Breathing space for investors

Speaking to StarBiz, Sunway University professor of economics Yeah Kim Leng (pic) said the relaxation will provide domestic and foreign investors with greater flexibility and efficiency in implementing their projects

PETALING JAYA: In its attempt to facilitate investors whose approved projects were affected by the Covid-19 pandemic, the government has decided to relax incentive conditions for manufacturing and services companies under the purview of the Malaysian Investment Development Authority (Mida).

The relaxation is for the period between 2020 and 2021.

Welcoming the move, economists said this would help investors implement their approved projects despite delays, avoiding the risk of investors postponing or cancelling their projects in the country.

Speaking to StarBiz, Sunway University professor of economics Yeah Kim Leng said the relaxation will provide domestic and foreign investors with greater flexibility and efficiency in implementing their projects.

The investors would be able to take into consideration both the impact of the Covid-19-induced recession and the appropriate supply chain reconfigurations in response to the pandemic shock and the ongoing US-China trade tension.

“The move is expected to raise the implementation rate of the approved investments which tend to fall whenever the economy hits a road bump.

“It will also entice investors who are rethinking of relocating their investments elsewhere due to less restrictive conditions to remain in the country.

“Importantly, allowing greater flexibility would attract other investors, especially those in related supply chains or production networks, to expand their operations in Malaysia, ” he said.

Socio-Economic Research Centre executive director Lee Heng Guie (pic below) also concurred that the relaxation of incentive conditions, which is believed to be given on a case-by-case basis, is a positive development for investors who require more time and resources to implement the approved projects.

Yesterday, Mida said in a statement that the relaxation of incentive conditions is part of the government’s proactive measures to continue Malaysia’s economic revitalisation efforts by facilitating investments and restoring investors’ confidence.

“Under the normal procedure, the approved companies are required to comply with certain conditions and implement their approved projects within a specific period, as stipulated in the approval letters issued by Mida.

“However, with the implementation of this relaxation mechanism, a company may be considered for certain relaxations on achieving the approved thresholds or meeting the implementation timeline of their approved projects, subject to compliance of identified criteria set by the government, ” it said.

To enjoy the relaxation, companies are required to submit their soonest requests to Mida with relevant supporting documentation, based on the prevailing policy decisions set by the International Trade and Industry Ministry as well as the Finance Ministry.

In 2020, Malaysia recorded a total of 4,599 approved private investment projects worth almost RM164bil in the manufacturing, services and primary sectors. This represents a decline of 22.4% from the total approved private investments of RM211.38bil in 2019.

However, the manufacturing sector posted higher approved investments last year at RM91.26bil as compared with RM82.73bil in 2019.

Looking ahead, Lee highlighted the need to further enhance Malaysia’s competitiveness and attractiveness as an investment location in the region, considering the increasing complexity of the investment landscape offered by Malaysia’s regional peers.

Maintaining competitiveness at both macro and micro levels is highly important, according to Lee, as Malaysia strives to consistently move up the competitive ladder, pushing the envelope for a more friendly and competitive business ecosystem.

“The macro and micro drivers are tax and non-tax incentives, economic and business environment, supply of skilled manpower, transparency and efficiency in regulation and the legal system as well as political stability.

“Improving the investment climate in Malaysia must continue to remain the government’s main economic agenda, sending positive signals in order to win over both domestic and foreign investors’ confidence, ” he added.

Meanwhile, Sunway University’s Yeah said Malaysia needs to enhance the complementary policies and enabling conditions such as good infrastructures, skilled manpower and conducive legal and regulatory environment, to entice high quality domestic and foreign investments into its shores.

“We should strategise to attract efficiency-seeking foreign direct investments by improving the quality of supporting services and supply chains to set up production bases here while offering them market-seeking opportunities in Asean and trading blocs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“Being able to fulfill the dual efficiency-seeking and market-seeking motivations of investors will make the country more attractive and competitive than its neighbours, ” according to him.