Chinese market presents opportunity for Malaysia

By Feng Da Hsuan and Liang Haiming Source:Global Times Published: 2017/9/7 20:48:39

Illustration: Luo Xuan/GT

Malaysia and China recently announced a massive economic and trade collaboration project related to Malaysia's East Coast Rail Link (ECRL), which will connect Peninsular Malaysia's east and west coasts.

We learned from our Malaysian contacts during our recent visit that such a big project would undoubtedly bring significant economic benefits to Malaysia, but one could also hear voices of discontent. Such voices are centered along the following lines.

First, since the Chinese investments in ECRL are significant, both technically and financially, it is expected that most if not all of the "local" benefits will be channeled to the large indigenous corporations, and not the small to medium ones.

Second, from the Malaysian side, there is no expectation that advanced Chinese technologies will be transferred to Malaysia, or any significant number of Malaysian workforce will be hired for the construction. Thus, it is believed that ECRL would be of little or no benefit to ordinary Malaysians.

Third, there is much discussion about the lack of transparency in bidding processes, which will surely enhance corruption.  

In our opinion, such discussions could be the result of misunderstandings. Our reasoning can be summarized as follows:

First, utilizing ECRL as an example where small and medium corporations are not at the receiving end of the benefits, the Malaysian government has made it abundantly clear that 15 percent to 30 percent of the engineering projects required by the project will be awarded to "national corporations." Furthermore, it is estimated that when ECRL is fully operational, the three to four Malaysian states involved can expect the project to enhance their economic growth at the level of 1.5 percent annually.

As a project whose purpose is to develop fundamental infrastructure, the above data clearly demonstrates that even if the small to medium corporations cannot receive direct or significant benefits in the short term, they surely will in the medium to long term.

Second, as far as technology transfer and job opportunities are concerned, it is estimated based on the official Malaysian data that even during the development period, various ECRL projects can and will create some 80,000 new jobs. Furthermore, China and Malaysia will initiate a robust "China-Malaysia Railway Talent Training Cooperation Program." Through this program, it is anticipated that some 3,600 Malaysian technical personnel will become well versed in the Chinese high speed rail technologies. There is another intriguing factor which needs to be taken into account. That is, Malaysia has the highest number of "foreign workers" (FWs). Chinese investments are primarily in basic infrastructure construction and agriculture. It is known that Malaysia's indigenous population tend to "shy away" from such jobs, and relinquish them to FWs. In this backdrop, even if the Chinese enterprises were to be "Malaysianized," it is expected that the hired workforce will not be primarily from the country.

 Third, during our stay in Malaysia, we learned that some of the local media were questioning the Chinese investments for accentuating corruption. Many have pointed out in the past that within Malaysia, the bidding and contract processes had some corruption and nepotism. For example, according to Utusan Melayu, a Malay-language newspaper, for every 100 million Ringgits (which is approximately $23.4 million) worth of public works contracts, 30 percent would go to bribes. If this was true, then surely it should and must attract the attention of the Malaysian government. After all, only if most, if not all, economic processes have clear, concise, transparent and conducive Standard Operating Procedures (SOP) could Malaysia attract serious and large-scale foreign investments, including those from China.

Indeed, as the Chinese and foreign enterprises make more transparent their work processes and specifications during the bidding process, this will definitely render Malaysia's business bidding process more transparent.

As an old saying goes, accurate data speaks loudly. With the above mentioned data, it is quite clear that Malaysia's small and medium businesses as well as its general public can and will benefit from the Chinese investments. Why then should there still be lingering misunderstandings? The reason, according to us, is because for Malaysians, investments from China are foreign in nature and for Chinese, Malaysia is a new market. It is clear that both sides have gaps in their understanding of each other's ways and means, and both need to do serious and important "homework." We urge the Chinese entrepreneurs to engage in acquiring Malaysian culture as soon as possible, a culture that must go way beyond the Malaysian Chinese communities.

Perhaps what is truly important for Malaysia's small and medium entrepreneurs and the general public is to not look for "lean" opportunities but "large" ones. We urge Malaysia's small and medium entrepreneurs as well as the general public to seriously engage in and travel to China to profoundly understand China's current economic situation and the Chinese needs and aspirations. To put it simply, China's massive market presents the most significant economic opportunities for Malaysians.

Feng Da Hsuan is senior advisor with China Silk Road iValley Research Institute and former vice president for Research and Economic Development at the University of Texas. Liang Haiming is chairman and chief economist with China Silk Road iValley Research Institute.

Posted in: INSIDER'S EYE

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