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Malaysia: Towards Global Competitiveness

Discover how companies in this Asian nation are poised to continue growing even in the midst of a financial meltdown.

Nov 08
While international economic uncertainty continues, Malaysia is bucking the market trends. Indeed, despite the current global financial meltdown and talk of a worldwide recession hanging over Corporate America in developed and emerging economies alike, Malaysia is not feeling the impacts.
Malaysia continues to outperform many nations in its efforts to attract foreign direct investment, according to the Malaysian Industrial Development Authority (MIDA). While Malaysia is not totally insulated from the crisis, preemptive measures have been taken, should the crisis reach Malaysia's shores.

Malaysia is standing out amid panicked global markets for two key reasons: strong economic fundamentals and safeguards the nation put in place in the wake of learned lessons from the 1997-1998 Asian financial crisis. Malaysian financial institutions remain resilient, and the nation is one of the top-10 least-affected countries amid the worldwide financial crisis.

Consider the statistics: Malaysia's Gross Domestic Product (GDP) is expected to grow between 4 percent and 5 percent in 2008. While that growth may slow somewhat to a predicted 3 percent to 4 percent in 2009, the nation is well positioned to sustain gains through the economic downturn.

Malaysia's current account surplus also bodes well for this country, which many call the Gateway to Asia. Malaysia reports a 16-plus percent GDP surplus and international reserves of $107 billion as of Oct. 15, 2008. Those reserves - which are four times the short-term external debt - could finance nearly nine months of retained imports.

These are a few of the reasons why global companies are still finding their way to Malaysia with new investments, despite intense competition from neighboring countries and the financial crises in Western nations. In fact, in the first eight months of 2008, MIDA approved a total of $10.7 billion of foreign investments, surpassing the $9.76 billion of foreign investments approved in the whole of 2007. Those investments were largely in basic metal, electrical products, chemical and chemical products, transport equipment, and food products.

Malaysia is becoming more competitive all the time. Malaysia ranks 20th for its ease of doing business out of a total of 181 economies surveyed in the World Bank Doing Business 2009 report, and fourth with regard to protecting investors. A.T. Kearney's annual Global Services Location Index ranked Malaysia among the top-three attractive locations for off-shoring and outsourcing services in 2005, 2006, and 2007.

And, according to the World Investment Report 2007, Malaysia ranks third among ASEAN member states in terms of FDI. The country is gaining a reputation as a good alternative to China in manufacturing circles. Though Malaysia is slightly more expensive, it produces higher quality goods and its government is easier to do business with.

National Instruments - a U.S. company and a global leader in test, control, and embedded design hardware and software for engineers and scientists - has just announced its first investment in Malaysia to establish an integrated manufacturing, R&D, and operations facility. The Malaysian facility will include a supply-chain management hub, IT development, and a financial services center. The company will be investing about US$80 million in the first and second phases to manufacture and service test, measurement, and automation hardware and software products. This major announcement was made at a press conference held by Malaysian Industrial Development Authority (MIDA).

MIDA is confident that total approved investments in 2008 will exceed the $17.4 billion approved for 2007. For 2009, the environment for FDI will be more challenging given the current global economic scenario, but Malaysia is well positioned to compete on the world scene.

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