The Impact of China’s Belt and Road Initiative on Malaysia’s Construction Sector

Chin, Mui Yin and Kon, Yee Qin and Wong, Hong Kok and Puah, Chin Hong (2022) The Impact of China’s Belt and Road Initiative on Malaysia’s Construction Sector. Studies of Applied Economics, 40 (2). pp. 1-18. ISSN 1133-3197

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Abstract

The Belt and Road Initiative aims to connect Eurasia, African and Asian countries in several ways. To achieve this objective, huge investments in the construction sector funded by China in various participating countries are underway. Some megaprojects had achieved great success. However, dissenting voices were expressed in some participating countries. As such, there is a need to study the real benefits of BRI by the receiving countries. This study therefore aims to examine the impact of the BRI on Malaysia’s construction sector by identifying the longrun relationship between foreign direct investment (FDI) inflows from China to Malaysia and the development of Malaysia’s construction sector during the period 1991-2018 using the autoregressive distributed lag (ARDL) approach. The empirical results signify positive impact of FDI inflows from China on the development of Malaysia’s construction sector. This finding suggests that Malaysia should continue to implement an open-door policy for the influx of FDI from China and collaborate with China in planning and executing construction projects in order to stimulate the development of construction sector and to sustain the long-run economic growth. It is highly likely that the FDI inflow from China, in particular the FDI involving high-technology, enable the local labours to gain from the benefits of technology transfer and subsequently enjoy the upliftment of skill-set. In order to ensure the success of BRI-linked projects in stimulating the development of Malaysian construction sector, a competent team should be formed in Malaysia to monitor the progress of each BRI-linked project to avoid falling into any debt trap situation, any loss of national sovereignty, as well as to ensure adherence to the spirit of the agreements signed between the donor and recipient of BRI projects.

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