Posts tagged economic policy

‘Wave’ of FDI flows into Malaysia in 2011

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There has been a ‘wave’ of foreign direct investment (FDI) into Malaysia this year, totaling RM31.7 billion (US$10.6 billion) to the end of July 2011. More than half of this has flowed to the manufacturing sector and the top sources are Japan, Singapore, the Netherlands and Taiwan.

Malaysia’s Minister of International Trade and Industry, Mustapa Mohamed, announced the figures and said government initiatives such as the Economic Transformation Programme (ETP) had attracted international interest. Domestic investment had also improved, with RM4.3 billion ($1.44 billion) also going to manufacturing projects.

Business Times reports a breakdown of manufacturing investments shows RM6.5 billion ($2.2 billion) went to electronics and electrical products, RM2.4 billion ($804 million) to basic metal products, RM1.7 billion ($570 million) to chemicals and chemical products, and RM1.1 billion ($369 million) to food manufacturing.

Mustapa also said the figures reflect a shift towards high-value-added, more capital intensive (investment per employee) industries as Malaysia became less competitive at the lower-pay end against countries like China and Vietnam. He promised more new opportunities and growth areas as the ETP chases its 2020 goal of RM1.2 trillion ($40.23 billion), 92% of which the government wants to come from the private sector.

Total investment in Malaysian projects, including both foreign and domestic, was RM47.2 billion ($15.8 billion) in 2010.

source & article: Business Times

The Economist: good policies creating a strong Penang

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“A combination of low cost and high technology” is the in-a-nutshell reason The Economist gives for the beginnings of Penang’s success in the healthcare and electronics industries. Penang state and its neighboring region on the mainland now account for 21% of Malaysia’s GDP as a result of its technology focus, as well as a strong rule of law, intellectual property protection and ease of doing business.

The road to technology riches was paved in the 1970s when Penang became Malaysia’s first free-trade zone, but the article also credits Penang’s current government for freeing up the local economy further by removing economic privileges and combating corruption and waste. For its part, the federal government has also invested heavily in Penang with massive infrastructure upgrades such as a duplication of the bridge to the mainland and extensions to the main seaport and international airport.

Penang has historically enjoyed a strategic trading position thanks both to its physical location between China, India and Southeast Asia, and the well-connected multi-ethnic mix that reflects this. High-tech industries have created a skilled local workforce of technicians and engineers, the capital Georgetown is enjoying a revival, and foreign companies are moving in once again.

source & article: The Economist

Could Indonesia overtake Thailand as an auto manufacturer?

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Will Indonesia overtake Thailand as the automotive manufacturing center of Southeast Asia? Thanks to increased investment from overseas carmakers, government incentives and a growing domestic demand for vehicles, many think so.

Thailand has traditionally been the country of choice for international manufacturers. Despite its own large middle-class customer base and strong production figures (1.64 million vehicles in 2010) it faces new pressure from rising costs and a new government-set minimum $10 daily wage for workers. Companies produced a total 650,000 vehicles in Indonesia and sold 764,000, but forecasts predict both numbers could top a million by 2013.

The Jakarta Globe reports:

Indonesia is already expecting more than $1 billion in investment in the automotive sector starting this year. Nissan recently announced a $250 million expansion plan; Suzuki has announced an $800 million expansion; Chrysler a $100 million expansion; Daihatsu just carried out a $246 million expansion; and BMW a $12 million expansion. India’s Tata also expressed interest in building a production base in Indonesia.

 

Peugeot and General Motors have also announced plans to assemble vehicles in Indonesia. The government also intends to provide tax breaks for investments over Rp1 trillion (US$117 million), though no formal arrangement has been made yet.

Indonesia’s auto manufacturing base is in Bekasi and Karawang, near Jakarta and the government-set minimum wage of $8 may see Thailand-based companies chase lower costs. As always, Indonesia’s infrastructure inadequacies will be an issue and the country would need to address them before it could become a serious global export leader, an analyst said.

source & article: The Jakarta Globe

 

Indonesia to give tax holidays to major foreign investors

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Indonesia is considering tax holidays for major foreign direct investors, targeting new and existing businesses in an attempt to bump the country’s FDI up to a total Rp240 trillion (US$28.2 billion) by the end of 2011.

Finance Minister Agus Martowardojo said details of the plan were still being discussed, but would probably feature 5-10 year tax breaks for investors in the base metals, telecommunications equipment, oil refinery, petrochemicals, machinery and renewable energy industries.

The new plan would also cover businesses which had been in operation less than a year. Projects such as a $6 billion joint venture by South Korea’s POSCO, a $4.5 billion petrochemical complex by Honam Petrochemical Corp (also of South Korea) and a $8-9 billion oil refinery from Kuwait Petroleum Corp were said to be waiting for an announcement on foreign investor tax breaks before going ahead.

Foreign direct investment (FDI) into Indonesia in Q2 is already up 21% on the same period last year, thanks mainly to the mining sector. The government is also mulling plans to give tax holidays to smaller investors employing 100-300 people, determined to take Indonesia’s economy into the global Top 10 by 2025 and making much-needed improvements to the country’s infrastructure.

Corporatize sports funding, says Malaysian govt.

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Malaysia’s government wants all sports development funding to come from private sources by 2020, saying it’s (yet) another reason the country should move from a planned to a market-based economy.

Financial sports events and development nationwide is becoming more expensive, and sports organizations need to move away from sponsorship to a corporate model with “dynamic return on investment,” said Sports Minister Ahmad Shabery Cheek at the Sports Business Conference.

Sports funding is also part of Malaysia’s grand Economic Transformation Programme (ETP) and 2011-12 has been designated Sports Industry Year (SIY) to encourage more economically sustainable, privately funded sports initiatives. Sports activities contributed about RM30.2 million to Malaysia’s GDP in 2009.

source & article: Business Times

 

Malaysian govt to start selling off its enterprises

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The Malaysian government is embarking on a rationalization of its GLCs (government-linked companies), and has identified 33 it plans to sell off, list, or partly-sell. At least 21 of those firms will see complete privatization by the end of 2012, as the government continues to review its role in Malaysian business.

The government said it doesn’t want a ‘fire sale’ of its companies and will ensure it receives ‘maximum value’ with each sale. It has not revealed exactly which companies it plans to divest, nor is it announcing how much it plans to earn from the rationalization. It has also identified four major areas which will still require government involvement in future: areas of business involving national security (including rice production); those with long gestation periods (like nanotechnology); vital infrastructure and transport projects; and those designed to increase Malaysia’s Gross National Income (such as the economic corridor developments).

According to The Star, the Malaysian government controls such major companies as Petronas, Felda, KTMB and state-level companies, while listed ones include Affin Holdings Bhd, Axiata Group Bhd, BIMB Holdings Bhd,Chemical Co of Malaysia Bhd, Malaysia Airline System Bhd, Malayan Banking Bhd, Tenaga Nasional Bhd, the UEM Group, TH Plantations Bhd and Sime Darby Bhd. The government also operates major investment companies like Kumpulan Wang Simpanan Pekerja (EPF), Khazanah Nasional Bhd,Permodalan Nasional Bhd (PNB), Lembaga Tabung Haji (LTH), Kumpulan Wang Persaraan (KWAP) and Lembaga Tabung Angkatan Tentera (LTAT).

The plan is another Strategic Reform Initiative under the government’s Economic Transformation Programme (ETP). Industry representatives were generally positive on the announcement, saying it would increase liquidity and attract larger investors to Malaysia.

source & article: The Star Business

Indonesia needs more reform to reach potential

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Indonesia could exceed projections and grow up to 6.4% this year, says another banking report, while adding its voice to cautions that economic reforms must accelerate in order to do so. The country won’t see super growth of 8-9% without infrastructure and manufacturing industry development, continued land reform and increased government spending.

This report comes from UK-based Standard Chartered Bank (StanChart) and is the latest in a string of calls for Indonesia to improve its economic foundations to achieve its potential. Only 5% of US$145 billion in infrastructure projects earmarked for President Susilo Bambang Yudhoyono’s first term (2005-09) have been realized, and government spending was a deficit of 1.5% of GDP, less than the 1.8% or $14.5 billion. Even that is an improvement on 2010′s 0.6% despite a budget target of 2.1%, according to the Jakarta Globe.

The World Bank agreed with StanChart’s claims, keeping its growth projections at 6.5% for this year and next, and adding that “poor infrastructure was “one of the biggest obstacles to firms operating in Indonesia.” The Bank’s chief economist Justin Yifu Lin said Indonesia’s destiny was in Indonesians’ hands, and that with more government discipline it could replicate other Asian countries’ emergence from agricultural to developed economies and join the world’s top 10.

source & article: the Jakarta Globe

Malaysia to draw up more regional development plans

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Like many emerging countries in the region and around the world, Malaysia understands that economic development regions can be great drivers of growth if done properly. While Johor’s Iskandar Malaysia has been getting most of the press recently, there are also plans to transform four other regions around the country.

They are: Georgetown and the Northern Corridor Economic Region (NCER); Kuantan and the East Coast Economic Region (ECER); Kuching and the Sarawak Corridor of Renewable Energy (SCORE); and Kota Kinabalu and Sabah Development Corridor (SDC). Plans to focus on these regions have existed for at least four years, but the government’s Performance & Delivery Unit (Pemandu) is accelerating efforts with specific transformation programmes and investigative laboratories to take them to the next level of growth.

Pemandu said “The Regional Cities and Economic Corridors Transformation Programmes will build on the excellent work done to-date. It will take the development achieved to-date to the next level to build out regional and global hubs in their economic areas of specialization.”

source & article: MIDA, Pemandu (PDF)

 

15 new initiatives announced for Malaysia’s Economic Transformation Programme

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Malaysia yesterday announced 15 initiatives, including nine new projects and seven recaps, as part of its Economic Transformation Programme (ETP). According to Prime Minister Najib Razak, the ETP is already bearing fruit despite running for only a short time.

Yesterday’s announcement was the sixth regular update of the ETP, and sees the programme reach 50% (or 65) of its 131 ‘Entry Point Projects’ launched. The 15 new initiatives promise to bring in RM2.77 billion (US$913.8 million) in investment, add RM66.31 billion ($21.87 billion) to Malaysia’s Gross National Income and create 36,595 new jobs by the target year of 2020.

The initiatives (with their national key economic areas) are: (more…)

New one-stop shop for Malaysian petroleum industry

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Malaysia is about to set up a central coordination and promotion center called the Malaysian Petroleum Resource Corporation, designed to make it easier for foreign companies in the oil field services & equipment (OFSE) industry to invest in Malaysia.

It’s hoped that by attracting more foreign OFSE producers to Malaysia with its cost competitive and more business-friendly environment, the country can build its expertise in the area. Sights are set on some 10-20 prominent companies, with the hope they could base 10% of their global operations in Malaysia. Malaysian companies in deepwater exploration would also benefit from foreign technology and skills.

Malaysian Deputy Prime Minister Muhyiddin Yassin announced the new one-stop center at the 13th Asian Oil, Gas and Petrochemical Engineering Exhibition (OGA 2011) in Kuala Lumpur this week.

OFSE companies would benefit from Malaysia’s proximity to growing markets in the region, which is projected to consume about 420,000 barrels of oil a day by 2015 and should grow opportunities in the midstream logistics market for oil and oil product storage. The OFSE industry on the whole has grown 25% in the past few years, and is reportedly worth RM800 billion (US$264.7 billion) globally.

source & article: MIDA

 

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