interview In the second part of her interview with malaysiakini, United States ambassador Marie T Huhtala speaks about US economic interests in the region, specifically Malaysia.

In 2000, Malaysia was US' largest trading partner and its 17th largest export market. US exports to Malaysia were RM41.8 billion and US imports from Malaysia were RM97.28 billion.

US direct investment in Malaysia is concentrated in the oil, gas, and manufacturing sectors and primarily in companies producing semiconductors and other electronic products. There are talks between the two countries to focus more on biotechnology in the years ahead.

Prime Minister Dr Mahathir Mohamad recently estimated Malaysian economic growth this year to be three percent amid a recovery in the US economy.


After the 1997 economic crisis, there were calls by Mahathir to start an East Asian Economic Caucus (EAEC) and Asian Monetary Fund (AMF). Some say nothing happened because the US was unhappy.

The first time I heard about the EAEC was about 10 years ago. It was well before the crisis.

We are in a very different time now, you know, we are in a different environment. I think you see greatly increased US involvement in East Asian economies, integration in fora like the Asean Regional Forum and the Asia Pacific Economic Conference (Apec).

All these institutions have matured a great deal in the last 10 years and we are very happy with our engagement with them. We don't feel at all unhappy about increased linkages within the East Asian countries. We think that they are fine, they don't bother us in the least.

Just last year, China took some steps in setting up some regional organisations.

They suggested a free-trade area with Asean which I think is a very interesting proposal. I don't know if it's going to go anywhere but it is interesting to me that they are thinking about something like that.

We don't oppose that. We feel that as a Pacific Rim nation, we have a vital stake in this region. We intend to remain deeply involved and we have plenty of mechanisms for doing that.

It is only natural in my personal view that the countries in Asia would also have bilateral or multilateral arrangements among themselves. We don't have any objections to it.

How do American investors view Malaysia?

They are generally very satisfied with the conditions here. They have good working arrangements. They have no problems with licenses and local regulations. And they have a very good workforce to draw from.

In fact, the management teams of most of our American companies comprise Malaysians. There are very few US expatriates here. The head offices are very pleased with the way things are running here. And the ones I have talked to are all intending to stay. They are having a good deal here and they want to keep going.

There was a report that US had removed Malaysia from its high risk list for counterfeit and piracy. Microsoft made quite a big issue of pirated software here last year. Do you think there is sufficient action on the government's part?

No, I don't. Here's the thing: This is an annual process. We have something called the Special 301 process whereby American companies submit comments to the US government about intellectual property rights protection in different countries.

Last year, Malaysia was on the designated priority watch list because we were very concerned about the situation here. As a result of it, your government took some strong steps to crack down and enforce your (piracy) laws.

We recognise that by bringing you down the watch list. It is a serious problem in the US as well. We are not saying that we don't have that problem, we do.

But every year we do this again. They just put out the call for companies to make submissions for 2002. So we are going to go through it again, every year. It is an on-going process.

The crucial thing is that no country can ever let up its efforts because the moment you relax your efforts to crack down on piracy, the pirates will set up here and make this their headquarters. It is a never-ending struggle.

The fact that we did lower Malaysia down a step on the list shows that we are very happy with the results here in the past year. I for one hope that they stay at that level or even drop lower but we will have to see. I don't have all the figures yet.

What about the projections for future trade with Malaysia? The US is an influential trade partner of Malaysia but now that the US economy is not as strong as before do you foresee any reduction in investments or trade?

There already has been an impact on the Malaysian economy because of a slowdown in the US. We are your biggest market as well as your biggest investors. So when we stop importing or when we reduce our imports, you are going to feel it in your exports. That's just a fact of life because our economies are linked so tightly.

The experts are saying that they are predicting a turnaround in the US economy this year, probably around the middle of the year.

I have even seen some forecasts - though there are a million economists - that the high-tech sector will lead the way. That would be very good for Malaysia because you are heavily invested in electronics, semiconductors and chips. So that would be good news for you.

I really would expect that as the US economy recovers, Malaysia will see its fortunes going up as well. But as I said, they are looking for this to begin around the middle of the year. Already US stock values are recovered fully to levels before Sept 11 which is a very good sign. It usually takes about six months between when the stocks go up and when the economy follows. So I think we are on track. I hope it's true.

Most of the American investments in Malaysia are related to semiconductor and electronics and a lot of companies are doing some sort of restructuring.

I think it is logical. They have to do it, in business you have to compete constantly. If you are not going forward, you'll slip backwards.

A lot of the American companies that I have talked to are interested in moving their operations here up the value chain by increasing the complexity and the sophistication of the products that they are making. Frankly, they know that they are going to lose the simpler assembly functions to other markets. That's part of a natural cycle.

Is there a trend to move the lower ends of the assembly chain to cheaper locations within the region?

Yes, I think a lot of companies are looking at China for instance. Wage rates are lower there. Now, wage rates are only one part of the picture. That's not the only thing you look at when you make a decision on where to locate.

One of the bigger things that you look at is political stability and predictability, rule of law, whether the rules for customs stay the same, whether the taxes stay the same, whether there will be a lot of corruption...

I think Malaysia does much better on those scales than a lot of other countries. But it is a dynamic situation. It doesn't stay static at all.

So I think it is important for companies to always be looking ahead and think about what is the next level up. For instance, biotechnology is a new field. It offers fantastic opportunities for companies that are willing to make the investments.

I think Malaysia would be a very good country to develop biotechnology. I know that your government is interested in facilitating that. There are very few countries that have caught the biotechnology wave. So this is an area that our companies are interested in and hopefully we will be able to do something here.


Tomorrow: Final part