Swift reopening, policy consistency key to economic recovery

Malaysia’s FDI beats expectation, but more can be done

by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL

BUSINESS firms in Malaysia do not feel that they will be able to see recovery in the remainder of 2021 due to a myriad of issues to be addressed such as the political situation and the longer than anticipated economic reopening.

Malaysian-German Chamber of Commerce and Industry CEO Daniel Bernbeck predicts the third quarter of 2021 (3Q21) and 4Q21 performance will be more or less similar to the 2Q21, with maybe a slight upward turn towards the end of the year, pending the government’s decision.

He said the biggest challenge for the country would most probably be a fast reopening of the economy with all necessary standard operating procedures in place to avoid another wave of Covid-19.

“For that, our members need reliable, consistent and favourable rules and regulations for their operations, as well as their workforce. In the coming months, we hope to see more relaxations regarding immigration rules for foreign talents including expats, quarantine rules, cross-border travels and many others,” Bernbeck told The Malaysian Reserve (TMR).

“Malaysia needs to prepare for a restart to also make consumers more confident in further economic developments, because we see that consumer spending is far behind the necessary. Retailers, service industry, restaurants and tourism are suffering badly from consumers controlling their expenses,” he added.

Citing Germany as an example, Bernbeck said the government has shifted from only looking at the daily infections to also taking the levels of occupancy of intensive care unit (ICU) beds and ventilation aid into account.

“Malaysia has broken records with the boost of vaccinations after May 2021 and the high number of vaccinated adults means that people can now expect a return to normalcy, such as working from the office, more social interaction and other aspects of their lives prior to the pandemic. That would lead to a huge boost in consumer spending, contributing to positive business sentiments, and will certainly help Malaysia recover quickly.

“The fundamental factors which have made Malaysia an attractive destination for foreign direct investment (FDI) remain intact. Our hope for 2022 is for strong support from the new government to make Malaysia more welcoming to foreigners and their investments.

“We hope to see improvements in the Malaysia My Second Home scheme, the reopening of expat schools for children of the expatriates living in Malaysia and many other aspects,” Bernbeck said.

Malaysia has made impressive achievements amid these challenging times, as evident with over 200% increase in FDI inflows in the first half of 2021 (1H21).

Bernbeck said this obviously referred to comparison to the 1H20 as the pandemic hit Malaysia hardest during 2Q20.

“During the 1H21 and before the implementation of MCO (Movement Control Order) 2.0, we had a period of economic recovery. While we fully trust the statistical analysis of Mida (Malaysian Investment Development Authority), it could be a comparison of two very particular periods during an unprecedented crisis and that may not really give a full picture of the situation,” he added.

Last Friday, Senior Minister Datuk Seri Mohamed Azmin Ali said the recent RM680 million investment by Taiyo Yuden Co Ltd to produce multilayer ceramic capacitors in Malaysia is a testament to the country being a preferred hub for global manufacturers and an Asean gateway.

Azmin expressed confidence that FDI would continue to flow into Malaysia in spite of the challenging global economic landscape.

“With our strategic value proposition via our National Investment Aspirations, companies, foreign and local alike, will be able to grow their businesses to another level and transform as competitive world players,” he said in a statement.

Apex Investment Services Bhd CEO Clement Chew said Malaysia is a beneficiary of multinational companies (MNCs) setting up manufacturing operations outside of China as tensions between the US and China continue, albeit at a less confrontational manner.

“The pandemic has brought home the importance of diversifying a company’s production base and supply chains. Separately, the year-on-year comparison in 2021 may be flattered by the low base in 2020.

“Last year, FDIs in Malaysia more than halved due to the Covid-19 pandemic. Therefore, the percentage increase in FDIs may appear impressive. One also has to analyse the share of FDIs that Malaysia received for this region,” he told TMR.

On outlook for the rest of 2021, he said the current rivalry between the US and China will continue to divert FDIs flows to this region.

“Malaysia will be a beneficiary of these flows. MNCs will want to reduce their reliance on one particular country to insure against geopolitical risks and health crises. Malaysia has an established manufacturing base, especially in the electronic and electrical industries.

“For electronics, a good supply chain exists for areas such as semiconductor manufacturing,” he added.

However, Chew said labour-intensive industries are struggling to hire workers, including foreign labour.

“Also, companies in the region are competing for talent such as engineers. If skilled and trained individuals leave the country, it hampers our ability to go up the value chain.

“Apart from the availability of skilled labour, attracting FDIs is not merely about cheap land, low rentals or competitive wages. It is about the ease of doing business, consistency in government policy and the rule of law,” he explained.