THERE'S been much talk about Malaysia falling behind its regional counterparts in terms of foreign direction investment (FDI), which includes losing out on key strategic investments.
This is based on a United Nations Conference on Trade and Development report, "Investment flows to developing countries in Asia could fall up to 45 per cent in 2020", saying Indonesia, Singapore and Vietnam received more than 80 per cent of the US$156 billion in FDI last year and only five per cent, or just US$7.8 billion, went to Malaysia.
Some examples include Apple, through its manufacturing partner, Foxconn, moving some iPad and MacBook assembly lines to Vietnam from China; Tesla building a factory in Indonesia and even contemplating a SpaceX launchpad; Amazon investing US$2.8 billion to build a localised data centre for its cloud computing services in West Java, Indonesia; and Alibaba, Bytedance, Tencent and other companies setting up regional headquarters in Singapore.
Nevertheless, there are always things we can do.
FIRSTLY, we must increase our domestic direct investment and strengthen our small- and medium-sized enterprises (SMEs) base.
A new policy vision is called for, with SMEs at the forefront and as a catalyst for economic and employment growth. It will also benefit government-linked companies and foreign investors as the spillover effect is reversed.
One of the ways is to boost and strengthen SME linkages and production networks in Asean, enabling SMEs to contribute towards intra-Asean trade and investment flows as well as regional integration. This could be done through the pre-existing Asean Inclusive Business Framework within the broader structure of the Asean Economic Community.
Furthermore, SMEs in Malaysia, Singapore, Thailand and Indonesia should enhance cooperation and involvement in, for example, the Indonesia-Malaysia-Thailand Growth Triangle and Singapore-Johor-Riau Growth Triangle.
SECONDLY, strengthening regional cooperation through Asean and the Regional Comprehensive Economic Partnership. There should be an Asean Industrial and Economic Masterplan (parallelling the Asean Connectivity Masterplan 2025, for example) that apportions and designates production network and supply chain bases along the competitive edges and advantages and strategic locations of member states.
Other policy steps include resuscitation of cross-border listings such as the Asean Trading Link (set up in 2012) by building on the Asean Capital Markets Forum for cross-border offerings of collective investment schemes. The revival of the Central Limit Order Book that was banned without prior warning set against the backdrop of the Asian financial crisis should perhaps be reconsidered as part of a ringgit stabilisation strategy.
THIRDLY, increase fiscal deficit to invest in domestic direct investment, including in research and development, and generate loose full employment — job creation strategy at the heart of our macro-economic strategy.
It is recommended that a macro-economic strategy with jobs creation — including as part of the spillover effects of research and development in green and renewable technologies — be part of the government's priority for the next five to 10 years, even as the low-touch economy, digitalisation and automation increasingly become the new normal with Covid-19 as the impetus.
Fiscal consolidation in the medium term, important though it is, will have to be modified and adjusted according to business cycles and therefore shouldn't be considered as cast in stone.
FOURTHLY, further diversify and boost our trade and investment links beyond our traditional FDI partners.
The International Trade and Industry Ministry should deepen our trade and investment linkages, respectively, with rapidly-growing economies and emerging markets in Latin America, Central Asia, Middle East and North Africa and Sub-Saharan Africa. Argentina, for example, is steadily becoming an important trading partner.
From January to August last year, exports to and imports from Argentina grew by 23.4 and 20.1 per cent, outpacing Malaysia's global trade record during the initial waves of Covid-19, according to International Trade and Industry Ministry deputy-secretary general Hairil Yahri Yaacob.
In conclusion, we need not lament in despair at our situation relative to our neighbours in terms of FDI stereotypically seen as the "saviour" of our economy and economic development. If there's to be a new national consensus on the next phase in national development, it's that we have what it takes to make the leap forward.
The writer is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focussed on strategic policy recommendations based on rigourous research
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times