The Malaysian Investment Development Authority (MIDA) has said that there’s a high possibility that total approved investments in Malaysia for 2022 will recover to the pre-pandemic level of over RM200 billion annually.
MIDA Chief executive officer Datuk Wira Arham Abdul Rahman said on average, domestic direct investment and foreign direct investment made up 60:40 of the country’s yearly approved investments, mainly for the services sector.
He said investments in semiconductors and electrical and electronics (E&E) would continue to make up the largest contribution to the total investment this year.
“The global disruptions in the E&E and semiconductor supply chains globally during the pandemic saw many chips and semiconductors being utilised in mobile phones and PC productions, (causing a shortage) for the automotive industry.
“Now the demand for chips and semiconductors in the automotive industry is on an uptrend,” he told a press conference after a panel discussion titled ‘Shifting the Paradigm: Enhancing DDI for Sustainable Economic Growth‘ in Kuala Lumpur on Tuesday.
In the first half of 2022, MIDA approved RM123.3 billion in total investment, largely in the services sectors, including for the data centre projects in Johor.
Arham declined to reveal the latest figure of approved investments but signalled that the trend is increasing, in tandem with growing interest in Malaysia as a preferred destination for investment among domestic and foreign investors.
In 2021, Mida approved a record RM309.4 billion (US$74.2 billion) in investments in the manufacturing, services, and primary sectors despite the unique global calamities, thanks to several big-ticket projects secured, especially in the E&E and semiconductor industry, including from Intel and Osram.
DDI Face Value Alone Not Depictive Of Nation’s Investment Scenario
Summing up the totals in terms of the value of domestic direct investment (DDI) data on its own is an incomplete portrayal of investment s in Malaysia, said MIDA Senior Executive Director Of Investment Policy Advocacy Sikh Shamsul Ibrahim Sikh Abdul Majid today.
“DDI numbers tend to be uneven over the years due to major investments being cyclical in nature. In terms of the value of approved DDIs, the amount has been uneven but recorded a downward trend from RM150.6 billion in 2015 to RM125.5 billion in 2019. During the Covid-19 pandemic years, it continued to fall to RM103.2 billion in 2020 and further to RM97.9 billion in 2021, which was somewhat expected.
Shamsul attributed these numbers to large-scale projects like Petroliam Nasional Bhd’s (Petronas) Pengerang project in Johor, where the investments tapered off close to 2018.
At a panel discussion entitled “Shifting the Paradigm: Enhancing DDI for Sustainable Economic Growth” today (Nov 8), he said: “A foreign direct investment (FDI) can invest about RM30 billion in a project, something you will not see in a DDI. But in terms of the number of projects, DDIs are about two to three times more than FDIs. We cannot conclude based on the value alone that DDI is down. Over time, big domestic investments [like Pengerang] will come again.
“Right now, what we really need to look at is how we can encourage domestic services companies to go into manufacturing, so that we can have more of that in the manufacturing sector,” he said.
Notably, the services sector dominated DDI approvals, totalling about 70% each year.
AmBank Group Chief Economist And Head Of Research Dr Anthony Dass added DDIs are usually smaller in value than FDIs.
“The value today may be small, but we hope that in five years’ time, it will grow bigger. But, even then, multinational corporations’ investments will still be bigger than DDIs. We have to move away from the traditional method of just looking at the value of the investment, and to include looking at value-adding and how much we have moved up the value chain,” he added.
Shamsul also discussed that there is a common misconception among local companies that where incentives are concerned, FDIs are able to get things done more easily than local companies.
He added that incentives are readily available for both local and foreign companies, and even for smaller companies, like the pioneer status and investment tax allowance.
But the incentives are not “free giveaways”, Shamsul said, as local companies would have to meet the criteria for the incentives. They would also need to approach MIDA directly to find out more, and apply for the incentives that can help to further their businesses and investments.
