KUALA LUMPUR (July 5): Malaysia is primed to be a major beneficiary of European and UK investments, but greater adaption and adoption of trade, sustainability, technology and digital trends and reform are required to convert this potential into reality, HSBC Bank Malaysia chief executive officer Stuart Milne said.
“As a strategic hub in Asean with strong economic fundamentals, Malaysia provides a range of investment opportunities to organisations from the European Union (EU) and the UK. In turn, these organisations can be a significant source of investment across the green and technology sectors for the country. But success will require building resilience and transforming how we do things in Malaysia now and in the future,” he said at the "HSBC EU & UK - Asean virtual client roadshow" recently.
Milne said Malaysia has received significant foreign direct investments (FDIs) and is uniquely positioned to capture increasing opportunities arising from supply chains that are moving to the Asean region.
"In the first quarter of 2021, the country’s FDI rose to RM9.1 billion from RM6.8 billion in the previous quarter. The EU and the UK remained key inbound investment sources," he added.
Regionally, Milne said over the past year, export flows across electronics, pharmaceuticals, commodities and mining have continued at pace, Asean’s supply chains have remained resilient, and FDI has continued.
"For 2020, Asean registered a growth of US$70 billion in greenfield investments according to UNCTAD’s Investment Trends Monitor. This was the biggest such FDI inflow of any developing world region."
But the region is not without its challenges, he added.
"Vaccinations will not be substantially rolled out across the region until 2022, which will stunt its consumption growth as lockdowns continue. It will also see increasing competition for private investment from other emerging economies such as India.
"Moreover, as business normalcy slowly returns, regional companies have seen this period of digital adoption as a short-term switch rather than a strategic shift. To remain competitive and to appeal to a growing population of online users, companies need to forge on and not let momentum stall," he noted.
Milne pointed to Asean’s labour force, saying it remains underutilised and thus impacting productivity. "This will be a challenge for several Asean markets particularly as their in-country labour costs begin to rise as more demand and commercial activity start to pivot to the region. Labour reforms will be critical to maintain competitiveness."
He also cited the Asian Development Bank, which stated that Southeast Asia could suffer an 11% fall in gross domestic product by 2100 if climate risks are not addressed.
"To offset these headwinds, greater policy reform to encourage greater trade flows, technological improvements to increase manufacturing productivity,and digital and sustainability adoption is needed," he said.
Milne suggested that some policy actions can include:
- Ratifying free trade agreements including the Regional Comprehensive Economic Partnership will help to drive export growth, as it seeks to eliminate many of these barriers while opening Asean countries to more trade activity.
- Improving investment conditions including tax. In Malaysia specifically, one of the key focus areas under the government’s PENJANA programme is stimulating foreign business investment by offering tax incentives.
- Businesses take a more strategic approach to digital adoption by creating stronger sector ecosystems; elevating an industry’s digital standards and practices; improving the way industries respond and adapt to changing payment systems.
- Developing levers to more strongly encourage adoption of green and sustainability practices including linking Southeast Asia’s future infrastructure projects with green and sustainable principles. This will open up opportunities to channel more private investment from countries including across the EU and the UK into these projects.