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Lower net FDI inflow may not be an unfavourable sign — MIDA

Lower net FDI inflow may not be an unfavourable sign — MIDA

08 Feb 2021

KUALA LUMPUR (Feb 8): A lower net foreign direct investment (FDI) inflow is not necessarily an unfavourable sign, the Malaysian Investment Development Authority (MIDA) said today as net FDI flows indicate the maturity of Malaysia’s monetary policy which allows for the repatriation of capital, interest, dividends and profits, which is a prerequisite for a trading nation such as Malaysia.

This business-friendly investment policy has also strengthened Malaysia’s position as a regional and global supply chain hub, MIDA, an agency under the Ministry of International Trade and Industry (MITI), said in a statement today.

“The net FDI flows are determined by many factors including abnormal disruptions in the global economy which could result in larger repatriations due to loan repayments and borrowings from their headquarters and affiliates overseas for the particular year.

“The decline in 2020 mirrors the situation Malaysia experienced in 2009 after the subprime crisis in the US. MNCs (multinational corporations) in Malaysia were repatriating higher amounts of their profits for loan repayments and retaining earnings to help their HQ and affiliates faced with financial difficulties.

“The same can be said for 2020 when the world was hit by the (Covid-19) pandemic,” MIDA said.

MIDA’s statement today was in response to a report by The Straits Times in Singapore on Friday (Feb 5) quoting the UN Conference on Trade and Development (Unctad) claiming that foreign investors were fleeing Malaysia amid the country’s increasingly unstable political situation.

It was reported that Unctad said FDI into Malaysia plunged by more than two-thirds to just US$2.5 billion last year, the worst drop in the region amid the Covid-19 pandemic.

According to the United Nations’ (UN) website, FDI is defined as investment made to acquire a lasting interest in or effective control over an enterprise operating outside of the economy of the investor while FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy, including reinvested earnings and intra-company loans, net of repatriation of capital and repayment of loans.
 
“FDI net outflows are the value of outward direct investment made by the residents of the reporting economy to external economies, including reinvested earnings and intra-company loans, net of receipts from the repatriation of capital and repayment of loans,” the UN said.
 
Today, MIDA said Malaysia continues to attract high levels of gross FDI. Quoting Department of Statistics Malaysia data for January to September 2020, MIDA said total gross FDI inflow into Malaysia was valued at RM108.2 billion compared with RM102.3 billion in the same period in 2019, an increase of 5.8%.

“This is a considerable achievement given the Movement Control Order (MCO) and Recovery Movement Control Order (RMCO) in Q2 and Q3 of last year, respectively. The gross FDI inflow is also reflective of the high levels of FDI projects approved and implemented in the economy (manufacturing, services and primary sectors) over the last few years. It is noted that the total FDI approved throughout 2018 to September 2020 was valued at RM206.02 billion.

“The FDI stock in Malaysia is prominently high, totalled to RM689.1 billion as at end of September 2020,” MIDA said.  

Source: The Edge Markets

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