WITH Malaysia expected to record a higher unemployment rate because of Covid-19, economists are urging Putrajaya to be more proactive attracting foreign direct investment (FDI) instead of waiting for the right factors to be in place.

They pointed to the US and Japan, which are already shifting their policies to attract manufacturers pulling out from China back to their home countries.

Since the Covid-19 outbreak, the US has announced proposals to relocate its businesses from China, while Japan is preparing to invest more in its companies operating in Southeast Asia as part of its policy to shift businesses operating in China.

India, meanwhile, is also lobbying US firms to set up shop in the subcontinent. The UK’s Financial Times reported India as seeking potential investors from the US, Japan and other countries, hoping to replace China’s position in the global supply chain.

India has also promised to consider revising labour laws to ease the setting up of factories and provide tax incentives to draw investments.

Associate professor of economics Wong Chin Yoong told The Malaysian Insight these are examples of proactive steps, nothing like what Putrajaya seems to have initiated.

Malaysia should be working to entice manufacturers seeking to leave China to come here instead, said Wong, who is attached to Universiti Tunku Abdul Rahman.

“It’s not the 1980s when there weren’t many other countries in the region that could compete with us, other than Singapore. The government needs to be proactive and put Malaysia out there.

“From land and tax matters to labour, we need to have packages tailored to specific industries,” said Wong.

Asean should also play its role as a regional bloc to attract investments as a whole and then decentralise investments to individual countries, he said.

He cited the aircraft component manufacturing industry as one example, including its many supporting fields.

These different subsectors need not be concentrated in the same country and could be dispersed in different countries, such as research and development in one Asean country and the making of component parts in another.

“Asean should play its role as an economic community to actively bring in foreign capital to the region. Malaysia itself may not be attractive enough, but the whole of Asean will be a different picture,” Wong said.

The Malaysian Chinese Chamber of Commerce’s socio-economic research centre (SERC) executive director Lee Heng Guie also believes that the next step for the government is to create a business-friendly environment that restores consumer and investor confidence.

“How to do it? The government needs to improve its leadership and communication of its positives. It needs to communicate how it is planning to revive the economy and create a business-friendly environment.

“Industries are waiting for more government aid and want to know the next direction.”

Lee said industries are still facing many challenges at this stage as market demand is still affected by the global supply chain while operating costs remain high.

“There will still be a lot of resistance in the next three to six months, faced by suppliers, wholesalers, customers. Profit recovery is still very slow, and cashflow is still a very important survival factor.”

Lee said even when the Covid-19 situation improves, customer confidence will still be damp. If even those with money refuse to spend, he said, the economy will be stagnant.

Longer-term economic recovery goals should, therefore, focus on stabilising employment levels so as to promote domestic consumption. This can include strategies to create jobs and maintain incomes.

“If everyone feels uncertain about their job security, they will not spend. They will worry about losing jobs, about pay cuts and won’t be willing to spend,” said Lee.

Another proactive measure is for the government and employers to work together to create jobs and train people in new or relevant skills as Covid-19 changes the way business is done. – May 26, 2020.