Manufacturing sector leads the way in investments

United Overseas Bank (UOB) Research in a report notes that five-year average in terms of approved investments was RM204.5bil, which matches closely to what the country did in the first quarter of 2022 (1Q22). (File pic shows manufacturing of cooking oil.)

PETALING JAYA: Malaysia’s total approved investments are projected to keep pace at RM200bil this year and that is said to be around what the country was achieving prior to the pandemic.

United Overseas Bank (UOB) Research in a report notes that five-year average in terms of approved investments was RM204.5bil, which matches closely to what the country did in the first quarter of 2022 (1Q22).

But comparing the 1Q22 with 1Q21, total approved investments were down 56.6% at RM42.8bil. The manufacturing sector continues to be the leading contributor of overall committed investments for the country.

“The bulk of 1Q22 approvals was channeled to the manufacturing sector (RM30bil or 70% of total approved investment), followed by the services (RM12.7bil or 29.6%) and primary (RM0.2bil or 0.4%) sectors.

These committed investments involved 910 projects that would generate 24,906 jobs,” said UOB Research.

“The 1Q22’s overall investment approvals continued to be driven by foreign direct investment totalling RM27.8bil or 65% of total approved investment while domestic investment approvals amounted to RM15bil or 35% last quarter,” the research house said in the report.UOB Research further explains that Germany, Brunei, the United States, Hong Kong and Japan were Malaysia’s key foreign investors, accounting for 87% of approvals across the manufacturing, services and primary sectors.

Kedah, Penang, Selangor, Sabah and Johor had shown positive yields by drawing a sum of RM31.8bil or nearly three quarters worth of approvals this year.

Although the manufacturing sector continues to occupy the lion’s share of investment approvals, the research house expects that since the rise of manufacturing approvals in 2021 was largely due to China’s solar energy mega project, manufacturing’s investment value of 1Q22 will revert back to its typical trend as seen in 1Q19 and 1Q20.

Overall, manufacturing investments soared by RM19.2bil, a 106.8% rise year-on-year (y-o-y). However, new investments scaled down to RM10.8bil, a 78.5% decline y-o-y.

“This year more than 60% of the approved manufacturing investments were for expansion purposes, of which 90.6% or RM17.4bil was from foreign investment sources.

“The remaining 35.9% were new investments,” said UOB Research.

For this sector, sub-industries made-up 92% or RM27.6bil of investment approvals with electrical and electronics in the lead with RM18.6bil.

This was followed by sub-sectors like petroleum products with RM5.1bil, non-metallic mineral products with RM1.9bil, chemicals and chemical products with RM1.1bil, and machinery and equipment with RM0.7bil.

Due to the swell of investments, many more job prospects are also expected to sprout. UOB Research projects that management, technical and professional employment opportunities will increase by nearly 40%, which is 8% higher than 2021.

This was in line with Ministry of International Trade and Industry and Malaysian Investment Development Authority’s goal to lower the dependency of foreign workers as the ratio of employment opportunities for Malaysians to foreigners is now 88:12.

“The capital investment per employee ratio of the projects approved in 1Q22 was RM1.38mil, lower than the RM2.09mil reported in 1Q21 but higher than the long-term average since 2010 of RM1.25mil,” UOB Research further mentioned.

Unlike the manufacturing sector which saw foreign investments taking up the bulk of investment money, domestic investments was the bulk of it in the services sector.

“Investments approved in the services sector reduced by 61.7% y-o-y to RM12.7bil in 1Q22, with domestic investments making up the largest portion at RM11.7bil or 92.1% of total services investment approvals.

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