Quality better than quantity in foreign investments

World Bank Malaysia cht

KUALA LUMPUR: As Malaysia looks to transform its economy, there is also a need to reorient its practices and policies to attract quality foreign investments that would help the nation achieve its aspirations.

According to World Bank Group lead economist for Malaysia Richard Record, (pic below) the country is now focusing more on quality investments rather than in quantity.

“It is becoming clear that Malaysia is now looking to attract a different type of investment. In the past, Malaysia was at a low level of development and there was a lack of capital. So foreign investment was an important source of investment.

“Now, it’s less so about that, and more about the types of technology, management practices, job creation and opportunities to move into new areas of competitive advantage.

“So Malaysia is looking for something a little bit different from foreign investment now and there’s an opportunity here to rejig some of the policies towards that attraction of quality investments, ” he said.

These reforms include improving speed and transparency in investment approvals and incentive offerings.

Record noted that moving towards an automated approval process would put Malaysia at the forefront.

There is also a need for a more coordinated promotional effort. While Malaysia has a lot to offer investors, Record noted that there were many institutions competing in parallel. Thus, a more coordinated approach would yield a higher return on investment.

According to a United Nations Conference on Trade and Development report, the inflow of FDI into Malaysia dropped by 68% last year.

However, Malaysia is not an isolated case as the report noted that global FDI collapsed in 2020, falling 42% to an estimated US$859bil from US$1.5 trillion in 2019.

“Malaysia is a highly open economy and is exposed to international business cycles. So it is inevitable that we saw a reduction in investment flows to Malaysia last year, ” said Record.

Meanwhile, World Bank Group country manager for Malaysia Firas Raad noted that Malaysia’s fiscal position coming out of the recovery will be somewhat constrained.

Hence, there will be a higher reliance on private investment.

“We are in a highly competitive environment because every government around the world is trying to attract investments. So this is where serious reforms and initiatives have to be implemented to make sure that Malaysia’s offering is really competitive with the countries we see in the region, ” he said.