Sabah: Is it a State Built by Local or Foreign Perspiration

Labour the main resource for production other than capital and technology or knowledge in an emerging country like Malaysia. The total factor productivity is high for labour compared to other resources. To enhance it further, the government came up with policies to upgrade the skills and knowledge of the workforce. Labour was combined with knowledge or technology to create human capital. The human capital was the main reason that attracted foreign direct investment into the nation. Knowledgeable and skilful human capital is also important to increase the total factor productivity of capital. Under the New Economic Model, the nation was separated into various corridors to attract foreign direct investment into the nation. The inflow of foreign direct investment guaranteed job opportunity, knowledge and technology and also export. This appreciates the exchange rate and purchasing power, eventually the economic growth of the nation. Sabah was one of the corridors that had great potential to attract foreign direct investment especially in the service-based industry and agriculture industry. Other than its uniqueness in terms of its natural environment, rich in flora and fauna, Sabah is also able to attract foreign direct investment due to its labour force. Labour force in Sabah consists of locals and foreign. The influx of foreign labour in Sabah is immense in the agriculture sector. Foreign labour differs from expatriates. The need for foreign labour has its advantages and disadvantages. The foreign labour was deemed important in the production activity but it caused unemployment among locals, allocation of resources for their needs, and also social costs like crime and diseases.

Thus, the Sabah government has taken numerous measures to reduce the dependence on foreign labour. But before such measures are taken an empirical analysis need to be carried out to justify whether the Sabah economic growth was dependent on local labour or foreign labour. An advance econometric analysis was used in this book to justify that Sabah’s economic growth is foreign labour dependent.