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Sustaining FDI inflows

Sustaining FDI inflows

08 May 2023

THE Covid-19 pandemic has created a challenging environment for attracting foreign direct investment (FDI).

Despite the move towards endemicity, repercussions from the last two years of lockdowns continued to have an impact, as seen in labour shortages and supply chain disruptions.

The Russia-Ukraine conflict had also exacerbated supply chain disruptions, and introduced challenges such as the energy crisis and material shortages.

A positive outcome for the manufacturing sector, though, is the shift towards digital transformation and the building of “intelligent factories”.

“Despite these challenges, Asean is expected to continue receiving a high level of FDI flows in 2022, based on the Asean Investment Report 2022,’’ said Malaysian Investment Development Authority (Mida) chief executive officer Datuk Wira Arham Abdul Rahman.

Supporting the continued growth of Asean are factors such as vibrant industrial development, the momentum of regional integration, growing numbers of middle-income consumers and consistent policy push.

Meanwhile, the Asia-Pacific region is set to remain the world’s fastest growing region. Asia-Pacific will pivot away from the global economic downturn and is poised to weather challenges through 2023, according to Knight Frank’s Asia Pacific Outlook report 2023.

This is despite ongoing stressors exacerbated by the Russia-Ukraine conflict and global financial volatility.

The world economy is expected to grow by just 2.2% in 2023, with risks of a further drop if financial conditions deteriorate in leading economies and contagion hits emerging economies, said the United Nations Conference on Trade and Development.

Global FDI flows in the second quarter (2Q) of 2022 reached about RM357bil, down 31% from 1Q and 7% less than the quarterly average of 2021.

Mida has a number of promising projects in the pipeline as it strives to be Asia’s investment gateway; it is making every effort to emerge as Asean’s digital hub.

To promote and facilitate investment projects, Mida has set up dedicated units that include the Circular BioEconomy Unit (CBE), Digital Investment Office (DIO) and the Project Implementation & Facilitation Office (Track).

Targeted as a new catalyst for growth, the CBE aims to accelerate Malaysia’s transition from a linear “take-up” model to a circular “make-use-return” paradigm.

It enables a large-scale transition to a circular economy for sustainable and inclusive development.

The DIO is a fully digital collaborative platform between Mida and the Malaysia Digital Economy Corp or MDEC to coordinate and facilitate all digital investments.

It also aims to strengthen the co-ordination among all investment promotion agencies in attracting new investments in this fast-evolution segment.

Meanwhile, Track provides end-to-end facilitation to all projects approved by the National Committee on Investment, thus enabling the speedy and efficient implementation of projects.

The team at Track will facilitate all stakeholders – small businesses and multinationals – on issues and challenges faced when kick-starting their projects.

Special tax incentives for relocation were extended until 2024 under Budget 2023; previously, they came under the national economic recovery plan in 2020.

A financial support facility for SMEs, the Industry4WRD Intervention Fund, helps SMEs in manufacturing and related services to embrace Industry 4.0.

SMEs eligible for this fund are subject to have completed the government-funded Industry Readiness Assessment programme.

The fund will be provided on a matching basis (70:30) based on eligible expenditures, up to a maximum of RM500,000. A maximum of 30% of the matching amount (70% of the total grant) will be provided upfront to companies, subject to approval.

To close the talent gap, Mida has undertaken a few initiatives such as:

> Three technical and vocational education and training-related funded programmes in upskilling and reskilling; these programmes were started in November 2020 until December 2022.

They had benefited more than 500 companies in sectors such as electronics and electrical (E&E), automation, manufacturing services-related and telecommunications. More than 1,000 trained local participants were hired from the upskilling and reskilling programme.

> The E&E ecosystem talent development programme which was started from July 22 until Dec 22, 2022, and had trained up to 125 Malaysians and benefited 26 companies in the E&E industry.

> The Skills and Technical Enhancement Programme which is expected to provide technical industrial training to 2,000 graduates from universities and skills training institutes.

Among the 24 focus areas are oil and gas, food technology, automation as well as machinery and metal.

Targeted for completion by 2023, this programme is implemented with the co-operation of the Federation of Malaysian Skills Development Centre:

> Talent outreach locally and abroad,

> One-on-one talent facilitation,

> Door-to-door talent internship facilitation,

> Industry-academia dialogue sessions, and

> Career fairs and talks.

With a variety of schemes, plans and strategies to attract FDI, Mida is actively tapping on the high growth potential in the Asia-Pacific region despite the overall bleak FDI outlook globally.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are her own.

Source: The Star