India-Malaysia Bilateral Relations: An Owerview

Malaysia and India have historical, political, economic, demographics, strategic and cultural relations between the countries with mutual respect and benefits. Malaysia has one of the largest communities of Persons of Indian Origin in the world, numbering close to 2 million (about 8% of Malaysia’s population). The overwhelming numbers are Tamil speaking, with significant people speaking Telugu, Malayalee and Punjabi also. Most of them, belongs to Indian Hindu community, are now citizens of Malaysia and well integrated into Malaysian system. Further, India a Hindu dominated country is a land of more than 160 Million Muslim with 13 percent share in total population, which constitutes more than 10 percent of world Muslim population. Both the countries are multi cultural and multi ethnic with due respect to each other faith and religion.  

Indians have significant contribution in all sector of Malaysian economy. Majority of Indian community is engaged in rubber and palm plantations, a small section is involved in service like police, railways and food business as well as in the legal and medical professions. The recent migration is of Indian IT professionals increased in early 21^st century. There are about 150,000 legally recruited Indian workers in Malaysia in both the skilled and semi-skilled category. In addition, there are about 10,000 professionals expatriates employed in IT, manufacturing, banking, etc. After Middle East countries, Malaysia is top favorable country to Indian laborer.  Trend of outflows Indian laborer to Malaysia during last decade is shown in given figure:

          

About 2000 students are studying in Malaysia from India with 17^th rank in all countries while an estimated 3000 Malaysian students are studying in India.

Commercial Relations

Commercial relations between the countries have become closer in recent years. Malaysia is the second largest trading partner for India within ASEAN, and India is the largest trading partner for Malaysia among the countries of the South Asia, excluding China. Malaysia ranked at seven in total trade of India amongst OIC countries and at place of 19^th across all countries of world. India and Malaysia have signed a Comprehensive Economic Cooperation Agreement (CECA) on 18th February, 2011, which will come into effect from 1st July, 2011. It is a comprehensive and ambitious agreement that envisages liberal trade in goods and services and a stable and competitive investment regime to promote foreign investment between the two countries. Bilateral trade between the countries has been increased manifold during the last years. Total volume of trade was 3577.47 Million US$ during the year 2005-06 which is reached now at 8012.19 Million US$ during the period 2009-10. It was merely 600 Million US$ during the year 1992. Trade between the countries during last five years is shown in given figure:

               

Both countries are agreed to target a bilateral trade volume of US$ 15 billion by 2015. Major trading commodities are food items, mineral, fuels, iron steel, meat, cereals, shipping, boats, machineries and organic chemicals.

India exports 84% share of total imported bovine meat in Malaysia, other major commodities imported by Malaysia with higher share of India’s export are cereals, spices and chicken meats. India is favorite destination of Malaysian to import bovine and chicken meat due to its Halal compliance. Malaysia exports may increase manifold in several industries if it targets the Muslim consumer by offering the Halal certified products. Potential areas of Halal trade between the countries are meat, confectionary products, processed food, chocolates, cereals preparations etc.       

Bilateral investment between the countries is also increased in recent years especially in infrastructure and construction sectors. Malaysia ranks at 24^th position amongst the investing countries in India with cumulative FDI inflows valued at 2 billion US$ from 1991 to 2010. In addition, about 6 billion US$ in Malaysian investments are believed to be invested in India through the Mauritius route. Notable among these are Maxis Communications in Aircel, Axiata in IDEA Cellular Ltd, Khazanah in IDFC, Apollo Hospitals, Yes Bank, etc. Malaysian construction companies’ largest presence outside Malaysia is in India. They have completed 52 construction projects worth US$ 2.34 billion in India, while 35 projects of similar value are under various stages of implementation. Under a partnership with Malaysian Airports, GMR completed airport in Hyderabad in 2008, and the second one in Delhi in July 2010. Infrastructure is favorite destination for Malaysian companies to invest. Investment breaks up in infrastructure sector between last three years are shown in given figure:

  

             

Indian companies have invested about 2 billion US$, making it the 7th largest investor in Malaysia. Indian companies that made major acquisitions include Reliance Industries Limited, Ballarpur Industries Limited, Larsen & Toubro and WIPRO. There are over 100 Indian companies including 60 Indian joint ventures operating in Malaysia. In addition, there are 60 Indian IT companies operating from Malaysia. IRCON International Ltd. has been actively engaged in the development of railways in Malaysia since 1988, and it is currently executing a double tracking project (Seremban – Gemas) worth over 1billion US$.

India is still lacking the institutional recognition of Islamic finance that could expand the investment volume manifold between Malaysia and India. Pointing to the Shariah investment market opportunities in India, Salman Khurshid, Minister for Minority Affairs and Corporate Affairs Govt. of India, has said during address a session to the 6th World Islamic Economic Forum (WIEF) in Kuala Lumpur, Malaysia on May 2010 that “about 261 companies are eligible for Shariah products in India and these represent 48% of the market capitalization. Among these companies 25 are Large Cap, 102 are Mid Cap, 80 are Small Cap and 54 are Micro Cap companies. Khurshid compared the market capitalization of the Shariah universe within India with that of the host Malaysia and Indonesia and informed the 6th World Islamic Economic Forum that in the case of India it is at USD 640 billion as compared to USD 210 billion (Total Mcap) in Malaysia and USD 108 billion in Indonesia. Hence, the opportunity for investing in India in a shariah compliant manner is huge, especially for investors from Malaysia and Indonesia.” Bombay stock Exchange (BSE) last year listed shariah index separately. Acknowledging the need of Islamic banking in India, Indian Prime Minister Mr. Manmohan Singh asked the Reserve Bank of India (RBI) to look into the Malaysian model of Islamic banking at the time of Malaysia visit in October 2010. Malaysian bank can start their operation as foreign bank with adherence to Shariah as Turkey’s Bank Asya in process to get the permission of RBI to offer Shariah-compliant lending in the country.

India also could be a major investing country for joint ventures of Halal endorsed products for Malaysian companies. Like in last year 2010, leading Malaysian fast food outlet company KFCH started its outlets in Pune & Mumbai serving the products cooked by Halal chicken. Before KFCH, there is completely untapped market of restaurant serving the Halal certified meat products.       

Travel and Tourism

Malaysia ranks at 9^th position country amongst top foreign tourist arrival in India and at the top position in south East Asia region. During the year 2009, Malaysian numbers of tourists visited India are 134,340. Most of the tourists’ purposes to visit India are leisure, holiday and recreation (55.6%); visiting friends and relatives (19.2%) and business and professional (13.1%). October-December months are peak period to Malaysian tourist arrival in India whereas April-June are lean months. India is the sixth largest source country for inbound tourism to Malaysia with about 600,000 Indian tourists visiting Malaysia in 2009, an increase of 9% over figures of 2008. In terms of air passenger traffic to and from India, Malaysia is ranked at 10^th place during the year 2009-10. During mentioned period, 1112892 passenger travelled to (558903) and from (553989) India between Malaysia whereas total freight traffic is 31100 tone between the countries through air route. Direct flights are available from Kualalumpur to Chennai, New Delhi, Tiruchirapally, Mumbai, Bangalore, Hyderabad, Cochin, Kolkata and Trivendram cities of India. Freight and passenger traffic is shown in given table:

       

       

Scheduled International Traffic (Passengers and Freight) To and From India between Kualalumpur and Indian Airports (2009-2010)
	Passenger (Number)			Freight (Tonnes)
City	to India	from India	Total	to India	from India	Total
Chennai	165370	172965	338335	4909	4271	9180
New Delhi	85864	88040	173904	4582	4364	8946
Tiruchirapally	92264	75671	167935	0	159	159
Mumbai	73061	74994	148055	3857	3677	7534
Bangalore	27064	24962	52026	1031	546	1578
Hyderabad	24543	24485	49028	579	675	1254
Cochin	16097	16125	32222	21	20	41
Kolkata	14306	13597	27903	0	81	81
Trivendram	38	182	220	0	0	0
Total (India)	15700668	16374986	32075654	474302	664766	1139068

At present, there are 114 flights between two countries, of which 93 are operated by Malaysian airlines and 21 by Indian airlines.

Such huge passenger and tourist traffic leads to a potential market of Halal travel and tourism in India. Air India and other Indian domestic and international Airlines still have to confirm about the authenticity to serve the Halal food during the travelling while starred hotels in Indian cities are also not compliance to Halal conscious consumer and don’t have the recognition of Muslim friendly services. Currently Halal authenticity is ensured verbally only after getting enquired.    

Strong bilateral trade, business, investment, travel and tourism relations between India and Malaysia lead to a potential unprecedented market for Halal business too. Malaysia is known as key leader country in promotion and expansion of Halal brand while India has the third largest demand market of Halal products with more than 160 Million Muslim consumer. Halal opportunities exist in processed food, meat, Islamic finance and consultancy services.