Malaysia's FDI still resilient

KUALA LUMPUR (June 27, 2013): Malaysia's foreign direct investment (FDI) scenario is still resilient as the country is adopting a targeted and selective approach in attracting niche quality investments in high-technology projects and not merely emphasising on value of investments, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

He said the government has undertaken various measures to promote value added activities, which include adopting an ecosystem approach to promote private investments, encourage outsourcing activities to enhance efficiency and gain a competitive edge as well as the introduction of domestic investment initiatives to encourage local companies to participate in global value chains (GVC).

"Our desire is to continue to make improvement that requires a holistic approach. Gross FDI inflows have been on an increasing trend. The FDI inflows into Malaysia were net inflows that reflect higher outflows through repayment of inter-company loans, trade credit and other capital payment," he told reporters after launching the World Investment Report 2012 by the United Nations Conference on Trade and Development (Unctad) here yesterday.

Mustapa said as Malaysia transits from labour intensive investments to high technology investments, the country's net FDI inflow last year saw a decrease of 17.4% in investments to US$10.1 billion compared with US$12.2 billion in 2011 in line with the global trend.

Despite the decrease, he said, Malaysia maintained its ranking as the third largest recipient of FDI in Asean.

In the first quarter of 2013, he said Malaysia's FDI totalled RM9.1 billion from RM8.6 billion a year ago.

Mustapa said Malaysia, through the Malaysian Investment Development Authority (Mida), has developed a sophisticated strategy in positioning itself as a global outsourcing hub for high-technology manufacturing value chain.
This, he said, is to position Malaysia as a prime location for GVC activities for transnational companies.

According to the World Investment Report 2013, Malaysia's participation in the GVC is ranked highly, with value added exports constituting 68% of total export share.

The report pointed that the Malaysian government recognises that a number of areas need to be strengthened in order to have the appropriate locations determinants to attract FDI.

Through this strategy, the report said Malaysia aims to build further on the existing competitive position as an outsourcing destination for transnational companies in the electronics, automotive, machinery manufacturing and oil and gas industries as well as leverage these strengths to become a key player in the aerospace, medical, defense and photovoltaic industries, he said.

In 2011, the report said Malaysia was ranked 11th among the top 20 economies with the highest FDI rate returns, testifying Malaysia as a profitable location to do business.

Malaysia was also ranked 16th Top Prospective Host Economy, up from 19th for the period 2013 until 2015, the report said.

"Many large corporations and prominent multinational companies (MNCs) have chosen Malaysia to establish their regional and global operations. Many of these MNCs have established structured training programmes to transfer their key competencies to Malaysian employees," Mustapa said.

In the long run, he said, it will create high income employment opportunities for Malaysians in sectors such as business, accounting, finance, information technology, engineering, technical and other new services sectors such as designing and analytical sciences.