KUCHING: Despite the Covid-19 pandemic, Malaysia’s manufacturing sector demonstrated resilience with investment approvals continuing to rise in the first nine months of 2020 (9M20), led by East Malaysia which attracted more than one-third of the overall manufacturing investment during 9M20.
UOB Global Economics and Markets Research highlighted this in a recent Macro Note report, noting that Malaysia’s total investments approved hit RM109.8 billion in January to September this year.
“Despite the Covid-19 pandemic that triggered a deep global downturn and delayed investment decisions worldwide, Malaysia’s manufacturing sector demonstrated resilience with investment approvals continuing to rise by 16.6 per cent y-o-y to RM65.3 billion in 9M20,” said UOB Malaysia senior economist Julia Goh.
She added: “During 9M20, foreign sources remained the key driver of overall manufacturing investments even though domestic direct investment in the sector saw a leap of 45.5 per cent y-o-y to RM25.9 billion (or 39.6 per cent share).
“China, Singapore, and Switzerland were the top three leading sources of FDI in the sector, while East Malaysia attracted more than one-third of overall manufacturing investment.
“Key subsectors that benefited included petroleum products, basic metal products, electrical & electronics, machinery & equipment, as well as chemicals & chemical products.”
The report explained that East Malaysia (Sarawak: RM15.8 billion and Sabah: RM11.9 billion) attracted more than one-third of overall manufacturing investment during 9M20, followed by Penang (RM10.6 billion), Selangor (RM7.3 billion), and Johor (RM5.7 billion).
It said, that key beneficiary subsectors included petroleum products including petrochemicals (RM15 billion), basic metal products (RM14.5 billion), electrical & electronics (RM7.7 billion), machinery & equipment (RM5.8 billion), chemical & chemical products (RM4.5 billion), food manufacturing (RM3 billion), transport equipment (RM3 billion), as well as scientific & measuring equipment (RM2.1 billion).
These industries make up 85 per cent of total approved investments for the sector.
Overall, Goh said: “We are raising our 2020 full-year approved investment forecast to RM138 billion as the 9M20 total investment approvals have surpassed our initial target of RM100 billion.
“Our new target is circa 32 per cent higher than the actual investments approved during the global financial crisis in 2009.
“This is an encouraging sign that Malaysia remains an attractive investment destination with ongoing efforts by the government to expedite the approval process for investment applications and offer competitive incentives. Higher actualisation of these investment approvals could help jump-start private investments in 2021 and beyond.”
Furthermore, with initiatives announced under Budget 2021 and by MIDA to lure investments amid emerging business opportunities in a post-pandemic new normal and global economic recovery, UOB Malaysia expect overall investments to regain momentum in 2021 to 2022, albeit at a measured pace.
“Actualisation of those investment approved year-to-date could help jump-start private investments in 2021 and beyond. The ratification of the recently signed Regional Comprehensive Economic Partnership (RCEP) by end-2021 should also reinforce Malaysia as a gateway to Asean and beyond, as well as strengthen Malaysia’s trade and investment outlook over the medium term. The tabling of 12th Malaysia Plan (12MP) 2021-2025 in Parliament early next month (January 2021) is another key event to watch as it will outline a development roadmap for Malaysia to recover and be competitive over the next five years, particularly in a post-pandemic new normal,” it said.