Monday, March 13th, 2023 at Economy | News
Malaysia must identify unique investment proposition to attract investors, improve reputation and become a more welcoming place for foreigners
by S BIRRUNTHA
MALAYSIA raised the eyebrows of its regional peers when American companies Tesla Inc and Amazon Web Services announced large-scale investments in the past weeks, with the country’s ability to attract mega investors when almost all Asean economies are fighting for investments.
But are the mega commitments enough to restore Malaysia’s glory, once known for its vibrant economy and friendly investment climate, but now has been taken over by Indonesia, Thailand and Vietnam?
Economists told The Malaysian Reserve (TMR) that Malaysia’s investment policies must be revamped by identifying gaps and implementing policy improvements to regain its shine as a primary foreign direct investment (FDI) destination.
Malaysia University of Science and Technology economist Dr Geoffrey Williams said the policies need a wholesome reform instead of minor tweaks.
He said it is difficult for Malaysia to regain its position as a top FDI destination due to heavy competition between Indonesia and Vietnam. They are seen as vibrant, growing economic zones.
According to Williams, Malaysia is seen as a slower and less vibrant destination with heavy government interference, which would be a drawback for domestic and foreign private investors.
What Needs to Be Done
“Malaysia must identify its unique investment propositions to attract international investors, improve its reputation and become a more welcoming place for foreigners,” he said, adding that some sectors could play crucial roles, including Islamic finance, palm oil, halal industry, and oil and gas.
“New industries that create employment must be targeted not just big brand companies with sales and service outlets,” he said.
According to him, Malaysia ranked sixth in the Asean region regarding total FDI received, behind Indonesia, Vietnam, Thailand, the Philippines and Singapore. Singapore alone received nine times more of Malaysia’s FDI on a US dollar basis.
He said Malaysia was also ranked sixth but ahead of Thailand and Indonesia in terms of FDI’s percentage of GDP. He noted that Singapore has a GDP per capita almost six times of Malaysia’s, while Indonesia and Vietnam are nine and three times larger in population, respectively.
Meanwhile, Sunway University Business School economist Dr Yeah Kim Leng said Malaysia needs to tweak its investment policies by sharpening focus, and enhancing cooperation and coordination among the federal, state and local authorities, including the various regional economic corridors.
He said a national investment agenda incorporating the promotion of domestic direct investment (DDI) and FDI would be desirable to raise the country’s private investment level from 16%-17% of GDP to 20%-25%.
He also emphasised that stakeholders must maximise benefits from the proposed agenda, including creating high-wage jobs and other spillovers to the domestic economy.
Yeah said it is unsurprising that Indonesia and Vietnam have overtaken Malaysia in receiving FDIs, given their larger population, bigger domestic market and favourable growth outlook.
“It is noted that as a share of GDP, Malaysia’s annual average of 2.3% exceeds that of Indonesia at 1.9% but significantly less than Vietnam’s 6% during the 2017 to 2021 period,” he said.
Yeah said the challenge for Malaysia is attracting sufficiently large — not necessarily bigger than the two countries — high-quality foreign investments, which could accelerate Malaysia’s structural transformation into an advanced and industrialised economy akin to South Korea, Taiwan or Singapore.
“Given its relatively well-developed infrastructures, presence of large multinational corporations and established domestic supply chains, the country is well positioned to garner a larger share of FDI,” he said.