News Room - Business/Economics

Posted on 11 Feb 2009

Malaysia's manufacturing sector excelled last year...But 2009 may not be good

Malaysia approved a record RM62.38bil worth of investments in the manufacturing sector last year, up from RM59.9bil in 2007, International Trade and Industry Minister Tan Sri Muhyiddin Yassin said.

He cautioned, however, that a global economic slump posed a challenge this year to attracting investment, especially from foreign investors.

"The scenario for 2009 is not good," he told a news conference at Malaysian Industrial Development Authority's (MIDA) event to announce the performance of the manufacturing and services sectors in 2008.

"I think the real financial meltdown has not melted completely.''

Muhyiddin added Malaysia would target sectors that offer bigger potential for future investment and identify companies that have excess cash to make investments in the country.

He said renewable energy would be a sector to focus on and there were still opportunities to get foreign companies to locate their operations in Malaysia.

The International Monetary Fund had projected worldwide economic growth to slow to 0.5% this year. Most economists believe Malaysia's gross domestic product (GDP) will expand slower than the official 3.5% growth forecast for this year.

The Government is set to announce a second stimulus package, on top of the RM7bil in November. An announcement on electricity tariff cut is expected to be made as early as this week.

For 2008, foreign direct investment (FDI) inflows into the manufacturing sector were the highest recorded to date at RM46.1bil, and marked the fifth consecutive year of increase.

FDI stood at RM33.4bil in 2007.

Australia was the largest source of foreign manufacturing investments with RM13.1bil last year, followed by the US, Japan and Germany.

"The significant increase in investments (in 2008) was due to approvals for several capital-intensive projects,'' Muhyiddin said.

He said the global financial crisis and recession in the US, one of Malaysia's key trading partners, would create tough challenges for Malaysia in sustaining its foreign investment inflows.

The World Bank had estimated foreign investment flows into developing countries to shrink 31% on-year to US$400bil in 2009, he said.

Muhyiddin said given the importance of FDI to Malaysia and the challenging environment, the Government's priority "is to work closely with the private sector to create an operating environment which is conducive and competitive for businesses".

"The Government will step up its efforts to secure jobs through re-training and offer support to industries," he said, adding that it was also committed to strengthening the government machinery to make it more efficient and effective.

Muhyiddin said this strategy would continue to be fine-tuned, whenever necessary, as the country adapted to new developments in the global economy.