By Charles F Moreira, Editor
Several reports have appeared on various Malaysian media about foreign multinationals relocating their factories, operations and offices from Malaysia to neighbouring countries and of several new foreign investments choosing to set up operations in our neighbours.
Copies or links to these reports, many of them additionally politically tinged. have also been doing the rounds of the Malaysian social media scene.
Most recently, a JPEG image of an article in The Straits Times of Singapore entitled “Foreign direct investments into Malaysia plunge, experts cite growing political risk”, dated 4 February 2021 was doing the rounds of WhatsApp groups about a month after it was published.
It refers to the United Nations Conference on Trade and Development (UNCTAD) report released about a week earlier which said that foreign direct investment (FDI) into Malaysia had dropped dramatical by over two-thirds to the equivalent of US$2.5 billion (RM10.32 billion) in 2020, the worst drop in the region amid the Covid-19 pandemic.
It went on to say that foreign investors were fleeing Malaysia due to the increasingly unstable politics and the Prime Minister Muhyiddin Yassin declaration of a state of emergency from 11 January to 1 August 2021, allegedly to cling on to power after his government was said to have lost its majority in parliament.
However, in his speech to announce the emergency on 12 January 2021 and published on the Prime Minister’s Office website, the Prime Minister assured Malaysians that this emergency was not a military coup and would not involve curfews.
Instead, its main objective was to enable the government to more effectively curb the spread of COVID-19 by enlisting the help of the private sector, especially private healthcare facilities, as well as private human resources, expertise, facilities, assets, testing laboratories and utilities to help relieve government agencies, especially public hospitals of the burden of dealing with the wave of the pandemic which was raging out of control in Malaysia at the time.
The emergency ordinances would also enable the government to facilitate businesses and overcome regulations which would otherwise make it difficult for the government to deliver public health services quickly, efficiently and effectively. It also provided the Malaysian Armed Forces with the same power accorded the Royal Malaysian Police, so that the military could assist the police to enforce regulations to protecting public health and for the military, police and immigration personnel arrest illegal immigrants and anyone who encroaches on Malaysia’s national borders.
These ordinances also enable the government to combat acts of economic sabotage, monopolies and excessive increase in the prices of goods during the pandemic and to impose heavier penalties on offenders.
The Straits Times went on to quote Y.B. Dr. Ong Kian Ming, currently DAP Member of Parliament for Bangi and former Deputy Minister of International Trade and Industry in the previous Pakatan Harapan government which collapsed on 24 February 2020 due to defections, as saying, “Is Malaysia in danger of going down the same path and being seen as the new ‘sick man’ of Asia in the 2020s because of political ineptitude and the inability to manage the Covid crisis under the Perikatan Nasional (PN) government?”
The article also quotes business advisor Peter Mumford, Asia director of the Eurasia Group as saying “The continued political uncertainty – only temporarily relieved by the state of emergency – and growing concerns about economic nationalism all weigh on investor confidence.”
Shortly before the emergency was declared, Finance Minister Tengku Azfrul Aziz had said that investors continued to have confidence in Malaysia but the head of an industry body, the European Union-Malaysia Chamber of Commerce and Industry (EuroCham), debunked the minister’s statement, stating that RM110 billion of approved foreign and domestic investments which the minister had cited in the first nine months of 2020 was 25% lower than in the same period in 2019.
“We currently receive a lot of concerns regarding Malaysia as a viable investment destination. Until today, the honourable minister was not even able to meet with us and listen to the concerns of our corporations. Without these inputs, your ministry certainly cannot address the problems on the ground. Besides, it really needs more than a few nice words and window dressing,” said EuroCham chief executive Sven Schneider.
The Straits Times also quotes statements by former prime minister and current member of parliament for Pekan, Dato’ Sri Najib Tun Razak in his Facebook page as saying, “Tesla is going to Indonesia. Amazon is going to Indonesia. Google is going to Indonesia. Malaysia… is no longer considered for investment”, based upon reports by these global technology giants.
The article also mentioned news that South Korean automaker Hyundai was relocating its Asia-Pacific headquarters from Malaysia to Indonesia and would invest close to RM6.4 there, following in the footsteps of Toyota which was investing RM8.25 billion in our giant neighbour to the south.
Also, on 31 January 2021, Nikkei reported that Japanese electronics giant Panasonic which provides batteries for Tesla’s electric vehicles would also close its solar panel plants in Malaysia.
The Straits Times article ended with charts of estimated inward FDI in ASEAN countries – namely, Indonesia, Malaysia, Philippines, Thailand, Vietnam and Singapore which showed that inward FDI into Indonesia, Vietnam and Singapore all dropped from 2019 to 2020, whilst FDI into Thailand dropped two years running from 2018 to 2020 and FDI into Malaysia had declined in the four years from 2016 to 2020. FDI into Philippines dropped from 2017 to 2019 but picked up in 2020, despite the pandemic.
Admittedly UNCTAD’s chart presents a rather grim picture for FDI into Malaysia and UNCTAD’s report as well as the two opposition members of parliament’s statements to blame Muhyiddin’s government and the emergency for the drop in FDI into Malaysia but according to UNCTAD’s estimates, the decline of annual FDI into Malaysia began in 2016, when Najib was prime minister leading a Barisan Nasional coalition government until the May 2018 general election.
MIDA clarifies
Turning to the proverbial horses mouth, in a media release dated 8 February 2021, the Malaysian Investment Development Authority (MIDA) refuted The Straits Times’ article and said that Malaysia continues to be the investment destination for high-value manufacturing and global services in Asia.
MIDA pointed out that the UNCTAD report estimated that FDI investment flow fell by 42% to an estimated US$859 billion in 2020 compared to US$1.5 trillion recorded in 2019. Almost all regions reported lower FDI in 2020, mostly due to lockdowns and a decrease in economic activities due to the impact of the COVID-19 pandemic.
The FDI inflows to developing countries decreased by 12%, whilst FDI into South East Asia dropped by 31% due to a decline in investments to the largest recipients in the sub-region; inflows in Singapore fell by 37%, Thailand by 50%, Indonesia by 24%, Vietnam by 10%, and into Malaysia by 68%.
“Notably, the computation of FDI flows by UNCTAD is based on Balance of Payment (BOP) statistics, published by respective countries in the context of net FDI flows”, wrote MIDA.
Lower net FDI inflow is not an unfavourable signal, whilst Malaysia continues to attract high levels of gross FDI.
According to the data by the Department of Statistics Malaysia (DOSM) for the period of January-September 2020, the total Gross FDI inflow into Malaysia was valued at RM108.2 billion compared to RM102.3 billion in the same period in 2019, an increase of 5.8%, which is a considerable achievement given the series of movement restrictions especially during the second and third quarters of 2020.
“The Gross FDI inflow is also reflective of the high levels of FDI projects approved and implemented in the economy (manufacturing, services and primary sectors) over the last few years. It is noted that the total FDI approved throughout 2018 to September 2020 was valued at RM206.02 billion”, wrote MIDA.
