Why in the News?

Malaysian Prime Minister Dato Seri Anwar bin Ibrahim is scheduled to visit India from August 19-21, marking his first visit as Malaysia's Prime Minister.

What’s in Today’s Article?

• India-Malaysia Relationship (History, Economic, Investments, Defense, etc.)
• Challenges / Prospects in Economic Ties

India – Malaysia Bilateral Relationship:

• India established diplomatic relations with the Federation of Malaya (predecessor state of Malaysia) in 1957.
• The two countries enjoyed a strong relationship in the 1960s as a result of the personal friendship between Prime Ministers Nehru and Tunku Abdul Rahman Putra.
• Presently, India and Malaysia have developed close political, economic and socio-cultural relations.
• Malaysia is home to over 2.95 million large Indian diaspora and the second largest PIO community in the world after the US.
• Economic & Commercial Relations:
  • Malaysia has emerged as 13^th largest trading partner for India while India figures among the ten largest trading partners for Malaysia.
  • A bilateral Comprehensive Economic Cooperation Agreement (CECA) covering goods, services and investment has come into effect from 2011.
  • 
  • Major Exports:
    • mineral fuels, mineral oils, aluminum and articles thereof, meat and edible meat offal, iron and steel, copper and articles thereof, etc.
  • Major Imports:
    • palm oil, mineral fuels, mineral oils, electrical machinery and equipment; animal or vegetable fats and oils, etc.
• Investments:
• As per official figures (DPIIT), Malaysia ranks as the 26^th largest investor in India with FDI inflow of US$ 1.16 billion during the period April 2000 to September 2022.
• The largest presence of Malaysian construction companies outside Malaysia is in India.
• Indian companies have invested in around 250 manufacturing projects of over US$ 2.62 billion.
• Presently, there are more than 150 Indian companies, including 61 Indian joint ventures and 3 Indian Public Sector Undertakings operating in Malaysia.
• Trade Settlement in Indian Rupees: Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies.
• Defense and Security:
  • India-Malaysia defense relations have developed steadily since the signing of a Memorandum of Understanding (MOU) on Defence Cooperation in 1993.
  • Both nations participate in each other's biennial defense exhibitions, LIMA and MILAN.
  • Additionally, India is involved in the Cooperative Mechanism on the Straits of Malacca and Singapore (SOMS), contributing to projects that enhance navigational safety and environmental protection.

Challenges and Prospects in India-Malaysia Economic Ties:

• The business relationship between India and Malaysia faces challenges that could slow down economic growth, such as geopolitical tensions, global demand stagnation, and higher import tariffs.
• However, the strong trade ties between the two countries are expected to persist.
• Despite these challenges, India and Malaysia have formed a strong strategic partnership, with both countries being members of important global forums like the Commonwealth of Nations, NAM, G-15, and G-77, which support their cooperation.
• There are many opportunities to strengthen bilateral relations further.
• Efforts like avoiding double taxation, mutual customs assistance, improving air connectivity, and collaborations among airlines can boost trade and tourism.
• Additionally, factors such as a vibrant diaspora, steady GDP growth, a younger population compared to China, expected increases in Foreign Direct Investment (FDI), and rapid digitization are promising for future trade.
• The recent revival of the India-Malaysia Joint Commission Meeting after 12 years shows renewed commitment to cooperation.
• The upcoming amendment to the Malaysia-India Comprehensive Economic Partnership Agreement (MICECA), which will include new economic sectors, is aimed at reaching a trade volume of US$25 billion within the next three years.
• By exploring new sectors, diversifying trade, and fostering beneficial collaborations, both countries can support India's goal of becoming the world's third-largest economy by 2027 and strengthen ties with ASEAN.