The Malaysian government will no longer encourage labour-intensive industries in the country, International Trade and Industries Deputy Minister Kerk Choo Ting said today.

"The labour-intensive industries in Malaysia are no longer competitive. So, the Malaysian government has made a decision, a policy decision that we don't encourage labour-intensive industries in Malaysia," Kerk said.

Replying to the question on how Malaysia is dealing with Chinese competition to Southeast Asia, especially in the labour-intensive industries, he said, "In that sense, it doesn't pose any difficulty for Malaysia. We're not competing for those labour-intensive industries."

Various economists have recently voiced their concern about the economic threat posed by China to other Southeast Asian countries which are heavily involved in labour-intensive industries.

With China's entry to the World Trade Organisation, more industries would be shifting their operations over to the rising economic giant which is able to provide labour at lower costs.

Kerk was speaking at a press conference at the Ministry of International Trade and Industries (Miti) office in Kuala Lumpur. He had earlier held a closed-door meeting with China's Foreign Trade and Economic Cooperation Vice-Minister Zhang Xiang, who was leading a 20-member delegation to Malaysia. Chinese ambassador to Malaysia Hu ZhengYue was also present at the meeting.

Increased bi-lateral trade

The meeting centred on economic co-operation in various fields including those of science and technology between the two countries. Bilateral trade between China and Malaysia increased by 52 percent in 2000 from 1999. It grew by 14 percent from January to October this year.

Kerk said China has committed to buy more palm oil from Malaysia. Its quota of 1.5 million tonnes of crude and processed palm oil this year would be increased to 2.1 million tonnes next year, and gradually increasing to 3.168 million tonnes in the fifth year, with the relaxation of import quota by China after its accession to the WTO.

Malaysia is also expected to make gains in the tourism, oil and gas industry, agriculture, construction as well high-tech manufacturing sectors with China's entry into WTO.

Zhang said China imported RM8.36 billion (US$2.2 billion) worth of high-tech products from Malaysia last year. He said Malaysia has ample experience in construction and China may look to it for help in building hotels and infrastructure for the 2008 Olympics in Beijing.

"In addition, we have the project for gas transmission from the West to East. In this respect, we believe Malaysia also has rich experience and knowledge," he said.

New opportunities

Zhang said China's opening up of its market in line with its entry into the WTO would bring new opportunities to the Malaysian business community.

Kerk said that China has a huge market with import potential of RM5.32 trillion for the 2001-2005 period. Chinese tourist arrivals in Malaysia have also doubled from 190,000 in 1999 to 426,000 in 2000.

He said that the trade balance between Malaysia and China which was in deficit in the past has become a surplus of between RM2 billion-RM3 billion for Malaysia.

In 1999, Malaysian investment in China was RM1 billion compared with China's RM11 million invested here.

The situation has changed this year. Malaysia invested RM539.6 million in China from January to June while China's investments in Malaysia amounted to RM2.917 billion from January to September.

Kerk said that China is investing heavily in the paper and pulp industry in Malaysia to meet its domestic demand. Potential investment could amount to RM10 billion if several projects now on the drawing board are realised.

China has entered into a joint venture with the Sabah state government and an unnamed private company in a paper and pulp project.