Business

Friday August 7, 2009

Economist: Malaysia's Investment environment must improve


KUALA LUMPUR: Despite talk of a relatively robust recovery among emerging markets, not all is sunny on the local economic front.

International investors are questioning Malaysia’s regional economic competitiveness as they begin to evaluate potential post-crisis investment opportunities in the Asian region.

Deutsche Bank Group global chief economist Dr Norbert Walter said Malaysia should make a concerted effort to improve its investment environment if it wanted to remain a competitive economic force among other emerging markets in the long run.

Dr Norbert Walter ... ‘Investment in Malaysia has been falling by almost 11% year-on-year.’

He cited political instability, uncertainty in the constitutional application of syariah law, and the lack of more concrete plans to develop local infrastructure as some of the key structural and institutional problems that might mar the country’s ability to attract and retain capital.

“Investment in Malaysia has been falling by almost 11% year-on-year for the past two quarters. Malaysia’s political volatility seems to be harming businesses and deterring future investment opportunities,” he told a media briefing on the worldwide recession yesterday.

When asked on the weakness of the ringgit against the greenback relative to other commodity-based currencies such as the Australian dollar, Walter speculated that this too might be due to investment capital outflows.

While the former International Monetary Fund economist lauded the Government’s prudence in diversifying its investment in sectors other than oil and gas such as the manufacturing sector, he urged the hasty embrace of renewable energy sources.

“Malaysia should capitalise on its geographical advantage as a tropical nation and explore its potential as a solar and biomass energy hub,” he said. On Malaysia’s economic recovery from the current crisis, Walter forecast an acceleration of growth well into 2010.

According to him, Malaysia’s recovery, however, would be slower than that of Singapore due to its greater reliance on foreign demand for commodities. The latter had already seen a recovery in the past month.

He alluded regional cooperation between Asean nations as a source of future growth and stability. “Deeper integration between Asean countries is definitely needed for economic reasons and for representation in the international forum,” he said, adding that Malaysia should promote Putrajaya as the official headquarters for Asean, even calling it the “Brussels of Asia”.

He went on to praise Bank Negara for promoting research of a potential integrated Asian monetary regime.

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