Malaysia needs to rejig its FDI strategy, says economists

PETALING JAYA — Malaysia needs to reexamine its strategies with regards to its attractiveness to generate more foreign direct investment (FDI), said local economists.

Sunway University Business School economics professor Dr Yeah Kim Leng told Malay Mail that although there are a handful of industries that may be attractive to FDI, the country needs to examine its strategy in attracting FDI.

“We need to examine the underlying cause which includes some business retracting because Malaysia might no longer be an attractive environment to conduct business,” he said.

Yesterday, leading gases and engineering company Linde Malaysia Sdn Bhd, a subsidiary of The Linde Group, announced their €150 million (RM693 million) joint venture with Petronas Gas Bhd.

The joint venture entails the building of a state-of-the-art industrial air gas facility that will produce gaseous oxygen and nitrogen to supply the needs of Petronas’s Refinery and Petrochemicals Integrated Complex within the Pengerang Integrated Petroleum Complex.

While The Linde Group’s injection of capital in the JV is positive for the economy, Malaysian economists however pointed out that foreign investments here are currently attracting selective industries at a smaller scale.

Yeah said the size and pace of foreign capital inflow may not be adequate to sustain the desired 8% to 10% growth in private investments annually.

Amid the positive FDI input in Malaysia, the country registered another trend in which core foreign investments have shown interest in leaving the country.

Norwegian-based telecommunications carrier Telenor Group is reportedly reviewing its options to sell its stake in Digi.com Bhd after facing fierce domestic competition, possibly showing a reduced risk appetite in emerging economies, especially in Malaysia.

It was said that the carrier may explore a joint venture with Asian carriers and would not opt out of selling its stake if it fails to find the right partner.

Telenor holds a 49% stake in Digi, valued at about US$4.6 billion.

Yeah said if Telenor opts to partner with an Asian carrier, it could be in line with its global plans and strategic reasons.

“But if they are selling their stake due to the declining attractiveness of the economy, then we need to step up our assets to attract both domestic and FDI,” Yeah said.

He said the negative news impacting the nation have heightened investors concern leading to a slowdown in FDI.

Yeah said FDI activities in the Asean region have trickled to Thailand, Indonesia and Vietnam.

“We need to reexamine our country’s attractiveness for business and there must be a refresher for FDIs, especially in terms of assets that are of higher value and thus, are more technologically intensive which will entice investors.”

Inter-Pacific Research Sdn Bhd Head of Research Pong Teng Siew said Malaysia is not a growth market anymore at this juncture and any company looking for growth should look elsewhere.

He said companies like Telenor Group need not invest more into the business if they can manage it but that various changes in policies here have left them in the lurch.

“There are a lot of regulatory changes and additional costs to business especially with the bandwidth cost which is imposed by the government, so it is not surprising that companies are looking at other markets.”

Pong said Myanmar has been earmarked for its future investment potential in the Asean region.

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