KUALA LUMPUR, Aug 1 — Tun Dr Mahathir Mohamad today defended the Najib Administration over the plunging foreign direct investment (FDI) in the country last year.
Dr Mahathir echoed the explanation made by Prime Minister Datuk Seri Najib Razak that the slowdown in investments was due to external factors.
The former prime minister said that foreign investors currently do not have the funds to pour in the country.
“Today, most countries and foreign business people do not have the money to invest in their own country because their country has a lot of unemployment so we cannot expect much foreign direct investment today,” he told reporters after attending The Loaf Malaysian Premier Bakery 4th anniversary here.
Najib has come under fire from opposition parties for Malaysia’s lacklustre FDI rates, which have fallen faster than regional counterparts such as Singapore and China even while capital outflows dampened private domestic investment.
The WIR 2010 released by the United Nations showed that FDI in Malaysia plunged 81 per cent last year, trailing behind countries like the Philippines, Vietnam, Thailand, Indonesia and Singapore.
The report revealed that Malaysia suffered a large 81.1 per cent drop in FDIs compared to far healthier figures in Thailand (30.4 per cent), Vietnam (44.1 per cent) and Indonesia (44.7 per cent).
In May, Minister of International Trade and Industry Mustapa Mohamed announced that investments in the country for Q1 2010 amounted to RM5.2 billion.
FDIs made up RM3.2 billion of this total, with Singapore, Taiwan and Japan being the biggest contributors.
Mustapa said the investment amount was still relatively low against the total amount of RM32.6 billion in investments received last year.
Najib has been trying to lift Malaysia’s profile as a destination for foreign investment to help the country achieve an average GDP growth of at least 6 per cent per annum over the next five years.
Najib’s administration has insisted that the GDP growth target is still achievable despite warning that the economy may slow down in the second half of the year due to external factors.
However Najib’s brother, Datuk Seri Nazir Razak, said that wrangling over affirmative action in the proposed New Economic Model (NEM) is causing uncertainty among investors.
The CIMB Bank chief executive officer said that there was a lot of debate over what sort of affirmative action should be in the NEM, notably involving vocal Malay rights group Perkasa, and the government needed to decide quickly for the sake of giving investors a sense of direction.
Dr Mahathir refused to comment when asked whether such issues had an effect and said it was for the government to decide.
“So the government must study,” said Mahathir.
Dr Mahathir has been a staunch supporter of a race-based affirmative action and distribution policy.
The former premier had said that the country owes its racial harmony to the New Economic Policy’s (NEP) because it has helped to reduced economic disparity between the different communities, especially between the Chinese and the Malays.