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Kuala Lumpur, September 24 – UNDP Malaysia, on behalf of the United Nations Conference on Trade and Development (UNCTAD), hosted the country release of the 2008 World Investment Report (WIR) at Wisma UN today.
The WIR is UNCTAD’s annual survey of global FDI tracking trends and patterns across the world, as well as at the regional and national levels.
This year’s World Investment Report, themed, “Transnational Corporations and the Infrastructure Challenge” takes a special focus on the increasing role of TNCs in the establishment and operation of infrastructure facilities and services and their direct impact on investment.
Speaking at the press briefing this morning, Puan Daratul Baida Osman Khairuddin, Officer-in-Charge, UNDP, said, “The provision of good quality infrastructure is a prerequisite for economic and social development and is considered one of the main preconditions for enabling developing countries to accelerate or sustain the pace of their development and achieve the Millennium Development Goals.”
Presenting the overview of the report was prominent economist, Datuk Zainal Aznam Yusof, who is also member of the Economic Council and distinguished fellow of the Institute of Strategic and International Studies (ISIS) Malaysia.
In 2007, Foreign Direct Investment inflows posted record highs, reaching US$1.8 trillion, up 30% from 2006, bringing the worldwide stock of FDI to $15 trillion.
The 790,000 foreign affiliates of international companies employed nearly 82 million people last year, and sold $31 trillion worth of goods and services.
Developing countries enjoyed a 21% increase in FDI inflows to $500bn, reflecting in many cases booming commodity prices and an improving policy environment. About two-thirds of the increase went to Asia, a quarter to Latin America and the Caribbean, and a tenth to Africa. Record-breaking inflows were recorded by Least Developed Countries ($13bn), CIS ($74bn), and Africa ($53bn).
Zooming in on Malaysia, Datuk Zainal said that the WIR noted that Malaysia’s FDI outflows surged by a sizeable increase of over 80 percent in 2007 to reach US $11 billion (RM38 billion) from US $6 billion (RM21 billion) in 2006.
Meanwhile, the country received US $8. 4 billion (RM29 billion) in FDIs last year, a hike of 38.9 per cent from US $6 billion (RM21 billion) in 2006.
In terms of FDI stock, outward FDI stock spiked by 61.3 per cent to US $58 billion (RM200 billion) in 2007, from US $36 billion (RM124 billion) in 2006. Over the same period, Malaysia recorded a growth of 42.5 per cent in inward stock to US $77 billion (RM266 billion) from US $ 54 billion (RM186 billion.)
According to UNCTAD, Malaysia is emerging as a significant player in terms of its rankings. Last year, the country surpassed Taiwan, becoming sixth among top recipients of FDI inflows for countries in the South, East and South East Asia. Previously, it was ranked seventh. Within ASEAN, Malaysia ranks third, behind Singapore and Thailand.
“Malaysian overseas investment has been rising in recent years and it reflects the international ambitions of our home grown companies, who are investing and engaging in international production for various reasons, including to build or acquire brand names as well as technology, and to harvest natural resources. Government policies have also been supportive of overseas investment.,” Datuk Zainal said.
Datuk Zainal also highlighted that one of the new areas of discussion in the report was the emergence of sovereign wealth funds as direct investors in large transnational mergers and acquisitions, as well as in troubled financial institutions. The other was the growing prominence of multinational companies from developing countries, including as investors in developed economies.
The report ranked Petronas by foreign assets as 56 among the world’s top 100 non financial transnational companies (TNC) and second to Hong Kong’s Hutchison Whampoa Limited in terms foreign assets among 100 top non-financial TNCs from developing countries.
Other Malaysian non financial companies from developing countries that have made the top 100 include YTL Corp(27), Genting(43), Telekom(53), Sime Darby(61)and Maxis (68).
Touching on the role of TNCs in infrastructure development, Datuk Zainal said that UNCTAD analysis reveals that much of the FDI in infrastructure in developing countries comes from companies from other developing countries. These firms now account for 30% of foreign infrastructure commitments in developing countries, and for 40% in least developed countries (LDCs).
Commenting on FDI inflows, Datuk Zainal believes Malaysia’s prospects will continue to look promising albeit at a more moderate level as concerns on the impact of the financial crisis and economic downturn triggered by problems in the sub-prime mortgage market in the United States remain unaddressed.
“According to UNCTAD, there will be a drop, in the percentage of companies planning large increases in investment overseas over the next few years but general improvements in the region’s investment environment will continue to attract investors,” he said.
These include the liberalisation of FDI, strengthened regional economic integration, resilient economic growth and strong industrial development.
“A continuation of progressive liberalization with vigour, especially for services, as well as more efficient admission procedures and attractive investment incentives will augur will for foreign investors, said Datuk Zainal, adding that competition for FDI is expected to intensify.
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