Are FDIs Always Fickle?

Foreign direct investment (FDI), the net inflow of long-term investments, is rather fickle. When the Prime Minister says there were RM330 billion in total approved investments for 2023, it does not mean that this amount of investments was made. They were approved but have not yet transformed into actual investments on the ground.

And, these are total approved investments, both domestic and foreign. Out of this total, 57 percent were foreign and 43 percent were local, amounting to RM188 billion and RM142 billion respectively.

However, actual FDI for 2023 was about RM38 billion compared to approved investments of RM188 billion, or just one-fifth of approved investments.

Two factors are at play. First, RM330 billion comprises mere approvals. The second factor is that these investments are not committed for 2023 but can extend to an investment over years. For example, Microsoft’s US$2.2 billion investment (over RM10 billion) in Malaysia spans four years.

FDIs and domestic investments are about conducive investment climates. That involves multiple, complex factors and interactions. It means strategic, long-term measures translated to clear, careful execution on the ground. The talk must be followed by action.

We need to improve infrastructure. We need to streamline and re-evaluate the incentives we give for FDI and give similar ones to local investors. We need our leaders to stay put in the country, put their heads together, get expertise in and prioritise what needs to be done and execute without delay. We need to focus on domestic issues where we can make positive change rather than foreign ones where we will have no or little impact at all.

What foreigners want is stability, investment friendliness, great infrastructure, good quality of

life, educated smart locals, no red tape, efficiency, corruption-free measures, better productivity, progressive thinking, less extremism and many more.

If we take care of ourselves and our country then investments will surely flow. Focus on the basics, not Gaza or Central Asia!

Reference:

Enduring myths and realities about FDIs, P Gunasegaram, Malaysiakini, 24 May 2024