More S’pore firms seen investing in M’sia in next 2 years

PETALING JAYA: Malaysia is expected to be among the top destinations for an anticipated increase in investments by Singapore-based companies into Asean countries over the next two years.

A survey commissioned by HSBC found that Malaysia’s growing consumer market and relative ease of doing business were the main drivers for the country’s inbound investment.

HSBC said Malaysia and Indonesia were the top two countries stated by surveyed Singapore-based firms looking to enter or further expand overseas, with 36% of them citing Malaysia.

It said 80% of respondents who planned to invest or expand into Malaysia said it was due to potential customer demand, while 75% said it was the ease of building relationship and another 73% cited the country’s overall investment climate.

The survey by the Singapore Business Federation (SBF) sought the insights of 1,036 Singapore-based companies on their interest in Asean expansion.

Of those surveyed, 86% were SMEs – those with annual turnover of S$100mil or less than 200 workers.

According to the Malaysian Investment Development Authority, Singapore was Malaysia’s third largest source of investment in 2017, after China and Switzerland.

Singapore was also the second largest inbound investor into the Iskandar region between 2006 and 2018 with RM21.5bil, according to the Iskandar Regional Development Authority.

“Malaysia’s manufacturing – while already strong – is now entering the higher-end space of automation and innovation, developing more complex and diverse products.

“So while many corporates may base their treasury and other back-office functions in Singapore, a lot of revenue-making operations are being driven out of Malaysia,” said HSBC Malaysia’s country head of commercial, Andrew Sill in a statement.

This, he said, was only expected to ramp up with Malaysia’s expansion along the supply and value chain.

Another reason more companies are choosing to set up their commercial headquarters in Malaysia, he said, was the affordability factor compared to Singapore.

A cost of living survey published by ECA International ranked Malaysia at the 212th place among the world’s most expensive destinations, compared to Singapore at 24th place.

Sill added that Singapore-based SMEs could make a significant contribution to the Malaysian economy as they looked to expand beyond their domestic markets, and could benefit from the cross-border activity previously seen as the domain of larger corporates.