KUALA LUMPUR - A United Nations report has confirmed what has so far only been spoken of anecdotally.
Foreign investors are fleeing Malaysia amid the country's increasingly unstable politics, which climaxed last month with Prime Minister Muhyiddin Yassin resorting to emergency powers as his government lost its majority in Parliament, the first government to do so in Malaysia's history.
Last week, the United Nations Conference on Trade and Development (Unctad) said that foreign direct investment (FDI) into Malaysia plunged by more than two-thirds to just US$2.5 billion (S$3.34 billion) in 2020, the worst drop in the region amid the Covid-19 pandemic.
The UN figures have added fuel to fire for those who have criticised Tan Sri Muhyiddin's economic policies, in particular how the investment climate has dampened in Malaysia. The critics have included ostensible allies in the ruling Perikatan Nasional pact, such as former premier Najib Razak.
"Is Malaysia in danger of going down the same path and being seen as the new 'sick man' of Asia in the 2020s because of political ineptitude and the inability to manage the Covid crisis under the Perikatan Nasional (PN) government?" said Mr Ong Kian Ming, the former deputy international trade and industry minister in the previous Pakatan Harapan (PH) government, on Monday. The term "sick man" of Asia was widely used in reference to the Philippines when it was under the dictatorship of the late Ferdinand Marcos in the 1970s and until the mid-1980s.
By contrast, the Philippines transformed into Asean's best performer last year, with FDI rising by 29 per cent to US$6.4 billion. Singapore saw a 37 per cent drop to US$58 billion, still comfortably the most attractive FDI destination in the region.
Malaysia's performance is even more alarming, when compared with others in developing Asia where the average decline was just 4 per cent.
Experts say a key contributor for the dismal performance is growing political risk - and the policy implications as populism takes precedence - since Umno lost in the 2018 General Election after six decades in power. The PH coalition that took over amid euphoria over the first-ever change of government since independence lasted only 22 months, crumbling under the weight of internal schisms between disparate allies.
"The continued political uncertainty - only temporarily relieved by the state of emergency - and growing concerns about economic nationalism all weigh on investor confidence," Eurasia Group's Asia director Peter Mumford, who advises firms with business interests in the region, told The Straits Times.
Just days before the government declared an emergency on Jan 11, Finance Minister Tengku Azfrul Aziz boasted of "investors' continued confidence in Malaysia" but industry players, including the head of the European Union-Malaysia Chamber of Commerce and Industry (EuroCham), scoffed at the claim, which was peculiar given that the figure of RM110 billion (S$36.2 billion) of approved - foreign and domestic - investments the minister cited for the first nine months of last year was more than 25 per cent lower than in 2019.
"We currently receive a lot of concerns regarding Malaysia as a viable investment destination. Until today, the honourable minister was not even able to meet with us and listen to the concerns of our corporations. Without these inputs, your ministry certainly cannot address the problems on the ground. Besides, it really needs more than a few nice words and window dressing," said EuroCham chief executive Sven Schneider.
Socio-Economic Research Centre executive director Lee Heng Guie believes the PN government has taken private-sector suggestions on board but needs to do much more.
Investments, he said, are "highly contingent on implementing transparent and stable, inclusive and efficient policies".
"Minimising day-to-day uncertainties as well as unclear guidelines and rules matter to businesses," he added.
The Unctad report also followed several potshots by Najib, the former premier whose years in office saw Malaysia attracting its highest levels of FDI. He was ousted in disgrace in 2018 after being implicated in a multibillion-dollar scandal at state investment firm 1Malaysia Development Berhad, or 1MDB.
"Tesla is going to Indonesia. Amazon is going to Indonesia. Google is going to Indonesia. Malaysia... is no longer considered for investment," he said in a Facebook post in December that cited reports of the tech giants getting ready to plough billions into the region's largest economy.
This year, news has broken of South Korean automaker Hyundai relocating its Asia-Pacific headquarters from Malaysia to Indonesia, having decided in 2019 to invest US$1.55 billion in a factory there. Hyundai is following in the footsteps of its Japanese counterpart Toyota, which is investing US$2 billion.
Japanese electronics firm Panasonic - the provider of batteries for Tesla's electric vehicles - has also chosen to shutter its solar panel plants in Malaysia, the Nikkei reported on Jan 31.