Malaysia Trip - Oct. 6-16, 2005

As part of our tour in Penang, we were taken to visit two small- to medium-sized Malaysian companies that have global operations: LKT Group and Pentamaster Corp.

LKT Group dates back to 1948 and its evolution mirrors the growth of Penang’s economy.

Two Penang-based entrepreneurs, who grew up with the semi-conductor industry, started the Pentamaster Corp. Bhd. in 1995. They are rapidly diversifying their company and are currently marketing their RFID (Radio Frequency Identification) technology globally.

The photo below is of the LKT office that we visited in Penang.

LKT Group

LKT Group has developed from a foundry that manufactured metal products such as household fencing in the 1950s into a designer and manufacturer of state-of-the-art equipment for the semi-conductor and other industries.


What impressed us most about the company has been its ability to make the most of whatever the economic conditions dominated Penang at a given time. By following the company's evolution, we were provided with insights into not only the company's development but that of the state as well.

Last year the company earned at least $26.5 million having passed for the first time the Malaysian ringgit 100 million-mark, according to its Web site at www.lkt.com.my

In the 1960s, LKT invested in machinery allowing it to diversify into the construction industries making piling equipment, cement mixers and mobile cranes.

To take advantage of opportunities presented by the multinationals that arrived in the 1970s, the company then diversified into manufacturing of precision tooling, components and fabrication of machinery parts for the semiconductor industry.

The proliferation of semi-conductor and other sorts of companies provided a base for LKT to become a local supplier and prepared the company to enter international markets, Ong Swee Yong, executive director and vice president, told us.

By the late 1980s, LKT represented a group of companies, including a company that specialized in the design and manufacture of precision automation equipment and equipment control software.

It also diversified into precision mould making, plastic injection molding and manufacturing.

By the mid-1990s after several restructurings, LKT was listed on the Kuala Lumpur Stock Exchange.

In 1997, it announced that it would operate globally. That year it also started a company that produced a printed circuit board handling system. In addition, the company designed and manufactured a component assembly line.

Since then the company has been developing at an even more rapid pace, becoming more service oriented as well as developing new products.

In the late 1990s, LKT beefed up its service offerings with 24 hours on-site and off-site technical maintenance service for industrial equipment. It also developed customized curriculum and technical training for its customers. In addition, it opened a company in Thailand to manufacture dies, jig and cutting tools for the disc drive, electronic, semi-conductor and other industries.

In 2001, it started a software house to develop software applications for automated equipment, for quality control and for document management. It also created a new division to design and manufacture advanced storage solutions ranging from industrial drawer cabinets, workstations to system racks.

Following extensive restructuring in 2002, the company selected a business partner in the United States to market its products.

Mr. Ong said that the move to the U.S. stemmed from the group’s many relationships with U.S. companies operating in Penang.

Last year, the company also expanded its design operations to Singapore.

Mr. Ong may be reached by sending an email to syong@lkt.com.my

Pentamaster Corp.

Tan Boon Teik, chief executive officer of Pentamaster Corp. Bhd., is justifiably proud of what his company has accomplished since it was founded in 1995.

He and the company’s executive chairman, Chuah Choon Bin, started the company as a software house primarily producing vision inspection systems. Today it is an integrated consulting and automation engineering solutions provider.

Although Mr. Tan grew up with Penang’s semi-conductor industry, he told us that the company has focused on becoming a highly diversified, including RFID applications for a variety of industries.

According to published reports the company expects revenues in 2005 of some $29 million, and a net profit of almost $5 million.

With generous institutional backing from a variety of investment firms, the company is in the process of building a third plant in Penang and is developing automated equipment used in the pharmaceutical, food and automotive industries.

Pentamaster has installed RFID technology for automated processes used in the manufacture of automobiles,computers and other industries.

In September, Pentamaster entered into a technical collaboration agreement with American RFID Solutions LCC to promote RFID technology in the ASEAN market.

To learn more about Pentamaster, go to www.plentamaster.com Mr. Tan may be reached by email at tan.boon.teik@pentamaster.com.my

In the photo below, Mr. Tan is pointing out his company's growing revenues.

Early in the morning of Oct. 12, we flew from Kuala Lumpur to Penang, a state in northwestern Malaysia that has been called “the Pearl of the Orient,” and that is composed of Penang island and a strip of mainland coast known as Seberang Perai.

Although we didn’t have time for such a ride, you can see the British colonial vestiges of Georgetown, the main city in Penang, from the backseat of a pedal-powered trishaw. The state remains a hot spot for tourists who enjoy the architecture as well as its Chinese culture and museums.

But Penang also attracts visitors who are primarily interested in its potential as a regional commercial base including some of the largest companies in the world that are familiar with the state’s development from an agriculturally-based economy to a far more diversified one.

The transition from an economy based on spice and sugar plantations and coconuts to one that includes a broadbased manufacturing sector began in the late 1960s under the administration of Penang’s former chief minister, Tun Dr. Lim Chong Eu.

During Dr. Lim’s administration from 1969-1990, the world’s largest multinationals opened operations in Penang including Bosch Group, Intel Corp., Motorola Inc., National Semiconductor Corp and Siemens AG.

“It all started with simple assembly lines and low labor costs,” said Wan Zailena Noordin, chief executive officer of the investPenang agency. “The companies liked it also because they could establish their operations near the airport and the people were English-speaking.”

In addition to attracting and retaining the world’s leading multinationals, she said that today the state’s challenge is to develop joint ventures or partnerships with information technology and biotech firms and to encourage the development of an entrepreneurial base.

The newly created investPenang agency, which is funded by the state government, was formed, according to Ms. Wan, to help accomplish these goals. The agency chose Silicon Valley in California for its first investment mission to the United States, which took place in March.

While becoming more aggressive in its marketing efforts, the state also is encouraging an analysis of all its businesses to determine where it can provide value-added activities. “We want to move up the value chain,” she said emphatically.

“We know that companies are no longer doing business in China just because of cost, but now also because of the market,” she added. “In view of China’s size, the playground is obviously not level so we have to promote our management strength, our industries’ maturity and that our employees have deep roots in the companies where they work.”

For instance, she said that Penang is competing with Singapore in conducting testing of semiconductor products instead of just being responsible for assembly. “We have looked at everything from the sand for the chips to the sales and marketing,” she said.

One of the state’s greatest strengths as it goes into the world and markets itself, she also said, is the large number of testimonials from companies that have operations in the state.

To learn more about investPenang’s activities, go to www.investpenang.gov.my Ms. Wan may be reached by email at wzn@investpenang.gov.my

The photos below are of the airport in Kuala Lumpur where a group waved while we passed. I'm afraid I'm not quite sure what they were trying to tell us. Our hosts at the investPenang agency took us to a wonderful Chinese restaurant where we enjoyed a great "home cooked" meal. We stayed at the Equatorial Hotel in Penang which had some marvelous views of the city. We think of Georgia as a green state, but so is Penang!

Malaysia is actively promoting itself as a prime location for multinational companies’ technical backup and support centers, according to Cheah Leong Wan, a communications manager, at the headquarters of the Multimedia Development Corp. Sedn. Bhd.

Dr. Cheah met with us at the development agency’s headquarters in Cyberjaya, Malaysia’s answer to Silicon Valley that opened in 1999 where wetlands and rubber trees once stood.

Rather than provide general call center services, he said that Malaysia is focusing on providing in-house technical support for the world’s largest companies and small- to medium-sized companies with global operations.

“We are in a good location to provide the sorts of services that these companies need for their operations,” he added. “Companies recognize that they must have business recovery centers and this is a service that requires the kinds of value-added capabilities we are developing.”

In view of its accomplishments in transforming its economy from an agricultural to a more diversified economy over the past 40 years, it would be easy enough for Malaysia to become complacent.

Instead, it is taking on the “Next Leap” in its development plans, Dr. Cheah told us, that includes recognition of supporting its schools to provide the workforce for its “knowledge society.”

China’s and India’s growth in its backyard have been the primary reasons for the new focus on developing “an information rich society,” he said, “a society driven by knowledge and technology.”

We learned that roughly a third of Malaysia’s gross national product was dependent on its manufacturing sector and that 80 percent of its exports were composed of manufactured goods.

Over the next 20 years, however, Malaysia will see its manufacturers either be threatened by competition from the rising giants of China and India or undercut by the lower-cost emerging countries such as Vietnam.

Cyberjaya – “jaya” means success in Malay – is in the middle of what is called the Multimedia Super Corridor, a suburb of Kuala Lumpur. Wired with high-speed fiber optics, the corridor spans 300 square miles, an area roughly the size of New York City. The technological infrastructure is currently being adapted to other areas of the country as well.

Photo of Malaysia's Export Exhibition Centre above...


Malaysia’s development of ‘halal’ food products for the Muslim world represents the latest initiative of an aggressive policy in recent years to increase all of its exports, Wan Azhamuddin Hj. Jusoh, a spokesman for the Malaysia External Trade Development Corp., told us during an interview.

Currently certified halal products being developed in Malaysia include processed chicken and beef, ice cream, chocolate and food supplements.

We first met with Mr. Wan in his downtown office and then visited the agency’s showroom nearby.

Malaysia’s main exports include automotive components, parts and accessories; chemicals and chemical products; electrical and electronic products; palm oil-based products; plastics and plastic products; processed food; rubber-based products; textiles and apparel; wood-based products and services.

But even with these established exports, the halal products should further Malaysia’s reach into Middle Eastern countries, Mr. Wan said. The country’s objective, he added, is to be the world’s leading hub for halal products.

Malaysia’s halal certification procedure has been commended by the United Nations as a model system.

Certification is awarded for meat products when the producer has followed procedures for slaughtering, processing and other related operations as prescribed by Islam.

For other food products, the halal designation means that all ingredients used in manufacturing the products are approved according to Islamic requirements.

A small sampling of the products on display at the external trade development corporation’s showroom may be seen in the photobook below.

Mr. Wan may be reached by send an email to azham@matrade.gov.my The agency’s Web site may be found at www.matrade.gov.my


Photos of export products below...

You get the impression that everyone is on the same page in Malaysia.

For instance, when we asked Datuk R. Karunakaran, the director general of our host the Malaysian Industrial Development Authority, what were his country’s top priorities, he immediately listed three:

First, to maintain “the challenge of national unity and harmony” and making sure that the country’s Chinese, Indians and Muslims are united in their support of the common good;

Second, to assure that Malaysia remains a competitive nation that can compete globally and continues to be attractive to foreign investment;

And third, that government assists the private sector, but does not get in its way.

We heard the same refrains from other government officials and private businessmen with whom we talked.

This common vision is largely the effort of the former Prime Minister Mahathir Mohamad, who set out in his “Vision 2020” plan a map for how Malaysia is to become an industrialized company by the year 2020.

Its objectives include industrial restructuring, technological upgrading and human resource development.

The manufacturing sector is to produce higher value-added products and developing workers better capable of meeting the requirements of more sophisticated manufacturing processes.

The plan includes pre-employment schools to train employees and the development of high-tech industrial parks.

It also calls for the development of its information technology resources and the widespread use of the Internet.

According to Mr. Karunakaran, representatives of countries from throughout the world visit Malaysia to learn how it is managing to realize the plan. “But very few can actually go ahead and do it,” he said.

He acknowledged that even for Malaysia the task has not been easy. At the time of independence in 1957, “We had all the ingredients for a natural disaster,” he said.

Within 40 years the country has been transformed from primarily a producer of primary goods, especially agricultural products, rubber, tin and palm oil into a regional manufacturing and service center.

Instead of “dwelling on the hang ups of British colonialism,” he said that the country’s leaders recognized the benefits derived from the civil service, its infrastructure and educational ties. “We’re lucky not to have any phobias of foreigners,” he added.

Despite all its preparations, he said that Malaysia faces more challenges ahead, primarily developing strategies that accommodate the rapid growth of China and India.

For more information, go to www.mida.gov.my


A photo of North Carolina journalist DG Martin and Mida's Datuk R. Karunakaran follows.

Malaysia surpassed Singapore last year as the 10th largest trading partner of the United States, Dom LaVigne, executive director of the American Malaysian Chamber of Commerce, told Mr. Martin and myself during an interview in his office in downtown Kuala Lumpur, the country’s capital.

In view of Singapore’s greater recognition globally as a finance and trading center, he considered the development significant.

Also in view of what the chamber considers “market challenges,” the development indicates a wider appreciation for the country’s strengths, including a strong growth rate of its gross domestic product, which in 2004 surpassed 7 percent.

Among the challenges cited by the chamber’s country commercial guide cites is the government’s criticism of U.S. policies for being “anti-Muslim.”

Malaysia’s effectiveness in protecting intellectual property rights is often questioned, according to the publication. In addition, it cited government restrictions that hamper foreign involvement in government contracts, financial and business services and telecommunications.

Despite these concerns, Mr. LaVigne, who is American and also has lived in Singapore, was optimistic about the country’s future. “We have a silent trickle of interest with about four companies a month showing an interest in investing here,” he said.

In comparison to Singapore, Malaysia’s wage rates are extremely competitive and it has much more territory to offer companies that wish to set up operations, Mr. LaVigne said.

He cited a trend that U.S. companies are looking for service centers that will be able to backup offices throughout the Asia- Pacific region.

He also underscored the importance of Malaysia’s multiculturalism, which is reflected in the country’s multiple Chinese and Indian dialects represented as well as Japanese and Korean languages.

“Many Americans don’t go overseas so they aren’t aware of the opportunities here,” he said. “There is a lack of knowledge about Malaysia in the U.S., but once U.S. companies visit their perspective changes. Malaysia is stable; security is not a problem and there is no anti-Americanism.”

After all, the U.S. is Malaysia’s top foreign investor, with accumulative capital investments of more than $28 billion, Mr. LaVigne said.

Some 60 percent of that investment is in oil, gas and petrochemical operations and the remaining 40 percent in manufacturing including semiconductors and other electronic products.

U.S. companies also are proving their loyalty to the country, he said, by not leaving for China where employee turnover rates far exceed those in Malaysia.

The country’s chief exports to the U.S. are electronics and electrical goods, wood commodities, textiles and rubber products.

According to Mr. LaVigne, a new area of development is focused on “halal” products that include agricultural goods prepared specially for Muslim markets.

We had heard about “halal” from Ms. Rafidah when she visited earlier in the year, but information about this development became a common denominator of the trip in our other interviews, on which I will be reporting later.

Other opportunities for investment that he cited include franchises and real estate development.

For more information, Mr. LaVigne may be reached by sending an email to dom@amcham.com.my The chamber’s Web site may be found at www.amcham.com.my

If you want to learn how an attitude of tolerance between races and ethnic groups can inspire economic development, take a trip to the state of Melaka, as we did on Oct. 9. It is here where Malay Islamic culture first took root.

Many of the world’s cultures converge in this state located on the country’s western coast next to the Straits of Malacca. The Malays, who are Muslim, live peacefully with a migrant population of many races, predominantly Chinese and Indian.

Mosques, churches and temples abound in this multicultural microcosm that bills itself in its promotional literature as representing “the future” of a globalized world.

Beyond its attraction as a tourist destination, the state also wants to leverage its social make-up as an economic generator.

Melaka is now in the process of providing a state-of-the-art international telecommunications infrastructure in an effort to modernize an economy that as recently as the 1960s was dominated by agriculture production and primary commodities.

“We have all the languages and cultures to be able to communicate with the rest of Asia,” said Mohd Hamim Talib, general manager of Melaka ICT Holdings SDN. BHD., a high-tech incubator.

A graduate of Marquette University in Milwaukee, Wisc., Mr. Hamim is overseeing the installation of the state’s new broadband infrastructure and wireless services.

The surprise visit of Chief Minister Datuk Seri Mohd Ali Bin Rustam to the incubator so he could meet with us underscored the importance that he and the state are placing on the initiative.

The telecommunications infrastructure currently in place provides wireless and Internet services including multimedia products and multiple language content management within the state.

But with the development of the Dumai-Melaka submarine cable stretching from Malaysia around India through the Red Sea to Egypt, the incubator seeks to position Melaka as one of the key international gateways and telecommunications hub for the region.

“We will be competing with centers in the Philippines, India and many other places,” Mr. Hamin said. “Very few places, however, will be able to compete with our wage rates and our cultural advantages.”

Once the cable system is completed, he said the incubator also would be able to provide more established telecommunications operators with disaster recovery systems.

“Let’s say you have a power failure in parts of India,” he added, “centers like those in Chennai are going to need backup systems for their protection.”

Go to www.michth.com to learn more about Melaka’s broadband initiative. Mr. Hamim may be reached by email at hamim@micth.com

The night of Oct. 8, DG Martin and I had a conversation over dinner with Azman Mahmad, a deputy director of the development authority, and our guide Mr. Sukri about Malaysia’s initiatives to attract foreign investment.

Mr. Martin, a former executive with the North Carolina university system and a columnist and host of a radio program, and I were the only two journalists invited on this trip to Malaysia.

We both had interviewed Rafidah Aziz, Malaysia’s minister of trade and industry, when she led a trade delegation through the Southeast in February.

Ms. Rafidah had replied to Mr. Martin’s questions about the nature of fundamentalist Islam by saying that as a peace-loving Muslim she considered herself a fundamentalist.

Her assertion that “I am a fundamentalist” had been well received by her government at home, and I heard a lot about that interview as we traveled throughout the week.

“Half the battle is getting them here,” Mr. Azman said about Malaysia’s efforts to attract foreign companies to invest in the country.
We were enjoying a “buka’puasa” seafood dinner at a downtown restaurant. The “buka’puasa” is the celebratory meal that is permitted after sunset during Ramadan.

Ramadan is the ninth month of the Muslim calendar during which Muslims fast in the daylight hours and eat meals with friends and family in the evening. It is considered a month for worship and contemplation to strengthen family and community ties.

A Muslim, Mr. Azman had seemed pleased to be having a good dinner after fasting all day, but it was clear that his mind was never far away from promoting Malaysia as an investment center.

He said he continues to be proud of his involvement in attracting a major Dell Corp. plant to Malaysia while he was assigned to the United States and based in Chicago.

Malaysia’s main competitors, he said, continue to be Singapore and Thailand and they compete on costs and incentives to attract foreign investment. What the foreign companies like about Malaysia, he added, is that the country can often provide lower costs and a well-educated labor force.

As I was telling friends in Atlanta about my invitation, I was surprised to learn how extensive the web of informal contacts between Americans and Malaysians is already established, primarily because so many Malaysians have studied in the U.S.

For instance, Atlanta-based Vince Farley, a former U.S. foreign service officer and an expert on Africa, told me to look up his friend from grad school days at the University of Pittsburgh, Elyas Omhar, Kuala Lumpur’s mayor from 1981-92.

Unfortunately I didn’t have the opportunity to meet Mr. Omar, but all the officials whom we met knew him and held him in high esteem.

Education is taken seriously at all levels.

There is an elite class of Malaysians who have studied abroad. But the educational system at home is extensive and continually preoccupied with teaching the skills that are needed now and those that will be needed in the future for the country to grow economically.

It became pretty clear to us that the country’s multiracial society works because of the widespread education and extraordinary tolerance different ethnicities have for each other. The fact that the economy is experiencing a healthy growth rate of more than 4% annually doesn’t hurt either.

It hasn’t always been like that. During the 1960s and 70s, racial strife existed because the Malays owned so little of the country’s wealth with the vast majority in the hands of the Chinese.

The solution was to give the Malays, who were primarily in the countryside, more ownership through government contracts and loans. Many Malays also received scholarships to study abroad so that they could join the Chinese and Indians in holding jobs and helping to develop the country.

Now Malaysia is in the extraordinary position of being able to conduct business successfully throughout Asia and the Middle East because of its diverse population as well as its recognition of tolerance as both a survival skill for its society and as a potent economic force.

We parted for the evening as jet lag began to set in and made arrangements to visit Melaka the next day, the birthplace of Malayan culture.

We arrived at Kuala Lumpur’s sparkling clean, modern airport at 6 a.m. Oct. 8 after more than 20 hours of flying from Atlanta including stop overs in Newark and Stockholm, and we were met by Sukri Abu Bakar, who works in Malaysia’s foreign investment promotion division.

We headed immediately for Putrajaya, an $8 billion administrative and government center south of the city that is adjoined by Cyberjaya, a collection of high-tech multimedia enterprises.

Putrajaya follows the example of the U.S.’s founding fathers who decided to build Washington D.C. as a planned city away from populous East Coast cities, or of the Canadians who built Ottawa, its capital away from Toronto or Montreal, to name only two examples.

The tropical vegetation lined the highway, which was fairly heavily traveled even at the early hour on a Saturday.

Once in the administrative center, however, there was less traffic and the road curved around a large man-made lake. We headed to the Putra Mosque, a towering structure built in 1999.

Malaysia is an Islamic state, but according to Mr. Sukri and others with whom I have talked it is a tolerant one with large Chinese and Indian communities in addition to the mostly Muslim Malays.

The mosque is a strong statement of the importance of Islam in this multiethnic nation. Putrajaya itself has several large palaces for its sultans, who have little direct political power, but a great deal of influence on the sharia laws in each of their districts.

The prime minister occupies one of the palaces, but the sultan of Selangor, the state in which Putrajaya is located, maintains a permanent residence across the lake from the mosque, and another large palace which is shared by the eight remaining sultans in the country on a 5-year rotating basis.

Putrajaya is the brainstorm of former Prime Minister Mahathir Mohamad, who first decided to build the planned city out of what was a palm oil plantation.

While its 323 acres continue to offer plenty of space for commercial and residential structures, many developments have been completed or are in the process of being constructed. A 100-metre wide tree-lined boulevard inspired by the Champs Elysees in Paris provides the main axis for the project and has the prime minister’s offices at its northern end and a convention center at its southern point.

Mr.Sukri shows me around Putrajaya and then sits with me at the Hassan Café while I enjoy a glass of “Teh Tarik,” a fine mixture of hot tea, milk and spices. He can’t join me, however, because it is the time of Ramadan, a time of fasting and he can have nothing to eat or drink until the sun goes down.

My friend Phang Ah Tong, investment consul at the Consulate General of Malaysia in New York, has invited me and one other journalist to visit Malaysia for 10 days and I am seizing the opportunity so that GlobalAtlanta readers will have an insight into this fascinating country. Not only is Malaysia located in the fastest developing economic region in the world, but it is doing so with a vastly diverse population composed of many different ethnic and religious groups.

For the first time, I will be using blog technology to deliver "real-time" observations of the trip. This technology allows me to interact with readers who may be interested in learning more about the country and its business opportunities. If you click on my email address on this page, I will do my best to respond to your questions during the trip. Please go to www.globalatlanta.com to find an article that describes the interviews Mr. Phang has had arranged for me and an itinerary of the places I will be visiting.