Malaysia Should Look at Structural Issues In Attracting FDI Into Malaysia -- Economists
KUALA LUMPUR, Jan 30 (Bernama) -- Malaysia should look at structural issues particularly to improve on the human capital, contribution to the productivity and employment side in attracting foreign direct investment (FDI) into the country.
President of the Malaysian Economic Association, Professor Emeritus Norma Mansor said that despite the global economic uncertainties with the geopolitical tension, Asia is seen as one of the thriving regions, with 70 per cent of global growth.
However, she said the incoming FDI is slowing down for Malaysia as it is receiving less compared to other countries in the region.
“The benefit of FDI is that it brings in technology and knowledge and it would also help Malaysia to join the global supply chain. However in the past years, 80 per cent of jobs created from the FDIs are semi-skilled and lower-end jobs,” she said at the sideline of the 2024 Global Economic and Strategic Outlook Forum (GESOF) here on Tuesday.
GESOF is jointly organised by the KSI Strategic Institute for Asia Pacific, the Economic Club of Kuala Lumpur, and the World Digital Chamber.
She noted that Malaysia’s productivity is also slowing down, hence the need to improve human capital issues.
“The country needs to create more high-value-added jobs as it would also mean high wages. Wages in Malaysia are relatively lower compared to the region such as Vietnam and Thailand especially if you are talking about the middle and high levels of organisations.
“This is also linked to the other aspect of employment which is brain drain,” she said.
The progressive wages, proposed by the government, could contribute towards the increase of wages plus with more of the value-added activities and high-income jobs, she noted.
Hence, the proposal to switch to digitalisation for technology upgrades would support productivity increase and boost the country’s economy, she said.
She also highlighted that having good social security for employment thus increasing the cost of doing business is not a factor that will discourage FDI, contrary to popular belief.
“That is not true because, from a survey among the industries that entered Malaysia, we found that the cost of social security is not a hindrance. In fact, better social security will encourage higher productivity and attract more qualified individuals to join.
“So having an inclusive social protection would support the employment that Malaysians want to have,” she said.
Meanwhile, Ambank (M) Bhd chief economist Firdaos Rosli said the government’s move regarding fiscal policy needs to be crystal clear as investors need to price in changes to gauge the risk to their investments.
Citing the subsidy rationalisation move to be implemented by the government, he said the timeline for the rollout and the mechanism need to be made certain.
Touching on the outlook of Malaysia’s economic growth, he said assuming that the subsidy rationalisation is not having any adverse impact, Ambank is looking at Gross Domestic Product growth of 4.5 per cent for Malaysia this year with the upside potential for trade.
“We expect the export of semiconductors to be more sanguine from the second quarter onward with more tourists arriving from China on the back of a visa-free policy to support the growth,” he said.
In terms of inflation, he noted the bank is looking at three per cent this year, with upside potential due to the subsidy rationalisation.
“On unemployment rate, it will continue to drop to the pre-pandemic level of 3.2 per cent this year, which is a good thing but the wage growth for this year would not be as good as last year following the lower base effect previously,” he said.
On the ringgit, he said the bank expected the currency to strengthen to RM4.50 against the US dollar, banking on the Federal Reserve to make the first rate cut move.
“However, with the US’ current labour market remaining strong, we expect the US interest rates to remain high in the near term,” he added.
-- BERNAMA
