Malaysia needs to attract new avenues of FDI

PETALING JAYA: Malaysia needs to look at attracting new avenues of foreign direct investment (FDI), especially in the services, oil and gas, and energy and environment-related sectors as they offer strong growth potential.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said renewable energy, such as solar and bio-fuel, was one big area that the country should leverage on.

Dr Yeah Kim Leng

“The ability to attract more solar energy or green technology players will be able to reverse the declining trend of FDI inflow into the country. These ventures are very capital intensive and we have ample raw material supply, low energy cost and land availability for such investments,” he told StarBizWeek yesterday.

Yeah said the entry of Hong Kong-based Sun Bear Solar Ltd, a global player in the solar energy industry, into the country was a good start.

Sun Bear will be investing RM5.2bil in a solar glass manufacturing plant in Kota Kinabalu Industrial Park, Sabah. The plant will be fully operational by the first quarter of 2012.

According to Yeah, global FDIs have contracted sharply due to the global financial crisis in 2008 and 2009.

“Malaysia’s share of inward FDI into the Asean economies was unchanged at 12% for the two previous five-year periods of 1999-2003 and 2004-2008. By contrast, Singapore captured 58% in the first period and 45% in the more recent period. Thailand, meanwhile, garnered 20% and 17% for the respective two periods. The stark reality is that Malaysia is now lagging behind our northern neighbour despite the latter being embroiled in political troubles.

“This should be taken as a wake-up call for Malaysia that it needs to do more to attract foreign investors,” Yeah added.

Last year, total manufacturing capital investment approved by the Malaysian Industrial Development Authority (Mida) fell 48% to RM32.6bil. Of the total amount approved in 2009, foreign investors accounted for 68% or RM22.1bil, a 52% drop from the previous year.

Likewise, domestic-owned investment approvals fell to RM10.5bil or a 37.1% decline from 2008.

Meanwhile, inward FDI which measures the flow of direct investment into the country fell from RM24.1bil in 2008 to RM5.7bil last year, a 76.5% decline.

Yeah said given that approved projects typically took between one to two years to reach implementation stage, “we expect the larger value of foreign-owned manufacturing capital investment approved in 2009 to translate into higher inward FDI flow this year as measured in the balance of payment account.”

Among the new ventures expected include that of Gulf Petroleum (M) Sdn Bhd and its consortium members which had last Wednesday formalised plans to invest some RM17bil on an integrated oil and gas complex in Port Dickson, Negri Sembilan.

The proposed development will include the setting up of a 150,000-barrels/day refinery, a petrochemical plant and storage facilities. Construction work is set to begin at the end of the year.

Another venture is for an aluminium smelter plant in Samalaju Industrial Park in Bintulu, Sarawak at the cost of US$1bil.

GIIG Holdings Sdn Bhd, a company controlled by billionaire Tan Sri Syed Mokhtar Al-Bukhary, has teamed up with Aluminium Corp of China Ltd (Chalco), the world’s second largest producer of alumina, for the project.

Construction of the plant will begin in the first quarter of next year for completion in 36 months.

With the gradual economic recovery, Yeah said trade and investment flows in the region were expected to normalise this year and pick up thereafter.

“With the Asian economies led by China and India expected to lead the global recovery amid the uneven and weak recovery in the advanced economies, capital investment flows intra-regionally as well as from the advanced economies are expected to increase in line with the better growth and investment outlook for the region,” he added.