A substantial 43% of investors surveyed by management consulting firm A.T. Kearney say they are seeking new opportunities in emerging markets. The foreign direct investment (FDI) outlook is thus not all doom and gloom, even in the shadow of last year’s 19% fall in global FDI. According to the Malaysian Investment Development Authority, foreign investments in approved manufacturing projects in Malaysia rose by 127.0% year-on-year to RM20.2 billion in Q1 2019.
As A.T. Kearney’s survey results represent investors’ future intentions, it remains to be seen how this trend will pan out given global growth concerns. The World Bank, citing slowing global trade, waning business confidence and subdued investment, had on June 4 sliced by 0.3 percentage point, their 2019 global GDP growth forecast, to 2.6%.
The competition for FDI can only get tougher, what with investor behaviour also evolving to adapt to a complex global operating environment. In the process of FDI destination selection, for example, there has been a shift away from attention at the country level. According to A.T. Kearney in its 2019 Foreign Direct Investment Confidence Index report, most investors now focus first at the regional or directly at the city level. Policy strategies aimed at attracting FDI will thus also need to evolve given this development.
To pursue FDI more systematically, policy makers will need to strengthen place marketing strategies if they have not already done so. Place marketing refers to the application of branding and sales strategies to different regions, countries, states or cities. With countries, states and cities all over the world competing for FDI, it is important that a place promotes its unique characteristics and differentiates itself from its competitors.
In Malaysia, the top three states with the highest share of approved manufacturing projects in 2018 were Selangor (33.4%), Johor (20.0%) and Penang (15.0%). Needless to say, place marketing strategies should revolve around their strengths, competitive advantages and potential for excellence – the reasons why they are strong investment destinations.
Selangor, for example, has a highly developed infrastructure for major industry clusters. Notably, the infrastructure is backed by an advanced commercial ecosystem. It is served by Port Klang, which has been earmarked for transformation into a regional maritime centre. Rated AA+ with a stable outlook in MARC’s sub-sovereign rating universe, the economy is Malaysia’s largest and one of its richest.
A lot more needs to be done to improve Malaysia’s attractiveness as an investment destination. It is critically important to, for example, put in place integrated, place-based economic transformation agendas especially in the aforementioned states to support our Industry 4.0 ambitions. That should attract further FDI inflows.
Quah Boon Huat, +603-2717 2931/ firstname.lastname@example.org
Nor Zahidi Alias, +603-2717 2936/ email@example.com