PETALING JAYA,Feb 17: The government is being seen by investors as one that is clueless and with no plans for the economy, unlike neighbouring nations, says former finance minister Daim Zainuddin.
He said the figures on investment seemed to indicate that investors were not confident that the government knew what it was doing.
“The government does not seem to have a plan. It is as simple as that. No investor will enter a country where they feel incompetence is so glaring.
“If we want to regain our status as a good investment destination, the leaders need to be better and, at the moment, investors do not see that happening. Don’t forget investors have choices. And they vote with their feet,” he told FMT in an email interview.
Daim, who was head of the Council of Eminent Persons set up by Dr Mahathir Mohamad in 2018, was asked to comment on the drastic drop in foreign direct investments (FDI) last year.
The United Nations Conference on Trade and Development (Unctad) said that while the pandemic had sent the inflows of FDI in the region plummeting, the rate of decline in Malaysia was larger compared to Indonesia, Vietnam and Singapore.
Daim said that even before the outbreak of the Covid-19 pandemic, these neighbouring countries had registered far higher inflows of FDI.
“This goes to show that Malaysia’s competitiveness in the investment landscape has fallen behind our regional competitors, who are fast climbing up the ladder of FDI destinations.
“We used to be the destination of choice in this region. If the present economic leaders don’t buck up, I foresee us sliding down even further,” he said.
Daim said while Malaysia’s policy was to focus on quality FDI in terms of capital intensity and high-technology industries, it must continue to enhance the domestic investment climate in all aspects.
Among them are competitive investment incentives, easing business-regulator pain points; competitive regulatory cost; policy clarity and consistency in compliance; and better coordination among the federal, state and local authorities.
He said it was also vital to address the deficit in skilled workers and tackle under-employment, increase technological absorption, and ease investors’ concerns about political stability.
“The recent declaration of a national emergency did not help. To mitigate the negativity surrounding the declaration, the government has to act in a transparent manner so as not to further undermine investors’ sentiment and confidence.
“It should be lifted when it has fulfilled its stated purpose and must not be prolonged. I hope that the new special independent emergency committee will not be a paper tiger,” he said.
Daim said a compelling future growth narrative for Malaysia, with a clear focus, strategy and investment-friendly policies were needed, along with proper execution of these policies.
This, in turn, can help transform and lift the economy. “We need an economic and business system that is open, dynamic, and fosters entrepreneurism. One that is also fair, sustainable and where everyone feels valued.”
He reminded the government that while Malaysia has enjoyed robust growth and progress in previous decades, “what got us here may not get us there”.
With technology evolving rapidly, Covid-19 accelerating the arrival of future trends and fierce competition globally and regionally, it is harder, he said.
“As such, everyone must embrace a positive mindset towards innovation and change to accelerate future growth and progress.”
Daim suggested that the government take several specific steps to overcome the lethargic FDI inflow. Among them are:
- Accelerate Domestic Direct Investment (DDI) as both DDI and FDI are equally important and can have complementary effects if the regulators devise high value creation.
- DDI-FDI linkages, especially with domestic SMEs, the backbone of Malaysia’s industrial base.
- Expedite regulatory reforms.
- Plug major weaknesses in addressing the shortage of skill sets and tackle underemployment.
- Devolve resources with strong political will in constructing and implementing credible economic and industrial development plans.
“More importantly, clear policies and communication are key to safeguarding investors’ confidence. Given that multiple authorities and agencies are involved in economic development, someone must take charge.
“There is a need for effective inter-agency coordination as well as clear messages on domestic policies and procedures as well as the country’s long-term economic plan,” Daim said.
He said this would provide clarity and certainty to the market, and instil public confidence in Malaysia’s macroeconomics and capital market.