While Malaysia’s FDI performance has declined in recent years, a new push by the Malaysian Investment Development Authority (MIDA) to support FDI in the country’s high-value-added manufacturing and business services sectors will power the rise of Malaysia’s reputation as a high-value-added investment destination, said MIDA chief executive Datuk Noharuddin Nordin. The government’s approach of creating a specialised ecosystem to attract investments, particularly in electronic products, transport equipment and manufacturing, is targeted at Malaysia’s slowing short-term FDI performance.
“The foreign companies that we have met in places like Manchester in the UK say that what they are looking for is an ecosystem that supports their operations because it is the most sustainable strategy for their business,” said Mr Nordin. “We at MIDA have worked to support companies’ operations by understanding how we can fill gaps along the supply chain in order to entice foreign companies to bring the relevant technologies for their business. We have performed relatively well so far.”
Although capital investment into greenfield FDI projects in Malaysia declined from a peak of $23bn in 2008 to $13bn in 2011 and $6bn in 2012, FDI into the software and services sector increased by 54% in 2012, according to fDi Markets. FDI into the manufacturing subsector between 2003 and 2013 represents 27% of all FDI projects.
For Mr Nordin, this is evidence that the country’s efforts to improve its business ecosystem have been effective in attracting specialised FDI. “Malaysia has really developed the right types of policies and programmes to ensure companies find the right kind of talents,” he said. “It has become well known as an attractive place to do business due to establishing a strong level of economic stability, as well as an infrastructure and a telecommunications framework that is very business friendly.”
Malaysia’s GDP has continued on a positive trajectory. In 2012 it grew by 5%, according to Bank Negara Malaysia. As the country shifts into high-value-added manufacturing and business services, Malaysia will continue to look to its traditional trading partners in the US and Europe for inward capital as well as sources of knowledge and technology transfer, according to Mr Nordin. Pointing to countries such as the US and the UK, which according to fDi Markets were Malaysia’s leading sources of FDI, accounting for 22% and 11% of investment, respectively, Mr Nordin said: “Our outlook this year is very promising and we will continue to look to these countries as partners.”