FDI in Malaysia down 5% in 2016

Total foreign direct investment (FDI) into Malaysia slipped 5% to RM41.18 billion in 2016 from RM43.44 billion in 2015, according to the Malaysian Investment Development Authority (Mida).“The decline was due to lower investments in the manufacturing and primary sectors,” International Trade and Industry Minister Datuk Seri Mustapa Mohamed said in a briefing here yesterday.

The decline in the country's FDI, said Mustapa, was in line with global FDI inflow, which slowed by 13% to US$1.52 trillion in 2016 from US$1.7 trillion a year earlier. “This is due to weak global economic growth and world trade volumes posting anaemic gains,” Mustapa said.Malaysia, he added, has also been more selective in its investment agenda, preferring quality projects in targeted ecosystems that will have a significant knock-on and multiplier effect throughout the domestic economy.

China was the largest contributor to the country's FDI last year, with RM4.7 billion of committed investments, followed by the Netherlands (RM3.2 billion), Germany (RM2.6 billion), the United Kingdom (RM2.6 billion), South Korea (RM2.2 billion), Singapore (RM2.1 billion), Japan (RM1.9 billion), the US (RM1.4 billion) and India (RM1.3 billion).Total investments in the country clocked in at RM207.9 billion in 2016, a 7.7% increase from RM193 billion a year ago, driven by investment in the services sectors that jumped 23%.

According to Mida, the ratio of foreign to domestic investment is still healthy, with 71.6% or RM148.9 billion generated domestically, with the balance of 28.4% or RM59 billion coming from foreign investors.The US, the Netherlands, China, Japan, Singapore, South Korea and the UK, Mustapa said, jointly accounted for 55.8% of total foreign investments in the country’s three core areas: manufacturing, services and primary sectors.

Last year, investments in the manufacturing sector fell by 21.7% to RM58.49 billion from RM74.69 billion in 2015, though the total number of projects increased to 733 from 680 a year ago.“The investment numbers looked big in 2015, but that was bumped up by two lumpy projects in Pengerang, Johor, and Sarawak,” said Mustapa, who foresees investment in manufacturing activities slowing further to RM55 billion this year.

“We have some mitigating strategies to support activities in the manufacturing sector, which include increasing efforts to develop and enhance local supply chains to support multinational companies,” he added.As for the services sector, Mustapa said investment activities continued to rise by 23% to RM141.21 billion in 2016, from RM114.55 billion in 2015, anchored by key real estate projects.

“In 2017, we see investment in the services sector coming in at RM75 billion, with global establishments, healthcare, education and hospitality to be the main key driver,” said Mustapa, who “prefers to give moderate targets as opposed to ambitious ones”.“Despite the [current] volatilities, we are off to a good start this year, with the collaboration between Petronas and Saudi Aramco, which has committed [an investment of] US$7 billion (RM30.8 billion),” he said.