EDITORIAL : THE NEW STRAITS TIMES, MALAYSIA

Targeted investments

SEVERAL American companies are set to invest billions in Malaysia in the advanced electronic, renewable energy, oil and gas, information and communications technology, healthcare equipment, pharmaceutical and services sectors. This demonstrates that, despite the fierce international competition for foreign direct investment (FDI), Malaysia continues to be an attractive business location for investors. This is underscored by the fact that investment inflows jumped from RM1.4 billion in 2009 to RM9 billion last year. Certainly, what continues to draw investors to this country are factors such as the country's political stability, as pointed out by Prime Minister Datuk Seri Najib Razak. But there is little doubt that marketing efforts such as Invest Malaysia New York 2011 have played an important role in winning them over to come and invest, and to stay and reinvest. However, there is little point for the prime minister and other top national leaders to roll out the red carpet on the international stage when lower-ranking officials at the local level are not willing to remove red tape. As bureaucracy constitutes a significant obstacle to investment flows, it is essential to make sure that the public service delivery system on the home front does not keep on undermining the good work done by investment promotion activities abroad.

Certainly not when the government has made it a point to develop a targeted investment promotion strategy to attract investments in new growth areas most likely to benefit the economy in the long run. Obviously, the imminent American investments in high-tech and knowledge-based industries are the kind of selective investments that we want, as asserted by the prime minister in New York on Thursday, as they can contribute to the goal of becoming a high-income nation. This is why a targeted investment approach is crucial as we make the transition from a labour-intensive, low-wage economy to a more technologically advanced, knowledge-based economy which pays higher wages to high-skilled workers.

At the same time, however, as important as it is to carry on wooing the kind of high-quality FDI that significantly adds value to the economy and creates high-income jobs, it is clear that we can no longer rely on foreign investment to be the agent of economic transformation that it was in the 1980s. As domestic investment is expected to be the engine of growth that drives us up the value chain and out of the middle-income trap, it is vital that the private sector responds to the policy initiatives and invests in innovative ventures and cutting-edge technologies.