Total approved manufacturing investments expanded by almost 120% year-on-year to RM16.4bil in the second quarter this year, the fastest pace since the first quarter of 2008, bringing the total approvals to RM28.6bil in the first half this year, according to the Malaysian Industrial Development Authority (Mida).
CIMB Investment Bank Bhd economic research head Lee Heng Guie said the foreign direct investment (FDI) inflows were encouraging as they were in line with the Government's objective to spur private investments.
“Domestic direct investments will continue to drive growth, while attracting the interest of the foreign investors,” he said.
CIMB Research said in a report that the numbers reflected investors' confidence in the favourable prospects in Malaysia.
It revised this year's manufacturing investment approvals estimate to between RM50bil and RM55bil from between RM45bil and RM50bil previously, while sustained net FDI was projected to reach RM35bil to RM40bil in 2012.
Foreign investors led the way with approvals more than doubling to RM10.2bil in the second quarter, marking the fourth consecutive quarter of increases. Foreign share of total approved investments climbed to 62.3% from 37.9% in the first quarter. The major foreign investors in Malaysia are Japan, the United States, the Netherlands, China, Taiwan and Singapore.
Japan was the largest foreign investor in the second quarter with total approved investments of RM3.1bil or 30.3% of total approvals.
High capital intensive industries like electrical and electronics accounted for the bulk of total approved investments in the second quarter, followed by chemical and chemical products, petroleum refineries, transport equipment, basic metal products and plastic products.
FDI is expected to increase to between RM25bil and RM30bil this year, with the catalysts coming from improved global FDI prospects as well as the investment opportunities under the Economic Transformation Programme.
The United Nations Conference on Trade and Development has listed Malaysia in the top 20 host economies for global FDI inflows from 2011 to 2013. The report said private investments were driving expansion of productive capacity and investment in new growth areas such as solar, advanced electronics and electrical products, medical equipment as well as the oil and gas sector.
Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said although the global economy had lost its momentum following bleak prospects of the US economy and the adverse impact of European debt debacle, it was not likely to succumb to another round of recession.
“As such, investors continue to invest where they think will give them the greatest returns on their investments.
“Many Asian countries, Malaysia included, will be the prime target as growth prospects are a lot better than those of the developed nations,” he said.
He said the strengthened yen resulted from massive capital inflows into Japanese denominated assets had made it more appealing for Japan to invest abroad.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said private investments had remained at a decade low since the 1998 financial crisis, with private investments accounting for only 10% to 12% of gross domestic product.
He said Malaysia could expect a higher level of investments to flow in to support economic growth.
“It is a testimony of an improved investment climate, with investors' positive reception towards ETP, and also efforts to improve the investment climate in Malaysia.”