Prime Minister Tan Sri Muhyiddin Yassin and his Australian counterpart Scott John Morrison today officiated the Comprehensive Strategic Partnership (CSP) at their first meeting which was held via video conference.

The Prime Minister’s Office, in a statement, said that at the meeting, the two Prime Ministers approved the Action Plan outlining strong initiatives under three key elements of the CSP.

These elements are Economic Wellbeing; Society and Technology; and Regional Defence and Security Cooperation.

“This partnership reflects the high level of commitment of both sides to further expand existing strong ties in various aspects of bilateral and multi-lateral cooperation.

“Apart from strengthening existing cooperation, this CSP also gives an opportunity for Malaysia and Australia to establish collaboration in various new fields, including digital economy; agriculture and food security; disaster management and public health; mental health; science, technology and innovation (STI); environment; and youth empowerment,” the statement said.

On Covid-19, the two leaders agreed that Malaysia and Australia take several effective measures to combat the pandemic and reduce its negative impact.

Among the proposals were to forge cooperation in Covid-19 vaccination programmes, ensure markets remain open and the global supply chain can function well to support economic recovery efforts and livelihoods, and cooperation in cross-border management.

“The announcement of the CSP between Malaysia and Australia today is timely, in line with continued efforts by both countries in facing the increasingly complex and difficult regional and global situations.

“This CSP enables the two countries to explore a new cooperation landscape and move further ahead. Malaysia and Australia are close partners. The two countries had established ties even before Malaysia achieved independence,” it added.

Australia established its High Commission in Kuala Lumpur in 1955 while the then Malaya set up the Federation of Malaya Commission in Canberra in 1956.

In 2015, Putrajaya and Canberra upgraded bilateral relationship to the Strategic Partnership Level.

The two countries also cooperate on various regional and international platforms, including the ASEAN-Australia Dialogue Cooperation, East Asia Summit, Asia-Pacific Economic Cooperation, Pacific Islands Forum, Commonwealth and the United Nations.

Source: Bernama

Malaysia and Australia enhance cooperation with Comprehensive Strategic Partnership

While economic conditions in Malaysia may have recovered from the lows of 2020, business sentiment has remained weak despite the billions of ringgit injected by the government to resuscitate the economy.

The resurgence of Covid-19 cases has, to a large extent, stymied plans by businesses to expand operations and to increase capital investments, due to fears of a total lockdown to combat the deadly virus.

An estimate by the Statistics Department showed that the country’s gross fixed capital formation, which is an indicator of domestic investment performance, has contracted sharply by 15.4% in 2020 following a decline of 2.1% in 2019.

According to RAM Ratings’ Business Confidence Index released on Dec 7,2020, business sentiment domestically will remain bleak for the next three months, with cashflow being a key concern among many businesses.

The reluctance of businesses to invest may hamper Malaysia’s economic recovery.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid expected domestic investment growth to be flattish this year, considering the soft business environment.

“Perhaps to some degree, uncertainty over political dynamics could also contribute to a lacklustre investment scenario, ” he told StarBiz.

However, on the bright side, he said Malaysia’s valuable natural resources, competent labour force, decent infrastructure and a peaceful society would continue to be conducive for investments.

To encourage businesses to invest, Mohd Afzanizam believed the government must continuously relook into investment-related incentives to ensure they remain relevant and suit the needs of industry players.

In addition, the red tape involving multiple government agencies administering investment matters must be minimised so that investors will not be frustrated by bureaucracy.“It’s a question of efficiency and being able to deliver favourable outcomes to the investors’ application for investment, ” he said.

Meanwhile, OCBC Bank economist Wellian Wiranto said tax incentives and other support measures from the government would help to encourage businesses to invest.

However, he pointed out that businesses would undertake new investments even without government incentives, provided the investments are worthwhile in their risk-return consideration.

“Our baseline expectation assumes some recovery in domestic investment activities in 2021 compared with 2020, that would help Malaysia achieve a respectable, but not a roaring, gross domestic product (GDP) growth rate of 5.7%.

“However, for the level of investment to return to 2019 level or beyond, it would require an upside risk scenario such as a faster-than-expected flattening of the pandemic curve, a successful rollout of the vaccination programme, and a lasting resolution of the ongoing climate of political uncertainties.

“In short, a lot of stars have to be aligned for us to see a V-shaped recovery in business investment activities, ” he said in a reply to StarBiz.

Echoing a similar view, MIDF Research economist Mazlina Abdul Rahman said domestic investment activities may not return to levels seen in 2019 or earlier, considering that there are still several downside risks to the economy.

“There could be delay and hiccups in the rollout of vaccines and an enormous spike in Covid-19 cases in the country could worsen the outlook.

“If we look at Malaysia’s capital and intermediate goods imports, they remained largely suppressed with double-digit contraction in latest November 2020’s data, suggesting that businesses are still pessimistic about the future demand for their products, hence are more cautious on any business investment decisions, ” she said.

Despite the soft domestic investment outlook, Mazlina, however, pointed out that business expansion and startups could be more prevalent in sectors that have benefitted from the pandemic such as e-commerce and pharmaceuticals.

Looking ahead, she expected the current low interest rate, which makes borrowings cheaper, to be supportive for new domestic investments, along with tax-related measures.

“The government could target areas or sectors we have an advantage comparatively with other countries and encourage new investments in those segments.

“It can then be easier to market local products internationally besides for domestic use.

“However, in the current situation, these measures may not be a strong drive for overall new investments amid still weak demand conditions on the ground, ” she added.

Source: The Star

Reviving domestic investments

Improving investment climate is key, say economists

PETALING JAYA: The Covid-19 pandemic has caused foreign direct investment (FDI) into Malaysia to plunge and economists feel more has to be done to reverse the trend.

“This is not unexpected and if you compare it with other countries in the region, it is not an isolated trend,” Socio Economic Research Centre’s executive director and senior economist Lee Heng Guie told Starbiz.

Lee said things could be better this year but he felt the government should do more amid the downturn to attract higher FDI inflows.

The United Nations Conference on Trade and Development (UNCTAD) estimated, in its Investment Trends Monitor report yesterday, that FDI into Malaysia dropped by 68% to Us$2.5bil in 2020.

UNCTAD said FDI inflows into the Asean region decreased by 31% to Us$107bil.

It said Vietnam saw inflows falling by 10% to Us$14bil while Singapore’s FDI inflows fell by 37% to Us$58bil and Indonesia’s inflows fell by 24% to Us$18bil.

Malaysia’s decline, according to the report, saw a larger magnitude drop compared with its neighbours.

The decline in FDI into Malaysia is comparable with the decline in FDI flows to developed economies, which declined by 69%, said the report.

According to official government statistics, the first nine months of 2020 had seen net FDI flows declining by 70.5% from Rm26.3bil in 2019 to Rm7.8bil in 2020.

“The official figures for the year 2020 have yet to be released by the government.

“We are looking at a trend where the fall in FDI appears to be larger than our neighbouring countries,” Lee added.

The country can do more to attract FDI flows like what is being done by some neighbouring countries.

“These countries have improved investment climate to facilitate investment into their countries.

“Special incentives can come from lowering taxes or further smoothening all the regulatory actions.

“Case in point is in Indonesia where it has the Omnibus Law, which had helped improve investment climate,” he said.

The government here had also done its best to attract more companies to invest in the country.

Alliance Bank chief economist Manokaran Mottain said, in an earlier report, that the country’s competitiveness has declined over the years, even as regional countries such as Myanmar, Cambodia and Indonesia are becoming more business-friendly.

“While we acknowledge that Malaysia has good rankings in several global indices, the fact is that there are still many areas where the country can improve on to attract foreign investors. The lack of transparency, lengthy process to obtain a business licence and high cost of compliance such as foreign workers levy are among the factors that have affected foreign investors’ interest in Malaysia,” Manokaran was reported as saying.

According to Lee, Malaysia has a lot of catching up to do, noting that investment climate reform should be the aim as it tries to bounce back from the Covid-19 pandemic.

“The government doesn’t only have to look at tax aspects but other factors that would influence whether a company would invest into the country.

“They should ease all the common ‘pain points’ at the regulatory, local government, federal government and local authorities on this matter,” he added.

There had been this long-standing point of political stability which was the country’s main selling-factor.

“However in recent times, this does not appear to be the case. The government needs to provide more stable economic conditions and a good investment climate,” Lee said.

The corporate tax rate in Indonesia is at 22% compared with Malaysia’s 24%, he pointed out..

“By 2022, Indonesia is going to bring this corporate tax rate down further to 20% and this is a commitment from the government there,” he said.

Source: The Star

Doing more to attract FDI flow

As investors are still grappling with economic predicaments caused by the year-long pandemic, think tanks believe that as a clearer picture of the country’s growth emerges, a dramatic return in foreign direct investment (FDI) is in sight, though not equivalent to the pre-pandemic level.

Malaysia is no exception in the battle for funds.

According the United Nations Conference on Trade and Development (UNCTAD), global FDI is set to recover only in 2022. It was projected to decrease by up to 40 per cent in 2020, from its 2019 value of US$1.54 trillion, first time since 2005 the FDI slips below US$1 trillion.

The FDI is projected to decrease by a further five to 10 per cent in 2021.

However, with its competitive edge from best logistics, as well as physical infrastructure facilities, a successful story of industrial zones to abundant skilled labour supply, the situation would soon change, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said.

And this is one of the features that distinguishes Malaysia from other countries in the region.

“But news or developments (of declining investment) of these kinds signal that Malaysia needs to be aware of the needs of investors so that they can continue to invest and grow their business here.

“Hence, issues such as bureaucracy and information sharing on investment incentives and how the government and the authorities can help in their investment in Malaysia need to be improved,” he told Bernama.

Mohd Afzanizam said a strong coordination among ministries and government agencies are needed to facilitate and build a better environment for local and foreign companies to invest in the country.

“Overall, the investment prospects for 2021 are challenging despite the good outlook.

“This is like a more positive external environment after US President Joe Biden announced a US$1.9 trillion economic stimulus package.

“In addition, there is an expectation that the technology sector will record an encouraging performance on the back of global semiconductor sales projected growth of 8.4 per cent this year, China’s gradual economic recovery, and the implementation of global vaccination programme that will facilitate the economic opening process in the future,” he added.

In addition, the low interest rate environment expected in 2021 helps encourage lending and financing activities among entrepreneurs for the purpose of expanding production capacity and productivity.

However, Mohd Afzanizam opined that the COVID-19-led Movement Control Order (MCO 2.0) has somewhat limited business activities which could hamper business expansion efforts, domestically.

Meanwhile, Universiti Malaya senior lecturer Dr Mohammad Tawfik Yaakub believes the government has an advantage in attracting more investment from, among others, Asia-Pacific Economic Cooperation (APEC) and ASEAN economies following their close ties.

“I feel that Malaysia is still a choice location and is able to attract mega investments but not this year, as industry players and international investors are also affected by the contraction of the world economy which warrants them to slow down planning and restructure investment strategies.

“So, the withdrawal of investment if it happens, does not reflect the country’s actual current investment situation,” Mohammad Tawfik, who is from the Faculty of Economics and Administration, said.

He said the government is seen ready to revitalise the FDI via two ministries, namely the Ministry of International Trade and Industry (MITI) (led by Datuk Seri Mohamed Azmin Ali) and that of the Prime Minister’s Department (headed by Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed).

“Certainly, the experience of these two ministers put them in good stead to attract more foreign investors who are just waiting for a signal from the government to start entering Malaysia, especially after the vaccine is obtained and distributed comprehensively,” he said.

Mohammad Tawfik also proposed that the government reduce the current tax tariff or implement any reduction in stages to attract new foreign investors.

“Even incentives to more focused foreign investors such as rental premium rates and strategic locality selection also play a role.

“For example, by further expanding strategic industrial areas such as the Kulim Hi-Tech Park in Kedah where a cargo airport will be developed and will be closer to the Penang Port compared to access to other localities that have only one facility (either airport or port).

“The distance between the port and the proposed Kulim cargo airport is only about 20 minutes away,” he added.

In the nine month of 2020, Malaysia recorded RM109.8 billion worth of approved investments in the manufacturing, services and primary sectors, according to MITI.

The manufacturing sector contributed RM65.3 billion or 59.5 per cent, followed by services (RM42.8 billion or 39.0 per cent) and primary sector (RM1.7 billion or 1.5 per cent).

These investments involved 2,935 projects and will create 64,701 jobs in Malaysia.

Of the total investments approved, the domestic direct investment (DDI) accounted for 61.2 per cent, or RM67.2 billion, while the FDI made up the rest or RM42.6 billion.

The top five sources of approved FDI for the three sectors were China (RM17 billion), Singapore (RM8 billion), the US (RM2.8 billion), Switzerland (RM2.8 billion), and the Netherlands (RM2.4 billion).

Compared to the corresponding period last year, the DDI in the manufacturing sector saw a leap of 45.5 per cent to RM25.9 billion while the value of approved FDI increased by 3.2 per cent to RM39.4 billion.

As for 2021, MITI has identified 23 high-impact projects potentially capable of bringing in investments worth RM75.4 billion into the country.

Source: Bernama

Bank on the competitive edge, up the game plan for FDI, says Economist

Malaysia’s economic growth has shown improvement over the past few months thanks to the government’s stimulus packages, but it does not work on an “off-on” switch basis and will therefore need more time to fully recover from the impact of the Movement Control Order (MCO), said Senior Minister Datuk Seri Mohamed Azmin Ali.

He said the government has taken the initiative to pump in a massive RM320 billion worth of stimulus packages not just to mitigate the adverse economic impact on the rakyat but also to jump-start and revitalise the entire economy.

This helped the economy recover from a deep contraction by 17.1% in the second quarter of 2020 to a decline of 2.7% in the third quarter, said the international trade and industry minister.

“While this definitely manifests the effectiveness of the stimulus packages, it should be borne in mind that it would still take at least another quarter, if not more, before the economy could see actual positive growth. This underscores the fact that despite the best efforts at economic recovery, it would take an extended period of time before the economy can actually pick up to show positive growth after the lifting of the MCO.

“Hence, the notion that the economy can revive instantaneously after a lockdown has been lifted has no real basis. The fact of the matter is that the economy does not run on a ‘switch off-switch on’ mode,” Mohamed Azmin said in a statement on his website titled “Going forward in our approach to overcome the impact of the Covid-19 pandemic”.

The minister noted that today marks one year since the first case of the Covid-19 pandemic was detected in the country.

In the face of seemingly insurmountable challenges, he said Malaysia has been able to remain resilient, thanks to our robust public health system and sound economic fundamentals.

Nevertheless, with the onset of the third wave of the outbreak, the country’s healthcare system has been subjected to even greater pressure, testing its capability and capacity to the limit.

In light of the recently reimposed MCO on Jan 13, which has been extended to Feb 4, Mohamed Azmin said it must be viewed along with other suggestions concerning alternative strategies and options.

For instance, he noted the government could consider tightening the standard operating procedures to prevent outbreaks at ignition sites and introducing clear guidance on geospatial planning such as quantifying indoor settings at any given time.

Additionally, the government could also step up targeted testing as well as regulate the costs of RTK-Antigen test kits to make Covid-19 testing more affordable and on a larger scale, particularly for industries, he said.

“It is important to note that apart from the toll on health and the economy, Covid-19 has a direct impact on the people. One loss in income affects the whole household. In practical terms, the loss of income for one breadwinner may well adversely affect the livelihoods of at least four persons in a family,” he said.

Acknowledging the strong support and collaboration by industry stakeholders and the rakyat towards ensuring economic recovery and sustainability during the pandemic, he added: “Public-Private-Rakyat synergy is an invaluable value proposition for nation building and should be embraced by all.”

Source: The Edge Markets

Azmin: Economy does not run on ‘off-on’ mode, will take time to recover after MCO

Foreign companies that have invested in the country said they remain committed to the country as they value and appreciate the long-term partnership with the Malaysian government and look forward to many more years of success.

On the re-implementation of the Movement Control Order (MCO 2.0) and the emergency proclamation to contain the increasing number of COVID-19 cases, many of the companies said the development had not affected their confidence in investing in the country.

Malaysian-German Chamber of Commerce and Industry chief executive officer Daniel Bernbeck said German investors in Malaysia mostly show a tendency to continue with their pre-existing investment plans as most of these investments are in high technology and have a long planning phase that started two to three years back.

He said the arrangement cannot be suddenly stopped, reversed or changed, and this applies to many big players and multinational companies.

“At the moment, most companies will not make new plans for investment in Malaysia before the MCO or the immediate effects of the pandemic have ended.

“They will most likely wait until the clouds have disappeared,” he told Bernama.

He said the implementation of MCO is quite challenging for the members particularly the small and medium enterprises (SMEs).

“Though the MCO 2.0 was predicted, it took some time for the new standard operating procedures to be ready.

“And we had to wait for the government’s announcement on which companies would be allowed to operate as well as get the rules and regulations translated into English,” he said.

Bernbeck said where the state of emergency is concerned, the main issue is related to the legal protection of assets and property for private companies.

“Securing their investment is very important for the SMEs as they provide high employment by their sheer numbers,” he added.

Meanwhile, German-based medical technology company B. Braun, with its ethos of protecting and improving the health of people, said it would support all efforts by the government to safeguard the health of Malaysians.

“We understand that the recently declared MCO 2.0 and state of emergency are moves by the government to contain and reduce the escalating number of COVID-19 cases in the country,” the company told Bernama.

Established in Penang in 1972, B. Braun Medical Industries is a pioneer foreign investor which has evolved into the nexus for the medical device industry in Malaysia.

Just last year, the company has expanded its portfolio of testing capabilities for healthcare solutions related to intravenous access, surgical technologies, intravenous systems, central venous puncture and pain control in Penang.

To date, B. Braun has made a total investment of over RM4.4 billion, with its production facilities occupying 193,285 square metres, including an acquisition of 45,360 square metres in 2016.

“These investments signify the planned stability and longevity of the company in Malaysia,” it said.

Source: Bernama

Foreign companies remain committed, value long-term partnership with Malaysia

Eurocham Malaysia said it was imperative for the business community to take seriously, the numerous media reports of clusters on COVID-19 infections associated with various factories, construction sites and other places of work.

“More importantly, do their their part, by investing in resources assist in implementing strict SOPs to avoid another full MCO, said its chairman Oliver Roche.

Eurocham Malaysia which has been tasked as the main contact point for the EU-Malaysia business community, has been working very closely with the government especially the Ministry of International Trade and Industry (MITI) from the early stages of the pandemic (2020), to date.

In a note to media today, referencing a communique that had been circulating, the organisation said it was a confidential internal circular sent to all its members, to relay the essence of its recent informal discussion with MITI and the commendable efforts of the Malaysian government in tackling the spread of COVID-19.

“The essence of the informal discussion with MITI was aimed to raise awareness about how the business community can play a role in flattening the COVID-19 curve and the economic repercussions that could follow if we do not play an active role while expecting the government to exhaust its efforts independently.

“In this context, the demanding situation of worker accommodations has been raised many times and was mentioned in our internal circular as crucial contribution in the effort of breaking the chain,” it said.

Eurocham Malaysia said it further wished to clarify that while MITI underscored the heightened sense of urgency that currently prevails, given the rising number of cases, there was no mention of an immediate lockdown after Feb 4, 2021.

“Therefore, we seek for people to remain focused on the bigger picture, in doing their part to ensure that another lockdown is avoided instead.

“In this trying time, we appreciate the strong working relationship with the Malaysian government, in particular MITI, and in our earnest opinion, they have been doing a commendable job in managing the pandemic since 2020,” Roche said.

Eurocham chief executive officer Sven Schneider had previously disclosed that if COVID-19 cases continued to increase, Putrajaya could be expected to declare a complete economic shutdown after Feb 4.

Source: Bernama

Eurocham Malaysia urges business community to avoid lockdown by doing its part