INVESTMENT PROMOTION, STRATEGIES ... - …

1 1 INVESTMENT PROMOTION, STRATEGIES , POLICIES ANDPRACTICES MALAYSIA SEXPERIENCEOECD China Conference on Foreign Investment11 12 September 2000 Xiamen, People s Republic of ChinaByKaziah Abdul KadirDirector, Planning & Research DivisionMalaysian Industrial Development Authority (MIDA) millionLabour millionMalaysian CitizenRacial Composition:MalaysChineseIndianOthersNon -Malaysian Citizen22. 7 millionPopulation329,735 sq kmAreaSource: Department of Statistics, yearsLife Expectancy(Male)(Female) RateSource: Economic Planning Unit, $ billionMerchandise ImportsUS$ billionMerchandise Price GDP GrowthUS$ billionReal GDPS ource: Economic Planning Unit, : Department of Statistics, goods%shareUS$ billionSectorsSource: Department of Statistics, Non-Resource & Based%share1999US$ $ : Department of Statistics, *1997199619951994 Country(US$ billion)* EstimatesSource.

2 World INVESTMENT Report 1999, ,919294 Vietnam19,9788,209 Thailand85,85528,564 Singapore10,1333,268 Philippines1,139173 Myanmar41,00510,318 Malaysia47114 Lao PDR61,11638,883 Indonesia1,065498 Cambodia8830 Brunei19981990 Country(US$ million)Source: ASEAN INVESTMENT Report, : Malaysian Industrial Development Authority (MIDA).012345678919961997199819992000 Domestic InvestmentForeign Direct InvestmentUS$ billion50%50%27%73%51%49%55%45%50%50%(pr ojected)11 Eradicate poverty. Restructuring of society. Establish a more united and justsociety. To be a fully developed nation inall aspects by year A system of free enterprise in almost allsectors of the economy.

3 Government provides the broad thrustsand directions for the whole economythrough the various National Plans. Public and private sector activities arecoordinated and monitored in asystematic manner. Transparent policies, rules and regulation. Restriction on entry and market accessimposed on limited domestic-orientedsectors to ensure the achievements ofsocio-economic Radical INVESTMENT promotion drivestarted in late 60s when the Governmentdecided to promote industrial developmentasameansof accelerating growth and development. diversifying the economy.

4 Generating new employmentopportunities. creating other business in onwards Value-added manufacturing. Widening/broadening industrialbase. Manufacturing Aggressive promotion of FDI in themanufacturing sector. Adopted an open and liberal policy on FDI Up to 100% ownership in projects whichare export-oriented, capital andtechnology intensive. Free repatriation of profits anddividends. Liberal exchange policy. Liberal employment of key expatriates. Allow ownership of industrial andresidential Maximum 30% foreign ownership limitedto the following: paper and plastic packaging.

5 Plastic components. metal stamping, fabrication andelectroplating. wire harness. printing. steel service Oriented Industries/ Activities(cont d) Services Sector: Finance Stockbroking: 49% Insurance: 51% Telecommunication: 61%(within 5 years reducedto 49%). Transportation Shipping:70% Forwarding:49% Wholesale and retail:30% Multimedia Super Corridor (MSC) :100% Mergers and take-overs:on the average 30%Foreign Ownership Allowed18 Attractive package of incentives, both fiscaland non fiscal. Massive Government INVESTMENT indevelopment and provision of Free Zones,Industrial Estate, Ports, Airports, Highways,Energy and other facilities.

6 Privatisation of some public enterprises toreduce Government s financial burden and tostimulate domestic Introduced in 1983. Guided by the Privatisation Masterplan. As at 1999 a total of 457 projectshave been privatised with a total cost ofUS$ billion. Major projects privatised: Construction/infrastructure. Government services. Finance. Electricity, gas & Sale of Assets Build-Operate-Transfer Build-Operate-Own Corporatisation Build-Transfer Management Contract Sale of Equity Lease of Assets21 The Cabinet (meets weekly). 23 Ministries assisted by key Agencies/Departments.

7 The Ministry of International Trade and Industry isassisted by its agencies:- Malaysian Industrial Development Authority(MIDA) - A one stop INVESTMENT promotion agency. Malaysian External Trade Development Corporation(MATRADE) - Export promotion . Small and Medium Industries DevelopmentCorporation (SMIDEC) - SMI development. Malaysian Technology Development Corporation(MTDC) - Technology Established in 1967. The principal Government Agencyresponsible for the promotion andcoordination of industrial development inthe country. Principle Activities:- promotion of FDI and Domestic INVESTMENT (15 overseas centres and 10 state offices).

8 Evaluation of applications for manufacturinglicences, incentives, duty exemptions,technical agreements and expatriate position. Industrial Ministry of Human Resource Immigration Department Royal Customs and Excise Department Department of Occupational Safety andHealth Department of Environment Ministry of Finance Telekom Malaysia Berhad Tenaga Nasional Berhad24 Regular INVESTMENT missions tocapital exporting countries USA,Europe, Japan, South Korea, Japan. Frequent domestic investmentseminars/workshop. Publication and dissemination ofpromotional Regular consultation with the privatesector as inputs to National Plans and AnnualBudgets.

9 As feedback on current governmentpolicies, rules and regulations. Regular reviews of policies, incentivesand procedures to improve Malaysia sinvestment 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000*Growth Rates (%)Rates (%)Year*estimate27 Crisis periods-Mid 80 s-1997-1998 Mid 80 s - The world recession impactedprices of Malaysia s - reduction in Government srevenue and contraction of the economy. Corrective measures: reduced government expenditure. stepped-up privatisation programmes. adopted more growth STRATEGIES throughopening up of the manufacturing The 1997 financial crisis: - contagioneffect of the devaluation of the ThaiBhat plus speculative attacks on otherregional currencies.

10 Consequences: short term capital flight. depreciation of Ringgit. contraction of the economy. decline in private INVESTMENT . crisis of Corrective Measures:- Establishment of the NationalEconomic Action Council (NEAC). Introduction of short-medium termrecovery measures through theNational Economic Recovery Plan(NERP). Major measures implemented: selective exchange controls. injection of public funds tofinance infrastructure encourage FDIs through furtheropening up of the manufacturingand selected service sectors. set up special mechanism toundertake management,recapitalisation andconsolidation of the affectedfinancial and corporate sectors.