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CNA
a day ago
- Business
- CNA
Malaysia's goods and service tax hike: ‘Necessary' but at what cost to businesses and consumers?
KUALA LUMPUR: Malaysian businesses and consumers already grappling with rising costs and the impact of United States tariffs could face added strain from the country's planned Sales and Service Tax (SST) hike next month, warned industry experts. While Prime Minister Anwar Ibrahim has defended the move as one targeting high-income earners, analysts and business groups said there could be spillover effects on the broader population and economy. 'Even though the sales tax increases are targeted towards non-essential and luxury goods, it may still impact the lower income through the effect of these taxes on the retail sectors,' economist Cassey Lee told CNA. 'The additional tax revenues collected through the higher sales taxes are also likely to be lower given the dampening effect of economic uncertainties on consumption of non-essential and luxury goods,' added Lee, who is a Senior Fellow and Coordinator for the Regional Economic Studies Programme at ISEAS-Yusof Ishak Institute in Singapore. A sales tax rate of 5 per cent or 10 per cent will be imposed on non-essential and luxury goods such as king crab, salmon, imported fruits, racing bicycles and antique artworks from next month, announced the Finance Ministry on Jun 9. The sales tax rate will remain unchanged for essential goods. Meanwhile, a service tax of 6 per cent or 8 per cent will be expanded to include property rentals or leasing, construction, financial services, private healthcare, education and beauty services. Acknowledging the growing public concern, Anwar's political secretary Muhammad Kamil Abdul Munim said that the expansion of the SST will proceed on Jul 1 as planned, but the government is open to revisiting the policy if necessary. The Finance Ministry on Wednesday (Jun 18) projected an additional RM5 billion (US$1.2 billion) in SST revenue from the expansion in 2025 and RM10 billion by 2026. On Sunday, Anwar said that the revenue generated from the tax collection would be used to increase the salaries of civil servants, social aid such as the 'Sumbangan Tunai Rahmah' and to develop infrastructure, local media reported. But the Federation of Malaysian Business Associations (FMBA) said that these gains 'must be weighed against the potential contraction in business activity and consumer spending', urging the government to reconsider and suspend the implementation. CUTBACKS AND HIGHER COSTS FOR CONSUMERS? Industry groups said they recognised the government's fiscal objectives but have voiced concerns over the 'far-reaching and potentially adverse impacts' the tax expansion may impose on small and medium enterprises (SMEs), the wider business ecosystem and Malaysian consumers. 'This move sends the wrong signal to domestic and foreign investors, raising doubts about policy consistency and the government's commitment to fostering a business-friendly environment,' said FMBA in a joint statement with five other major business associations. These are: SME Association of Malaysia, Malaysia Retail Chain Association, Malaysia Retailers Association, Bumiputra Retailers Organization Malaysia and Malaysia Shopping Malls Association. The six groups urged the government to defer the expansion, citing the potential impact on Malaysia's economy. 'Implementing such a broad-based tax hike amid a fragile recovery will exacerbate inflation, cripple SMEs, discourage investment and erode consumer confidence,' the statement dated Jun 15 read. In a separate statement on Tuesday, Abdul Malik Abdullah, chairman of the FMBA, said that SMEs, many of which operate on thin margins and limited cash flow, would face rising input costs due to the 'cascading nature' of the SST. 'Of greater concern is the fact that these economic sectors are involved in producing goods and services for end consumers, and may have to pass down some of the increased costs through market pricing,' a spokesperson from the Malaysian Institute of Economic Research also told CNA. Some business owners are already bracing for the impact. The owner of Salmonly Cafe in Kuala Lumpur, Nor Marsilla Ismail, told CNA that she is considering a menu revamp as she is adjusting prices and recalculating her costs and margins. 'Our bestseller item is the salmon rice bowl so we have to adapt to survive,' she said, noting that salmon prices have not yet increased, but could soon. Salmon is among the 'discretionary goods' that will be subjected to a 5 per cent sales tax rate starting next month. The revised tax framework is also expected to hit the manufacturing sector, particularly with the inclusion of capital goods such as machinery, which FMBA's Abdul Malik said could hinder business expansion and stifle innovation. Echoing these concerns, the Federation of Malaysian Manufacturing had previously highlighted that taxing machinery and equipment - typically considered capital expenditure - would drive up investment costs. Both the Federation of Malaysian Manufacturing and the Federation of Malaysian Business Associations have called for a broader exemption list to protect industry competitiveness. 'This includes items critical to upgrading production lines, automating processes and scaling operations,' said the Federation of Malaysian Manufacturing's president Soh Thian Lai, as quoted by The Edge on Jun 12. 'The imposition of sales tax on capital goods is expected to increase investment costs, potentially delaying business expansion and dampening overall investment appetite across key manufacturing and commercial sectors.' He added that many manufacturers newly affected by the revised SST, especially those previously exempt, would require more time to prepare and comply. In addition, under the expanded scope of service tax, leasing and rental services are now subject to an 8 per cent tax, with exemptions for residential rentals and SMEs with annual rental revenue below RM500,000. Tax partner Jalbir Singh Riar from Ernst & Young Tax Consultants Sdn Bhd (EY) said that the targeted exemptions reflect a 'progressive approach' by the government in balancing the need for increased revenue with socio-economic considerations. Still, industry observers caution that the broader scope of service tax to include rentals could lead to higher operational costs, which will be transferred to consumers through higher prices, potentially weakening consumer demand and discretionary spending. Teh Young Khean, senior executive director at real estate consultancy Knight Frank Malaysia, added that the 8 per cent tax could affect existing tenancy agreements that typically have fixed terms, prompting companies to reassess their real estate strategies. This may result in businesses postponing expansion or relocation plans, or in some cases, downsizing their commercial footprint, he added. 'We anticipate a potential temporary slowdown in leasing activity as most businesses would be affected by the increase in the cost of doing business,' Teh told CNA. STILL 'NECESSARY' TO ENSURE LONG-TERM FISCAL RESILIENCE: EXPERTS Despite the challenges faced by businesses and consumers, economic experts said that the expanded SST is 'necessary' to boost tax revenue collection and enhance Malaysia's fiscal sustainability. The Malaysian Institute of Economic Research noted that Malaysia's tax to gross domestic product (GDP) ratio of below 13 per cent is much lower than the Asia Pacific average of 19.3 per cent in 2022. 'Therefore, we acknowledge that the expansion is necessary as part of overall tax reform considering depleting petroleum revenue and expected reduction in personal income taxes due to an ageing society,' a spokesperson from the institute. Data from the Organisation for Economic Cooperation and Development (OECD) also found that the ratio is much lower than the OECD average of 34 per cent. Malaysia's 2025 fiscal outlook report in August last year estimated that Malaysia's petroleum-related revenue is projected to decline to 18.3 per cent of the total federal revenue in 2025, continuing a downward trend that began in 2009, Free Malaysia Today reported. 'The move aligns with the broader fiscal consolidation agenda, aiming to broaden the tax base, boost revenue collection, and progressively reduce the federal government's budget deficit from 4.1 per cent of GDP in 2024 to 3.8 per cent in 2025,' Singh, the tax partner from EY, told CNA. The Malaysian Institute of Economic Research acknowledged that the base expansion of the SST is being introduced 'during very challenging economic circumstances amid the reciprocal tariffs imposed by the US' on the global front. In the joint statement by the six business associations, the groups highlighted the growing trade uncertainty with the tariffs that could further undermine Malaysia's export competitiveness, especially for SMEs integrated into global value chains. The Malaysian Institute of Economic Research said the government thus has a 'very delicate balancing act' in achieving revenue needs amidst external challenges and concurrently elevating inflation pressure in the economy. 'While the SST expansion is strategically sound, a phased implementation approach would provide businesses with more time to adjust and ensure smoother compliance,' said Singh of EY. Lee from ISEAS said that the government should consider fine-tuning its tax reforms to minimise the potential impact of tax increases on domestic consumption and the retail sector given the external uncertainties which will impact exports and foreign direct investments. Experts also told CNA that the government's move to provide some limited exemptions are 'steps in the right direction' which needs to be further strengthened with additional support measures to help alleviate inflationary pressures on businesses and the people. The six business associations meanwhile have called for a more consultative approach that prioritises business stability, national competitiveness and long-term growth. 'It is imperative that any tax policy or adjustment be approached with empathy and practicality, with the aim of ensuring that it does not become an added burden on already struggling enterprises,' the statement read, as quoted by the New Straits Times. The group of business associations has slammed the SST framework for lacking transparency and efficiency as compared to the previous Goods and Services Tax (GST), which avoided cascading taxation across supply chains. Cascading tax is a type of tax that's imposed at each stage of a product's journey along the supply chain. According to the groups, the SST model is unsustainable for SMEs operating on thin margins, discouraging investment, expansion and job creation, as reported by the New Straits Times. Anwar has defended the government's position, saying that it is not ready to reintroduce the GST as it is a broad-based tax that would affect all segments of society, especially the poor. 'GST taxes everybody. While it is efficient and straightforward, just 6 per cent across the board, I must ask, if everyone has to pay 6 per cent, why should the poor and the unemployed be taxed as well?' he said on Jun 15, as quoted by local media. WILL THE EXPANDED SST AFFECT ANWAR'S POLITICAL SUPPORT? The proposed tax expansion was announced by Anwar, who is also the finance minister, during the tabling of Budget 2025 in October last year. Although implementation was initially scheduled for May 1, full details of the revised scope were only confirmed on Jun 9. Some observers told CNA that the move could have political repercussions, especially among the urban middle class. 'If domestic consumption is severely impacted, this will reverberate to the lower-income population through unemployment,' Lee from ISEAS told CNA. However economic expert Ida Md Yasin from Putra Business School in Malaysia said that the SST expansion is 'only one of several factors' that will shape public support for Anwar. The finance ministry has announced that penalties against companies for non-compliance with the tax's legal requirements will not be imposed until Dec 31. Anwar's political secretary Muhammad Kamil has also reiterated the government's flexibility in responding to public concerns. 'This is not divine law, it's human legislation. So, there's no issue if adjustments or improvements are needed. What's important is that the majority of the people are not burdened by this expansion,' he said, as quoted by Malay Mail.
CNA
3 days ago
- Business
- CNA
CNA938 Rewind - Why Chinese brands are expanding in Indonesia
CNA938 Rewind Researchers at ISEAS-Yusof Ishak Institute say newcomer food and beverage brands from China are surging in some Southeast Asian markets like Indonesia. Andrea Heng and Susan Ng speak with Nirgunan Thiruchelvam, Head of Consumer and Internet, Aletheia Capital, to examine the appeal of the country and wider region, and how it fits into China's economic recovery story.
CNA
30-05-2025
- General
- CNA
US should not see China defence chief's absence at Shangri-La Dialogue as a snub: ISEAS director
Mr Choi Shing Kwok, director and chief executive officer at the ISEAS-Yusof Ishak Institute, explains why he does not see the absence of Chinese defence officials at the Shangri-La Dialogue in Singapore as a missed opportunity for Beijing. He also shares why French President Emmanuel Macron's attendance at the annual defence gathering is a show of support for Asian allies.
South China Morning Post
30-05-2025
- Business
- South China Morning Post
Vietnam's Mekong challenge: balancing ties with China amid build up of dams, canal projects
China-backed projects on the Mekong River may complicate ties with Vietnam, analysts warn, as Hanoi navigates the delicate balance of cooperation with Beijing while maintaining a strategic presence in neighbouring Cambodia and Laos. At a recent online forum on May 27, the discussion centred on Vietnam's complex security challenges and how Hanoi can maintain relations with its three neighbours while protecting its interests, especially amid China's growing economic influence in infrastructure projects, such as dams in Laos and Cambodia. China has embarked on extensive dam-building activities in the Mekong area, operating 12 mainstream dams and 95 tributary dams that pose an upstream threat to Vietnam, according to Phan Xuan Dung, research officer at ISEAS Yusof Ishak Institute and a PhD candidate at Australian National University. 'These dam projects have been developed unilaterally without consultation with the lower Mekong countries,' Phan said, adding that the dams have significantly reduced water flow and sediment reaching the Mekong Delta. The Mekong Delta serves as Vietnam's agricultural powerhouse, supporting some 80 million people and contributes to one-third of the country's gross domestic product, Phan said. Workers use excavators to dig the Funan Techo canal along the Prek Takeo channel that runs into the Mekong River in Cambodia. Photo: AFP Meanwhile, Laos operates 77 dams with 61 more planned, including seven on the mainstream Mekong, as it furthers its ambition to become the 'battery of Southeast Asia' by exporting hydropower energy.
CNA
29-05-2025
- Business
- CNA
China is wooing Malaysia and Indonesia with mega investments. Is the plan working?
KUALA LUMPUR and JAKARTA: If the Association of Southeast Asian Nations (ASEAN) were forced to choose between the world's pre-eminent powers, 71 per cent of Malaysians would prefer China over the United States. That is according to the State of Southeast Asia 2025 survey, published last month by the ISEAS – Yusof Ishak Institute in Singapore. Leaving aside United States President Donald Trump's tariffs, one of the reasons for Malaysians' support for aligning with China is its 'growing economic importance' in the region, said former Malaysian deputy minister of international trade and industry Ong Kian Ming. The transformation of Proton, Malaysia's national car brand, and the forthcoming East Coast Rail Link — with Beijing having a key role in both — are just two examples that may explain why Malaysians feel upbeat about working with China. Over in Indonesia, a survey in March last year showed that some 73 per cent of Indonesians perceived Beijing's activities in the South China Sea as a threat to their country's sovereignty. Yet, in the State of Southeast Asia 2025 survey, support for aligning with China was strongest in Indonesia (72 per cent). Whether Indonesians view China as a military adversary or a reliable economic partner, their country is of strategic importance to Beijing. Firstly, it is the world's largest Muslim country, cited Centre for China and Globalisation vice president Victor Gao. The second reason is its geopolitical position, which straddles 'a very long distance from the east to the west — so many islands'. Indonesia has a 'huge economic upside', he added, noting the move of its capital from Jakarta to Nusantara, East Kalimantan. 'That'll involve a lot of hard work and engineering breakthroughs — a huge amount of capital investment.' The country also has the largest Chinese diaspora community, numbering more than 11 million. That makes Indonesia 'very special' from China's perspective, he said, even as many of them are Indonesian citizens. Malaysia and Indonesia are two countries where China is making significant inroads with projects including industrial parks, ports, nickel-processing plants, auto factories and more. As tensions between China and the US continue, Beijing is focusing its market efforts on the Global South, which represents 85 per cent of the world's population. And the largest Global South economy on China's doorstep is ASEAN. Its combined gross domestic product in 2023 was US$3.8 trillion — the world's fifth-largest economy. Just this week, both sides, along with the Gulf Cooperation Council, held an inaugural summit to strengthen cooperation. As Trump's tariffs bring uncertainty to the region, will ASEAN member states such as Malaysia and Indonesia pivot to China, asks CNA series China And The Global South. THE EAST COAST RAIL LINK In Malaysia, one Chinese project taking shape is the 665km East Coast Rail Link that runs from Port Klang, the country's busiest port, and crosses to the east coast, with its final stop in Kelantan, near the Thai border. Once the railway is up and running in January 2027 — with 20 stations altogether — it will whisk freight and people across the country at up to 160kmh. It is a feat of engineering, with teams from China using mammoth machines to bore tunnels through mountain rock. Such mega projects are pricey. The construction of the rail link was priced at RM65.5 billion (US$15.5 billion at current rates) under the Najib Razak administration. Under the Anwar Ibrahim government, the cost of construction is expected to be RM50 billion. This makes it Southeast Asia's most expensive Belt and Road railway project. In comparison, the Laos-China Railway cost US$6 billion. Chinese mega rail projects elsewhere in the world have also been subject to criticism for not having enough local multipliers and for using materials, labour and technology all from China. The Malaysian government has tried to assuage these concerns. Malaysian Transport Minister Anthony Loke pointed to the two countries' agreement to involve local companies in at least 40 per cent of the project's civil works. As to concerns about the project's impact on Malaysia's fiscal health, he said: 'We inherited this project. We don't have a choice, but we try to make the best of it.' He pointed to a 2019 renegotiation whereby the Chinese side accepted 50 per cent liability, in the form of a joint venture, for any operational losses during the loan period. But if there are profits, they will take 20 per cent and Malaysia will take 80 per cent to sustain repayments. These are the safeguards, said Loke, to ensure the project 'will be more sustainable and, hopefully, … operationally profitable'. Noting that the east coast of Peninsular Malaysia is relatively poorer in terms of economic development, he added that with the rail link, the government hopes to bring more manufacturing to the east coast, where land costs are also cheaper. 'There's still a lot of untapped and undeveloped land,' he said. There is already an industrial park waiting to connect to the rail link: the Malaysia-China Kuantan Industrial Park. It has attracted investments worth more than RM31 billion as of October 2023, which should create over 14,000 jobs. The industrial park is connected to the Kuantan Port, which has been expanded and upgraded by yet another Chinese company, the Guangxi Beibu Gulf International Port Group. Kuantan Port is Malaysia's closest port to China. Cargo ships sailing out take three days to reach the Guangxi region. A rail connection between Port Klang and Kuantan Port will then create 'a land bridge' between the Straits of Malacca and the South China Sea, said Loke. 'It's important in the sense that it creates infrastructure (that's) readily available. 'From a security point of view, from a supply chain point of view, if there are any tensions in the South China Sea, then this is a major option … that can be used.' WHAT CHINA'S REVAMP OF PROTON MEANS On the west coast of Peninsular Malaysia, another ambitious plan is afoot — to transform part of Perak into a national automotive hub and the country into a regional electric vehicle (EV) manufacturer. 'We know that our neighbouring countries are also attracting a lot of EV manufacturers,' said Loke. 'Malaysia has to, of course, step up.' It is doing so with high-tech robots from China assembling thousands of cars in Proton City, located in Tanjung Malim. This is the latest step in Proton's transformation since 2017, when China's Zhejiang Geely Holding Group acquired a 49.9 per cent stake in the car brand. The first was the introduction of the X70, Proton's first sport utility vehicle, in 2018. 'This was part of the technology transformation adopted by Proton,' said deputy chief executive officer Roslan Abdullah. 'We also learnt operational efficiency, thus reducing our operational costs.' In December, Proton launched its first homegrown EV, the 7, with retail prices starting at under RM110,000. Anwar hopes this will be the launch pad for a holistic ecosystem in Malaysia's EV sector. Geely's partnership with Proton would be a 'great business case study', said Ong, 'for Chinese companies and for others who are interested in seeing how a Chinese company can turn around a local entity in another country'. Sharing some of the key lessons, Roslan said the first was that the competition is unrelenting, as 'the market is big, and there are so many players'. To be 'ahead of everything', Proton migrated to new media marketing, besides introducing the latest technology. Secondly, because of the competition, 'everything is urgent', he said. 'We have to be very quick, and thus it improves our operation.' Motoring journalist Daniel Fernandez, the managing editor of is in no doubt that Geely's investment has been a 'huge success' for Proton. 'Because now there's no bailout from the government. That means the taxpayer isn't paying for Proton to stay alive,' he said. 'The older generation, who used to distrust Proton, … is slowly coming back to the brand. But the biggest change, I feel, is … the new generation of buyers are now happy to go into a Proton showroom.' WATCH: China's mega-investments in Malaysia as it woos ASEAN (25:40) Malaysia's investment figures over the past five years show that China is among the top five sources of FDI, with Netherlands, Singapore and the US also featuring on that list. Still, Chinese investments would not be more than 20 per cent of Malaysia's total FDI inflow — certainly not last year or in 2023 — Ong highlighted. That demonstrates, to him, 'a very balanced approach' to attracting FDI from different countries. Malaysia's leaders have always spoken of the need for non-alignment, and Loke affirmed that Malaysian foreign policy will remain neutral. 'We know that it's a very challenging situation right now,' he said. 'Hopefully, we can navigate this situation peacefully. 'We can continue to attract investment from both the US and China and … from Europe, from the Middle East, from Japan (and) Korea. These are all our major investors and major trading partners, so this will continuously be our focus.' A WHOOSH OF PRIDE AND NICKEL-PLATED DREAMS In Indonesia, a resort centre developed by the Dutch in the early 1900s has seen one Chinese-built structure have a major economic impact in the past two years. Bandung, the capital of West Java, is crested by hills and has lower year-round temperatures than most other Indonesian cities. It remains a popular holiday destination, but the drive from Jakarta takes at least two and a half hours. With a US$7.3 billion high-speed rail, Whoosh, now connecting the two cities — and its trains covering the 142km distance in around 40 minutes, zipping through the Indonesian landscape at up to 350kmh — business is booming for many. At the Mason Pine Hotel, the number of meetings, incentives, conferences and exhibitions has increased by more than 20 per cent, said Bayu Aji, its director of sales marketing until quite recently. 'And these customers keep coming back.' Many Jakarta-based corporations are hosting events in Bandung nowadays because a day trip to Bandung could even take less time than commuting within Jakarta. Also, the high-speed train is clean, punctual and comfortable. While there was 'a lot of discussion and polemic' on the high-speed rail — the first in Southeast Asia — before its completion, the uptake in its use has been 'very fast and very incredible', said former Indonesian trade minister Mari Pangestu. 'It's a very technologically advanced high-speed train, so in that sense, we're proud that this could be done in Indonesia,' added Mari, who is deputy chair of Indonesia's National Economic Council. 'And it wasn't just Chinese engineers. There were also Indonesian engineers, and there was a partnership there. There was a lot of capacity building and training.' China is also Indonesia's main partner in building its nickel sector. The Southeast Asian country has the world's largest reserves of this mineral, a key component for EV lithium batteries. Besides investors from China building smelters to refine nickel in places such as Sulawesi — adding value to Indonesia's metal exports and creating jobs — they are helping to build plants that produce battery materials and, soon enough, cars. China's BTR New Material Group and Singapore's Stellar Investment jointly invested US$478 million to build one such plant, which opened last August. Another US$299 million has been committed in a second phase of investment. Further downstream, Chinese electric car manufacturer GAC Aion is opening its Indonesian factory this year, targeting an annual production capacity of 50,000 units; and EV giant BYD is building a US$1 billion plant, with operations set to commence early next year. The biggest investment is coming from Chinese battery material maker CNGR Advanced Material Co, which plans to build an integrated production facility worth US$10 billion. These are all part of an economic development policy known as downstreaming, a critical pillar of Indonesian President Prabowo Subianto's plans for the country. And Chinese companies are playing a major role in Indonesia's efforts to add to the value chain because they have 'the most advanced and efficient technology', said National Economic Council executive secretary Septian Hario Seto. They make up the world's top 10 lithium battery companies, along with three from South Korea and 'one or two' from Japan. 'It is what it is today,' said the former deputy minister of investment and mining coordination. 'One thing that we can make sure is, we have a commitment (to) international cooperation. … The commitment from Indonesia is that we want our product to be freely sold to any country. So, it's not only to China.' TWO SIDES OF THE COIN Another recent priority for Indonesia was to join BRICS. The country became an official member on Jan 7 — the first in Southeast Asia to be part of the organisation. The group has been a growing political force in the past two decades, building on its desire to create a counterweight to Western influence. Some observers view Indonesia's membership as an indication that Jakarta is tilting towards Beijing. But Carlyle Thayer, an emeritus professor at the University of New South Wales, Canberra, sees more than that. Indonesia also wants to join the Organisation for Economic Co-operation and Development, he highlighted. 'The broader picture is to expand Indonesia's influence.' The country's foreign policy position is clear and based on national interests, said Septian. 'We don't want to lean towards (any one) axis.' But according to Ryan Hass, the director of the Brookings Institution's John L Thornton China Center, the Chinese strategy is to 'make other countries dependent upon them economically'. 'At the same time, China would like to establish military dominance over them,' he said. 'This combination of economic dependence and military dominance, (the Chinese) believe, should compel other countries to become more accommodating … (to) China and its long-term goals.' Indonesia is one of the countries China's territorial interests will 'run up against', he added. In this case, Beijing's nine-dash-line map of the South China Sea overlaps with Indonesia's exclusive economic zone near the oil- and gas-rich Natuna Islands. Gao, however, described claims of Chinese military ambitions against Indonesia as 'barking up the wrong tree'. 'We've been here for hundreds, if not thousands, of years. And between China and Indonesia, there have never been territorial adventures against each other,' he said. Indonesia is bulking up its defence regardless. In January, when Japanese Prime Minister Shigeru Ishiba visited Jakarta, it was announced that Japan would give Indonesia two high-speed patrol boats and boost regional maritime security cooperation. In 2023, the Indonesian military was the only one from ASEAN that participated in a two-week training exercise between Australia and the US. Experts have pointed out that these war games, called Talisman Sabre, are designed with China in mind. It is a balancing act, however, for Indonesia: Jakarta and Beijing have plans for joint military exercises this year. Indonesia sees the two sides of the coin, according to Mari. 'We do see China as an important market, also an important source of goods, components, investments and tourists, so there's the positive side,' she said. On the downside, there are, among other things, labour-related issues involving Chinese workers. 'In the 70s, we had kind of similar issues when there was a lot of Japanese investment,' she said. 'Both sides need to … accept each other's differences.' As for the perceived potential military threat and the Natunas issue, she hopes economic pragmatism will prevail. 'Can we look at whether we can develop this jointly?' she said. 'That's a more pragmatic view.'
