Carmelo Ferlito of the Center for Market Education said the two countries’ paths appeared to be converging, with Indonesia rapidly catching up with Malaysia due to its progressive and business friendly response to the Covid-19 pandemic.
Malaysia has long been seen as the more business-friendly country, driven by policies that attract foreign companies of all sizes to set up local operations, but Ferlito said this could change with the world adapting to a post-pandemic environment.
He noted that Malaysia, over the last few decades, had become an attractive business hub for several reasons.
“There was political stability and positive business regulations, good arrangements for low-skilled foreign workers and expats, a good balance between cost of labour and skill levels and strong infrastructure. This made Malaysia attractive to all businesses, even SMEs,” he told FMT.
“On the other hand, Indonesia, while offering cheap labour and a huge domestic market, developed a less business-friendly framework that really only attracted the big investors.”
However, he said, the two countries’ response to Covid-19 could see a change in this dynamic. While Malaysia pursued a zero-case strategy early on, Indonesia recognised the need to preserve livelihoods and avoided repeated lockdowns.
Also, while some in Malaysia stoked nationalistic sentiments by scapegoating migrant workers during the pandemic, Indonesia’s government was aggressive in creating a more inviting environment even at the expense of popularity with its controversial Omnibus Job Creation law, which removed certain worker and environmental protection regulations to make business easier for investors.
“I see a convergence path. Malaysia’s attractiveness will slightly diminish while Indonesia leaps forward. Malaysia will then play a role in largely attracting only smaller investments.”
He said Malaysia’s policies pointed to the country being content with its current crop of investments as shown in it being selective with the foreign labour allowed in at all levels.
“Indonesia, however, seems to realise that this is a historic moment to seize upon opportunities to play a larger role economically, both regionally and globally.”
But he also said “the game is not over” and pointed to current strategies in Malaysia aimed at living with the virus, indicating a more economically positive approach to Covid-19.
“(The year) 2022 will be crucial for Malaysia, which will need to play its cards right in the competitiveness game,” he said.