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Malaysia may record better FDI performance

Malaysia may record better FDI performance

21 Jun 2021

The foreign direct investment (FDI) in Malaysia is expected to make a turnaround this year following the inescapable decline in net inflow in 2020 due to the pandemic.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told The Malaysian Reserve (TMR) the FDI performance should be better in 2021 simply because it is expected to be a recovery year, although the pace may be uneven and often disrupted by the Movement Control Order (MCO).

“Generally, the figure should turn around in 2021. Manufacturing sentiments have been quite buoyant thus far, judging from the Purchasing Managers’ Index (PMI) indices which have been sustained at above 50 points now, and the country has been the immediate beneficiaries of improving global (conditions) based on the recent exports which shot up more than 60% in April.

“The key question is how do we sustain the trend going forward and what sort of FDI that we want to bring in that will help our local industries in terms of business complexity and be integrated with the global supply chain?”

In 2020, the country’s FDI suffered a 54.8% decline in net inflow to register RM14.6 billion from RM32.4 billion in the previous year, while investment abroad registered RM11.9 billion.

The Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin said although FDI flows dropped, the declining trend did not continue at the beginning of 2021 with statistics for the first quarter of 2021 (1Q21) released in May showing recovery by registering RM9.1 billion, the highest investment since the pandemic hit Malaysia.

Putra Business School Assoc Prof Dr Ahmed Razman Abdul Latiff is also of the view that FDI is set to improve this year, especially during the second half, due to several factors including the announcement of the National Recovery Plan, which provides some certainty on when the economy will be reopened, as well as the acceleration of the vaccination programme.

He opined that the soon to be announced 12th Malaysia Plan will be another factor which will guide future investors on their decision to invest in the country and the likelihood of the pandemic to be contained successfully year-end.

The Centre for Market Education CEO Dr Carmelo Ferlito said it is too early to exult as the data that refers to 1Q21 was when the Covid-19 situation was still under control.

“That was when the strong MCO 3.0 was not expected and the political situation looked more stable than it is now. Furthermore, 2020 was such a bad year that a physiological rebound was to be expected.

“Presently, the business mood among international companies in Malaysia is not too positive, reflecting also the general trend in Asia in maintaining harsh movement restrictions when the rest of the world is clearly moving toward reopening. The figures in the next quarters may look less appealing,” he told TMR.

Source: The Malaysian Reserve

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