‘FDI flows into manufacturing to remain subdued’

PETALING JAYA: Foreign direct investment (FDI) flows into manufacturing will remain subdued in 2018 due to the increasing focus on quality investments in the targeted ecosystems, which should yield positive impact on the domestic economy, according to AmBank Research.

“Thus, we expect the strategy to zoom in on developing and enhancing local supply chains to support multinational companies. On the services side, we believe the main drivers will be on global establishments, healthcare, education and hospitality,” it said in a note yesterday.

Total FDIs slipped 12.7% year-onyear to RM41 billion last year from RM47 billion in 2016 due to slower growth in investments from the manufacturing and construction sectors.

Investments in both manufacturing and services weakened, with FDI flows into manufacturing tumbling by 46.9% to RM6.4 billion from RM12.1 billion in 2016 in tandem with a drop in the total number of projects to 687 from 733 in 2016.

For services, it slipped by 17.4% to RM19.8 billion from RM23.9 billion in 2016 dragged by the real estate.

AmBank Research said despite the current volatility on the global front driven by noises like the risk of emerging market debt crisis, trade war and currency war, Malaysia is off to a good start in 2018 given that a total of 402 projects have been recorded as of May this year with a proposed investment sum of RM75 billion.

On an annualised basis, it said Malaysia could reach around RM180 billion in proposed investment this year, supported by healthy global gross domestic product of 3.6% in 2018 coupled with favourable world trade projected around 4% to 4.4%.

In addition, the research house said, Malaysia’s focus to become a leading food and beverage exporter through FDIs could also drive investments, as such focus would attract established brands with the right support for local companies in meeting global standards.

Last year, the total approved investments clocked in at RM197.1 billion, a decline of 7.4% from RM212.9 billion in 2016, due to lower investment in the services sector which fell by 17.2%.

Foreign investments approved by the Malaysian Investment Development Authority last year slid RM5.9 billion to RM21.5 billion.

AmBank Research said the ratio of domestic investment to total approved investment remained healthy at 72.2% in 2017, with RM142.4 billion generated domestically, while the balance of RM54.7 billion came from foreign investors.

“We found China, Singapore, the UK, Japan, Germany, South Korea, and the Netherlands jointly accounted for 61.5% of total foreign investments in three core areas including manufacturing, services and primary sectors,” it added.