The Impact of China’s Belt and Road Initiative on Malaysia’s Construction Sector

Abstract

The Belt and Road Initiative aims to connect Eurasia and Africa in several ways. To achieve its objectives, huge investment in the construction sectors, funded by China, in various participating countries is underway. Some megaprojects have achieved great success. However, dissenting voices concerning issues have been heard in participating countries. As such, this study aims to examine the impact of the BRI on Malaysia’s construction sector by identifying the long-run relationship between foreign direct investment (FDI) inflows from China to Malaysia and the development of Malaysia’s construction sector during the period 1991-2018 using the autoregressive distributed lag (ARDL) approach. The empirical results signify the positive impact of FDI inflows from China on the development of Malaysia’s construction sector. This finding suggests that Malaysia should continue to collaborate with China to develop and execute mega construction projects involving high-technology to stimulate the development of the construction sector and to sustain Malaysia’s long-run economic growth. A professional team should be formed in Malaysia to monitor the progress of each BRI-linked project to ensure the avoidance of debt traps and any loss of national sovereignty, as well as to ensure adherence to agreements.