Growth in private investments drops sharply in 2018 from year before

SERC executive director Lee Heng Guie (centre).

KUALA LUMPUR: A research think tank has urged Putrajaya to come up with a holistic plan to revitalise private investments in the wake of a decline in this sector in recent years.

The Socio-Economic Research Centre (SERC) said the ratio of private investment to Malaysia’s gross domestic product (GDP) had rebounded after the Asian financial crisis from an average of 11.2% (2001-2010) to 16.1% (2011-2018).

But the think tank said the growth of private investments has been moderating from 13.6% per annum in 2011-2014 to 6.1% per annum in 2015-2018.

“It pulled back sharply from 4.5% in 2018 from 9.3% in 2017,” said SERC executive director Lee Heng Guie, adding that the figures were based on actual domestic direct investments (DDI) and foreign direct investments (FDI).

The average growth rate of private investments from 2001 to 2017 was 10.5%.

Lee said there were external and domestic factors behind the slower growth of private investments and the sharp drop in growth rates recorded last year.

Externally, he said, investors were concerned over the US-China trade war and uncertainties over the US Federal Reserve interest rate hikes, while domestically, there is caution over the policy direction after the change of government last year.

Lee called for a national investment strategy plan to examine external and domestic factors that could affect investors’ decisions.

He cited as example a lack of clarity on foreign worker recruitment.

“Yes, we want to reduce the dependency on foreign workers but we also need to look at the concerns of manufacturers while trying to reduce the dependency.

“In the short term, we must be able to fulfil the needs of the businesses or it will affect their operations.”

He said the government must be a good facilitator so that the private sector can operate in a more conducive business environment, including sound and transparent regulatory and competition policies as well as an efficient tax system.

But he said the private sector should avoid being overly cautious.

“The new government says it needs three years to make Malaysia’s economy healthy again so the private sector must fill this void or else the overall economy will be dragged down.”

Lee said a survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) found that while businesses were cautious over their prospects in the first half of this year, they were more positive in the second half of 2019 and 2020.