FDI in Malaysia down from $5.5 bn to $3.9 bn

FDI in Malaysia down from $5.5 bn to $3.9 bn
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First Published: Tue, Aug 21 2007. 09 44 AM IST
Updated: Tue, Aug 21 2007. 09 44 AM IST
AFP
Kuala Lumpur: Malaysia has embarked on a huge development plan to spread growth and jobs to its Malay-majority hinterlands, but analysts said it faced tough competition for necessary foreign investment.
Prime Minister Abdullah Ahmad Badawi last month launched a $51billion (Rs2040 crore) development initiative to cut poverty in northern Peninsula Malaysia, the country’s Muslim heartland.
He had already unveiled the Iskandar Development Region in southern Johor state, which aims to attract $14.2 billion over five years to turn the area into a new Asian metropolis.
However, other Asian nations like China, India and fast-growing Vietnam were luring away key foreign investment, analysts said.
Only one-third of the targetted $51billion for Peninsula Malaysia is due to come from the government, so foreign funds are required for the plan to succeed, said Wan Suhaimi Saidie, an economist with K Kenanga Bhd.
“But now we are facing stiff competition from Thailand and Vietnam. These countries have advantages over Malaysia, for instance in the form of a younger workforce or bigger population,” he said.
Chua Hak Bin, an economist with the Singapore-based firm Citigroup Global Capital Markets, also said attracting more overseas money would be hard.
“Malaysia has really fallen behind Singapore, Vietnam and China in attracting foreign direct investment,” Chua said. Part of the reason could be China’s popular free trade zones and Singapore’s relatively low corporate taxes.
Officials have embarked on a marketing offensive in Singapore to sell the Iskandar Development Region, but so far it has not attracted major foreign investment.
Malaysia, Southeast Asia’s third largest economy, has seen foreign direct investment steadily declining. In 2006 it amounted to an estimated $3.9 billion compared to $5.5 billion in 2001.
Analysts said Abdullah’s ambitious development project would still have an impact, creating new job opportunities across a variety of sectors over the next few years.
“New employment opportunities will be created with the development of the country’s hinterlands,” Lee Heng Guie, head of economic research with CIMB Investment Bank, told AFP.
“With infrastructure development taking place, like the second bridge link to the island resort of Penang, there will be a rise in demand for building materials,” he said. Some analysts have speculated that the development plans were announced recently because Abdullah plans to hold early an early election, possibly later this year.
He was hoping to boost his government’s popularity by trying to spread economic growth across the country, they said. The plans were “highly politically motivated” ahead of an anticipated early election, Citigroup’s Chua told AFP.
Malaysia official economic growth forecast for 2007 is 6%, behind that of rivals like China and India while its economy grew 5.9% in 2006.
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First Published: Tue, Aug 21 2007. 09 44 AM IST
More Topics: Malaysia | Economy | FDI | India | China |