IDEAS on why China contractors are preferred to locals

IDEAS director Laurence Todd.

KUALA LUMPUR: An expert has cited financing, skills and the working culture as the main reasons why China contractors and subcontractors prefer hiring China firms, particularly when it comes to construction projects.

Institute for Democracy and Economic Affairs (IDEAS) director Laurence Todd said even though Malaysians have been able to participate as major shareholders, at the contractor and subcontractor stage, opportunities provided to local firms and small and medium enterprises were still debatable.

Todd was presenting the initial findings from a report called “Impacts of Investment from China in Malaysia on the Local Economy” that he co-authored with Meghan Slattery.

In the report, Todd said at the contractor level, there had been cases of local firms winning the contracts.

However, he said the growth of China firms in Malaysia has happened quickly and this has created fierce competition among China and Malaysian contractors.

At the subcontractor-level, he said the participation of local industry players is even harder to identify.

“Again the picture is mixed. There are certainly cases of contractors from China hiring local firms.”

However, he reported claims of preference for China companies.

He said China firms may not opt for local labour and cited a lack of skills or capacity for large-scale projects.

His report stated that local firms and workers are not suited to the practices and general working culture of China contractors, including the working hours and efficiency.

The other reason, he added, was local SMEs tend to be in a weaker financial position when compared to Chinese companies.

He reported that local SMEs may not be able to compete in view of the low margins that can emerge as a result of the highly-competitive structuring of the projects by Chinese contractors.