Malaysia’s FDI poised to pick up in 2021 as pandemic recovery accelerates

GLOBAL macro conditions will be the prime driver of actualised investments over the next two to three years.

Other key drivers include the country’s vaccine rollout that started on Feb 24 that should help investments regain momentum from 2Q 2021 onwards, according to UOB Global Economics & Markets Research.

“As such, we expect Malaysia’s total investment approvals to trend up to RM185 bil in 2021 (from RM164 bil in 2020),” projected the bank’s senior economist Julia Goh.

“Potential catalysts include border reopening, global economic recovery, and ratification of Regional Comprehensive Economic Partnership (RCEP).”

In UOB’s view, key events to watch out for are the announcement of the 12th Malaysia Plan (12MP) 2021-2025 in mid-March that outlines Malaysia’s development roadmap over the next five years, particularly in a post-pandemic new normal.

Elaborating on its projected uptrend of Malaysia’s FDI by 12.8% in 2021, Goh noted that as of end-December last year, the Malaysian Investment Development Authority (MIDA) has RM65.9 bil worth of potential investments being actively evaluated.

Moreover, MIDA has also identified 240 high-profile foreign investment projects, including Fortune 500 companies in the manufacturing and services sector with a combined potential investment value of RM81.9 bil.

These include on-going negotiations with companies from various sectors such as automotive, chemical, and advanced electronics to transform Malaysia into a high-value added manufacturing, services, and global supply chain hub.

Malaysia’s total approved investments came off by 22.4% to RM164 bil in 2020 (2019: RM211.4 bil) following the adverse impact of COVID-19 pandemic.

This involved 4,599 projects with potential creation of 114,673 new jobs over the next few years. A large part of the approvals was domestic direct investments (DDI) which accounted for RM99.8 bil or 60.9% of total investments.

Approved foreign direct investments (FDI) was RM64.2 bil or 39.1% of the overall total. China, Singapore and the Netherlands were the top sources of FDI last year with a combined share of 54.8% of total FDI approved. – March 4, 2021

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