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Declining Private Investment: No More Jobs for Us?

Updated 14 Oct 2019 – By Michael Malone & Hakimie Amrie


You might’ve come across the term private investment but aren’t quite sure what it means exactly, right? It’s okay, we gonna try to explain it as simple as we can. Basically, private investment is the purchase of capital assets by organisations and investors such as properties i.e lands, buildings, machinery and other types of equipment that are not easily sold for profit-making.



In case you guys didn’t know, Bank Negara Malaysia (BNM) said that private investment is a major contributor to Malaysia’s economic growth. For example, it’s very good for technological advancement. This enables companies to reduce the cost of production and encourage the growth of new businesses like Grab and Foodpanda, etc. Besides that, private investment is also important for creating new jobs in Malaysia. 

But not long ago, AMBank Group Chief Economist, Anthony Dass shared that private investment IS NOT doing well in Malaysia. Based on BNM reports, the growth of private investment in Q1 2019 was 0.4% compared to 6.9% in Q3 2018. Whoops, that’s a lot! 



This makes us wonder: “If private investment plays such a big role in our economy, why is the growth so low, especially this year?”. To stick to our kepochiness trait, we did some digging and here’s what we’ve found.


Actually, we’re just the VICTIMS of economic conflict. What’s new, right?

But, how exactly is this economic drama affecting us?  Apparently, private investment growth is affected by the uncertainty in the global trade negotiations (read: US-China trade war), according to the Q1 and Q2 reports by BNM. 



China and the US are imposing ridiculous tariffs on each other’s products i.e. electronics. Because of that, any slow-down in their economy due to the tariff could also affect us. How? Well, Malaysia appears to be a major exporter of those electronic components to the US and China. This could lead to the possibility of lower exports from our side because expensive kan. That’s why lah investors don’t want to take that chance so as a result they take a cautious stance and cut back on their investments to avoid any loss. 



Nevertheless, this external factor is not the only thing that’s pushing private investment away. As some of us probably know, the Malaysian property market is having a hard time right now. Our properties are crazy expensive and most people simply can’t afford one. As a result, a lot of properties remain unsold. So it’s no surprise that investors are passing on investment opportunities in Malaysia’s property market at the moment. 



So, what can the government do to encourage private investments in Malaysia?

Unfortunately, there’s nothing our government can do to solve the trade war between the US and China (pfft), but there are other things they can do to encourage private investment in Malaysia. However, bear in mind that there’s no definite solution to this matter.



According to economist professors, Lufti Erden and Randall G.Holcombe, public investment in infrastructures such as roads, communication networks, IT, sewage, tunnels, and bridges has a positive effect on private investment. If that’s the case, then the government should spend more on infrastructure to increase private investment. This will result in more job creation like engineers, architects, quantity surveyors and whatever within that segment.



But of course lah, there’ll always be that one person who disagrees and that person is, Jayant Menon. He claimed that too much involvement from the government like theGovernment-Linked-Companies (GLCs) will push away private investment. Why? 


Well, he believes infrastructure companies have a tendency to prefer government contracts more due to favourable regulations (true also). Therefore, the government should be involved less and let private investment run its course.

So as you noticed, even the experts don’t really agree on how to encourage private investment, but in the end, it all boils down to one thing - private investment is important and the government should try to protect it. We don’t just want to rely on the trade war that we cannot control, right?

[UPDATE]

Based on the Belanjawan 2020 presented on 11 October 2019, our government decided to provide investment incentives worth RM1 billion a year for 5 years. These incentives will be used to attract Fortune 500 companies to invest with us. On top of that, our Finance Minister, Lim Guan Eng also said that a 'Special Channel' will be established under InvestKL to attract more investors from China. 

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