Malaysia State-Linked Firms, Tycoons Pressed to Invest at Home
Malaysia’s government-linked companies and businessmen are being pressed to boost spending at home amid concern that more money is being invested abroad than flowing into the country.
Fresh ideas to stimulate investment may be included in the government’s so-called New Economic Model, International Trade and Industry Minister Mustapa Mohamed said in an interview on Feb. 27. Prime Minister Najib Razak will unveil the strategy in about a month’s time, Mustapa said.
“In the past couple of years there’s been more outflows than inflows,” Mustapa said. “We are going to be more aggressive in promoting our people to invest in Malaysia. We have spoken to our GLCs, for example. They have got some plans, some of which have been presented to the government.”
Malaysia reported a net outflow of 17.8 billion ringgit ($5.3 billion) in direct investment in the six months through September 2009, according to statistics department data. State- linked companies, including oil and gas producer Petroliam Nasional Bhd., mobile-phone operator Axiata Group Bhd. and palm- oil producer Sime Darby Bhd., have invested abroad in recent years to expand their operations.
The cumulative net outflow in investment overseas during the past three years was 40 billion ringgit, the Edge weekly newspaper reported on Feb. 27, citing central bank data. Investments abroad were mainly in oil and gas, financial services, communications and business services, the Edge said.
“There was a phase in Malaysia’s history when we encouraged our companies to move abroad and there was a time when we received a lot of foreign direct investment inflows into the country,” Mustapa said.
Spend at Home
While the government won’t stop companies investing overseas, it will encourage them more “aggressively” to spend at home, Mustapa said. The minister didn’t specify what measures to stimulate domestic investment may be included in the New Economic Model, saying details are being ironed out and discussions are still under way.
Property is one industry where government-linked companies can invest more locally, Mustapa said quick payday loans. “Some of the GLCs have huge land banks,” he said. “So this is time for them to think about putting more money into our system. We have been talking to our GLCs. We have been talking to our own people, our rich entrepreneurs who have done very well.”
Malaysia eased rules governing foreign investors, initial public offerings and property purchases last year, peeling back decades of benefits to the ethnic-Malay majority as the nation slid into its first recession in a decade.
Exports Improve
Overseas companies investing in the Southeast Asian nation and locally listed businesses no longer need to set aside 30 percent of their equity for so-called Bumiputera investors, identified as Malays and some indigenous people. Overseas ownership thresholds in the fund management industry and at local stockbrokers were also raised.
Malaysia emerged from its recession last quarter with gross domestic product rising 4.5 percent from a year earlier. Investment as measured by gross fixed capital formation jumped 8.2 percent, and the construction industry grew 9.2 percent, Malaysia’s central bank said on Feb. 24.
Export data for January, due on March 5, could exceed expectations, Mustapa said, adding that the country has no need for further stimulus. Malaysia unveiled 67 billion ringgit of measures under two packages in 2008 and 2009 to help resuscitate growth.
“What has happened in respect to Malaysia is a global phenomenon,” said Mustapa. “There has been a global contraction of foreign direct investments throughout the world.”
Approved factory investment dropped by about half to 32.6 billion ringgit last year as companies delayed projects during the global economic slump, Mustapa said last month. The government aims to attract domestic investments to account for 60 percent of total investments by 2020 from about 32 percent in 2009, he said Feb. 23.
Filed under: economics by Wolf