Malaysia is ranked the 16th Top Prospective Host Economy for the period 2013 until 2015, up three spots, according to the World Investment Report 2013 released by the United Nations Conference on Trade and Development (UNCTAD).

The ranking was based on the percentage of respondents selecting an economy as a 'top destination'.

Subtitled "Global Value Chains: Investment and Trade for Development", the report was launched by International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

In 2011, Malaysia was ranked 11th among the top 20 economies with the highest Foreign Direct Investment (FDI) rates of return, or FDI profitability, at 17 per cent, testifying Malaysia as a profitable location to do business.

Malaysia also maintained its ranking as the third largest recipient of FDI in Asean, the report said, adding the country's net FDI inflows last year saw a decrease of 17.4 per cent in investment to US$10.1 billion compared to US$12.2 billion in 2011.

The bulk of Malaysia's FDI inflows were in the manufacturing sector, unlike other Asean countries where investments were in the infrastructure, services and primary sectors, said the report.

"The decline of FDI inflows into Malaysia is in line with the global drop in manufacturing, where UNCTAD attributes it mainly to the decline in the value of greenfield projects," said the report.

It said the manufacturing sector in Malaysia is going through a period of transformation and restructuring, with industry players expected to reduce their investments into low-value sectors and increase their activities in research and development, high knowledge, high value-added and high technology industries.

Meanwhile, Mustapa said the government has undertaken various measures to promote value-added activities, which include adopting an ecosystems approach to promote private investment, encouraging outsourcing activities, and introducing domestic investment initiatives.

He said many large and prominent multinational companies (MNCs) have chosen Malaysia to establish their regional and global operations.

"Many of these MNCs have established structured training programmes to transfer their key competencies to Malaysian employees.

"In the long run, it will create high-income employment opportunities for Malaysians in sectors such as business, accounting, finance, Information Technology, engineering, technical and other new services," said Mustapa.

On the global front, the report said global FDI inflows declined by 18 per cent to US$1.35 trillion in 2012 from US$1.6 trillion in 2011.

"The global rankings of the largest recipients in FDI reflect that developing countries took the lead in FDI last year, accounting for 52 per cent of global FDI flows, notwithstanding FDI inflows to developing countries fell by four per cent compared to 2011," said the report.

UNCTAD projects global FDI inflows this year to remain close to the 2012 level, with an upper range of US$1.45 trillion, and predicts FDI inflows for 2013 and 2014 to rise moderately to US$1.6 trillion and US$1.8 trillion respectively.