A TOP Japanese surgical-instrument maker and a Chinese glass-product manufacturer are two of the notable companies in the surge of foreign investments that came into Malaysia last year, which nearly doubled the amount in 2017.

Pentax Medical of Japan and Jinjing Technologies of China are part of the RM80.5 billion in foreign direct investment (FDI) last year, said the government, a 48% increase from RM54.4 billion in 2017.

Also setting up shop is US-based Smart Modular Technologies, a maker of computer memory chips, for a base to manage its global supply chain.  

Putrajaya has trumpeted the increased FDI, particularly in the manufacturing sector, as proof that investors are still confident in Malaysia despite critics claiming otherwise.

However, according to data, direct domestic investment (DDI) in the economy fell by 17.1% in 2018 to RM121.2 billion from RM146.2 billion in 2017.

Overall, approved investments for 2018 from both domestic and foreign sources totalled RM201.7 billion up from RM200.6 billion in 2017.

About RM115.6 billion of the investments came between July and December, when the new Pakatan Harapan administration began announcing its major policy thrusts, including the mid-term review of the 11th Malaysia Plan.

According to data from the International Trade and Industry Ministry (Miti) and the Malaysian Investment Development Authority (Mida), these investments will create more than 129,000 jobs in 4,667 projects.

The biggest FDI recipient was the manufacturing sector, which recorded a 37.2% increase in 2018 compared with 2017. More than 59,000 jobs are expected to be created in the sector from these investments, a 5% increase from 2017.

In its Malaysian Investment Performance Report 2018, Mida said the country is one of a few which have benefitted from the ongoing trade war between the United States and China.

“The trade war has opened doors for Malaysian manufacturers to potentially capitalise on, becoming alternative suppliers of substitute goods for both parties involved,” the report said.

“As foreign investors look for greener pastures to flee trade tariffs and tensions, Malaysia’s solid economic standing, wide trading networks, and diversified sectors could prove attractive to those seeking to steer their way around the disruption, search for new opportunities and open up alternative markets.”

Manufacturing star

China contributed almost a quarter or RM19.7 billion of the RM80.5 billion coming into the country in 2018.

Jinjing Technology, which will build a plant in the Kulim Hi-Tech Park, is one of those Chinese companies highlighted by International Trade and Industry Minister Darell Leiking.  

“The company will contribute to the development of the solar and glass ecosystems in Malaysia and provide 855 job opportunities to locals with salaries of between RM3,000 and RM10,000 a month,” Leiking had said when unveiling the Mida report.

Indonesia was the second highest source of FDI at RM9 billion followed by the Netherlands at RM8.3 billion, Japan (RM4.1 billion) and the United States (RM3.2 billion).     

More than one third (32.9%) of the new investments in the manufacturing sector is going to the petroleum and petrochemicals industry, followed by basic metals products at 13.1% and electrical and electronic goods at 8.5%.

“A notable project in this industry is Sarawak Petchem, which is part of the Sarawak government’s initiative to develop Bintulu as a petrochemical hub,” said Leiking.  

“This is in addition to investments by Pengerang Energy Complex and Petronas Chemicals Isononanol in Johor.”

The number of capital intensive projects also went up by 43.2% in line with the government’s aim to move the sector up the value chain to create more high-skilled and better paying jobs for Malaysians, Leiking said.  

Economic cornerstone

Although the manufacturing sector was the star performer in attracting FDI, the services sector continued to be the cornerstone of the economy, according to Mida.

A key highlight in the sector is that Malaysia continues to attract multinational companies to set up their global and regional bases in the country, Mida said.  

These include companies such as Smart Modular Technologies, Frencken Group, Onwards Media Group (OMG) and Jobstreet.

“Smart Modular Technologies, for example, has made Malaysia its base to undertake supply chain management from third-party suppliers to third-party customers,” said Leiking.  

“This translates to employment opportunities for 90 Malaysians. The company will utilise big data, cloud computing and real-time analytics technology to manage its global supply chain, which will involve more than one million components, 220 suppliers and network companies in 1,000 locations.”

Overall, the services sector attracted RM103.4 billion in investments, a fall of 17% from RM124.5 billion in 2017.

In an almost opposite picture from the manufacturing sector, FDI for the services sector fell by close to half or 42.2% in 2018. The sector attracted RM16.5 billion in FDI in 2018 compared with RM28.5 billion in 2017.  

However, domestic investment in the sector was still strong at RM86.9 billion in 2018 compared with RM96 billion in 2017.

These investments are expected to create more than 68,800 jobs, down 16.2% from 82,150 in 2017.

Almost half or 47.9% of these investments is expected to go to the real estate and property industry, followed by utilities (9.8%) and financial services (9.7%). – March 20, 2019.