By CW Sim

The announcement of a “90-day visa-free policy” by China sparked market turbulence and public debate. Some questioned whether Malaysia would be “overrun” by foreigners, while others worried about the survival of local SMEs.

Suddenly, sectors like photography packages, beauty services, home renovations, and e-commerce became focal points on social media. Anxiety, misunderstandings, and even rejection permeated public discourse.

But what are we truly concerned about? Are we apprehensive about outsiders, or are we uneasy because we ourselves are unprepared to face a genuinely free and open market?

According to the Chinese Embassy in Malaysia, the mutual visa exemption agreement follows international standards: a single stay of 30 days, with a cumulative total not exceeding 90 days within 180 days, and it’s a reciprocal arrangement. The notion of “a single stay of 90 days” is a misinterpretation, not the policy’s intent.

The issue lies not in openness but in whether our policy pace and institutional support are synchronised. The Madani government’s intent to deepen Malaysia-China relations and unleash economic potential amidst global shifts is evident. Although some ministerial statements have been misconstrued, they reflect Malaysia’s commitment to openness and mutual trust in the new era of major power relations. The key now is whether policy mechanisms and societal communication can keep pace with national strategies.

However, external policy pressures also reveal our internal challenges: Are we truly ready to enter a competitive and open society?

Resisting Institutional Transformation

According to the Department of Statistics Malaysia’s “2023 SME Annual Report”, SMEs contribute 38.2 per cent to the GDP, yet their overall digitalisation rate is only 25 per cent. In contrast, China’s Ministry of Industry and Information Technology reports a 68 per cent digital penetration rate among Chinese SMEs. This isn’t about one side overpowering the other but about the tangible gap in technology and efficiency – a gap that fuels local business anxieties.

In reality, many local businesses resist not just external competition but the pace of institutional transformation. Take the government’s forthcoming implementation of electronic invoicing (E-Invoice) as an example. To date, numerous SMEs have yet to complete system integration, with some adopting a wait-and-see or delaying attitude. While SMEs contribute nearly 40 per cent to the national GDP, their sluggish progress in financial transparency and digital governance is concerning. If we haven’t even standardised our invoicing systems, how can we confront the new rules brought by automation and international investments?

The government should intensify guidance, training, and technical support. Simultaneously, it must clearly communicate to the public that free-market competition waits for no one. When competitors have already entered the “digital track”, and we’re still hesitating at the starting line, we can’t blame others for running faster; we must question why we haven’t started running ourselves.

Historically, many local industries have relied on traditional models and word-of-mouth. With the push for open policies, it’s natural to feel the impact of competition. But the issue isn’t that others are too strong; it’s that we’ve neglected to strengthen ourselves. We can’t oppose US tariff barriers while resisting the free flow of foreign capital. We can’t advocate for trade liberalisation while hoping to shield our market from external disturbances. A nation can’t bet on both sides, and its people can’t straddle two boats.

Data indicates that Chinese investments in Malaysia haven’t fully permeated everyday life sectors. In the first three quarters of 2023, China’s non-financial direct investment in Malaysia grew by 23 per cent year-on-year, with 74 per cent concentrated in manufacturing – projects like LONGi Green Energy’s silicon wafer plant in Kuantan and Geely’s automotive collaboration with Proton. Services account for less than 10 per cent, making many rumours evidently detached from reality.

Ensuring Openness is Orderly, Regulated, Forward-looking

What truly warrants our contemplation is how to establish rules that ensure openness is orderly, regulated, and forward-looking.

Firstly, industry segmentation should be clarified. Sensitive sectors like low-cost services and e-commerce should be subject to special review or registration systems. For instance, Thailand’s 2021 amendment to the Foreign Business Act requires platform operators to link with local tax accounts, preventing regulatory evasion from the outset.

Secondly, foreign joint ventures and local collaborations should be encouraged. During the 1990s “Look East Policy”, Proton’s joint venture with Mitsubishi successfully localised engine technology, boosting the nationalisation rate from 30 per cent to 80 per cent. Such joint venture mechanisms can serve as a springboard for today’s SME digital transformation.

Thirdly, a “National Cooperation Certification Mechanism” could be established to recognise foreign enterprises that are legal, compliant, contribute to employment, and promote technological upgrades. The East Coast Rail Link project employs 70 per cent local staff, and TikTok Malaysia’s local employee ratio has reached 85 per cent, demonstrating the feasibility of joint ventures and localisation.

Among these, the food and beverage industry is particularly notable. In recent years, over 15,000 foreign-owned F&B establishments have been registered and operate in Malaysia, primarily from other Southeast Asian countries and China, encompassing fast food, hotpot, snacks, and beverages. Most operators comply with laws and regulations, stimulating consumption and introducing competition. However, some operate without registration, evade taxes, and undermine public trust, genuinely provoking public resentment. The government should employ business licensing, tax regulations, and health ratings to ensure market order, safeguarding the interests of consumers and local businesses alike.

We must discern: market-disrupting, rule-evading speculative behaviours must be curtailed, while compliant, employment-generating, mutually beneficial foreign partners should receive institutional support and societal recognition.

I firmly believe that most foreign friends come to Malaysia to operate lawfully and harmoniously. However, institutional responsibilities shouldn’t rely solely on self-discipline but should be upheld through public consensus and daily oversight. The few who tarnish the collective image will inevitably be exposed under scrutiny. A sound system should ensure that the righteous aren’t disadvantaged and that the nation remains orderly.

Collective Construction for Shared Prosperity

The virtue of a system must become a national consensus, transcending ethnicities and industries. Only through collective construction can we achieve shared prosperity.

Civilisation has never been merely a posture but a capability – not just about welcoming others but about having the ability to set rules, enforce standards, and manage risks. Beyond competition, we need systems; above systems, we need confidence; within confidence, we need culture and magnanimity.

As I often say: “A truly strong nation isn’t one without outsiders but one unafraid of internal and external changes.”

The free market waits for no one. The government can sign agreements and establish mechanisms, but ultimately, it’s every Malaysian who must face the challenges. Instead of fretting over others taking our share, we should ask ourselves: What do we possess that others can’t take away?

When Penang’s nutmeg need not fear Guilin’s osmanthus, and Melaka’s Zheng He treasure ships continue to sail with mutual benefit, our golden fifty years can truly set sail.

-- BERNAMA

CW Sim is a Senior Fellow of Strategic Pan Indo Pacific Arena (SPIPA).