World Economy

Malaysia FDI Rises by 28% in Q1

Malaysia FDI Rises by 28% in Q1Malaysia FDI Rises by 28% in Q1

Malaysia received 28% more foreign direct investments in the first three months this year despite weak global economic conditions, government data showed.

Foreign direct investments amounted to 12.8 billion ringgit ($3.14 billion) between January and March compared with 10 billion ringgit during the same quarter last year, the Malaysian Investment Development Authority said in a statement, Nikkei reported.

Domestic investments, however, plunged 59% year-on-year to 24.5 billion ringgit from 59.8 billion ringgit in a slowing economy where export-reliant factories are struggling with tepid global demand and local consumers grapple with a rising cost of living.

“We expect this year to be another challenging year for the country,” said International Trade and Industry Minister Mustapa Mohamed. “As a diversified economy, we believe we can withstand these challenges and overcome them, especially with the continued inflow of foreign investments into the country.”

Malaysia, which aims to attract investments worth some 148 billion ringgit annually, has been relying on domestic capital to create jobs and support growth in its trade-dependent economy as foreigners increasingly look to set up shop in China and Vietnam where labor cost is cheaper.

Last year, the country secured total investments worth 186.7 billion ringgit, down from 235.9 billion ringgit in 2014, as global economic headwinds, worsened by declines in commodity prices and stronger US dollar, squeezed capital inflow.

Malaysia’s economic expansion pace could decelerate to between 4.0% and 4.5% this year, according to government forecast, compared to 5.0% growth last year and 6.0% growth in 2014. Inflation meanwhile could pick up at between 2.5% and 3.5% in 2016 from 2.1% a year earlier.

In the first quarter, Malaysia recorded investments totaling 37.3 billion ringgit involving 1,271 projects, the recent data showed. The country’s services and manufacturing sectors attracted 74% and 24% of the investments respectively, while the remainder went into the primary sectors, such as oil exploration activities and palm oil plantations.

Oil prices, despite a recent rebound, have more than halved from their peaks in July 2014 prompting global oil majors to shrink their budgets and scale back investments. Malaysia’s national oil-and-gas company Petroliam Nasional, or Petronas, plans to cut its operating and capital expenditure by as much as 50 billion ringgit over the next four years to weather the slump.

Foreign investment in the services sector doubled to seven billion ringgit while domestic investments fell 1.4% in the first quarter. “We are seeing more foreign participation in distributive trade, education services, global establishments, financial services and real estate sub-sectors,” Mustapa said.