Well Done Lah Malaysia

FDI Crashing Because Ininvestors Lost Faith

A lack of confidence in Malaysia’s economy has driven foreign direct investment (FDI) to our neighbours, leaving the once-roaring “Asian tiger” to compete with Indochina countries. The World Foreign Investment Report (WIR) 2010 released by the United Nations showed that FDI in Malaysia plunged 81 per cent last year, trailing behind countries like the Philippines, Vietnam, Thailand, Indonesia and Singapore. “For the first time ever in history, Malaysia attracted less investment than the Philippines” says the analyst. The analyst pointed out that Malaysia was the only Asean country to experience negative FDI flow in 2009. The Philippines attracted US$1.95 billion (RM6.24 billion) in FDI compared to Malaysia’s US$1.38 billion, while Singapore raked in the most — more than US$16 billion. “Among Southeast Asian nations, we are now only attracting more FDI than Cambodia, Myanmar, Brunei, Laos and Timor-Leste. What was previously unimaginable, that we may one day be compared to countries such as Cambodia and Myanmar, is now a real possibility,” he added. He also pointing out that those countries had also attracted less than US$2 billion in FDIs last year. Prime Minister’s has been trying to lift Malaysia’s profile as a destination for foreign investment to help the country achieve an average gross domestic product (GDP) growth of at least six per cent per annum over the next five years. But Malaysia’s FDI rates have fallen faster than other regional players like Singapore and China, and at the same time capital outflows have dampened private domestic investments. PM’s administration has also warned that the economy may slow down in the second half of the year due to external factors but have insisted that a six per cent growth was still achievable.

The analyst also said that Malaysia had suffered the biggest decline of FDI in Southeast Asia from 2008 till 2009. “The government cannot use the excuse of the (global financial) crisis as the reason for the precipitous drop in FDI as we have performed the worst compared to all other countries big and small in the region,” he said. Data revealed that Malaysia suffered a large 81.1 per cent drop in FDIs compared to far healthier figures in Thailand (30.4 per cent), Vietnam (44.1 per cent) and Indonesia (44.7 per cent). However, Singapore, Brunei, Philippines and Myanmar still managed to register positive growth, the analyst who is the economist expert, pointed out that Malaysia was the sole Southeast Asian nation to have registered a net negative FDI flow last year. PM’s was criticised for stalling on the NEM. “Malaysia was the only country where our outflow of FDI amounting to US$8.04 billion is substantially greater than the FDI of US$1.38 billion received. Not only are foreign investors unwilling to invest in Malaysia, our own local investors as well as foreign investors who are already in the country have a total lack of confidence in the ability of our economy to generate an attractive return to their investments,” he added.

He pointed out that Malaysia’s net FDI flows have declined from US$2.56 billion in 2004 and US$1.09 billion (2005), to a net negative US$0.02 billion (2006), negative US$2.7 billion (2007) and negative US$7.67 billion in 2008. “Despite PM repeatedly insisting that the era where ‘the government knows best’ is over, his administration continues to crowd out private investments by directly awarding mega-projects to government-linked entities, such as the Sungai Buloh land to an Employee Provident Fund joint venture with the government, or the Sungai Besi airport redevelopment, to the 1 Malaysia Development Fund,” he said. “Without these necessary and critical changes to the government’s economic policies, the Malaysian economy will only continue to drift away from the radar of both local and foreign investors,” he added. The analyst went on to criticise PM for not moving ahead with his New Economic Model, pointing out the prime minister had been forced to call it a “trial balloon” after a sour reaction from some Malay groups.