Perak

Kedah

Penang

Kelantan

Perlis

Terengganu

Pahang

Melaka

Sabah

Sarawak

Selangor

Kuala Lumpur

Negeri Sembilan

Johor

of Japanese ODA in Malaysia

Anniversary

Printed in February 2017

Japan International Cooperation Agency Malaysia OfficeSuite 29.03, Level 29, Menara Citibank,165, Jalan Ampang, 50450 Kuala Lumpur, Malaysia.Tel: 03-2166 8900 Fax: 03-2166 5900http://www.jica.go.jp

with a focus on JICA’s Cooperation

In line with the economic development of Malaysia over the past 60 years, the economic relation between Malaysia and Japan has become increasingly closer than ever. In the 1960s and 1970s, Malaysia’s exports to Japan were mainly wood and tin, and its imports from Japan were machines and metal products. From the middle of 1980s onward, Japanese manufacturers set up many subsidiaries in Malaysia, and hence, the electric and electronics industry in particular saw tremendous growth. This was further driven by the foreign direct investment (FDI) policy of the Malaysian government and the rapid appreciation of Japanese yen in the foreign currency market. Japan exported industrial materials and parts for production to Malaysia, while Malaysia exported to Japan manufactured products from the factories here apart from wood and mineral fuels. During this period, the trade exchange with Japan saw

Since the independence of Malaysia in 1957, Malaysia’s economy has demonstrated a stable growth for over 60 years. The population grew by 3.7 times from 8.16 million in 1960 to 29.90 million in 2014. During the same period, the country’s Gross Domestic Products (GDP) increased by about 180 times and GDP per capita by about 50 times. The economic growth has improved the living of its people. The incidence of poverty based on the household income below the poverty line set by the Malaysian government has outstandingly decreased from 49% in 1970* to 0.6% in 2014.

Japan’s Official Development Assistance (ODA) to Malaysia dates back to 1956, when the first technical trainees visited Japan from the Federation of Malaya. Since then, the Japanese government has continuously cooperated with the Malaysian government even up to this present day. ODA is broadly defined as resource flows provided by official agencies to promote the economic development and welfare of developing countries. It consists of bilateral and multilateral cooperation. Bilateral cooperation is implemented on a government-to-government basis, and multilateral cooperation is conducted through financial sources contributed to international organisations. Japan’s bilateral cooperation has the following three modalities:

Loan aid: Long-term, low-interest loans, also known as yen loans, provided to large-scale infrastructure projects and especially in Malaysia, study abroad programmes; Technical cooperation: Cooperation aimed at human resource and institutional development in a variety of fields including infrastructure, economy, society, and environment through training, advice/consultation by experts, and activities by members of Japan Overseas Cooperation Volunteers; and Grant aid: Financial assistance without an obligation for repayment, granted for improvement of equipment and buildings for development.

Economic Relationship between Malaysia and Japan

GDP and GDP per Capita of Malaysia (at current prices)

Trade Amounts between Malaysia and Japan

Social and Economic Development of Malaysia

Over the last six decades, Japan’s Official Development Assistance (ODA) has walked hand in hand with the development of Malaysia, serving as a foundation for stronger bonds among people in Malaysia and Japan. This brochure introduces the course of Japanese ODA to Malaysia, with a central focus on JICA’s cooperation.

Overview of Japan’s ODA

Features and Contribution of Japan’s CooperationCooperation in response to changing needs for development

Japan extended cooperation to Malaysia along with its needs. An emphasis was placed from the 1970s on the development of economic infrastructures, including power generation. Later, in the 1980s and 1990s, an increasing emphasis was placed on the improvement in manufacturing technologies and human resources. In the 2000s, the cooperation was extended to a more diversified field including urban and environmental improvement. The timely cooperation was enabled by systematic development policies under the eleven Malaysia Plans and a mutual trust between the people of Malaysia and Japan. A great emphasis on human resource development

Under Japan’s cooperation, most of the projects have been designed to incorporate the components of training and technical transfer, regardless of whether they are infrastructure or industrial development. In Malaysia, loan aid has long been extended to scholarship

programmes as well as infrastructure development. The human resource base which was thus formed in an extensive and continuous way had not only supported the Malaysian government and the development of local industries and society, but also paved the way for many Japanese investors to expand businesses in Malaysia. Evolution of project cooperation by governments to broader interactions involving private sectors, local authorities and civil societies

In Malaysia-Japan cooperation, trusts were fostered among those engaged in many project sites. The trusts formed a basis for extensive relations between not only government officials in Malaysia and Japan, but also varying parties such as companies, local authori-ties and civil societies in the two countries. These relations are an essential asset for both Malaysia and Japan in the future.

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

0

2,000

4,000

6,000

8,000

10,000

12,000

GDP (current US$ billion): Left axis

GDP per capita (current US$ billion): Right axis

(US$ billion)

(Year)

(US$)

Source: World Bank, “World Development Indicators”

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

0

10

20

30

40

50

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014

(RM million) (%)

(Year)Source: Department of Statistics; JETRO,"Malaysian Economy in Figures 2010"

Exports to Japan (Left axis)

Imports from Japan (Left axis)

% of Exports to Japan in Total Exports (Right axis)

% of Imports from Japan in Total Imports (Right axis)

Balance of Foreign Direct Investments in Malaysia by Country/Area (as of the end of 2015)

Global Financial Crisis

Asian Financial Crisis

0

500

1,000

1,500

2,000

2,500

3,000

1975

1980

1985

1990

1995

2000

2005

2010

2014

(Million USD)

(Year)

Source: Ministry of Foreign Affairs of Japan, “ODA Country Data”, etc.

Loan Aid (Net Disbursements) Technical Cooperation Grant Aid

Japan's Official Development Assistance to Malaysia (Cumulative Amount)

107,524

73,757

43,882

26,63423,278

21,620

21,532

18,467

14,337

8,659

8,254

101,790

(RM million)

Singapore

Japan

Netherlands

35,193United StatesHong Kong

Switzerland

United Kingdom

Virgin Islands (British)

Germany

Bermuda

Australia

Korea, Republic of

Others

Source: Department of Statistics, Malaysia

a major contribution to the total trade amount of Malaysia. In 1995, manufacturing products accounted for more than 80% of its total export amounts, and Malaysia has successfully transformed itself from an agricultural based nation into an industrialised country exporting industrial products to the world. In the 2000s, the trade between the two countries has further expanded, thanks to the rapid increase of liquid natural gas (LNG) export by Malaysia.

Investments by Japanese firms have always played a significant role in Malaysia industrialisation policy which places attracting foreign direct investments as its core strategy. As of the end of 2015, Japan’s balance of direct investments in Malaysia was RM 73.8 billion, making it the second largest investing country after Singapore.

The gross disbursements of Japan’s ODA to Malaysia from 1969 to 2014 amounted to USD 7.8 billion in total. The total amount of Japan’s ODA based on the net disbursements of loan aid (deducting the repaid amounts) was over USD 2.5 billion as of the end of 2014.

While Japan’s bilateral cooperation has also been implemented by various government organisations, JICA, through the above three modes of cooperation, has been taking key roles in it under the Japanese government’s policy.

In regard to human support, since 1956, Japan has accepted about 17,000 trainees from Malaysia through JICA training programmes. JICA has dispatched about 3,600 experts in total to Malaysia. In addition, a total of about 1,500 volunteers have worked with the people in Malaysia.

Under “Vision 2020” which is a long-term vision of the country, the Malaysian government is promoting economic growth as well as the quality of life of all Malaysians with an aim to becoming a fully developed country by the year 2020.

* The 1970 figure is only for Peninsular Malaysia. In 2014, the average monthly poverty line income was RM930 for Peninsular Malaysia, RM1,170 for Sabah, and RM990 for Sarawak.

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Malaysia’s economy was mainly dependent on agriculture, forestry, and mining until the 1960s. In the 1970s, industrialisation started rapidly, thanks to the government’s leadership on education and infrastructure development. Malaysia has maintained efforts to strengthen its industrial capacities including technology, human resource, and management, while utilising foreign investments as well. Japan’s cooperation has specifically focused on these self-reli-ant efforts. An emphasis was given to industrial development

A significant case is a variety of cooperation with the Standards and

Industrial Research Institute of Malaysia (SIRIM) over the past three

decades. SIRIM is in charge of dissemination, establishment, and

approval of the international and domestic standards for industrial

products. JICA supported SIRIM in pursuing this mission by conduct-

ing training, dispatching experts, and supplying equipment. In the

field of development and dissemination of industrial technology,

various cooperation projects were implemented in order for SIRIM to

lead industrialisation of Malaysia. The project areas ranged from

fundamental technologies such as metal processing and foundry to

advanced ones such as fine ceramics and artificial intelligence (AI)

system development. The cooperation had successfully attracted

foreign direct investments including those from Japan and built an

important basis for current economic policies.

Infrastructures of roads and rivers in particular are not developed simply to meet an existing demand but to prepare for future changes of the socio-economic structure. This requires long-term and compre-hensive planning. Japan’s cooperation in infrastructure development has thus emphasized long-term planning from an overall point of view. Typical examples are a national water resource development plan prepared in 1978-82 and a national road network development plan in 1990-93. Under these national plans, a series of plans were prepared at the regional level, including river basin management plans for Kinabatangan, Klang, Kelantan and Mudah, and transport plans for major cities and their vicinities, including Kuala Lumpur, Johor Bahru and Klang Valley and a plan to link the Kuala Lumpur metropolitan area and Johor through an express way. Based on these prepared plans, a number of investment projects were identified for funding by the Japanese loan aid. A typical example is “Seremban - Ayer Hitam toll expressway”. Nine projects were financed by the Japanese loan aid for road development and water resource management, including “Crocker Range Crossing Road Project” in Sabah state, being the first of many road projects, and “Pahang-Selangor Raw Water Transfer Project” with a Japanese loan aid of the largest amount. Subsequent-ly, the Malaysian government has been implementing projects based on these plans with its own funds. The infrastructure development cooperation was not only for physical construction but also technical and managerial achievements. Government officials engaged in road development and river manage-ment often mention that the methods of planning and management accumulated in Japan have been introduced to Malaysia and further developed through the process of their application to situation in Malaysia.

Energy and electricity development is a foundation of industrialisa-tion and the community as a whole. Cooperation was started from Temengor Hydro-Electric Project to which Japan provided the long-term yen loan. The mid-1970s was the period when electricity needs were surging in tandem with the rapid economic development of the country. The long-term yen loans were provided to hydro-elec-tric power plants with multi-purpose dams, thermal-electric power plants and installation of new facilities . Also, studies were conducted to formulate plans of electricity development. Later in late-1990s after the Asia currency crisis when private investments in electricity sector were stagnated the Port Dickson Power Station Rehabilitation Project, for example, was implemented, and contributed to the new

Crocker Range Crossing Road Project

Centre for Instructor and Advanced Skill Training (CIAST)

Pahang-Selangor Raw Water Transfer Project

Tenom Pangi Hydroelectric Power Station (Construction in 1979; Rehabilitation in 1992)

Port Dickson (Tuanku Jaafar) Power Station (Rehabilitation in 1999)

National Metrology Institute of Malaysia(Former National Metrology Laboratory, SIRIM Berhad)

Responding timely to the needs and priorities of industrial policies

Energy

Building a foundation of industrialisation

Industrial Development

Consistent cooperation from planning, implementation to operation

Road and Water Infrastructures

through support for technology development, SMEs promotion, vocational training, and trade and investment promotion. They were implemented in line with the priorities of the Malaysian government’s industrial policy in that period. Most recently, institutional improve-ment has been a main focus in response to private sector develop-ment, such as energy saving, occupational safety, pollution control, intellectual property rights, and customs system.

environmentally-friendly facility of electricity power supply. The new electricity generation equipment achieved the highest generation efficiency of 55% among all power plants in Malaysia at that period, and the plant achieved 37.7% decrease of greenhouse effect gas emission during 2009-2011.

Until now mutual-relationships between two countries continue; private companies of both Malaysia and Japan who had worked together for some of the projects have concluded cooperation agree-ment based on the mutual trust between engineers and companies of both countries.

Japan’s ODA has been implemented in a variety of areas. Presented below are major examples of such cooperation.

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Malaysian coastal area is a strategic sea gateway for many vessels. It is a vital point not only for Malaysia but also for other countries in South East Asia as well as East Asia including Japan. In 2005, the Malaysian government established the Malaysian Maritime Enforcement Agency (MMEA) to strengthen maritime security and tackle the problems of piracy, smuggling, and fish poaching that the Strait of Malacca and some other sea areas in Malaysia faced. Japan has cooperated with MMEA in strengthening the institutional and human capacities since its inception. In recent years, further cooperation has been extended in maritime law enforcement and search and rescue operations. In this respect, MMEA is now effectively maintaining maritime security in important seas such as the Strait of Malacca which influences the global economy.

South-South cooperation is a form of cooperation in which a　developing country supports another developing country. Malaysia started the Malaysian Technical Cooperation Programme (MTCP) in 1980. Since then, it has been a major player of South-South cooper-ation in the international community. The MTCP has attracted about 31,000 participants from about 140 countries. Japan has technically and financially supported MTCP since 1992, mainly based on the experience of bilateral technical cooperation between Malaysia and Japan. Subject field varies, from production technologies, vocational training, IT, occupational safety, entrepre-neurship development, environmental conservation, preventing infection, higher education, public administration, tariff system, government revenue control, coastal guard, peace keeping, trade to finance. Major targets are ASEAN countries including Cambodia, Laos, Myanmar and Vietnam, African countries and Islamic countries, especially Afghanistan and Palestine.

Japan Overseas Cooperation Volunteer (JOCV) is an ODA programme of Japan. They are expected to contribute to development by living and working together at the grass-roots level with the local people. Five volunteers first participated in the development of Malaysia in 1966. In the 1960s and the 1970s, they participated in the agriculture development, preschool teaching and other rural develop-ment activities mainly under FELDA* programmes. In the 1980s and the 1990s they participated in the activities along with industrialisation, such as car repair, computer technics and Japanese language. In more recent years, many participated in activities that tended to be left behind economic growth such as preservation of natural environment and assistance and education for persons with disabilities. Since 1966, about 1500 volunteers have worked in Malaysia, which is the fourth largest country which has received JOCV members in the world. This is made into reality thanks to the warm understanding and acceptance by the people, community and the government of Malaysia, as well as the volunteers’ own efforts.* Federal Land Development Authority: Malaysian government agency that was founded to foster land-own farmers through the development of land and relocation.

The ratio of urban to rural population reversed from “1 to 3” to “3 to 1” during the period from 1960 to 2015. Malaysia is now predominantly an urban society. However, the country cannot cope with the rapid urbanisation as much as it has successfully managed the economic development. Thus, there have been growing concerns over the urban environment. In response to this, Japan’s cooperation has been well underway since the 2000s. Major components are sewerage development and technical assistance to local governments for strengthening managerial capacity and the operation and mainte-nance capacity of facilities for solid waste management. Urban environmental management calls for the partnership with local residents as well as local governments. Through JICA partnership programme, universities, urban municipalities and NGOs participated in encouraging the Japanese experience in urban environmental improvement to be shared among Malaysian local governments. Relationships between Malaysia and Japan have since seen increas-ing diversity of cooperation from city to city in addition to government to government as well as company to company cooperation.

Japan’s cooperation in the education sector focused on higher education. The Malaysian government put greater importance on the expansion of universities in the country and support for overseas study as the era of industrialisation started around the 1980s, which sought after more high-qualified engineers. Japan’s cooperation was in line with this demand and therefore, focusing on the expansion of university of science and technology and the support for overseas students. The Look East Policy is one of the features in the cooperation on human resource development between Malaysia and Japan. The former Prime Minister of Malaysia, Tun Dr. Mahathir advocated the Look East Policy which aimed to learn the work ethics and values apart from the languages and technologies from eastern countries including Japan and South Korea. A number of overseas students and training projects have been conducted in cooperation with the Malaysian and Japanese governments under the Look East Policy. Japan supported expansion of many universities. Among them were packages of facilities, equipment and experts were provided to University of Malaya Language Centre, Department of Marine and Department of Biotechnology at Universiti Pertanian Malaysia (currently Universiti Putra Malaysia), Department of Medicine at the National University of Malaysia, University of Sarawak and Malaysia-Japan International Institute of Technology. Also, cooper-ation on biodiversity and ecosystems conservation was conducted with Universiti Malaysia Sabah. Another major cooperation on higher education was intended to support Malaysian students studying abroad to Japan. Japan provided a total of JPY 18.5 billion for the “Higher Education Loan Fund Project” that continued from 1993 to 2015 in three phases. In addition, Japan supported the Malaysian government when it faced difficulty securing the budget for the Look East Policy programme due to the Asia currency crisis in 1997. Japanese government provided approximately JPY 14 billion from 1999 to 2004 to continue the programme. About 2,300 students earned bachelor/master/doctor’s degree in Japan from these two overseas student projects.

HigherEducation

Urban Environment: Sewage and Waste Management

Developing human resources through expansion of universities and supports for overseas students

Toward the city-to-city cooperation for a better environment

Maritime Security Enhancing security in the Strait of Malacca and other sea areas

Contributing to the international community through Malaysia-Japan cooperation

South-South Cooperation

Creating the future through living and working together with the people

JICA Volunteers

Overseas students’ projects supported the development of engineer-ing workforce that Malaysia needed. Human resource development through these projects had also encouraged the exchange of people between Malaysia and Japan.

Malaysia-Japan International Institute of Technology

Third Country Training Programme (TCTP) on Occupational Safety and Health Management

Japan Overseas Cooperation Volunteers (JOCV) : Automotive Repair

Cooperation to Malaysian Maritime Enforcement Agency (MMEA)

Grass-roots Technical Cooperation on Improving Waste Management in Kota Kinabalu (Visit to Akita City, Japan)

Higher Education Loan Fund Project

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