Malaysia ‘s total approved investment in the primary, manufacturing, and services sectors recorded MYR64.8bn in 1H20, which is – 38.4% lower compared to the same period a year ago amid the COVID-19 outbreak. These investments involved 1,725 projects and are expected to create 37,110 employment opportunities in Malaysia over the next few years.
Of the total investments approved, approximately 69.8% or RM45.3bn were domestic investments (DDI) while the remaining 30.2% or RM19.5bn were foreign investments (FDI). Manufacturing investment approvals overtook services investment approvals for the first time since 2010, while primary investment approvals hit a record low.
Manufacturing sector recorded a total of RM35.7bn in approved investment in 1H20, which was -3.0% lower than the RM36.8bn in 1H19. However domestic investment posted a substantial jump by almost 80% (at 79.8% ) to RM17.9bn, which made up 50.1% of total manufacturing investment approvals.
More than two-thirds of overall manufacturing investments in 1H20 ( 69.3% or RM24.7bn) were new greenfield projects, against capital expansion projects’ (30.7% or MYR11.0).
Key focused sub-sectors included petroleum refineries & products, machinery manufacturing, E&E products, food manufacturing, and scientific & measuring equipment. Sabah, Penang, Johor, Selangor, and Terengganu were top five states garnering the most manufacturing investment.
Approved investment in the services sector dropped -54.1% to RM28.6bn ( RM62.4bn in 1H19). Local investments fell -32.4% to RM27.0bn while overseas investments declined -92.6% y/y to RM1.6bn. As such, approved foreign investment accounted for 5.8% of total approved investment in the services sector against local investment’s 94.2% share in 1H20.
The support services industry under the purview of MIDA covered sub-sectors such as integrated logistics, research and development, green technology, integrated circuit design, oil and gas services and licenced warehouse.
In 1H20, approved investments in the support services industry saw an increase of 18.5% due to the surge of projects in the integrated logistics services and green technology sub-sectors that strengthened by 172.1% and 7.0% respectively. In addition to providing over 3,249 new jobs, these investments will also create spin-off benefits for other local businesses, further strengthening Malaysia’s industrial network.
Finance Minister Tengku Zafrul said that the government is working on its Budget 2021 and the 12th Malaysia Plan that will look at being more investor-friendly. The government announced several tax incentives in the PENJANA economic stimulus plan to attract FDIs.
Despite the ongoing pandemic effects and downside risks to the global and Malaysia economic outlook, year-to-date investment approvals represented 61.8% of Malaysia’s full-year approved investment during 2009 GFC and have already hit 64.8% of our 2020 full-year target of RM100bn (2019: RM211.4bn).
The Project Acceleration and Coordination Unit (PACU) has been established in MIDA to facilitate the approval of businesses particularly manufacturing and related services and to ensure that the implementation of approved projects is successful within 24 months.
Written by: Julia Goh, Senior Economist, UOB & Loke Siew Ting, Economist, UOB