ChineseInvestmentsinMalaysiaandItsImpactontheSMELabourMarket
NATIONALECONOMICOUTLOOKCONFERENCE(MIER)22November2017WanSaifulWanJanChiefExecu1ve,IDEAS
TheNewEconomicModel
• ThetopicshouldbeexaminedinthecontextoftheNEM
• NEMaimstomakeMalaysiaadevelopedandcompeKKveeconomywhosepeopleenjoyahighqualityoflifeandahighlevelofincomeresulKngfromgrowththatisbothinclusiveandsustainable.
• TheMalaysianeconomywouldbemarket-led,well-governed,regionallyintegrated,entrepreneurialandinnovaKve.
ChineseInvestmentsinMalaysia
- In2017,ChinaremainedasMalaysia’stoptradingpartnerfortheeighthyearinarow
- ChinaisthehighestFDIinvestorinMalaysia,surpassingtheUS,SingaporeandJapan
- ChinasurpassedSingaporeasthelargestinvestorinMalaysia’srealestate
- ChinaisoneofthelargestforeigncontractorsinMalaysia
AreChineseinvestmentsleadingustoNEM’sdeveloped,compe11ve,highincomeeconomy?
CaseStudiesofChineseInvestmentsinAfricaandItsImpactontheLabourMarket
OVERVIEW
- ChineseinvestmentsintotheAfricanconKnenthasbeenontheupswingsince2009.
- A2014WorldBankReportindicatedthatthereare450ChineseownedprojectsinAfrica.46%inmanufacturing,40%inservicesand9%inresourcerelatedindustries.
- ThenumberofChineseworkersinAfricaisjustover252,000asof2004.StaKsKcsdonotaccountforSMEworkerswhichesKmatesbelievewouldtakethefiguretowards750,000.
- HighestdensityofChineseworkerscurrentlyinAlgeria(70,542)andAngola(50,231).LowestnumberofworkersarefoundinMaliandTogorespecKvely.
Kenya:CaseStudy
- Ina2014SACEsurvey,itwasreportedthat93%ofChinesecompaniesinKenyahiredKenyanworkers.
- Amongstthecompaniessurveyed,itwasreportedthatKenyanscomprise78%offullKmelabourand95%ofpart-Kmelabour
- 63%ofChinesecompaniesinKenyareporthavingapolicytoreplaceChineseworkerswithlocalsatallechelonsoftheworkforce.
- LocalemployeesarealsoaffordedtrainingbyChineseemployeestopreparethemfortakingoverofseniorposiKons.
DatatakenfromtheChineseCompanies’Percep1onSurveyofDoingBusinessinKenya2014
SouthAfrica:CaseStudy- StellenboschUniversitystudy(2012)found160ChinesefirmsinSouthAfrica.
Only49supplydata,andtheycreateatleast13,000jobsforlocals.
- Chineseinvestmentcreatesnewjobsforlocal'upstream'and'downstream'firmssuchasrawmaterialsuppliers,logisKcsfirmsandadverKsingagencies.
- HiSensehascreatednearly300indirectjobssinceitbegunthedevelopmentofitindustrialpark.ThisisknownasindirectjobcreaKonofFDI.
- ZTEhascreated5000indirectjobsforlocaltelecomoperators,contractorsofprojectsandsuppliersoftelecomproducts.
- StrictlawsbySAgovernmenthavequotasinplacethatrequireforeignfirmstohirelocalemployees.Onlywherethereisaskilldeficiencycanalocallabourerbereplacedbyforeigncounterpart.
Africa:PosiKveEffects
- Ingeneral,ChineseinvestmentsinAfricacreatesincreasedtrade,FDI,andimprovementintheinfrastructuresector.
- TheconKnenthasseenanincreaseinemploymentopportuniKesforlocals,withtheexcepKonofNorthernAfricawheretheeffectswereinsignificant.
- China’saidandfinancingfillsavoidlegbytheWestandpromotesthedevelopmentofAfricancountries.
- ManyChineseprojectsrequirelargeinvestmentandallowsforlongtermrepaymentthattradiKonaldonors/financiersarereluctanttoprovide.
Africa:NegaKveEffects
- BacklashagainstChineseinvestmentisrisingacrossAfrica.
- LocalresidentsaccuseChineseofstealingjobsandisolaKngthemselvesbybuildingworldsthatrepresentChina
- EgyptandAngolahaveKghtenedlabourlawstoensurerestricKonsonthenumberofChineseworkersentering.
- Egyptlawcurrentlyallowsoneforeignworkerforeveryninelocalsemployed.Angolarequires70%ofafirm’slabourforcetobelocal.
Africa:NegaKveEffects
- UnhappinesswhenconstrucKonoftheCapeCoastStadiuminGhanahadChineselabouraccountfortwo-thirdsofthelabourforce.
- Chineseemployerstendtopaythelowestsalaries/wagesinAfrica,notgranKnganymeaningfulbenefittoAfricanworkers.
- InmostpartsofAfrica,majorityofChinesefirmsemploylocallabourintolowskilledposiKons.
- Academicsurvey(2014)among400companiesin40African
countriesfoundthatlowskilledroleswere80-97%occupiedbylocals.
LessonsFromAfrica
- ChinesecompaniesbringmanyworkersfromChina,paylowwages,provideminimalbenefits,andminimaltrainings.
- Wagesvaryamongdifferentcompanies.Somehigherthanothers,butgenerallysKlllow.
- Chinesecompaniesarequicktoadaptthemselvestothehost’ssocio-legalcontext.
- Theydocreatenewjobs.Butmainlylow-skilled.
TheMalaysianCaseWhatWeKnowThusFar...
Whatwedid
- FocusedontheEasternCorridorEconomicRegion(ECER).
- InterviewedkeypersonnelfromMCKIP,ECERDCandMCCC.
- MCKIP,withanareatotaling3000acres,hasajractedalargeamountofChineseinvestments.
- NarroweddownthestudytoMCKIP
BackgroundofMCKIP
- Malaysia’sfirstNaKonalIndustrialParkjointlydevelopedbyMalaysiaandChina.SisterparkistheChina-MalaysiaQinzhouIndustrialParkinQinzhou,China.
- 51%ownedbyIJMLand,SimeDarbyPropertyandthePahangStateGovernment.49%byBeibuGulfPortGroupandQinzhouInvestmentDevelopmentCo.Ltd.
- TheindustryclustersinMCKIPare:i. Steelandnon-ferrousmetalsindustryii. Machineryandequipmentmanufacturingiii. Cleantechnologyandrenewableenergyiv. Oil&gasandpetrochemicalenergyv. Electricalandelectronicindustryvi. Researchanddevelopment
MapofMCKIP
InvestmentsinMCKIP
- Asof2015,MCKIPhasajractedRM15.08billionininvestments.
- AllianceSteelisthefirstinvestor,bringinginatotalofRM5.6billioninMCKIPphase1.
- Buildingisongoingfora710-acresteelmillthatcanproduce3.5milliontonnesofsteelannually.
- Thetargetamountofinvestmentsfor2017isRM10billion.
LabourinMCKIP
- Immediatelyfoundchallengeswithdata.NopubliclyavailabledataonnumberofChineseandMalaysianworkersinMCKIP.
- TherearelocalcompaniesconstrucKngtheAllianceSteelfactory,forexampleindoingtheearthworks.
- ButmanyjobsrequiringhigherskillsareundertakenbyChineseworkersbroughtinbytheinvestors.
DoesMCKIPfitintotheNEM?
- TheMCKIPpromiseshigh-valueinvestments,andcanhelpgrowMalaysia’seconomy.
- Immediatejobsaremainlylow-skilledinconstrucKons.Laterjobsarefactory-based.
- UncertainhowtotransiKonhigher-leveljobstolocals.
- Uncertainifthelevelofwages/incomeoftheworkersare“high-income”.
Keychallenges
- Immediateterm:ShortageoflocallabourMalaysiansareunajractedtolabour-typejobseventhoughECERDChassetan80:20labourraKo.
- Immediate–Midterm:LocallabourunproducIveChineselabourismoreproducKveandefficient.Theyworklongerhours,workonweekendsandpublicholidaysforthesamepay,adheretostrictersafetyandoperaKonalstandards.MalaysianlabourturnoverishigherandlessproducKve.Inshort,locallaboursarenotajracKvetoemployers.
Keychallenges
- Long-term:Wherearethehigh-incomejobs?Thereisnoquotaforhigher-skilledjobs.Vastmajorityofthejobscreatednowarelower-skilled.Inthefuturetheyaremainlyfactory-based.
SomepolicyquesKons
1. DowehaveaplanonhowtoensuretheinvestmentsfitintoourNEM?OristheNEMnownolongerthe“masterplan”?
2. Willtheannouncedinvestmentsreallycreatehigh-incomejobs?(notforgerngthatsomejobsmaybenew,suchasonlineretailers)
3. DowehaveenoughskilledmanpowertotakeovertheprojectsagertheChinesehavecompletedthem?IsoureducaKonsystemgoodenough?
4. WhyisourlabourerssounproducKve?.
