Despite the current uncertainties in the global economic environment, investment inflows into the manufacturing sector in Malaysia continue to be encouraging. During the first three months of 2009, a total of 194 projects involving investments of RM7.4 billion were approved. Foreign investments in manufacturing projects approved during this period amounted to RM3.3 billion, while domestic investments totaled RM4.1 billion. Malaysia continues to attract FDI into the manufacturing and services sector through, among others, Trade and Investment Missions, Specific Project Missions and its network of 19 overseas centres all over the world.

The country’s strong fundamentals, diversified export base and low exposure of local financial institutions to the US subprime market will enable the Malaysian economy to withstand any adverse effects of the global financial crisis. In addition, the first and second stimulus packages introduced by the government, amounting to RM67 billion, are also expected to have positive effects on the manufacturing and services sector.

Complementing the growth and development of the manufacturing sector, the Government is taking steps to promote and develop the services sector. Recognising the growth potential of the services sector, the Government recently liberalised 27 services sub-sectors with no equity restrictions. These sub-sectors are in the areas of computer and related services, health and social services, tourism services and sporting and other recreational services as well as other business services.

The initiatives to liberalise the services sector have been pursued with the view to create a conducive environment to attract investments and technology, as well as to create high value jobs. These efforts are expected to enhance the level of competitiveness of the services sector in the country.

As a measure to further sustain Malaysia’s competitiveness in the services sector, the Government established a Services Sector Capacity Development Fund (SSCDF) to provide financial assistance for capacity building of the domestic services providers. The fund is made available to services sector associations and service providers. The applications for grants are evaluated by MIDA, while applications for soft loans are processed by the Malaysian Industrial Development Finance Bhd (MIDF).

Recently, MIDA disbursed 50% of grants approved to three associations, i.e. the Bumiputra Manufacturers and Services Industry Association of Malaysia (PPIPBM), the Association of Consulting Engineers Malaysia (ACEM) and The National ICT Association of Malaysia (PIKOM) to undertake its qualifying capacity development programmes.

Carrying on the momentum in cross border investments
Even during the current global economic crisis, Malaysian companies continue to undertake investments overseas albeit at a slower pace. Based on Bank Negara Malaysia (BNM) statistics for the period January – March 2009, Malaysia’s overseas investments (excluding Labuan IOFC) amounted to RM6.59 billion compared with RM9.44 billion for the corresponding period in 2008.

Major overseas investment destinations are Thailand, Singapore, Indonesia, Vietnam, China, Hong Kong, Canada, United States, Saudi Arabia, United Arab Emirates, India, Mauritius and Egypt. Key sectors include manufacturing, financing, real estate, insurance, business services, utilities, transport & communication, agriculture, forestry, fishing and construction.

Malaysia-Singapore Third Country Business Development Fund (MSBDF)
The Malaysian and Singaporean Governments continue to encourage businessmen and companies in both countries to collaborate to venture into third countries. Towards this end, the Malaysia- Singapore Third Country Business Development Fund (MSBDF) has been set up to encourage business enterprises from both countries to team up and jointly identify business opportunities in third countries. The fund is a matching grant that can be used for joint missions, joint feasibility studies (target specific due diligence studies or pro-active searches) and joint market research in third countries prior to committing an investment.

In January 2009, to further enhance the utilisation of the fund, MIDA and International Enterprise Singapore (IES) completed reviewing the enhancement of the fund based on proposals submitted by the Federation of Malaysian Manufacturers (FMM) and Singapore Manufacturers Association (SMA).

Among the improvements made are as follows:

• Expansion of scope of fund to include joint market research (by associations).
• Flexibility in terms of submission of two years’ audited financial statements, whereby applicants are allowed to submit the documents at the point of claim instead of at point of application.
• Fine-tune and simplify the MSBDF forms i.e. only two forms for application of the fund (BDF1-2009) and submission of claims (BDF1A-2009).
• Deletion of the need to register interest with MIDA and IES before commencing the activity.
• Flexibility in terms of the 60:40 participation ratio for joint mission, provided that such flexibility will not undermine the need to ensure a balanced participation from both countries.
• Inclusion of new items to be considered as eligible expenses to claim for the grant, i.e. costs related to organising a promotional seminar locally, advertisement in local newspaper and informal networking session.

To ensure that the objective of the fund is achieved, MITI and MIDA aim to promote the fund extensively by creating awareness in the Malaysian private sector. MIDA will continue to work together with Malaysia South-South Association (MASSA) to assist Malaysian companies in the pursuit of business opportunities in both developed and developing countries. Malaysian businessmen should seize the business opportunities available abroad, in view of the benefits which can be accrued for both their companies and our country.