Medium-term FDIs for next 3 years seen higher due to ongoing property, infrastructure and O&G projects
PRIVATE investment in Malaysia can grow by at least 15 per cent annually till 2015 with the ongoing implementation of infrastructure, property, and oil and gas (O&G) projects, says CIMB Investment Bank.
The prospect of higher global foreign direct investments (FDIs) in the medium term (US$1.45 trillion, or RM4.61 trillion, in 2013; US$1.6 trillion in 2014; and US$1.8 trillion in 2015) is positive for Malaysia.
"Post-general election, we expect that broad policy continuity and the rising momentum of the Economic Transformation Programme (ETP), including oil and gas projects and developments in the Iskandar region, will underpin inflows of between US$10.3 billion and US$12.7 billion in 2013-2014," commented regional economist Lee Heng Guie on the latest World Investment Report.
FDIs in Malaysia pulled back 17.4 per cent to US$10.1 billion last year (from US$12.2 billion previously) due to the fragile global economy and political uncertainties on the domestic front ahead of the 13th General Election.
"We expect FDI momentum to revive due to broad policy continuity and certainty after GE13 as well as accelerated ETP implementation."
He noted that although Malaysia was the 30th largest recipient of FDI inflows in 2012, way behind China (second), Singapore (eighth), India (15th) and Indonesia (17th), its cumulative FDIs of US$31.3 billion, or US$10.4 billion per year in 2010-2012, surpassed the pre-global financial crisis level of US$4.3 billion per annum in 2008-2009.
"We maintain our conviction that private investments in Malaysia will sustain robust growth of 15.1 per cent this year (22 per cent in 2012), 17.1 per cent next year and 18 per cent in 2015."
CIMB said the government needs to step up its efforts to retain as well as woo investors.
"Continuous reforms in market liberalisation and human capital enhancement, including skills enhancement and the maintenance of a conducive business environment, are vital to keep up the country's investment momentum."
The realisation of the Asean Economic Community (AEC) by 2015 and ongoing negotiations on the Trans Pacific Partnership (TPP) pact will open the investment gateway for both domestic and foreign investors to increase their market access, and will widen investment opportunities.
Based on a United Nations Conference on Trade and Development survey covering 159 companies, Malaysia is ranked the No. 16 top prospective host economy for FDIs in 2013-2015, behind China (first), India (third), Indonesia (fourth), Thailand (eighth) and Vietnam (11th).
In the area of tax competitiveness, Malaysia's present corporate tax rate of 25 per cent is higher than that of South Korea (24.2 per cent), Thailand (20 per cent), Taiwan (17 per cent), Singapore (17 per cent) and Hong Kong (16.5 per cent).
Lee said although emerging economies remained an attractive FDIs destination, the confidence index had deteriorated, based on AT Kearney's 2013 FDI Confidence Index.
The slippage was partly due to the improvement of advanced countries such as the United States, Canada, Australia, the United Kingdom, France and Spain after suffering significant setbacks during 2008-2009.
On FDI outflows, he noted that the level of outward investment at US$17.1 billion was higher than most countries in Asean except Singapore. Most investments, which flowed into the services, mining and manufacturing sectors, were in the UK, Singapore, Australia, Indonesia and Hong Kong.