By Pankaj Kumar
POLICY reforms to cut red tapes, tackling economic crime and enhancing Malaysia’s human capital are key strategies that can improve the country’s competitiveness in attracting Foreign Direct Investments (FDIs).
As a nation, we have to review why Malaysia is not attracting the right FDIs. At the same time, we must analyse why neighbouring countries continue to be FDI magnets.
The COVID-19 pandemic must not be used as an excuse for poor FDI inflows as it is proven other ASEAN countries were lesser impacted by the global pandemic.
To put things into perspective, the United Nations Conference on Trade and Development (UNCTAD) report that showed Malaysia secured just about RM10 bil in FDIs in 2020. This is the lowest since 2009 when FDI was only RM5.1bil due to the 2008 Global Financial Crisis.
Notably, while Malaysia saw a massive dip of 68% in total FDIs in 2020, the UNCTAD Report indicated that the Philippines saw a 29% jump in FDIs, while other ASEAN nations performed better than Malaysia.
In recent months, Indonesia has been attracting prominent businesses including Hyundai which moved its US$1.55 bil (RM6.27 bil) business from Malaysia and Toyota which will open its electric vehicle venture worth US$2 bil (RM8 bil).
Even Elon Musk is contemplating a Tesla factory in Indonesia.
Malaysia needs public policy reforms that cuts red tape and attract quality FDIs. Policies related to restricting foreign equity ownership in specific sectors and barriers to allowing foreign companies to bring in their own highly skilled workforce should be reviewed.
Economic crimes like the financial scandals, smuggling issues and tobacco black market where Malaysia today has the highest incidence of illegal cigarettes in the world are turning investors away.
Naturally foreign investors will be turned off by the perception of high levels of corruption and breakdown in the rule of law. Their investments may be jeapordised due to out-of-control economic crime.
Take the tobacco industry for example. The persistently high levels of illegal cigarettes trade has caused major manufacturers like Phillip Morris International, British American Tobacco Malaysia Bhd and Japan Tobacco International to close their plants in 2012, 2016 and 2017 respectively.
Nearly a thousand employees were laid off in total and a vibrant eco-system of supporting businesses and services worth multi-billions of ringgit grounded to a halt.
This is why the Malaysian Government must take decisive and comprehensive action against the black market. Enforcement must go hand-in-hand with policy reforms in order to regain investors trust and confidence.
Last but not least, Malaysia must also invest in enhancing the skill-set and mind-set of its human capital.
The new norm will usher in different challenges and opportunities. Our current and future talent pool must be able to adapt, innovate and be equipped to match the needs of this changing environment in order to present a compelling reason for globally-oriented organisations to invest in Malaysia. – Jan 27, 2021
Pankaj Kumar is an economic and investment commentator as well as the former chief investment officer of Kurnia Insurans (M) Bhd.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
