Malaysia Continues to Be the Investment Destination For High-Value Manufacturing and Global Services in Asia

Kuala Lumpur, 8 February 2021 - The recent report by The Straits Times of Singapore on 5 February 2021 regarding foreign investors fleeing Malaysia is incorrect. The piece falsely indicates that the United Nations Commission on Trade and Development (UNCTAD) report confirmed what has been spoken of anecdotally.

The UNCTAD report estimated that Global Foreign Direct Investment (FDI) flow fell by 42 per cent to an estimated USD859 billion in 2020 compared to USD1.5 trillion recorded in 2019. Almost all regions reported lower FDI in 2020 which were mainly due to the impact of lockdowns and a drastic decrease in the economic activities during the COVID-19 pandemic. The FDI flows to developing economies decreased by 12 per cent. FDI into South East Asia contracted by 31 per cent due to a decline in investments to the largest recipients in the sub-region; inflows in Singapore fell by 37 per cent, Thailand by 50 per cent, Indonesia by 24 per cent, Vietnam by 10 per cent, and followed by Malaysia by 68 per cent. 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. Lower net FDI inflow is not an unfavorable signal. 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 per cent. This is a considerable achievement given the Movement Control Order (MCO) and Recovery Movement Control Order (RMCO) in Q2 and Q3 of last year, respectively. 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.

The UNCTAD report estimated the net FDI flow into Malaysia for the whole year of 2020 totalled USD2.5 billion (approximately RM10.1 billion), a decrease of 68 per cent from the previous year’s performance. Based on the data from DOSM, Malaysia registered net FDI outflows in Q3, driven by the outflows from debt instruments amounting to RM9.35 billion in the stipulated period. This was reflected in inter-company loan extensions and scheduled loan repayments, which are typical for multinational corporations’ (MNCs) operations; as well as the trade credits granted to manufacturing firms, in line with substantial exports, especially in the electrical and electronics (E&E) sector. Notably, Q3 2020 is an exceptional period for the first time since Q4 2009. Meanwhile, equities moderated to RM13.40 billion from RM17.33 billion in January to September 2019, a decrease of 23 per cent compared to the estimated global FDI drop of 42 per cent in 2020. more

Source: Malaysian Investment Development Authority (MIDA)

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