Foreign Dominance and Local Resilience in Infrastructure Development: Evidence from Sarawak, East Malaysia

Abstract

As the Sarawak state government accelerates infrastructure development to stimulate economic growth, it has attracted numerous foreign construction enterprises—particularly Chinese firms—entering the market through low-cost bidding. However, this foreign-dominated model, while improving efficiency, has triggered local enterprise marginalization, industrial chain fragmentation, payment delays, and project setbacks, undermining the intended economic spillover effects of public investment. Grounded in policy analysis and field evidence within a dependency theory framework, this study evaluates the structural impacts of foreign participation on Sarawak’s local economy, uncovers governance gaps, and proposes strategies to enhance local economic resilience under open-market conditions. The findings reveal that foreign contractors (especially Chinese enterprises), despite their capital and technological advantages in dominating mega-projects, exhibit pervasive shortcomings: inadequate local participation (falling far below the 40% policy target), deficient knowledge transfer (local firms hold only 6% of green technology patents), significant value leakage (foreign profit repatriation dominated project value flows), and widespread execution delays/cost overruns due to underestimation of tropical climate-geological risks, institutional maladaptation, and resource misallocation. Drawing on experiences from the Philippines, Indonesia, and Vietnam, the study proposes systemic reforms: introducing a Low-Bid Risk Evaluation System (LRES), enforcing a mandatory Local Participation Index (LPI), establishing a Smart-Contract-Based Digital Payment Chain System (DPCS) to protect subcontractors, and requiring pre-bid local adaptation training for foreign contractors. These recommendations aim to construct “embedded institutional resilience,” transforming policy intent into executable governance mechanisms to ensure infrastructure investment genuinely serves Sarawak’s inclusive and sustainable growth.