KUALA LUMPUR (March 15): Malaysia’s investment approvals have risen by 0.5% to RM202 billion, from RM201 billion in 2017, on the back of greater manufacturing investment, auguring well for foreign direct investment flows, according to UOB Research.
In a note today, the research house said under the assumption of an average investment approval rate of 60% during the 2016 to 2018 period, potential 2019 gross FDIs of RM120 billion to RM130 billion could be realised.
Furthermore, the increase in total approved investments could potentially lead to the creation of 129,780 new jobs.
In particular, approved Chinese manufacturing investments saw an increase of 411% to RM20 billion in 2018.
However, it noted approved local investments saw a 17% decrease to RM121 billion, on the back of higher approvals in the manufacturing sector.
While approvals rose by 37% to RM87 billion or to 43% of total investment approvals, the primary sector saw a decrease in investment approvals.
UOB Research said primary sector investment approvals fell by 12% to RM11 billion, constituting 5% of total 2018 investment approvals, with the oil and gas sector taking up the lions share with RM10.2 billion, with the plantation and commodities sector receiving RM0.6 billion in 2018.
UOB Research Senior Economist Julia Goh said Malaysia stands to benefit from the trade war between the US and China.
“Malaysia stands out as a beneficiary, resulting from the trade diversion and supply chain relocation away from China, especially in electronics, machinery, wood, paper, plastics and rubber.
"Based on channel checks and newsfeeds, we think that the US-China tensions have accelerated plans for foreign companies to expand production in existing Asean-based facilities, or acquire/partner companies in the region to ramp up production capacity,” Goh said.
However, she noted that the net impact of the trade war remains uncertain, as benefits gained could be mitigated by weaknesses in global demand, as well as near-term capacity and labour constraints.