FDI crashing because investors lost faith, says DAP

By Boo Su-Lyn | The Malaysian Insider

KUALA LUMPUR, July 25 — A lack of confidence in Malaysia’s economy has driven foreign direct investment (FDI) to our neighbours, leaving the once-roaring “Asian tiger” to compete with Indochina countries, the DAP said today.

The World Foreign Investment Report (WIR) 2010 released by the United Nations showed that FDI in Malaysia plunged 81 per cent last year, trailing behind countries like the Philippines, Vietnam, Thailand, Indonesia and Singapore.

“For the first time ever in history, Malaysia attracted less investment than the Philippines,” DAP national publicity secretary Tony Pua said in a statement today.

The Philippines attracted US$1.95 billion (RM6.24 billion) in FDI compared to Malaysia’s US$1.38 billion, while Singapore raked in the most — more than US$16 billion.

“Among Southeast Asian nations, we are now only attracting more FDI than Cambodia, Myanmar, Brunei, Laos and Timor-Leste,” added Pua.

“What was previously unimaginable, that we may one day be compared to countries such as Cambodia and Myanmar, is now a real possibility,” said the Petaling Jaya Utara MP, pointing out that those countries had also attracted less than US$2 billion in FDIs last year.

Prime Minister Datuk Seri Najib Razak has been trying to lift Malaysia’s profile as a destination for foreign investment to help the country achieve an average gross domestic product (GDP) growth of at least six per cent per annum over the next five years.

But Malaysia’s FDI rates have fallen faster than other regional players like Singapore and China, and at the same time capital outflows have dampened private domestic investments.

The Najib administration has also warned that the economy may slow down in the second half of the year due to external factors but have insisted that a six per cent growth was still achievable.

Today, Pua also said that Malaysia had suffered the biggest decline of FDI in Southeast Asia from 2008 till 2009.

“The government cannot use the excuse of the (global financial) crisis as the reason for the precipitous drop in FDI as we have performed the worst compared to all other countries big and small in the region,” said Pua.

Data revealed that Malaysia suffered a large 81.1 per cent drop in FDIs compared to far healthier figures in Thailand (30.4 per cent), Vietnam (44.1 per cent) and Indonesia (44.7 per cent).

However, Singapore, Brunei, Philippines and Myanmar still managed to register positive growth, said Pua.

Pua, also DAP’s chief economist, pointed out that Malaysia was the sole Southeast Asian nation to have registered a net negative FDI flow last year.

“Malaysia was the only country where our outflow of FDI amounting to US$8.04 billion is substantially greater than the FDI of US$1.38 billion received,” said Pua.

“Not only are foreign investors unwilling to invest in Malaysia, our own local investors as well as foreign investors who are already in the country have a total lack of confidence in the ability of our economy to generate an attractive return to their investments,” added Pua.

He pointed out that Malaysia’s net FDI flows have declined from US$2.56 billion in 2004 and US$1.09 billion (2005), to a net negative US$0.02 billion (2006), negative US$2.7 billion (2007) and negative US$7.67 billion in 2008.

“Despite Datuk Seri Najib repeatedly insisting that the era where ‘the government knows best’ is over, his administration continues to crowd out private investments by directly awarding mega-projects to government-linked entities, such as the Sungai Buloh land to an Employee Provident Fund joint venture with the government, or the Sungai Besi airport redevelopment, to the 1 Malaysia Development Fund,” said Pua.

“Without these necessary and critical changes to the government’s economic policies, the Malaysian economy will only continue to drift away from the radar of both local and foreign investors,” he added.

Pua went on to criticise Najib for not moving ahead with his New Economic Model, pointing out the prime minister had been forced to call it a “trial balloon” after a sour reaction from some Malay groups.

  1. #1 by yhsiew on Sunday, 25 July 2010 - 10:27 pm

    It looks like Malaysia is going to be the next country after Greece to seek financial help from the world bodies.

  2. #2 by raven77 on Sunday, 25 July 2010 - 11:04 pm

    If it can happen to Iceland…it will easily happen to Bolehland.

    No rocket science. Just common sense. You spend more year o year with no income coming in…you go bankrupt lah one day.

    That one day is here now. Get ready for that annoucement saying your FD in the bank is gone or your ASB share value is now 10 cents.

    Poetic justice. Razak created 13/5/1969 and sent the Tunku to retirement. Najib will pay for both his and his father’s sins.

    I just hope there will not be Bangkok scenes, when the rush to the banks to get your money out starts…

  3. #3 by ablastine on Monday, 26 July 2010 - 12:03 am

    What do you expect from a country whose policies are dictated by pressure groups like Perkasa who still thinks that the world at large owes them a living because they are Malays. An ignorant electorate which allowed such corrupt regime to rule for 50 over years continuously with impunity is partly to be blamed. It is unfortunate that all the oil and and rich resources of the country were not enough to overcome its curse in the form of a maniacal mamak and ignorant electorate. The former is now histroy and the latter will face the real music should they continue to remain ignorant as this drastic drop in FDI is just a warning of worse things to come.

  4. #4 by monsterball on Monday, 26 July 2010 - 1:54 am

    I don’t think it will be hell for the middle and poor classes…right now.
    It is the thousands of millionaires that will transfer their deposits to elsewhere and factories shrink with thousands jobless.
    In actual fact…those that have deposits are going to earn better interests as banks will be hard press for more money…and Bank Negara have no extra funds to spare.
    Yes…it will be the EPF and Petronas that will give us signs.
    Depositors may get 1.5% pa instead of 4% and car petrol will sky rocket …to at least 20sen per litre.
    Watch out for all these signs that will create ca change reactions to your food stuffs and essentials.
    Malaysians have the last chance to save themselves by voting UMNO B out completely in the 13th GE.
    If Najib dares to find reasons to declare Emergency Rule..all hell will go loose and his family will be not safe anywhere in the world.
    As such..I think he dare not risk fooling Malaysians to the extreme.
    Yes….the 81% drop of investments in Malaysia have crated history for Najib and lets see how he will comment on this.
    Naturally…Malaysians will be led to believe our country is not competitive…telling half truths and hiding the fact that investors have lost complete confidence of UMNO B government and know Malaysians want change and they prefer to stay out for awhile and see what happens.
    Once PR take over convincingly with more than two thirds….many will come back….knowing corruptions is no more.
    Our blessed country…no matter what is still filthy rich to withstand all economic disasters….and it all depends on UMNO B to stop stealing and think of Malaysians for once.
    However…they have stole for decades and no matter how good they may try to be…there is no such thing as forget the pass and give Najib a chance.
    55 years is enough and to save Malaysia and our children……we must try new government.

  5. #5 by kpt99 on Monday, 26 July 2010 - 6:59 am

    If such trend is to continue and no appropriate actions are taken,M’sia will face a tough time to become a high income and developed country in 2020.

  6. #6 by Bigjoe on Monday, 26 July 2010 - 7:29 am

    What many have to realise firstly is what does this relative drop really means? It comes at a critical time when we HAVE TO carve a niche in higher value added industries and job. At a time when we have EVER more poorly qualified graduates graduating out of mediocre institutions. It comes at a time when EVERYONE is competing for those higher value added industries and jobs AND not creating enough of it.

    The fact of the matter is we cannot even afford just matching what the average FDI is. WE NEED TO BE AMONG THE TOP RELATIVE DESTINATION or we have problems. To be below average IS actually to do worst than Cambodia and Myanmar in relative terms.

  7. #7 by Bigjoe on Monday, 26 July 2010 - 7:54 am

    The fact of the matter is WE ARE the Worst Peformer in SEA. We are already the sickest man in Asia already. Its just the manifestation of disease is not evident only.

  8. #8 by oct on Monday, 26 July 2010 - 9:06 am

    All these have no meaning to the kampung folks as they don’t understand what is FDI. As long as the kampung folks perceived that BN is doing the right thing and MSM don’t publish these bad news, this FDI issue will not have a country wide effect. PR must tell the kampung folks what this means to them i.e Bolehland will go broke sooner than later. How much can BN support its cronies when no FDI flows in? BN knows how to build and build white elephants so that their cronies and division heads can keep them afloat.
    BN cronies are mainly made up of contractors and so are their members. So if BN has no projects for them, they have no where to go except to dig up s**ts of PR.
    Let’s tell all the voters even those in East Malaysia & rural that Malaysia sunny days are over. Vote for a clean & efficient Govt (PR) so that investors have confident in Malaysi!!!

  9. #9 by boh-liao on Monday, 26 July 2010 - 9:34 am

    No worries, very soon we will attract less FDI than Cambodia, Myanmar, Brunei, Laos n Timor-Leste
    Oredi UmnoB/BN tycoons r shifting RM 2 other sun-rise currencies, like RMB which will increase in value in years 2 come
    RM may soon b a banana currency, 1 bagful 2 pay 4 a cup of teh tarik
    Those with 2020 vision must start training their children 2 b maids, nurses, butlers, n other service providers 2 work overseas
    Otherwise learn a trade like producing n selling illegal DVDs, trafficking designer drugs, operating underground 4-D in China n India, becoming Ah Longs, etc
    Say THANK YOU 2 UmnoB/BN 4 making many of us into self-employed entrepreneurs

  10. #10 by dagen on Monday, 26 July 2010 - 9:40 am

    My bro-in-law is taiwanese. He is in the high tech manufacturing line. And he has this to say about the general taiwanese manufacturers’ sentiment towards investing in malaysia. “Go to indonesia or thailand. Things are better there.”

  11. #11 by dagen on Monday, 26 July 2010 - 9:52 am

    Wow only ten yrs left to reach target. Jib said we need 6% growth every year. In other words every year counts. So if we miss the target for this yr (remember jib announced that second half of this yrs growth will slow down) then that would mean (wot?) we will be (?) 10% off-target come 2020. Feel almost like the recent world cup. Doesnt it? Every game counts.

  12. #12 by penang lim on Monday, 26 July 2010 - 10:33 am

    What else is new ? I thought we were doing great guns
    and resilient to the world economic slowdown – why are the foreign investors shying away ? it is down hill all the way – from general admin , sports , education etc etc ..it looks like we are heading for the worst in years to come – the only way to check this is a change of goverment – full stop

  13. #13 by Peter on Monday, 26 July 2010 - 11:43 am

    If you have racialistic, lazy and birds brain dickheads shouting to the whole world in Perkasa, Gertak and some NGOs about their rights and grabbing the country wealth by not doing anything, who would want to come and invest here. Even the very local investors prefer to go oversea.
    On top we do have many many “little napoleons” in the government services all over the country. Take a look at the arches in Penang erected without consulting the state opposition government recently. Before they can be completed, they now have to be demolished. Never seen or heard 150 grand of rakyat money just vanished in thin air within so short a time by a civil servant. This feat should be in the Bolehland Book Of Records.

  14. #14 by Kasim Amat on Monday, 26 July 2010 - 12:29 pm

    I do not see any major problem in the decline of FDI. This is just a short term result. All the FDI will sure come back when all the Malays can be united. We should not compare ourselves with our neighbouring country because they are different from us. We must maintain our own culture and value. Decline in FDI will not affect the economy of our country because our fundamentals are strong. Racial harmony and social stability is more important in this country. DAP is trying to come up of scare tactics and use the current FDI to discredit our government.

  15. #15 by katdog on Monday, 26 July 2010 - 2:02 pm

    Kasim Amat :
    I do not see any major problem in the decline of FDI. This is just a short term result. All the FDI will sure come back when all the Malays can be united.

    Ah ha ha ha! I fail to fathom how Malay unity has anything to do with FDI.

    Look at Thailand. Its politics is a complete basket case with the Reds versus the Yellows constantly shutting down the main capital Bangkok with protests.

    Despite that, Thailand still got the second highest FDI in the region at 5.9 billion USD (compared to Malaysia #6 with 1.3 billion USD).

    FDI will come back? Nice dream. Other than Singapore and Thailand, investors have got other more profitable destinations for investments: Indonesia and Vietnam. And this is just in South East Asia alone.

  16. #16 by Mel_a_yu on Monday, 26 July 2010 - 2:54 pm

    The headline of the Boo Sy-Lyn write-up itself says it all (at the end of it) .. “….. says DAP”. So what do you expect?.. Even when the FDI is good it will be regarded as bad, what does one expect when its not so good this time?

  17. #17 by Mel_a_yu on Monday, 26 July 2010 - 3:05 pm

    I think we shouldn’t only read the DAP report, there are some thought-provoking points to be noted here:

    Speaking at the UN Headquarters in Kuala Lumpur today, Universiti Malaya economist Rajah Rasiah (at podium in photo) said that Malaysia’s poor performance casts doubts over whether it can achieve the targets set to achieve high income status.

    “Malaysia is fortunate to be in a good neighbourhood, located among growing countries. The three largest recipients of FDI are located in Asia (but) Malaysia does not even make the top 10 list of recipients,” he said.

    He added that this is remarkable for a country with a specific FDI policy, unlike Taiwan which is placed 10th in the list.

    Conversely, Malaysia is “doing well in FDI outflows”, ranking fifth in the list of South, East and Southeast Asian countries investing abroad.

    “Speaking to fund managers, I get the impression that we have the resources to invest locally but not many viable options to do so. Even local investors find us less attractive,” he said.

    Human capital a barrier

    The main stumbling block, he said, remains our narrow human capital pool which leaves industries stagnating in low-end production.
    He added that while foreign investor laud the ease of doing business in Malaysia, a lack of skilled labour, research and development and technological capabilities is placing the country on the losing end of the increasingly competitive FDI battle.

    Malaysia has 300 to 400 science and technology workers for every 100,000 persons, as opposed to 3,000 in countries which made the transition from middle to high income status, he said.

    Similarly, the country is under-investing in research and development at only 0.64 percent of GDP, while others like Taiwan and South Korea are investing about 3 percent of theirs.

    It should also look at mirroring such nations in developing a “vetting mechanism” for FDI to ensure that the investments can be a catalyst for human capital and technology development.

    This will include screening FDI by choosing those with technologies that could be upgraded along the value chain and monitoring to ensure a transfer of expertise takes place.

    “We allow foreign firms in by giving grants and tax incentives, so we must ensure that spillovers (in terms of technology transfers) occur,” he said.

    The bottom 40 percent of the population should also be assisted insofar as developing their skills to meet the shortage in industry.
    “In assisting the lower income population, we should look at developing skills like precision engineering and die casting, which are sought after by foreign investors,” he said.

  18. #18 by Kasim Amat on Monday, 26 July 2010 - 3:44 pm

    If there is indeed a drop in the FDI as suggested by the UN report, how come I di not feel anything? If there is such a drop, there is surely an increase in unemployment rate but we did not see that. The economy is still healthy and people are still spending. In fact, Malaysia government’s most urgent task now is to help raise the Malay’s equity to 30% in order to continuously stimulate the entire economy. Increasing government’s project is important and we should also send more talented Malays to work in foreign firms. Foreign firms should play a part in helping to bring up the Malay’s stake as well because they benefits from investing in Malaysia, they should also take care of our Malay people. This is part of their responsibility if they want to invest in Malaysia. We should not remove the 30% Bumi stake requirement just because there is a slight drop in the FDI.

  19. #19 by Mel_a_yu on Monday, 26 July 2010 - 3:51 pm

    #17…Kasim, are you sure you’re a Malay or a non-Malay planting yourself to be regarded as the typical Malay. I have my doubts. You sound too uneducated. In this internet world, one never knows.

  20. #20 by on cheng on Monday, 26 July 2010 - 5:13 pm

    Foreign firms should play a part in helping to bring up the Malay………. Malaysia, they should…..Malay people. This is part of their responsibility if they want to…….
    Kasim A feel that foreigner owe Malaysia Malay a living??
    How about made Kasim’s proposal become official rule fo all foreign investors and see what happened??

  21. #21 by katdog on Monday, 26 July 2010 - 7:05 pm

    Ha ha ha! Kasim Amat’s answer really reflects all that one needs to know about the UMNOputras.

    The words Globalization obviously does not exist in their vocab.

    With grassroots supporters such as these, does anyone truly believe that UMNO-BN has the will to change and adapt in the face of the rising challenges?

  22. #22 by son of perpaduan on Monday, 26 July 2010 - 7:23 pm

    Dear En. Kasim,

    How do you measure your points which doesn’t reflect FDI are really in sharp decline?

  23. #23 by katdog on Monday, 26 July 2010 - 7:49 pm

    Human capital issues are just the tip of the iceberg. There are a myriad of problems due to flawed policy making in Malaysia.

    Example, 30% bumiputera equity requirements is a big turn off for many companies.

    Insane immigration policies whereby it is easier to bring in cheap unskilled Indonesian laborers and maids than it is to bring in a skilled western professional.

    A broadband policy that allowed monopoly of such a crucial service has lead to neighbours surpassing us in terms of speed-cost of broadband services.

    An education system that ‘encourages’ the smartest and brightest to look overseas for scholarships to further their education. These foreign funded scholars never return.

    Flawed subsidy and concessions systems that have lead to incomes being artificially depressed.

    Deteriorating public safety and corruption has also lead to reduced investor confidence.

    But the most damning reason why investors are shying away from Malaysia: the inconsistent and in-transparent policy flip flops by the current and past administrations. No one is going to invest in a country where they are unable to have a clear idea and outlook on the direction of the country as investors need to calculate their risk-return tradeoff.

    Yet, the Najib administration has left many investors scratching their heads wondering what NEM entails and when it is going to happen. Frequent flip-flops by Najib also does not inspire much confidence in investors to his words.

  24. #24 by House Victim on Monday, 26 July 2010 - 10:58 pm

    Any reason why Foreigner should Invest in Malaysia and not other places? when
    1. BNM cannot even provide an answer on
    a) what is the maximum interest charge that a bank can charge?
    b) if a bank can charge interest on a daily compound?

    2. Police/KUP/AG can keep silent on Police Reports on Lawyer cheating and assaulting clients?

    3. BNM silent on motor Insurance company charging client new part when they are using used parts? Same for the Insurance Association?

    4. Courts and Judges bully to clients by siding lawyers and silents to enquries and compliants? Chief Judge and Chief of Justice silent to complaints and push case through without clients and the lawyers attending?

    5. BAR siding Lawyers with manipulation of complaint procedures and dragging without investigations? Close their eyes even when lawyers had been declined bankrupt by the court?

    6 Land offices and Directors silent to enquiries and complaints on land and housing matters but allowing public reserved land to turn private, allowing house to be built in water retention ponds and condo without facilities and finally issued Apartment?
    Silent to complaints on Developer who has mis-appropriate Common Facilities into hotel?





  25. #25 by House Victim on Monday, 26 July 2010 - 11:10 pm

    Why should they come to invest in a Country where even a small but essential PM Department – the PCB – Public Complaint Burea cannot dare to comfirm the receipt on a Complaint on the Police/KUP/AG on the Cheating and Assaulting of clients by Lawyers?
    From the General Director to the Officer-in-charge?

    Why should they come and invest in a country with many foreign educated officers but “shy” or purposely refused to reply in English??

  26. #26 by ktteokt on Tuesday, 27 July 2010 - 7:32 pm

    Who would not lose faith in a country which puts race and religion first? Ask Guthrie why it preferred to sell everything – log, stock and barrel to the Malaysian government those days and go over to Indonesia instead! This simply means that Indonesia is better than MALAYSIA!

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