Foreign investment, technology transfer
Foreign investment, technology transfer
Foreign investment has been more than just a catalyst for
economic growth and integration in the Asia Pacific region. It
has also become the driving force behind the increasing migration
across national borders of "high-skilled" workers and technology,
raising a number of policy issues.
Malaysia, as one of the fastest growing economies in the
region, is also experiencing this new phenomenon, as shown in a
recent report by the PECC (Pacific Economic Cooperation Council).
The Malaysian Industrial Development Authority (MIDA), a
government agency set up by an Act of Parliament, is responsible
for promoting and coordinating industrial development. All
manufacturing firms with shareholder funds of RM2.5 million
(about US$975,500) and above or employing 75 or more full-timers
need to apply to MIDA for a license and practically all foreign
investment proposals are large enough to have to do so.
Direct foreign investment totaled RM9.3 billion (about US$3.6
billion) or 40 percent of total paid-up capital, foreign and
local in 1991. The major investors are from Japan, Singapore, the
United States, Chinese Taipei and the United Kingdom. Total
employment of the larger manufacturing firms was 700,000 workers
of whom 1.4 percent were non-Malaysians but it is not easy to
establish employment by multinational companies alone. However,
two important employment generating sectors, namely electronics
and textiles, are heavily dominated by direct foreign investment.
Current guidelines on employment of expatriates for the
manufacturing sector stand at five expatriate posts for new
investment where the foreign paid-up capital is US$2 million and
above. Where foreign paid-up capital is RM0.5 million, one key
post is approved. For executive posts, which require professional
qualifications and experience, expatriates can be employed for a
maximum of ten years, subject to the condition that Malaysians
are being trained to take over. For non-executive posts, which
require technical skills and experience, expatriates can be
employed for up to five years, again with Malaysians being
trained to succeed them.
All technology transfer agreements of manufacturing firms are
approved by MIDA to ensure that local parties are not unfairly
restricted, national interests are protected and fees, where
applicable, are commensurate with the level of technology. Over
2,000 agreements were signed between 1988 and 1992, most of which
were technical assistance agreements. The electrical and
electronics sector had the largest number of agreements followed
by the chemical sector. The largest number of agreements was
signed with Japan, the United Kingdom and the U.S.
It is difficult to assess the effectiveness of technology
transfer although it appears that there has been minimum cost and
maximum effectiveness with the regulations. A survey on
technology transfer conducted among 49 Japanese firms established
the following:
* Parent firms have considerable control over joint ventures and
subsidiaries and the foreign partner/parent firms handle most
crucial decisions on product choice, production techniques,
marketing and managerial decisions;
* Investments are motivated by the need to expand or control
market shares, both international and domestic rather than
investment incentives; and
* The electronics industry has not produced any technological
spin-offs for local industries and that local subcontractors
supply less than 25 percent of inputs.
Recent studies are more optimistic. One suggests that the
electronics industry not be footloose and that it take root in
the local economy, despite cheap unskilled labor no longer being
an important input. Another suggested that the electronics
industry has a vested interest in the Asia Pacific region, which
is a growing market. (rlt)