KUALA LUMPUR: Malaysia is expected to record “modest” growth in realised investments this year amid declining global foreign direct investment (FDI) flows, said the Malaysian Investment Development Authority (Mida).

Global FDI inflows into the country slipped 8% to RM35.08 billion last year from RM32.24 billion in 2013, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

He said the decline in global FDIs into the country was in tandem with the drop in global FDI inflow, which slipped 8% to US$1.26 trillion last year from US$1.36 trillion in 2013.

Citing a study by the United Nations Conference on Trade and Development (UNCTAD), Mustapa said the decline was attributed to uncertainty in the global economy.

“The fragility of the world economy, with growth tempered by hesitant consumer demand along with volatility in currency markets and geopolitical instability, will act as a deterrent for investors,” he told reporters after presenting details of Malaysia’s investment performance for 2014 here yesterday.

Mustapa said this year, Mida expects to approve new investments of RM56 billion for the manufacturing sector and RM64.5 billion for the services sector, excluding real estates.

“There are RM65.1 billion worth of projects in the pipeline this year, and we expect modest growth to sustain the country’s investment performance,” he added.

Total new investments approved jumped 8% to a record RM235.9 billion last year from RM219.4 billion in 2013. It also surpassed the RM148 billion average annual target of the 10th Malaysia Plan for 2011 to 2015.

This constitutes approved investments in the manufacturing, services and primary sectors.

Of this, 72.6% or RM64.6 billion were generated from domestic investments, while the remaining 27.4% or RM171.3 billion were contributed from FDIs.

On a segmental basis, the services sector contributed 63.4% or RM149.6 billion to the total investments, followed by the manufacturing sector (30.5% or RM71.9 billion) and the primary sector (6.1% or RM14.4 billion).

Malaysia recorded RM181.5 billion in realised private investments last year, a 13.1% jump from RM160.5 billion in 2013.

“The increase in realised private investments was driven by strategic projects that fall within the National Key Economic Areas,” said Mustapa.

Going forward, Mustapa said the government aims to lure more investors through measures such as tax benefits and customised incentives, some of which had been announced in Budget 2015.

“Some of the measures will include tax incentives for principal hubs and projects that invest in innovation, technology and creation of high-income jobs. There is also a five-year full tax exemption to manage, maintain and upgrade industrial estates,” he said.

Mustapa said Mida had also proposed a 200% capital allowance on automation expenditure to encourage automation in labour-intensive industries, as well as a special incentive package for investors to relocate to less developed areas.

This article first appeared in The Edge Financial Daily, on February 27, 2015.