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Malaysia’s FDI plunge: Who’s taking it seriously?

“Malaysia’s precipitous drop in inward foreign direct investments and an increase in outward foreign direct investments (FDI) mark a complete lack of confidence in Malaysia’s economy.

(Pic by duchessa / sxc.hu)

    1. For the first time ever in history, Malaysia attracted less investment than the Philippines.
    2. Compared to the previous year 2008, Malaysia suffered by far the biggest decline of FDI in Southeast Asia.
    3. Malaysia was the only country in Southeast Asia to have registered a net negative Foreign Direct Investment Flow.
    4  For the first time ever, cumulative Outward FDI Stock exceeded cumulative FDI Inward Stock.
    5. Barring a ‘blip’ in 2001 when we attracted only US$0.55 billion in FDI, this is the first time we’ve attracted less than US$2 billion in FDI over the past 20 years.”

DAP national publicity secretary and Petaling Jaya Utara Member of Parliament Tony Pua, in a 25 July 2010 press release. Pua was responding to the United Nations Conference on Trade and Development (Unctad)’s World Investment Report 2010. The Unctad report stated that FDI in Malaysia fell 81% from US$7.3 billion in 2008 to US$1.4 billion in 2009.

Pua said the drastic dip could not be brushed off as a one-off caused by the global financial crisis, but was part of a consistent decline in Malaysia’s competitiveness in recent years. The only other Southeast Asian countries with lower FDI than Malaysia in 2009 were Cambodia, Myanmar, Brunei, Laos and Timor-Leste. (Source: Foreign Direct Investments: What Happened to Malaysia?, Pua’s media statement, 25 July 2010)

“It doesn’t mean that the net investment flow is lower, is necessarily bad.”

“Look at the quality of the investments and look at the facts in terms of the timing of investments.

“It could be some delays. It could be a big, lumpy Malaysian investment overseas that distorts the net number.”

CIMB group managing director and chief executive officer Datuk Seri Nazir Razak, telling people not to jump to conclusions over the 81% plunge in FDI. Nazir, who is Prime Minister Datuk Seri Najib Razak’s younger brother, said “huge” investments by CIMB and Maybank into Indonesia were possible factors that contributed to the lower net FDI figures. (Source: Nazir cautions against bashing low FDI figures, The Malaysian Insider, 26 July 2010)

“The second quarter will be good and the momentum seems to be good.

“We are expecting a single high digit growth for the second quarter.”

Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop, expressing confidence that Malaysia was on target to achieve 6% gross domestic product (GDP) growth and high-income status by 2020. Nor Mohamed said there were strong indications of improvement in trade, import and export, and this would lead the country to achieve its target. (Source: Malaysia to register high single-digit growth in Q2: Nor Mohamed, mysinchew.com, 3 Aug 2010)

“[The government] has been totally misled by the double-digit growth in the first quarter of 2010. The government attributes this dramatic turnaround to its own policies, but the facts show the rebound was largely attributed to an export surge in the first quarter – a regional trend.

“The double-digit growth was also attributable to the low base value a year ago which will wear off in subsequent quarters.”

Malaysian Institute of Economic Research distinguished fellow, Emeritus Professor Datuk Dr Mohamed Ariff, in an interview with The Nut Graph in June 2010. Ariff said there were indications that the government was in denial about the growth rates Malaysia could achieve in its 10th Malaysia Plan.

Ariff said the government had projected 6% GDP growth per annum on the assumption that private investment would grow at 12.8%. However, he said that from 2006 to 2009, the private investment growth rate was only 2%. (Source: Malaysia’s economic outlook: Will we make it?, The Nut Graph, 28 June 2010)

“If we were to bring those kinds of investments in, we will require more cheap foreign labour. We don’t want that kind of investments anymore.”

International Trade and Industry (Miti) Minister Datuk Seri Mustapa Mohamed, explaining that low-value-add and labour-intensive investments were headed where labour cost was cheaper because Malaysia no longer provided incentives for such investments.

He stressed that the ministry was not disputing the FDI data reported by Unctad, declaring the statistics “important” and “correct”. He said, however, that the figures alone did not constitute the whole picture.

Miti also said the sharp fall in FDI in 2009 was due to foreign companies not making additional investments in Malaysia. At the same time, these companies had repatriated profits made in Malaysia to their parent companies that were in the midst of a global recession. (Source: Mustapa: Miti taking proactive measures to attract FDIs, The Star, 29 July 2010)

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6 Responses to “Malaysia’s FDI plunge: Who’s taking it seriously?”

  1. Andrew I says:

    Privatisation of kudos, socialisation of blame. So what else is new?

  2. Shoka says:

    “International Trade and Industry (Miti) Minister Datuk Seri Mustapa Mohamed, explaining that low-value-add and labour-intensive investments were headed where labour cost was cheaper because Malaysia no longer provided incentives for such investments.”

    Since the minister doesn’t explain why we can’t seem to attract investment in high-end investments either, this explanation seems incomplete.

    In the absence of publicly available data, it’s impossible to evaluate [that] the attribution of outward flow of capital is due to repatriation by foreign-owned firms. No doubt this is one component but surely it’s not the only one.

  3. Bigjoe says:

    You did not mention that Mahathir says foreigners have no money to invest? [...] Seriously, he is such an embarrassment to spout such nonsense.

  4. TC Ang says:

    FDI, like human rights, has an inverse proportional relationship with oil price. Don’t take my word for it, a quick google of historical oil price and FDI in Malaysia, and see for yourself. When a government has income from what is essentially free from the ground, why bother investing in the people? We keep getting told we do not have much oil, but just have a look at our production numbers and multiply that with the current $/barrel rate, and see if you believe what you have been told.

    The human mind deals with trauma by comparing itself with another in a worse position. Even though we achieved independence at the same time as Singapore, we used to be able to console ourselves that Singapore was an anomaly,and we are better off than all our other neighbors. We are slowly losing that option.

    Bahrain was one of the first Middle Eastern countries to discover oil, it’s also recognised that it will be the first to run out. Now compare Bahrain with the rest of the Middle East. Human rights, education, women’s rights, political system etc.

    For the FDI situation to improve, there first has to be a fundamental mood shift in society. The number of discontented souls has not reached critical mass yet. Let that happen first.

  5. FDI represent a very important indicator, it is the signal of our capital inflow and outflow. Just like import and export, we are now having more money going out rather than coming in, creating a negative cash flow. Imagine cash flow like a heart, if a heart stops circulating the blood, no matter how healthy the organ, it will fail. For developing countries, FDI also represents a transfer of technical expertise and technology from other countries. When foreign companies set up their base here, they also bring with them their expertise. When such figures come out, it means we are lagging behind in the race of attracting investments.

  6. stewoolf says:

    If the plunge is the trend, what about Malaysia’s listing as the top ten most competitive economies??!! Reading TMI’s posting of BERNAMA’s report on the KLIA aerotrain downed for four-month’s “maintenance” (??!!) while watching NTV7′s 9:30PM Mandarin news about CSL’s speech in Kedah WITHOUT mentioning his comment on the impact of religion on the economy, you can’t help feeling that journalism in Malaysia is in need of “transformation”, just like the Malaysia economy, Umno, etc. TNG, don’t give up, try harder!! :)


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