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Attracting more foreign direct investment

Attracting more foreign direct investment

01 May 2023

TO strengthen the economy, a lot of focus is being placed on attracting foreign direct investment (FDI).

Malaysia adopts focused, targeted and selective approaches towards attracting investment inflows to ensure quality and high-impact investments.

While intensifying the promotion of foreign investments, it encourages long-term, sustainable investments and facilitates the development of Malaysia as a digital hub.

For 2023, one primary strategy is based on a country and industry focus; the country focus takes advantage of trade diversions due to uncertain geopolitical tensions that include the United States-China trade conflict and the Russia-Ukraine crisis.

“Within the shift in the global supply chain, Malaysia is promoted as an alternative hub for manufacturing and distribution activities,’’ said Malaysian Investment Development Authority (Mida) CEO Datuk Wira Arham Abdul Rahman.

The industry focus approach emphasises investments in new development areas – electric vehicles, smart factories using 5G technology, supply chain ecosystems and green technology.

FDIs in 2022 accounted for 61.7% of total investments or RM163.3bil.

Foreign investors were mostly concentrated in information and communications, electrical and electronics, mining, transport equipment as well as chemicals and chemical products.

China led the way in total approved investments with RM55.4bil, followed by the United States (RM29.2bil).

With RM264.6bil in approved investments in 2022, Malaysia’s manufacturing and primary sectors have shown resilience in the face of a challenging economic landscape.

Mida has a number of promising projects with potential investments of RM14.6bil.

The manufacturing sector has 31 projects with potential investments of RM10.6bil; investments in services amounted to RM4bil.

The recent commitment by Tesla and Amazon Web Services to invest in Malaysia is testament to its political stability and institutional strengths.

“In line with Malaysia’s aim to become Asia’s investment gateway, Mida is making every effort to quickly emerge as Asean’s digital hub,’’ said Arham.

This is based on Malaysia’s highly developed information and communication technologies infrastructure, talented science, technology, engineering and mathematics pool, strong intellectual property protection framework and rule of law.

The revised New Industrial Master Plan will set the tone for Malaysia’s industrial development by outlining new growth opportunities, improving ease of doing business and attracting high-quality digital investments.

To reduce Malaysia’s carbon footprint and promote sustainable development, Mida will prioritise investments that benefit the people, planet as well as funding for green projects and renewable energy.

With the rise in environmental, social and governance (ESG) investing, Mida together with the Investment, Trade and Industry Ministry (Miti), is pushing for targeted policies and initiatives in sustainability.

Currently, a key initiative is the ESG framework for the manufacturing sector as a guide for businesses and to encourage speedier adoption of ESG principles.

This is to attract FDI and integrate local companies into the global chain.

Mida will continue to support and facilitate investments in the adoption of clean energy sources and technologies as well as the development of the halal and farming sub-sectors.

Other ESG considerations are deforestation, labour standards, corporate governance and transparency in labour sources.

Miti, through Mida, will also further intensify the promotion of foreign investments in 2023 by engaging in more promising activities and direct discussions with potential companies.

Following the recent trade and investment to South Korea, more of such missions are in the pipeline to Japan, Europe, the United States and other parts of the world.

‘Strike force’ sessions, special project missions and specific working visits will be carried out by heads of government, ministries and Mida officials to world-renowned companies with high investment potential.

“Strike force” sessions, led by the Mida management, are targeted one-to-one meetings with potential investors to finalise their investments into Malaysia; the topics discussed are technical and specific in nature.

These topics include, among other things, the terms of incentives, local sourcing opportunities and training for staff.

Intensified engagement sessions will be conducted with new and existing investors via seminars and webinars, roundtable meetings, working visits, one-on-one meetings and networking events by Mida Overseas Centres.

There will also be further strengthening and diversifying of co-operation with chambers of commerce, other investment promotion organisations and agencies, banks and the international business community.

Foreign companies will be assisted via placement of experts in Malaysia to continue contributing to Malaysia’s economic development.

To promote Malaysia’s advantages as a regional investment hub, media promotions will be improved via international and local media as well as electronic platforms.

To ensure that Malaysia remains attractive to investors, the National Investment Aspirations (Nia) which provides the framework for the New Investment Policy (Nip), is set in motion to review investment-related policies.

The Nia aims to restructure the country’s investment strategies to secure more high quality, high impact and capital intensive projects.

Meanwhile, the Nip is expected to propel long-term growth for Malaysia through the flow of sustainable, quality investments in new and complex growth areas.

To help small and medium enterprises, the Domestic Investment Co-ordination Platform (DICP) provides support in terms of:

> Bank co-ordination; DICP will partner a bank to co-organise an event that provides financing facilities to small and medium enterprises.

> Venture capital and private equity: Local champions will be identified for further growth, and assisted in preparing funding proposals and connected to the relevant funding sources.

> Initial public offerings (IPOs); Local champions that are ready to go for IPOs will be identified and assisted in the preparation of their IPO prospectus, identification of underwriters and connection to the relevant authorities.

The government continues to adopt pro-business policies; among the efforts to transform Malaysia into a high income nation driven by the services sector, is the exemption of the 30% bumiputra equity condition.

“It is anticipated that this policy could further catalyse digital investments into Malaysia and contribute towards the government’s target of attracting RM70bil of digital investments by 2025,’’ said Arham.

This exemption applies to purchases of land for data centre projects that are approved by the Malaysian cabinet for land acquisitions valued above RM20mil.

Data centre projects benefiting from this policy must be implemented within two years after the completion date of the title transfer.

The year 2023 promises to be an exciting year for the promotion of foreign investments into Malaysia.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.

Source: The Star