Outward%20Foreign%20Direct%20Investment:%20The%20Malaysian%20Experience - PowerPoint PPT Presentation
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Outward%20Foreign%20Direct%20Investment:%20The%20Malaysian%20Experience
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Outward Foreign Direct Investment: The Malaysian Experience Emeritus Prof. Dr. Mohamed Ariff and Greg Lopez Malaysian Institute of Economic Research – PowerPoint PPT presentation
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Title: Outward%20Foreign%20Direct%20Investment:%20The%20Malaysian%20Experience
1
Outward Foreign Direct Investment The Malaysian
Experience
- Emeritus Prof. Dr. Mohamed Ariff
- and Greg Lopez
- Malaysian Institute of Economic Research
2
Presentation Outline
- Key OFDI Trends
- Key Factors
- Push Factors
- Pull Factors
- Strategic Reasons
- Conclusion
3
OFDI as a of South, East and SE. Asia Total FDI
Stock
Source UNCTAD
4
OFDI as of GDP
Source UNCTAD
5
OFDI Flows 1980 - 1992
US million
Source UNCTAD
6
OFDI Flows 1993 - 2005
US million
Source UNCTAD
7
OFDI - Top Ten Locations (1993 -2005)
RM million
Source BNM, various years
8
Trends - Destination (1999 - 2005)
Source BNM 2006
9
Trends - Sectors
Source BNM 2006
10
Trends - Investment Type
- Malaysian controlled companies (GLCs RCCs) -
61 of OFDI (1999 - 2005) - Mainly through equity joint ventures
- Funded internally (62)
11
Trends - Investment Type
- OFDI by NRCCs - 39 (1999 - 2005)
- NRCCs investment were essentially extension of
inter - company loans to related companies abroad
(91)
12
Structural Push Factors
- Economic growth - RGDP grew at 6.5 on average
from 1957 - 2005 - GDP per capita (at current prices) grew on
average at 7.0 (1957 - 2005) - Gross domestic savings increased from 29 of GDP
in 1981 to 43 in 2005.
13
Push Factors - Tight Labour Market
Unemployment
Source Nambiar 2007
14
Push Factors - Private Sector Development
- No. of listed companies on the MSE grew at an
average of 5.6 per annum (1981 - 2001). - KLCI grew at an average of 3.1 per annum (1981 -
2001) - Prior to crisis, MSE was the 4th largest in Asia
(market capitalisation)
15
Cyclical Push Factor
- Recession of 1985 and Financial Crisis of 1998
- Market saturation in certain sectors
16
Institutional Push Factors
- Government policies
- Economic Nationalism and affirmative action (1970
- 1980s) - Tax exemption, tax incentives special funds
(1991 - present)
17
Key Determinants
- Rising cost of labour especially in relation to
the cost of labour in the region - Wealth accumulation (individuals companies)
- Raise capital cheaply in the MSE
18
Structural Pull Factors
- Low cost of factor (labour, raw material) prices
in the region (labour intensive companies -
manufacturing textiles) - Markets
- Resource seeking (PETRONAS, plantation companies
19
Institutional Pull Factors
- Investment and Trade Agreements
- Investment Guarantee Agreements
- ASEAN Free Trade Agreement
- The WTO Agreement
- Institutions
- MIDA, MATRADE and EXIM Bank
- MASSA MASSCORP
20
Strategic Pull Reasons
- South - south co-operation
- Diversifying markets (moving away from the U.S.,
E.U. and Japan) - Access to resources (oil gas)
21
Findings
- No conclusion can be made as the nature of the
study is limited - Two trends can be identified
- State led
- NRCCs (inter - company loans)
- State involvement in OFDI significant
- GLCs are significant players
- Other push and pull factors similar to general
reasons for OFDI - More in depth research using firm level data is
needed.
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