Despite the pandemic, foreign direct investment’s (FDI) into the country appears not to be abating evidenced by the fact that Malaysia had increased by more than threefold, from RM11.4 billion in January-March 2020 to RM54.9 billion in January-March 2021, constituting 68.1 percent of total investments, while domestic investments totalled RM25.7 billion. This is a testimony that Malaysia is an attractive investment destination although many questions arise if the momentum in FDI can be sustained.
The external factors are constantly in a state of flux and neighbouring countries also provide allure and attraction for foreign investments and Malaysia’s ability to continue to be the preferred investment destination may be in question.
With the neighbouring countries moving up the economic trajectory, the incentives that we provide to foreign investors that were once deemed attractive may not be longer so.
The problem that we have in continuing to be an attractive destination may be further compounded by the emergence of China and India with relatively skilled labour, lower costs, and a huge market that would seem attractive to the detriment of Malaysia and the rest of Southeast Asia.
The models of incentives that we offer to investors must be both fiscal and non-fiscal incentives as well as propelling small and medium scale industries into the international stage with Asean Economic Community.
To continuously attract FDI, Malaysia must allow foreign companies that have invested or want to invest in Malaysia to bring in more expatriate staff from their home- country so that the necessary expertise can be imparted that would help Malaysia move up the value chain faster.
Currently, there are restrictions in the country on the number of positions to be filled by expatriates, but it can be elective on this as this would facilitate us moving up the trajectory. Additionally, If Malaysia is to attract top-tier investments into the country, it needs top-tier people with technical skills and that would take a longer time for Malaysians to achieve this find while investors may find neighbouring countries more attractive. It must liberalise the infusion of technical staff from overseas to help catapult Malaysia’s workforce to a higher level.
In addition, the government can initiate various skills development initiatives such as The Penang Skill Development Board that have been able to produce industry-driven personnel particularly for the E&E sector and the Rubber Glove Industry that have their training centre, producing a world-class workforce.
To further enhance its competitiveness, it is paramount that our investments in Research & Development be increased many-fold and culture of research and development be used. Towards moving up the economic trajectory, we must emulate the Fraunhofer-Gesellschaft, which is the leading organisation for applied research in Europe.
The institute aims to ensure that all research it carries out is applied research and ensure that it adds value to society. Malaysia is already an educational hub and the various multinationals can collaborate with these universities to produce world-class products and thus create industry-driven people.
Malaysia should also encourage the establishment of more institutions of higher learning from South Korea and Germany here that would facilitate producing industry-driven graduates as both these countries are known for their technological and engineering prowess.
It is also important that Malaysia embrace technology at a faster pace through an overhaul in the education system that would cater to the needs of Industry 4.0 where buzzwords like IoT, Drones, and robotics have become the buzzword.
With Malaysia having a game plan to move up the value-chain, it can continue to be an attractive investment destination for multinationals but there must be firm execution of plans by policy-makers to infuse foreign talent and revamp the education system if Malaysia is to remain competitive.
