CALL TO ADDRESS CAUSE OF GROWING DEFICIT IN NET FDI INFLOW

KUALA LUMPUR, July 23 (Bernama) -- Malaysia should address the main cause of
the growing deficit in net foreign direct invesment (FDI) inflow by relooking
its policies in order to remain competitive and attractive.

In making the call, University Malaya's holder of Khazanah Nasional Chair of
Regulatory Studies, Prof Dr Rajah Rasiah, said net FDI inflow to Malaysia slowed
since mid-1990s and started to face a growing deficit since 2006.

The World Investment Report 2010 by the United Nations Conference on Trade
and Development (UNCTAD) stated that FDI inflow for Malaysia dropped 81 per cent
to RM4.43 billion (US$1.381 billion) last year from RM23.47 billion in 2008
(US$7.381 billion).

Malaysia experienced the biggest decline compared to its peers, according to
the report.

Rajah said narrow human capital base, low knowledge synergies from research
and development labs, and slow build-up in technological capabilities were among
the main causes of net FDI deficit in the country.

"Competition for FDI intensifying with the opening of China, India, Vietnam
and the Philippines is also one of the key reasons," he said at a briefing at
the launch of UNCTAD's World Investment Report 2010 here Friday.

UNCTAD said that Malaysia was not among the top 10 FDI destinations in the
2008-2009 period but it was the top fifth investor (outward flow) in the region.

"We are doing well in FDI outflow. We have financial capability but most
attractive markets are aboard. We are becoming increasingly less attractive even
in our own country," Rajah said.

According to him, innovation has to be the instrument to achieve the Vision
2020 target of making Malaysia a high income economy and FDI should be an
integral part of the New Economic Model.

"Knowledge-intensive enabler industries should form the core part of
FDI-invitation strategy," he said, adding that Malaysia should reduce its
technology dependency by providing an environment to catch up quickly on
technology.

Rajah said the mechanisms for vetting, monitoring and appraisal must be
strengthened and made accountable.

For instance, it is still unclear on how government procurement is handled,
he said.

"There is also serious mislocation of subsidies in Malaysia," he added.

Malaysia should arrest the decline in private investment to effectively
foster viable domestic growth, including in low carbon industries, said United
Nations' resident coordinator for Malaysia, Kamal Malhotra.

Although concerns over declining investment and engaging private sector
participation in the economy were dealt with in the New Economic Policy and 10th
Malaysia Plan, "the challenge for Malaysia will, however, be in converting the
lofty vision and content of these documents into implementation reality in the
next five to 10 years", he said.
-- BERNAMA