Malaysia insists foreign investors still keen despite bleak UN report

Experts blame the dismal FDI figures on growing political instability and policy uncertainty since Umno lost the general election in 2018. PHOTO: REUTERS

KUALA LUMPUR - Malaysia has said it remains attractive to investors despite a United Nations report showing it suffered the worst drop for foreign direct investment (FDI) in the region last year.

The Malaysian Investment Development Authority (MIDA) insisted on Monday (Feb 8) that foreign investor confidence remained high despite the report in The Straits Times on Feb 4, which quoted the UN Conference on Trade and Development (Unctad) as saying that Malaysia's FDI plunged by more than two-thirds to just US$2.5 billion (S$3.3 billion) in 2020.

That represented more than double the average percentage fall for FDI in other South-east Asian countries. The Unctad figures was even more alarming when compared with other developing countries in Asia, where the average decline was just 4 per cent.

"A lower net FDI is not necessarily an unfavourable sign," MIDA said in a statement, noting that the outflow mirrored the situation in 2009 during the United States sub-prime crisis.

"Multinational corporations in Malaysia were repatriating higher amounts of their profits for loans repayments and retaining earnings to help their HQ and affiliates faced with financial difficulties," it added.

The investment promotion agency also said that for the first nine months of last year, the gross FDI inflow (not taking into account outflows) "into Malaysia was valued at RM108.2 billion compared to RM102.3 billion in the same period in 2019, an increase of 5.8 per cent".

Experts blame the dismal FDI figures on growing political instability and policy uncertainty ever since Umno lost the general election in 2018 after six decades in power.

But the Pakatan Harapan coalition that won the polls and ushered the country's first-ever change of government since independence lasted only 22 months, crumbling under the weight of internal schisms.

Prime Minister Muhyiddin Yassin, who took over in March last year with the toppling of the PH government, has been able to shore up his minority government, the first in the country, after declaring an emergency in January. It will last until August.

Just days before the government declared the emergency, 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.

"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.

Although trade associations have rarely criticised Malaysia's government directly in the past, MIDA says "the views of the CEO of EuroCham may not necessarily reflect the views of all its members. The Chamber also does not represent all foreign MNCs operating in Malaysia".

Join ST's Telegram channel and get the latest breaking news delivered to you.