Most Read
Most Commented

MP SPEAKS Dr Mahathir Mohamad is still stuck in the past and is unable to accept that the economic reality and requirements for Malaysia to progress are now different.

Foreign Direct Investment (FDI) is not just about investment in the manufacturing industry. In order to move Malaysia to the next stage of our economic development of a developed high income country, we need to develop the services sector.

In most developed countries, the services sector contributes as much as 80 percent of the employment and their Gross Domestic Output.

In an effort to break out from the middle-income trap and provide higher-income jobs - particularly knowledge-based jobs, for Malaysians, the government had made a deliberate effort to develop the services sector and rebalance our economy. This effort had started since 2009.

The Forest City project which Dr Mahathir had repeatedly attacked using a racial bias is an example of such a FDI in the services sector.

The low-cost manufacturing-based industry that was competing based on a lowest-cost basis had played its role as Malaysia transitioned from an agriculture-based economy to manufacturing.

It is particularly telling that Mahathir had recently written in his blog that foreign manufacturers will be attracted by "low-cost Malaysians", tax holidays and free land.

In our current situation of economic full employment, Malaysia had to depend on foreign workers to fill such manufacturing jobs. Curiously, there were no complaints from Dr Mahathir about foreign workers' remittances or repatriation during that period, which was estimated at RM20 billion per year.

Outflow of capital has been around since Malaysia opened its economy to the world decades ago. Multinational companies who set up their operations in Malaysia have been repatriating profits from local operations back to their headquarters since the 1980s.

On top of foreign workers' repatriations, there has also been a net outflow of RM20 billion in investment income every year since 1999. This means foreign companies in Malaysia have been repatriating profits from their operations in Malaysia since back then.

This essentially means that Malaysia is a place where foreign investors can set up operations, create jobs and make money without any undue problems. This has been the case since Dr Mahathir's reign.

Mahathir needs to understand that Malaysia has out-grown that model and we can no longer compete based on low-cost manufacturing industries as this would mean to continue depressing Malaysian salaries and income - a chief complaint of Malaysians before 2009.

It is sheer insanity to keep on doing the same thing and expecting a different result.

Despite the government's focus to move from a low-cost, manufacturing-based industry into the high-segment, service-based industry (as in developed countries), the manufacturing sector is still among the highest recipients of FDI.

Malaysia still places high importance on the manufacturing sector. However, the government has become more selective in what type of FDI in manufacturing it wants here and prefers high value-added manufacturers with a high degree of automation that is vertically integrated that takes advantage of our extensive infrastructure and the advantages that Malaysia offers.

In 2015, out of RM43.4 billion in FDI, almost 40 percent or RM17.1 billion of FDI went into the manufacturing sector. This conclusively shows that we are still attracting FDI into the manufacturing sector.

Investment in the manufacturing sector since 2009 is still double of what it was in the 1990s when Dr Mahathir was in charge.

However, investments in the services sector since 2009 has boomed from RM30 billion to as high as RM150 billion in 2014 and RM115 billion in 2015.

It is also not true that Johor is only attracting FDI via land sale to foreigners. Since 2012, Johor has displaced Selangor and Penang as the number one state in attracting manufacturing investments

This has led to significant growth in the economic development of Johor to the extent that the median household income and median average salary for Johor had overtaken Penang during this period.

Although land is a state issue, there are enough laws and regulations at both the state level and federal government that will act as checks and balances on foreign investment.

The Johor state government and the federal government will never allow the rights of Malaysians -especially the bumiputra population - to be encroached on. This is a promise we intend to keep. Neither will we allow politicians to use racist arguments to sabotage our economy and put in jeopardy our plans to bring Johor and Malaysia into high-income status

We can keep reminiscing about the past of low-cost manufacturing, or we can move forward to progress as a nation. It is all Malaysians' choice, not some individual’s choice.


ABDUL RAHMAN DAHLAN is a Minister in the Prime Minister's Department, Economic Planning Unit.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

ADS