Investment crucial to boost productivity

UOB Malaysia has a prudent forecast of RM200b worth of investment approvals for 2022


INVESTMENT is a necessity for businesses as it allows them to produce and meet customer demand in a timely manner.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid believes that investment would help improve productivity for companies, which then translates into a better competitive edge, larger market share and good margins.

“For 2022, the general theme would be recovery with a cautious outlook. Such cautiousness is still revolving around the pandemic, given that Covid-19 is prone to mutation with each new variant having different characteristic, transmissibility and severity once infected.

“Not to mention, extreme weather conditions such as heavy rains, which may cause flash floods, as well as possible drought season, that (may) also undermine the recovery momentum,” he told The Malaysian Reserve.

Malaysia attracted a total of RM177.8 billion in approved investments in the manufacturing, services and primary sectors, involving 3,037 projects from January to September 2021, according to the Malaysian Investment Development Authority (Mida).

This, it said, represented a 51.5% increase compared to the same period a year earlier and was expected to generate 79,899 jobs in the country.

The statement noted that the manufacturing sector accounted for the largest share of total investments in the January to September period, amounting to RM103.9 billion (58.4%), followed by the services sector with RM57.8 billion (32.5%) and the primary sector with RM16.1 billion (9.1%).

It added that foreign direct investment (FDI) accounted for nearly 60% of approved investments, valued at RM106.1 billion, with Singapore, China, Austria, Japan and the Netherlands as the top five foreign investment sources, contributing nearly 85.3% or RM90.6 billion of total approved FDI.

While FDI led approved investments in the manufacturing sector, Mida noted that investments from local companies dominated in the services and primary sectors. Domestic direct investment totalled RM71.7 billion or 40.3% of total approved investments.

Mohd Afzanizam said the numbers looked decent, considering the extent of economic uncertainty brought by the pandemic and changes in leadership during the year. It also suggests a vote of confidence on the part of foreign investors.

“Therefore, it is extremely important that these approved investments would be materialised to crystallise the benefits such as job creation and investment in the economy,” he added.

Meanwhile, United Overseas Bank (M) Bhd (UOB Malaysia) senior economist Julia Goh said with year-to-date total investment approvals reaching 96% of its initial full-year target of RM185 billion and incorporating the recent announcement of over RM30 billion worth of investment by a US chip giant, she raised her 2021 full-year target to RM215 billion (2020: RM167.4 billion).

She said the government has also lined up strategic and focused trade and investment missions targeted to capture investments in high technology, innovation and research-driven industries.

In the pipeline are 523 projects with proposed investments of RM32.7 billion in the manufacturing and services sectors as at Dec 10, 2021.

“However, expectations of tighter global monetary conditions and lingering uncertainties surrounding the pandemic would continue to pose challenges to FDI flows in emerging markets including Malaysia next (this) year.

This leads us to have a prudent forecast of RM200 billion worth of investment approvals for 2022.

“Upside risks to our forecast 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 coming into force in January 2022,” she said in a note.

Malaysia also offers several tax incentives for new and existing companies to relocate to Malaysia under the National Recovery Plan announced in June 2020.