Wither the Malaysian Economy?
By Dr. Dzulkefly
To paraphrase an adage in investment, ‘investors are the worst cowards as they will only go to where they can return’. Going by this maxim, as an investment destination, Malaysia no longer looks as attractive and rewarding.What are these indicative of? Well, our own local investors as well as foreign investors who are already in our country have a diminishing confidence in the ability of our economy to generate an attractive return to their investments. In other words, investors now see greener pastures in the region and improved and better opportunities abroad.
Granted, a heated policy debate is abuzz about Malaysia’s performance in foreign direct investment (FDI) and her economic policies. The recent of release of the UNCTAD World Investment Report (WIR) 2010 showed that while global FDI dipped by 37%, Malaysia’s FDI plunged by a whopping 81 percent from US$7.32 billion (RM23.47 billion) in 2008 to just US$1.38 billion (RM4.43 billion) last year.
As if that wasn’t grim enough, the WIR 2010 Report also pointed out that only Malaysia suffered a net outflow of FDI in the entire Southeast Asia region in 2009. A massive amount of US$8.04 billion (RM25.77billion) flowed out last year as opposed to the FDI inflow of US$1.38 billion (RM4.43 bilion). Again, all the other countries in the region had a net positive FDI flow in 2009. Dismal and depressing, you may surmise.
Admittedly, we have clearly fallen off the investors’ radar for whatever reasons. Indonesia, Philippines and Vietnam have overtaken us. In 2008 we accounted for 15.5% of FDI flows into SE Asia; in 2009 it was down to 3.7%.
While FDI arguably fluctuates, our net FDI flows, unfortunately have consistently declined from US$2.56 billion in 2004 and US$1.09 billion (2005), to a net negative US$0.02 billion (2006), negative US$2.7 billion (2007), negative US$7.67 billion in 2008 and negative US$6.66 in 2009.
To paraphrase an adage in investment, ‘investors are the worst cowards as they will only go to where they can return’. Going by this maxim, as an investment destination, Malaysia no longer looks as attractive and rewarding.What are these indicative of? Well, our own local investors as well as foreign investors who are already in our country have a diminishing confidence in the ability of our economy to generate an attractive return to their investments. In other words, investors now see greener pastures in the region and improved and better opportunities abroad.
Should we be concerned? Yes, of course. Why? Well, the PM places all his macroeconomic targets of high growth and higher income economy actually premised strongly on private investment! That’s why we must be concerned. In plain terms, if things don’t improve we are derailed from the word go. That’s what it means. Period.
With a current gearing at 52% of GDP (ie RM405.1bil), government spending is already stifled by public debt. A penchant to award massive mega-projects on a direct nego basis is surely very irresponsible as it diminishes further our capacity to spend and grow.
