KUALA LUMPUR, April 10 – Malaysia needs to liberalise its services industry to attract more investment from foreign companies like Tesco, a top official from the country’s main investment promotion agency said today.
Foreign direct investment (FDI) is expected to take a big hit this year due to falling demand from key markets following the global economic slowdown and the country’s premier has said the services sector will be liberalised to prop up the economy.
“We are moving towards that direction,” Afifuddin Abdul Kadir, the deputy director general of Malaysian Industrial Development Authority (MIDA), told Reuters in an interview.“We want to be more relaxed, to open up the services sector. We (earlier) promoted the sector without opening up the industry.”
The services sector is the top contributor to the country's gross domestic product but only a tenth of its investment came from outside the country last year, in contrast with more than 70 percent foreign investment in the manufacturing sector, according to data from the international trade ministry.
Foreign services companies such as retailers need a local partner who owns 30 percent of the set-up, while in manufacturing there is no such restriction.
“Distributive trade services, for example, Carrefour and Tesco, they are asking us (for opportunities to invest), but the only problem there is that this sector is not 100 per cent opened up,” said Afifuddin.
Britain’s Tesco is 30 per cent owned by government-controlled Sime Darby, Malaysia’s biggest company by market value.
This policy has seen Malaysia slip in FDI rankings, according to United Nations data. FDI totalled US$53.58 billion (RM193 billion) in 2006, little changed from US$52.75 billion in 2000, while neighbouring Thailand saw a surge to US$68 billion in 2006 from around US$30 billion in 2000.
Afifuddin said MIDA is aiming at professional services, retail, construction, education, tourism, health, logistics and information-related services to meet its target of US$12.76 billion investment in services in 2009.
Malaysia’s Prime Minister Datuk Seri Najib Razak last month reiterated the government’s aim to push for liberalisation of the services sector to increase its contribution to gross domestic product to 70 per cent from 55 per cent.
No concrete steps for services sector reform have emerged since the prime minister’s announcement and it lags manufacturing significantly in terms of foreign direct investment.
Central bank data shows manufacturing accounts for 45 per cent of foreign direct investment while services forms 27 per cent, even though manufacturing contributes a lower 30 percent to the economy. – Reuters
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