BNM Annual Report 2014: Debunking Malaysia’s investment myths

KUALA LUMPUR: Since 2010, Malaysia’s private investment has grown at double-digit rates, following a five-year period of relatively low growth. 

Several misconceptions have, however, surfaced surrounding this positive development, according to Bank Negara Malaysia in its annual report 2014.

Myth #1: The strong performance in investment has been driven by the Government and Government-linked enterprises

A common misconception is that investment by commercially-run public enterprises (PEs), such as Petronas, or in public infrastructure projects, such as the MRT, is classified as private investment. Rather, investment of this nature is classified as public investment, alongside other investment by the General Government under the System of National Accounts 20081.

In 2014, investment by the private sector accounted for 64% of total investment. Public investment represented only 36% of total investment. 

Of the public investment, 72% was undertaken by public enterprises, comprising mainly commercially-run entities such as Petronas, Tenaga Nasional and Telekom Malaysia. Only 28% of public sector investment was undertaken by the General Government, comprising the Federal Government, State Governments, Statutory Bodies and Local Authorities.

Myth #2: Most investments are in the property sector

Residential property: In 2014, investment in residential property (also referred to as dwellings investment) accounted for only 17% of private investment. This share has moderated slightly from 18% in 2005, and is lower or comparable to the share of dwellings investment in other countries (for example the UK: 39%; US: 20%; Australia: 20%; South Korea: 14%). 

Broad property: The share of investment in broad property, which consists of residential property, office and commercial spaces, has remained at 18% of total investment since 2005.

Myth #3: Capital spending concentrated in oil and gas industry

The mining sector, which consists mainly of the upstream oil and gas industry, only accounted for 16% of private investment and around 19% of total GFCF in 2014. In terms of contribution to growth, the mining sector contributed 1.1 percentage points to the growth in private investment. 

Capital spending in the sector reached a peak in 2012, mainly due to the simultaneous commencement of several major oil and gas projects under the Economic Transformation Programme (ETP), such as the deepwater exploration activity in Gumusut-Kakap and enhanced oil recovery in the Tapis field. 

Going forward, the share of investment in the oil and gas sector is expected to decline slightly, but remain supported by new projects in the pipeline, including the Pengerang Integrated Petroleum Complex (PIPC). 

Myth #4: Private investment in Malaysia is undertaken mainly by foreign entities

In 2014, an estimated 19% of private investment was accounted for by foreign direct investment (FDI). This share has declined from an estimated 35% in 2007. 

The bulk of private investment continues to be undertaken by Malaysian companies and funded domestically via the banking system, internally generated funds and capital markets