ADUN SPEAKS Malaysians are frustrated to find out that the federal government is going to “import” another 1.5 million migrant workers from Bangladesh.

But the question is, why are we only angry now? This is not a new issue - why didn’t we object against the government in the early 1990s when then prime minister Dr Mahathir Mohamad opened the floodgates for the exodus of Indonesian migrant workers into our country?

The answer is simple and straightforward.

Then, in the 1990s, our economy was still fairly healthy. There were some structural problems, yet they did not hinder our economic performance as a whole. But times have changed.

Today, we can no longer compete with China, the world’s factory, or even Vietnam, the world’s shop floor - especially over the cost of labour. They are where we were in the 1990s. Alas, we have passed the golden era of the manufacturing boom.

We lost our best chance to move up the value chain in the manufacturing sector. We were too complacent in the sea of abundant cheap labour supply and did not empower our industry to move away from being labour-intensive, to becoming tech-driven with value-added production.

We are now in a race to the bottom. Many Indonesians are no longer interested to work in Malaysia. The government has no other option but to look for other sources of cheap labour.

You may ask, “What went wrong? Can we impose higher wages now and move away from this vicious circle of low-wage and low-skill migrant workers?”

To answer the question, please allow me to repeat our success story before the 1997 financial crisis to understand what we have done wrong.

Everyone talked about the stock market

Throughout the roaring 1990s, Malaysia was one of the Southeast Asian countries which attracted foreign capital inflow. Our Kuala Lumpur Stock Exchange was once the busiest market in Southeast Asia.

From CEOs to retirees and housewives, everyone was talking about the stock market. Mahathir started his massive privatisation and industrial policy with almost bottomless financial resources provided by our national cash cow, Petronas.

By not using domestic capital - the money we save in banks - the Mahathir government did not enforce strict export requirements, like what happened in South Korea and Japan.

Mahathir’s ‘Look East Policy’ did not look into the depths of their industrial policy. We developed our national automobile industry and heavy industry with a lot of money, but all of them had failed to compete internationally. We learnt everything from Japan and Korea, but we did not learn the most important thing: their discipline, or more specifically, export discipline.

Export discipline is the core value of South Korean and Japanese industrial policies. It enabled them to develop into a strong industrial and manufacturing country today. The Japanese and South Korean governments did not hesitate to punish their domestic conglomerates that failed to hit export targets. The usual outcome would be loans being curtailed, and acquisitions or mergers with other companies.

However, we did not enforce export discipline in Malaysia. While we produced the national car, we did not care if its specs are able to compete in the global market as long as Malaysians will buy it at an exorbitant price. Proton failed, Perwaja failed, our infant industrial policy failed, but there is always somebody to bail them out - so long as Petronas is there.

Since it is not the money from our pocket, a lot of us just did not care.

We had money. There had been abundant savings due to our prudent Asian culture and the new wealth from our industrialisation; additionally, there was foreign capital inflow. But you may ask, “Where did our money go?”

Unfortunately, our money did not really go into industrialisation or research and development (R&D).

We may blame businesses for not providing higher wages and preferring to employ migrant workers at low wages. But the real reason is that they either do not have enough capital to up the value chain, or would rather spend their money in sectors that can get higher profit faster.

Under a normal and healthy industrial environment, entrepreneurs can either use the company’s savings or bank loan to implement automation on their production process.

Although putting all your profit into automation can be a risky decision, they usually take up bank loans. However, our Malaysian commercial banks are not interested in lending to all these productivity expansion projects at all.

Besides that, entrepreneurs also find that production without export discipline is not sustainable for them. Instead of putting money into automation or productivity expansion, they prefer to jump on the bandwagon to speculate in the stock market, real estate and etc. They may actually get better return on investment than productivity expansion in the short term.

Asian version of the ‘American Dream’

That was what happened in 1990s stock market, and is now happening in the real estate market.

In fact, the year before the 1997 Asian financial crisis, commercial banking loans to mining, agriculture, manufacturing, and gas and water supply sectors were merely 25 percent of all approved loans. Tw20 years later, loans to these were reduced even further to about 11.73 percent of all approved lending.

At the peak of the real property market boom between 2013 and 2014, loans to these sectors were merely 8.88 percent and 9.09 percent, respectively.

So, where did our money go?

Partly due to our own Asian version of the ‘American Dream’ - homeownership - but partly due to the federal government’s “bread and circus” fiscal and monetary policy, and partly due to the government's agenda to enrich crony contractors and approved permit (AP) holders, our money had mostly gone into buying houses and cars.

In the years following the 1997 financial crisis, commercial banking loans to house and vehicle mortgages were in the region of 50-60 percent of the total approved loans.

In an extreme contrast, the South Korean government did not even allow its citizens to take overseas holidays during the early days of the country’s industrialisation era; no credit went into speculation or unproductive economic activities.

When there is no money going into productive sectors, there will be little or no technological upgrades and R&D activities. Thus, our industry continues to stay at the bottom of the value chain, which usually means labour-intensive, low-profit margin and low-skill economic activities. Hence, the continual dependence on cheap labour for survival.

Consequently, our tertiary-educated labour force found the wage level so unattractively low that they cannot even pay back their study loans. As such, they either go overseas to look for better job opportunities or work at least two jobs to make ends meet.

In such a situation, there is no such thing as work commitment, since these workers will constantly look for higher pay and better job vacancies.

A lot of employers, especially small and medium enterprises (SMEs), are also victims of our government’s failed policy. They were not able to secure credit to upgrade their factories and technologies.

I have been receiving requests from my constituents asking for help to secure bank loans for their businesses. Our commercial banks are just not interested to help local businesses. They are more interested to pump it into the property and household credit market.

Why are they not interested to help domestic businesses? It is because our local businesses are not tech-driven. The government is just not helping them in R&D and exports.

Given that even the foundation of all industries, the heavy industry, has failed and eventually received government’s bailout, what can other smaller players in the country expect? They do not have the network and access to financial resources from either the government or commercial banks and if they fail, they will go bankrupt.

The issue of migrant workers is not about race or skin colour; it is all about our Malaysian economy. We have to stop blaming the victims of our failed national industrial policy. Neither SME employers nor the local graduates are the root cause of the migrant workers issue.

The real culprits are those who have access to our money but did not use it wisely. We, the people, should demand for a fundamental change in our national development policy to drive our destiny away from this race to bottom.

WONG SHU QI is Johor DAP publicity secretary and Senai state assemblyperson.