Wednesday, July 1, 2009

Liberalization of Investment Policy

The announcement on liberalization of investment policy made by PM Najib came at the right time. This will improve the current economic situation and to attract more local and foreign investors to Malaysia.

According to a Bernama report, the Ministry of International Trade and Industry has announced an increase of 53.4% growth in FDI in 2008 with an amount of US$12.9 billion (RM46 billion) as compared to US$8.4 billion (RM30billion) in 2007. Although there is tremendous increase of FDI is 2008, the United Nations Conference on Trade and Development (UNCTAD) predicts that there will be a further drop in FDI in year 2009 due to the current global financial crisis. With this in mind, we cannot dwell on our past achievements.

Malaysia can no longer depend on foreign workers as cheap labour. We cannot continue to depend on the export of oil as the main source of the nation’s revenue. We have to move up the value added chain, then only can we achieve a high income economic model and a respectable economic growth of a minimum growth of 6% annually.

Based on the current economic situation, there is intense competition in attracting FDI. The current economic slowdown will push foreign investors to seek for lower production and investment costs. According to UNCTAD World Investment Prospects Survey 2007 - 2009, there are three main motives for companies to internationalize their production: market seeking, resource seeking and efficiency seeking. The major factor that affects foreign investors' decision to invest in other countries, however depends on the size of the local market, meaning large economies such as China and the United States are the most popular markets for investments. Therefore, China who is a rising star in the global economy will likely to benefit from FDI. Last year, China recorded a 10.6% increase in FDI. We have to ensure that we are still in the race to compete with huge potential market like China.

Since the 30% bumiputra quota requirement for companies seeking to be public listed on Bursa Saham Malaysia is now scrapped, it is hoped that this policy will be able to attract both local and foreign companies to seek listing in Bursa Malaysia. Lets hope it will put Bursa Malaysia on the radar screen of the international investment community. Through an open, pro-business and stable and predictable investment climate, we hope to promote a more vibrant stock exchange.

Meanwhile, PM Najib has also announced that the Foreign Investment Committee (FIC) is 'no longer exist' because it did not serve its purpose well. The FIC was first established to monitor the 30% ownership rule in Malaysia but it did not manage to sustain the RM54bil in shares allocated to bumiputra. There are only RM2bilion of shares left in the hands of bumiputra. The government should look at economic participation by the bumiputra rather than just the equity participation. The government should not micro-manage the economy. It should look at the economic participation of the bumiputra at the macro level.

It is time that the government also look at the Government Linked Company (GLC). Only a few GLCs can compete at the international level. Within the country, it only serves to compete with locally incorporated companies, including bumiputras. The government has set KPI for the GLC and it is time to open up the GLC so that it will attract talented people of all races, including overseas talent.

The government needs to monitor all the new measures as announced be implemented according to the books. Often, it’s the deviation of implementation by the ‘Little Napoleons and Little Josephines’ that the rakyat is upset with the government. Hence, there is a need for a new KPI whether these policies are implemented accordingly.

PM Najib’s announcement proves that he’s committed to change and reform the government. He has to walk the talk. Then only people have confidence in the new administration. Lets hope these policies changes is just the beginning of many more good policies to come that will bring benefit to all races. Then only can we achieve a ‘Satu Malaysia’ where no race is denied of his constitutional rights to enjoy the fruits of the nation’s development.











1 comment:

Tuanku said...

Dear Dr Chua,

The Liberalization of Investment Policy announced at Invest Malaysia 2009 is indeed good for the long term economy and financial prospect in Malaysia.

Do UMNO goons are ready to accept such liberalization of their huge interests in NEP wealth to allow other races and foreigners to take over the billion assets and equities participation in Malaysia ? Many foreigners and Malaysians are still doubtful and worried the hidden agendas behind on such liberalization objectives.

Yes, many foriegn investors still believe such liberalization is just a short term carrot to mitigate and improve the situation to stop the high decline of foreign investments in Malaysia.

Analysts, fund managers and foreign investors are still analysing, reading, looking and reviewing many factors beside the liberalization of investment policy in Malaysia.

Five major general factors to be considered by all investors from local and overseas are as follows:-

(a) People constitution rights are rampas away by BN goons in power grab in Perak. Similar, many potential Chinese investors are withdrawing their interests to invest billions in Perak when PR lost their power. BN leaders set a bad example of grabing power from a legitimate state govt voted by Perakians. Hence, foreign investors worried about their rights of their billion investments in Perak and Malaysia should similar "rampasan harta" by UMNO in future.

(b) High crime rate, red tapes, corruptions, poor governance, political instability , injustice and abuse of power deter foreign investors and rich people to park their billions in Malaysia.

(c) The NEP policy remained and the marginalisation and discrimination policies against other minority races. Brain drain in workforce, lack of professionals, poor education system and social problems are several negative investment risks to be studied by many rich investors.

(d) UMNO leaders are still arrogant and big bully against other component parties. The weaknesses and internal conflict in MCA, Gerakan and MIC caused lack of confidence in foreign investors to trust BN leaders now.

(e) The internal conflict in PR state govt and PAS dominance of PR political games. The marginalisation and discrimination against Penangites by BN federal govt also major concern of many investors in Penang.

Last but not least, PM Najib and BN leaders must resolve the five major problems stated above before foreign investors really "DARE" to continue investing their billion USD in Malaysia. Otherwise, the Liberalization of investment policy is irrelevant to many foreign investors when the five main issues deter them away.

A recent short interviewed with my bizfriend, a Middle East investor is withdrawing his million petrol dollars in JB and transfer to Singapore and Brunei. This because he worried about the five major risk factors. He is very doubtful about the transparent issue on the liberalization of investment policy and he dont expect to get free lunch from greedy and corrupted UMNO dominance party.
I have "no positive word" to convince him to change his mind.

Whay say you - Dato'?

Thanks for your publication of this feedback in your good blog.

Best regards,

Tuanku Perakian.

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