The Minister of International Trade and Industry (MITI) has stressed today in the parliament that the increase of FDI recently is phenomenal ie from USD1.4billion to USD 9.0billion. He emphatically said that this is an increase of 500%. He was making reference to the UNCTAD Global Investment Trend Monitor latest report. The Minister must firstly be corrected the UNCTAD reported figure is US$ 7 billion and not US$9billion..
The Minister audaciously said, that percentage wise, Malaysia has outperformed all regional economies. His answer to YB Selayang on FDI and Malaysia’s competitiveness is much wanting and only seen as a ‘one-upmanship’ stunt, typical of the BN’s ministers.
While we are able to accept that we have increased our FDI tremendously, we must also be reminded that it is due to our low base in the preceding year ie US$1.4bilion, hence the high percentage. Period.
The Minister needed no reminder that we are still way behind as compared to the regional economies as an investment destination. More specifically our neighbours performed better than us in term of actual numbers in FDI, namely Indonesia – US$ 12.8b, Singapore – US$ 37.4b, Hong Kong – US$ 62.6b and even Thailand (facing political turbulence) obtained US$ 6.8billion. This critique is meant to remind MITI and not intended to belittle much less to undermine the effort of the ministry.
In relation to the issue of propelling competitiveness and attracting FDI, I would like to highlight the pertinent critique made by The World Bank in a report late last year (Malaysia Economic Monitor November, 2009). Should we want to pursue an aggressive, coherent and strategic approach in enticing FDI, the most critical consideration is on the issue of human capital or more for the lack of it.
In simple term, the switch from physical infrastructure development to soft infrastructure – based on the perceptions of firms in manufacturing and business support services, is the biggest obstacle in the inability to attract FDI. In other words the shortage of skilled labours and knowledge workers.
Over 70% of firms in the manufacture and services sectors surveyed in 2002 and 2007 indicate that one of the top three most important causes of job vacancies is that applicants do not have the required basic or technical skills. How would we convince investors of our capacity and capability?
Malaysia has remained in the 48th position out of the 145 countries on the World Bank’s Knowledge Economy Index 2009 and has been stuck in that position for more than a decade, indicating that we have been lagging behind in areas of innovation and education.
For completeness sake, other stifling factors in attracting FDI are (ii) High taxes and onerous tax rules and (iii) the lack of business support services.
In the face of a troubling time and the bad prognosis of the global economy, Malaysia must not be too bullish with our ability to attract future FDI. Given our 13 years of fiscal deficit and our public debt rising above 53% of the GDP, quality FDI, is doubtless an essential ingredient to propel our economy further.
There are limits, however, to our ability to effect massive pump-priming exercises, as seen in the deluge of projects pronounced in the EPP or the Entry-Point Projects without triggering imprudent debt and dangerous fiscal deficit level.
Very unfortunately, I must say that the PM has already tempered with the New Economic Model or NEM’s reform, succumbing to the hard-line Malay right group, Perkasa and the Umnoputera lobby. The nation has lost the golden opportunity to trigger a social transformation that would have led to the birth of a vibrant economy and the nation regaining its competitiveness.
Reforms of critical democratic institutions are equally in order to effect an eco-sytem that are both conducive and legally reassuring to investors. Bluntly put and this might sound strange to you, only through ‘Political Reform’ will you have a chance of fully realizing ‘Economic Changes’.
So please PM and Ministers, don’t blow your trumpet too soon about FDI but remain Focus on Reform!
Dr Dzulkefly Ahmad. Malaysia MP for Kuala Selangor.
