What new initiatives is MIDA currently involved in?
MAHMUD: We have been in this business for the last 45 years and the industrial development of the country has moved from strength to strength. So we are actually focusing more on high value activities and the knowledge-based economy, encouraging companies to look at new technologies, and in new growth areas. To name a few, we are actually promoting medical devices on the manufacturing front, life science related activities, aerospace, advanced materials, and also advanced chemicals and electronics. So those are the few areas in the manufacturing arena, not to forget the renewables, from equipment to services.
Talking about services, we are aligned to the new key economic areas, and a new economic model. On the services that we are promoting, from tourism related to specialized services, to aerospace and engineering services, and also using Malaysia as the hub to service customers in the region. There are a great deal of developments taking place in ASEAN and in Malaysia after our engagement in regional FTAs. So that framework has been laid down with many countries. International companies should look at this as the advantage for their operation in Malaysia or from Malaysia, even leveraging on the strength of Malaysia in Islamic financing in raising funds and also bonds, using Islamic financing to finance their projects and customers in other countries.
So those are the activities. But the R&D spending among companies, we want companies to spend more on R&D activities, to bring up the innovation culture. It is not that we have not been spending, but we have not been spending enough. So we are accelerating that and encouraging foreign investors to use Malaysia as their R&D location, to improve products and processes and make better products from Malaysia.
Where do FDI levels stand today?
MAHMUD: The last few years we have seen an increasing trend. If you look at the BoP figures, we achieved about MYR38bn ($12bn) last year and that was compared to MYR32bn ($10.1bn) in 2012. So that is around the highest we have achieved so far. This signifies a vote of confidence in terms of foreign investment coming into Malaysia, and you can see that in terms of our third party ranking at the World Bank and IMF, the rankings have improved. Even the latest one, the Ease of Doing Business, has reached to number 6. Overall, the IMF and also the World Bank rankings and other independent rankings have improved tremendously. So all of these do not happen if the enabling environment is not good in Malaysia. In fact, the enabling environment has been improving since the government has introduced different initiatives.
For example, the special committee on the ease of doing business called PEMUDAH. Literally, PEMUDAH means the ease of doing things or the ease of doing business. So a lot of red tape, regulations and processes, business processes, and re-engineering has been introduced. This translates into the ease of doing business in Malaysia getting much better.
So that is the trend of foreign investment in the last year. MYR38bn ($12bn) is among the highest that we have achieved so far. In terms of leading indicators, those figures approved by MIDA in 2013, the approved figures total, including domestic, is MYR216bn ($68.5bn). We were also surprised by that much of a leap and bound that came into the economy. So we are hoping this year, 2014, it will be another successful year because the approved figures, it is a leading indicator that will show the following year's investment will be very encouraging.
What nations are the biggest foreign direct investors into Malaysia?
MAHMUD: We still have a strong top five: European, American, Japanese and also to a certain extent, Korea and Singapore. So these have been our traditional top five investors. Germany, they take turns depending on the industry, but of late, some investments are also coming from China, because China has switched to a stage where their companies are going abroad to invest in areas of their interest.
Of course, Malaysia would like to be part of the benefits, and enjoy the benefits of this outflow from China. If you remember during the WEF, the Prime Minister of China announced that about $500bn is coming out of China to go to various locations around the world, for strategic reasons. Of course, Malaysia also wants to be the beneficiary, but of course investment from China may not all be relevant for Malaysia, but we will be looking at what will complement Malaysia. For example, the regional headquarters, the services, distribution, and certain parts of technology that the Chinese actually have some edge in this market, and in the regional market.
Manufacturing is still the backbone of Malaysia.
Investment from other regions keeps coming and increasing, including new areas like the Middle East. There has been some interest from the Middle East as well. So of course the Middle East will be investing in areas where they are competent, they are investing in Malaysia and other regional markets as well.
What investment opportunities are you actively promoting?
MAHMUD: Manufacturing is still the backbone of Malaysia. Of course, when you talk about manufacturing, you need to have technology and capital. So that is why the main capital exporting countries with technology will still be coming to Malaysia and leveraging on the infrastructure that has been developed over the years, not only physical but aslo the human capital, the ability of Malaysians to manage the operations to serve international customers. So I think we still see that all these will keep coming and developing, and leveraging existing strengths. The government is also putting in the right policies and measures to move up the value chain, not only for manufacturing, but also for services, and to create more pools of people capable of operating in higher knowledge-based activities.
What is MIDA’s role in the Economic Transformation Programme (ETP)?
MAHMUD: The ETP is only part of the whole ballgame, if I can call it that. The economic transformation is in those 12 sectors that the government is giving additional support. But the non-ETP is also important and that needs attention. So our role is both; we facilitate and assist investors who are investing in ETP as well as non-ETP projects. For the ETP, we work closely with all the agencies involved in the ETP, because these are predetermined projects that have been identified and we classify it as ETP. So we make sure that their investment is facilitated and there are no hiccups, there are no issues, and we try to assist them to get their projects off the ground. The faster we get the project off the ground, the faster it will benefit the ETP. Likewise, for the non-ETP, we meet investors and we assist and facilitate from the beginning. So it's more about giving equal emphasis, because both are important.
What role does MIDA play in the National Key Economic Areas (NKEAs)?
MAHMUD: We are involved everywhere actually. We are directly involved in the E&E (Electrical and Electronics), in greater Kuala Lumpur, in the healthcare sector, and also in the downstream of palm oil products and oleo chemicals, aerospace, and medical devices. So our people are everywhere, going into the NKEAs and steering committees. They are inside those committees to assist the committee in the implementation, and to try to look at what are the issues that will stop the investment from happening or will delay the investment. So we are working together across the board within the government. But directly, what we are monitoring is the E&E and the KPIs with our minister. But not withstanding, there are many other steering committees within the NKEA that we are involved in.
How does MIDA facilitate investment in Malaysia?
MAHMUD: When it comes to investment, that's where we come in. Facilitating investment is one of our roles. If the investment requires approvals of licenses or maybe incentives, that will be our involvement. Actually, MIDA has been there for many years. At the inception, we will get involved with our projects or our investors, so we walk them through the approval process and then from the approval process, we walk them through until they are implemented. So it's an end-to-end kind of investment facilitation.
So we have an internal MIDA team, industry support, the vision, and also our state officers, who are directly dealing with the local authorities and state governments to facilitate and assist in the implementation of projects and all the investment. In that sense we are very involved in the EPPs (Entry Point Projects). Of course, we complement our colleagues in PEMANDU, and in other ministries and agencies, because as you know when you talk about one investment it involves many government agencies, many stakeholders, for us to look at. At the end of the day, we want to see the investment really happen.