Anisha Bhaduri says city’s growing pivot to Muslim nations is a forward-looking policy of exploration beyond its traditional trading partners

On Dec 10, one of the pledges made in Chief Executive John Lee Ka-Chiu’s 2025 Policy Address came to fruition with the opening of the Economic and Trade Office (ETO) in Kuala Lumpur. This is the fourth ETO established by the Hong Kong Special Administrative Region government in the Association of Southeast Asian Nations (ASEAN) region, after setting up ETOs in Singapore, Jakarta and Bangkok, indicating a deepening regional engagement that is not only singularly trade-reliant but also a nod to the evolving dynamics of diplomacy, people-to-people relations and emerging technologies.

Malaysia’s ministry of foreign affairs welcomed the development, saying it was “a historic milestone that significantly strengthens the robust and positive relationship between Malaysia and the HKSAR”.

Malaysia is Hong Kong's eighth-largest trading partner and the third-largest among the 10-member ASEAN comprising Brunei Darussalam, Cambodia, Indonesia, the Lao People's Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. According to Hong Kong Trade Development Council (HKTDC) research from Feb 2025, Hong Kong has been the second largest investor in Malaysia, having contributed “about $25 billion of the country’s total FDI (foreign direct investment) stock as of end 2023”. Some 80 percent of Hong Kong’s total FDI stock in Malaysia was poured into parts of the service sector such as banking and logistics with the remainder going to manufacturing.

HKTDC data from Nov 2024 identifies Malaysia as the third-largest investor in Hong Kong among the 10 ASEAN member states. "Its cumulative FDI in Hong Kong reached a total of $4.4 billion by the end of 2022, accounting for 0.2 percent of total FDI stock in Hong Kong."

If we consider how Malaysia’s recent investment facilitation measures, two particular initiatives might resonate with Hong Kong.

In May 2024, Malaysia introduced the Malaysia Digital (MD) Tax Incentive, an initiative for digital firms working with AI, big data analytics, blockchain and integrated circuit design with embedded software.

Also, the Malaysian government announced that it will allocate 100 million Malaysian ringgit (US$21 million) to stimulate Islamic finance innovations. The country is a leading Islamic finance hub.

Here’s something else about Malaysia that might interest Hong Kong. In December, it emerged that Malaysia’s small- and medium-sized enterprises (SME) sector rebounded remarkably with recent data showing that SME GDP grew by 11.6 percent, surpassing the national average.

The legal dimension should not be ignored either: The common law heritage shared by Malaysia and Hong Kong. As Secretary for Justice Paul Lam Ting-kwok pointed out in a speech in Malaysia last year, between 2018 and 2024, Court of Final Appeal (CFA) judgments have been cited on 46 occasions in a number of common law jurisdictions. To quote Lam, “There are around 13,000 solicitors, 1,600 barristers and more than 920 law firms in Hong Kong. Some of these firms have altogether 315 overseas offices and 85 offices in mainland China. And we have 77 registered foreign law firms and more than 1,450 registered foreign lawyers.”

The Jakarta, Bangkok and Singapore ETOs have their work cut out. For example, the Jakarta ETO not only represents the HKSAR government on matters between Hong Kong and ASEAN as a whole, but is also responsible for promoting economic and trade ties between Hong Kong and four ASEAN countries — Indonesia, Malaysia, Brunei Darussalam and the Philippines.

The Bangkok ETO is focused on Thailand, Cambodia, Myanmar and Bangladesh.  And, the Singapore ETO has under its purview Singapore, Laos, Vietnam and India.

With the Jakarta ETO already broadly responsible for Malaysia, a separate ETO in Kuala Lumpur for focused engagement is perhaps warranted as the people-to-people dimension buttresses the bilateral trade aspects.

In his Sept 2025 Policy Address, the chief executive pledged to further promote Muslim tourism — "...we will strengthen our strategy of 'accreditation, education, and promotion', encouraging the industry to provide more Muslim-friendly facilities and food options," he said.

HKTDC data from Aug 2025 tells us that Southeast-Asian visitors from Muslim‑majority nations surged in 2024 to become Hong Kong’s second‑largest source of tourists after the Chinese mainland. According to Hong Kong Tourism Board statistics, Malaysian visits registered a 50 percent rise to 405,508, while Indonesian arrivals surged 43 percent to 366,973. The city also welcomed 16,498 visitors from the Gulf Cooperation Council (GCC) nations comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Speaking of Saudi Arabia, eyes were again on growing ties when Financial Secretary Paul Chan Mo-po announced at a conference in November that a major Saudi development company was planning a roadshow in the city in December to look for strategic partners. Earlier in November, Hong Kong saw the first IPO by a company headquartered in the Middle East — the Dubai-based multinational Softcare.

At the same conference, Chan said the Hong Kong Monetary Authority (HKMA) and the Public Investment Fund (PIF) of Saudi Arabia will soon jointly launch a $1 billion fund, the agreement for which was inked in Riyadh in October 2024, as widely reported. The fund aims to support Hong Kong and Greater Bay Area companies to expand into Saudi Arabia.  

During Chan’s visit to Saudi Arabia in late October, five memoranda of understanding (MoUs) were signed spanning a wide range of fields but the fields of innovation and technology and the digital economy were key. Significantly, three technology firms from Hong Kong and the Chinese mainland specializing in AI, smart sensing technologies and robotics signed MoUs with Saudi enterprises in areas of technology application, business development and scenario implementation.

Given Saudi Arabia’s recent overseas deals to harness and build on growing AI prowess, it would seem that Hong Kong’s overtures are timely and new-age.

The city’s growing pivot to Muslim nations is a forward looking policy to meaningfully engage with Asian countries to the west of Hong Kong as it continues to explore and grow beyond its traditional engagement bases. And, what is encouraging is that the people-to-people aspect of it is consistently factored in.

The author is an award-winning English-language fiction writer and current-affairs commentator.

The views do not necessarily reflect those of China Daily.