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Japan has expressed its unhappiness over Malaysia’s foreign worker policy saying that it could affect Japan’s Foreign Direct Investment (FDI) into the country. According to a news report published in The Edge, a Malaysian weekly, the Japanese ambassador Masahiko Horie said,

“Since the Malaysian government has disallowed the intake of foreign workers, many Japanese companies are finding it difficult to employ production operators.”

In a bid to improve the economy and reduce the country’s dependence on foreign labor, the Malaysian government has made it clear that it will go ahead and cut back on foreign workers and instead encourage locals to take up their jobs. The Malaysian government’s stance has ruffled the business community who are now worried about the competitiveness of doing business in Malaysia. For the past five years Japan has been one of Malaysia’s highest FDI contributors, but this may no longer continue given the list of grouses expressed by the Japanese firms doing business in Malaysia. Apparently it is not only the Japanese firms who are up in arms, but Taiwanese investors and Indian entrepreneurs are worried too.

Given this scenario, it is likely that many foreign enterprises that are currently doing business in Malaysia may start shopping for other immigration friendly jurisdictions – Singapore being a potential choice. Although Singapore has imposed some restrictions on immigration of unskilled labor in its 2010 budget, the Ministry of Manpower reckons that it will have “minimal” impact on businesses, provided they tap into schemes to raise their productivity levels. Note that the Singapore government has not limited the proportion of unskilled workers a company can employ, but has only made it more expensive to hire such labor. This move will still allow companies to gain access to foreign labor during growth periods. The Singapore government realizes the economic implications of an open immigration policy in an increasingly competitive business climate and is exercising caution in introducing changes.

The bottom-line is that countries that adopt a restrained approach to crafting their immigration policy, are the ones most likely to benefit. In the absence of such restraint they run the risk of losing out on significant investments to other immigration friendly jurisdictions.

Here is an excerpt of Singapore’s Prime Minister Lee Hsieng Loong’s interview with journalist Charlie Rose, where PM Lee cites foreign talent as one of the factors that makes Singapore different.

Interested in doing business in Singapore? Find out how to setup a Singapore company.