Chinese Investments in Malaysia and Its Impact on the SME Labour Market

Transcription

1 Chinese Investments in Malaysia and Its Impact on the SME Labour Market NATIONAL ECONOMIC OUTLOOK CONFERENCE (MIER) 22 November 2017 Wan Saiful Wan Jan Chief Execu1ve, IDEAS

2 The New Economic Model The topic should be examined in the context of the NEM NEM aims to make Malaysia a developed and compekkve economy whose people enjoy a high quality of life and a high level of income resulkng from growth that is both inclusive and sustainable. The Malaysian economy would be market-led, well-governed, regionally integrated, entrepreneurial and innovakve.

3 Chinese Investments in Malaysia - In 2017, China remained as Malaysia s top trading partner for the eighth year in a row - China is the highest FDI investor in Malaysia, surpassing the US, Singapore and Japan - China surpassed Singapore as the largest investor in Malaysia s real estate - China is one of the largest foreign contractors in Malaysia Are Chinese investments leading us to NEM s developed, compe11ve, high income economy?

4 Case Studies of Chinese Investments in Africa and Its Impact on the Labour Market

5 OVERVIEW - Chinese investments into the African conknent has been on the upswing since A 2014 World Bank Report indicated that there are 450 Chinese owned projects in Africa. 46% in manufacturing, 40% in services and 9% in resource related industries. - The number of Chinese workers in Africa is just over 252,000 as of StaKsKcs do not account for SME workers which eskmates believe would take the figure towards 750, Highest density of Chinese workers currently in Algeria(70,542) and Angola(50,231). Lowest number of workers are found in Mali and Togo respeckvely.

6 Kenya: Case Study - In a 2014 SACE survey, it was reported that 93% of Chinese companies in Kenya hired Kenyan workers. - Amongst the companies surveyed, it was reported that Kenyans comprise 78% of full Kme labour and 95% of part- Kme labour - 63% of Chinese companies in Kenya report having a policy to replace Chinese workers with locals at all echelons of the work force. - Local employees are also afforded training by Chinese employees to prepare them for taking over of senior posikons. Data taken from the Chinese Companies Percep1on Survey of Doing Business in Kenya 2014

7 South Africa: Case Study - Stellenbosch University study (2012) found 160 Chinese firms in South Africa. Only 49 supply data, and they create at least 13,000 jobs for locals. - Chinese investment creates new jobs for local 'upstream' and 'downstream' firms such as raw material suppliers, logiskcs firms and adverksing agencies. - HiSense has created nearly 300 indirect jobs since it begun the development of it industrial park. This is known as indirect job creakon of FDI. - ZTE has created 5000 indirect jobs for local telecom operators, contractors of projects and suppliers of telecom products. - Strict laws by SA government have quotas in place that require foreign firms to hire local employees. Only where there is a skill deficiency can a local labourer be replaced by foreign counterpart.

8 Africa: PosiKve Effects - In general, Chinese investments in Africa creates increased trade, FDI, and improvement in the infrastructure sector. - The conknent has seen an increase in employment opportunikes for locals, with the excepkon of Northern Africa where the effects were insignificant. - China s aid and financing fills a void leg by the West and promotes the development of African countries. - Many Chinese projects require large investment and allows for long term repayment that tradikonal donors / financiers are reluctant to provide.

9 Africa: NegaKve Effects - Backlash against Chinese investment is rising across Africa. - Local residents accuse Chinese of stealing jobs and isolakng themselves by building worlds that represent China - Egypt and Angola have Kghtened labour laws to ensure restrickons on the number of Chinese workers entering. - Egypt law currently allows one foreign worker for every nine locals employed. Angola requires 70% of a firm s labour force to be local.

10 Africa: NegaKve Effects - Unhappiness when construckon of the Cape Coast Stadium in Ghana had Chinese labour account for two-thirds of the labour force. - Chinese employers tend to pay the lowest salaries / wages in Africa, not grankng any meaningful benefit to African workers. - In most parts of Africa, majority of Chinese firms employ local labour into low skilled posikons. - Academic survey (2014) among 400 companies in 40 African countries found that low skilled roles were 80-97% occupied by locals.

11 Lessons From Africa - Chinese companies bring many workers from China, pay low wages, provide minimal benefits, and minimal trainings. - Wages vary among different companies. Some higher than others, but generally skll low. - Chinese companies are quick to adapt themselves to the host s socio-legal context. - They do create new jobs. But mainly low-skilled.

12 The Malaysian Case What We Know Thus Far...

13 What we did - Focused on the Eastern Corridor Economic Region (ECER). - Interviewed key personnel from MCKIP, ECERDC and MCCC. - MCKIP, with an area totaling 3000 acres, has ajracted a large amount of Chinese investments. - Narrowed down the study to MCKIP

14 Background of MCKIP - Malaysia s first NaKonal Industrial Park jointly developed by Malaysia and China. Sister park is the China-Malaysia Qinzhou Industrial Park in Qinzhou, China. - 51% owned by IJM Land, Sime Darby Property and the Pahang State Government. 49% by Beibu Gulf Port Group and Qinzhou Investment Development Co. Ltd. - The industry clusters in MCKIP are: i. Steel and non-ferrous metals industry ii. Machinery and equipment manufacturing iii. Clean technology and renewable energy iv. Oil & gas and petrochemical energy v. Electrical and electronic industry vi. Research and development

15 Map of MCKIP

16 Investments in MCKIP - As of 2015, MCKIP has ajracted RM15.08 billion in investments. - Alliance Steel is the first investor, bringing in a total of RM5.6 billion in MCKIP phase 1. - Building is ongoing for a 710-acre steel mill that can produce 3.5 million tonnes of steel annually. - The target amount of investments for 2017 is RM10 billion.

17 Labour in MCKIP - Immediately found challenges with data. No publicly available data on number of Chinese and Malaysian workers in MCKIP. - There are local companies construckng the Alliance Steel factory, for example in doing the earthworks. - But many jobs requiring higher skills are undertaken by Chinese workers brought in by the investors.

18 Does MCKIP fit into the NEM? - The MCKIP promises high-value investments, and can help grow Malaysia s economy. - Immediate jobs are mainly low-skilled in construckons. Later jobs are factory-based. - Uncertain how to transikon higher-level jobs to locals. - Uncertain if the level of wages / income of the workers are high-income.

19 Key challenges - Immediate term: Shortage of local labour Malaysians are unajracted to labour-type jobs even though ECERDC has set an 80:20 labour rako. - Immediate Mid term: Local labour unproducive Chinese labour is more produckve and efficient. They work longer hours, work on weekends and public holidays for the same pay, adhere to stricter safety and operakonal standards. Malaysian labour turnover is higher and less produckve. In short, local labours are not ajrackve to employers.

20 Key challenges - Long-term: Where are the high-income jobs? There is no quota for higher-skilled jobs. Vast majority of the jobs created now are lowerskilled. In the future they are mainly factory-based.

21 Some policy queskons 1. Do we have a plan on how to ensure the investments fit into our NEM? Or is the NEM now no longer the masterplan? 2. Will the announced investments really create high-income jobs? (not forgerng that some jobs may be new, such as online retailers) 3. Do we have enough skilled manpower to take over the projects ager the Chinese have completed them? Is our educakon system good enough? 4. Why is our labourers so unproduckve?.

22 Thank you