Is Malaysia actually lagging behind in attracting international direct funding?

There’s been a lot agitation and kopitiam discuss stories that Malaysia is falling behind its regional neighbours in attracting international direct funding (FDI), together with supposedly dropping out on key strategic investments.

Some level to a June 2020 United Nations Convention on Commerce & Improvement as the premise for the grim discuss: “Overseas direct funding to creating economies in Asia … is projected to say no by as much as 45% in 2020”. The report additionally highlighted that Indonesia, Singapore and Vietnam acquired greater than 80% of the US$156bil (RM626.7bil) in FDI that Asean nations pulled in 2020. Solely 5%, or simply US$7.8bil (RM31.3bil), went to Malaysia – which after all doesn’t appear to augur nicely for us.

Among the particular (and inaccurate) examples of investments which are making the rounds on social media and messaging apps embrace the next:

> Samsung Electronics desiring to shift its show manufacturing operations from China to Vietnam – this has really been formally denied by the corporate; for the file, Samsung already has six factories and two analysis and improvement centres in Vietnam.

> Apple, by means of manufacturing associate Foxconn, is shifting just some – ie, not all – of its iPad and MacBook meeting traces to Vietnam from China as a part of its “parallel provide chain” technique. Because of this there’s scope for different regional nations comparable to Malaysia to draw the remainder of this manufacturing community within the world worth chain.

> Tesla is constructing a manufacturing unit in Indonesia and even considering a SpaceX launchpad there – in actuality, talks between the Indonesian authorities and the electrical car and clear power firm are nonetheless ongoing.

> Amazon is investing US$2.8bil (RM11.2bil) to construct a localised information centre for its cloud computing providers in West Java, Indonesia. Information localisation would minimise the potential for aggressive tax avoidance (switch pricing) for firms comparable to Amazon. However ought to Indonesia resolve to hitch the Complete and Progressive Trans-Pacific Partnership (CPTPP), the benefits gained from information localisation shall be diluted as a result of the CPTPP has an in-built bias towards information localisation.

Whereas information of those investments is inaccurate, nonetheless, Malaysia can’t afford complacency. The next are coverage measures that would ramp up Malaysia’s efforts to draw FDI within the face of rivalry from regional rivals.

> Firstly, we should improve home direct funding (DDI) and strengthen our small and medium-sized enterprises (SME) base. A brand new coverage imaginative and prescient is known as for by which the present coverage paradigm is turned on its head with SMEs on the forefront, appearing as a catalyst for financial and employment progress. This might additionally profit government-linked firms and international traders because the spillover impact is reversed.

A technique to do that is to spice up and strengthen SME linkages and manufacturing networks in Asean, enabling SMEs to contribute in direction of intra-Asean commerce and funding flows in addition to regional integration. Moreover, SMEs in Malaysia, Singapore, Thailand and Indonesia ought to improve cooperation and involvement in, for instance, the Indonesia-Malaysia-Thailand Development Triangle and the Singapore-Johor-Riau Development Triangle.

> Secondly, strengthen regional cooperation by means of Asean and the Regional Complete Financial Partnership for larger regional interdependency.

There needs to be an Asean Industrial and Financial Masterplan (paralleling the Asean Connectivity Masterplan 2025, for instance) that apportions and designates manufacturing networks and provide chain bases alongside the aggressive edges and benefits and strategic areas of member states. In order that, for instance, Vietnam’s manufacturing traces and zones for electrical and digital merchandise are absolutely built-in with Malaysia’s.

Different coverage steps would come with the resuscitation of cross-border listings, such because the Asean Buying and selling Hyperlink (arrange in 2012) by constructing upon the Asean Capital Markets Discussion board for cross-border choices of collective funding schemes. The revival of the Central Restrict Order Guide that was banned with none warning set towards the backdrop of the Asian monetary disaster beforehand ought to maybe be reconsidered as a part of a ringgit stabilisation technique.

> Thirdly, improve fiscal deficit to put money into DDI, together with in analysis and improvement (R&D), and generate free full employment.

It’s really helpful {that a} macro-economic technique with jobs creation – together with as a part of the spillover results of R&D in inexperienced and renewable applied sciences – at its coronary heart be a part of the federal government’s precedence for the subsequent 5 to 10 years, even because the low-touch economic system and digitalisation and automation more and more develop into the brand new regular with Covid-19 because the impetus.

Fiscal consolidation within the medium-term, necessary although that’s, should be modified and adjusted in keeping with enterprise cycles and subsequently shouldn’t be thought of as solid in stone.

> Fourthly, additional diversify and increase our commerce and funding hyperlinks past conventional FDI companions.

Past the speedy area, East Asia, North America and the European Union, Malaysia’s Worldwide Commerce & Business Ministry, by means of its two wings, the Malaysia Exterior Commerce Improvement Corp and the Malaysian Funding Improvement Authority, ought to deepen commerce and funding linkages with the quickly rising economies and rising markets of Latin America, Central Asia, the Center East and North Africa, and sub-Saharan Africa.

If there’s to be a brand new nationwide consensus of the subsequent part in nationwide improvement, let or not it’s one which’s renewed by confidence – avoiding the dual extremes of isolationism/autarky and over-dependence – that we’ve got what it takes to make that leap and transformation as a nation.

JASON LOH

Head, Social, Legislation & Human Rights, Emir Analysis

Word: Emir Analysis is an unbiased suppose tank centered on strategic coverage suggestions.