SAN JOSE (California): Malaysia expects the US, its top investor of foreign direct investments (FDIs), to be a strong contributor this year in the oil and gas, renewable energy, petrochemical and advanced technology sectors.

Malaysian Investment Development Authority (Mida) senior director of investment Phang Ah Tong said investments are also expected to be significant in solar, aerospace, biomass and advanced electronics.

“It was a good year for the US investments in Malaysia in 2010 where we observed a 456 per cent jump compared to the previous crisis year.

“In comparison, Malaysia attracted US$3.8 billion (RM11.59 billion) in FDIs from 47 projects compared to 19 projects totalling US$685 million (RM2.08 billion) previously,” he said in an interview here.

Mida, together with the US-Asean Business Council, held a breakfast meeting for businesses from San Jose, the capital of Silicon Valley.

To date, US investments in Malaysia are most significant in the electrical and electronics industry, led by names like Dell, making up a total 73 per cent, followed by the oil and gas sector, which contributes 13 per cent of the total.

Motorola Solutions Inc (formerly Motorola Inc) also announced the setting up of the Global Excellence Centre in Malaysia for services support from various parts of the world to provide 24/7 technical support to its internal and regional customers more effectively.

During his meeting with Malaysian Prime Minister Datuk Seri Najib Razak in New York last week, Motorola Solutions’ executive vice president (product and business operations) Gene Delaney described Malaysia as a critical part of the company’s regional and global business growth for over 37 years now.

Motorola Solutions will be an active contributor to the nation’s growth through the Collaborative Research in Engineering Science & Technology (CREST) initiative, a component of the Economic Transformation Programme.

To date, Motorola Solutions has invested RM4 billion, providing job opportunities for 7,000 people including 1,000 locally-trained engineers.

Meanwhile, technology players told the Multimedia Development Corp (MdeC) roundtable that while Malaysia has been ahead of others in terms of adoption of technology with the Multimedia Super Corridor in place, a more detailed analysis was needed.

There must be a degree of change to create a culture of innovation and make it relevant by getting to know mega trends and the kind of healthcare needed.

E-commerce is still within the means of the merchants, one commented, and there is a need for the small- and medium-sized enterprises to rise.

They also expressed their concern with data protection, security and privacy issues.

The roundtable, which was chaired by MDeC CEO Datuk Badlisham Ghazali, sought feedback from many of the leading players in the Silicon Valley on Digital Malaysia, the country’s strategic tool to hasten its transformation agenda.

Interview with Tan Sri Dr Sulaiman Mahbob

May 2011

From his position as Chairman of the Malaysian Investment Development Authority (MIDA), Tan Sri Dr Sulaiman Mahbob is well aware that his chair plays the role as one of the most important pairs of eyes and ears to spot for investments in Malaysia
As MIDA gravitates towards becoming a one-stop centre for investments in Malaysia, the Chairman heads a MIDA that has become more autonomous in recent history. He also sits on boards such as the boards of Bank Negara Malaysia (BNM) and once led the secretariat of the National Economic Action Council (NEAC) that saw Malaysia through the dark days of the Asian financial crisis.
MIDA is the incarnation of the Federal Industrial Development Authority (FIDA), a statutory body within the government that oversaw promotion and coordination of industrial development in Malaysia. Its name was changed to Malaysian Industrial Development Authority in 1979 to reflect the Malaysian identity and became the focal point of contact for foreign and domestic investors who intend to set up projects in the manufacturing and related services sectors in Malaysia. As the nation gears itself to become a high-income nation, the government has made plans to corporatise MIDA to facilitate its new role and functions. The agency has been empowered to negotiate directly with investors and coordinate the promotion efforts. In this regard, the Malaysian Industrial Development Authority will be known as Malaysian Investment Development Authority whilst retaining its familiar acronym ‘MIDA’ and become the government’s principal agency for the promotion of the manufacturing and services sectors in Malaysia.
Malaysia launched the Third Industrial Master Plan (IMP3), 2006-2020 in 2006. The IMP3 outlinedstrategies and policies in the country’s continuing efforts towards realising the vision of becoming a fully-developed nation. The IMP3, a fifteen-year ‘rolling plan’, will be important in positioning Malaysia’s long-term competitiveness to meet the challenges of a fast changing global economic environment. It coincides with Malaysia’s realisation of a developed country by 2020 (IMP3 2006).
Among the thrusts of the Plan is to further enhance the business operating environment in the country and tosustain the growth momentum of the manufacturing sector at 5.6 percent per annum, and to contribute about 28.5 percent to the country’s gross domestic produce (GDP) by the year 2020. The investment target for IMP3 is RM412 billion or RM27.5 billion per annum, with exports forecast at RM1.4 trillion, and the sector’s contribution to the GDP at GDP 28.5 percent. A key challenge of the 10th Malaysia Plan is to stimulate private sector investments to grow at 12.8 per cent per annum or RM115 billion worth of private investments per annum. The challenge is to devise new and innovative strategies to meet this investment target.
“MIDA is the major instrument to help achieve the economic transformation of the country through theprocess of industrialisation. To achieve its objective, MIDA will intensify efforts to attract foreign anddomestic investments to propel the country to a developed nation. MIDA is also working towardsbringing in quality investments and high income jobs,” said the Chairman.
One of the chief advancements for MIDA to become an agency that can quickly generate investments was theestablishment of the National Committee on Investment (NCI) that has enabled real-time decision-making within MIDA. Efficiency in an agency like this would be especially important since it deals with several hundred high-profile investments into Malaysia per year; 2010 alone generated almost 47.2 in total approved capital investments, representing a 44.8 percent increase from the previous year. Major investments were from the US, Japan, Hong Kong, Singapore, Germany, Taiwan and the Netherlands.
Last year was a good year for the manufacturing sector, which was the fastest growing sector of the year. It had a growth rate of 13.5 percent and contributed almost 28 percent of the GDP. On the other hand, the services sector grew 7 percent and contributed 57 percent to the GDP.
“I think we have two ways to move local industries up the value chain on both sides, on the manufacturing side as well as the services side. Firstly, we can look at deepening the industries which demand high skills and secondly, to encourage foreign companies to establish their services arm here to cater for their branches worldwide,” said the Chairman.
In addition to the increasing global competition for investment, Malaysia also faces other challenges such as: liberalisation of trade, investments and services; rapid pace of technological development; availability of skillsand talents; and the need for greater involvement in research and development and innovation activities.
“The talents available are by and large trained locally, and we also have foreigners contributing to our talent pool. Those who are trained locally come from our local and private universities, some of which are specialised towards a particular industry.
“One of the main issues of this policy is the liberalization of the professional workforce, and how it affects foreign workers. We need to think about how to help them bring their families here and look into education for their children. We are also keen to channel their investments into high-value properties when they are here so that they don’t end up competing with the local low income and lower-middle income families,” said the Chairman.
Today, there is strong competition for foreign direct investment (FDI) not only from the developed countriesbut also from developing countries such as China, India, Thailand and Vietnam. Competition for FDI is expected to intensify as countries continue to liberalise their investment environment and offer attractive fiscal and non-fiscal incentives.
“We are not trying to compete in labour-intensive industries. Such industries have moved to countries likeChina, Indonesia, Vietnam and Thailand. We are looking for quality investments that require high skills workers which means that we are competing with countries like Taiwan, South Korea, and Singapore. Of course we have our own niche that can be found in the electronics and electrical clusters that are set to rise in the value chain ladder. We want to bring in investments in these value-added, knowledge-intensive and high-technology industries,” said the Chairman.
To further promote and develop the services sector in Malaysia, the Government continues to enhance theexisting incentive schemes and introduced new incentive packages to attract investments into the targetedservices sector such as tourism services, healthcare travel (medical tourism), renewable energy, energyconservation / efficiency and green technology.
“In terms of selling Malaysia to the world, there are some areas where we have been doing well. Many regardtertiary education in Malaysia as good and that is why we find many postgraduate foreign students in thecountry at the moment. To sell Malaysian healthcare, we have a lot of private hospitals here which requirequalified specialists from abroad. So we have to bring them here to improve the marketability of our healthcare industry.
Among the challenges faced by MIDA in sustaining investments in the manufacturing and services sectorsinclude the need to enhance domestic direct investments (DDI) and shifting towards productivity-driven growth.“If you look at the types of commodities that Malaysia has, say rubber and palm oil for example, these are doing well in the world market. Rubber alone is around RM15 per kg. My concern is with the local manufacturers, who tend to produce more for the domestic market only. They have to look at the world as a whole and market the goods and services and to face competition in the global market,” said the Chairman.
“In the manufacturing industries, their investments tend to be very small-scale. They need to know that if they invest in the human resource and production they will be able to access the world market. Once you access the world market, your production capacity will increase to serve more people. Then you are not constrained on local market forces anymore because you can compete worldwide in terms of quality, prices and so on. We have got to move up and invest in IT, automation and our workers,” he said.
MIDA also has a range of incentives for both domestic and foreign investors. Some of the main incentives forcompanies investing in the manufacturing sector are the Pioneer Status, which is an income tax exemptionranging from 70 percent to 100 percent of statutory income for a period of five years to ten years and anInvestment Tax Allowance of 60 percent to 100 percent of qualifying capital expenditure incurred for a period of five to ten years. The allowance can be offset against 70 to 100 percent of statutory income.

Economic Strength

Malaysia is in its’ most radical transformation as it battles to achieve the Vision 2020. The transformation is visible on the political front, the public sector and among Malaysian business entities.

Making Transformation Happen

Malaysia has progressed from an economy dependent on agriculture and primary commodities to a manufacturing-based, export-driven economy spurred on by high technology, knowledge-based and capital-intensive industries. To move the country forward, the Government has crafted a framework comprising four pillars to drive the change.

The New Economic Model (NEM) to be achieved through an Economic Transformation Programme (ETP) constitutes a key pillar which will propel Malaysia to being an advanced nation with inclusiveness and sustainability in line with goals set forth in Vision 2020. The ETP will be driven by eight Strategic Reforms Initiatives (SRIs) which will form the basis of the relevant policy measures.

Three other pillars have been launched over the past year. They are the 1Malaysia, the Government Transformation Programme (GTP) to strengthen public services in the National Key Results Areas (NKRAs) and the 10th Malaysia Plan 2011-2015, the economic blueprint that will set the tone of the whole country development over the next five years. It contains the new policy directions, strategies and programmes all targeted enabling Malaysia to emerge as a developed high-income nation.

Continuous Economic Success

The Government’s initiatives have produced positive results and are reflected in our economic growth figures. In 2010, the Malaysian economy grew 7.2%, compared to a contraction of 1.7% in 2009. Based on current estimates, Bank Negara Malaysia has projected a growth of 5-6% in 2011.

The rollout of projects under the Government’s Economic Transformation Programme (ETP) will continue to drive our economic growth in 2011. These initiatives auger well for the Government’s stated objective of turning Malaysia into a high income nation by the year 2020, with a per capita income of USD15,000 from the present USD8,140.

High Level of Global Integration

The continued recovery and improvement in the global economy has also had a positive effect on Malaysia’s trade performance in 2010. Total trade in 2010 was valued at RM1.169 trillion, an increase of 18.3% from RM988.2 billion in 2009. This was contributed by exports of RM639.4 billion and RM529.2 billion of imports. Export expanded by 15.6% while import rose 21.7% compared with 2009. Malaysia recorded a trade surplus of RM110.23 billion for the year.

For January 2011, Malaysia exports grew by 3% to RM54.04 compared with January 2010 and recorded a trade surplus of RM9.2 billion. This was the 159th consecutive month of surplus since November 1997.

Top 10 Most Competitive Countries in the World

Despite the adversity in economic circumstances, Malaysia for the first time has earned a position among the 10 most competitive countries in the world, according to the 2010 World Competitiveness Yearbook (WCY), published by the Swiss-based Institute for Management Development (IMD).

The country has taken the 10th spot on the Switzerland-based IMD’s World Competitive Yearbook for 2010, up from 18th placing last year. The list measures Malaysia against 58 countries this year, from 57 nations last year.

With an index score of 87,228, Malaysia has joined the ranks of the most competitive countries in the world, sharing the Top 10 ranking with Singapore, Hong Kong, the US, Switzerland, Australia, Sweden, Canada, Taiwan and Norway.

27th Most Networked Economy

Malaysia also is the world’s 27th most networked economy and the highest-ranked nation not to belong to the group of high-income countries. In the Global Information Technology Report 2009-2010, released by the World Economic Forum (WEF), Malaysia is ranked sixth in Asia behind Singapore, Hong Kong, Taiwan, South Korea and Japan.

The report praised Malaysia as it seemed to be clearly leading the way, with outstanding marks for its readiness (11th) and usage (12th).

Economic Growth Corridors

As a testament to the country’s commitment to promoting free trade and business incentives, the government has established five economic growth corridors, to further develop Malaysia.
The five economic growth corridors are:

•Iskandar Malaysia in Southern Johor (IRDA);

•Northern Corridor Economic Region (NCER);

•East Coast Economic Region (ECER);

•Sabah Development Corridor (SDC); and

•Sarawak Corridor of Renewable Energy (SCORE).

Priority will be given to building urban agglomerations, focusing corridors around clusters and developing high economic impact sectors under the 10th Malaysia Plan (10MP) (2011-2015).