Despite an ongoing political corruption scandal and a lacking technical skills base, Malaysia is said to be an appealing location for potential investors
Malaysia is perceived as the world’s best country in which to invest, according to a recent report by Y&R’s BAV Consulting, The Wharton School of the University of Pennsylvania and US News and World Report.
The report based its findings on a survey that asked 6,000 business decision-makers to score countries on eight equally weighted attributes: corruption, dynamism, economic stability, entrepreneurship, tax environment, innovation, labour force and technological expertise.
Malaysia topped the list by over 30 points, with neighbouring Singapore coming second.
The result came as no surprise to Irwan Shah Zainal Abidin, director of the Asian Research Institute of Banking and Finance at Universiti Utara Malaysia, a public university, who said he has been impressed by Prime Minister Najib Razak’s “clear and sound economic management and vision” since coming to power in 2009.
“Growth prospects remain robust this year, the inflation rate is stable and unemployment rate is still in the full employment category. Furthermore, the financial sector remains rock solid and the monetary policy is still ahead of the curve,” he said.
“So I expect many investors will be keen to park their capital in Malaysia, especially in the specific sectors which the 11MP [Malaysia’s current five-year economic plan] and the 2017 Budget have been focusing on, such as services, infrastructure, manufacturing, tourism, education, and construction.”
Malaysia’s economy grew by 4.2% in 2016, down from 5% growth the previous year, and many commentators have characterised the country’s economy as “struggling” under Razak.
In the eyes of Francis Hutchinson, senior fellow and coordinator of the Malaysia Studies programme at the Institute of Southeast Asian Studies, “very-well developed physical infrastructure” and an “extensive set of free-trade agreements linking the country to major markets” made Malaysia appealing to potential investors.
“Third, it has very experienced investment liaison officers that are used to hand-holding investors and helping them navigate through the country’s approval procedures,” he said.
Yet the country’s economic growth has been tempered by a skills shortage that limited the average annual labour productivity growth between 2011 and 2015 to 1.8%, well short of the 3.7% annual growth set by the 11MP.
Hutchinson flagged the skills shortage as “the most serious issue that investors are likely to face in Malaysia”.
“The country has a structural shortage of scientific and technical manpower, which has been aggravated by issues in the education system, particularly relating to learning outcomes. This has been further aggravated by brain drain. Thus, firms will find it challenging to find and then retain skilled workers,” he said.
The Southeast Asian nation has also been criticised for its high levels of corruption, with Najib at the heart of an ongoing global corruption saga for allegedly embezzling more than $1 billion from the state investment fund 1MDB.
But Hutchinson said that not all investors would be put off by the corruption allegations.
“It depends on whether foreign investors are seeking to produce for export or access the local market. If they are producing for export and are operating in free trade zones, it is likely that their experience will be relatively straightforward and efficient,” he said.
“However, if they are seeking to penetrate the local market, that is where they will find things more challenging, and they will have to deal with non-transparent tender processes and awards.”