Malaysia’s visa-free policy for Indians will boost trade, industry lobby CIIM says

India and Malaysia should re-evaluate their comprehensive economic cooperation agreement (CECA), which they had signed in 2011, and include sectors such as digital and renewable to balance and expand trade ties, Datuk Umang Sharma, chairman of the Consortium of Indian Industries in Malaysia (CIIM), said in an interview.

Highlighting the impact of the CECA and the potential for growth in services trade, Sharma pointed to challenges while also outlining how next-generation trade links can be forged between both nations.

Sharma also advocated for a reinvigorated approach to trade and investment, emphasizing the untapped potential in services trade, SME engagement, and sectoral collaboration, with a special focus on tourism and digital transformation as key drivers.

In the same interview, CIIM secretary Suraj Arora said Sultan Ibrahim Iskandar’s ascension as Malaysia’s constitutional monarch last week (Wednesday, 31 January), and his pro-India views signal promising prospects for bilateral relations.

Edited excerpt (questions and responses have been edited and condensed):

Where are we on the current state of Malaysia-India economic cooperation?

Sharma: Historically, the economic ties between India and Malaysia stretch back to the pre-Christian era, laying a foundation for strong commercial links. In recent decades, Indian enterprises, starting with Godrej in 1968, have played a key role in Malaysia’s transformation into an industrialized economy. Today, Indian involvement spans across palm oil refining, power, railways, information technology, biotechnology, and more. Following Prime Minister Narendra Modi’s visit in 2015, our bilateral ties were elevated to enhanced strategic partnership status. While the signing of the Malaysia-India Comprehensive Economic Cooperation Agreement (CECA) agreement in 2011 significantly boosted trade, there’s untapped potential for further growth.

How has the Malaysia-India CECA impacted trade and investment, and how can it be improved?

Sharma: The CECA was a game-changer, enhancing trade and investment between our nations. It marked a new era of economic collaboration, covering goods, services, and investment. Over 200 Indian companies have since invested more than $3 billion in Malaysia, creating substantial employment. On the other side, there is now a significant presence of Malaysian companies in India that have invested $7 billion directly and through third countries. Despite the challenges of the covid pandemic, bilateral trade increased by 26% in 2022, crossing the $20 billion mark. However, the benefits have been somewhat skewed towards Malaysia. It’s time to re-evaluate CECA, focusing on sectors such as digital and renewable, to balance and expand our trade relations.

What is the status on the trade in services provision in CECA?

Sharma: The Malaysia-India CECA was designed to facilitate the movement of professionals across sectors–from accounting and auditing, architecture, urban planning, engineering services, and medical, dental, nursing, and pharmacy–enhancing services trade between our countries. Malaysia made commendable strides by removing entry conditions for Indian professionals, yet challenges remain in securing timely approvals. Despite early efforts by CIIM to promote the benefits of CECA, the full potential of service trade under the Malaysia-India CECA remains underutilized. Addressing these challenges is crucial for leveraging the agreement’s full scope and ensuring mutual benefits.

In the post-pandemic era, how successful have trade-promotion agencies such as Invest India and Malaysian Investment Development Authority (MIDA) been?

Sharma: Agencies such as Invest India and MIDA have a big role to play in promoting trade and investment, especially among small and medium enterprises (SMEs), which are the backbone of our economies. Despite the presence of big Malaysian infrastructure companies in India, SME engagement is minimal. Singapore hosts more than 4,000 Indian companies, while Malaysia has fewer than 200. A targeted approach, including state-level penetration and the establishment of an SME CEO forum could significantly enhance business engagement. Having lived and worked in Malaysia for 25 years and in India for 10 years in the SME sector, I feel the Malaysian success story is unsold in India. Very few Indian businessmen know the excellent opportunities available in several sectors and the ease of doing business in Malaysia. By sharing success stories and promoting Malaysia’s economic corridors, we can inspire more Indian businesses to explore opportunities in Malaysia, fostering a deeper, more inclusive economic partnership. Malaysia has identified several economic corridors that could interest Indians wanting to invest in Malaysia. States like Penang, Johor Bahru, Melaka, Sabah, Sarawak, and Selangor are progressive, and Invest India should actively engage with them. Similarly, even though they have offices in India, MIDA must engage with the states more. Dedicated sector-wise business delegations/trade missions to states could do wonders, and decisions could be even faster.

How can next-gen trade and investment links between India and Malaysia be developed?

Sharma: Tourism is the key to sparking trade and investment. When people visit for holidays and appreciate the locale, culture, food, and infrastructure, they often consider business opportunities. This is particularly true for SME entrepreneurs. Enhancing connectivity with more flights, simplifying visa processes, and mutual tourism promotion are crucial. Establishing dedicated India and Malaysia desks, led by experienced individuals in both governmental and business dealings, can significantly streamline and boost trade and investment, particularly for SMEs.

Which sectors should the focus be on to future-proof India-Malaysia relations?

Sharma: To future-proof our bilateral relations, we should focus on sectors that leverage our mutual strengths. With the Malaysia Digital initiative and India’s prowess in digital technology and trained workforce, collaboration in the digital economy is a natural fit. Infrastructure projects in India, like road building and cargo terminals, present opportunities for Malaysian firms. Renewable energy, especially solar, is another area; Malaysia’s solar panel manufacturing aligns with India’s renewable energy goals. Semiconductor manufacturing and expertise exchange in pharma, biotech, drones, aerospace, fintech, and innovation incubators offer fertile ground for joint ventures and trade. Additionally, cultural and sporting events centered on Bollywood and cricket can serve as magnets for Indian tourists and businesses, laying the groundwork for deeper economic ties.

How is CIIM helping bolster trade relations?

Arora: In the past year, CIIM has actively engaged in boosting trade relations through various initiatives. A networking event featuring the earlier Agong (King) as chief guest, attracted about 500 industry participants. The Indian High Commissioner visited some Malaysian states as part of an outreach effort aimed to strengthen ties between state departments and CIIM. We also explored new business avenues in eastern Malaysian states of Sabah and Sarawak, and participated in dialogues with India’s ministry of electronics and information technology (MeitY), seeking further trade opportunities.

What’s driving the growth in bilateral trade?

Arora: Trade between the two countries is witnessing an organic growth, particularly in traditional goods such as palm oil and electronics. This growth is bolstered by diplomatic engagements and India’s emerging global reputation in defense manufacturing, opening up new avenues for defense equipment trade with Malaysia. The recent visa-free entry policy for Indians has significantly boosted tourism, enhancing people-to-people and trade relations.

How will the ascension of Sultan Ibrahim Iskandar, Malaysia’s new king, affect trade relations with India?

Arora: With Sultan Ibrahim Iskandar of Johor’s ascension as Malaysia’s King on 1 February, and his pro-India stance—underscored by his training at the Indian Military Academy in Dehradun—bilateral relations are poised for growth. His influence, combined with active political engagements, including visits by defense and external affairs ministers from both countries, is expected to strengthen business and trade ties further.

How about opportunities for Indian startups in Malaysia and vice versa?

Arora: Indian startups are making inroads in Malaysia, exemplified by Pine Labs’ acquisition of Kuala Lumpur-based Fave, enhancing its position in the payments market. The ASEAN startup summit spotlighted Indian unicorns, indicating a vibrant exchange of innovation. On the flip side, Malaysian investment in India’s renewable sector, like Gentari’s investment in ReNEW, and ongoing discussions for unified payments interface (UPI)-based remittances, highlight the growing business synergies, fostering smoother transactions and expanded opportunities for startups in both countries.