Prolonged political issues may put off investors


THE business community in Malaysia needs political will that is focused on combating the pandemic and returning the economy to growth that requires a clear vaccination strategy.

Despite the vacuum of political leadership at the moment, Malaysian-German Chamber of Commerce and Industry (MGCC) CEO Daniel Bernbeck (picture) said political stability and consistent policies are vital for foreign investors to make their business decisions in Malaysia.

“At the moment, most potential investors are just about to learn of the political developments in Malaysia and are watching how things unfold. We do not believe that the time is there to make evaluations on other countries yet.

“But, foreign investors, especially the members of the German Mittelstand, are usually very sensitive and are carefully evaluating potential destinations before making decisions. And there are always many factors to consider — in all potential investment destinations,” he told The Malaysian Reserve.

Right now, he said, MGCC does not see any immediate consequences in Malaysia as the chamber understands that all political institutions are working closely to ensure the nation’s stability.

“Only if political instability lasts longer than expected and starts to adversely affect the economy, we might see fee increases, such as the transaction costs between exporters and importers.

“This would reduce incentives to create and maintain business relationships. But for the time being, we are not aware of any effect of this kind,” he said.

Although it would be harder for Malaysia to attract foreign businesses now due to pandemic and political developments, Bernbeck maintained that the country’s fundamental factors still make it an attractive business destination, such as the good level of English proficiency, the existing technical skill set, the well-developed infrastructure and close proximity to other Asean countries.

Bernbeck said some industries are more sensitive towards political stability than others and those would be the ones that would be affected the most by any uncertainty.

“Having said that, political stability does affect every other industry to some degree. First of all, companies do not operate in a vacuum, but are closely knit into the society around them, together with their workforce and their families.

“Political stability also influences social stability. Only if there is reliable governance by the authorities, rule of law and peaceful state of security, can companies operate their businesses smoothly by securing the level of comfort the society needs. This is why political stability matters to all industries,” he explained.

For example, he said the recent decision regarding new conditions for the Malaysia My Second Home (MM2H) programme will send a negative signal to the investors.

“Not only with regard to the thresholds that quadrupled, but primarily because of the retroactive implementation of these changes. It is not affecting only future applicants, but also people that have already invested here under MM2H may see their investment and retirement income go up in flames.

“This is something that is sending an impression of legal uncertainty to many others, also the whole business community. And even if it may look like it is affecting only foreigners, the damage will also be experienced by Malaysians, for example real estate owners that see the value of their property melt.”

Due to the pandemic, Bernbeck said supply chain management has been forced to make unprecedented and sudden changes to keep industries running.

He said this started from the sourcing of raw materials and parts, securing international transport and relocating stockage, and went on to production and after-sales services with all the travel restrictions.

“We are currently in the middle of a global change in the ways of doing business”.

He further stressed that all countries need to make sure that they keep up with these changes and ensure the best possible opportunities for the international economies.

“This is not an easy task as currently there are dynamic movements in all directions. Digitalisation and transparency of these complex processes will be key to a company’s success in the near future,” he said.

“What we would like to offer to the Malaysian government and industry is to work closely with our chamber and its members, most of them technology leaders, to continue a fruitful dialogue in order to join forces for the benefit of all involved. We stand ready to support this,” Bernbeck added.