Chairman shares insights on Mida’s roles in attracting FDIs


  • Investment
  • Saturday, 14 Dec 2019

StarBizWeek recently met up with Mida chairman Datuk Abdul Majid Ahmad Khan, who was the former Malaysian ambassador to China. Mida has a weight on its shoulders to attract foreign direct investment (FDI) into the country, especially in the current fast-changing economic landscape. Below are excerpts of the interview:

WITH the focus on Industry 4.0 in Budget 2019 and the launch of the Industry 4.0 blueprint, can you elaborate on the types of FDI that Mida is focusing on for next year?

Mida is focusing on the catalytic and high-growth sub-sectors, namely, electrical and electronics (E&E), machinery and equipment (M&E), chemicals, aerospace and medical devices, as well as other high-technology and capital-intensive projects.

In driving further investments in the manufacturing sector, Mida continues to organise events, particularly those relating to smart manufacturing. This includes collaborations with various technology solution providers to assist companies preparing for digitalisation.

What criteria does Mida use when attracting and approving FDI?

Mida has adopted a more focused and targeted approach towards attracting quality investments. The agency is attracting new quality projects and encouraging existing industries to shift away from low value-added products and services. Quality investments promoted by Mida feature projects that are high-technology-oriented; high value-added; knowledge-intensive; skills-intensive; export-oriented; capital-intensive as well design and research and development (R&D)-intensive.

Other parts that will be developed within this ecosystem will be its supporting services, the manufacturing of its equipment, improving its related policy frameworks as well as its R&D activities.

Mida also seeks to develop strong R&D linkages between the industry and tertiary and research institutions to generate quality investments in new and emerging technologies.

You have vast experience in the civil service, with stints in the Prime Minister’s Department, the Foreign Affairs Ministry and having joined several Malaysia Missions abroad. You have also been the President of the Malaysia-China Friendship Association and the honorary chairman of the Malaysia-China Chamber of Commerce. What do you hope to bring to Mida? What changes, if any, does the agency need to boost its effectiveness?

I hope that my experience in various capacities will be valuable to Mida, especially in the context of the organisation’s efforts to attract more quality investments that will translate into tangible benefits felt by all Malaysians.

Mida is an established organisation with over 50 years of experience in attracting investments into the country. Given the rapid evolving trends in the global marketplace, it is necessary for Mida to embrace change and keep pace with the private sector’s dynamic business approach in ensuring there is a significant leap in investment activities in all economic sectors.

What is your view on the ongoing trade war between the US and China and now involving parts of Europe? How has this impacted the flow of FDI into Malaysia and what will the ongoing impact be?

As a small open economy, Malaysia will inevitably be affected by the US-China trade war. Malaysia’s strategic location within the region, world-class infrastructure, as well as a multilingual talent pool enable us to benefit from potential trade diversions from China.

The Economic Intelligence Unit has also found that Malaysia is projected to be one of the leading countries in the ICT and automation industries. As such, it commented that Malaysia’s ICT industry is poised to gain from the shift in trade, partly owing to its strong logistics network and good business environment.

How much has the ringgit’s weakness impacted positively on FDI inflows into Malaysia and will it continue to be an attractive consideration for investors?

Global headwinds, such as the ongoing US-China trade war and rising fears of a global recession, have put pressure on the ringgit. However, Bank Negara is confident that the ringgit will continue to assume a key role in absorbing external shocks.

According to the Department of Statistics, the total stock of FDI in Malaysia rose by 10.3% to RM667.5bil in the second quarter of 2019, from RM605.1bil a year ago. This steady rise in total FDI stock shows the continuing attractiveness of Malaysia as an international investment destination, amid rising trade tensions across the world.

The ringgit’s weakness has encouraged FDI inflows by decreasing the cost of international investment and increasing the returns to foreign investment relative to exports. This situation has indirectly benefited both Malaysian and foreign investors, making Malaysia an attractive investment destination in an increasingly competitive global environment.

What are three things that you think Malaysia should have to increase its competitiveness in attracting more high-value FDI?

There needs to be an improved talent pool – continuous engagement between industry and academia to address the mismatch between the industry demands and graduate capabilities; developing a pool of quality talent across all industries through collaboration between the government and private sectors; and undertaking re-skilling and up-skilling activities to cater to high-tech jobs.

The government is developing a single Technical and Vocational Education and Training system to ensure standardisation and industry-driven programmes.

Placement of lecturers from universities to the industry for exposure and knowledge exchange to equip them with the current trends of the industry is crucial.

We need to enhance the supply chain ecosystem – develop local supply chain ecosystems through activities such as supply chain conferences. This aims to promote sustainable business linkages towards stimulating the growth of supply chains between multinational corporations (MNCs), limited liability companies (LLCs) and small and medium enterprises (SMEs) in Malaysia.

Existing MNCs in Malaysia need to be assisted through various facilitation and hand-holding programmes, particularly with local state authorities and utility/service providers.

Also, vendor development programmes need to be encouraged to upgrade local companies to cater to the needs of high-technology segments of the industry such as aerospace, medical device and precision engineering.

The government’s delivery system needs to be improved – review and improve business processes and policies in line with global standards. The government is reactivating a special task force to facilitate businesses under the purview of Pemudah.

In January this year, Malaysia launched its National Anti-Corruption Plan. With both the public and private sectors playing their roles in combating corruption, this will lead to greater efficiency and enhance the ease of doing business in the country.

There is an issue of high unemployment among the youth in Malaysia. This is likely to do with a mismatch in demand and supply in the job market. What is Mida doing to tackle this?

Mida has played a vital role in closing the talent gap in the country. The various initiatives undertaken by Mida include the Mida Skim Latihan Dual National (SLDN) Apprenticeship Programme, where we collaborate with the Federation of Malaysian Manufacturers, the Education Ministry (MoE), the Department of Skills Development and the Human Resources Ministry.

The programme is a two-year initiative where 16 to 17-year-old students are placed at a vocational college for six months to undergo academic and vocational courses, with another six months of practical training in participating companies for two consecutive years. Once the students graduate from vocational colleges, they can immediately be employed by the participating companies.

Mida is also working on an initiative to create more talent in the fields of engineering, material science, applied physics and applied sciences through a collaboration with the MoE and the Semiconductor Fabrication Association (SFAM). The initiative looks to develop content syllabus as required by SFAM to address the shortage of technicians within the semiconductor sub-sector.

Aside from that, we also conduct Mida Matchmaking and Information Sharing Sessions with industry players to update the latest investments approved and potential employment created at both the national and state levels. This is to understand and gather talent requirements for specific industries and connect and match them with the relevant education and training institutions and act as a platform to initiate industry-academia collaboration in order to address the skills mismatch/talent gap.

We are also encouraging foreign investors and multinational companies to provide internship opportunities and industrial training placements to Malaysian students who study abroad, particularly the Public Service Department (JPA) and Majlis Amanah Rakyat (Mara) scholars. This is to ensure that they are industry-relevant, ready to enter the job market and are ultimately able to contribute to the economic growth of the country.

On the domestic investment front, can you share what is the current trend like? And are there government incentives for local investment in new industries such as IoT, digital media, AI etc?

The government has lined up pragmatic approaches to balance the contribution of FDI and domestic direct investment (DDI) to the Malaysian economy. DDI is important to ensure sustainable economic growth of the country in the future.

Mida has undertaken various initiatives to stimulate more domestic investments in the manufacturing and services sectors, which include providing attractive fiscal and non-fiscal incentives to increase quality investments into high-technology, capital-intensive, knowledge and creative industries, and R&D-based activities.

We also approach existing potential Malaysian companies to encourage their expansion and diversification, as well as enhancing efficiencies and effectiveness of their delivery system via simplification of rules and procedures and real-time decision making.

We also promote higher-value chain partnerships between Malaysian companies and foreign partners.

Intensifying outreach programmes and establishing direct networking through domestic investment seminars and industrial linkage programmes is also being done, as is organising regular meetings with domestic investors to obtain views on ways to attract and encourage re-investment by Malaysian companies.

The government has also introduced various measures to increase the participation of local investors in the economy. For example, the Domestic Investment Strategic Fund – a matching grant to accelerate the shift of Malaysian-owned companies in targeted industries to higher value-added, high-technology, knowledge-intensive and innovation-based industries.

There is also a special investment tax allowance of 50% for the E&E industry. Given that the E&E sector is a major export revenue earner and investment contributor to Malaysia, this incentive will encourage companies in the sector that have exhausted the reinvestment allowance for 15 consecutive years for reinvestment projects to further reinvest in Malaysia and remain competitive in the international markets.

The extension of the automation capital allowances (Automation CA) to 2023 is to encourage more companies to automate their processes and reduce dependencies on unskilled foreign workers. Companies should be able to boost their production and profit margins by substituting costly workers for advanced equipment and software.

Local SMEs and MNCs will be able to upgrade their technological capabilities to be more competitive internationally by moving up the value chain and participating in the global ecosystem and supply chain.

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