Malaysia’s FDI decline under attack by opposition

Posted on July 27, 2010

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Followup on my earlier post on 24 Jul about Malaysia’s drastic drop in FDI by 81 % in 2009, the  International Trade and Industry Minister Mustapa Mohamed had today came out confidently saying that Malaysia is optimistic of wooing RM115 billion private investment by 2015 in line with the target set under the 10th Malaysia Plan. His confidence,  he attribute it to the  Government Transformation Plan which would create a conducive environment for investment flow. I can never understand the Ministers these days, always quoting either the GTP or the NEM as a source of their confidence.

The Minister has forgotten that the foreign investor evaluate our country based on actions not words. Till today, we have yet to see any concrete results of the GTP , the NEM is a non-starter still stuck in the starter blocks.  Najib has repeatedly backtracked from the NEM and shown little initiative to implement his stated  measures of needs-based, as opposed to race-based, affirmative action, open, transparent and competitive award of privatisation projects etc . This was further hampered by the demands of PERKASA.

As expected, the opposition had came out guns blazing deriding the government for this exceptionally poor performance. PAS was the most vocal condemning the decline and Prime Minister Datuk Najib was heavily lambasted with no face given.

PAS vice-president Mahfuz Omar blamed Prime Minister Najib poor performance as finance minister over the drastic 81 percent drop. He said foreign investors are now avoiding Malaysia because of rampant graft and a questionable legal system. He adds that foreign investors are also wary of the flawed legal system, citing the unresolved case of the VK Lingam video controversy, the BN takeover of Perak and the second sodomy trial of Anwar Ibrahim. Mahfuz said that if Najib’s role was to be compared to that of a chief executive officer, the premier would certainly have to resign. “The prime minister is the CEO of a country and is responsible for bringing returns to the country… The 81 percent drop in FDI has stripped Najib of his qualifications to be premier and finance minister. Najib should step down gracefully to save 1Malaysia and his ‘people first, performance now’ slogan,”. He further added the questionable management of government assets such as conglomerate Sime Darby Bhd, Federal Land Development Authority, and banking giant Maybank Bhd. “They (foreign investors) don’t see the culture of accountability and responsibility,” he said.

The barrage continued from  PAS MP of Shah Alam  , Dzulkefly Ahmad who said Najib was “desperately trying to band-aid the economy” to attract investors so that the national GDP could be pushed up to six percent in the next five years. He said it was time for Prime Minister Najib Tun Razak to admit that Malaysia was no longer attractive to investors, who prefer to take their money to neighbouring countries because of their more conducive political and economic climates. He said Malaysia’s performance was lethargic and embarrassing compared to investments in the Philippines, Thailand, Indonesia, Singapore and even Vietnam.
Dzulkefly said one of the reasons investors were running away was that the cronies of BN leaders had an unfair advantage over them. The Finance Ministry awards contracts only to certain companies. If you look hard, you’ll see the same faces all the time. It’s frustrating to investors.” “Just look at the country’s marketability today. With so many scandals, such as the controversial purchase of Scorpene submarines, it is no surprise that investors have a bad opinion about the country. These scandals have convinced them that Malaysia is a bad bet.” He criticized the government weakness and its indecisiveness in implementing the so-called New Economic Model in the face of attacks from PERKASA.

DAP’s Tony Pua said the FDI drop was Malaysia’s worst performance when compared to the other countries in Southeast Asia. “Thailand, Vietnam and Indonesia’s FDI declined by 30.4 percent, 44.1 percent and 44.7 percent, respectively, those figures are by far healthier when compared to Malaysia’s 81.1 percent drop.
“This was despite the fact that Thailand was facing a year-long political upheaval while Vietnam was mired in a currency crisis.
Malaysia, in fact, was the only country within the region to register a net negative FDI flow.
“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.”
Taking a longer look at Malaysia’s track record over the past two decades, Pua showed that FDI in Malaysia had been on a general decline “while our neighbours are generally trending upwards”

Despite the opposition’s attacks, the government had again dismissed it away as just empty vessels making a lot of noise. The government must take this as a wake-up call that Malaysia is sick and is going progressively sicker. The decline in the FDI will not pull the country up to a high income nation. The lack of investments would see lesser jobs available and more unemployment in the market especially affected will be the  new school leavers and graduates entering the job market. Instead of industrialisation, we could see de-industrialisation. If there is no pickup in the FDI, do not be surprised to see accelerated subsidy cuts as then the government can no longer afford to maintain the subsidies.