Foreign Direct Investments: What Happened to Malaysia?
The recent release of World Investment Report (WIR) 2010 by United Nations Conference of Trade and Development (UNCTAD) provided a picture that is nothing short of grim and ugly for the Malaysian economy especially in its attractiveness as a local and foreign investment destination. While the headline 81% drop in foreign direct investment (FDI) from US$7.32 billion to US$1.38 billion can be brushed of as a 'blip' due to a global financial and economic crisis in 2008-2009, a more in-depth study reveals that it was certainly not a one-off.
Our country's leadership should instead heed the loud alarm bells the data presented to prevent our economy from drifting aimless to a point of no return. The UNCTAD WIR 2010 data revealed five firsts for Malaysia:
1. For the first time ever in history, Malaysia attracted less investment than the Philippines.
Malaysia has lost out to Thailand in FDI for the very first time in 1998 while Indonesia exceeded us recently for the first time in 2005. Vietnam on the other hand, beat us in FDI for the very first time the year before, in 2008. While we have come to accept Thailand, Vietnam and even Indonesia as having gained competitiveness against Malaysia in recent years, we are suffering ignominy of attracting lower FDI compared to the Philippines for the first time ever in history. The Philippines attracted US$1.95 billion in FDI compared to Malaysia's US$1.38 billion.
Among Southeast Asian nations, we are now only attracting more FDI than Cambodia, Myanmar, Brunei, Laos and Timor-Leste. And for the first time ever, what was previously unimaginable that we may one day be compared to countries such as Cambodia and Myanmar is now a real possibility.
2. Compared to the previous year 2008, Malaysia suffered by far the biggest decline of FDI in Southeast Asia
The global financial crisis has resulted in sharp declines in FDI for many countries in this region, especially given the region's reliance on investments from the United States and Europe. However, the Government cannot use the excuse of the crisis as the reason for the precipitous drop in FDI as we have performed the worst compared to all other countries big and small in the region.
While many of our regional competitiors suffered declines in FDI last year, none of them came close to what we experience. Thailand, Vietnam and Indonesia's FDI declined by 30.4%, 44.1% and 44.7% respectively, those figures are by far healthier when compared to Malaysia's 81.1% drop. This was despite the fact that Thailand was facing a year-long political upheaval while Vietnam was mired in a currency crisis.
On the other hand, Singapore, Brunei, Philippines and Myanmar still managed to register positive growth although for Singapore, the bulk of its decline in FDI was registered in 2008 which accentuated its improvement in FDI in 2009.
3. Malaysia was the only country in Southeast Asia to have register a net negative Foreign Direct Investment Flow
The WIR 2010 presented data for both the amount of FDI a country receives as well as the amount of FDI which originates from a country that was invested overseas. Out of all the countries in the region in 2009, Malaysia was the only country where our outflow of FDI amounting to US$8.04 billion is substantially greater than the FDI of US$1.38 billion received. All the other countries in the region had a net positive FDI flow in 2009.
4.For the first time ever, cumulative Outward FDI Stock exceeded cumulative FDI Inward Stock
For the first time ever the amount of foreign direct investment flowing out of Malaysia accumulated over time amounting to US$75.62 billion, or the “Outward FDI Stock” has exceeded our cumulative foreign direct investment coming into the country, which amounted to US$74.64 billion.
The trend of both local and foreign investors voting with their feet to seek greener pastures overseas...
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