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Confidence an impetus to attract FDIs, says Rehda Institute

Confidence an impetus to attract FDIs, says Rehda Institute

21 Jan 2022

One of the pertinent dialogues discussed at the Rehda Institute’s CEO Series 2022 Annual Property Developers Conference held on Jan 20 is how Malaysia is poised to attract more foreign direct investments (FDIs).

A panel discussion titled “Attracting strategic foreign investment into Malaysia: How can Malaysia differentiate itself regionally?” drew ideas and views on what can be done to attract more international investments.

The panellists were Malaysian Investment Development Authority (MIDA) chief executive officer (CEO) Datuk Arham Abdul Rahman, FIABCI Malaysia president and S P Setia Bhd deputy president and chief operating officer (COO) Datuk Seri Koe Peng Kang, EUROCHAM Malaysia chairman Oliver Roche, AMCHAM Malaysia CEO Siobhan Das and Malaysia-China Business Council (MCBC) director Datuk Tee Guan Pian.

AMCHAM’s Das said: “It is a discussion we need to further explore. As it is, Malaysia is already home to many manufacturing companies, and the ecosystem here is absolutely solid, stable, growing, with a trained workforce and a proven track record. An emerging area is the role of environmental, social, and governance (ESG), and its role to play [in the local market] to attract the FDIs.”

The panellists raised the challenges in labour and talent. “The question is, with the investments coming in so rapidly, do we have sufficient resources [on the ground] to meet them?” said Das.

MIDA’s Arham commented: “Although we have done well for the numbers, there is still room for improvement, especially in terms of talent, and high-skilled talent. In terms of consistency, we have been very successful, but talent is something that we have to manage.”

FIABCI’s Koe said: “We have companies that provide automation designs, tools to support this ecosystem. If you compare to our neighbouring countries, they enjoy what we have to offer; from our weather, infrastructure, education, cultures and so on.”

According to MIDA, a total of 522 manufacturing projects worth RM103.9 billion were approved in the period of January to September 2021, compared to RM64.8 billion the same period in 2020, which translates to more than 60% increase. MIDA added that Singapore tops Malaysia’s FDI sources (RM44.2 billion), followed by China (RM22 billion), Austria (RM10.9 billion), Japan (RM6.9 billion) and the Netherlands (RM6.6 billion).

MCBC’s Tee said: “Malaysia is still very attractive; we still see investments coming in from China, although Singapore seems to have garnered the most. During the pandemic, the major shift of policy in China [has resulted in] more investments pumped in, in Hong Kong and Singapore, and it is still a challenge to invest in Malaysia.”

The panellists concurred that Malaysia is still a top destination for multinationals to set up their regional headquarters for management, finance, and training activities.

According to InvestKL, with its “RM20 billion by 2030” target, KL is also the hub for innovation and talent, supported by a strong ecosystem, and having access to a talented multiracial workforce that’s young, educated, productive and fluent in English. If there is political stability and and investor-friendly environment, along with the government transformation programme, the country will attract further FDIs.

Clarity in policies

Despite the encouraging numbers, there’s certainly room for improvements. The panellists agreed that there has to be consistency in policies, and in sustaining long-term investments.

Koe said: “As far as policies, we must create confidence. A lot of policies have been created without consultation from the private sector.”

“We need to have a dialogue with the authorities; and with stakeholders across the industry, be it developers, valuers, estate agencies and consultants. We need to work together with the government to improve the overall economy, otherwise we would have different visions,” he added.

Das concurred. “It is good that Malaysians are recognising and communicating this issue, magic bullets are not expected overnight, but it needs to be a collaborative effort. To have this conversation, it will not only help us make the right regulatory decisions but also drive investors and their confidence to invest in Malaysia.”

Meanwhile, market perception is also key. Koe said: “The industry must be very careful about the word ‘oversupply’; it will cause a knee-jerk reaction, attract the wrong attention and the wrong regulatory penalised for the oversupply, and generally, I think the oversupply situation in Malaysia refers to the high-rises in the south.”

The panellists listed the other intricacies. InvestKL’s Yam said: “Less than 2% of the property stocks here are owned by foreigners; which is equivalent to 60,000 units (out of the six million units of houses) is quite minuscule, and yet there is a [misconception] that they are driving up the property prices; also foreigners may have to consider which lands to purchase by state [as it is by state matter].”

Yam pointed out the population growth in Malaysia to stipulate the demand for housing. “Despite the pandemic, interestingly, if you look at last year, there were about 196,000 marriages. Every year, there are about 200,000 newly married couples who are looking for new homes. I believe it is a matter of pricing and good location.”

Das added: “Also, all the states are different in terms of policies. Johor and Penang, for example, have different strategies in attracting FDIs. Liveability is also key in attracting FDIs, so the investors can also bring their families, to drive those investments forward, and to live here for the long term.”

EUROCHAM Malaysia’s Roche said: “There was also a lot of controversy about the MM2H programme [with a new quota imposed on its participants, limited to no more than 1% of the Malaysian population]. I strongly recommend that we look at reducing the requirements and that will create more job opportunities and talent. We have been pushing the restart button for the EU-Malaysia free trade agreements and negotiations.”

Koe added: “Once there is better clarity; we would want the foreign business hubs, students, and retirees, hence we need more promotional efforts to capture them, and show them what we have to offer, such as the previous ‘Malaysia Truly Asia’ video campaign, for example.”

Tee said: “When we opened the dialogue with China and the immigration, the responses were encouraging. With projects such as ECRL, it gives the impression that more investments will be coming in. There had been stringent criteria for the Chinese, and due to the pandemic, there had been delays as well. In terms of the human resource aspect of FDIs, we have to be clearer.”

MIDA’s Arham emphasised ESG policies, adding: “Our policies need to be clear, consistent and transparent; we have to obey the fiscal policy. At MIDA, we have continuously engaged with all the chambers associations.

“We have to work together to ensure the investments will be here for the longer term. Moving forward, in the spirit of our competitiveness, we are working towards building a sustainable environment for FDIs in Malaysia.

“We are also planning to incorporate green ESG policies such as what the EU has done, for example to utilise renewable energy index by 2024, to give us the competitive advantage compared to our neighbours.”

Source: The Edge Markets

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