[COLUMNIST] Malaysia's FDI Conundrum: The Falling Ringgit and Questions Surrounding Budget 2024

KUALA LUMPUR: Recent revelations concerning Malaysia's Foreign Direct Investment (FDI) figures have stirred the nation's political and economic waters.

Earlier in the year, Prime Minister Anwar Ibrahim celebrated an impressive RM 170 billion in foreign investment from China, resulting from 19 Memorandums of Understanding (MoU) signed during a visit to Beijing.

The announcement was lauded by various sections of his administration as evidence of Malaysia's rising appeal to foreign investors under his stewardship.

However, the ebb and flow of politics means perceptions can change quickly. Numerous experts have begun scrutinising the declared amounts, sparking widespread debates about the authenticity of the announced figures.

The spotlight on these figures intensified when Budget 2024 was presented. Documents revealed that only RM 132.6 billion of investments were sanctioned in the first six months. From this, just RM 63.3 billion was attributed to FDI.

When juxtaposed against the RM 170 billion allegedly sourced from China, this disparity warrants further examination. There's a need for more specificity regarding the RM 170 billion figure. Was it a projection, a long-term goal, or an aggregate over multiple years?

The ambiguous nature of these statistics somewhat clouds the administration's stance on transparency. It's not just the amount; the source of the investment also matters. China's overseas investments have frequently been viewed with caution.

The term "debt-trap diplomacy", particularly in connection with China's Belt and Road Initiative (BRI), raises concerns about nations becoming ensnared in unmanageable debts, potentially leading to a compromise in their strategic assets. Sri Lanka's Hambantota Port saga is often cited as a cautionary tale in this narrative.

The Ringgit's fluctuating health is another factor weighing on economists' minds. It's a known axiom that currency strength is a reflection of international confidence. In light of these recent developments, the Ringgit's decline might be indicative of deeper economic concerns.

Budget 2024, meanwhile, has its share of critics. Economist, Professor Geoffrey Williams expressed reservations about the budget's lack of focus on certain areas, including TVET and gig-economy training allowances.

He was also sceptical about the RM44 billion earmarked for loans to micro-enterprises, suggesting that the real beneficiaries might be intermediaries rather than the enterprises themselves.

Trust is the bedrock of international finance. The current ambiguity surrounding Malaysia's FDI numbers, coupled with tepid responses to Budget 2024, might be undermining that essential trust.

The global investment community gauges various elements when determining investment strategies, and a nation's credibility is paramount. If there's a sense of opacity or inconsistency, potential investments could be rerouted.

The Ringgit's depreciation can be attributed to numerous factors, but it's impossible to overlook the developments in Malaysia recently. The nation is at an inflection point, with public confidence wavering.

The onus now rests on PM Anwar to offer clarity.

Can the government institute measures to restore faith in Malaysia's economic integrity and vision? Only time will tell, but the world, especially Malaysians, watch keenly.

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* Ahmad Zaim Ahmad Tawfek was an assistant to Federal ministers in formulating economic, youth and foreign policies for Malaysia.

** The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the position of Astro AWANI.