A HEAD of the Bandung Asian-African Summit in Indonesia last April, statements from Prime Minister Datuk Seri Najib Razak’s office suggested a long-range view for enhancing relationships on the continent. Driven by “commitment to strengthening cooperation” and achieving “prosperity through South-South cooperation”, Malaysia is expressing great enthusiasm and commitment to exploring opportunities in Africa.
Indeed, the continent could find itself playing a central role as part of Malaysia’s effort to develop a latticework of political and trade relationships with developing nations. Since the 1990s, Singapore’s northern neighbour has undertaken a sustained effort to build partnerships across the developing world as part of its vision to achieve greater resiliency on the global stage through political and economic diversification. In the wake of the recent financial crisis, this aspiration has all but certainly been renewed.
Taking note of Africa’s burgeoning investment opportunities, Malaysia has responded with ever larger amounts of foreign direct investment that have blazed a trajectory of consistent 20 per cent plus year-on-year growth over the past decade. These FDI flows culminated at a whopping US$19.3 billion in 2011, eclipsing those of China and India on the continent, and following behind only the United States and France as the third largest international investor that year.
Malaysian firms can now be found operating in a wide range of sectors across the continent, from resource extraction, hotel and leisure, shopping, and financial services. The diversity of undertakings reflect Malaysia’s recent transformation into a more multi-sectored and dynamic economy and indicate the private sector’s appetite to establish meaningful in-roads into frontier markets well beyond the Asean region.
Malaysian company Probase Manufacturing Sdn Bhd, for example, completed its first road development project in Kenya in June, which leveraged new soil technology to cut the expected price tag of such a project by more than half, while in the process piquing the interest of Rwanda and Swaziland to undertake similar pilot projects worth US$3 million each in their countries.
Other companies, like Pacific Inter-Link, are long established in the continent with regional offices in Ethiopia, Nigeria and Ghana that are engaged in manufacturing and commodities trading.
While Africa may not be reciprocating in terms of FDI, the relationship is nonetheless a two-way street of growing awareness and integration. Preceding the 2011 investment surge, 2010 was marked by an equally rapid increase in the number of African students enrolling into Malaysian universities. According to United Nations Educational, Scientific and Cultural Organisation figures, Malaysia welcomed 120 per cent more African student enrolments in 2010, reaching 11,825 from 5,373 in the year before. Political engagement has also been two way, with the Malaysian agenda driven by a robust network of diplomatic missions on the continent that is comparatively larger than many of its Asean counterparts.
This rhythm of engagement is priming the Malaysia-Africa corridor to take advantage of the next wave of opportunity. According to the Malaysia International Islamic Financial Centre, there are increasingly attractive and feasible possibilities for linking Kuala Lumpur’s bustling Islamic finance community to address substantial investment needs for critical African infrastructure projects. Several African nations have turned to the global sukuk market for funding and when considering the on-going US$31 billion per year funding gap for infrastructure on the continent, Malaysian underwriting could play a relevant role in advancing the continent’s broader economic development agenda. With Africa accounting for less than three per cent of global Islamic banking assets, this is the next frontier for Islamic finance.
Similarly, the halal industry presents Malaysia with excellent opportunities for joint-entries into Africa with Asean regional partners in Singapore and Indonesia. Halal players in food, travel and lifestyle products should begin incorporating Africa into their global expansion strategy, if they have not already, with a view to tap into the fastest growing middle class in the world, dense urban centres and a nearly 30 per cent Muslim population.
As the largest exporter of halal goods in the world already, with exports reaching to around US$11 billion in 2013, Malaysia is well positioned to lead such a charge into Africa. The global halal market is rapidly expanding beyond the traditional confines of the food and beverage space, to include products such as cosmetics, tourism and health products, becoming a more holistic concept.
Although Africa represents only 15 per cent of this global market, the continent’s population is expected to double to about 1.9 billion by 2050, with the Muslim population growing at a rate of 170 per cent, both highly favourable growth drivers ahead for halal.
While the Asean-Africa nexus is in a nascent stage, Malaysia is standing out as a trail-blazer for new markets and industries. Africa is rising and its nations are turning to Asia for partners in development. With Malaysia on track to achieve first-world status by 2020, it is a development showcase for what this once mislabelled “hopeless” continent is set out to achieve in its own right in the coming decades.
Published in: New Straits Times