3 Jan 2022

Paige Lim

MALAYSIA’S investment approvals are projected to be worth RM200 billion (S$64.8 billion) in 2022, as tighter global monetary conditions and lingering uncertainties surrounding the Covid-19 pandemic continue to pose challenges to foreign direct investment (FDI) flows, according to economists from UOB.

Despite the more prudent forecast, they added that upside risks could come from Malaysia’s “robust growth prospects, stronger regional recovery as vaccination rates progress, and potentially positive trade and investment diversion effects with the Regional Comprehensive Economic Partnership (RCEP) coming into force in January 2022”.

UOB added that the country has also offered several tax incentives for new and existing companies relocating to Malaysia, as part of the National Economic Recovery Plan (Penjana) announced in June 2020.

The bank’s forecast of Malaysia’s 2022 investment approvals follows their upward revision of the country’s 2021 full-year target to RM215 billion. This is a result of Malaysia’s year-to-date total investment approvals reaching 96 per cent of the bank’s initial-year target of RM185 billion, and also factoring in the recent announcement of over RM30 billion worth of investment by a US chip giant.

Malaysia’s total investment approvals rose 51.5 per cent year on year to RM177.8 billion in the period of January to September 2021, up from RM117.4 billion in the corresponding period in 2020.

The manufacturing sector accounted for the largest share of total investments, which amounted to RM103.9 billion (58.4 per cent of total), followed by the services sector with RM57.8 billion (32.5 per cent) and the primary sector with RM16.1 billion (9.1 per cent). These investments involve 3,037 projects that would generate 79,899 jobs in the country.

FDI approvals accounted for nearly 60 per cent of approved investments at RM106.1 billion. The top 5 foreign sources were from Singapore, China, Austria, Japan and the Netherlands, with investment approvals from those areas hitting RM90.6 billion.

The manufacturing sector was led by FDI approvals, with FDI contributing 88.3 per cent or RM91.7 billion of the total. The bulk of the manufacturing approved investments were new investments, forming 74.4 per cent of the total at RM77.3 billion, while manufacturing investment for expansion purposes was also robust at 25.6 per cent or RM26.6 billion.

The top-performing industries that attracted the most investments in the manufacturing sector included electrical and electronics, fabricated metal products, rubber products, basic metal products, food manufacturing, chemicals and chemical products, scientific and measuring equipment, and transport equipment.

Key projects approved during the period of January to September 2021 include an Austrian company making high-end printed circuit boards and integrated circuit substrates that chose Malaysia for its first production plant in the region; the subsidiary of a Dutch semiconductor and components company expanding its operations in Negeri Sembilan; and a Japanese company expanding its multilayer ceramic capacitors production in Kuching, Sarawak.

On the other hand, domestic investments were the main contributor to both the services and primary sectors, at 81.1 per cent (RM46.9 billion) and 78.3 per cent (RM12.6 billion) of the total, respectively. In the services sector, key sub-sectors that recorded the highest investments were real estate, global establishments, financial services, utilities and support services. For the primary sector, the mining sub-sector attracted the highest investments, followed by plantation and commodities, and agriculture.

The Malaysian government has also lined-up strategic and focused trade and investment missions targeted to capture investments in high technology, innovation and research-driven industries, said UOB. In the pipeline are 523 projects with proposed investments of RM32.7 billion in the manufacturing and services sectors.