Body needed to study social impact of FDI: Ideas chairman
PETALING JAYA: Institute for Democracy and Economic Affairs (Ideas) chairman Tan Sri Rebecca Fatima Sta Maria said it is crucial for the government to form a body to assess the social impact of any foreign direct investment (FDI) that comes into Malaysia as there is already an existing one to look into the environmental impact.
Rebecca, who was previously secretary-general of the Ministry of International Trade and Industry, noted that there has been a reversal in the flow of FDIs between the two countries as Malaysian investments in China used to be six times more than China’s investments in Malaysia.
Ideas yesterday unveiled its report on the “Impacts of Investment From China in Malaysia on the Local Economy” which noted that there is a lack of technology and skills transfer from China to Malaysia, as well as the employment of Chinese subcontractors and labour for construction projects undertaken in Malaysia.
Rebecca, who delivered her opening remarks at the session, noted that the study by Ideas was carried out based on secondary data and there is a need for academics to work together with government bodies such as Malaysian Investment Development Authority and the Statistics Department due to the availability of data on the nature of the investments with these agencies.
“We need to get more vigorous analysis of the nature of the investments in Malaysia so we can then make more concrete solid conclusions. I am hoping that today’s discussions will see us getting in that direction,” she said.
Ideas director of research and development Laurence Todd said while presenting the report that skill requirements, differences in working practices, cultural preferences, language barriers, local capacity, access to finance and politically motivated preferences were identified as possible causes for the employment of Chinese sub-contractors and labour force for projects undertaken by Chinese companies in Malaysia.
According to him, evidence from other countries suggests FDI is most beneficial when there is a high level of technology and knowledge transfer but this requires the involvement of human capital.
“There are indications that Chinese firms do not always provide opportunities for such transfers, particularly to local SMEs,” he said while adding that there is a need for the skills gap to be bridged.
Meanwhile, Dr Cheong Kee Cheok of University Malaya’s Institute of China Studies said in his commentary on the paper that the onus lies with the holding company, which is usually local, on calling for more local participation in the labour force. Foreign companies incorporated in Malaysia are required have at least 51% local shareholders.
He also noted that if skills transfer is what these companies are looking at, they should be included as a clause in contracts.
When it comes to government contracts, he said the government should also bargain to secure reasonable deals.
China’s investments are not only limited to construction but are also seen in the services and manufacturing sectors as well as the Malaysian stock and bond markets, which gained momentum under the previous administration.
The report flagged the Melaka Gateway project which has come under criticism due to the lack of consideration of the impact on local communities and the environment. The RM43 billion project is now being reassessed.