Malaysia bled FDI at over twice the rate of Asean in 2020, UN agency finds

KUALA LUMPUR, Jan 25 — Malaysia lost foreign direct investment at a worse rate than both its neighbours and the rest of the world during the pandemic-hit 2020, according to the United Nations Conference on Trade and Development’s (UNCTAD) Investment Trends Monitor.

UNCTAD determined that Malaysia’s FDI last year was down 68 per cent from 2019 and amounted to just US$2.5 billion (RM10.1 billion), compared to the Asean region that lost 31 per cent on average to reach US$107 billion.

Globally, all FDI contracted by 42 per cent, going from US$1.5 trillion in 2019 to US$859 billion last year went Covid-19 hit.

“FDI flows to developing economies decreased by 12 per cent (to an estimated US$616 billion). The decline was reflected across all types of investment: the value of announced greenfield projects (-46 per cent), the number of cross-border project finance deals (-seven per cent) and the value of cross-border M&As sales (- four per cent).

“FDIs in developing Asia fell by four per cent to an estimated USD476 billion in 2020, the mildest FDI contraction among all regions,” the UNCTAD report said.

The report said Thailand’s FDI contracted by 50 per cent to US$1.5 billion, mainly due to a large divestment, pointing to the sale of Tesco, United Kingdom to a Thailand investor group for US$9.9 billion)

“FDI flows in the Philippines bucking the trend, rose by 29 per cent to US$6.4 billion,” the report added.

Elsewhere in the region, Singapore, Indonesia, and Vietnam registered FDI declines of 37 per cent, 24 per cent, and 10 per cent, respectively.

UNCTAD said that such a level of decline in FDI had not been seen since the 1990s and was over a third more severe than in the aftermath of the 2008-2009 global financial crisis.

It added that despite projections for the global economy to recover this year — albeit hesitant and uneven — it expects FDI flows to remain weak due to uncertainties surrounding “evolution of the Covid-19 pandemic.”

The organisation had projected between a five and 10 per cent FDI slide for 2021, in last year’s World Investment Report.

“The effects of the pandemic on investment will linger.

“Investors are likely to remain cautious in committing capital to new overseas productive assets.

“For developing countries, the prospects for 2021 are a major concern,” James Zhan, director of UNCTAD’s investment division said.