The digital economy is expected to make up 22.6 per cent of Malaysia's gross domestic product (GDP) and create 500,000 jobs by 2025, according to local reports.
Pro-active direct state intervention in the economy in the form of investment and fiscal measures on the one hand and increasing domestic direct investment (DDI) on the other bodes well for a climate of continuing flows of FDI into Malaysia.
Going forward, we need to reconceptualise and reframe our FDI in a slightly fresh direction that preserves both "quality" and "quantity" of the inflows.
Firstly, we need to leverage on our competitive advantage in the so-called "non-economic" investments, including aerospace. This requires close strategic cooperation, collaboration and coordination between the federal and state governments – as Selangor is a leading regional hub for the aircraft maintenance, repair and overhaul (MRO) as well as the manufacturing and engineering and design sub-sectors.
Last year, the Selangor Darul Ehsan Aerospace Industry Coordination Office or S-DAICO which is also the secretariat for the Selangor Aerospace Council chaired by the menteri besar was formed with the view of executing the Selangor Aerospace Action Plan 2020-2030, among others.
At the federal level, the National Aerospace Industry Coordinating Office (NAICO) was established in August 2015 under the International Trade and Industry Ministry (Miti) to primarily oversee the implementation of the strategies and initiatives in the Malaysia Aerospace Industry Blueprint (2030).
In this regard, traditional investors such as the US continues to play a pivotal and key role.
For example, as mentioned in a scholarly article entitled, "Malaysia's Foreign Policy under Najib: A Comparison with Mahathir" Khadijah Md Khalid (Asian Survey, 2011), in 2009, Composites Technology Research Malaysia Sdn Bhd (CTRM) and US-based Goodrich Corporation entered into a strategic partnership which "enables the former to manufacture nacelle components (the enclosed part of an airplane) in the next two decades.
The contracts were valued at US$135 million for the next five years. The period of the contracts is the lifespan of the aircraft, and CTRM project contracts are valued at US$1.5 billion over 20 years".
The prime minister in the same first anniversary speech also noted that aerospace will be a key driver of growth even as we are shifting towards a green economy at the same time. With green technology and the Fourth industrial Revolution (4IR) in full swing, both aerospace and the green economy can converge and coalesce in the future.
Secondly, we need to leverage on our position within Asean to be an important gateway and "first-stop" destination for FDI to the rest of the region. And not least the wider Regional Comprehensive Economic Partnership (RCEP) involving Asean plus Five, i.e., Australia, China, Japan, Korea and New Zealand – and to be ratified by Malaysia this year.
Our historical ties with the UK fresh from Brexit, and keen to foster and forge new strategic and economic ties with Commonwealth countries, particularly Malaysia, augurs well for a renewed foreign economic diplomacy. Elizabeth Truss, UK's Secretary of State for International Trade has expressed the country's commitment to supporting Asean's economic ambition that's embodied in the signing of the UK-Asean economic and digital partnership last November.
It's vital, hence, for Malaysia to play its part in stepping up the implementation of the Asean Comprehensive Investment Agreement (2012) to ensure that, e.g., relocation of FDI in one member-country will benefit the original host country via production network linkages and integrated supply chains. The Asean Comprehensive Recovery Framework (ACRF) which aims to "maximise the potential of the intra-Asean market and intensify broader economic integration" recognises the 2012 Agreement as core instrument and mechanism.
Towards that end, we could honour the memory of the late Tun Abdul Razak Hussein (see "Driving Development: Revisiting Razak's Role in Malaysia's Economic Progress" by Rajah Rasiah & Kamal Salih [Editors], University Malaya Press, 2019) in his export-oriented industrialisation and pro-FDI policies at the national level.
Also, the late Tun Lim Chong Eu (see "From Free Port to Modern Economy: Economic Development and Social Change in Penang, 1969 to 1990", by Chet Singh, Rajah Rasiah, Wong Yee Tuan, Penang Institute/Iseas-Yusof Ishak Institute, 2019) at the state level by re-imagining free industrial/trade zones as harbingers of regional integration where Asean is both one export as well as production market.
This requires reconceptualisation of the sub-regional growth areas such as Sijori (Singapore-Johor-Riau), IMT-GT (Indonesia-Malaysia-Thailand Growth Triangle) and the BMPGA (Brunei-Malaysia-Philippines Growth Area) as integrated free industrial/trade zones and mega-agglomeration/mega-clusters for intra-regional as well as global exports.
Our FDI has always been built on strong and viable foundations. We can be confident that for the next lap, it'll continue to be so.
The writer is Head of Social, Law & Human Rights at EMIR Research, an independent think tank focussed on strategic policy recommendations based on rigorous research.
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times