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NEWS UPDATES 12 August 2010

Malaysia urged to act on FDI

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MALAYSIA should act now on the shrinking inflow of foreign direct investment (FDI) before its position as an investment destination deteriorates further, says CIMB Investment Bank.

It called on the government to remove all costly barriers, including the perceived policy risk, to give foreign investors compelling reasons to put their money into the country and create high-value-add production and high-wage jobs.

For instance, Malaysia still lags in the "ease of doing business", which has the unintended effect of favouring existing businesses and hampering competition.

Its chief economist Lee Heng Guie said the trend towards further investment liberalisation, facilitation and promotion is critical if Malaysia is to regain its competitive edge in attracting domestic and foreign investments.

The Statistics Department will release the investment data today.

The changing investment pattern by multinationals will also add a new dimension to Malaysia's capital flows, both as a recipient of FDI and as a net capital exporter.

On the domestic front, prospects of economic recovery, the strong improvement in global competitiveness ranking and the implementation of government and economic transformation programmes bode well for the country in its drive for foreign and domestic investments in the medium term.

CIMB estimates that FDI will jump from the RM5 billion last year to RM12 billion to RM14 billion this year, while private investment may rebound 6 per cent this year, after tumbling 17.2 per cent in 2009.

He noted that Malaysia has been losing to its regional peers in the race for FDI, drawing in US$42 billion (RM132 billion) cumulative FDI inflows (US$4.2 billion a year) from 2000 to 2009, down from US$48.2 billion (RM151 billion), or US$4.8 billion a year from 1990 to 1999).

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