A proposal to make Malaysia the gateway for investment into Asean!
PETALING JAYA: A proposal to make Malaysia the gateway for investment into Asean has been dismissed as unrealistic.
Malaysian Institute for Economic Research senior fellow Geoffrey Williams described it as “no longer relevant” and a narrative that is already out of date.
“It shows no real vision for the future,” he told FMT Business.
However another economist, Barjoyai Bardai, while less critical, nonetheless stressed that it would require sustained commitment and resources.
“We need to up our pace and attractiveness given strong competition from Indonesia, Vietnam and Thailand, which have overtaken us, but it is not too late,” he said.
Williams and Barjoyai were responding to a statement by minister of international trade and industry Tengku Zafrul Aziz outlining an agenda to position Malaysia as a strategic country and a quality investment destination with the credibility to also act as a gateway to Southeast Asia.
Tengku Zafrul made the statement while speaking to Bernama ahead of the World Economic Forum (WEF) in Davos, Switzerland which he attended as Malaysia’s representative.
Williams pointed out that offshore investments were already flowing directly into the big markets such as Indonesia and Vietnam. “Those investors don’t need a gateway,” he added.
Furthermore, he said, other countries were not only bigger but were also growing faster than Malaysia, with more opportunities for investment.
“They have an expanding middle class, better education system and a more welcoming environment for foreigners,” he added.
Investments in or investments out?
Stressing his view that Malaysia is descending into irrelevance, Williams pointed out that net foreign direct investments (FDIs) to Malaysia had been falling since 2016.
Worse, Malaysian companies have been increasingly investing in other countries.
He believes the corporate titans and representatives of government-linked companies (GLCs) that were also at the WEF were more likely to be looking for investment opportunities elsewhere than to attract high-impact investments into Malaysia.
The Employees Provident Fund, Permodalan Nasional Bhd and Khazanah Nasional Bhd were represented at the WEF. Also at the forum were several Malaysian corporate titans.
Williams said that apart from areas that traditionally resisted automation, Malaysia also needed value added investments in healthcare, the creative industries and even leisure-based activities.
“But I doubt the minister will have the imagination to understand the development implications of the fourth industrial revolution and the future of work,” he said.
“Expect the same old things in new packages,” he added.
Barjoyai said any new investments should come with multiplier effects that can reverberate through the economy to restructure it.
Citing Thailand’s electric vehicle manufacturer Energy Absolute as an example, he said such investments should have a high impact.
“It must not just take us to a better environment, it must also give access to the lower income group to participate in and enjoy the benefits,” he said.
Don’t forget the brunettes
Williams said that rather than woo the big brand names, as Tengku Zafrul is known to do, Malaysia should pursue smaller companies that will actually create jobs, offer supply chain opportunities and promote long-term research and development for the country.
“Rather than the big companies, more FDIs come through less well-known and smaller start-ups looking to expand,” he said.
Williams said the smaller companies usually expand by going into new markets and they tend to employ more local people.
“However, large companies just want to service their existing markets so their overseas operations are often sales outlets or warehouses and logistics hubs, which employ fewer people,” he said.
“They tend to keep production in their own countries but sell here. On the other hand, smaller companies are more likely to build production facilities where they invest in,” he added.
As an example, he cited the case of Volkswagen which produces its cars in Germany while its investment in Malaysia amounted only to a warehouse in Johor.
“We should not just go for the blondes when there are many brunettes,” he said allegorically.
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