaysian government for the planning stage. Later on, Omahe became also involved on the inception of the high tech, Multimedia Super Corridor.

Overall, Japanese entrance to Malaysian economy due to the Look East Policy was remarkable. Japanese capital flowed heavily to Malaysia’s manufacturing sector. Trade between the countries as well as other Asian countries increased remarkably.

The Look East Policy and the inclination heavily to Japan, nevertheless, faced some huge problems. One problem was that expected transfer of Japanese technology to Malaysia via foreign direct investment proved to be slow. It was already clear that Japan had little plans to transfer their know-how to other countries as other Southeast Asian countries experience. Furthermore, the said increase of trade between Malaysia and Japan appeared one-sided. Malaysia incurred $2.7 billion deficit with Japan by 1984 as a result of the Look East Policy. Following the unbalanced trade relation, the Japanese government decided not give rights for a Malaysian Airline and Northwest Orient Airline joint venture to use Tokyo as a stop between a Malaysia-US flights. Because of Tokyo’s decision, Mahathir criticized Japan for having a colonial attitude towards Malaysia. After the flight access incident, Mahathir himself backtracked the Look East Policy but not abandoned.

Later on, in 1990, the Look East Policy returned to vigor. With the announcement of the Vision 2020, Malaysia needed Japanese investment to achieve the status of developed country by 2020. The Multimedia Super-Corridor was one of the projects of the government that needed investments from East Asian nations. Also on December 1990, Mahathir announced a trade bloc that would compete with the Asia-Pacific Economic Cooperation (APEC) – the East Asia Economic Group (EAEG). The idea of Mahathir was a free trade area comprising of the ASEAN, China, Korea, and under the leadership of Japan. This however faced criticisms from ASEAN and the US. But the whole idea was never abandoned, only modified. A year later, the Indonesian proposed the same idea but not a trade bloc as Mahathir planned, but an East Asian Economic Caucasus (EAEC) that would be consultative body. The Caucasus, however, was not assertive or influential. Eventually, the Caucasus was abandoned because it did not provide the help needed when the 1997 Asia Financial Crisis devastated a lot of Asian countries.

The rejuvenation of the Look East Policy through the 1990’s was as remarkable as the 1980’s. More contracts were given to East Asian companies. An example of the contracts given to Koreans and Japanese was the construction of the one of the tallest buildings in the world, the Petronas Tower. Also, during the 1997 Asia Financial Crisis, the amount of large Japanese investment to Malaysia allowed the Southeast Asian state to receive the needed $2 billion dollars from the Miyazawa Initiative that aimed in protecting Japanese investments abroad from bankruptcy.

The Look East Policy continued until Mahathir stepped down in 2001. The Look East Policy is one of Mahathir’s iconic policies. It allowed Malaysia to have the investments needed for its industrialization, although some failed. It allowed Malaysia to move away from its former colonial masters. However, it has several flaws. One such flaw involved a change of reliance for western Britain to an eastern Japan. 

Bibliography:
Cheah, B. Malaysia: The Making of a Nation. Singapore: Institute of Southeast Asian Studies, 2002. 

Dhillon, K. Malaysian Foreign Policy in the Mahathir Era, 1981-2003: Dilemmas of Development. Singapore: NUS Press, 2009. 

Milne, R. Malaysian Politics under Mahathir. London: Routledge, 1999.

1 comment:

  1. I feel that the references used in writing this article are kinda one-sided. Shouldn't the author also refer to books written by the policy maker himself?

    ReplyDelete