Confidence is the key

Source: http://www.mysinchew.com/node/42629?tid=12

• Opinion

2010-07-30 14:19

By LIM SUE GOAN
Translated by SOONG PHUI JEE

It is good when the Ministry of International Trade and Industry (Miti) is concerned about the 81% plunge in the country's foreign direct investment (FDI) last year. However, the most important thing is to improve the investment environment and overcome the weaknesses so that we can re-attract foreign investment.

Miti Minister Datuk Seri Mustapa Mohamed has given various explanations for the decline in the FDI, including investments now shifting to infrastructure projects in backward countries and the global economic crisis leading to 37% fall in the FDI globally. But why then are the FDIs of Thailand and Indonesia continuing to grow?

Instead of speculating, it is better to take a more practical approach by trying to understand how foreign investors think and come out with countermeasures

Prime Minister Datuk Seri Najib Razak has unveiled some economic liberalization measures in April this year, including liberalizing with immediate effect 27 service sub-sectors with no 30% bumiputera equity condition imposed on health and social services, tourism, transport, business, computer and related services. However, these are not enough to reverse the decline. It shows that the problems that hinder foreigners from investing here are serious.

It will not help even if the government is going to announce 200 more investment plans by the end of this year if the problems remain unsolved.

The Finance Minister should set up a workshop, accumulate advices from local and foreign entrepreneurs, classify the complaints into different categories and set deadlines to solve the problems within a year.

Foreigners look at several considerations when deciding on whether to invest in a country:

Return rate: China is able to attract so many funds because of its very attractive return rate (a huge market and low labour costs). Malaysia is having a sharp drop in business opportunities. Our outflow of FDI has reached US$8.038 billion last year and the factors including lack of open tendering and contracts directly go to companies and entrepreneurs with backgrounds.

The return rate is related to the increasing labour, government administrative and social costs. If a society is having too many privileges, including racial and political privileges (politicians randomly issue letters of support), it will then violate the principle of fair competition in business.

1. A sense of comfort: If foreigners do not feel comfortable to invest here while being troubled by governmental red tapes and bureaucracy and are worried about the ever changing investment policies, they will withdraw.

   The sense of comfort should also include no worry in employing foreign workers or labours, sufficient expertise to support, as well as stable power and water supply.

   No one will feel comfortable if they always have to pay under the table, struggle with commissions for middlemen or being stuck in traffic jams every time they step out of their homes.

2. A sense of security: The sense of security is a psychological feeling and perception which cannot be measured by a Key Performance Indicator (KPI).

   In addition to maintaining public order, the sense of security also comes from a fair and highly transparent judicial system without corruption and power abuse.

   Only a democratic society with a healthy political system that respects human rights will make foreigners at ease as they know that once they encounter a business or personal problem, they are protected by laws.

   When too many mysterious and fraud cases are left unsettled, it will also affect the investment grade. Therefore, it is a right move for the authority to book those responsible for the Port Klang Free Zone (PKFZ) fiasco.

The key lies on confidence. If foreign investors have confidence in our country, the country's reputation will rebound and for sure, our FDI inflow will also increase.

Sin chew Daily