by Dr Hsu Dar Ren
Declining FDI cause for concern
While we Malaysians are arguing over ‘who is marginalising who’ and concentrating on who gets what, the whole world is passing us by. Malaysia used to be a top destination for foreign direct investments (FDI). In fact, Malaysia was ranked fourth in the world (United Nations rankings) for FDI in 1990. But FDI flow into Malaysia has decreased steadily and Malaysia was ranked 62 last year.
Citigroup in their latest report mentioned that ‘Malaysia is quickly dropping off the radar screens of global investors. Whether measured in terms of FDI draw, stock market capitalisation or trading volumes, Malaysia is slipping down the ladder’.
According to Unctad’s (United Nations Conference on Trade and Development) World Investment Report 2006, total inflow of FDI into the region of East Asia, South Asia and South East Asia increased by 19% over the previous year and
amounted to US$165 billion in 2005.
While China, Hong Kong and Singapore are getting the lion’s share of FDI to this region, it is surprising that even Indonesia has overtaken us in FDI inflow for the year 2005. Our 2004 FDI figures were, in fact, higher than in 2005. This means that while the whole region is benefitting from an increase in FDI, Malaysia is actually experiencing a decrease in foreign investments.
Our main competition in this globalised era is outside the country and not inside. If we don’t buck up, we will not stand a chance in this rapidly advancing globalised world.
One of the main reasons why Malaysia is fast losing its competitiveness, as mentioned in the Citigroup report, is that the NEP distorts the market and needs to be fine-tuned. The Citigroup report suggested direct government subsidies and
preferential treatment in social services, such as education and healthcare as being more preferable compared to the NEP requirements which ‘distort the property, labour and stock markets’.
This is the comment from one of the world’s leading financial groups. Like it or not, this report is going to influence a lot of foreign investors.
The world today is full of investment opportunities. Foreign investors need not – and would not – come to invest in our country unless we offer them better returns and more attractions than other countries. If we don’t change our present system, perhaps FDI inflow will continue to slide and we really stand the risk of being marginalised in the decades to come.
Perhaps a review of the NEP is pertinent. We need to focus on growth and liberalise the financial sectors further in order to move faster forward.
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