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Favourable FDI destination

Favourable FDI destination

18 Jun 2024

Malaysia’s recent influx of substantial foreign direct investment (FDI) indicates several positive trends and potential developments for the country, according to Previndran Singhe, the chief executive officer and founder of Zerin Properties. 

High-profile investments, such as Apple’s new store and contributions from Microsoft and Google, can elevate Malaysia’s status as an attractive destination for FDI, he noted.

These developments are expected to enhance Malaysia’s international standing, showcasing a dynamic and resilient economy with a bright future fueled by technological advancements, diversified growth, and improved global connectivity, he told Business Times. 

“With all the investments coming in, Malaysia is gaining enhanced global visibility and building investor confidence. The influx of blue-chip companies signals a stable and promising business environment, potentially attracting other savvy investors,” he said.

Malaysia has experienced a notable wave of investment from major foreign companies and tech giants throughout this year.

Prominent entities such as Google, Apple, Microsoft, ByteDance, and BlackBerry are among those investing. These investments highlight Malaysia’s appeal as a key hub for global business and technology ventures.

Google plans to invest US$2 billion (RM9.4 billion) in establishing its first data centre and Google Cloud region in Malaysia.  

Ruth Porat, president and chief investment officer, and chief financial officer of Alphabet and Google, said in a statement that Google’s first Malaysian data centre and Google Cloud region is the group’s largest planned investment so far in Malaysia — a place Google has been proud to call home for 13 years. 

Google said its investment is estimated to support more than US$3.2 billion (RM15.04 billion) in positive economic impact and 26,500 jobs by 2030.  

Apple, meanwhile, opened its inaugural retail store, The Exchange TRX Mall, in Kuala Lumpur on June 22, marking a substantial increase in its physical retail footprint across Southeast Asia. 

BlackBerry has also opened its first-ever Asia Pacific Cybersecurity Centre of Excellence in Cyberjaya, focusing on cybersecurity.  

Microsoft chairman and chief executive officer Satya Nadella had also unveiled a significant investment of US$22 billion (RM90.2 billion) to advance new cloud and artificial intelligence (AI) infrastructure in Malaysia during the Microsoft Build AI Day held in Kuala Lumpur.  

Concurrently, Microsoft is in the process of constructing a substantial data centre in Cyberjaya. 

ByteDance, the parent company of TikTok, based in China, plans to invest US$2.13 billion (RM10 billion) to establish an AI hub in Malaysia.  

In addition to this initiative, ByteDance intends to expand its data centre facilities in Malaysia’s Johor state with an additional investment of RM1.5 billion. 

Previndran said that major investments across various industries suggest robust economic prospects and can significantly boost Malaysia’s gross domestic product (GDP). 

He also highlighted that investments in sectors like technology, AI, cybersecurity, distribution, and sustainable energy are diversifying Malaysia’s economic base, reducing its reliance on traditional sectors such as manufacturing and oil.

Additionally, these new investments are expected to create more jobs for Malaysians. 

For instance, projects by Apple and Microsoft in AI will generate numerous employment opportunities, positively impacting local job markets. 

Furthermore, skill enhancement initiatives by companies like Bytedance, which focus on AI hubs, can elevate local expertise in high-tech industries, promoting skill development and enhancing the workforce’s global competitiveness.

Regarding infrastructure and technological advancement, he said that investments in digital centres and cloud infrastructures by Google, Microsoft, and others will modernise Malaysia’s infrastructure, increasing its global competitiveness. 

Collaborations with global tech giants can also spur local innovation, positioning Malaysia as a hub for tech development in Southeast Asia, he said.

Sr Tan Wee Tiam, a research head, said that all these investments, whether realised, in the pipeline, or in the planning stage, are beneficial for Malaysia.

He explained that the surge in investments can be attributed to several factors.

“Firstly, Malaysia has traditionally been strong in the E&E sector but has stagnated at the low to mid-end of the production and supply chain, partly due to China attracting the bulk of FDI.

“The trade war has led to friend-shoring and de-globalisation, prompting many companies to adopt the “China + 1” strategy.

“Further, Malaysia’s strong infrastructure, reliable power and water supply, skilled workforce, widespread use of English, and robust legal system make it an attractive destination for these corporations,” he said.

On the significant influx of data centres coming to Malaysia, especially in Johor, Tan said that this trend may be due to Singapore’s 2019 moratorium on data centres and the stringent guidelines implemented when the ban was lifted in 2022.

Johor’s proximity to Singapore, lower power and water tariffs, abundant land, and the familiarity of corporate senior management with the area have expedited these decisions, he said.

“We can expect more investments to flow into Malaysia, particularly Johor, due to the foresight of both the Malaysian and Singaporean governments in collaborating on initiatives such as JS-SEZ, SFZ, RTS, and potentially HSR,” he said.

Sunway University economics professor Dr Yeah Kim Leng said the surge in investments here is due to a combination of geopolitical, economic, and strategic factors.  

He noted that multinational firms are ‘trans-‘shoring’—transferring their offshore production facilities to other countries in Asia to shield from the potential US-China trade conflict escalation.  

“Chinese companies are investing overseas to diversify away from US markets and capitalise on the expanding markets in Asia and other Asian countries.  

“Being strategically positioned with good infrastructure, a multi-lingual and a greater English-proficient workforce than neighbouring countries. 

“This also includes a well-established semiconductor and information and communication technologies (ICT) supply network, Malaysia has surged ahead in attracting high tech FDI,” he said. 

Yeah added that Malaysia’s energy security, lower natural disaster risk, attractive investment policies, political stability, and forward-looking economic policies are also factors that will continue to attract both foreign and domestic investors. 

Echoing similar views, another industry expert said tech giants and foreign companies will continue to choose to invest in the country due to its strategic geographical location, which offers easy access to the broader Southeast Asian market. 

He opined that this is despite the country’s long-running political instability and the rising cost of doing business. 

“This region is home to a rapidly growing middle class and presents significant opportunities for consumer-driven growth. 

“Malaysia has a well-developed infrastructure, a highly skilled workforce, and a relatively high level of English proficiency, making it an attractive destination for technology and service-oriented industries. 

“Additionally, Malaysia’s government has been proactive in creating a favorable business environment through various incentives, including tax breaks, grants for high-tech industries, and investments in digital infrastructure.  

“The establishment of digital free trade zones and innovation hubs like Cyberjaya has also enhanced Malaysia’s appeal,” he noted. 

The expert also highlighted that Malaysia has a stable legal framework and strong protections for foreign investors, which provides a level of security and predictability that can outweigh some of the risks.  

He said the recent surge in investments, especially this year, can also be attributed to global supply chain shifts, where companies are looking to diversify their manufacturing bases in response to geopolitical tensions and disruptions, such as those experienced during the COVID-19 pandemic. 

Source: NST