MALAYSIA must speed up its reforms and competitiveness to avoid being left behind in Asean in terms of investments, said the Socio-Economic Research Centre (SERC).

SERC executive director Lee Heng Guie said today: “2021 is a redefining year for Malaysia where it has to make bold and decisive reforms to improve its economic resilience.”

Although Malaysia is still ahead of its main Asean rivals – Indonesia, Thailand and Vietnam – they are catching up fast, said Lee.

“Singapore aside, Malaysia has fallen two spots in the global competitiveness index (27th), political stability index (89th) and global opportunity index weighted rank (30th).

“And on the investment freedom index (IFI), Malaysia has stagnated at 60 while the Philippines has caught up to 60, Thailand (55), Indonesia (50) and Vietnam (40).”

A higher score on the IFI means fewer restrictions on investment flow. Singapore has the highest in Asean at 85.

On the trade freedom scores, Thailand (83) has overtaken Malaysia (82) with the Philippines closing in at 82, Indonesia (81) and Vietnam (80), said Lee. 

A higher score on the trade freedom index means fewer tariff barriers.

“And in the broadband speediest index, Singapore and Thailand have much higher fixed broadband speeds of 241.1 and 213.1 respectively while Malaysia is at 91.4,” said Lee.

Improvements by other Asean countries resulted in much of the FDI flowing to them instead of Malaysia, he said.

“From 2016-2019 for instance, Indonesia and Vietnam received 8.9% and 8.1% 4-year CAGR compared to Malaysia which declined 6.7%.”

This is reflected in the domestic direct investments (DDI) and foreign direct investments (FDI), which are expected to shrink in 2020.

“The approved DDI has been generally on a downward trend from 20.7% (2011-2015 CAGR) to -4.9% (2016-2019 CAGR).

“To improve investments, the government has to speed up the reforms as private-sector-led growth is contingent on government stability, transparency and good regulatory practices.

“The government also needs to minimise the day-to-day uncertainties and unclear guidelines and rules pertaining to businesses,” said Lee.

Among some of the common grouses for investors include delays in approvals, lack of transparency in the approval process, inconsistency and complexity, said Lee. – February 4, 2021.