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The Study on Achievements and Roles byJapanese Official Development Assistance

for Social and Economic Developmentin Malaysia

Final Report

April 2017

Japan International Cooperation Agency(JICA)

International Development Center of Japan, Inc. ＭＳ

J R

17-001

The Study on Achievements and Roles byJapanese Official Development Assistance

for Social and Economic Developmentin Malaysia

Final Report

April 2017

Japan International Cooperation Agency(JICA)

International Development Center of Japan, Inc.

The study on Achievements and Roles by Japanese Official Development Assistance

for Social and Economic Development in Malaysia

Final Report

Table of Contents

Abbreviation

Tables and Figures

Executive Summary

Part I An Overview

1. Overview of the Study ························································································ 1

1.1 Study Objectives and Backgrounds ··································································· 1

1.2 Study Approaches ························································································ 1

1.3 Study Workflow and Schedule ········································································· 2

1.4 The Study Team ·························································································· 4

2. Malaysia’s Development ····················································································· 5

2.1 Changes in Social and Economic Indicators ························································· 5

2.2 Changes in Development Visions and Policies ······················································ 9

2.3 Economic Relations between Malaysia and Japan ················································· 12

3. Japan’s ODA ·································································································· 16

3.1 Record of ODA ························································································· 16

3.2 Japan’s ODA Policies and Cooperation in Each Period ··········································· 21

4. Salient Features and Prospects of Japan’s Cooperation to Malaysia ·································· 24

4.1 Salient Features ························································································· 24

4.2 Prospects for Japan’s cooperation ···································································· 26

Part II Sector Analysis

5. Road and Water Infrastructures ············································································· 31

5.1 Trends and Highlights ·················································································· 31

5.2 Accomplishment and Prospects of Japan’s Cooperation ·········································· 35

6. Energy ·········································································································· 38


6.2 Case Study of Cooperation ············································································ 41

7. Industrial Promotion ························································································· 44


7.2 Case study of cooperation ············································································· 48

8. Higher Education ····························································································· 52


8.2 Case study of cooperation ············································································· 57

9. Urban Environment: Sewage and Waste Management ·················································· 61



10. South-South Cooperation ···················································································· 65



Abbreviation

AAJ Ambang Asuhan Jepun

A/C Aftercare

AI Artificial Intelligence

AJDF ASEAN Japan Development Fund

ALEPS Alumni Look East Policy Society

AOTS Association for Overseas Technical Scholarship

ASEAN Association of South-East Asian Nations

AUN/SEED-Net ASEAN University Network/ Southeast Asia Engineering Education Development Network

BOT Build Operate Transfer

CEAPAD Conference on the Cooperation among East Asian Countries for Palestinian Development

CIAST Centre for Instructor and Advanced Skill Training

DAC Development Assistance Committee

DID Department of Irrigation and Drainage

E/N Exchange of Notes

EPP Economic Partnership Program

EPU Economic Planning Unit

ETC Electronic Toll Collection

FTZ Free Trade Zone

GDP Gross Domestic Product

HELP Higher Education Loan Fund Project

HICOM Heavy Industries Corporation of Malaysia

HIDA The Overseas Human Resources and Industry Development Association

ICT Information and Communications Technology

IEC International Electrotechnical Commission

IPP Independent Power Producer

ISO International Organization for Standardization

ISIS Institute of Strategic and International Studies

IWK Indah Water Konsortium

JACTIM Japanese Chamber of Trade and Industry, Malaysia

JBIC Japan Bank for International Cooperation

JETRO Japan External Trade Organization

JICA Japan International Cooperation Agency

K-economy Knowledge-based economy

KITA Kitakyushu International Techno-cooperative Association

L/A Loan Agreement

MARA Majlis Amanah Rakyat

MATRADE Malaysia External Trade Development Corporation

MEXPO Malaysia Export Trade Centre

MHA Malaysia Highway Authority

MIDA Malaysian Investment Development Authority

MJIIT Malaysia-Japan International Institute of Technology

MSC Multimedia Super Corridor

MTCP Malaysia Technical Cooperation Program

NC Numerically Controlled

NDP National Development Policy

NEB National Electric Board

NEM New Economic Model

NEP New Economic Policy

NEXCO Nippon Expressway Company Limited

NGO Non-governmental Organization

NVP National Vision Policy

ODA Official Development Assistance

OECD Organisation for Economic Co-operation and Development

OECF Overseas Economic Cooperation Fund

OIC Organization of Islamic Countries

SIRIM Standards and Industrial Research Institute of Malaysia

TCDC Technical Cooperation among Developing Countries

TICAD Tokyo International Conference on African Development

TNB Tenaga Nasional Berhad

Tables and Figures

Table 2.1: Changes of average annual GDP growth rate of Malaysia and neighbouring countries 6

Table 2.2: Transitions of Malaysia’s development visions, policies and strategies ·················· 8

Table 2.3: Number of Japanese-affiliated Subsidiaries in Malaysia ··································· 15

Table 5.1: Japan’s Cooperation for Road Development ················································· 31

Table 5.2: Japan’s Cooperation for Water Development ················································ 32

Table 6.1: Total Amounts of Japan’s Cooperation ······················································· 38

Table 6.2: Main Projects with Loan Aid in Energy Sector ·············································· 38

Table 7.1: Major cooperation projects for industrial promotion ······································· 44

Table 7.2: Japan’s main cooperation to SIRIM ··························································· 48

Table 7.3: Summary of Japan’s main cooperation to SIRIM ··········································· 48

Table 8.1: Major cooperation projects for higher education ············································ 52

Table 8.2: Overview of loan aid for overseas students’ projects ······································· 57

Table 9.1: Japan’s Cooperation in Urban Environment ················································· 61

Figure 2.1: Population trend of Malaysia ·································································· 5

Figure 2.2: GDP and GDP per capita of Malaysia (at current prices) ·································· 5

Figure 2.3: Poverty incidence of Malaysia ································································· 6

Figure 2.4: Development of Malaysia’s Trade with Japan ·············································· 13

Figure 2.5: Inward FDI Flows in Malaysia (manufacturing sector; approved amount) ············ 14

Figure 2.6: Inward FDI Stocks in Malaysia (manufacturing sector, as of end of 2015) ············ 14

Figure 3.1 : Trend of cumulative ODA expenditures on Japan’s ODA to Malaysia (net disbursements, by the type of modalities) ··························································· 17

Figure 3.2 : Trend of support for human resources by JICA (cumulative number) ················· 18

Figure 3.3 Grant aid to Malaysia by sector (grant aid provided by JICA, based on the amount) · 19

Figure 3.4: Technical cooperation to Malaysia by sector (1988-2013, technical cooperation provided by JICA, based on the amount) ··························································· 20

Figure 3.5: Japan’s loan aid to Malaysia by sector (based on the amount) ··························· 21

Figure 6.1: Port Dickson (Tuanku Jaafar) Power Station ··············································· 41

Figure 7.1: Transition of Japan’s cooperation for industrial promotion ······························· 47

Executive Summary

Changes in Malaysia’s development Malaysia has achieved stable economic and social development since its independence. GDP per capita has grown at an average annual rate of 6% from 1980 to 2015. Malaysia’s GDP per capita is the 11th largest among countries whose population is more than 30 million as of 20151. Population almost doubled from 15.7 million to 30.33 million during the same period. People’s efforts and the government’s initiative brought this growth. The Malaysian government has formulated eleven five-year development plans (Malaysia Plans) since 1966 down to the present. Along with these development plans, it has continuously planned and implemented policies intended to support the industrialization.

Consequently, industrial structure greatly changed. Proportion of agriculture and mining industries decreased from 51% in 1966 to 26% in 2000, and 22% in 2015. On the other hand, proportion of manufacturing industry rapidly increased from 11% in 1966 to 31% in 2000. After 2000, growth in service sector is even salient; it increased from 38% in 1966 to 43% in 2000 and 55% in 2015. Trend toward industrialization and service economy brought rapid urbanization. Proportion of urban population reached 62% in 2000 and 75% in 2015 while that of 1980 was 42%. In particular, concentration of the population in Kuala Lumpur is remarkable2. Its population reached 6.6 million in 2015 (26% of the total population) from 1 million in 1980 (7% of the total population).

When tracing Malaysia’s development chronologically, Malaysia started the industrialization from the 1960s to the 1970s. The government put greater importance on import substitution policy in the 1960s and labour intensive export industries (electric, electronics and textile products) in the 1970s to transform the industrial structure that had been dependent on export of natural rubber and tin. Industrialization was considered as a means for not only growth, but poverty eradication and reduction of gaps after the May1969 racial riots, and government initiative was strengthened, accordingly. International oil price increase in 1979 became a boost for the Malaysian economy and industrial infrastructure including Free Trade Zone (FTZ) was developed.

In the first half of the 1980s, the government propelled heavy industrialization such as establishment of the Heavy Industries Corporation of Malaysia (HICOM) and the promotion of “national car project” by Proton. As a part of industrialization, the Look East Policy started with an aim at learning work ethics and technologies from East Asia. However, the series of policies switched to export-oriented industrialization in response to sluggish price of primary products and deregulation of foreign investments. At the same time, privatization policy was introduced. Japanese companies rapidly

1 The World Bank open data 2 Kuala Lumpur is a generic term used to refer to Kuala Lumpur Metropolitan Area. It is also called Greater Kuala Lumpur or the Klang Valley. It consists of 10 municipalities including Federal Territory of Kuala Lumpur and the total landmass is 2.793.27 sq km (Source: World Population Review website).

expanded direct investments in Malaysia after the Plaza Accord signed in 1985 until the 1990s. Although the Malaysian economy was affected by the Asian Economic Crisis in 1997, it managed to recover in a relatively short time through fiscal and monetary easing policies. The Malaysian economy experienced changes in international environment in the 1980s and the 1990s, but continuously promoted industrialization by changing policies in time, under the stable administration.

After the 2000s, development policy diversified in addition to the industrialization, e.g. transformation into the knowledge-based economy, a balance among sectors, regions and ethnicities, environmental sustainability and response to urbanization. The Malaysian economy, dependent on export, recorded a negative growth at constant prices for the first time since 1998, affected by the world financial crisis in 2008. Since then, the Malaysian economy has started to face the period where structural shift is necessary. Especially, transition of economy, from dependence on export and foreign investments to that on domestic market and overseas investments especially to resource-rich, neighbouring, and Islamic countries, and growth in service sector are signs of such transition.

Following five are major factors for the continuous development in Malaysia. First, both the people and the government paid careful attention to realizing balanced multiethnic society and kept stable government. Second, the government has maintained a solid administrative base for planning and implementing policies, and systematically developed the nation along with eleven development plans. Third, Malaysia has responded changes in international environment in a flexible manner by using multifaceted external relations with ASEAN, East Asia, Islamic and Commonwealth countries. Fourth, the country benefited from economic growth in ASEAN and East Asia as one of the industrial network hubs. Fifth, the government received continuous technical/financial cooperation from international communities such as specialized UN agencies, the World Bank, the Asian Development Bank and bilateral donors including Japan.

Overview of Japan’s cooperation Japan’s ODA consists of bilateral and multilateral assistance. The Japanese government plans and implements ODA policies. As for bilateral assistance, JICA is mainly in charge of reflecting ODA policies in implementing projects in developing countries.

Japan’s ODA in Malaysia dates back in 1956 when the first technical trainees visited Japan. Japan has spent a total of 7.85 billion USD cumulative gross disbursements and 2.56 billion USD cumulative net disbursements by 2014. Breakdown of cumulative net disbursement on ODA is 4% for grant aid, 60% for technical cooperation and 37% for loan aid respectively. The total amount of loan disbursements is equivalent to 3.8 times of total expenditure on grant aid and technical cooperation.

Grant aid by JICA was used to provide equipment and construct facilities in human resource and agriculture/fishery/livestock/forestry sectors. Technical cooperation has supported human resource and organizational development through trainings, consultation by experts, development studies and

volunteers in various sectors such as infrastructure development, industrial promotion, human resource development, environmental management, community development and support for the vulnerable people. Development studies have contributed for the preparation of master plans and the projects. Loan aid is long-term and low-interest finance, also known as yen loans, and was granted to large-scale infrastructure projects and study abroad programs. Intensive loan aid during the Asian Economic Crisis filled up short-term foreign currency needs as well.

Major development issues and accomplishment of Japan’s cooperation Infrastructure (road and water resource development) The Malaysian government has put a great importance on infrastructure development since its inception to transform the economy from agriculture-/mining-based to industry-/urban-based. Infrastructure development was the largest public spending until the mid-1990s. Japan’s cooperation has played two important roles during the period. One was the technical transfer in masterplan making, construction, maintenance and operation through technical cooperation, and another was financing of large-scale public investment by loan aid. National Road Network Development Plan (1990-1993) and National Water Resource Development Plan (1978-2982) are examples. Japan’s experiences on infrastructure development planning were effectively utilized in these master plans. In particular, the Malaysian relevant ministries pointed out the significance of the Japan’s experience in integrated approach, empirical-data-based planning, and response to the changes in demand structure arising from urbanization and industrialization. They pointed out that these experiences were continuously introduced and practiced, and contributed to the capacity development of relevant ministries in planning and implementation.

Ayer Hitam- Seremban Toll Expressway (1983-1987) and Expressway Toll System (1986-1987) in road sector are major projects for large-scale public financing using the loan aid in the road sector. They comprise a part of the North-South intercity expressway along the western shore of the Malay Peninsula and a toll system. The construction and management of expressway was handed over to private companies under the privatization master plan which was announced in 1991. The Expressway Toll System was one of the important factors that enabled the privatization.

Pahang – Selangor Raw Water Transfer Tunnel (2005-2014) is a major project in water resource sector. Concentration of population and economic activities with rapid economic development brought about an imbalance in demand-supply of water in the capital region. This issue was also pointed out in the National Water Resource Development Plan (1978-1982). The Pahang-Selangor Raw Water Transfer Tunnel project was decided to be developed using the loan aid after the serious water shortage in 1998. Water transfer is planned to start in 2017.

Accomplishment of Japan’s cooperation on infrastructure development in Malaysia can be summarized as follows. First of all, development studies by JICA were fully utilized to prepare sector-wide long-term master plans. These long-term master planning became conventional in the

ministries concerned and led project identification through their efforts as well as continuous advice and training from Japanese experts. Secondly, the Japanese government financed large-scale projects with long-term and low-interest loans when private investments were not common for infrastructure development. Thirdly, Japan’s cooperation contributed to putting Malaysia’s privatization policies in practice. Both public and private sectors absorbed the human resources, network and knowledge which had been fostered through cooperation, for their use in the development and operation of the infrastructures under private initiative.

Energy Malaysia has been producing and consuming oil and gas. The consumption has expanded as the economy grew. Japan’s cooperation has responded the changing energy sector. Japan is the largest natural gas market for Malaysia. At the same time, Malaysia is one of the biggest suppliers of natural gas for Japan together with Indonesia and Qatar. Consequently, energy policies of Malaysia have relevance to Malaysia-Japan relationship as well.

Majority of cooperation projects in the energy sector were power development. National Electric Board (NEB, later Tenaga Nasional Berhad) was in charge of power development until the privatization in 1992, and most of Japan’s cooperation focused before 1992. 12 power plants were constructed, of which 6 were hydro-electric and 6 were thermal electric power plants. In Malaysia, energy source-mix of power generation greatly changed from oil-based to gas-/coal-/hydro-based with increases of international oil price in the 1970s. Japan’s cooperation responded to this change by centring on gas and hydro. Port Dickson (Tuanku Jaafar) Power Station Rehabilitation Project (1999, 2000) was planned for using energy resource more efficiently and reducing environmental pollution. Using the loan aid, the project replaced outdated and inefficient oil-fired electric generation equipment with a new highly-efficient and low toxic gas emission gas-combined-cycle power generation equipment

Most of cooperation for electricity was loan aid for National Electric Board. Planning and implementation structure at NEB was strengthened through 25-year cooperation by the World Bank. It can be said that early power development in Malaysia was achieved through collaboration among NEB, the World Bank and Japan. The energy sector accounts for 46% of the total amount of Japan’s loan aid to Malaysia. Consequently, the power plants constructed with Japan’s official loans account for 35% of the total generation capacity by Tenaga Nasional Berhad (TNB) in 1995.

Technical cooperation includes JICA’s development studies for small-scale hydroelectric power and multipurpose dam. Loan aid projects successfully transferred important techniques for private-private, or public-private partnership. A typical example is Port Dickson (Tuanku Jaafar) Power Station Rehabilitation Project. It transferred the knowledge and manuals on operation and maintenance of new equipment, technical knowledges through outsourcing, and understanding on work ethics through the work on ground. Network and mutual trust among both engineers and managers comprise one of the

technical basis for TNB and IPP companies.

Industrial promotion The industrial structure of Malaysia heavily relied on export of natural rubber and tin when it embarked on building the country. Since then, the government has promoted development centring on industrial development. Main component of industrial promotion is administrative service for private sectors. In Japan, it has been an important pillar for industrial development together with industrial trade policy, monetary policy, infrastructure development, energy supply, higher education and vocational training. Malaysian needs on industrial promotion were large and, Malaysia and Japan cooperated in wide range of areas, such as the development of institutions and plans for industrialization and private sector development, the improvement of administrative capacity to support industrial activities, and industrial human resource development.

Japan’s cooperation on industrial development started from the 1980s when the focus of industrialization shifted from import substitution to the export expansion led by foreign investments. From the 1980s to the mid-1990s, supports were extended for the improvement of basic manufacturing technology such as metal processing and foundry, SME management and the establishment of industrial standards. Since the mid-1990s, a growing attention was paid to the efficiency of corporate management and quality competitiveness as well as production efficiency, in response to the industrialization led by foreign investments in neighbouring countries. Consequently, Japan’s cooperation started to incorporate new fields such as the introduction of advanced technologies including hazardous chemical substance management and artificial intelligence (AI) system, and the strengthening of administrative capacity development to cope up with global market, including customs, intellectual property rights and services on export. In particular, the technical cooperation on administrative capacity development helped to introduce and stretch practical knowledge.

A remarkable case is the cooperation with Standards and Industrial Research Institute of Malaysia (SIRIM) for over 20 years. A major cooperation was extended to the development of particular manufacturing technologies such as metal, foundry, fine ceramics and AI, the development and promotion of metrological standards, and the improvement of product testing capacity to meet exporting standards. The cooperation is remarkable in the technical transfer in response to the process of Malaysia’s industrialization, “one step ahead” cooperation, and fostering SIRIM as a reference centre of industrial technologies. Role of SIRIM in industrial development has become relatively smaller in response to improvements of technical capacity in the private sector. However, it is worth saying that a current basis for industrial technologies in Malaysia was developed through 20-year intensive activities by SIRIM.

Higher education Japan’s cooperation on education sector in Malaysia targeted higher education although many of Japan’s cooperation in other countries targets primary and secondary education. Many of the

cooperation was conducted during the late 1980s to the early 2000s, which corresponds to the period when Malaysia’s needs for human resource development were large in response to the country’s industrialization. Primary and secondary education was the major focus of education policy before the 1980s. There were only five public universities at that time and most students would study abroad to the UK, the US, etc. to study for a degree.

Then Prime Minister Mahathir advocated the Look East Policy in 1981. Major objective was to contribute to the industrialization by acquiring work ethics and values in East Asia. As a result, The Fourth Malaysia Plan (1981-1985) advocated the promotion of science, engineering and technology education, and emphasized higher education, especially that of engineers. Accordingly, Japan’s cooperation focused on the construction of university facilities and the supports for overseas study.

Cooperation for universities includes construction of University of Malaya Language Centre, technical cooperation for the Faculty of Fisheries and Marine Science and Department of Biotechnology at current Universiti Putra Malaysia and loan aid for Department of Medicine at the National University of Malaysia and Universiti Malaysia Sarawak. As for the supports for overseas study, Higher Education Loan Fund (HELP) was provided from 1992 to 2015 in three phases. After 2001, transition to the knowledge-based economy was emphasized and Project on Networked Multimedia Education System was conducted from 2001 to 2005 in response to the Malaysian need on human resource development in ICT. Also, cooperation has been extended since 2003 to ASEAN University Network/ Southeast Asia Engineering Education Project with top engineering universities in ASEAN countries. The most recent cooperation is loan aid and technical cooperation for Malaysia-Japan International Institute of Technology (MJIIT). It applies engineering education practiced in Japanese national universities.

Supports for overseas study are remarkable cases among cooperation for higher education sector in Malaysia. These were scholarship programs using the loan aid. HELP continued 23 years from 1992 to 2015 and provided total of 32.5 billion JPY. About 2,200 students received the scholarship. Also, the project effectively adopted “twining program” from the second phase. Firstly, the project contributed to bridging the demand-supply gap for engineers and scientists that occurred in the process of industrialization. Second, it adhered to the Look East Policy. Third, it fostered Malaysian people who are fluent in Japanese and share understanding on cultures on eastern Asia including Japan. They will contribute to bridging Malaysia and Japan in the future.

Urban environment (sewage and waste management) In Malaysia, ratio of population in cities and rural areas reversed from 1:3 in 1960 to 3:1 in 2015 indicating that Malaysia became a predominantly urban society. Environmental policies started to be highlighted from the Seventh Malaysia Plan (1996-2000). Japan’s cooperation has increasingly been in progress since around the year 2000. The cooperation was extended mainly in technical cooperation for the solid waste treatment and loan aid/technical cooperation for sewage system.

Cooperation is noteworthy on the solid waste treatment among local governments through grass roots technical cooperation. Mutual understanding by residents and local governments about environmental awareness and waste separation is essential for effective waste treatment. Since 2010, Japanese local governments have worked with Sibu City and Kuching City in Sarawak State, Malacca State, Kuala Lumpur, Fraser’s Hill region in Pahang State and Kota Kinabalu City in Sabah State. Main activities of the cooperation are training and the awareness building for local government staff and citizens. The international exchange through cooperation among local governments and residents is effective in increasing people who have common understanding on both countries

Full-scale cooperation in the sewage sector started after the project preparation study on Sewerage Treatment Plant from 1996-1999. Based on this study, loan aid for the Sewerage Treatment Plant Project started from 2000 to 2009. Intensification and modernization of sewerage projects were conducted in 13 cities in Selangor, Negri Sembilan and Malacca States, which became a spearhead for national sewerage development programs. Technical cooperation on Improvement of Planning Capability in Sewerage Sector (2006-2009) became a base for these sewerage development programs. Proportion of the population served with sewerage is still about two-thirds in Malaysia, and the experience of the cooperation is expected to expand nationwide in the future.

South-South cooperation South-South cooperation (SSC) is “a process whereby two or more developing countries pursue their individual and/or share national capacity development objectives through exchanges of knowledge, skills, resources and technical know-how, and through regional and interregional collective actions, including partnerships involving Governments, regional organizations, civil society, academia and the private sector, for their individual and/or mutual benefit within and across regions”3. Malaysia launched Malaysia Technical Cooperation Program (MTCP) in 1980. Since then, Malaysia is a pioneer country in SSC. MTCP has been participated by more than 31,000 persons from about 140 countries. It consistently maintains its emphasis on human resource development.

Japan has been supporting MTCP for more than thirty years both technically and financially. A major scheme of the support is Third Country Training Programme (TCTP) by JICA. The JICA’s cooperation with MTCP mostly uses the experience of Malaysia-Japan technical cooperation in the past. Topics include production technologies, KAIZEN, vocational training, IT, occupational safety, entrepreneurship development, environmental protection, prevention of infection disease, immunization, training of nurses, higher education, public administration, custom administration, revenue management, coastal guard, prevention of terrorism, peace building, trade and financing. Most participants are from ASEAN member states, African nations and the Middle East.

3 "Framework of operational guidelines on United Nations support to South-South and triangular cooperation: Note by the Secretary-General".

While primary purpose of Japan’s cooperation to Malaysia is to promote Malaysia’s development, it is also true that the cooperation contributes to mutual benefits of Malaysia and Japan consequently. Above all, SSC should promote mutual benefits. It is said that networks fostered through MTCP extensively contribute to the private sector of Malaysia such as trade, investment and finance in ASEAN, East Africa and Islamic countries.

The cooperation has met a variety of development needs in different parts of the world, with the combined effect of development experiences on the part of Japan and the principle of international cooperation as well as English communication ability on the part of Malaysia. The JICA’s TCTP in Malaysia is likely to offer a new opportunity for international cooperation in the diversifying international economy and society, being free of conventional thinking of developed versus developing.

After reviewing Malaysia-Japan cooperation with respect to major development issues, one might as well conclude that:

1. The cooperation supported long-term structural shift in Malaysia by responding to the development needs in each period. Especially, it supported the shift from primary resource-based to industrial-based economy, from rural-based to urban-based society, and from government-led to private-led development.

2. Japan financially and technically supported basic infrastructure development at its early stage when Malaysia required intensive public investments for its economic growth and industrialization.

3. It continuously supported human resource development. Especially, it supported practitioners through technical cooperation projects, and engineers and scientists through the scholarship for students abroad.

4. It continuously supported development of administrative capacity in both infrastructure and industry sectors. It particularly played an indispensable role in long-term master planning, operation and maintenance of facilities, introduction and utilization of new technologies, and human and institutional capacities to support private sector development.

5. While based primarily on bilateral governmental cooperation, efforts have been made to promote participatory international cooperation which is more open. Examples are the cooperation between private firms based on project implementation and privatization, and the grass roots cooperation in environmental management.

These accomplishments in Japan’s cooperation are not clearly observed in developing countries other than Malaysia. This is because the Malaysian side had bases to seriously take and use Japan’s cooperation in an effective manner. Particularly, Malaysian government organizations including EPU

have strong ability to prepare the plans responsive to changing socio-economic needs and to timely make requests to Japan for its cooperation. Secondly, the Malaysian government itself has always highlighted human resource development in development policies. Thirdly, trust relationship has been fostered between Malaysian and Japanese stakeholders through project cooperation. The trust relationship has been maintained both in the government organizations and the private companies which have once been involved in project cooperation. There are a number of cases where the trust relations have been continuous in the Malaysian government organizations which worked with Japanese counterpart in project cooperation at one time. A factor to the continuous trust relations is supposedly a relatively long period of services of officials in such government agencies.

Thus, the Japan’s cooperation has been made conducive to development by the Malaysia’s bases to take and effectively use the Japan’s cooperation. Ones observe that Japan’s cooperation to Malaysia is characterized by the matching to the development needs in different period, the effective input to human resource development, and the cooperation leading to the mutual economic relationship. It is the Malaysia’s capacity that has taken advantage of these characteristics for its development.

These accomplishments deserve an asset for the collaboration for development between Malaysia and Japan in the future. In particular, the following points are possibilities.

1. Under the policy toward a knowledge-based economy, Malaysia’s needs on advanced technology and introduction/development/dissemination of technical knowledge are high for both private and public sectors. Continuous communication with Malaysian organizations that Japan has supported through ODA can be an effective tool to responding to these needs.

2. Development administration will continue to be privatized both in Malaysia and Japan. In parallel, existing government to government cooperation will be further evolved into private to private cooperation.

3. Both countries have long experiences of South-South cooperation. Malaysia may soon more actively enhance cooperation for other countries with its own vision for international cooperation. Consequently, the past and ongoing experiences have a great potential in diversifying international environment.

4. Taking these points into consideration, the potential of JICA is high to be an information centre of development and cooperation in industry-government-academia.

Part I An Overview

1. Overview of the Study

1.1 Study Objectives and Backgrounds

Year 2016 was the 60th year since the first technical trainees visited Japan from Malaysia in 1956. During these years, Malaysia has achieved sufficient social and economic development to aim at becoming a member of developed countries by 2020. Between 1980 and 2015, Malaysia’s nominal GDP grew from approximately USD 24.5 billion to USD 296.2 billion at an average annual real growth rate of approximately 6%. GDP per capita increased more than six-fold from approximately USD 1,770 to USD 11,310 in 2014.

Japan’s Official Development Assistance (ODA) has continuously supported Malaysia in response to the requests from the country, while shifting its focuses in terms of sectors, geographical areas, and approaches according to the country’s growth. A number of projects have been planned and implemented in many fields such as institutional development, infrastructure development, and human resource development.

Under these circumstances, this study tried to examine how Japan’s ODA has aligned with social and economic development in Malaysia by reviewing the contents, process and background of key programs and projects. The particular objectives were as follows:

Review the role and achievements of the cooperation between Malaysia and Japan through ODA in promoting social and economic development of Malaysia and deepening the Malaysia-Japan economic relationship as well as partnership.

Prepare public relations material to present and share the study results with people in Malaysia and Japan. The study results are also to be presented in a seminar held in Malaysia.

Learn from the experiences of development cooperation between Malaysia and Japan to obtain implications for Japan’s cooperation with newly industrializing countries in the future.

1.2 Study Approaches

The study was conducted taking into consideration following points.

1) Exchanging information and ideas with relevant organizations

ODA projects have been carried out jointly by Malaysian and Japanese stakeholders. Taking this point into consideration, the study team held discussions with not only Japanese stakeholders including JICA, but also with Malaysian stakeholders including the Economic Planning Unit (EPU) and line ministries in charge of project planning and implementation, and analysed study results.

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2) Focusing on sectors

The study tried to look at the process of development and cooperation from a long-term point of view by putting focus on the sectors which represent the Malaysia-Japan cooperation, rather than modalities such as loan assistance, technical assistance or grant aid. Specifically, the study team selected sectors whose magnitude of cooperation seemed to be large, grasped large trends of cooperation and analysed representative projects.

In case that visible relationships are observed between development in a sector and achievements by relevant ODA projects, the study team tried to analyse their correlation and show quantitative results to the extent possible. Also, the study team tried to reveal how ODA projects have contributed to private sector development, trade and Malaysia-Japan partnership.

3) Keeping a record of past efforts

It is the cooperation among many stakeholders in Malaysia and Japan from policy level to implementation level that has enabled ODA projects to contribute to social and economic development in Malaysia. Many parties have worked hard on the ground and contributed to the success of the projects, while their experiences tend to be lost as time passes. However, these experiences include important lessons for the development and cooperation in the future. We should pass down these lessons without forgetting them.

In addition to the quantitative analysis on the project results, the study team conducted interviews to those who have participated in projects in selected sectors and recorded their efforts. From the interviews, the study team drew implications for effective, efficient and broader-based cooperation between the two countries in the future.

4) Taking into consideration the public relations

The study prepared brochures in Malay, English and Japanese as well as a short video in English and Japanese in addition to the report itself. The study team tried to summarize the results in a clear manner so that both Malaysian and Japanese citizens easily understand them.

1.3 Study Workflow and Schedule

The study was conducted from August 2016 to April 2017 with following procedures.

【First work in Japan (from early to late August 2016)

1) The study team collected and analyzed relevant materials to better understand the history of socioeconomic development in Malaysia. In addition, the team reviewed the summaries of ODA projects at different times.

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The materials which were covered include reports of JICA/OECF/JBIC and policy and planning documents developed by the Malaysian government.

2) The study team interviewed relevant stakeholders in Japan who have experience of ODA projects in Malaysia. The interview survey helped the study team to select the target sectors as well as deepening the understanding of the study.

3) The study team worked out the content of fieldwork interviews and selected potential interviewees in Malaysia.

4) The study team prepared a draft inception report which includes the overall approach of the study.

【First work in Malaysia (from early to late September 2016)】

1) The study team explained and discussed the content of the draft inception report to JICA Malaysia Office. Based on the feedback, the team finalized the inception report.

2) In light of the findings made during the first work in Japan, the study team collected additional necessary information in the field and also conducted site visits and interviews with relevant parties.

3) The study team explained and discussed the content of the inception report to the Malaysian side, including the Economic Planning Unit to receive their feedbacks

【Second work in Japan (October 2016)】

1) The study team analysed and synthesized the information collected with a focus on a long-term trend in development and cooperation.

2) The study team prepared a draft progress report based on the information and analysis obtained from the field survey.

3) The study team identified information that still needed to be collected in Malaysia and prepared for second work in Malaysia

4) The study team utilized available materials to develop the promotion panel.

【Second work in Malaysia (from early to middle November 2016) 】

1) The study team collected information and conducted interviews to reinforce analysis in priority issues emerged through the study so far undertaken.

2) The study team explained the progress report to stakeholders in Malaysia, including the Economic Planning Unit as well as JICA Malaysia Office to obtain feedbacks from them.

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【Third work in Japan (December 2016)】

1) The study team analysed and synthesized the findings so far obtained, and outlined the draft final report.

2) The study team developed the promotion brochure and video

【Third work in Malaysia (from early to middle February 2017) 】

1) The study team explaind the content of the draft final report to stakeholders in Malaysia, including the Economic Planning Unit as well as JICA Malaysia Office. The content of the report was discussed and feedbacks were collected.

2) The study team prepared for the seminar which is planned to be held in May to share and discuss the findings of the study with relevant parties from both the Malaysian and the Japanese side as well as other agencies for international cooperation.

【Fourth work in Japan (late February 2017)】

1) Based on the feedbacks for the draft final report, the study team prepared the final report and submitted it to JICA Malaysia Office.

【Fourth work in Malaysia (mid-May 2017)】

1) JICA will host a seminar in Malaysia to share and discuss the findings of this study with relevant parties from both the Malaysian and the Japanese side as well as other agencies for international cooperation. The presentation during the seminar will be based on the final report, and the promotion brochure and video will also be presented.

1.4 The Study Team

The study team comprised the following experts:

Team Leader/ Analysis on ODA Project: Dr. Jinichiro Yabuta

Economic Sector Analysis: Mr. Yusuke Hasegawa

Basic Infrastructure Sector Analysis: Mr. Hiroo Okuda

Social and Administrative Sector Analysis: Ms. Yumiko Yamada

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2. Malaysia’s Development

2.1 Changes in Social and Economic Indicators

According to the World Bank, the population of Malaysia grew by 3.7 times from 8.16 million in 1960 to 29.90 million in 2014 (Figure 2.1). During the same period, its Gross Domestic Products (GDP) increased by 176 times from USD 1.9 billion to USD 338.1 billion, and GDP per capita by 48 times from USD 235 to USD 11,307 (Figure 2.2). Figure 2.2 indicates that while the population grew in a relatively stable pace, the country has accelerated its economic growth since the middle of the 1980s, even though it suffered downturn a few times due to economic recession in the world.

Source: World Bank, World Development Indicators

Figure 2.1: Population trend of Malaysia

Source: World Bank, World Development Indicators

Figure 2.2: GDP and GDP per capita of Malaysia (at current prices)

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Consequently, industrial structure greatly changed. Proportion of agriculture and mining industries decreased from 51% in 1966 to 26% in 2000, and 22% in 2015. On the other hand, proportion of manufacturing industry rapidly increased from 11% in 1966 to 31% in 2000. After 2000, growth in service sector is even salient; it increased from 38% in 1966 to 43% in 2000 and 55% in 2015. Trend toward industrialization and service economy brought rapid urbanization. Proportion of urban population reached 62% in 2000 and 75% in 2015 while that of 1980 was 42%. In particular, concentration of the population in Kuala Lumpur is remarkable. Its population reached 6.6 million in 2015 (26% of the total population) from 1 million in 1980 (7% of the total population).

It is observed that Malaysia has generally demonstrated a good performance in economic growth compared with its neighbouring countries. In the 1970s and the 1990s, in particular, the country achieved high GDP growth among fast-growing ASEAN members (Table 2.1). Its stable economic growth was also attributed to the fact that the scale of slowdowns caused by the world economic recession was relatively small in Malaysia.

Table 2.1: Changes of average annual GDP growth rate of Malaysia and neighbouring countries

1960-70 1970-80 1980-90 1990-2000 2000-10 2010-15

Malaysia 6.5 7.8 6.0 7.1 4.6 5.3

Indonesia 4.1 7.9 6.4 4.2 5.2 5.5

Philippines 4.9 5.9 1.7 2.9 4.8 5.9

Singapore 9.2 9.1 7.7 7.1 5.8 4.0

Thailand 8.2 6.9 7.8 4.4 4.6 2.9

Source: Compiled by JICA Study Team based on World Bank, World Development Indicators

Social development of Malaysia was examined below in terms of people’s income. As Figure 2.3 indicates, incidence of poverty based on the household income below the poverty line set by the government outstandingly decreased from 49.3% in 1970 to 0.6% in 2014.

Note: The 1970 figure is only for the Peninsular. Source: GOM, Malaysia Plans

Figure 2.3: Poverty incidence of Malaysia

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According to the Malaysia Plans, GINI Index of Malaysia, which describes inequality of income distribution, decreased from 0.513 and 0.480 in 1970 and 1984, respectively, to 0.401 in 2014. On the other hand, based on the World Bank’s World Development Indicators, the latest data for Malaysia and neighbouring countries show 0.463 for Malaysia (in 2009), 0.430 for Philippines (in 2012), 0.395 for Indonesia (in 2013), and 0379 for Thailand (in 2013), implying that Malaysia’s figure is relatively high. While economic growth of Malaysia realized an increase in average income of people and a great reduction of poverty population, there remains room to tackle income disparities among people.

As for the continuous development in Malaysia, following five are major factors. First, both the people and the government paid careful attention to realizing balanced multiethnic society and kept stable government and policy consistency. Second, the government has maintained a solid administrative base for planning and implementing policies, and systematically developed the nation along with eleven development plans. Third, Malaysia has responded changes in international environment in a flexible manner by using multifaceted external relations with ASEAN, East Asia, Islamic and Commonwealth countries. Fourth, the country benefited from economic growth in ASEAN and East Asia as one of the industrial network hubs. Fifth, the government received continuous technical/financial cooperation from international communities such as specialized UN agencies, the World Bank, the Asian Development Bank and bilateral donors including Japan.

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Table 2.2: Transitions of Malaysia’s development visions, policies and strategies

Source: JICA Study Team

Period 1966- 1970s 1980s 1990s 2000s 2010s 2020

Prime MinisterTunku AbdulRahman(1957-)

AbdulRazak(1970-)

HusseinOnn(1976-)

MahathirMohamad(1981-)

NajibRazak（2009-）

Malaysia Plan 1MP(1966-1970)

2MP(1971-1975)

3MP(1976-1980)

4MP(1981-1985)

5MP(1986-1990)

6MP(1991-1995)

7MP(1996-2000)

8MP(2001-2005)

9MP(2006-2010)

10MP(2011-2015)

11MP(2016-2020)

Major Eventsin the World

・1984-86 World MarketDownturn of PrimaryProducts・1985 Plaza Accord

・1993 AFTA started ・1997 AsianEconomic Crisis

・2000 Recession afterInternet bubble

・2008 GlobalFinancial Crisis

・2016 ASEANEconomic Community(AEC) came intoeffect

Major Eventsin Malaysia

・1969 13 MayIncident

・1985-86 MarketDownturn of PrimaryProducts

・1993 AFTA started ・1997 AsianEconomic Crisis

・2000 Recession afterInternet bubble

・2006 Japan-MalaysiaEconomic PartnershipAgreement (JMEPA)came into effect・2008 GlobalFinancial Crisis

・2016 ASEANEconomic Community(AEC) came intoeffect

≪Laissez-faireEconomic Policy≫・ Industrialization byImport-substitution

・HeavyIndustrialization(Selective Import-substitution)・1981 Look East Policy・1983 PrivatisationPolicy

・Second Export-orientedIndustrialization

・Diversification ofIndustry Base・Development ofSmall and MediumIndustries (Bumiputraenterprises)

・Productivity-drivenGrowth

・Knowledge-basedEconomy(K-Economy)

・Moving theeconomy up thevalue chain

・1971 SpecialIncentives forElectronics Industry・1972 First FreeTrade Zone （FTZ)Established in Penang

・1980 HeavyIndustries Corporationof Malaysia (HICOM)established

・1983 Proton founded ・1986 Promotion ofInvestment Act(Deregulation for foreigninvestmetns)

・1996 MultimediaSuper Corridor (MSC)Program Launched

・Large-scale RegionalDevelopment Projectsstarted

・12 National KeyEconomic Areas・ Inclusive Socio-economicDevelopment・Quality of Life

・EnhancingInclusiveness;Wellbeing for All・Industry-led Technicaland VocationalEducationand Training (TVET)・Green Growth

・Support for importsubstitution (sugarrefinery plant; textilemill)

【Support for improving core manufacturingtechnology to establish a foundation ofindustrialization and strengthening researchfunction in agriculture, forestry, and fisheriessector】

【Support for institution and human resourcedevelopment to strengthen local industries;Support for environmental management andreducing disparities in response toindustrialization】

【Support for human resource development toward an economy with highly-added value;Support for improving people's welfare; Collaboration for common challenges in the region】

・Support for FTZ development throughprojests on power plants and portconstruction (Johore, Penang, Port Klang)・Technical cooperation with MARA vocationaltraining institutes

・Support for heavy industrialization and exportoriented industrialization through infrastructuredevelopment (electricity, gas, road, railway, etc.)・Research on agriculture/forestry/fisheries(poultry disease, forestry products, fisheryproducts)・Improvement of core manufacturing technology(metal, metrology, fine ceramics, foundry, etc.)・Initiation of accepting trainees in response toLook East Policy

・Support for SMEs and higher educationhuman resources by Yen loans・Support for introducing higher leveltechnology (bio-technology, AI system);environmental management (utilization ofwood, hazardous chemical substances,aquatic resoruce)・Graduation from general grant aid (1991);graduation from Yen loan in conventionalareas (1994)

・Support for higher eduction and science and technology toward knowledge-based economy・Improvement of institutional capacity for resilient, inclusive, and sustainable society(disaster prevention, biodiversity, environment, energy saving, waste management, tax,police, etc.)・Support for vulnerable people (disabled, elderly)・Support for improving maritime safety and security capacity・Support for south-south cooperation

Development andEconomic Policy

≪Interventionist Economic Policy≫・1971- "Bumiputra Policy"・First Export-oriented Industrialization

・Private Sector-led Economy; Innovation-led Economy・Escape from Middle-Income Trap・2010 "1Malaysia"announced

Japan’s ODA forImplementation of

Malaysia'sDevelopment

Policy

【Support for basic infrastructure development and productionincrease to establish a foundation of nation building】

OPP-3

Basic Objectives ofDevelopment

[NEP]1. Eradicating poverty for all Malaysians2. Reducing and subsequently eliminating identification of race by economic function andgeographical location

[Vision 2020]Becoming a fully developed country by the year 2020

[NDP]1. Ensuring the balanced　development ofmajor sectors　of the　economy and regions2. Reducing socio-economic inequalitiesacross communities

[NVP]Building a resilient and competitive nation

[NTP/NEM]Becoming a high-income economy that isboth inclusive and sustainable

Abdullah Ahmad　　　　　　　Badawi (2003-)

Vision/ Policy

New Economic Policy (NEP) 1971-1990 Vision 2020 (1991-2020)

National Development Policy (NDP) 1991-2000 National Vision Policy (NVP) 2001-2010 National Transformation Programme (NTP)

New Economic Model (NEM)

First Outline Perspective Plan (OPP-1) OPP-2

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2.2 Changes in Development Visions and Policies

Since 1966 up to now, the government of Malaysia has formulated eleven five-year development plans (Malaysia Plans). In 1970, the New Economic Policy (NEP), a longer-term, overall policy was initiated, and other long-term policies and plans have been formulated since then. Under the vision and policy at the time, the government has promoted social and economic development centring on industrial development particularly through the development of manufacturing industries. Table 2.2 summarises transitions of development visions, policies, and strategies adopted by the government at each period responding to changes in the domestic and international environments. The transitions are detailed chronologically below.

From 1960s to 1970s: From Import Substitution to First Export-oriented 2.2.1Industrialisation

From the 1950s when the Federation of Malaya attained independence to the 1960s, the government adopted a laissez-faire economic policy under which commercial and industrial activities were freely undertaken by people of Chinese descent in the cities while agriculture was mainly undertaken by Malays in the rural areas. However, the government set out industrialisation through import substitution by protecting and fostering domestic industries in order to transform the industrial structure that was then dependent especially on export of natural rubber and tin, and through diversification of primary products such as wood and palm oil.

The government shifted its industrialisation policy from import substitution to export-oriented strategy in the end of 1960s, due to a limited scale of the domestic market in a country with a population of 10 million at that time. Investment Incentives Act 1968 and special incentives for the electronics industry (1971) were introduced to foster labour intensive exporting industries. Following the enactment of Free Trade Zone (FTZ) Act 1971, the first FTZ was established in Penang in1972. These measures promoted a number of major foreign electronics manufacturers such as semiconductor makers to come to Malaysia. As a result, the electric and electronics industry and the textile industry accounted for approximately 60% of Malaysia’s total export amounts of manufactured goods in 1980.

In 1970, then Prime Minister Abdul Razak formulated the New Economy Policy (NEP), a 20-year long-term policy, in the aftermath of the Sino-Malay racial riots called the 13 May 1969 incident triggered by the results of the General Election. NEP had two objectives of eradicating poverty in the whole country and reducing gaps among ethnic groups through the reorganisation of the Malaysian society, which marked the initiation of so-called “bumiputra policy” aiming to improve economic positions of Malays. Industrialisation was recognised as a means to attain the objectives of NEP from the perspectives of economic growth as well as distribution among the population.

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1980s: Heavy Industrialisation to Second Export-oriented Industrialisation 2.2.2

In the first half of 1980s, the government propelled heavy industrialisation. This was motivated by the results of the prior industrialisation policy based on FTZs, where most foreign investments were concentrated on the labour-intensive, assembling works and that the investments did not create economic linkages to local industries. The Heavy Industries Corporation of Malaysia (HICOM) was established in 1980, and HICOM embarked on joint-venture projects with major foreign firms in such areas as cement, steel, and automotive. In particular, Proton, which was founded in 1983, was expected to play a leading role in strengthening Malaysia’s technical capacities through the promotion of “national car project,” thus contributing to the development of local supporting industries.

The Malaysian economy, however, faced a serious slump in the middle of 1980s caused by a downturn in the international market of primary products such as tin and palm oil and an expansion of fiscal deficits. This resulted in negative growth in 1985 for the first time since the independence of the country. As a countermeasure, then Prime Minister Mahathir Mohamad who took office in 1981 shifted again to export-oriented industrialisation, and reduced regulations on foreign investments by establishing the Promotion of Investment Act in 1986. In addition, the Malaysian government started privatising state-owned enterprises in 1983 to reduce the government debts. Japanese companies rapidly expanded direct investments in Malaysia driven by a sharp appreciation of Japanese yen after the Plaza Accord signed in 1985, coupled with the Malaysian government’s policy on promoting foreign investments. As a result, Malaysia achieved rapid economic growth with an annual growth rate of over 8% constantly from 1988 to the late 1990s.

In this period, Dr Mahathir announced the Look East Policy with a view to accelerating modernisation and industrialisation by learning the work ethics and advanced technology from Japan and Korea. As part of this policy, the government initiated the programmes to send a number of Malaysian students to Japan every year for studying in vocational training institutions and universities.

1990s: Strengthening of Local Industries and Productivity Improvement 2.2.3

Malaysia successfully transformed itself from an agricultural based nation into an industrialised country, thanks to a continued high growth from the late 1980s to the late 1990s driven by foreign direct investments, such as those of Japanese firms. In 1995, the manufacturing and agricultural sectors accounted for 26% and 13% of Malaysia’s GDP respectively, and manufactured products exceeded 80% of the total export earnings. However, the Malaysian economy rapidly fell into a slump affected by the Asian Economic Crisis that originated from a crisis of Thai Baht in 1997. Dr Mahathir managed to recover its economy in a relatively short time through his economic stimulus package such as expansion of fiscal expenditures and monetary easing policy, as well as introduction of fixed exchange rate and currency restriction for short-term funds to protect from currency speculation. The

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country kept its annual GDP growth rate at 7% or over throughout the 1990s. Thus, Malaysia successfully achieved industrialisation led by foreign direct investments. On the other hand, various challenges were recognised to further economic development toward the realisation of the country’s long-term goal, as stated below.

In 1991, then Prime Minister Mahathir announced the country’s long-term development vision named “Vision 2020,” aiming to become a fully developed country by 2020 from not only economic but any other aspects. Under the vision, unity of Malaysian people was targeted where different ethnic groups lived together in a harmonious way. On the economic development front, establishment of competitive economy was targeted through the diversification of narrow manufacturing industry base, the technological improvement of local industries, particularly small-scale ones, the strengthening of linkages between these industries, the advancement of industrial technology development including high technology, the reinforcement of human resource development, and so on. As a groundwork period of the first 10 years for realising “Vision 2020,” the government formulated the National Development Policy (NDP), whose detailed plans were reflected in the Sixth and Seventh Malaysia Plans. The Sixth Malaysia Plan set as the main objective the diversification and sophistication of industrial base toward a balanced development, and the Seventh Malaysia Plan a transformation from investment-led into productivity-led economy. One of the projects embodying such policies was the Multimedia Super Corridor (MSC) project that initiated in 1996 with a view to making Malaysia an important hub of the IT industry.

From 2000s: Knowledge-based Economy, Innovation-led and Sustainable Society 2.2.4

Entering the 2000s, the Malaysian GDP kept growing by around 5% per annum after a temporary stagnation caused by the September 11th terrorist attacks in the US. The year 2009 recorded a negative growth at constant prices for the first time since 1998, affected by the world financial crisis in 2008. Since then, the Malaysian economy has been keeping an annual growth of around 5% until now.

Succeeding NDP, the National Vision Policy (NVP) was announced in 2001, with a goal of building a highly resilient and competitive country reflecting on the experience of the Asian economic crisis. As a prime measure to gain high competitiveness, transformation into the knowledge-based economy (K-economy) was targeted, and this was actually set as the first objective of the Eighth Malaysia Plan.

In 2003, Mr Abdullah Ahmad Badawi succeeded Dr Mahathir as Prime Minister, and emphasised the transition to a value-added economy in all sectors of agriculture, industry, and service, human resource development, and the improvement of quality of life in the Ninth Malaysia Plan. In addition, he proposed the development of five regional economic corridors with a view to economic promotion in the region.

Prime Minister Najib Razak who took office in 2009 aims to realise the country with all populations

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united, under the slogan of “1 Malaysia.” The New Economic Model (NEM), which is a mid-term policy covering the last 10 years of the “Vision 2020” period, sets the strategic goal of becoming a high-income economy that is both inclusive and sustainable, escaping from the “middle-income trap,” then realising high quality lives of Malaysian people. The Tenth and Eleventh Malaysia Plans formulated under the NEM policy also place stress on the issues related to the way the growth is achieved, such as inclusive social and economic development and environmental sustainability, in addition to the growth itself to a high-income country.

2.3 Economic Relations between Malaysia and Japan

In tandem with the economic development of Malaysia for the last 60 years, economic relations between Malaysia and Japan have been increasingly tightened. This section examines how the relationship between the two counties has been developed in terms of trade and direct investment.

Trade 2.3.1

The total amounts of Malaysia’s export and import both have grown by more than 200 times from 1960 to 2014. The composition of export items has dramatically changed during the period, reflecting the development of Malaysian economy. In 1960, primary and manufactured products accounted for 80% and only 3% of the total export amount, respectively. Manufactured products surpassed primary products in the late 1980s. In 2014, 77% of the total export amount came from manufactured products and 23% from primary ones4.

Along with USA and Singapore, Japan has constantly been an important trade partner to Malaysia since the 1960s. In the 2000s, China has rapidly increased trade with Malaysia. In 2015, Japan was the third biggest export destination of Malaysia after Singapore and China, and the fourth biggest source of import after China, Singapore, and USA. The transitions of trade items between Malaysia and Japan show the path that Malaysia has taken toward industrialisation. In the 1960s and 1970s, Malaysia’s main exports to Japan were 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 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. On the other hand, Malaysia exported to Japan manufactured products from the factories there, apart from wood and mineral fuels. During this period, the trade exchange with Japan saw 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

4 Ministry of Finance Malaysia, Economic Report

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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. In July 2006, the Japan-Malaysia Economic Partnership Agreement (JMEPA) came into effect and the tariffs were set to be removed on 97% of the product items traded between the two counties.

Source: Department of Statistics, Malaysia; JETRO, “Malaysian Economy in Figures 2010”

Figure 2.4: Development of Malaysia’s Trade with Japan

Japan’s Direct Investment to Malaysia 2.3.2

As stated above, after experiencing a negative growth in 1985, Malaysia promoted export-oriented industrialisation by actively inviting foreign direct investment through the Promotion of Investment Act in 1986. Since then, the FDI flows have generally expanded driven by the electric and electronics industry with some fluctuations on a year-to-year basis. From the late 2000s on, investments started to be seen in response to large-scale regional development plans of the Malaysian government.

Investments by Japanese firms have continuously played a large role in Malaysia’s FDI-led industrialization.. Japan has often been the first or the second biggest investor country to Malaysia in terms of annual investment amounts approved. For the year 2015, approved investments from Japan of MYR 4.0 billion made the country second to USA with MYR 4.1 billion. The MYR 4.0 billion was composed of investments to the electric and electronics industry (41%), the ceramic industry (18%), the petrochemical industry (15%), the chemical industry (10%), and so on5. The data on FDI stocks in

5 Original source: MIDA; referred to by JETRO

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Malaysia also shows that Japan was the second leading investor country (with MYR 73.8 billion) after Singapore, as of the end of 2015.

Source:：Compiled by JICA Study Team based on MIDA, “Malaysia Investment Performance Report” and JETRO, “Malaysian Economy in Figures 2010”

Figure 2.5: Inward FDI Flows in Malaysia (manufacturing sector; approved amount)

Source: Department of Statistics, Malaysia

Figure 2.6: Inward FDI Stocks in Malaysia (manufacturing sector, as of end of 2015)

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Japanese Firms in Malaysia 2.3.3

The number of subsidiaries of Japanese firms based in Malaysia was 477 in 1986 and 1,456 in December 2015, out of which about a half were the manufacturing industries6. Back in the 1960s when the Malaysian government started the industrialisation policy by import substitution, Japanese manufacturers such as consumer electronics companies established their factories to produce products for the Malaysian market. In the 1970s, in response to the export-oriented industrialisation policy of the Malaysian government, Japanese makers of consumer electronics, electronic components, and semiconductors entered FTZs as the export base to Europe and the neighbouring countries by utilising the local labour force and production parts and materials imported mainly from Japan. From the late 1980s, under the government’s second export-oriented industrialisation policy, Japanese electronics firms actively established large-scale production bases in Malaysia for exporting, driven by an appreciation of the yen. The moves promoted the supporting industries such as electronic components makers to establish their factories in the country, leading to Malaysia as a major accumulation base for the electric and electronics industry in the world. According to a survey to Japanese subsidiaries in Malaysia conducted by JETRO in 1989, the respondents particularly regarded highly the investment environment of Malaysia compared with other Asian countries in terms of “stability of politics and society”, “infrastructure”, “measures for attracting foreign investments”, “labour cost”, and “labour force (quality, education, training).”7 The number of Japanese firms in Malaysia since 2000 has, however, been around 1,400 until now, resulting from a rise in labour costs driven by a rapid increase in foreign firms in Malaysia, and the rise of China as the production base as well as the shifts of Japanese firms’ foreign production to China from the late 1990s. More recently, while new entries of Japanese labour-intensive industries in the manufacturing sector are slowing down, the number of firms coming to Malaysia to target the growing consumer market in the service sector is demonstrating an increasing trend8.

Table 2.3: Number of Japanese-affiliated Subsidiaries in Malaysia

Unit: Number of companies

1986 1991 1995 2000 2005 2010 2015

Malaysia 477 742 1,070 1,420 1,307 1,407 1,456

Manufacturing 214 360 596 793 729 730 771

(Electric & Electronics) (30) (137) (244) (347) (310) (273) (270)

Non Manufacturing 263 382 474 627 578 677 685

Source: JETRO, “Malaysian Economy in Figures 2010”; JETRO website; JACTIM, “Malaysia Handbook 1992”

6 JETRO 7 JETRO (March 1990), “Survey of Japanese-affiliated Firms in Hong Kong and ASEAN”. (published in Japanese) 8 Japanese Chamber of Trade and Industry, Malaysia (JACTIM) (January 2014), “Malaysia Handbook 2014”. (published in Japanese)

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3. Japan’s ODA

Japan’s ODA consists of bilateral and multilateral assistance. The Japanese government plans and implements ODA policies. As for bilateral assistance, JICA is mainly in charge of reflecting ODA policies in implementing projects in developing countries.

This chapter overviews Japan’s ODA in Malaysia down to the present. The chapter first shows how the ODA assistance has changed and then reviews what kind of sectors or issues Japan has supported in each period.

3.1 Record of ODA

Overview 3.1.1

As stated in the previous chapter, Japan’s ODA in Malaysia dates back in 1956 when the first technical trainees visited Japan. It was one year before Malaysia became independent as the Federation of Malaya. Loan aid and the first project-type technical cooperation started in 1966. Grant aid started in 1976.

Japan has spent a total of 7.85 billion USD cumulative gross disbursements and 2.56 billion USD cumulative net disbursements by 2014, according to “Japan’s ODA Data by Country 2015” by the Ministry of Foreign Affairs9 (OECD-DAC directions). Breakdown of cumulative net disbursement on ODA is 4% for grant aid, 60% for technical cooperation and 37% for loan aid respectively. The total amount of loan disbursements is equivalent to 3.8 times of total expenditure on grant aid and technical cooperation.

Assistance by modality 3.1.2

Figure 3.1 shows the trend of cumulative net disbursements of Japan’s ODA to Malaysia by modality.

Breakdown of cumulative net disbursements of 2.56 billion USD as of 2014 was 104 million USD for the grant aid, 1.515 billion USD for the technical cooperation and 938 million USD for the loan aid respectively. Although the cumulative net disbursement exceeded 2 billion USD in the early 1990s, it dramatically decreased during 1995 to 1997 when the Malaysian government actively repaid the loan instead of requesting the new one in order to reduce the amount of public overseas borrowing. Afterwards, loan aid restarted in 1998 when Malaysian economy stagnated due to the Asian economic crisis, which again increased the cumulative net disbursement. Since 2010, net disbursement of the

9 The cumulative disbursements shown in “Japan’s ODA Data by Country 2015” is the total amount from 1969 to 2014. According to the OECD/DAC database, both gross and net disbursements from 1960 to 1968 for Japan’s ODA in Malaysia are 3.28 million USD.

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loan aid on a single-year basis has been negative because loan payment has exceeded loan disbursement after the world’s financial crisis in 2008. Cumulative net disbursements have also been decreasing.

Source: Japan’s ODA Data by Country, Ministry of Foreign Affairs website

Figure 3.1 : Trend of cumulative ODA expenditures on Japan’s ODA to Malaysia (net disbursements, by the type of modalities)

Japan has received the total of 22,375 Malaysian trainees and dispatched 4,316 experts to Malaysia by 201410. In particular, JICA has received 16,883 Malaysian trainees and dispatched 3,660 experts and 1,486 volunteers11. Figure 3.2 shows the trend on support for human resources by JICA.

10 Ministry of Foreign Affairs, “Japan’s ODA Data by Country 2015” 11 JICA annual reports in each year. The study team referred statistical data on JICA website （https://www.jica.go.jp/malaysia/index.html）with regard to the past data. Volunteers include Japan Overseas Cooperation Volunteers and Senior Volunteers.

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Source: JICA annual reports, JICA website

Figure 3.2 : Trend of support for human resources by JICA (cumulative number)

Assistance by sector in different ODA modalities 3.1.3

This section reviews Japan’s cooperation by sector based on JICA’s sector classification.

1) Grant aid

Japan has provided Malaysia with grant aid of 13.96 billion JPY in total by 2014, of which JICA conducted 10.69 billion JPY. Nearly half (45%) of JICA’s cooperation was used for “human resource development”. Cooperation for “fisheries” was 29%, that for “animal industry” was 12%, that for “planning/ administration” was 7% and that for “public works/utilities: transport/traffic” was 7% respectively (Figure 3.3). In human resource development sector, CIAST was built in the 1980s. JICA supported for building research institutions on cultured prawn and poultry disease from the mid-1980s to the 1990s in the agriculture/forestry/fisheries sector. After 1991, Malaysia “graduated” from the grant aid except for cultural grant assistance and grant assistance for grass-roots human security projects, in response to the country’s economic growth. Since 2007, JICA has cooperated on governance sector including maritime security and preventing sea smuggling and other illegal activities under the new grant aid scheme that Japan has established to combat with terrorism.

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Source: the study team calculated the data based on Japan’s ODA record to Malaysia by sectors and years (technical cooperation/grant aid)（https://www.jica.go.jp/malaysia/index.html）

Figure 3.3 Grant aid to Malaysia by sector (grant aid provided by JICA, based on the amount)

Grant aid was provided by organizations other than JICA. Cultural grant assistance provided educational and acoustic equipment to governmental and higher educational institutions. Also, grant assistance for grass-roots human security projects has been continuously conducted since 1989.

2) Technical cooperation

Japan provided technical cooperation of 127.03 billion JPY in total to Malaysia by 2014. JICA was in charge of about 90%, or 114.43 billion JPY of technical cooperation. JICA supported a wide range of sectors from 1988 to 2013 (in total 79.09 billion JPY) as Figure 3.4 shows. When dividing the period of cooperation into two parts which are the first part from 1988 to 2000 (56.36 billion JPY) and the second part from 2001 to 2013 (22.73 billion JPY), cooperation on planning/administration (the first part:11%, the second part: 21%) and social welfare (the first part: 1%, the second part: 8%) sectors dramatically increased while that on agriculture/forestry/fisheries (the first part: 21%, the second part: 11%) and mining/industry (the first part: 15%, the second part: 7%) sectors greatly decreased.

Human Resources45%

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s29%

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Animal Industry12%

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7%

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Transport/Traffic7%

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Source:：Source: the study team calculated the data based on Japan’s ODA record to Malaysia by sectors and years (technical cooperation/grant aid)（https://www.jica.go.jp/malaysia/index.html）

Figure 3.4: Technical cooperation to Malaysia by sector (1988-2013, technical cooperation provided by JICA, based on the amount)

3) Loan aid

Japan provided the total of 931.84 billion JPY of loan aid on the loan agreement basis12 starting from the first one in 1966 to the latest one in 2011. Figure 3.5 indicates the detail of loan aid by sector based on JICA’s sector classification. Electric power and gas accounts nearly half (46%). Then social services (28%), transportation (13%) and mining and manufacturing (11%) continues. Electric power and gas sector accounted for more than half of the loan aid until the 1980s (55% of the total loan aid of 423.82 billion JPY by 1990). On the other hand, cooperation on social services sector started the late 1980s. It accounts for 43% of the total loan aid of 508.02 billion JPY after 1991 and became the largest sector. This is because target sectors for cooperation were limited to “environmental improvement”, “poverty reduction and improvement of income disparities”, “SME development”, and “human resource development” sectors after Malaysia “graduated” the regular loan aid in 1994 as the level of income increased.

12 The first loan aid is included the loan by both Overseas Economic Cooperation Fund (OECF) and Export-Import Bank of Japan. The amount of loan aid based on Exchange of Notes (E/N) was 976.04 billion JPY (Source: “Japan’s ODA Data by Country 2015” by Ministry of Foreign Affairs, websites on Ministry of Foreign Affairs and JICA).

Human resources21%

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14%

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12%

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Others4%

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Source:：The study team calculated the data based on websites of Ministry of Foreign Affairs and JICA

Figure 3.5: Japan’s loan aid to Malaysia by sector (based on the amount)

3.2 Japan’s ODA Policies and Cooperation in Each Period

This section describes Japan’s major cooperation and aid policies by looking at how Japan’s support has aligned with Malaysia’s development issues and policies. Table 2.2 is also relevant to this topic.

1960s to 1970s: supports for basic infrastructure development and 3.2.1improvements of productivity for the establishment of a national infrastructure

After Malaysia became independent as the Malaya Federation in 1957, Malay Federation was established in 1963 and Singapore was separated in 1965. Malaysia was in its early developmental stage during the 1960s and infrastructure development for the nation building was necessary. At the same time, the country adopted import substitution industrialization as its industrial policy in order to change the industrial structure that had been dependent on natural rubber and tin export. In response to these backgrounds, Japan actively supported infrastructure and network development such as communication and broadcasting equipment. Also, Japan supported to build sugar and textile factories with the loan aid which corresponded with the import substitution industrialization strategy to increase self-sufficiency in these products. At the same time, cooperation on the primary industry in which most of the labour population engaged was conducted; JICA supported mechanized farming for the productivity increase in response to the dual cropping of rice that was the major focus in the First Malaysia Plan.

During the 1970s, free trade zones (FTZ) were established all over the country based on the export-oriented industrialization strategy. Japan supported FTZ development by providing loan aid to electricity projects and port development. Also, technical cooperation for MARA (Majilis Amanah

Electric Power and Gas

46%

Social Services28%

Transportation13%

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11%

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1%

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Rakyat) vocational schools in Johor Bahru and Kuala Lumpur were conducted to support the industrialization policy by fostering skilled workers. The technical cooperation also aimed at improving economic status of Bumiputra which aligned with the long-term development vision of NEP under Razak administration advocating poverty eradication and reducing gaps among ethnicity groups.

1980s: supports for improvements of basic industrial technology and 3.2.2enhancement of research capacities in agriculture, forestry and fishery industries

Power and energy sectors were the main focus of Japan’s loan aid in the 1980s, which aligned with the Malaysian government’s heavy industrialization and subsequent export-oriented industrialization policies. In agriculture, forestry and fishery sector, Japan provided technical cooperation on research capacity development such as poultry disease and forestry researches. Development of human resource and equipment to improve the industrial technology including metal industrial technology, measurement technology, fine ceramics and molding technology were conducted to serve as the foundation for the industrialization. Facilities were improved using the grant assistance for some parts of the technical cooperation, which supported the launch of research institutions and engineering training centres in an integrated manner. Also, in response to the Look East Policy, Japan started to receive trainees for technical and industrial development program and executive development program in 1982.

1990s: supports for organizational capacity and human resource development to 3.2.3strengthen the domestic industry and supports for environmental management and correction of disparities associated with the industrialization

The 1990s corresponds with the period when Malaysia became an industrial nation. While the country rapidly industrialized, technology upgrade and enhancement of organizational capacity and linkage remained as the challenges. Japan’s ODA focused on these areas together with environmental management and social disparities that the industrialization brought about. Two-step loans for SME development through government financial institutions and funds established by the government were provided. Also, loan aid to support higher education human resources development started. Such loan included supports for the Look East Policy and construction of universities. Furthermore, Japan supported Malaysian government’s regional development projects for the poverty eradiation. Japan provided technical cooperation on biotechnology and AI system which aimed to introduce more advanced technology compared with the 1980s. Cooperation was also extended to environmental management such as effective use of timbers, analysis and management of toxic chemicals and fishery resources management.

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Japan’s ODA policy to Malaysia changed explicitly in the 1990s; Malaysia “graduated” from the regular loan aid in 1994 and target sectors for cooperation were limited to “environmental improvement”, “poverty reduction and reduction of income disparities”, “SME development” and “human resource development”13. With regard to the grant aid, Malaysia “graduated” in 1991 except for cultural grant assistance and grant assistance for grass-roots human security projects.

As stated in 2.2.3, the Malaysian economy exacerbated due to the Asian economic crisis in 1997. The Malaysian government requested the Japanese government to provide loan aid in 1998 for the first time since 1994. Japan provided approximately 107.7 billion JPY of loan aid, which was the largest amount that Japan had provided in a single year, to support long term financial needs.

After the 2000: human resource development for high value-added economy, 3.2.4supports for the national welfare development and collaboration on common regional issues

In response to the Malaysian government’s goal of inclusive and sustainable high value-added economy for all, Japan has worked on human resource development with more advanced knowledge and various issues that are resulted from the industrialization process. Loan aid was provided for the higher education sector including the construction of a university campus that students learn Japanese style of engineering education. Japan provided a wide range of technical cooperation including private sector development (SME development, intellectual property, work safety and hygiene, etc.), environmental management (energy saving, waste management, biodiversity, etc.), supports for socially vulnerable people including the disabled and the elderly and governance such as tax and police practices. Technical cooperation projects on capacity development for maritime security have been continuously conducted in an effort toward solving common issues in East Asia. Grant aid has been provided for improvements of equipment such as high-speed crafts and inspection system.

Japan’s ODA policy put its importance on strengthening bilateral relationship as partners that deal with developmental issues beyond East Asia. Malaysia and Japan have been continuously conducting the third country training program by sharing the cost to support Malaysia’s south-south cooperation.

13 Junichi Yamada (1998), “Japanese Official Development Assistance in Southeast Asia –Special Reference to Malaysia,” ISIS Malaysia, pp.87-88. Also, the Ministry of Foreign Affairs of Japan states in its “ODA Country Data Book 2012” that Japan’s ODA loans to Malaysia have been provided in the areas of “environment,” “human resource development,” “disaster prevention and control,” and “assistance to reduce disparities” since 1994.

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4. Salient Features and Prospects of Japan’s Cooperation to Malaysia

4.1 Salient Features

After reviewing Malaysia-Japan cooperation with respect to major development issues, one might as well conclude that Japan’s support to Malaysia are featured by the following points:

1) Matching to the development needs in different period

Japan’s cooperation has been responsive to the long-term changes in socio-economic development of Malaysia. The cooperation supported long-term structural shift in Malaysia by responding to development needs in each period. Especially, it supported the followings: structural changes from agricultural and mining-based to industrial-based economy, from rural- to urban-based society, and from government- to private-led development.

In the initial period of technical cooperation, an emphasis was placed on the analysis of state of the art and planning. Such technical cooperation was followed by intensive financial cooperation for the infrastructure projects such as electricity. Based on these infrastructure, Japan’s cooperation supported industrialization by strengthening, on a step-by-step basis, state enterprises, import substituting activities, technological basis of manufacturing production, national industrial standards and export competitiveness.

In other words, Malaysia has prepared the requests for Japan’s cooperation precisely based on changing national five-year plans for development, while Japan has maintained a principle of identifying projects on the basis of request by host country. Under this principle, Japan’s international cooperation has responded the needs from host country. This principle becomes more effective as the host country is capable of preparing precise requests. The more the country has capability in planning, effectiveness of the principle becomes larger. In other words, the Malaysian government has effectively utilized Japan’s cooperation by using its excellent planning capacity. In this sense, improving the planning capacity itself was important for effective use of international cooperation. Japan’s technical cooperation to Malaysia, especially development studies, put greater importance on this point.

In this connection, one should not overlook a broad understanding and a mutual trust lying behind the cooperation between Malaysia and Japan. Malaysia’s “Look East Policy” has been an important background to determine contents and scale of cooperation between the two countries. Japan has been trying to respond to the Look East Policy as it restarted financial cooperation when Malaysia suffered from the Asian currency crisis, even though Malaysia “graduated” from the recipient countries in terms of financial cooperation. These broad understanding and mutual trust have led relevance and

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effective use of project cooperation.

2) Effective input to human resource development

Japan continuously supported human resource development in Malaysia. In particular, it supported practitioners through cooperation projects and the technical human resources in public and private sectors through scholarship for overseas study. Japan has supported human resources through cooperation projects in many developing countries. Especially, administrative capacity development as well as human resources has been continuously supported in infrastructure and industry sectors. Administrative capacity development through human resource development was particularly important in preparing basic/long-term plans, operation and maintenance of facilities, introduction and utilization of new technology, and human and organizational capacity development for company supports.

Malaysia has made use of financial cooperation for the scholarship of students studying in Japanese universities. Demand from the Malaysian side is strongly reflected in this financial cooperation. Except for Malaysia, Japan’s financial cooperation has often been provided to support large-scale infrastructure rather than scholarship program.

The intensive input to human resource development has formed a basis for Malaysia to make effective use of what Malaysia learned from Japan in Malaysian society. At the same time, it has encouraged to diversify and promote personal exchange between both countries.

Japanese government policy for international cooperation assumes that growth of the national economy can be sustainable only when nation is willing to be responsible for its future and its people themselves make efforts to develop their nation14. In fact, Japan itself understands the importance of investments in human resource based on its experience, and has made an attempt at sharing of knowledge and experience with host countries in any type of international cooperation. Malaysia shares with Japan in the understanding and practice of the human resource investments, with a result of enhancing effectiveness in international cooperation.

3) Cooperation leading to the mutual economic relationship

Malaysian and Japanese people worked together and built up a mutual trust through cooperation process between two governments. This trust led to the economic partnership between the two countries sometime in the form of cooperation agreement between companies after a project finished. There are several examples of implementing study/project together, and in some cases they led to even more comprehensive partnership agreements between both parties. e.g. a commercial agreement for consulting services made in 1997 between Tenaga Nasional Berhad and Tokyo Electric Power

14 Ministry of Foreign Affairs, Nihon no Kokusai Kyoryoku: Sekai to Chikyu no Mirai no tameni

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Company, and a memorandum of understanding signed in 2009 between UEM/PLUS in Malaysia and Central Nippon Expressway Company Limited in Japan. These partnerships were realized partly because of privatization of public works in both countries. As the privatization goes on, a part of government cooperation developed into cooperation at private-sector level. Electricity, expressway, and sewerage are examples.

Direct partnerships based on such trusts that were fostered through working together for projects are undoubtedly precious assets for future relationships between the two countries.

The above three characteristics in Japan’s cooperation are not necessarily seen in other developing countries apart from Malaysia. The reason why these were effectively implemented in Malaysia is that the Malaysian side had system to receive and utilize Japan’s cooperation in an effective manner. In particular, “the government’s strong planning capacity”, “policies that put great value on human resource development”, and “trust relationship through projects among stakeholders in both countries” that were described above seem to be important factors.

4.2 Prospects for Japan’s cooperation

Achievements of Japan’s cooperation deserve an asset for the future development in Malaysia. In particular, following four are possibilities.

1. Under the policy toward a knowledge-based economy, Malaysia’s needs on advanced technology and introduction/development/dissemination of technical knowledge are high for both private and public sectors. Continuous communication with Malaysian organizations that Japan has supported through ODA can be an effective tool to responding to these needs.

2. Development administration will continue to be privatized both in Malaysia and Japan. In parallel, existing government to government cooperation will be further evolved into private to private cooperation.

3. Both countries have long experiences of South-South cooperation. Malaysia may soon more actively enhance cooperation for other countries with its own international cooperation vision. Consequently, these experiences have a great potential in diversifying international environment. Importance on regional cooperation in response to the globalization is expected be larger in addition to the traditional South-South cooperation in near future. Such regional cooperation includes enhancement of connectivity in ASEAN region, human resource network and improvements of regional trade and investment systems, etc.

4. Taking these points into consideration, the potential of JICA is high to be an information centre of development and cooperation in industry-government-academia. As a country transitions to a “graduate country” from ODA projects along with economic and social growth, many stakeholders

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including private sectors, universities, local governments, etc. start to get involved in cooperation. Under the circumstance, integrating past ODA projects and information on current trend on cooperation other than ODA projects (local governments, universities, NGOs and private companies, etc.) into one place will help various stakeholders to share information and Malaysia-Japan relationship to develop further.

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Part II Sector Analysis

5. Road and Water Infrastructures

5.1 Trends and Highlights

Infrastructure development is crucial element of socio-economic development. It covers the economic infrastructures such as transport, energy and communications and the social infrastructures such as education and health. This chapter focuses on road and water resource sectors which have become a framework for the nation building and led economic development of Malaysia. Another sectors that Japan’s cooperation were salient- energy (particularly electricity), education (particularly higher education) and urban development (sewage and waste management) are described in the following chapters.

The Malaysian government has put greater importance on infrastructure development since its inception and infrastructure development was the largest public spending until the mid-1990s. Malaysia’s economy is dependent on exports. Therefore, development of transportation and water infrastructure associated with manufacturing and urban activities was especially important for the national economy. This applied during the period when Malaysia transitioned its major export sectors from agriculture and mining to manufacturing and services. At the same time, infrastructure improvements in East Malaysia and the eastern shore of the Malay Peninsula was socially important issue considering its relatively slow development compared with the western shore of the Malay Peninsula that manufacturing and urban development were active.

Japan’s cooperation played two important roles when public-spending-driven infrastructure development was active. One was technical transfer of masterplan planning, construction, maintenance and operation through technical cooperation and another was financing of large-scale public investment by loan aid. After the mid-1990s, government enterprises including infrastructure development were privatized as part of promotion of foreign capital and enhancement of financial management. Japan’s cooperation on road and water infrastructure development were concentrated before the privatization period when the government was mainly in charge of them (table 5.1 and 5.2).

Table 5.1: Japan’s Cooperation for Road Development

Project Period Type of Cooperation Project Name Amount (million JPY)From To

1977 Loan aid Construction of road over Crocker range 7,355 1977 Loan aid Construction of Sabak Bernam bridge 605 1978 1980 Development study Construction of Sarawak trunk road 1981 1982 Development study Johor Bahru road transport plan 1982 1984 Dispatch of experts Road construction and maintenance 1982 1984 Dispatch of experts Expressway construction and management 1982 1984 Development study Tatau - Kapit trunk road 1983 Loan aid Ayer Hitam- Seremban toll expressway 4,500 1985 Loan aid Ayer Hitam- Seremban road 740

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1986 Loan aid Expressway toll system 1,683 1986 1989 Development study Klang Valley transport plan 1987 1989 Dispatch of experts Urban transport planning 1987 1989 Dispatch of experts Road construction 1988 1991 Dispatch of experts Expressway toll system 1988 1991 Dispatch of experts Road pavement 1988 1990 Dispatch of experts Traffic engineering 1988 1989 Development study Plan of traffic management on expressway 1989 1991 Dispatch of experts Analysis of traffic accidents 1989 1991 Dispatch of experts Road management 1989 1990 Dispatch of experts Urban transport 1989 1991 Dispatch of experts Urban transport planning 1990 1993 Development study National road network development plan 1990 1992 Development study National bridge maintenance and rehabilitation plan 1991 1993 Dispatch of experts Expressway and structural engineering 1991 1993 Dispatch of experts Analysis of traffic accidents 1993 1995 Dispatch of experts Environmental engineering of expressways 1994 1996 Development study Plan for bridge design standardization 1995 1996 Development study Outer ring road development plan for the capital region 1995 1998 Dispatch of experts Expressway traffic management system 1997 1999 Development study Plan for environmental improvement of urban transport

in Kuala Lumpur

1997 1997 Dispatch of experts Maintenance and management of expressways 1999 1999 Development study Plan for developing traffic control data 1999 2000 Dispatch of experts Expressway traffic control system 2000 2002 Dispatch of experts Expressway management control system 2000 2002 Dispatch of experts Expressway traffic system 2000 2002 Dispatch of experts Landslide control for expressways Note *1 Year of L/A for loan aid. Source：Compiled by JICA Study Team based on website of JICA and data from JICA Malaysia

Table 5.2: Japan’s Cooperation for Water Development

Project Period Type of Cooperation Project Name Amount (million JPY)From To

1978 1982 Development study National water resource development plan 1979 1981 Development study Kinabatangan river basin development plan 1980 1982 Development study Kelang river basin management plan 1982 1984 Development study Perlis-Kedah region water resources development plan 1986 1989 Dispatch of experts River engineering 1987 1989 Development study Kelantan river basin management plan 1988 1990 Development study Plan for flood mitigation and drainage in Penang island 1989 1992 Dispatch of experts River engineering 1990 1994 Development study National plan for river mouth formation 1990 1992 Dispatch of experts River and coastal engineering 1992 1995 Dispatch of experts River engineering 1993 1995 Development study Integrated plan for Mudah river basin management 1995 1998 Dispatch of experts Irrigation and drainage 1995 1998 Dispatch of experts River engineering 1996 1998 Development study Plan for river basin information system 1999 Loan aid Pahang – Selangor raw water transfer project:

Engineering study 1,093

1999 1999 Dispatch of experts Irrigation 1999 1999 Dispatch of experts Irrigation

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2000 2000 Dispatch of experts Irrigation 2005 Loan aid Pahang – Selangor raw water transfer project 82,040 Note *1 Year of L/A for loan aid. Source：Compiled by JICA Study Team based on website of JICA and data from JICA Malaysia

As shown in the tables above, major part of Japan’s cooperation for infrastructure development was consulting services to carry out development studies such as master plan and feasibility studies and the specific advisory services by experts dispatched from Japan. Both the development studies and the advisory services accompany themselves with technology transfer in planning, engineering design and making engineering design standards.

Major master plan projects in road sector are Johor Bahru Road Transport Plan (1980-1981), Klang Valley Transport Plan (1986-1989), National Road Network Development Plan (1990-1993), Outer Ring Road Development Plan for the Capital Region (1995-1996), and Plan for Environmental Improvement of Urban Transport in Kuala Lumpur (1997-1999). These master plans presented long-term extensive road network plan and suggested priority road projects. National Road Network Development Plan is called “Koran for Malaysia’s road plan” in the Ministry of Public Works even today.

Major focus of cooperation in water resource sector was planning of master plans that cover the river basin or the country as a whole. Major projects are National Water Resource Development Plan (1978-1982), Kinabatangan River Basin Development Plan (1979-1981), Kelang River Basin Management Plan (1980-1982), Perlis-Kedah Region Water Resources Development Plan (1982-1984), Kelantan River Basin Management Plan (1987-1989), National Plan for River Mouth Formation (1990-1994), and Integrated Plan for Mudah River Basin Management (1993-1995). According to the Department of Irrigation and Drainage (DID), development of national water resource plan was new in Malaysia. However, Malaysian experts succeeded in developing the National Water Resource Development Plan by revising it twice. The first version was revised during 1998-2000 by Economic Planning Unit (EPU) and the second one was revised during 2009-2011 by DID.

In Malaysia, EPU was mainly in charge of developing master plans and selecting projects, and each ministry is considered as enforcement agencies. Therefore, each ministry does not usually develop long-term master plan on its own. National Road Network Development Plan by the Ministry of Public Works and National Water Resource Development Plan by DID are few examples and are considered as advanced examples in infrastructure development sector programs. Japan’s experiences on infrastructure development planning were effectively utilized in these sectoral program planning. In particular, 1) comprehensive approach for water resource management and urban transportation management, 2) estimate and planning based on the actual observational data, and 3) response to the demand change by urbanization and industrialization, were utilized.

Dispatch of experts and technical transfer of planning and implementation through trainings were

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continuously conducted together with cooperation on master plans. Engineering technology including building technique, structural engineering and maintenance technology and demand-side management technique like urban transportation management were the targets for technical transfer in road sector. River engineering, information system development and irrigation technology became the major target for water resource sector. Experts were continuously dispatched on a long-term basis. For example, JICA has dispatched 17 road experts from Japan Highway Public Corporation for 29 years. The continuity is considered to contribute to planning and implementation capacity development of ministries that are in charge of infrastructure development. Also, the continuous dispatch of experts has later developed to partnership in the private sector. Relationship with PLUS Expressways Berhad in Malaysia and NEXCO in Japan is an example. Both countries experienced privatization of road administration around the same time, which also became one reason for the partnership.

For large-scale public financing using the loan aid, Ayer Hitam- Seremban Toll Expressway (1983-1987) and Expressway Toll System (1986-1987) in road sector and Pahang – Selangor Raw Water Transfer Tunnel Project in water resource sector are major projects.

The Malaysian government has developed short-range toll expressways in bridges and areas like Kuala Lumpur where transport demand is high by receiving financing from the World Bank, etc. since it established Highway Planning Unit under the Ministry of Public Works in 1966. During the period of the Fourth Malaysia Plan (1981-1985), development of North-South intercity expressway (922km long) that connects the western shore of the Malay Peninsula from north to south was an important project. Ayer Hitam- Seremban Toll Expressway is a part of the expressway whose length is 182km and located in the economic central region from Kuala Lumpur to Johor Bahru. Entire North-South intercity expressway opened in 1994 and Ayer Hitam- Seremban Toll Expressway is one of the most important section among the country’s road network.

Expressway Toll System started after the Toll Expressway Project. It targeted two sections (from Kuala Lumpur to Ayer Keroh and from Ipoh to Changkat Jering). Currently, Malaysia’s expressway network is 1,800km long and the whole line is the toll road. Construction and management of expressways were relegated to Malaysian Highway Authority (MHA) in 1980. The government adopted a privatization policy including infrastructure in 1983. Every construction and management of expressway was handed over to private companies under the privatization master plan which was announced in 1991. Currently, MHA supervises participating private companies and Highway Planning Unit is in charge of designing road network plans. Under these circumstances, Expressway Toll System contributed to securing income for MHA at first and later enabled construction and management of expressways by private companies. At present, private companies have discretion over fare structure and fare standard.

Water shortage was a long-standing problem in Kuala Lumpur and Selangor, and the National Water

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Resource Development Plan (1978-1982) pointed out the possibility of tight water supply in Klang Valley area. While Malaysia is originally a water-rich country, concentration of population and economic activities with rapid economic development brought disequilibrium of water in the capital region. According to Ghufran Memon, population of Selangor and Kuala Lumpur increased by 2.7 times from 2.41 million in 1980 to 6.47 million in 2006, and amount of water consumption increased by 4.9 times for household use and 6.5 times for industrial use (industrial use accounts for approximately 40%)15. In 1998, the area introduced water allocation system due to unusual rainfall level and about 1.2 million people were affected for almost half a year. Despite various efforts to secure water resource within the region, balance between supply and demand started to reach a limit. The government was considering various alternatives, but finally decided that it is essential to transfer water from the Semantan River in Pahang Province through a tunnel to Selangor Province. National Water Resource Development Plan (1978-1982) mentions possibility of supplying water from Pahang Province to Selangor Province too. New Miyazawa Initiative announced in 1998 by Japan became an opportunity where the government decided to use the loan aid for the project. Since the project was large-scale water resource development, influence on natural environment as well as social environment including settlement of about 300 indigenous people generated much interest, and intensive survey and discussions were conducted. As a result, the government approved the plan in 2005 and subsequently signed the loan agreement. Water transfer tunnel was constructed from 2005 to 2014.

5.2 Accomplishment and Prospects of Japan’s Cooperation

Development studies by JICA were fully utilized and long-term master plans in road and water resource sectors were prepared. These master plans became a base for individual plans such as road network plans by region and river basin plans. While infrastructure is developed depending on its demand, it forms economic and national land’s structure in advance. These long-term master plans on infrastructure played an important role in shaping advanced policies. EPU is in charge of planning policies in Malaysia and demarcation between planning and implementing agencies is relatively clear. Therefore, there are few examples where implementing agencies plan comprehensive and long-term master plans. Under these circumstances, it is important that Ministry of Public Works and Department of Irrigation and Drainage realized planning based on their experiences on the ground and project processes. In particular, ideas about project as a part of network or river basin plans and emphasizing interrelationship among projects in the same sector were considered as a new planning method and became established. Also, long-term master plans as well as project plans started to emphasize improvement and use of observational data, which was one of changes that technical cooperation brought about to ministries. 15 Ghufran Memon (2009), The Need for a Water Demand Management Plan for Selangor

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These long-term master planning which led individual project planning and project formulation became established through efforts of Malaysian ministries and continuous advice and training from Japanese experts. Design of plans and organization of observational data were major target for advice from Japanese experts. In addition, individual technical transfer in implementation phase such as construction technique and operation and maintenance were continuously conducted.

The Japanese government financed large-scale projects such as expressways, expressway toll systems and water transfer tunnel when Malaysia’s infrastructure was developed using the public investment. These were up-front investment projects and required intensive public investment funds. Therefore, low-interest long-term financing by loan aid were necessary to realize the projects. In addition, development studies by JICA suggested, or pointed out possibilities of realizing these large-scale public investment projects.

Japan’s cooperation on infrastructure development contributed to putting Malaysia’s privatization policies in practice. Major roles of ministries changed from implementation to supervision of individual projects after the privatization in the 1990s. Human resources, knowledge and experiences which had been fostered through technical cooperation were utilized for supervision. Part of human resources moved to infrastructure companies including government ones and worked for private-sector-driven infrastructure development. Japan also experienced privatization of infrastructure projects around the same period. Cooperation at the government level were taken over to private sectors. For example, cooperation agencies on expressway were taken over from Ministry of Public Works to Malaysian Highway Authority and BOT participating companies in Malaysia, and from Japan Highway Public Corporation to NEXCO in Japan respectively.

Malaysia’s infrastructure development level is high among ASEAN countries because of intensive public investment at an early stage and active private investment. However, development is an ongoing process and Malaysia’s interest toward Japan’s experience for sectors with high needs is large. One example is general coordination on water resource management. This is an issue which lasts depending on urbanization and changes in the entire administration. In particular, issues are diverse: relationship between federal and state governments, coordination among states, building database on water resource, water fare structure, effective use of water, prevention of water contamination, use and regulation of underground water, and prevention of flood. Many ministries including Ministry of Energy, Green Technology and Water, Ministry of Natural Resources and the Environment and Ministry of Agriculture and Agro-Based Industry are in charge these issues. Especially, water shortage in the capital region cannot be solved by the large water transfer tunnel alone and comprehensive approach including water use will be more and more necessary.

Interest on Japan’s experience of Intelligent Transport System is also high. Needs for transportation management such as introduction of ETC, traffic light system and car navigation are high and

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interaction with Ministry of Land, Infrastructure, Transport and Tourism and NEXCO in Japan has started.

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6. Energy

Malaysia has been producing and consuming oil and gas. The consumption has expanded as the economy grew. Japan’s cooperation has responded the changing energy sector. Japan is the largest natural gas market for Malaysia. At the same time, Malaysia is one of the biggest suppliers of natural gas for Japan together with Indonesia and Qatar. Consequently, energy policies of Malaysia have relevance to Malaysia-Japan relationship as well. Majority of cooperation projects in the energy sector were power development. National Electric Board (NEB, later Tenaga Nasional Berhad) was in charge of power development until the privatization in 1992, and most of Japan’s cooperation focused before 1992.


Overview of Japan’s Cooperation 6.1.1

Total amounts of cooperation in energy sector in Malaysia are as below.

Table 6.1: Total Amounts of Japan’s Cooperation

（accumulations from 1956 to 2014 fiscal year, Million Yen）

Yen Loan*1 Technical Cooperation Grant Total 437,825 865 0 438,690

*1 total of Yen loan and Investments Source: JICA Malaysia Office

As the table shows, loan aid is the main scheme for the cooperation to the energy sector in Malaysia.

The main projects financed by the loan aid are: Multi-purpose dams JPY8,793 million, Energy Plants JPY337,890 million, Power Transmission Line JPY10,312 million, and Gas JPY80,830 million. Main Yen projects with the loan aid are shown in Table 6.2.

Table 6.2: Main Projects with Loan Aid in Energy Sector

Start Year *1

End Year *2

Cooperation Type Name of the Project

Loan Amount

(Mil. Yen) 1974 1975

Loan Aid The Temengor Hydro-Electric 22,093

1977 Loan Aid The Prai Power Station Unit No.6 4,2291978 Loan Aid Gas Turbines 3,9391978 Loan Aid Pasir Gudang Power Station 7,0991978 Loan Aid KL (North) – Kampong Awah Trans’ Line & Substation 2,0551979 1980

Loan Aid Trengganu Hydro-Electric 19,687

1979 1992

Loan Aid Tenom Pangi Hydro-Electric 8,178

1980 Loan Aid Kenering Hydro-Electric 5,5571980 Loan Aid Bersia Hydro-Electric 3,6701981 1984

Loan Aid Port Klang Power Station 141,391

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1992 1993 1982 Loan Aid Batang Ai Hydroelectric 6,1001982 Loan Aid Batang Ai Hydroelectric (Transmission Line) 3,9001984 Loan Aid Engkilili-Sibu Transmission Line Construction 4,3571983 1985

Loan Aid Sabah Gas Grid 29,890

1993 Loan Aid Patau-Patau Power Station Extension 3,7001999 2000

Loan Aid Port Dickson (Tuanku Jaafar) Power Station Rehabilitation Project 102,851

Note: (*1) Year of L/A for grant aid and loan aid. The multiple years indicate loans were provided for several times. (*2) Completion years of loan aid projects are omitted due to difficulty in identifying them from the disclosed information. Source: Completion Report: Advisor for Promotion of Implementation and Formulation for Yen Loan Projects of Japan in Malaysia, Oct. 2010

Except the Sabah Gas Grid project in 1983 and 1985, the majority of cooperation projects in the energy sector were for the electric power plants in the mid/late-1970s and the late-1990s. The former period was the time when electric consumptions surged up in parallel to the rapid economic development. At that period, Japan’s cooperation helped constructions of hydro and thermal electric plants and installation of gas-turbine generators in 4 places in Malay Peninsula (1978). These gas-turbines generators, which responded the emergent needs at the time, finished their roles, and now they were replaced by the diesel generators.

In the latter period, Malaysia faced itself with a shortage of electricity again. In the 1990s, the Government of Malaysia has started to promote Independent Power Producer (IPP) for power generations. However, because of the Asian economic crisis which had started in July 1997 in Thailand, IPPs could not invest in the period. The Malaysia Seventh 5-year development plan stated the diversification of energy sources. Considering those situations and policies, outdated facilities were renewed for stable and increased electric generations, and gas-combined cycle electric generation facilities were introduced in the Port Dickson (Tuanku Jaafar) Power Station Rehabilitation Project.

Considering technical cooperation projects, although the number of projects is smaller than that of loan projects, the cooperation such as development studies has been continuously conducted since early days in the energy sector. Those studies were mainly about hydro-electric power generation. They were: Lebir Dam Project (1987-89) which includes hydro-electric power generation, flood control, and irrigation; Feasibility study on small scale hydroelectric power development project at upper Liwagu river basin in Sabah (1991-92); and Feasibility Study on Sarawak Small Scale Hydroelectric Power Project in Malaysia (1984-88), for example.

Accomplishment of Japan’s Cooperation 6.1.2

Most of cooperation for electricity was loan aid for NEB. Planning and implementation structure at NEB was strengthened through 25-year cooperation by the World Bank. It can be said that early power development in Malaysia was achieved through collaboration among NEB, the World Bank and Japan. The energy sector accounts for 46% of the total amount of Japan’s loan aid to Malaysia.

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Therefore, as described above, loan aid for electricity was large in terms of financial amount among Japan’s cooperation to the energy sector. According to the study conducted by the Overseas Economic Cooperation Fund (OECF16) in December 1986, about 60% (JPY 153,379 million) of total JPY 256,648 million loan agreements was for the electricity sector as of March 1985. The same report analysed that 31% of total investment cost for electric developments in Malaysia between 1981 and 1985 was provided by Japanese Yen Loan17, 1,110 MW was generated by the power plants constructed by using Japan’s loan (about 31% of total 3,606 MW generated by National Electric Board (NEB)18 in the Malay Peninsula). The figure indicates an importance of Japan’s cooperation to the development of electric sector in Malaysia at the age. Also, according to Yamada, who studied Japan’s ODA in South-East Asia, said that 2,598MW was generated by the power plant constructed by Japan’s official loans as of 1995, accounting for 34.7% of the total generation of 7,485.7MW by Tenaga Nasional Berhad (TNB)19.

Many Japanese companies worked for construction projects with the loan aid and it is said that through the construction processes of working with local contractors, Japanese companies transferred their technical knowledge to local companies. Yamada pointed out several achievements based on interviews to the people who were in charge of those projects.20

- Gas-turbine generators were introduced by the Japan’s cooperation project in Malaysia for the first time. The TNB engineers acquired technical knowledge on the gas-turbines through working together with Japanese companies. Those engineers used the knowledge for constructing Connaught Bridge Power Plant and Paka Power Plant later.

- Similar facilities were introduced to Prai Thermal Power Station and Pasir Gudang Thermal Poweer Plant, and through the installation processes, technical knowledge was transferred to local engineers. Especially, the simulation machine for Prai Thermal Plant, which was installed in the TNB training facility, contributed to the technical upgrading in their operation and maintenance.

- Temengor Dam for Temengor Hydro-electric Power Plant was the first rock-fill dam in Malaysia. Bersia and Kenering were the first large concrete gravity dams. The technical knowledge acquired by those projects was utilized for Kelantan in the early-1990s.

- Four engineers who were in charge of Port Klang Power Station constructions moved to IPP companies and contributed to the development of IPP industries.

16OECF was merged to Japan Bank for International Coopearation (JBIC) and later merged into Japan International Cooperation Agency (JICA) 17 OECF (December 1986) Malaysian Electricity Impact Report 18 Privatized in February 1990 and became Tenaga Nasional Berhad (TNB). 19 Junichi Yamada, Centre for Japan Studyies, ISIS, Malaysia (1998) “Japanese Official Development Assistance –Special Reference to Malaysia-“ 20 -ditto-

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If we see the situations from different angle, Malaysia could acquire technical knowledge on electricity by using Japan’s cooperation projects as opportunities. Then, they used the acquired knowledge effectively for further electricity development. This means that Malaysia fully utilized limited experiences to acquire technical knowledge, which is one of Malaysia’s characteristics while many other countries have been relying on donors for developing their economies.

6.2 Case Study of Cooperation

In this section, the experience of the Port Dickson (Tuanku Jaafar) Power Station Rehabilitation Project (1999, 2000) is analysed to see what happened in the project implementation process, how the incidents contributed to the development of Malaysian economy and society, and how those processes lead to the Malaysian-Japan good relationships of today.

Overview of the Project 6.2.1

This project is to replace outdated and inefficient oil-fired electric generation equipment to the new highly-efficient and low toxic gas emission gas-combined-cycle power generation equipment at the Port Dickson (Tuanku Jaafar) Power Station.21 At the time, equipment at the Port Dickson had started outdated and increased greenhouse effect gas emissions. In this project, total 7 old heavy oil/ natural gas fired generation equipment were installed with a total capacity being 600MW in 1960s-70s. These equipments were replaced by a gas-combined-cycle generation equipment with a generation capacity being 1,500MW in total and more efficient and little greenhouse gas emission.

Figure 6.1: Port Dickson (Tuanku Jaafar) Power Station

Source: JICA

21 http://www.jica.go.jp/oda/project/MXVII-3/index.html

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Roles and Achievements of Japan’s Cooperation 6.2.2

A direct result from the project was the replacement of old and environmentally-problematic power generation equipment by a more efficient one with smaller environmental impact. Quantitative impacts are as below:22

- 1,500MW electric generation equipment accounting for about 3,200,000 households’ consumptions was renewed (increased 900MW compared to the old equipment).

- The gas-combined-cycle electric generation equipment achieved the highest generating efficiency of 55% among all power plants in Malaysia.

- Reduction of NOx (about 60%), SOx (about 100％), and CO2 (about 30%). As a result, 37.7% decrease of greenhouse effect gas emission was achieved in 2009-2011.

- 43 Malaysian companies were sub-contracted for the project implementation. This arrangement generated local employments.

This project contributed to the stabilization and increase of electric power supply and eased environmental impact. It is important to note that the technical transfer was also achieved through the project process.

In addition, the record time of 12 million man-hour accident-free labour hours was achieved throughout the construction phases 1 and 2. It is reported that the number of operators for O&M of the plants was decreased to 138 people from 288 people based on higher technologies and newly acquired operational knowhow.

According to an interview to TNB officers conducted in September 2016, in addition to the positive technical transfer effects with the installation of new equipment, technical transfers through working together with Japanese companies are important: positive impacts over Malaysian workers by Japanese work ethics such as punctuality and cleanliness of site. TNB officers said that Japanese engineers were very practical and shared concrete knowledge and knowhow through site works. TNB has rotated their engineers who had got experiences in JV with Japanese companies to other project sites so that they could share and accumulate those knowledge and knowhow in their organization. This was possible since TNB hired engineers for long-term basis. The existence of such a dissemination mechanism made Malaysia possible to improve engineering levels in a short term.

At the moment, there is no ODA cooperation project in the Malaysian electric sector. However, based on the mutual trust developed through working together, TNB has fixed business cooperation agreements with Japanese private companies: a relationship started as an international cooperation 22 http://www.my.emb-japan.go.jp/Japanese/bilateral/power_station_pd/090616.html

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project has still continued as a business cooperation contract. TNB is hoping to work together with Japanese companies on some new areas such as Smart Grid, where Japanese technologies are advanced, and as a trustworthy partner for exploring new markets in neighbouring Asian and middle eastern countries.

The cooperation in the electric sector created an important value for both Malaysia and Japan by developing mutual understandings and working partnership in the private sector.

Lessons from Cooperation 6.2.3

Although there are various Japan’s cooperation schemes, a common and important characteristic is high concern on “human resource development”. Even in the projects with the loan aid, a majority of those projects were not designed to directly contribute to human resource development, when Japanese companies were involved, technical transfers were implemented through the implementation process. Japanese companies normally sub-contracted sections to local companies and trained local people and shared their technical manuals to local engineers. Those behaviours of Japanese companies should have led to technical transfers.

The Malaysian government selected effectively the areas where they requested for the Japanese cooperation based on their national development plans. Malaysia has effectively learned and acquired technology and knowhow through the cooperation projects. The successions are achieved probably because Malaysia also put high value on the human resource development like Japan.

Regarding Japan’s cooperation to the Malaysian energy sector, especially to the electric sector, in addition to the installation of technology by each project, there might be some positive impacts to Malaysian society through construction process, operation and maintenance training, sharing working culture, etc. of Japan.

Moreover, the mutual trust, which was developed based on the experience of achieving the goal together, is transformed into business partnership contracts in some cases. Those are important basis of friendship between Malaysia and Japan now.

It may increasingly be difficult for Japan to provide assistances especially to the areas where private companies alone can generate profits like in the energy sector. As of today, there are still a number of people who remember experiences of working together with Japanese people in Malaysian electric sector. Business relationships, which originated in cooperation projects, still remain. However, the memories would fade away with time. For maintaining good relationships between Malaysia and Japan in multi-layers of private and government levels, both countries need to make efforts to utilize partnerships, which were developed through the cooperation projects in the past, to emerging needs of the future.

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7. Industrial Promotion


Overview of Japan’s cooperation 7.1.1

The industrial structure of Malaysia heavily relied on export of natural rubber and tin when it embarked on building the country. Since then, the government has promoted social and economic development centring on industrial development particularly through the development of manufacturing industries. In response to this, Japan’s cooperation has placed an emphasis on industrial promotion through the support for industrialisation. “Cooperation for industrial promotion” referred to in this chapter includes supports in a wide range of areas, such as development of systems and plans for industrialisation or private sector development, improvement of administrative capacity in relation to economic activities of the private sector, industrial human resource development (except for higher education), and so on. Table 7.1 indicates JICA’s major cooperation projects in the form of grant aid, technical cooperation, and loan aid.

Table 7.1: Major cooperation projects for industrial promotion

Start Year*1

End Year*2

Cooperation Type*3 Project Name

Amount(JPY

Mil.)*4 1966*5 Loan Aid Textile Mill Construction 580

1971 Loan Aid The Project of Plantation Refined Sugar Plant in Perlis 2,997

1973 1975 TCP MARA Vocational Training Institute, Kuala Lumpur 1976 Grant Aid ASEAN Project on Tyre Research Laboratory*3 600

1976 1981 TCP MARA Vocational Training Institute, Johor Bahru 1978 1984 TCP Metal Industry Technology Centre 1981 1985 TCP Project on the National Metrology Laboratory

1982 Grant Aid The Establishment Project of the Centre for Instructor and Advanced Skill Training in MALAYSIA

1,740

1982 1991 TCP Centre for Instructor and Advanced Skill Training(CIAST) 1982 Loan Aid ASEAN Urea Project (Malaysia) 33,600

1983 Grant Aid The Establishment Project of the Centre for Instructor and Advanced Skill Training in MALAYSIA

2,060

1985 1990 TCP National Computer Institute 1986 Loan Aid ASEAN Urea Project (Malaysia)(2) 4,797

1987 1992 TCP ASEAN Project on Characterization of Fine Ceramics 1988 1993 TCP Foundry Technology Unit 1988 Loan Aid AJDF Category B (Bank Industri Malaysia Berhad) 10,013

1988 Loan Aid AJDF Category B (Bank Pembangnan Malaysia Berhad) 5,890

1988 Loan Aid AJDF Category B (Malaysian Industrial Development Finance) 10,442

1989 1994 TCP The Radiation Applications Project

1992 Loan Aid Small And Medium Scale Industry Promotion Program (SMIPP) (Malaysian Industrial Development Finance Berhad)

4,660

1992 Loan Aid Small And Medium Scale Industry Promotion Program (SMIPP) (Bank Industry Malaysia Berhad)

4,660

1992 Loan Aid Small And Medium Scale Industry Promotion Program (SMIPP) 4,660

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Start Year*1

End Year*2

Cooperation Type*3 Project Name

Amount(JPY

Mil.)*4 (Bank Pembangunan Malaysia Berhad)

1993 1997 TCP Project on Evaluation and Analysis of Hazardous Chemical Substances and Biologic

1994 1999 TCP The Malaysia External Trade Development Corporation 1995 2000 TCP The Malaysia Al System Development Laboratory 1996 2000 TCP Measurement Centre of SIRIM (Phase 2) 1998 2002 TCP The Project on Risk Management of Hazardous Chemical Substances 1998 2004 TCP Japan-Malaysia Technical Institute: JMTI 1999 Loan Aid Fund for Small and Medium Scale Industries 16,296

1999 2002 TCP Capacity Building on Product Test on IEC 335 & IEC598 in Malaysia

2003 2007 TCP Human Resources Development and Improvement in Tax Administration Project

2004 2006 TCP Improving Economic Indicators of Malaysia

2006 2008 TCP Risk Management System for customs

2006 2009 TCP Development of Human Resource for Small and Medium Industries

2006 2013 TCP Economic Partnership Program (EPP) "Vocational Training Programme"

2007 2010 TCP Human Resource Development in the Intellectual Property Rights' Administration

2007 2010 TCP Human Resources Development and Improvement in Tax Administration Project (Phase 2)

2008 2011 TCP Risk management approach at clearance and post clearance process

2008 2011 TCP Improvement of Vocational Training System To Keep Meeting With The Needs of Industries

2009 2012 TCP SMIDEC-JICA Human Resource Development Phase 2

2010 2013 TCP Human Resource Development and Improvement in Tax Administration

2015 2018 TCP Project for Enhancing Transparency and Predictability of Preferential Role of Origin on EPA/FTAs in Customs Clearance

Note: (*1) Year of E/N for grant aid and of L/A for loan aid. (*2) Completion years of loan aid projects are omitted due to difficulty in identifying them from the disclosed information. (*3)TCP: Technical Cooperation Project (Project-type technical cooperation) (*4) E/N amount for grand aid and L/A amount for loan aid. (*5) Year of E/N signed. Source: Compiled by JICA Study Team based on JICA knowledge site, JICA website, and MOFA Japan website

It is understood from the table that a few grant aid projects have been implemented and that the number of loan aid projects is relatively limited too, except for the ones to provide funds through policy-oriented financial institutions. Obviously, this resulted from the fact that Malaysia “graduated” from being a recipient country of general grand aid projects and conventional loan aid projects in the 1990s. Thus, there are few cooperation projects seen in Malaysia that comprehensively provide combined support of financial cooperation for building facilities and technical cooperation for improving operation as a package. One exceptional case was cooperation for the Centre for Instructor and Advanced Skill Training (CIAST) where grant aid and technical cooperation were provided from 1982 to 1990. In recent years, many projects focus on technical cooperation in particular domains of technology or capacity improvement of administrative management. For technical cooperation, apart from technical cooperation project (TCP), various types of cooperation, including development study, dispatch of individual experts, dispatch of volunteers, and acceptance of trainees, has been conducted.

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Accomplishment of Japan’s cooperation 7.1.2

Figure 7.1 shows the transition of Japan’s cooperation for industrial promotion as a whole, based on the grouping of the projects by their main purposes. It should be noted that it does not mean that there was no assistance provided by Japan outside the period and the areas shown in the figure. It suggests an overall picture that Japan’s cooperation has shifted its weight according to the policies for industrialisation and the needs of the Malaysian government. It is elaborated as follows:

During the period of import substitution until 1970 and in the early 1980s, Japan supported the construction of state-owned factories for sugar refinery, textile, and fertilizer, in response to the needs of Malaysia to expand its industrial production capacity. From around 1980 to the middle of 1990s, which is the initial period of export-oriented industrialisation utilising foreign investment, the technical level of local industries was very low. The focus of Japan’s cooperation at that time was placed on the improvement of basic manufacturing technology such as metal processing and foundry, as well as the establishment of institutional foundation for industrialisation such as industrial standard. In 1985, the Malaysian government announced its first Industrial Master Plan (1985-1995) (IMP-1) that put priority to the strengthening of economic linkage between foreign and local industries and the promotion of small and medium scale industries (SMIs). In line with this, Japan extended financial cooperation to foster SMIs, in addition to the continuing cooperation to improve basic industrial technology.

The Second Industrial Master Plan (1996-2005) (IMP-2) targeted increasing productivity and added-value by transforming its investment–driven economy into productivity-driven one, and the following Third Industrial Master Plan (2006-2020) (IMP-3) aims to strengthen the global competitiveness. Japan’s cooperation has been consistent with the orientation of the plans in the sense that it started to support for the introduction of more advanced technology such as hazardous chemical substance management and artificial intelligence (AI) system from the mid-1990s. Since around 2000, many of the projects have been implemented to increase competitiveness by strengthening linkages with the global market, as seen in the type of projects to develop product testing capacity in electronics and automobile sectors, and administrative capacity in the field of customs and intellectual property rights.

In addition to the above role of Japan’s cooperation in the overall transition of Malaysia’s industrialisation, it seems that Japan’s cooperation for increasing administrative capacity has played another role to support the organisation to establish its base of activities by providing necessary techniques and operation know-how at the timing of organizational reforms or reorganisation. For example, when JICA started a technical cooperation project for the Malaysia External Trade Development Corporation (MATRADE) as a counterpart (1994-1999), the organization had just undergone reorganisation and transformed from a policy-formulating unit in the ministry called the

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Malaysia Export Trade Centre (MEXPO) into a public corporation to serve the private sector. According to the interviews with officers of MATRADE who were involved in the project, while the scope of the work and the authoritative power of the organisation were expanded, it was lacking expertise for practical work operation, and the cooperation provided by JICA experts filled the missing part. For instance, through this cooperation, MATRADE published its first-ever handbooks for Malaysian exporters, and several manuals for conducting market research were developed. Its function of providing information to customers was also strengthened. The results of this cooperation formed the foundation of organisational development of MATRADE. The number of staff grew by six-fold from 109 when the project started to 619 in 2014, and the member firms increased more rapidly from 1,019 to 8,07223. During the same period, Malaysia’s export amount expanded by five times.

From the above, it can be described that Japan’s cooperation for industrial promotion underpinned the transitional development of Malaysia’s industrialisation, by responding to the focus of the Malaysian government at the time, and timely filling the needs of the government for establishing new functions after administrative reorganisation in the process of policy implementation.

Source: JICA Study Team

Figure 7.1: Transition of Japan’s cooperation for industrial promotion

23 JICA (1999), “Terminal Evaluation of Project for Malaysia Trade Development Corportation,”, and MATRADE, “Annual Report 2014.”

Purpose of Coopertaion 1965-1980 1981-1990 1991-2000 2000-present

(Malaysia's Industrial Master Plan)

Support for planning ofindustrial promotion

Productivity increase

Development of industrialtechnology

Strengthening ofadministrative capacity

Support for SMEs andsupporting industries

Industrial human resourcedevelopment

Major industrialsectors

Support-ing industries

Construction of state-owned factories

Basic industrial technology/industrial institutions

Advanced industrial technology/Foundation of global competitiveness

Capacity improvement of business and economic administration

Financial support to SMEs

Basic industrial technology SME support function

Strengthening of Vocational training schools Vocational tra ining system

Training of indutrial technology and management (Look East Training) EPP Tra ining

IMP-1 IMP-2 IMP-3

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7.2 Case study of cooperation

As a case study of Japan’s cooperation for industrial promotion, this section will examine the cooperation with the Standards and Industrial Research Institute of Malaysia (SIRIM), who have worked as a counterpart in a number of cooperation projects, especially those for developing industrial technology.

Overview of the project 7.2.1

SIRIM was established in 1975 based on the SIRIM (Incorporation) Act. Since then, the institute has supported Malaysia’s industrialisation through the research and development of metrological standards and industrial technology. After the “corporatisation” in 1996, it became SIRIM Berhad, all of whose shares is owned by the Ministry of Finance. Japan’s main cooperation activities to SIRIM are listed in Table 7.2. The list contains the projects already listed in Table 7.1, and added other cooperation activities such as aftercare cooperation (A/C) which was implemented after some technical cooperation projects (TCP), and main activities under the scheme other than TCP.

Table 7.2: Japan’s main cooperation to SIRIM

Start Year

End Year

Cooperation Type*1 Name

1978 1984 TCP Metal Industry Technology Centre 1981 1985 TCP Project on the National Metrology Laboratory 1987 1992 TCP ASEAN Project on Characterization of Fine Ceramics (A/C 1999-2001) 1988 1993 TCP Foundry Technology Unit (A/C 1997-1998)

1991 1993 Development Study

Study on the Industrial Standardization & Quality Assurance Improvement Program in Malaysia

1993 1994 Development Study The Study for Upgrading the Measurement Centre, SIRIM

1993 1997 TCP Project on Evaluation and Analysis of Hazardous Chemical Substances and Biologic

1995 2000 TCP The Malaysia Al System Development Laboratory 1996 2000 TCP Measurement Centre of SIRIM (Phase 2) 1998 2002 TCP The Project on Risk Management of Hazardous Chemical Substances 1999 2002 TCP Capacity Building on Product Test on IEC 335 & IEC598 in Malaysia

2000 2002 Development Study The Study on Cleaner Production Promotion in Industry Sector

2007 2011 Expert Automotive Components and Parts Testing Center in Malaysia Note: (*1) TCP: Technical Cooperation Project (Project-type technical cooperation) Source: Compiled by JICA Study Team based on JICA knowledge site and JICA website

These cooperation activities can be divided into the following three groups by their objectives: (1) development of particular manufacturing technology; (2) development and promotion of metrological standards; and (3) improvement of product testing capacity to meet the exporting standard. They are summarised in Table 7.3.

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Table 7.3: Summary of Japan’s main cooperation to SIRIM

Group Name Objective and outline (1) Development of particular manufacturing technology

1) Metal Industry Technology Centre 2) Foundry Technology Unit 3) ASEAN Project on Characterization of Fine Ceramics 4) The Malaysia Al System Development Laboratory

1) Improvement of metal processing technology 2) Improvement of foundry technology 3) Research cooperation on oxide, non-oxide, and glass ceramics 4) Transfer of AI system technology through prototype development and dissemination of the technology

(2) Development and promotion of metrological standards

1) Project on the National Metrology Laboratory2) Study on the Industrial Standardization & Quality Assurance Improvement Program in Malaysia 3) The Study for Upgrading the Measurement Centre, SIRIM 4) Measurement Centre of SIRIM (Phase 2)

Support to the National Metrology Laboratory in SIRIM on the establishment of metrological standard service system in several areas of quantity, the development of primary standards and measuring instruments, the management of metrological standards, etc.

(3) Improvement of product testing capacity to meet the exporting standard

1) Project on Evaluation and Analysis of Hazardous Chemical Substances and Biologic 2) The Project on Risk Management of Hazardous Chemical Substances 3) Capacity Building on Product Test on IEC 335 & IEC598 in Malaysia 4) The Study on Cleaner Production Promotion in Industry Sector 5) Automotive Components and Parts Testing Center in Malaysia

1),2) Support for regulation and management of Hazardous Chemical Substances and development of their evaluation capacity 3) Improvement of product testing capacity for IEC335 (for domestic electric appliances) and IEC598 (for lighting instruments) 4) Development of recommended measures and action plans to promote cleaner production in the industry 5) Improvement of capacity for environmental testing and testing and analysing for lighting components in the automotive sector

Source: Compiled by JICA Study Team

Role and Achievements of Japan’s Cooperation 7.2.2

As indicated by the comparison of listed items between Table 7.1 and Table 7.2, this variety of cooperation to SIRIM has occupied a very large part of Japan’s entire cooperation to Malaysia for industrial promotion. In particular, most of the cooperation to develop industrial technology including standardisation was implemented with SIRIM as the counterpart. The roles and contributions that the cooperation with SIRIM as a whole has played in industrial promotion are as follows:

1) Cooperation in line with the transition of Malaysia’s industrialisation

In regard to Japan’s cooperation to SIRIM in the field of particular industrial technologies, as stated in 7.1.2, developing basic manufacturing technologies, such as metal processing and foundry, was aimed at in the initial period of industrialisation in Malaysia. The cooperation was later oriented towards new areas, such as fine ceramics and AI system, in line with the policy of the Malaysian government aiming to strengthen and sophisticate the industry. Another noticeable feature is that a long-term, constant cooperation was provided to individual institutes or research centres specializing in particular fields under SIRIM, by various forms of technical cooperation including technical cooperation project, extension of the project, after-care cooperation, development study, dispatch of individual experts, and so on. This has supported the particular organisation to accumulate technical capacity. For instance, the first technical cooperation project with the National Metrology Laboratory supported the laboratory to develop metrological standards in the areas of mass, length, capacity, temperature, and

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electricity. In consideration of the advancement of manufacturing technology among local small and medium-scale industries, the second phase of the project was implemented to maintain more accurate measurement standards in four areas of quantity.

2) “One step ahead” cooperation

While Japan’s cooperation to SIRIM was in line with the progress of Malaysia’s industrialisation, it was not only dealing with the existing needs of the industry at the point in time. Many of the cooperation were planned and conducted one-step ahead of the times in order to be well prepared for the coming technological trends. JICA’s study report issued in 2010 that reviewed its cooperation with SIRIM implies that the first technical cooperation project itself was planned in the anticipation that investments of Japanese manufacturers would be activated. In addition, the phase 2 of the project was conducted against the background that the International Organization for Standardisation (ISO) was expected to tighten technical qualifications on metrology such as traceability and uncertainty of measurement. A major reason for the realisation of such projects would have been far-sightedness of the Malaysian government that requested them. In other words, it shows that the government has been holding a high planning capacity so that it can accurately identify the areas in need of external support in its mid-term plans.

3) Fostering SIRIM as a reference centre of industrial technologies

The series of “one step ahead” cooperation enabled SIRIM to serve as a “reference centre” of new technologies from the industries, vocational training schools, and universities in Malaysia. In an interview with researchers in SIRIM who participated in JICA’s cooperation projects in the 1980s and 1990s, there was a common pattern to JICA’s cooperation for developing particular technologies such as metal processing, foundry, and AI systems: JICA’s project introduces an advanced technology at the time to SIRIM, who disseminates the technology to industry. For example, SIRIM actively provided technology to Proton24 who had various technical problems in the late 1980s when the company had just started production. Another example is the cooperation project on metal processing, where SIRIM first adopted Numerical Control (NC) machine tools and wire cutting technology, and guided the development of metal processing industry in the country. However, it is also pointed out that SIRIM is not the only reference centre any more in many fields now because technology level is now improved and research and development is actively conducted in the private sector.

24 A car manufacturer founded in 1983 under the “national car project” of the Malaysian government

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As shown in the previous section, Japan constantly provided cooperation to SIRIM for about 30 years from shortly after its establishment, according to medium and long-term plans and strategies for industrialisation of the government of Malaysia. For the first 20 years, in particular, the cooperation undoubtedly propelled the institute to the leading organisation to build a foundation of industrialisation of Malaysia, by supporting SIRIM’s efforts intensively. An interviewee in this study recalled that the cooperation related to hazardous chemical substances, which was one of the “one step ahead” projects, resulted in finding very few needs for the new technology from industry just after the completion of the project. However, the project is now on the table again among researchers in chemical analysis in SIRIM, because they are discussing a possibility of applying the platform of the project to their ongoing work to establish the safety management system of nanomaterials. During the period of cooperation, along with its organisational growth, SIRIM started to work as a partner to JICA jointly providing training programmes to foreign countries. As early as the mid-1990s, they initiated third-country training programmes for countries in South-East Asia and South Asia in the areas of die designing, ceramics, and standards and conformity assessment.

No cooperation projects have been implemented between SIRIM and JICA now, including third country training programmes. It is perceived that the SIRIM group has been in major organisational changes, such as promotion of establishing subsidiary companies that provide services to the private sector as their main task. Under such circumstances, as well as with the passage of time, the number of the “remaining” researchers who were directly involved in cooperation with JICA in the 1980s and the 1990s is expected to decrease further in a few years. Although it seems that, as stated above, the role of SIRIM as the only reference centre of technology in Malaysia has been smaller than before, the interviews with the researchers in this study indicate that SIRIM has been actively exploring new technologies to serve as the leading institution for the knowledge-based society targeted by the government. In this sense, it would be highly worthwhile considering a seamless path of cooperation with an asset organisation to Japan, such as SIRIM, in order to maintain a favourable relationship toward the realisation of Malaysia as an advanced economy after “graduation” from ODA, and even after the realisation. Currently, in the laboratories of institutes and subsidiaries under SIRIM, one can observe still utilised some of the equipment and instruments provided as part of JICA’s technical cooperation in the 1980s, and among the researchers are those who participated in the counterpart training in Japan at that time. This is the very reason why it is important to consider now maintaining some form of Japan’s cooperation by JICA or other organisations in a collaborative and integrated manner.

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8. Higher Education


Overview of Japan’s cooperation 8.1.1

Most of Japan’s cooperation on higher education started after 1981 when former Prime Minister Mahathir advocated the Look East policy. Major cooperation until 1980 was the dispatch of Japanese teachers (Japan Overseas Cooperation Volunteers) to universities including University of Malaya and MARA University of Technology. 29 Japanese teachers were dispatched from 1956 when Japan’s cooperation to Malaysia started until 1980. Table 8.1 shows representative projects including grant aid, technical cooperation and loan aid in higher education sector.

Table 8.1: Major cooperation projects for higher education Start Year

End Year Cooperation Type Project Name Amount

(JPY Mil.) 1982 Grant aid University of Malaya Japanese Language Centre 390 1984 1989 TCP Project for Development of Faculty of Fisheries and Marine

Science, Universiti Pertanian Malaysia

1985 Grant aid Language Laboratory for MARA University of Technology 17 1985 Grant aid Audiovisual Aids for Science University of Malaysia 47 1988 Grant aid Expansion of University of Malaya Japanese Language Centre 383 1990 1995 TCP Development of the Department of Biotechnology at the Faculty

of Food Science and Biotechnology, Universiti Pertanian Malaysia

1991 Grant aid Audiovisual Aids for National University of Malaysia 41 1992 Loan aid Higher Education Loan Project (I) 5,493 1993 Loan aid Hospital Universiti Kebangsaan Malaysia 10,215 1993 Grant aid Laboratory Equipment for Japanese Higher Education Centre in

University of Technology Malaysia 48

1994 Grant aid Audiovisual Aids for University of Malaya Japanese Culture Centre

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1996 Grant aid Equipment Aids for Sarawak University 49 1997 Grant aid Emergency Grant Aid (supports for overseas study) 454 1997 Grant aid Japanese Language Learning Equipment for University of Putra 36 1998 Loan aid Look East Policy 14,026 1998 Loan aid Universiti Malaysia Sarawak Development Project 18,549 1998 2003 TCP The Project for the Aquatic Resource and Environmental Studies

of the Straits of Malacca in UPM

1999 2000 TCP Development of the Department of Biotechnology at the Faculty of Food Science and Biotechnology, Universiti Pertanian Malaysia (after care)

1999 Loan aid Higher Education Loan Project (II) 5,285 2001 2005 TCP Project on Networked Multimedia Education System 2002 2007 TCP Technical Cooperation Programme for Bornean Biodiversity and

Ecosystems Conservation in Sabah, Malaysia

2003 Present TCP ASEAN University Network／Southeast Asia Engineering Education Development Network（AUN／SEED-Net）Project

2005 Loan aid Higher Education Loan Project (III) 7,644 2011 Loan aid Development Project of Malaysia-Japan International Institute of

Technology 6,697

2013 2018 TCP Technical Assistance for the Development Project of Malaysia-Japan International Institute of Technology

Source: Compiled by JICA Study Team based on documents from JICA Malaysia Office and JICA website

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Many of the cooperation was conducted during the late 1980s to the early 2000s, which corresponds to the period when Malaysia’s needs for human resource development were large in response to the country’s industrialization. Loan aids for construction of universities and supports for overseas study account for the largest amount. Packages of facilities, equipment and experts were provided for the construction of universities. Technical cooperation projects have been conducted in various areas in response to the Malaysia’s needs in each period although the number of projects are small.

Accomplishment of Japan’s cooperation 8.1.2

This section overviews Japan’s cooperation and its accomplishment in higher education sector by the times.

1) Independence~1980s

There are no salient projects during this period because, as stated before, most of Japan’s cooperation in higher education sector started after the Look East Policy in 1981. Transition of Malaysia’s education policies before the 1980s can be divided into two periods which are 1) from after independence to 1970 and 2) after 1971. Primary and secondary education was the major focus during these two periods. Soon after independence, the most important idea in Malaysia’s education policies was to realize a unified state, provide education for all children regardless of their ethnicity or religion, and establish a national education system.

New Economic Policy (NEP) was announced in 1971 and it brought about changes in education area. Use of the national language as the medium of instruction in primary and secondary schools was promoted as a measure to achieve the national unity. Schools whose medium of instruction had been English were gradually substituted for those that use the national language as the medium of instruction.

In higher education sector, University of Malaya was founded in 1962. Four universities which are Science University of Malaysia, National University of Malaysia, Agricultural University of Malaysia (currently Universiti Putra Malaysia) and University of Technology Malaysia were established by 1980. There were only five national universities at that time and most students would study abroad to the UK, the US, etc. to study for a degree.

2) During the 1980s

Many of Japan’s cooperation aligned with the Look East Policy during this period. At the beginning, Japan supported industrial human resource development for company executives in addition to overseas study. The Fourth Malaysia Plan (1981-1985) that was planned along with the NEP’s basic policy advocates the promotion of science, engineering and technology education in higher education. It shows that focus on human resource development expanded from primary and secondary education

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to higher education.

Main idea of the Look East Policy is Malaysian people learning from the “East” including Japan and South Korea which have achieved social and economic success. Major objective was to contribute the modernization of the industry and development of Malaysia by acquiring work ethics and values such as diligence, teamwork and time management in addition to language and technology. The Malaysian government has implemented many relevant projects to the Look East Policy. Major projects are the Look East Policy programs and Academic Education Programs.

One of Japan’s cooperation on the Look East Policy programs was grant aid for construction and expansion of University of Malaya Language Centre. Japan provided about 3.9 million and 3.8 million USD equivalent in 1982 and 1988 respectively. The Malaysian government has implemented the overseas study program to Japan since 1982 as one of the Look East Policy programs. Japan cooperated on preparing school buildings such as the lecture hall, the large classroom and the language laboratory that are used for the preparatory course of the overseas study program (commonly known as “AAJ”). In addition, the Japanese government has dispatched Japanese language teachers and subject teachers of mathematics, chemistry, physics, etc. who teach at the AAJ down to the present25.

JICA and Association for Overseas Technical Scholarship (AOTS, currently HIDA) coordinated Technical and Industrial Training Program and Executive Development Program. They also provided financial support for Japanese organizations that received Malaysian trainees. Malaysian engineers who worked in both private and public sectors were dispatched to various industries including multinational firms such as Sony, Hitachi and Sharp, etc and received training for three to six months. Many ex-trainees highly evaluated training in Japan beneficial in that they acquired work ethics such as self-responsibility, ideas for quality, work efficiency and teamwork26.

During this period, in addition to the cooperation on the Look East Policy, Japan provided support for the Faculty of Fisheries and Marine Science at current Universiti Putra Malaysia. Technical cooperation through training, consultation by experts and provision of facilities was conducted for 5 years from 1984. It supported improvements of educational and technical levels of the first Faculty of Fisheries and Marine Science established in Malaysia.

3) During the 1990s

Former Prime Minister Mahathir advocated “Vision 2020” in 1991 whose vision was Malaysia becoming one of the developed countries by 2020. The Seventh Malaysia Plan set many goals in

25 The Japan Foundation dispatchs Japanese language teachers and the Ministry of Education, Culture, Sports, Science andTechnology dispatchs subject teahcers.

26 Junichi Yamada, Centre for Japan Studies, ISIS, Malaysia (1998), “Japanese Official Development Assistance- Special Reference to Malaysia-“

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higher education sector; it advocated establishment and expansion of educational institutions in science and technology, enhancement of research and development through collaboration with domestic and foreign research institutions, and promotion of enrolment in engineering education. In response to these goals, Japan’s cooperation during this period focused on human resource development in engineering fields. In addition to the support for construction of universities, Japan provided scholarship for individuals in the form of overseas study projects.

The second half of the 1990s corresponds to the period when the legal system in higher education changed drastically. Private Higher Educational Institutions Act made establishment of higher educational institutions easier. Amendment of Universities and University Colleges Act corporatized public universities and gave them more administrative and financial autonomy. During this period, a lot of public universities, community colleges, private colleges and universities including branch campuses of foreign universities were established in order to increase access to higher education.

The Japanese government cooperated on human resource development in science and technology, and granted loan aid called “Higher Education Loan Fund Project (HELP)” that supported students who study science and technology in Japanese universities. The loan aid was provided from 1992 to 2015 in three phases. Also, during the period of the Asian Economic Crisis in 1997 when the Malaysian government faced difficulty in securing the budget for the Look East Policy programs, Japan supported the continuation of the program. Japan provided grant aid in 1998 and loan aid from 1999 to 2004.

The Japanese government also cooperated on the expansion of universities in Malaysia, of which following is the major cooperation.

Development of the Department of Biotechnology at Universiti Putra Malaysia: Japan provided the technical cooperation project for 5 years from 1990 to 1995. Through dispatch of experts, training and provision of equipment, promotion and enhancement of educational and research activities by academic staff were supported. The project was beneficial to improve the research capabilities in biotechnology

National University of Malaysia Hospital: Malaysian and Japanese government signed loan aid of about 10.2 million USD equivalent in 1993. National University of Malaysia was the only university that did not have university hospital among three medical universities in Malaysia at that time. The loan aid supported the followings: 1) improvements of medical skills and knowledge for medical students and graduates as well as fostering nurses, 2) promotion of research and development, and 3) provision of medical services.

University Malaysia Sarawak Development Project: Malaysian and Japanese government signed loan aid of about 18.5 million USD equivalent in 1999. University Malaysia Sarawak was the

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only university in Sarawak province. Japan provided comprehensive cooperation including construction of the 5 faculties with high-priority, provision of equipment, human resource development for faculties, students and academic staff.

4) After 2000

Malaysian economy set the goal of developing a knowledge-based economy from a labour-intensive economy after 2001. Higher education sector also set the goal of developing human resource with skill, knowledge and innovativeness to contribute the knowledge-based economy. Human resource development and research development in science and technology, ICT and multi-media were major focus. The Ninth Malaysia Plan (2006-2010) advocates the creation of university with international status and increase in graduate students engaging in research and development. Furthermore, the Tenth Malaysia Plan (2011-2015) puts greater importance on fostering industries with high value added and improving cross-cutting research capabilities in science and technology that meet the needs of industry. Therefore, the plan emphasizes the necessity to increase the number of graduate students in science and technology and to establish the joint research system between industry and academia.

Japan’s cooperation on the development of engineering human resource continued during this period. Project on Networked Multimedia Education System was conducted from 2001 to 2005 in response to the Malaysian need on human resource development in ICT. The project helped to establish the multimedia network education system that connects the Multimedia University as a hub with five educational institutions in remote areas. In 2005, Japan provided approximately 7.6 billion JPY equivalent of loan aid for the third Higher Education Loan Fund Project.

The Japanese government has been implementing ASEAN University Network/ Southeast Asia Engineering Education Project (AUN/SEED-Net) with top engineering universities in ASEAN countries since 2003. Japanese universities and JICA support to improve educational and research capabilities of member universities and strengthen network among member universities as well as enhancing collaboration with industry and community to deal with mutual regional issues and industrial human resource development. 26 universities from ASEAN countries are member countries, of which University of Malaya, Science University of Malaysia, University Putra Malaysia and University of Technology Malaysia are from Malaysia.

The most recent cooperation on higher education is Malaysia-Japan International Institute of Technology (MJIIT). Equipment and machinery for the educational use were procured using the loan aid of about 6.7 million USD equivalent in 2011. Also, Japanese experts have been dispatched down to the present. MJIIT is an academic institution that adopts Japanese-style engineering education such as research laboratories (called i-kohza) that are unique to Japanese national universities.

As stated before, Malaysia’s current policies emphasize the necessity to establish a knowledge-based

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economy and create innovation in order to achieve sustainable economic growth and become a competitive country. Higher education sector focuses on the promotion of research and development in addition to the increase in the number of higher education institutions. Malaysia sets the goal of producing 100,000 doctoral graduates by 2020. Also, five universities are designated as research universities that receive special subsidies from the government to promote research and development, and to improve facilities for faculties. Furthermore, Malaysian universities focus on internationalization by receiving many foreign students; the proportion of foreign students in higher education is set to be 10% by 2020. Projects such as AUN/SEED-Net and MJIIT work on enhancement of research and development capabilities, increase in the number of graduate students and marketing activities to receive overseas students. It can be said that these projects align with Malaysia’s needs on higher education sector.

8.2 Case study of cooperation

This section overviews Japan’s support for overseas students’ projects.

Overview of the project 8.2.1

Japan has supported overseas students’ projects in various modalities from the 1980s down to the present in response to the increasing demand on higher education in Malaysia and the Look East Policy. As stated above, one of the cooperation is dispatches of Japanese and subject teachers for preparatory courses that Malaysian students take before studying in Japan. Also, Japan has provided cooperation using the loan aid; it supported two projects in four phases. Detail of the projects are shown in table 9.2.

Table 8.2: Overview of loan aid for overseas students’ projects

Name Year Amount of loan Project period Number of graduates Higher Education Loan Fund Project (I)

1992 5.5 billion JPY 1993~2004 Bachelor’s: 279

Higher Education Loan Fund Project (II)

1999 5.3 billion JPY 1999~2009 Bachelor’s: 270, Master’s: 79

The Look East Policy 1999 14 billion JPY 1999~2004 1,308 Higher Education Loan Fund Project (III)

2006 7.6 billion JPY 2005~2015 Bachelor’s: 239, Master’s: 45, Doctor’s:14

Higher Education Loan Fund Project (HELP) was conducted in three phases whose forms of cooperation have been changed according to Malaysia’s needs. During the first phase of the HELP, Malaysian students studied the two-year preparatory course in Malaysia and then studied abroad to Japan for four years to receive a Bachelor’s degree. However, the Malaysian side requested that the Japanese side adopts the twining program in order to reduce the cost of study which was relatively expensive compared with Western countries and eventually increase the number of students who study in Japan. In response to the request, the Japanese side adopted the twining program from the second

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phase of the project and shortened the length of study in Japan by Japanese universities approving credits that students earned in Malaysia. HELP terminated in 2015, but the Malaysian government continues to support students who study for a degree with the twining program in Japan at its own expense.

The Japanese government supported the Look East Study Program that had been conducted since 1981 when the Malaysian government found it difficult to secure the budget due to the Asian Economic Crisis. Approximately 4,900 people studied abroad to Japanese universities and technical schools, etc. up to 2009, of which the loan aid supported about 1,400 students.

Roles and Achievements of Japan’s Cooperation 8.2.2

Roles and achievements of overseas students’ projects are considered as follows.

1) Bridging the demand-supply gap for human resources

Projects are considered to contribute to bridging the demand-supply gap for engineers that happened as Malaysia promoted industrialization and high value-added industry. There is a data that many of the students who came back from Japan work as engineers or researchers after graduation. The periods when Japan cooperated on human resource development (around the 1990s to the 2000s) corresponds to the ones when Malaysian higher education policies greatly changed. It is highly probable that Malaysia needed a lot of know-hows and funds to foster human resources and to eventually aim at becoming a country that receives foreign students. During these periods, Japan supported many universities with the comprehensive cooperation including human resource development program and construction of buildings, which also are considered to contribute to reducing the demand-supply gap.

2) Adhering to the Look East Policy

Japan adhered to the Look East Policy through support for overseas study and dissemination of Japanese engineering education. Indeed, interviews with the ex-overseas students revealed that they acquired soft skills which are peculiar to Japanese such as diligence, punctuality and teamwork in addition to Japanese language and technical skills through their study in Japan and that they effectively utilize these skills in their professional careers. Also, Centre for Japan Studies at the Institute of Strategic and International Studies (ISIS) conducted a questionnaire survey for graduates who finished the Look East Policy program. The survey revealed that most of them responded that they became aware of diligence, productivity and efficiency through the study and the daily life in Japan27. The Japanese government has dispatched Japanese teachers for preparatory courses in Malaysia for over 30 years and this is considered to help Malaysian students to acquire these soft skills as well.

27 Junichi Yamada, Centre for Japan Studies, ISIS, Malaysia (1998), “Japanese Official Development Assistance- Special Reference to Malaysia-“

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3) Fostering pro-Japan/Japanese people in Malaysia

There is a data that nearly 70% of HELP graduates found a job in Japanese companies28. Also, students who participated in the Look East Policy Programs work actively in various sectors such as the government and the business community including Japanese firms. Ex-overseas students to Japan organize various alumni associations and conduct activities. Alumni Look East Policy Society (ALEPS) is the biggest alumni society and it organizes various activities including networking activities among ex-overseas students, introduction of Japanese culture to the Malaysian citizens, and consultation services for those who want to study in Japan in the future. To work actively in alumni associations and to have positive feeling toward Japan at the individual level will increase the number of pro-Japan/Japanese people who understand Japanese culture and values. This will help to activate personal exchange of Malaysian and Japanese in various levels such as the government and the business community.

According to an interviewee who studied abroad to Japan with HELP III, approximately 20-25% of students who graduated from Japanese universities in March 2013 remain in Japan as graduate students or company employees as of the end of 2016, after three years from graduation. This is considered to reflect the recent trend of Japanese companies actively hiring foreign students. Some of graduate students may continue the study by receiving scholarship from organizations like Mistry of Education, Culture, Sports, Science and Technology. These graduates who remain Japan taking advantage of overseas study program are able to further acquire technology and work ethics and enhance interpersonal network. This seems to be meaningful in that it produces human resources who bridge Malaysia and Japan in the medium-to-long-term.


In many cases, what students learned from studying bachelor’s/master’s degrees in Japan belongs to each individual rather than their organizations. Therefore, impact of the projects such as contribution to human interaction between Malaysia and Japan tends to remain at the individual level. It is thus very difficult to measure to what extent technologies or work ethics that a graduate learned through the study in Japan spread to other people, the company that he/she works or the society as a whole.

Furthermore, several ex-overseas students stated during the interview that many graduates, although they found a job in Japanese firms, eventually make a career move to foreign companies or research institutions because of low salary or unclear career path of Japanese firms. This may indicate that spill-over effects for Japanese companies that develop business in Malaysia are limited.

Impact of overseas student projects can be measured by how the graduates utilize knowledge and 28 JICA, Post-evaluation reports on Higher Education Loan Fund Project I & II (published in Japanese).

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skills that they acquired through the overseas study in their work and how they contribute to the society in the medium-and long-term. At the same time, whether competitive human resources want to study in Japan is an important point. This is affected by factors that do not directly relate to ODA; whether studying in Japan is attractive compared with other countries, whether students can achieve high status after going back to Malaysia, etc. While Japan’s cooperation on overseas study stops for now except for the dispatch of teachers for the preparatory courses, the Malaysian government continues to support the study in Japan and it will continue to produce human resources who are familiar with Japanese technologies and values. Taking this point into consideration, it seems significant for the Japanese government to continue cooperation of some sort, so that Malaysian people who are fluent in Japanese and understand Japanese values and ethics are able to bridge Malaysia and Japan, and help sustainable social and economic development for both countries.

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9. Urban Environment: Sewage and Waste Management


Malaysia is not an exemption to the countries which have experienced rapid urbanization along with the national economic growth. Ratio of population in cities and rural areas reversed from 1:3 in 1960 to 3:1 in 2015. Although the government put greater importance on economic development, response to urbanization as a result of economic development was relatively slow. Environmental policies started to be highlighted from the Seventh Malaysia Plan (1996-2000). This trend has continued down to the present.

Japan’s cooperation has increasingly been in progress for urban environment since around the year 2000. The cooperation was extended mainly in technical cooperation for the waste treatment and loan aid/technical cooperation for sewage treatment. The technical cooperation includes development and planning studies, training to aim for knowledge transfer, advisory services by experts and grass roots technical cooperation. Japan Overseas Cooperation Volunteers and Senior Volunteers have also been active although the number has been few in recent years.

The grass roots technical cooperation is aimed at promoting the cooperation extended by the civil society organizations with willingness of international cooperation, such as nongovernmental organizations, universities, local governments and public institutions. A remarkable case is the knowledge sharing through the grass root technical cooperation between local governments in Malaysia and Japan in waste treatment and management. Separation and weight saving are necessary for both outside landfills and modern incineration plants for waste treatment in cities and its surroundings. Participation from civil society is essential for the process. In this regard, supports from grass roots level are effective.

The table below shows typical cases of cooperation in the urban environmental management.

Table 9.1: Japan’s Cooperation in Urban Environment

Project Period Type of Cooperation Project Name From To

1976 1978 Development study Sewage and drainage plan in Penang state 1978 1981 Development study Sewage and drainage plan in Alor Setar state 1999 2000 Development study Plan for integrated improvement of urban drainages 2000 Loan aid Sewerage treatment plant project 2000 2002 Development study Plan for grand water and environmental management in federal

territories of Kuala Lumpur 2003 2004 Development study Safe closure and improvement of solid waste dumping sites 2004 2006 Development study Plan for weight saving of solid waste 2006 2009 Development study Strengthening of the capacity to plan sewage projects 2007 2008 Grass-roots cooperation Technical cooperation in sewage 2008 2009 Grass-roots cooperation Technical cooperation in sewage

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2008 2011 Grass-roots cooperation Planning and monitoring of awareness raising program for 3R of solid waste

2009 2009 Training in Japan Management of waste water treatment facilities 2009 2009 Training in Japan Youth training*2 Urban environment management

2010 2013 Training in Japan Training for Economic Partnership Program(EPP)*3 Control of soil pollution and hazardous solid wastes

2010 2010 Dispatch of experts Operation and maintenance of waste water treatment facilities 2010 2011 Training in Japan Youth training in urban environmental management

2010 2011 Training in Japan Training for EPP Integrated solid waste incineration and management system

2010 2011 Training in Japan Youth training Urban environmental management 2010 2010 Training in Japan Environmental and social considerations in loan aided projects 2010 2010 Training in Japan Training for EPP Integrated management of soil pollution

2010 2011 Grass-roots technical cooperation Participatory waste management in Sibu city

2010 2010 Training in Japan Training for EPP Sludge control for reducing environmental load in water treatment plant

2011 2013 Technical cooperation Capacity development of environmental research institute 2011 2012 Training in Japan Youth training Urban environmental management

2011 2013 Grass-roots technical cooperation Improving efficiency in waste management

2011 2011 Training in Japan Efficient operation of waste water treatment facility 2012 2012 Dispatch of experts Operation and maintenance of sewage treatment facility

2012 2015 Grass-roots technical cooperation

Environmental protection and waste treatment in Kuching city, Sarawak state

2012 2015 Training in Japan Training for EPP Waste management administration

2013 2016 Grass-roots technical cooperation Supporting grass root cooperation fir waste management

2014 2016 Grass-roots technical cooperation Waste management improvement in Fraser’s Hill

2015 2018 Grass-roots technical cooperation Improving waste management in Kota Kinabalu

*1 Project with loan aid is defined to commence in the year when the letter of agreement is signed between Malaysia and Japan *2Youth training is a program to provide basic training for the youth on the knowledge needed based on relevant Japanese experience.

*3 Economic Partnership Program(EPP) is to provide training for 100 participants in 9 subjects based on Malaysia-Japan Economic Partnership Agreement signed on 13 December 2005 (Source: JICA). Cooperation on waste treatment among local governments through grass roots technical cooperation is noteworthy. For example, following cooperation was conducted from around 2010 to the present.

・ Community-Based Solid Waste Management System Development Project in Sibu City (Sibu City in Sarawak State and Kitakyushu City (2010-2011))

・ Promote for Efficiency of Waste Management in Malaysia (Solid Waste Management and Public Cleaning Corporation and Malacca State and Kitakyushu City (2011-2013))

・ Environmental Conservation and Domestic Solid Waste Management in Kuching, Sarawak, Malaysia (Kuching City in Sarawak State and Mogi Town in Tochigi Prefecture (2012-2015))

・ Partnership Building with Local Residents on Waste Management in Malaysia (Kuala Lumpur and Clean Authority of Tokyo (2013-2016))

・ Improvement of Solid Waste Management in Fraser's Hill (Fraser’s Hill region in Pahang State and Kitakyushu City (2014-2016))

・ Improvement of Municipal Waste Management in Kota Kinabalu (Kota Kinabalu in Sabah State

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and Akita City (2015-2018))

Training and awareness for local government staff and citizens are main activities of above cooperation. In particular, environmental awareness, waste treatment system, sorted collection of waste, and technical knowledge on waste weight saving are major focus. Training in Japan including site inspection and visit for relevant organizations are actively conducted in addition to training in Malaysia. Kitakyushu International Techno-cooperative Association (KITA) has various partnerships with many local governments in Asia in urban environment sector in Kitakyushu City. Kitakyushu City conducted technical cooperation for Solid Waste Management and Public Cleaning Corporation for three years after cooperation on Sibu City.

Development studies were conducted in Penang and Alor Setar in the 1970s. Full-scale cooperation started after the project formulation study on Sewerage Treatment Plant Project from 1996-1999. Based on the study, loan aid for the Sewerage Treatment Plant Project started from 2000 to 2009. Local governments and state governments used to hold jurisdiction over sewerage until 1993 in Malaysia. Many of the treatment facilities were small-scale and were not sustainable both financially and technically. Approximately 80% of them remained to be out of order. In 1993, the government implemented a major reform to operate sewerage projects under its jurisdiction. In response to the reform, Japan’s cooperation on sewerage started. The government established Indah Water Konsortium (IWK) and it has operated and maintained nationwide sewerage down to the present. Loan aid provided in the 2000s supported large-scale intensification and modernization of small-scale sewerage projects in 13 cities in Selangor, Negri Sembilan and Malacca States. This became a spearhead for sewerage development programs by IWK. Technical cooperation on Improvement of Planning Capability in Sewerage Sector (2006-2009) became a base for these sewerage development programs. Prevalence of sewerage in Malaysia has rapidly improved from 5% in 1990 to 67% in 2012.


It was about 15 years before when cooperation on urban environment sector widely started. Although this is relatively short time, many technical cooperation and loan aid projects were conducted and had significant results. Japan formulated projects according to Malaysia’s drastic administrative reform of transferring jurisdiction of sewerage from local governments to the federal government. Consequently, intensive loan aid was provided to improve facilities in high-needs areas and realized intensification of existing sewerage projects in local areas. Malaysia’s sewerage prevalence rate is still about two thirds of the total population, and this experience is expected to extend nationwide in the future. Privatization of sewerage projects has been slow and public corporations are in charge of operation. However, capable local governments may become targets for privatization in the future. In case of Japan, almost all operation and maintenance of sewerage has been privatized.

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Cooperation among local government using the grass roots cooperation has been effective especially in the waste management. Interaction among people is meaningful for local to local international cooperation although its scale is limited. However, cooperation on waste management was more than necessary. Government alone cannot deal with effective waste treatment. Understanding by local residents and their knowledge on waste separation and coordination with local governments are essential. Therefore, cooperation with local governments which had experienced same situation was very valuable for Malaysian local governments and residents. Participants of training in Japan through grass roots technical cooperation mentioned the same. The grass root cooperation is useful in intensifying local to local exchange of people and knowledge between the two countries by sharing experiences at the local level.

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10. South-South Cooperation


Japan’s Support to South-South Cooperation 10.1.1

Japan has been supporting South-South Cooperation (SSC) for more than thirty years. A major scheme of the support is Third Country Training Programme (TCTP) by JICA. JICA defines TCTP as mutual cooperation among developing countries for their self-sustained development by mutual collaboration and technical and economic cooperation. Japan started TCTP or SSC in 1975 to support Thai government to receive Lao trainees. JICA started the TCTP prior to the Buenos Aires Plan of Action for Promoting and Implementing Technical Cooperation among Developing Countries adopted by the UN assembly in 1978. Proportion of the TCTP in the total number of trainees in Japan expanded from 18% to 28% between 1995 and 2009. JICA conducts the TCTP in a number of countries like Malaysia, Brazil, Thailand and Argentine which come closer to the “graduation” from the developing countries.

South-South Cooperation by Malaysia: Malaysian Technical Cooperation 10.1.2Program (MTCP)

Malaysia launched MTCP as early as two years after the Buenos Iles Plan of Action was adopted. Since then, Malaysia is a pioneer country in SSC. The MTCP has a principle of international cooperation of “prosper-they-neighbour philosophy”, which keeps a clear line between the “assistance” that more developed countries help those less developed.

MTCP has been participated by more than 31,000 persons from about 140 countries. It consistently maintains its emphasis on human resource development under the idea of “development is human resource”. Participants are received in a wide range of viewpoints by taking into account of political, economic and humanitarian issues. Until the mid-2000, many participated from nations of ASEAN, Organization of Islamic Cooperation and Pacific. Ever since then however, it has been attracting participants from more extensive regions, including Africa and Latin America under a new policy of the “open regionalism”.

MTCP is managed by International Cooperation Development Division (ICADD) of the Ministry of Foreign Affairs and supported by training institutions in the country. EPU used to hold jurisdiction over MTCP until 2009, but it was transferred to the Ministry of Foreign Affairs to ensure consistency with diplomatic policy. Currently, about 100 training courses are organized by 79 training institutions. About two-thirds of them are financed by the Malaysian government alone, while the remaining one-third by international donors. The training covers a variety of subjects, including public

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administration, governance, health, education, sustainable development, agriculture, poverty reduction, investment promotion, information and IT and finance.

Third Country Training by JICA in Malaysia 10.1.3

In Malaysia, the first TCTP by JICA was a training on metalworking conducted by SIRIM between 1983 and 1988. This training was participated by 114 persons from 13 countries. In 1992, MTCP and JICA agreed to jointly conduct TCDC by MTCP and TCTP by JICA. Since then, JICA has been cooperating with MTCP in both technical and financial aspects. The technical aspect includes dispatch of lecturers from Japan and preparation of training modules, while the financial aspect includes split the training cost between MTCP and JICA. JICA has continuously deployed a project formulation adviser for SSC since 2005. Malaysia is now the fifth largest partner of JICA’s TCTP in the world among 41 countries that conducted TCTP from 2010 to 2014. It attracted 231 participants in Malaysia in 2014. The JICA’s cooperation with MTCP mostly uses the experience of Malaysia-Japan technical cooperation in the past. Topics of TCTP in Malaysia include factory technologies, KAIZEN, vocational training, IT, occupational safety, entrepreneurship development, environmental protection, prevention of infection disease, immunization, training of nurses, higher education, public administration, custom administration, revenue management, coastal guard, prevention of terrorism, peace building, trade and financing.

The TCTPs have been attracting participants from ASEAN member states, including Cambodia, Laos, Myanmar, and Vietnam, African nations including those of Anglophone, south and eastern parts and the Middle East, especially Afghanistan and Palestine. The TCTP represents most of internationally financed training courses by MTCP. It is undertaken for participants from different countries in principle, while a TCTP course for Palestine is exclusively for Palestine.

The TCTP for Palestine is managed jointly by three governments of Japan, Malaysia and Palestine under the agreement reached among Malaysia, Indonesia, Thailand, Japan and etc. in the Conference on the Cooperation among East Asian Countries for Palestinian Development (CEAPAD) in 2012. It focuses on five subjects of national economy, planning, finance, agriculture and governance.

Since 2008, annual consultation meeting has been held among the Malaysian Ministry of Foreign Affairs, JICA Malaysia Office and the Embassy of Japan in Malaysia on the South-South Cooperation. In the meeting hosted by ICADD in February 2016, JICA Malaysia Office proposed the shift the focus of cooperation to result-oriented and stressed to have common understanding among stakeholders of MTCP-TCTP in the planning and implementation of trainings.

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While primary purpose of Japan’s cooperation to Malaysia is to promote Malaysia’s development, it is also true that the cooperation contributes to mutual benefits of Malaysia and Japan consequently. Above all, South-South Cooperation should promote mutual benefits. Similarly, while MTCP’s primary purpose is to develop capacity of beneficiary countries, it is said that networks fostered through MTCP extensively contribute to private sector of Malaysia such as trade, investment and finance. Then, what are mutual benefits of JICA’s support to Malaysia’s South-South Cooperation? Firstly, the mutual benefits would include increased opportunities for the trade and investments in Asia and Pacific, which constitute on economic base in both countries. Of particular importance is to narrow the development gaps between new and original member states of ASEAN through development cooperation, trade and private investment. The gaps still remain to be a major bottleneck to the ASEAN regional economic integration, which is crucial to both the Malaysian and Japanese economies. Secondly, a positive stance of Malaysia toward African development is very much in line with Japan’s initiative in Tokyo International Conference on African Development (TICAD). Thirdly, Malaysia can make best use of Japan’s experience to meet technical needs of Islamic countries such as finance and industrial development, since Malaysia is one of the most modernized countries among the OIC members. On the other hand, the collaboration with Malaysia in developing the Middle East is valuable to Japan because its approximately 80% of crude oil import is dependent on the Middle East.

In addition, Malaysia-Japan cooperation is effective in contributing to the international society through technical cooperation. The cooperation has met a variety of development needs in different parts of the world, with the combined effect of development experiences on the part of Japan and the principle of international cooperation as well as English communication ability on the part of Malaysia. It could be a breeding ground of new approach to flexible international cooperation which is neither traditional bi-lateral nor multi-lateral by combining Japan’s abundant experiences in technical cooperation with Malaysia’s multifaceted international channel. Emerging economies such as China, South Korea and India have been developing large-scale cooperation mainly in Africa from both technical and financial aspects. However, these cooperation is not backed up by the principle of international cooperation that Malaysia has followed for a long time. The JICA’s TCTP in Malaysia is likely to offer a new opportunity for international cooperation in the diversifying international economy and society,. For example, followings are possible opportunities:

Transition from vertical technical transfer (e.g. from Japan to Malaysia to other developing countries) to horizontal technical exchange

Transition from technical transfer to research and development exchange

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Building a hub for the South-South Cooperation (especially enhancement of capacities on project planning and evaluation)

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References

Department of Statistics Malaysia website（http://www.dosm.gov.my/v1/）

Embassy of Japan in Malaysia website (http://www.my.emb-japan.go.jp/Japanese/JIS/LEP/top.html)

EPU and JICA (2008). “Effective Technical Cooperation for Capacity Development: Malaysia Case Study”.

Ghufran Memon (2009). “The Need for a Water Demand Management Plan for Selangor”. Government of Malaysia, “Malaysia Plan” each edition Japanese Chamber of Trade and Industry, Malaysia (JACTIM), “Malaysia Handbook” each year’s

edition (published in Japanese) JETRO (1990, 3). “Survey of Japanese-affiliated Firms in Hong Kong and ASEAN” (published in

Japanese) JETRO, “Malaysian Economy in Figures 2010” JICA “JICA annual report” each year’s edition JICA website（https://www.jica.go.jp/） JICA (1999). “Evaluation Report on Malaysian External Trade Corporation” (published in

Japanese) JICA（2004）. “Evaluation Report on Higher Education Loan Fund Project” (published in

Japanese) JICA（2007）. “Evaluation Report on Hospital Universiti Kebangsaan Malaysia” (published in

Japanese) Completion Report: Advisor for Promotion of Implementation and Formulation for Yen Loan

Projects of Japan in Malaysia, Oct. 2010 (published in Japanese) JICA（2011）. “Evaluation Report on Look East Policy” (published in Japanese) JICA（2011）. “Evaluation Report on Universiti Malaysia Sarawak Development Project”

(published in Japanese) JICA（2014）. “Evaluation Report on Higher Education Loan Fund Project (II)” (published in

Japanese) Junichi Yamada (1998). “Japanese Official Development Assistance in Southeast Asia –Special

Reference to Malaysia”, ISIS Malaysia. Malaysia External Trade Development Corporation, “Annual Report 2014”. Malaysian Investment Development Authority, “Malaysia Investment Performance Report” each

year’ edition Ministry of Education (2013). “Malaysia Education Blueprint 2013-2025”. Ministry of Finance Malaysia, “Economic Report” each year’s edition Ministry of Foreign Affairs “Japan’s ODA Data by Country” each year’s edition

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Ministry of Foreign Affairs Website（http://www.mofa.go.jp/mofaj/） UNESCO Institute for Statistics (2014). “Higher Education in Asia: Expanding Out, Expanding

Up”. Yumiko Kanegae (2002). “Education and School System in Malaysia” Kyoei University

(published in Japanese) World Bank, World Development Indicators

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Documents

The Study on Achievements and Roles by Japanese Official ...Japan’s ODA in Malaysia dates back in 1956 when the first technical trainees visited Japan. Japan has Japan has spent