Give us clearer policies on investment, govt urged

Manufacturers seek clarity on govt’s stance on their industries

KUALA LUMPUR: Economists and manufacturers are calling for clearer policies on investment from the new Pakatan government ahead of Budget 2019.

Among the policies manufacturers are seeking clarity are the extension of the reinvestment allowance, consistency in taxes as well as the government’s stance on their respective industries.

Leonard Ariff Abdul Shatar, the group managing director of a leading pharmaceutical manufacturer CCM Duopharma, said in a recent interview that it is taking a step back to undertake investments in specific projects as it looks forward to understanding the government’s stance on the healthcare industry.

“For example, we would like the government to have pro-generic stance for pharmaceuticals for access and affordable prices. We want to see consistency in application on the fundamentals,” he said.

Furthermore, Leonard added that manufacturers are looking to understand if the government will extend the reinvestment allowance for its investors, noting that the allowance will help domestic investors to undertake reinvestments in the country.

Despite the lack in direction of the new government’s policies, manufacturers are embracing the changes in corporate Malaysia positively on expectations that business-friendly statements from the government will translate to actual policies moving ahead.

“I am glad that the new government’s statements are pro-business but we need to understand the government’s position on our industry as it would determine what sort of investments we will undertake moving forward. Statements must move from being mere rhetoric to actual polices”, Leonard pointed out.

Likewise, the Federation of Malaysian manufacturers pointed out in a brief statement that manufacturers were cautiously optimistic for the 2H18 on hopes of predictability of policy direction from the new government. However, it declined to comment further.

According to Department of Statistics, private investment growth has sharply moderated to 3.4% in the first half of this year (1H18) compared with 10% in the corresponding period last year on the back of weaker investor sentiment.

For the full year, Alliance Bank’s chief economist Manokaran Mottain expected private investments to have a sluggish growth of 4.7% in 2018 from 9% last year due to poor investor confidence amid uncertainties on the local front such as the cancellation of mega-infrastructure projects, alarming RM1 trillion government debt and the 1MDB corruption scandal.

“Once the infrastructure activity continues, domestic investors will also undertake more investments” he said.

Having said that, Manokaran added that the Ministry of Economic Affairs should disclose a clearer direction on the government’s stance on policies ahead of Budget 2019 because “time and money doesn’t wait for people” and a delay in clarity of policies will boost more capital outflows to other emerging markets.

“I believe you still have to give the new government time but certain things you can give them time and some things like clarity in policies, you cannot because of capital flight,” he pointed out.

Budget 2019 is to be tabled in parliament on Nov 2 this year.

On the global front, the expected slow down in global growth, mounting trade tensions, rising interest rate hikes and Turkish lira has dampened investor sentiment.

Regional private equity investor Ian Yoong said weaker private investments growth in the country is also mainly due to concerns from US-China trade war spat, dramatic slide of the Turkish lira concerns and rising interest rates.

He expected that reinvestment activities in Malaysia from both local and foreign investors to moderate and recover by the beginning of next year should the government indicate certainty in policies in the coming months ahead.

As it is, Malaysian equities took a hit last week while the ringgit slid to its lowest level since Nov 24th last year as fears climbed over a contagion from the currency crisis gripping Turkey.

Not forgetting post-14th general election, total foreign selling in the equity market amounted to RM12.2bil between the period of May to July.

But, the momentum of the outflow has slowed down last month on the back of steadier oil prices.

“There are global issues that are causing weaker investment sentiments.

Manufacturers are excited that the new government is in power as they believe there will less leakages from corruption.

“But, the manufacturers are seeking for stability and certainty of policies in the local front.

They also have fears that the ringgit might weaken against the US dollar,” Yoong said.