KUALA LUMPUR: Malaysia's investment approval target is projected to reach RM138 billion for the full-year of 2020 following the total approved investments of RM109.8 billion in the first nine-month (9M2020) of the year.
United Overseas Bank (Malaysia) Bhd (UOB) said the revised forecast is about 32 per cent higher than the actual investments approved during the global financial crisis in 2009.
"This is a positive sign that Malaysia remains an attractive investment destination with ongoing efforts by the government to expedite the investment approval process and offer competitive incentives," said senior economist Julia Goh and economist Loke Siew Ting in a Global Economics and Markets Research today.
Malaysia's total approved investment during the period has surpassed the bank's initial target of RM100 billion, despite the Covid-19 pandemic that triggered a deep global downturn and delayed investment decisions worldwide.
Under the 2021 Budget, the government has unveiled a slew of initiatives to accelerate investments in Malaysia to spur economic growth and create higher multiplier effects in the economy.
The initiatives include a RM1 billion special incentive package for high value-added technology projects including research and development investments in aerospace and electronic clusters, income tax rate of zero per cent up to 10 per cent for the first 10 years and 10 per cent for the subsequent period of 10 years to manufacturers of pharmaceutical products including vaccines.
Additionally, a 10 per cent income tax rate for a period of five years and renewable for another five years for Global Trading Centres; an extension of the Principal Hub, Industrialised Building System components manufacturing, and shipbuilding and ship repairing industry incentives' application period; and expansion of the scope of special tax rates to selected manufacturing companies which relocate their businesses into Malaysia or undertake new investments, to include selected high-technology services sectors.
The Malaysian Investment Development Authority (MIDA) had set up the Project Acceleration and Coordination Unit (PACU) to provide end-to-end facilitation for all projects approved to enable the timely implementation of investments in the country.
The government investment facilitator agency had also introduced online modules namely e-Manufacturing Licence (e-ML), e-Incentive, and JPC Online Application to accelerate the necessary approvals for manufacturing licences, incentives, and exemption of customs duties to expedite the execution of projects.
UOB said these initiatives to lure investments amid emerging business opportunities in a post-pandemic new normal and global economic recovery.
"We expect overall investments to regain momentum in 2021-2022, albeit at a measured pace. Actualisation of those investment approved year-to-date could help jump-start private investments in 2021 and beyond," they said.
Economists said ratification of the recently signed Regional Comprehensive Economic Partnership (RCEP) by end-2021 should also reinforce Malaysia as a gateway to Asean and beyond, as well as strengthen Malaysia's trade and investment outlook over the medium term.
"The tabling of 12th Malaysia Plan (12MP) 2021-2025 in Parliament early next month (January 2021) is another key event to watch as it will outline a development roadmap for Malaysia to recover and be competitive over the next five years, particularly in a post-pandemic new normal," they added.
During the January to September 2020, Malaysia's manufacturing sector demonstrated resilience with investment approvals continuing to rise by 16.6 per cent year-on-year (YoY)t o RM65.3 billion. This partially cushioned the drag from services (51.8 per cent YoY to RM42.8 billion) and primary (-73.5 per cent YoY to RM1.7 billion) sectors.
Foreign sources remained the key driver of overall manufacturing investments even though domestic direct investment in the sector saw a leap of 45.5 per cent YoY to RM25.9 billion (or 39.6 per cent share). China, Singapore, and Switzerland were the top three leading sources of foreign direct investments (FDIs) in the sector, while East Malaysia attracted more than one-third of overall manufacturing investment.
Key subsectors that benefited included petroleum products, basic metal products, electrical and electronics, machinery and equipment, as well as chemicals and chemical products.