According to the United Nations’ World Investment Report 2010, foreign direct investment (FDI) for Malaysia has plunged 81 percent from US$7.32 billion (RM23.47 billion) in 2008 to just US$1.38 billion (RM4.43 billion) last year.
This is further confirmation that despite the many efforts to court foreign investors to invest here, the foreign and local business community is not buying what is being sold to them in terms of the attractiveness of Malaysia as a place to do business.
The latest data must be especially a letdown for Prime Minister Najib Razak who has been active on the international front, attending investor meetings and courting foreign fund managers and foreign business leaders to persuade them to put their money in Malaysia.
There are various important points that we can deduce from the data in the table, and other tables in the report comparing the Malaysia inflows with other countries in the SE Asian region.
1. The downturn in FDI is not a one or two year phenomenon but a long term trend. The previous attraction that we had for foreign investors is no longer there, and this is likely to continue in the foreseeable future.
2. The trend is not only of diminishing FDIs into Malaysia but for us to do worse than the rest of our neighbors in the region. In 2008 we accounted for 15.5% of FDI flows into SE Asia; in 2009 it was down to 3.7%.
3. No longer first choice. Short of a complete breakdown in the governments in neighboring countries such as Singapore, Thailand, Indonesia and Vietnam, we are looking at foreign investors preferring to invest in these countries rather than Malaysia.
4. Political stability – no problem. Even if political turmoil and social instability appears to be more pronounced in countries such as Thailand, we are no longer able to compete with them for FDI.
5. The outflow of domestic investments is a new trend. This suggests that the country is unable to develop new industries or sustain existing industries to prevent local funds from leaving the country. It also indicates loss of confidence by local business in the country’s economy and politics.
It’s definitely not a good news for the government in particular and Malaysian in general. Read in full…