Parliament Should Discuss FDI Slide

Khoo Pay Peng

Politicians from both sides of divide should sit back and take note of the of gloomy economic signs. Both sides should cease all unwarranted, wasteful and senseless political bickering and focus their attention on what they were elected to do – govern the govern and come out with policy responses to address the current economic malaise.

The significant FDI slide and negative net flow should be discussed thoroughly in the parliament. We demand these policy makers to take this matter seriously before this country continues with the perpetual slide.

According to this report:

A nosedive in foreign direct investments in Malaysia in 2009 follows a continued downward trend in FDI, increasingly overshadowed by regional players, noted a United Nations report.

According to the World Investment Report 2010, FDI plunged 81 percent from US$7.32 billion (RM23.47 billion*) in 2008 to just US$1.38 billion (RM4.43 billion) in 2009.

(*Calculated based on exchange rate of US$1 = RM3.20650)

The 2009 FDI is less than half of the annual average FDI inflow between 1995 to 2005, which encompasses the long recovery period following the 1997 economic crisis.

Malaysia’s performance also pales in comparison with neighbouring economies like Thailand and Indonesia whose FDI figures did not contract as severely, despite the global financial crisis.

Thailand suffered a decline of US$4.44 billion (RM14.24 billion) while Indonesia saw a more modest drop of US$2.60 billion (RM8.32 billion) in foreign investments in 2009.

The severe dip also places Malaysia in the red for the first time in the last 15 years, with figures for cumulative FDI (see chart right) surpassing incoming investments by about US$1 billion (RM3.21 billion).

The FDI outflow has a serious repercussion on jobs creation, domestic industrial development and broad economic development. If not enough investments are committed domestically, the industrial sectors are going to remain narrow and limited.