NST Leader: High on FDI

When elephants fight, it is the grass which suffers. So goes an old Kenyan adage.

Not so for Malaysia, in the tit-for-tat trade war between the United States and China.

Malaysian Investment Development Corporation (Mida) data for the first half of the year (1H2019) is pointing to US and Chinese investors heading for greener pastures here. A neat RM11.7 billion from the former and a respectful RM4.8 billion from the latter. They are not alone.

Investors from Singapore (RM3.1 billion), Japan (RM2.1 billion) and the British Virgin Islands (RM1.4 billion) are flocking here too. Interestingly, the five countries jointly accounted for 92 per cent of the total foreign investments approved in the manufacturing sector during the period.

If services and primary sectors are taken into account, the total investments that are headed our way amount to RM82 billion, or a surge of 97.2 per cent.

In an interview with Bloomberg on June 18, Bank Negara Governor Datuk Nor Shamsiah Mohd Yunus spoke of the trade diversion resulting from the trade spat adding 10 basis points to the country’s growth rate of 4.3 to 4.8 per cent this year. While some economists are saying the surge may be temporary, others are pointing to the conducive ecosystem of Malaysia that may keep the capital here for long.

Professor Yeah Kim Leng of the Business School of Sunway University sees the trade spat as a long-drawn tussle for economic supremacy, suggesting a reconfiguration of global supply chains and industrial production patterns. Someone’s pain may be Malaysia’s long-term gain.

Datuk Dr John Antony Xavier of the Putra Business School, Universiti Putra Malaysia, points to a number of factors why this is so. Malaysia has first-class infrastructure, a wide array of incentives and a one-stop investment processing centre. It is not an accident that Malaysia is ranked 15 among 193 countries in the World Bank’s ease of doing business category.

Malaysia has a respectable placing in the world competitiveness ranking too — 22nd among 63 countries as assessed by IMD World Competitiveness Centre of Switzerland.

But it must do more to keep foreign direct investment (FDI) coming. As a trading nation — 75 per cent of Malaysia’s gross domestic product is made up of exports — it is not free from global economic upheavals. Open economy means open threats. What’s more, recession rumbles are reverberating around the world.

Xavier has a Keynesian thought (John Maynard Keynes’ idea of spending your way out of recession) — policymakers must pump prime the economy. Being too obsessed with the budget deficit will only work against us, Xavier reasons.

Economist Dr Aimi Abdul Rashid agrees. Priming the economy means doing four things. One, the government must crank start mega infrastructure projects that have been put on hold. Where recession is, Keynes is not too far away.

Two, entice foreign businesses to reinvest their profits by dangling tax exemptions. Three, grow our small- and medium-sized enterprises by encouraging them to go cross border. Logistics network support by the government is a must.

Four, Malaysia should widen and improve Internet connectivity. Done well, our FDI high may last longer.

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2020-04-29T12:56:25+08:00