Driven by FDI Increase of 249.4% in the Manufacturing Sector
Approved foreign direct investments (FDI) increased by 109.7% to RM64.1 billion in January-September 2018 from RM30.5 billion in the same period last year. This was mainly driven by the manufacturing sector which recorded a strong increase of 249.4% in January-September 2018. Approved FDI in the primary sector also rose by 99.3%. This indicates that investor confidence in Malaysia remains high despite the challenging global economic environment. Meanwhile, domestic investments led with RM75.2 billion, contributing 54% to the total approved investments in all three sectors.
Manufacturing Sector Malaysia continues to be a competitive location for manufacturing projects. A total of 468 projects worth RM59.1 billion were approved in January-September 2018 compared with RM34.6 billion in 463 projects in the corresponding period of 2017, representing an increase of 70.5% in capital investments.
Foreign investments approved in the manufacturing sector recorded a total of RM48.8 billion for January-September 2018, a rise of 249.4% from RM13.9 billion in the same period last year. China accounted for RM15.6 billion or 32% of total foreign investments, followed by Indonesia (18.4%), the Netherlands (17%), US (6.3%), Korea (4.9%) and Japan (4.3%).
Notable investments include a new manufacturing project from Leaf Malaysia OpCo, a US based company that will be setting up a facility in Johor to convert plant-based biomass into fermentable sugars. “The first plant is expected to begin operations in 2021 and will create 60 job opportunities for highly skilled local workforce. Our 2G biomass products have a wide range of applications for domestic and export markets, including energy, fuels, bio-plastics and high value specialty chemicals. We have also identified a strategic local partner for our Johor BioHub operations,” said Leaf Malaysia’s Managing Director, Jason Jones.
Another quality project is an expansion by STMicroelectronics, a global semiconductor MNC which has been in Malaysia since four decades ago. Its Malaysian plant is a key manufacturing facility for STMicroelectronics’ global assembly and test manufacturing. It is also the centre of excellence for development and manufacturing of automotive semiconductors. Approximately 70% of the semiconductors produced in this plant are dedicated to the automotive sector.
Malaysia has huge potentials to collaborate with these foreign companies and benefit from the transfer of knowledge and expertise across many industries. As the principal investment promotion agency of the country, MIDA continues to encourage local sourcing by foreign companies. Through the outsourcing of manufacturing, FDI has been driving technology by nurturing Malaysian companies to become global champions. For example, domestic industry players Vitrox, Pentamaster and Walta have established a one-stop metal component supply chain hub initiative known as the Penang Automation Cluster (PAC). The group leverages on the capabilities of human resources and availability of technical and vocational education in the country, which provides technical skills training to meet the demands of high precision and high quality metal fabrication parts and modules by multinational companies and large local companies.
“Our new investment will focus on building and managing the local supply chain ecosystem of advanced and precision engineering of metal fabrication. This will improve cost competitiveness through local sourcing of high precision parts and produce competitive products for the international market. Besides, with the adoption of Industrial 4.0 world class smart manufacturing in PAC, we will further attract high impact FDI and create job opportunities in the region. PAC will be the showcase of a successful model in stimulating more SME clustering concepts to support nation building,” said Mr Chu Jenn Weng, Director of PAC.
Under the 11th Malaysia Plan Mid-Term Review, the targeted catalytic and high potential growth subsectors namely electrical and electronics, chemicals and chemical products, machinery and equipment, medical devices and aerospace, continue to be emphasised. These industries contributed 31.5% (RM18.6 billion) to the total approved investments in the manufacturing sector. Other industries which recorded increased investments are petroleum products (including petrochemicals); basic metal products; paper, printing and publishing; rubber products; machinery and equipment; and transport equipment. These six industries constituted 63.5% (RM37.5 billion) of total investments approved during this period.
Investors have responded positively to the Government’s initiatives towards attracting investments in capital-intensive, high-value added and high technology projects. This is reflected in the increase of the capital investment per employee (CIPE) ratio to RM1,439,583 in the first nine months of 2018 from RM1,062,113 during the same period of this year.
The approved manufacturing projects will create 41,033 job opportunities. The jobs created include 775 electrical and electronics engineers, 867 mechanical engineers and 142 chemical engineers. In addition, the approved manufacturing projects will also require about 5,628 skilled craftsmen such as plant maintenance supervisors, tools and die makers, machinists, IT personnel, quality controllers, electricians and welders.
Services Sector For the period of January-September 2018, approved investments in the services sector amounted to RM69.9 billion compared with RM74.2 billion recorded in the corresponding period of 2017. These investments were from a total of 2,721 projects and are expected to create 50,896 job opportunities. Domestic investments made up the largest portion, recording RM60.4 billion or 86.4% of the total approved investments for the services sector during this period. The rest or RM9.5 billion were from foreign sources. The services subsectors that showed an increase in approved investments were healthcare, education, global establishments, real estate and supporting services.
The approved investments for the supporting services sub-sector recorded a rise of 24.8% to RM4.8 billion in the first nine months of this year from RM3.9 billion in the corresponding period last year. The bulk of the approved investments were from green technology activities with investments of RM2.7 billion, whereby 96.8% were from domestic investments. These activities were led by energy generation projects with approved investments of RM2.4 billion, followed by energy conservation (RM120.1 million), green services (RM91.7 million), green building (RM23.8 million) and waste management projects (RM16 million).
A notable energy generation project that was approved during this period is an expansion project by Tadau Energy. According to its Managing Director, Ms Susanna Lim,“Our base in Kudat, Sabah is an ideal location for a solar power plant as the northern Sabah district has clear and unpolluted skies, and gets a large amount of direct sunlight. The development of this project has the greatest potential for Malaysia especially Sabah to transition to clean energy as it will save the environment from approximately 50,000 metric tonnes of carbon dioxide (CO2) emission and can power more than 30,000 homes annually. Overall, the company has created more than 200 job opportunities for the local community.”
Approved investments for global establishments also saw an increase of 95.7% during the first nine months of 2018. MIDA approved 149 projects proposing to make Malaysia their Principal Hubs, Regional Offices or Representative Offices. Investments in these projects amounted to RM4.1 billion, with significant spin-off effects on the economy. These activities are expected to create job opportunities for 1,598 knowledge-based or highly technical-skilled workers, as well as positioning Malaysia on course for greater integration into the global supply chains/global value chains.
Out of the total, MIDA has approved four Principal Hubs with investments worth RM3.8 billion. Among them is a business venture by Jobstreet.com, a leading online employment marketplace in Asia. “After having merged with a Hong Kong based company in 2014, Jobstreet had an important task to decide where to locate the Principal Hub of the newly created venture. Malaysia was chosen because it is strategically located in the region, enjoys strong government support in the technology industry as well as the availability of incentive to help businesses like JobStreet. Our investment in Malaysia will also bring tangible benefits to the country, through the creation of employment especially in high value and managerial positions and, our capital and operational spending will allow us to contribute back to the economy,” said Mr Jakson Peters, the company’s Chief Financial Officer.
Primary Sector In January – September 2018, the primary sector attracted investments worth RM10.3 billion or 7.4% of total approved investments in this period. This sector comprises three main sub-sectors namely agriculture, mining and, plantation and commodities. Investments by foreign sources totalled RM5.8 billion (56.3%) while domestic investments contributed RM4.5 billion (43.7%). The mining sub-sector took the lead with approved investments of RM9.7 billion in 22 projects, followed by the plantation and commodities sub-sector with investments of RM501.5 million, and the agriculture sub-sector making up the rest of approved investments.
