Despite the uncertain global business environment prevailing as a result of high oil and food prices, Malaysia continues to demonstrate its resilience towards these challenging external developments. Investment approvals into Malaysia’s manufacturing sector are attestation to this fact.

Approved investments in the country’s manufacturing sector from January to May 2008 amounted to RM26.2bn ($8.1bn). Foreign investments in manufacturing projects approved during this period totalled RM17.7bn or 67.5% of the total investments approved. Some of the major projects approved were from Q-Cells (Germany), Ibiden (Japan), Honeywell and Sunpower (both US). The government is confident of surpassing the target of RM27.5bn per annum under the Industrial Master Plan 3 (IMP3) for approved investments in the manufacturing sector in 2008.

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Manufacturing Boost

Malaysia is increasingly attracting more capital-intensive, high value-added and high technology projects, as reflected in the capital investment per employee (CIPE) ratio of manufacturing projects, which continues to register an ascending trend. The CIPE ratio for the first five months of 2008 was RM750,000, compared with RM613,600 for the whole of 2007.

Interest in Malaysia as an investment location has not waned. The government’s principal investment promotion agency, the Malaysian Industrial Development Authority (MIDA), has recorded an increase in project proposals in renewable energy, particularly in biomass and solar energy, as well as the oil and gas and aerospace industries. Other areas that have received considerable inflows of investments include the high-end electronics projects and machinery, parts and components industries. Favourable incentives are offered by the Malaysian government to companies investing in promoted industries, and MIDA assists these companies in applying for the incentives.

Attracting investment

Malaysia’s success in attracting quality investments can be attributed to several factors. The country’s cost-competitiveness, prudent and pragmatic business-friendly policies, developed infrastructure and availability of highly skilled human resources are among the reasons which have enticed well-known foreign companies to set up their operations in Malaysia.

While the investment figures speak for themselves, it is always a bonus when a country receives international recognition for its efforts. The Switzerland-based Institute for Management Development’s World Competitiveness Yearbook 2008 recently reported that Malaysia has moved up four notches from 23rd to 19th position this year in terms of competitiveness. Malaysia’s ranking puts it ahead of, among others, the UK (ranked 21st), Japan (22nd), Estonia (23rd), Thailand (27th) and South Korea (31st). In addition, AT Kearney’s Annual Global Service Location has ranked Malaysia as one of the top three attractive locations for off-shoring and outsourcing services in 2005, 2006 and 2007.

The World Bank remains confident that Malaysia will be able to sustain growth, despite the challenging global economic scenario. At the recent World Economic Forum on East Asia held in Kuala Lumpur, World Bank vice-president for East Asia and the Pacific region, James Adams, said that overall the World Bank has maintained its optimistic outlook on the growth in East Asia, particularly in Malaysia.

Government commitment

Malaysia’s strong credentials in sustaining growth include the government’s commitment in handling the issues affecting the country, as reflected in the recent initiatives that have been introduced. According to Mr Adams, the government has done a good job in implementing measures to address the issues, particularly on inflation, considering that it is hard for governments, taking cognisance of their particular circumstances, to decide how they can implement them effectively based on the country’s political and economic concerns.

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