Will FDI Roll-In Despite Lockdown?

 

Forbes

UNCTAD determined that Malaysia’s FDI last year (2020) was down by 68% from 2019 and amounted to just USD 2.5 billion. This is compared to the ASEAN’s drop of 31% in 2020.

Globally, all FDI contracted by 42%, dropping from USD 1.5 trillion in 2019 to USD 859 billion in 2020. This is the Covid hit.

Thailand’s FDI contracted by 50% to USD1.5 billion while the Philippines bucked the trend and rose by 29% to USD 6.4 billion. Singapore, Indonesia and Vietnam all registered declines.

UNCTAD has projected 5-10% FDI slide in 2021, as effects of the pandemic will linger.

According to a Standard Chartered report in March, 2021, Malaysia is seen as the second most favourable ASEAN country (after Singapore) for foreign investment (from U.S., U.K., Germany and France). China views Malaysia as its top choice. However, many (investors) are in a state of abeyance because of the Emergency, developments on the 12^th Malaysia Plan (2021-2025) and the unveiling of the New Industrial Master Plan.

Both DDI and FDI need to understand the medium and long-term measures for putting the country on a growth trajectory. New technologies, competitive incentives and domestic challenges will define our future. Manufacturing and services are the main recipients and the main drivers of GDP. Malaysia is a major player in the global E&E supply chain, close to 40% of our overall exports is from this sector.

From an ASEAN perspective, the top economic sectors that FDI will consider are:

−         Logistics;

−         Technology;

−         Manufacturing;

−         Real estate;

−         Financial services;

−         Life sciences;

−         FMCG; and

−         Electronics

Then there is RCEP – which will enable greater trade and investment within the region and with others like India, through FTAs already in place. Of the above, Malaysia needs to focus on those it has a competitive advantage. Hopefully, we are not tied down by legacy issues in moving forward. And the essence is to remain agile and not flip-flop.

 

Reference:

1.     Justin Lim, Malaysia second most favourable country for foreign investment in Southeast Asia — Standard Chartered, The Edge24 March 2021

2.     Daljit Dhesi, FDI rolling in despite lockdown, StarBiz, 7 June 2021

3.     Investing in ASEAN, ASEAN Business Partners, 2021/22