WHEN the Foreign Investment Committee (FIC) was deregulated in 2009, oversight of foreign investment into Malaysia’s strategic sector was left under the purview of its respective sector regulators. While applauded as a bold move to further liberalise the Malaysian economy, it had, unfortunately, limited results.

On one hand, it can be rightfully argued that the sector regulators are in the best place to tailor regulations according to the needs of the sector. On the other, these regulators would not necessarily be in the best position to scrutinise the broader, multifaceted considerations involved with foreign ownership of strategic assets.

While investments are and have been a traditional driver of economic growth, it should not justify unfettered access by foreign parties into our strategic sectors. Recognising this, Malaysia would do well to establish an overarching review body solely for foreign investment into Malaysia’s strategic sectors and assets.

These strategic sectors are defined as assets that are vital to the nation that their incapacity or destruction would have a devastating effect on national economic strength, national defence and security, and the government’s capability to function. Broadly speaking, sectors that are recognised as being strategic in nature include transportation, telecommunications, power generation, and security.

Usually a dull topic to most, public interest in foreign investment into strategic sectors has been piqued by the increase of Chinese investments into Malaysia. Perhaps, also responsible for exacerbating the sentiment of caution is the grandiose vision of China’s Belt and Road Initiative (BRI), and how it promises to be a game-changer for the wider region.

Regardless, it is important to view Chinese investments in context. For example, from the 1970s to 2000s, Japan had also heavily invested, through its Official Development Assistance (ODA) programme in Malaysian roads, railways, power generation facilities, ports and telecommunications. As these assets are also considered strategic, public reaction then was not dissimilar to what Chinese investments are facing today.

Given the above, it is remiss when certain segments of the public discriminate genuine investments based on its origin, with some even likening the investments as a “wholesale” of the country’s assets to a foreign power. These borderline xenophobic claims, not merely problematic in itself, also detract from the real consideration that should be taking place. It is argued that as today the country has attained greater development as compared to the 1970s, Malaysia can afford to be more selective of the types of investment it receives.

This does not mean that Malaysia should reject foreign investment to modernise its infrastructure, but instead, better balance the competing interests of national security and economic prosperity.

This is necessitated by the inherent nature of the strategic sector, where any incapacity or destruction would have disproportionate consequences. For example, any disruption (however short) in Malaysian power generation will adversely affect hospitals, telecommunications networks, the operational capability of our armed forces and also government.

This example also demonstrates that any incapacitation or destruction of strategic assets would have consequences that are not sector-specific. This makes the case for an overarching foreign investment review body working in tandem with the respective sector regulators. By having representatives from various sectors, different perspectives of risks can be taken into consideration, ensuring a more comprehensive review process. The proposed foreign investment review body does not necessarily need to be empowered with the authority to block any proposed foreign investment, as adding a layer of strategic review would in itself be a good move forward.

In terms of composition of an oversight body, Malaysia could do well by taking a leaf out of the book of the USA’s Committee on Foreign Investment in the US (CFIUS). Members of CFIUS include heads of the Department of the Treasury, Department of Justice, Department of Homeland Security, Department of Commerce, Department of Defence, Department of State, Department of Energy, Office of the US Trade Representative, and Office of Science & Technology Policy.

Regardless, it cannot be stressed enough that any foreign investment review should be done in a timely and transparent manner. Bureaucracy associated with a submission for review and the review process itself has to be kept at a minimum. This is to ensure that the need to safeguard national interest does not come at the expense of a higher cost of doing business with Malaysia.

While some might draw parallels with the ill-fated and problematic FIC, it should be noted that the scope of any review body has to be limited to foreign investment into strategic assets. By omitting similar requirements for non-strategic assets, it would not unnecessarily expose foreign investors to additional bureaucracy.

With a foreign investment review body in Malaysia, we would be better able to achieve the twin goals of maintaining national security and furthering economic prosperity. Furthermore, a review process can also minimise negative perceptions and the politicisation of foreign investment, regardless of origin.

To conclude, it is worth highlighting that when it comes to foreign investment in strategic assets, we should not give in to paranoia about the loss of Malaysian sovereignty. No foreign investment should be discriminated based on its origin, and Malaysia cannot, and should not turn its back on any foreign investment. Instead, Malaysia has to wisely manage these investments and balance between the competing interests of national security and economic prosperity.

It is hoped that with a foreign investment review body in Malaysia, we can achieve just this.

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