KUALA LUMPUR: Malaysia's approved manufacturing investments shrank 48% to RM32.6 billion last year from RM62.8 billion in 2008 as global foreign direct investment (FDI) flows took a hit from the global economic and financial crisis.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed said today the investments were for 766 projects, of which foreign investments accounted for 67.8% or RM22.1 billion.

"The approvals last year still exceeded the average annual investment target of RM27.5 billion set under the Third Industrial Master Plan (IMP3)," he said when announcing the performance of the manufacturing and services sectors here today.

The report was prepared by the Malaysian Industrial Development Authority (Mida).

"Malaysia's economy is expected to grow between 4% and 5% in 2010. Foreign investment inflows in Malaysia are expected to be sustained in 2010," he said, adding that the gross domestic product (GDP) contracted by 3.8% in the January-September period last year before turning around in the fourth quarter.

For the whole year, he said GDP was expected to have shrunk by 3%.

Mustapa said the 766 approved manufacturing projects would create 64,330 jobs, of which 64.9% were in the managerial, technical and supervisory levels and skilled workers categories.

In the services sector, he said 2,720 projects involving RM36.3 billion in investments were approved last year and they were expected to provide 37,357 jobs.

On the approved manufacturing investments, Mustapa said foreign investments accounted for the bulk of the approvals totalling RM22.1 billion or 67.8% of the approved investments.

"Foreign investments in projects with investments of RM1 billion and above totalled RM12.2 billion or 37.3% of the total investments approved, indicating FDI inflows into the country were mainly for quality investments," he said.

The 2009 data showed foreign manufacturing investments were returning to the levels prior to the record foreign investments registered in the last two years.

Domestic investments were RM10.5 billion in 2009 or 32% of total investments approved, he said, indicating domestic investors were still keen on the manufacturing sector.

With manufacturing accounting for 26.8% of GDP in January-September, the sector employed 3.3 million people or 28.4% of the country's workforce.

As for foreign investments, he said they were mainly in chemicals and chemical products, non-metallic mineral products and electronics and electrical products. The three sub-sectors recorded RM16.3 billion in foreign investments.

Mustapa said the trend in projects approved over the last five years was capital intensive in nature. Average capital investment per employee or CIPE ratio from 2005-2009 was RM505,744 compared with RM320,166 from 2000-2004.

Japan was the largest foreign investor, with approved investments at RM7 billion compared with RM5.6 billion in 2008. The bulk of the investments was a project in the chemical and chemical products industry with investments of RM5.6 billion.

Investment approvals from Hong Kong jumped to RM5.3 billion from RM83.6 million in 2008, with investments mainly in chemicals and chemical products and rubber products industry.

However, US investments in 2009 fell sharply to RM2.3 billion from RM8.7 billion in 2008, mainly due to the recent financial crisis.

Approved investments for Singaporean companies totalled RM2 billion last year, almost unchanged from 2008.

Mustapa said strong pull factors and cost-competitiveness continue to attract greenfield investments.

"Of the 766 approved manufacturing projects, 471 were for new projects, involving investments of RM22.1 billion or 67.8% of total investments. Foreign investments in these projects amounted to RM16.4 billion or 74.2% of total foreign investments approved," he said.

Mustapa said existing companies also increased their investments as they expanded and diversified. Their investments totalled RM10.5 billion or 32.2% in 295 projects.

Of the RM10.5 billion, foreign investments totalled RM5.7 billion and domestic investments RM4.8 billion.

Domestic investments were in basic metal products and chemicals and chemical products industries totalling RM2.4 billion.

Mustapa said the aerospace industry recorded approved investments of RM551.9 million. The renewable energy and energy conservation sub-sector recorded approved investments of RM752 million.

For the services sector, he said 2,720 projects involving RM36.3 billion in investments were approved last year.

Of these investments, RM32.9 billion or 90.6% were domestic investments while foreign investments were RM3.4 billion or 9.4%. These projects are expected to provide 37,357 employment opportunities.

The transport segment of the services sector recorded RM7.9 billion in approved investments, energy (RM6.8 billion), financial services (RM4.3 billion), real estate (RM4.2 billion) and telecommunications (RM3.8 billion).

A total of 740 projects with investments of RM5.4 billion were approved for regional establishments, support services and Multimedia SuperCorridor status companies in 2009.