Posts tagged FDI
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
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.
More companies listed on the Bursa Malaysia (Malaysian stock market) are potential acquisition targets for Japanese companies as investment continues to flow in, thanks to a strong yen and a geographic diversification drive gathers pace in Japan.
The momentum was already underway before Japan’s 11 March 2011 disasters highlighted the need for more offshore activity. Between January 2009 and July 2011 Japan was involved in 513 M&A deals worth US$14.2 billion in emerging Asia, reports The Edge Malaysia. This figure includes Chinese and Indian deals as well as those in Malaysia and Indonesia.
Focusing on Malaysia alone, however, Japanese FDI rose 537% year on year in 2010 (compared to 109% in other Southeast Asia), accounting for 12% of all foreign direct investment inflow. Japan was involved in 34% of Malaysian M&A activity.
But this activity might not be what you’d expect from Japanese deals, and is certainly different to those of the previous two decades. UOB Kay Hian Malaysia Research said it’s not the electronics and electrical sector attracting Japanese interest this time. Instead, the Japanese are looking at logistics, financial, healthcare and consumer industries, as well as heavier industries where Malaysia offers a better deal on energy and logistics costs. The research house said Japanese companies were also prepared to pay more for greater control of their acquisitions, like Asahi Group’s purchase of Malaysian bottler Permanis, and Mitsui & Co’s 30% stake in Integrated Healthcare Holdings. Companies that already trade with Japanese firms are seen as more attractive.
source & article: The Edge Malaysia
Indonesia’s economy could probably cope with a sudden outflow of ‘hot money’ from its economy but should still be wary of risks presented by such bubbles, said the government.
Bambang Brodjonegoro, The Finance Ministry’s head of fiscal management, said his country should minimize hot money scenarios, or short term investors chasing quick profits on the country’s fast-rising economy. Channeling investments into long-term FDIs (foreign direct investors) and government bonds was preferable to achieve stability and growth.
Foreign investors have become fascinated with so-called ‘emerging’ economies in the past few years as growth opportunities in the developed West have dried up and countries like China, India and Indonesia have boomed. Indonesia’s premier market index, the Jakarta Composite Index (JCI) has risen 6% this year to 4,130.80 and its currency, the rupiah, has increased its value by 5.5% against the US Dollar, to Rp 8,491.
The government may well be getting its wish, as foreign sales of Indonesian government bonds have also risen 31% to Rp 248 trillion (US$29 billion) with 15 year bonds yielding an attractive 9%. The Finance Ministry said foreign investment could reach 40% of all bond holdings after the government sells a further Rp 40 trillion by the end of this year.
Indonesia has suffered in the recent past from rapid foreign capital flight, once during the Asian Crisis of the late 1990s and less severely after the 2008 global financial crisis, which still devalued the rupiah. With the effects of both crises still looming large in memory, fears of hot money and moves to curb short term investments are common across the region.
source & article: The Jakarta Globe
Longer-term investment inflows into Indonesia are replacing riskier short-term investments, a condition showing more confidence and more favorable to economic growth.
According to The Jakarta Post, Bank of Indonesia (BI) data shows foreign direct investment (FDI) increased from US$2.48 to $2.9 billion in the first quarter of 2011, a 17% rise. At the same time, the trend was reversed in shorter-term foreign portfolio investment (FPI) went from $6.1 billion to $3.56 billion.
BI spokesman Difi A. Johansyah said investment loans rose 29% on a year-on-year basis as of May 2011, and would build Indonesia’s economic capacity for growth without negative impacts, like economic overheating. Increased production capacity would ensure ample supply to meet demand, mitigating inflation.
The trend will move even further towards FDI and longer-term investments should Indonesia achieve investment-grade rating from Moody’s, Fitch Ratings and Standard & Poor’s, enabling influxes from large foreign institutional investors. Indonesia’s central bank also recently revised the country’s growth forecast for 2011 from 6.4% to 6.8% on improved prospects for investment and exports.
source & article: The Jakarta Post
More good news of new Japanese investments for Malaysia as Prime Minister Najib Razak completed a short but high-level tour last week. Japanese firms have reportedly confirmed a commitment to RM3.8 billion (US$1.26 billion) in new investments between now and 2012, with another RM5.22 billion ($1.72 billion) to follow from 2013-15.
Key targets for investment are industries specializing in electrical and electronic goods, biomass, metallics and substrates used in the manufacture of hard drives. The total includes Tokuyama Corporation’s RM3.7 billion ($1.22 billion) investment in a polysilicon project in Bintulu, Sarawak state. Polysilicon is a vital ingredient in making electronics and solar photovoltaic (PV) cells.
During the tour, Najib met with Japanese Foreign Minister Takeaki Matsumoto, held discussions with representatives of the Japan-Malaysia Economic Association (Jameca) and delivered the keynote address at the 17th Nikkei International Conference.
Matsumoto apparently asked Najib to consider Japanese firms for major Malaysian infrastructure projects arising from the Economic Transformation Programme (ETP), such as the proposed Mass Rapid Transport system. He also expressed support for the new Malaysia-Japan International Institute of Technology, due to begin in September, and promised a special loan from his government to guarantee its success.
For its part, Malaysia has lifted a travel advisory it issued for its citizens going to Japan after the Fukushima nuclear incidents, and offered its expertise as an intermediary between Japanese firms seeking foreign investments of their own in lucrative Middle East markets.
source & article: Business Times
The CEO of the Iskandar Regional Development Authority (Irda), Ismail Ibrahim, said he was ‘glad’ at the level of knowledge and interest of Iskandar Malaysia in the European Union. Attending a meeting of the Asean-EU Business Council in Singapore, he said European investors were interested to hear which sectors were available to them and added that Irda will organize more investment roadshows to spread the message.
Irda would also arrange a tour of major sites in Iskandar Malaysia’s 2,217 sq km for locally-based European businesspeople. The special economic zone has attracted RM73 billion in investments so far, with foreign direct investment FDI already coming from EU members the United Kingdom, France, Spain and the Netherlands.
The day’s events also included a European Day Celebration luncheon for the EU’s 60th anniversary organized by the European Chamber of Commerce (EuroCham). 200 business leaders from Asean and the EU attended, along with guest of honor Malaysian International Trade and Industry Minister Mustapa Mohamed.
source & article: The Star Online
Indonesia has achieved 22.3% of its domestic and foreign direct investment targets for 2011 in the first quarter with a total Rp 53.6 trillion (US$6.197 billion) realized, according to figures released by the Indonesia Investment Coordinating Board (BKPM). Of the total, Rp 14.1 trillion is domestic investment and Rp 39.5 trillion is from foreign sources.
That’s a 110.4% increase on domestic investment totals and a 11.8% increase on foreign direct investment for the same period in 2010.
“The investment realization on the first quarter/2011 shows a significant improvement, compared to that of the same period on 2010. This improvement is seen from the increased distribution and amount of investment flows to the outside of Java and the number of domestic direct investment,” said BKPM Chairman Gita Wirjawan. Projects located outside Java have seen a 24% increase in investment.
The domestic sectors benefiting most from the increases are Transport, Storage and Communication (Rp 2.7 trillion; 6 projects); Non Metallic Mineral Industry (Rp 2.4 trillion; 12 projects); Electricity, Gas and Water Supply (Rp 1.6 trillion; 12 projects); and Food Crops and Plantation (Rp 1.4 trillion; 54 projects).
Biggest beneficiaries of foreign investment are Mining (US$1.0 billion; 79 projects); Electricity, Gas and Water Supply (US$0.6 billion; 15 projects); Transport, Storage and Communication (US$0.5 billion; 35 projects); Food Crops and Plantation (US$0.4 billion; 74 projects); and the Food Industry (US$0.3 billion; 61 projects).
The five largest foreign investors in Indonesia have remained constant: Singapore (US$1.1 billion); United States (US$0.4 billion); Japan (US$0.3 billion); British Virgin Islands (US$0.2 billion); and the United Kingdom itself (US$0.2 billion).
BKPM said the increases showed even more confidence in Indonesia’s growth and economic policies, which would in turn help the investment climate by improving services for investors at national and local levels.
Big things continue to happen for the Iskandar Malaysia economic zone near Singapore. Business Times reports Bio-XCell Sdn Bhd says it’s about to announce a new international investor for the zone’s biotechnology park, with another two lined up to join in the next couple of years.
Bio-XCell, which is at the center of the park’s development and its main promoter, is a joint venture between Malaysia’s Biotechnology Corp Sdn Bhd and UEM Land Holdings Bhd. The three prospective tenants helped secure extra funding from Maybank for the project and have even been named: India’s Biocon Ltd, France’s Metabolic Explorer and US-based Glycos Biotechnologies Inc.
Maybank’s new contribution is worth RM250 million (US$82.45 million) as a 12-year Islamic term facility, enabling the development’s first phase to be completed. The first phase’s total RM950 million ($314.45 million) cost will also be funded by foreign direct investment (FDI) and sale of shares to the public. About RM500 million worth of FDI has already been raised.
Iskandar Malaysia’s biotechnology park is a 29-hectare, 1.125 million sq ft space dedicated to making biotechnology a bigger contributor to Malaysia’s GDP, as well as harnessing the economic advantages of its location in the Johor Bahru growth corridor. The plan is to grow the park in three stages over six years. Bio-XCell’s definition of ‘biotechnology’ includes “biopharmaceutical, industrial technology and green chemical” industries not related to agriculture.
source & articles: Business Times
Singapore has been playing a big role in Malaysia’s recent foreign investment spike. As of September 2010, there are 75 approved Singapore-backed projects worth a total of US$1.134 billion.
Malaysian Minister of International Trade & Industry, Mustapa Mohamed and Minister Idris Jala spoke to about 400 corporate leaders at the Forbes Asia breakfast meeting, in partnership with the Singapore Business Federation (SBF). Both the ministers and SBF chairman Tony Chew drew attention to the immediate cross-border benefits of Malaysia’s Economic Transformation Programme (ETP), and reassured investors that the Malaysian government remained fully committed to liberalization.
Under the ETP, restrictions on advertising for international recruits and 10 year position term limits have been repealed, and passport/visa processes have been streamlined for workers on both sides of the border.
source & article: pemandu.gov.my