Among the factors that set Malaysia apart from other Asian investors in Africa are that Malaysian investments are highly diversified and Putrajaya exercises significant soft power across African states, says a report in The Diplomat.
Another important factor is the fact that the Malaysian Government emphasises its modern Islamic credentials, which opens up markets that are mostly closed to Chinese, Indian, and Western investors.
In 2011, with investments of US$19 billion, Malaysia was Africa’s most important Asian investor, ahead of China and India in terms of the size of its foreign direct investment (FDI), the report said.
The Diplomat report said Petronas, for example, was actively engaged in up- and downstream activities across Africa and its African production accounted for roughly one third of the firm’s international production (and 10 per cent of its overall production) in 2014.
Malaysia is also rapidly expanding its footprint in Africa’s palm oil industry. Africa is seen as the next growth market. Malaysian multinationals such as Sime Darby, Felda Global Ventures, and IOI Global are some of the key players in palm oil production in Africa.
Another key economic factor contributing to Malaysia’s unique standing in Africa is its ability to serve Islamic industries. These include the global Sukuk market (or “shariah-compliant” bonds) as well as halal goods and services. It is estimated that roughly 45 to 50 per cent – or about 500 million people – of Africa’s 1.1 billion-strong population are Muslims.
“Malaysia’s significant soft power, as well as its cultural and political-economic attraction, set the country further apart from other Asian investors in Africa. Malaysia actively lobbies its development model within an African development narrative to the continent directly,” the report said.
In 2013, Prime Minister Najib Razak wrote in a South African newspaper that Africa should emulate Malaysia’ reforms towards open markets, the critical role of the private sector for economic development, the advantage of trade agreements and regional economic integration, and the key role of transparency and accountability.
Pointing out that African students were increasingly going to Malaysia to study, it added: “Malaysia’s multicultural and multi-ethnic society, its relaxed visa policy for Muslim countries, and its affordable and high-quality higher education system makes it a particularly attractive destination for African students.”
The Diplomat report tipped the hat to former Prime Minister Dr Mahathir Mohamad, saying that it was he who set this successful policy and engagement with Africa in motion.
It said: “Mahathir combined his advocacy for the Third World with pragmatic commercial diplomacy in order to support Malaysia’s economic development.
“For Mahathir, Africa was the last frontier. In his eyes, Africa’s poor, developing, and ex-communist states were an opportunity for Malaysian corporations to develop, gain valuable overseas experience, and quickly produce substantial revenues. These revenues could subsequently be used for Malaysia’s domestic development.”
The report said Mahathir’s political and diplomatic support allowed Malaysian corporations to expand internationally, develop new consumer markets, and find investment opportunities in Africa.
Although the report said this strong government support was missing today, it ended on a positive note by saying Malaysia’s role across Africa was likely to grow further in the future.