Approved Investments in the Services, Manufacturing and
Primary Sectors Rose by 17.7% in 1H2018
Malaysia continues to attract new approved direct investments in the services, manufacturing and primary sectors in the first half of 2018 (1H 2018) with a total of RM80.2 billion, an increase of 17.7% from the same period last year (RM68.2 billion). The investments approved in January – June were from 2,346 projects. These are expected to generate 60,181 job opportunities for Malaysia.
Despite rising competition and a challenging external environment, Malaysia remains a competitive investment location for foreign investors. Foreign investments increased by 35.3% to RM26.5 billion in 1H 2018 from RM19.6 billion in the same period last year. The increases in foreign investments were mainly seen in the manufacturing and primary sectors. Meanwhile, domestic investments led with RM53.7 billion, contributing 67% to the total approved investments in all three sectors. The performance of the domestic investments also saw a rise of 10.5% from RM48.6 billion in the same period last year.
The services sector continued to account for the largest share of approved investments, contributing 63.5% or RM50.9 billion. A total of 2,025 projects were approved and will create more than 33,970 job opportunities, the largest potential employer in the economy. Around 89% of these jobs will be in the distributive trade, education, MSC status and healthcare sub sectors.
Domestic investments made up the largest portion, recording RM44.9 billion or 83.6% of the total approved investments for the services sector during this period. The rest or RM6.0 billion were from foreign sources.
For the period of January to June 2018, the total approved investments for the healthcare services sub-sector recorded a significant rise of 282.5% to RM1.1 billion from RM294.7 million in the first half last year. This is in line with the Government’s efforts to strengthen its healthcare delivery system by offering more private hospitals, ambulatory care services and private healthcare centres. From the seven approved projects, 93.3% were from domestic sources.
The increased investment performance for the services sector was also contributed by approved investments in the supporting services sub-sector, which recorded an increase of 248.1%. The bulk of the approved investments derived from green technology activities with investments of RM2.5 billion – of which 96.7% came from domestic sources. The green technology activities were led by energy generation projects with approved investments of RM2.3 billion followed by green services, energy conservation, green building and waste management projects (RM200.4 million). Other supporting services namely licensed warehouse, oil and gas services and integrated logistics were approved with five, three and 15 projects, recording investments of RM697 million, RM653 million and RM544.3 million respectively.
Meanwhile during this period, a total of 27 projects were approved to undertake research and development (R&D) activities as well as technology related activities. These contributed a total of RM52.3 million of approved investments, which were solely from domestic sources.
During this period, investments in global establishments rose by 157.1% to RM744.7 million from RM289.7 million in the same period last year. This was mainly due to a 430.4% increase in investments for Principal Hub projects, amounting to RM583.5 million; and a 211.1% rise in new representative offices (RE) to RM48.9 million. The bulk of these investments were once again by domestic investors, contributing 63% to the total.
Malaysia’s manufacturing sector remains resilient and recorded approved investments of RM20.2 billion from 287 manufacturing projects for the first half of 2018 as compared to RM16.7 billion from 299 manufacturing projects in the same period last year. The increase of 21.2% in terms of the value of investments is an indication that capital-intensive projects are dominating Malaysia’s manufacturing landscape.
The approved manufacturing projects will create 25,165 job opportunities. The jobs created include 530 electrical and electronics engineers, 607 mechanical engineers and 85 chemical engineers. In addition, the approved manufacturing projects will also require about 1,742 skilled craftsmen such as plant maintenance supervisors, tools and die makers, machinists, IT personnel, quality controllers, electricians and welders.
For 1H 2018, foreign investments in approved manufacturing projects rose by 63.1% to RM15.2 billion from RM9.3 billion in the corresponding period last year. The increase reflects the country’s competitiveness as a location of choice for investments. China accounted for RM6.5 billion or 43% of the total foreign investments, followed by Korea (16%), Japan (10%), Singapore (5%) and France (4%).
Notable investments include a new manufacturing project from China for the basic metals industry that involves utilising ‘blast furnace’ technology that not only produces quality end-products at a cheaper cost but can also contribute to a greener steel-making process. This project, which offers 98% of its total job opportunities to Malaysians, is expected to reduce imports of intermediate goods and will strengthen the metal and steel industry.
Another example is an expansion project by a French industry leader in thiochemicals technologies to produce high value added sulfur derivatives. The project, which will create an additional 33 job opportunities, is set to support the strong growth of the animal feed, petrochemical and refining markets in the region.
Others include a tier 1 aerospace company from UK that will be establishing its new aero engine component repair facility in Johor by 2019. The company intends to add research capability to the facility and will work with local knowledge institutes to adopt new technologies and grow its product offerings for the new generation of aero engines.
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.
The targeted catalytic and high potential growth subsectors namely electrical & electronics, chemical & chemical products, machinery & equipment, medical devices and aerospace that continues to be emphasised under the 11th Malaysia Plan Mid-Term Review, contributed 26.7% (RM5.4 billion) to the total approved investments in the manufacturing sector. Once implemented, these projects will further energise the development and growth of the overall manufacturing sector.
Industries which recorded increased investments include the basic metal, rubber, transport equipment, plastic, fabricated metal, and textiles & textile products. These six industries constituted 62.4% (RM12.6 billion) of the total investments approved in the first half of 2018.
The capital intensity, measured by capital investment per employee (CIPE) ratio of projects approved within the sector increased to RM805,173 in January to June 2018 from RM767,611 in the same period last year. There were 4 projects approved with investments of at least RM1 billion, totalling RM8.6 billion (42.6%) of total investments approved in the manufacturing sector. As for investments of at least RM100 million, 29 projects were approved with total investments of RM15.2 billion (75.2%) of all investments approved in this sector. This shows that Malaysia continues to attract more capital intensive projects.
The primary sector contributed RM9.1 billion or 11.3% to the total approved projects in the first half of 2018. The mining subsector continued to lead with approved investments of RM8.8 billion, followed by plantation and commodities with RM311.8 million and agriculture with RM38.7 million. These investments are expected to create 1,039 job opportunities. The mining subsector was dominated by oil and gas exploration activities. This solid performance by this subsector reflects Malaysia’s potential to be a leading hub for the oil and gas industry in the region.
Malaysia continues to welcome quality investments into the country that will contribute to enhancing the country’s technological capabilities, develop the local supply chain and increase the country’s export revenue. Malaysia is truly a land of opportunities, not just for investors from a few selected countries but for all those who have the spirit of entrepreneurship and are willing to contribute to the economic advancement of the country. The new Government is committed for Malaysia to remain pro-business with prudent and pragmatic policies to ensure a conducive environment for businesses to thrive.
Minister of International Trade and Industry, Datuk Darell Leiking, expressed his optimism on the performance of the Malaysian economy moving forward. “The foreign and local investments have risen by 35.3% and 10.5% respectively, which shows people’s confidence in the country. With the change of government that promotes transparency and our effort in restoring the confidence of investors, I am certain that the figure will increase even further for the second half of the year,” says Darell.
He has just concluded a trade mission to Japan and Korea last week and secured RM2.84 billion of potential investments, which he cited as an evidence of foreign investors’ faith in the new government and its investor-friendly policies led by Prime Minister Tun Dr Mahathir Mohamad. Despite the American-China trade war, says Darell, Malaysian economy continues to be resilient and with investments in segments that are moving up the value chain, we can look forward for the country being transformed into a knowledge-based, and skill-based advance economy.