UNCTAD: Malaysia - a profitable location to do business

Malaysia recorded a Foreign Direct Investment (FDI) rate of return or FDI profitability of 17% and ranks 11th among the top 20 economies with the highest FDI rates of return in 2011, according to the United Nations Conference on Trade and Development (UNCTAD) in the World Investment Report 2013, which was unveiled yesterday.

"The rates of return on FDIs indicate that Malaysia is a profitable location to do business," says UNCTAD.

Based on the report, Malaysia has also moved up from 19th spot to rank as the 16th Top Prospective Host Economy for the period 2013 until 2015.

Yesterday, the Minister of International Trade and Industry, Dato' Seri Mustapa Mohamed launched the report, which was presented by Masataka Fujita, the Head of Investment Trends and Issues Branch, Division on Investment and Enterprise, UNCTAD at the Malaysian Investment Development Authority (MIDA) office in Kuala Lumpur.

Net FDI inflows into Malaysia remain resilient and are still trending upwards with RM9.1 billion secured for the first quarter of this year despite a dip in 2012 to US$10.07 billion (RM32.12 billion) compared with US$12.2 billion in the preceding year, as the country moves away from labour-intensive investments to technology and knowledge-intensive investments.

Dato' Seri Mustapa said the lower net FDI inflows was due to a higher outflows in terms of repayments of inter-company loans, trade credits and other capital payments, besides the fact that Malaysia has of late been targeting niche quality investments in high-technology projects rather than focusing on the value of investments.

The Minister said many large corporations and leading multinationals, which have picked Malaysia for their regional and global operations, have structured training programmes to transfer their key competencies to Malaysians.

These would create high-income employment opportunities in sectors such as business, accounting, finance, IT, engineering, technical and other new services sectors including designing and analytical sciences, he added.

FDIs into Malaysia were concentrated in the manufacturing sector unlike other Asean counties where the inflows were in the infrastructure, services and primary sectors.

As Malaysia's manufacturing sector moves up the value chain, companies are expected to reduce their investments in low-value industries and expand their operations in high-knowledge, high value-added and high-tech industries as well as research and development activities.

Meanwhile, UNCTAD said Malaysia through its main investment promotion agency, MIDA, has developed a sophisticated strategy to leverage on its existing locational advantages to promote investments in high technology manufacturing value chain segments.

The dip in FDI inflows follows the global trend, where worldwide FDI inflows declined by 18% last year to US$1.35 trillion from US$1.6 trillion in 2011.

Nevertheless, developing economies continue to attract FDIs, garnering some 52% of the global FDIs despite a 4% drop compared to 2011.

FDIs into East and Southeast Asia decreased to $326 billion in 2012 from RM343 in 2011 due mainly to the slowing global economy, fiscal constraints in Europe, a significant shrinkage in global M&A activities and cautious sentiment in investing by Transnational corporations (TNCs).

For 2013, UNCTAD expects global FDIs to be about the same as last year's level with a gradual increase to US$1.6 trillion in 2014 and US$1.8 trillion in 2015.

Meanwhile, UN Resident Coordinator ad interim Wivina Belmonte, who was also present at the launch, said Malaysian transnational corporations operating in energy, construction, plantations, information and telecommunications, and manufacturing have expanded their businesses in Asia and Africa, making Malaysia a leading developing-country investor in Africa.

Source: MIDA and NST Business Times and StarBiz