KUALA LUMPUR: Malaysia’s foreign direct investment (FDI) inflows increased 12.3% to RM32.9 billion in 2011 from RM29.3 billion in 2010, and the government expects to maintain a similar growth rate this year despite concerns over the global economy.

At the Malaysian Investment Development Authority’s (Mida) annual media conference yesterday, International Trade and Industry Minister Datuk Seri Mustapa Mohamed emphasised that most of Malaysia’s FDI was derived from within Asia.

According to Mida, the five leading sources of foreign investments in approved projects last year were Japan (RM10.1 billion), South Korea (RM5.2 billion), the US (RM2.5 billion), Singapore (RM2.5 billion) and Saudi Arabia (RM2.2 billion). Together, they accounted for 66% of the approved foreign investments in 2011.

“Countries in Asean and the Middle East continue to be the more important partners to Malaysia, though we continue to receive strong interest from investors in Europe,” said Mustapa.

Of last year’s FDI, nearly 60% or RM20.2 billion was directed towards new projects while the remaining 40% went to expansion or diversification.

Mustapa (left) receiving the Malaysia Investment Performance reports from Mida chairman Tan Sri Dr Sulaiman Mahbob yesterday.

The manufacturing sector accounted for the largest share of FDI, contributing 50.1%, followed by the services sector (27.3%), mining and quarrying (22.2%), as well as the agriculture, forestry and fishing sector (0.4%).

In terms of location, the states that received the largest share of approved projects were Selangor (263 projects), Johor (188) and Penang (109). The three states accounted for 560 or 66.2% of the projects approved last year.

Malaysia was ranked as the third largest recipient of FDI within Asean, according to preliminary figures by the United Nations Conference on Trade and Development (Unctad).

Malaysia was positioned behind Singapore and Indonesia, which last year attracted inflows of US$41 billion (RM123.8 billion) and US$19.7 billion respectively.

Unctad said global FDI inflows increased 17% to US$5.1 trillion last year, exceeding the pre-crisis average of US$1.47 billion. However, it is expected to rise moderately to US$1.6 trillion this year due to the adverse spillovers from the eurozone area.

Although Malaysia’s FDI grew at a rapid rate last year, it continued to be in second place behind domestic direct investments (DDI).

DDI continued to be the main driver of the local economy, accounting for 55.4% or RM82.3 billion of total approved investments last year. However, this was a decline from 57.9% in the preceding year.

“Foreign and domestic investors continue to respond positively to the government’s initiatives to invest in new growth areas and emerging technologies, high value-added industries, high technology and capital intensive industries and R&D activities,” said Mustapa.

He said the new growth areas that have managed to attract high levels of investments and are presently undergoing development include the solar, aerospace, automotive and biochemical industries.

In terms of GDP, he said the country is expected to grow between 5% and 6% this year following a growth of 5.1% last year, underpinned by strong domestic demand and economic activities under various government initiatives.

“Private and public investments are expected to increase 15.9% and 7% respectively in 2012, supported by higher direct investments and implementation of the ETP and Second Rolling Plan projects under the 10MP,” Mida said in a report.

This article appeared in The Edge Financial Daily, February 22, 2012.