Malaysia shows resilience and opportunities in attracting investments
06 Apr 2024
Malaysia has witnessed the emergence of numerous new plants, indicating the enduring resilience and opportunities within its industrial sector despite the post-pandemic closures of certain factories.
Samuel Tan, executive director at KGV International Property Consultants, said the openings symbolise elements crucial for economic recovery such as job creation and the potential adaptation of industries to evolving market demands and emerging technologies.
He said the depreciation of the ringgit presents a notable competitive edge, encouraging investors to channel their investments into Malaysia and leverage it for exporting goods overseas.
“The closure of Goodyear Malaysia is a wake-up call for the stakeholders not to take things for granted. Even though Malaysia has many selling points that attract international investors looking to relocate some of their manufacturing plants outside China, it is facing stiff competition from other Asean countries, such as Vietnam and Indonesia.
“However, it is important to note that while some plants have closed in Malaysia, many foreign companies have either relocated here or expanded their operation in Malaysia,” he told Business Times.
Tan emphasised the necessity of consistently monitoring investor requirements and promptly addressing their concerns to sustain this positive momentum.
He also underscored the necessity of bolstering domestic direct investment (DDI) to serve as the country’s pillars of growth.
According to him, 93 manufacturers had ceased operations between 2018 and July 2022, with 17,648 jobs lost.
However in the same period, 3,893 factories were approved creating 331,509 new jobs, with an investment value of RM503.3 billion.
Of the RM503.3 billion, 70 per cent or RM388.2 billion were from foreign direct investments (FDI) while 22.9 per cent or RM115.1 billion were DDIs.
“This shows that the government is continuously adopting proactive measures to attract investments for various sectors. This includes streamlining strategies to ensure that both foreign and domestic investors to invest in Malaysia instead of moving to other countries,” he said.
Based on a survey conducted by the American Chamber of Commerce, American multinational corporations (MNCs) maintain a positive outlook on Malaysia’s economic potential, recognising it as a prime destination for investment and growth.
In the 2022/2023 survey, 81 companies participated, with 65 of them being American MNCs. Notably, half of the respondents, totaling 42 companies, operate in the manufacturing sector, with a predominant focus on electrical and electronics manufacturing.
The survey revealed that these MNCs have injected RM172.6 billion in FDIs into Malaysia by the end of 2023, demonstrating their enduring commitment to the country, which traces back to the 1950s.
Furthermore, the survey highlighted that the 81 participating companies collectively employ 148,778 individuals, with 89 per cent of them being Malaysians.
These companies contribute significantly to the economy by paying RM11.7 billion in salaries.
Additionally, they contribute to their employees’ future security by allocating RM1.3 billion towards the country’s Employee Provident Fund and Social Security Organisation.
Commenting on the findings, Tan emphasised Malaysia’s historical significance as a major recipient of foreign direct investment, particularly in sectors such as manufacturing, services, and technology.
“The attractiveness of Malaysia as an investment destination depends on various factors including government policies, economic stability, infrastructure development, ease of doing business, and geopolitical factors.”
Tan said many MNCs on the global front have either relocated, expanded, or closed their operations post-Covid-19 and due to the changes to the geopolitical landscapes and investment environments.
“Malaysia has experienced all the above. The recent announcement by Goodyear Malaysia to shutter their plant in the Shah Alam, which opened in 1972, is part of its Goodyear Forward corporate restructuring program, aimed at delivering US$1 billion in cost reductions by 2025. It is not the end of the era for Goodyear Malaysia,” he said.
Tan noted that Malaysia’s competitive edge surpasses that of its neighbouring countries, largely owing to the government’s proactive initiatives and policies.
Measures such as the New Industrial Masterplan (NIMP) 2030 have significantly attracted more investors to the country, he said.
Tan also highlighted the National Energy Transition Roadmap (NETR) as another noteworthy policy capable of facilitating fresh investments across various sectors, particularly in renewable energy. This encompasses the establishment of solar farms and the implementation of energy systems within industrial parks, specifically designed to be eco-friendly.
Such endeavours aim to further enhance Malaysia’s attractiveness to FDIs, he said.
Meanwhile, Dr. Yeah Kim Leng, a professor of economics at Sunway University Business School, said it is normal for companies to enter and exit the market in a free market economy, according to
He noted that it is also typical to witness expansion and contraction within individual industries.
However, widespread and persistent closures of companies and declines in industries, without a simultaneous emergence of new and higher-value firms and industries, would raise concerns, he told Business Times.
“It indicates an erosion or loss of the country’s competitiveness and this will be reflected in slower economic and income growth, rising unemployment and declining standard of living.
“The Goodyear case is unique and specific to the tyre industry. Malaysia’s other industries especially E&E, machinery and equipment, chemicals and most service industries are expanding at a healthy pace,” he said.
Yeah added that a dynamic and healthy economy will undergo structural change whereby weaker firms and industries are forced out by competition and replaced by stronger ones in the well-known process called “creative destruction”.
Source: NST
