Firms from developed countries operating in Malaysia: Is sustainability an issue?

There are several benefits that developing nations can gain from the courting of the presence of enterprises from developed countries, including the creation of jobs, getting a boost to the local economy, increased tax income for local governments, and the knowledge transfer of new management skills and technology.

Increased competition from these companies in the local arena will result in better goods, more options, a better reputation for the nation, and infrastructural improvements.

Multinational corporations choose to operate in Malaysia because of Malaysia’s political and social stability, proactive government policies that encourage foreign investment, well-established transportation networks and other infrastructure, a modern judicial system as a result of the legacy of British legacy, a highly-skilled labour force characterized by the national traits of hard work and a strong sense of responsibility, overall English proficiency, a good education system, and facilitation of communication with foreign companies.

Malaysia is one of the top investment locations in the world for offshore manufacturing operations due to its friendly business climate. In 2022, according to the International Trade and Industry Ministry, Malaysia has attracted more than 5,000 international businesses from more than 40 nations. As a sign of their trust in Malaysia as a location for their commercial endeavours, several of these companies have also increased and diversified their businesses.

Compliance with sustainability rules is one of the main issues facing the operations of international companies’ industrial facilities.

There has always been an issue with environmental contamination in Malaysia.

The fast growth of tin mining, a sector that started at the turn of the century roughly 100 years ago, was the first cause of environmental contamination as mine effluents and sludge ran into rivers.

Later on, when other industries such as natural rubber and palm oil manufacturing got underway in earnest, effluents from these factories further contaminated rivers and oceans. The Malaysian government’s sustainability-related policies are less stringent compared to those in developed nations for manufacturing or production facilities.

In 2018, in Pulau Indah, an island municipality about one hour’s drive from Kuala Lumpur, and home to Malaysia’s largest port, received hundreds of bags loaded with plastic debris from the United States, Britain, South Korea, and Spain. These had overflowed into the streets of an industrial zone (Reuters, 2018). Even as additional container loads of plastic garbage were being unloaded, the neighbourhood was filled with the odour of burning plastic and the fumes from almost a dozen recycling facilities.

A restriction on garbage imports that went into effect at the beginning of the year in China had blocked the flow of more than 7 million tonnes of plastic scrap annually into the country, thus catalyzing the dumping avalanche. Malaysia swiftly rose to become the top alternative location, importing roughly 500,000 tonnes of plastic garbage from its top ten source nations between January and July.

To manage the volume of trash, dozens of enterprises had sprung up in Malaysia, many without operating permits, utilizing outdated equipment and dangerous disposal techniques. Pellets made from recycled plastic were subsequently used to create new plastic items.

However, the process is dangerous to the environment. Burning plastic that cannot be recycled sends hazardous chemicals into the atmosphere. Or they end up in landfills where it would contaminate water and soil.

According to the Institute of Scrap Recycling Industries and the United Nations trade database, the United States, the top exporter of plastic waste, sent 178,238 tonnes of the material to Malaysia between January and July 2018—nearly twice as much as the volume it had sent to Thailand, its second-most popular destination.

More than any other nation, Britain, another significant exporter of plastic garbage was sending a fourth of its waste to Malaysia. Malaysia’s previous Minister of Environment, Yeo Bee Yin, in 2020, had remarked that if the situation continued, Malaysia would have to set rigorous conditions, demand top-of-the-line green technology, and only let the companies run in heavily industrialized regions.

Currently, factories are dispersed across the country, even in or close to residential areas. Three months ago, a sizable recycling facility sandwiched between palm plantations in Kuala Langat, southwest of Kuala Lumpur was shut down. Towers of plastic trash, up to 10 feet tall, much of which was consumer packaging from the United States, Britain, France, Netherlands, Germany, and Australia, were left in its front yard. A sizable area of land near the facility had been converted into scrap disposal areas.

Environmental concerns have always been associated with the recycling process. Unrecyclable plastic is burnt, releasing hazardous chemicals into the atmosphere. Or they up in a landfill where it may contaminate the ground and water supplies. (repetitive)

In conclusion, having foreign companies operate in Malaysia brings many advantages. However, numerous enterprises that use subpar technology and dangerous garbage disposal methods have sprung up without operating permits in Malaysia, taking advantage of the current flood of plastic waste.

Sustainability is a crucial issue. It is time for the government to develop a policy or bylaw for waste materials disposal by foreign businesses and recycling facilities.

By Dr Khakan Najaf, Lecturer at Sunway University Business School

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