by Kathy Fong
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KUALA LUMPUR: For the first time, Malaysia saw its outflow of foreign direct investments (FDIs) surpass the inflow last year. What this effectively means is that there were more funds flowing out for investments abroad than FDIs coming into the country.

 

According to United Nations Conference on Trade and Development (Unctad) Investment Report 2008 that was released yesterday, the country’s outflow of FDIs surged nearly 82% to RM38 billion, exceeding the inflow of RM29.04 billion by RM8.96 billion, or 31%.
Last year’s inflow itself was a 39% increase from RM20.9 billion in 2006.

 

“The sizeable increase in outward investments was driven by cross-border acquisitions by firms, particularly in finance and other services, telecommunications and the extractive industries,” Datuk Zainal Aznam Yusoff, a member of the Economic Council of Malaysia, told a press conference yesterday.

 

He said the country’s overseas investment has been rising in recent years, reflecting local companies’ ambition to grow their businesses abroad for various reasons.

 

Statistics in the Unctad report show that Malaysia’s FDI outflow expanded from RM15.9 billion in 2004 to RM38 billion last year.

 

Zainal explained that one push factor for local enterprise to cross the border was to seek resource-related assets such as plantation land in Indonesia. Another investment abroad was Petroliam Nasional Bhd’s (Petronas) exploration for oil elsewhere to replace depleting domestic reserves.

 

Petronas came in second in terms of total foreign assets after Hong Kong’s Hutchison Whampoa Ltd, in a compilation of the top 100 non-financial transnational companies in developing countries.

 

Other Malaysian non-financial companies that made the list for having sizeable investments abroad are YTL Corp Bhd, Genting Bhd, Telekom Malaysia Bhd, Sime Darby Bhd and Maxis Communications Bhd. Being on the UN’s list implied that these companies’ foreign assets have grown substantially over the years.

 

In terms of FDI stock, Malaysia’s outward stock spiked 61.3% to RM201.3 billion last year from RM124.8 billion in 2006. Over the same period, it recorded a growth of 42.5% in inward stock to RM265.2 billion from RM186 billion.

 

FDI stock is a measure that values the share of capital and reserves, including retained profit attributable to the parent enterprise, plus the net indebtedness of affiliates to the parent company. Inward stock is the valueof capital and reserves in the economy attributable to a parent enterprise resident in a different economy while outward stock is the reverse.)

 

On the global front, Unctad said worldwide FDI flow rose 30% to an all-time high of US$1.88 trillion despite the financial crisis that originated from US subprime loans in August last year.

 

The organisation noted the worldwide economic slowdown appeared to contribute to lower FDI flow this year compared with last year.

 

“The unprecedented levels of cross-border mergers and acquisitions (M&As) contributed substantially to the global surge in FDI last year,” it added.

 

The report said the value of M&A transactions amounted to US$1.64 trillion in 2007, or 21% higher than the record set in 2000. Cross-border M&As involving private equity funds almost doubled to US$461 billion, accounting for over one- quarter of the value of such transactions worldwide.

This entry was posted on Thursday, September 25th, 2008 at 9:42 pm and is filed under Newsclipping. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.