KUALA LUMPUR: PRIME Minister Datuk Seri Najib Razak’s recent visit to China will further uplift Malaysia’s private sector in the short and long term, with larger investments expected to spill into the country.
Economists contacted by Business Times believe that the visit was without a doubt a boost to the Sino-Malaysia economic relationship.
Universiti Utara Malaysia (UUM) Asian Research Institute of Banking and Finance director Dr Irwan Shah Zainal Abidin said the deepening of the trade and investment relationship would be sustainable, involving long-term investments.
Irwan said the long-term investments could be related to sectors such as infrastructure, manufacturing, tourism and services, especially on digital economy and banking and financial industry.
“In line with the Asian Infrastructure Investment Bank and the ‘One Belt, One Road’ initiative, Chinese investments are expected in specific sectors such as energy, transport, telecommunications and innovation and technology.
“For Malaysia, this will invigorate the growth momentum and help the country realise the 2017 Budget target and the National Transformation Plan to transform Malaysia into a high-income nation by 2020.”
Universiti Kebangsaan Malaysia (UKM) Graduate School of Business principal fellow and head of Strategic Centre for Public Policy, Prof Datuk Dr John Anthony Xavier, said the Chinese investments coming in would be another source of the country’s foreign direct investments.
“The influx of Chinese investments is good as it demonstrates the confidence China has in our economy and recalibrates the present poor international misperception.
These are exciting days as we look forward to further investments, know-how and renewed confidence in the economy. ”
However, he said Malaysia needed to re-orientate uninformed local views that Chinese investments were tantamount to economic colonisation.
MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd Nor said from January to June, 16 Chinese-related projects worth RM1.6 billion had been approved,
compared with 17 projects amounting to RM1.9 billion for the whole of last year.
“We have seen projects in various magnitudes undertaken by Chinese companies in various sectors.
Presently, investments are primarily in basic metal products, electrical and electronics, chemical and financial sector, among others,” he said.
Chinese investments in real estate and infrastructure will be a boon to the economy especially when Malaysia is experiencing moderate growth amid a slow-recovering world economy.
Xavier said these investments would serve as a platform and a critical mass for further development through the multiplier effect on the economy.
“Our property market is in the doldrums. Chinese investments will surely give the industry a boost. Such investments include the futuristic underground metropolis in Bandar Malaysia and the ongoing real estate investments across Iskandar Malaysia region.”
On the One Belt, One Road initiative, Xavier said Malaysia could tap the master plan to become a regional logistics hub.
He said massive infrastructure projects such as the Kuala Lumpur-Singapore high-speed rail project and the deepwater port in Malacca would be the country’s springboard to become the “preferred logistics gateway to Asia”.
The Asean-China Free Trade Agreement will also be a growth catalyst for the logistics industry while establishing Malaysia as the preferred location for value-added logistics services.
“Such investments will play to our strengths, such as infrastructure and strategic location. So, while developing the infrastructure, Chinese investments can be seen as strengthening our technological capabilities.
“This is where it is critical for Malaysian companies to have joint ventures with the Chinese to profit from their skills and technology development.
“Such joint ventures have led to the China-Malaysia Qinzhou Industrial Park in south China and the Malaysia-China Kuantan Industrial Park (MCKIP),” he said.
Irwan said in the short- and medium-term, there would be abundant benefits for Malaysians with more job opportunities.
“The MCKI Pande-free trade zone, among others, will create more jobs. The appointment of Alibaba Group founder Jack Ma as the country’s digital economy adviser will give further boost to young Malaysians,” he added.
For small and medium enterprises (SMEs), Irwan said China’s palm oil purchase from Malaysia would also boost the industry.
Kamaruddin said SMEs could benefit from being in the value chain of Chinese investments.
“However, we do not see these SMEs benefiting from direct funding unless it is a joint venture or equity participation,” he said.
Xavier also said Chinese investments would help develop SMEs further as the Chinese companies relied on SMEs for their supplies.
“We can also expect investments in ship-building, such as naval patrol boats,” he added.