Media Release: Greater predictability and transparency needed to attract EU and foreign investors

Kuala Lumpur, 30 August 2021 — The ASEAN Business Advisory Council (ASEAN-BAC) Malaysia held a consultation meeting with members of its joint business councils and foreign business councils to discuss Malaysia’s efforts in attracting foreign direct investment (FDI), particularly investors from the European Union (EU).

“The EU and Malaysia are key trade and investment partners, with the EU being Malaysia’s fourth-largest trading partner and one-fifth of the country’s FDI coming from the EU,” said Ambassador of the European Union to Malaysia Michalis Rokas.

Ambassador Rokas noted that while the trade and investment relationship between Malaysia and EU is on the whole satisfactory, there remains untapped potential for both sides to work together to “build back better” especially in the post-pandemic recovery period.

The ambassador’s sentiments were echoed by other presenters and panellists, including ASEAN-BAC Malaysia Chairman Tan Sri Dato’ Dr Munir Majid, who said in his opening address that while the COVID-19 pandemic has been challenging for Malaysia as well as its ASEAN neighbours, it is the persistent political turbulence that has crippled the country and hindered its growth.

1. Time to restart talks for an EU-Malaysia free trade agreement

EU-ASEAN Business Council (EU-ABC) Executive Director Mr Chris Humphrey concurred with Tan Sri Munir Majid’s views on the urgent need for Malaysia to sort out its political issues as he pointed out that investors do not know how long the current administration will remain in office.

This lingering uncertainty, he said, coupled with the country’s inability to ratify trade agreements that it has signed such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP), creates a trust deficit that will affect Malaysia’s ability to negotiate other bilateral trade agreements such as one with the EU.

ASEAN-BAC Malaysia Council Member Tan Sri Yong Poh Kon added that ratifying the CPTPP could enable Malaysia to reach an agreement with the EU sooner since certain provisions laid out in the CPTPP—such as those involving labour—would be similar to those required in an FTA with the EU.

The EU has completed bilateral trade agreements with Singapore and Vietnam, and is currently in talks for similar free trade agreements (FTA) with other ASEAN countries such as Indonesia. As such, the panellists agreed that Malaysia needs to push for progress in this area.

“EUROCHAM Malaysia firmly believes that there is a need for a formal framework to elevate trade between the EU and Malaysia to the next level. Since several ASEAN countries have already signed or are in advanced stages of FTA negotiations with the EU, we strongly recommend that the Malaysian government restarts the currently-stalled FTA dialogue,” said EU-Malaysia Chamber of Commerce and Industry (EUROCHAM) CEO Mr Sven Schneider.

2. EU investors seek transparent and predictable market access requirements

EU Ambassador to Malaysia His Excellency Michalis Rokas believes that the country should continue to be an attractive investment destination as long as it provides transparency and predictability.

“Malaysia should attract foreign investments and investors by streamlining and simplifying market access requirements for foreign companies, in a systemic and non-discriminatory way.

Furthermore, foreign investors should be consulted before a new policy is developed, and their comments should be reflected in the final decision taken.

Sufficient transition time should also be granted between the adoption of a policy and its implementation so that companies can prepare for the changes,” said Ambassador Rokas.

ASEAN-BAC Malaysia Council Member Mr Raja Singham concurred, stressing that communication is key and that in many cases, the problem lies in identifying and communicating through the proper channels, as well as in aligning expectations.

Malaysian Investment Development Authority (MIDA) Director of Foreign Investment Promotion Mr Faizal Jalaludin, for his part, shared that while international business travel has been greatly limited due to the pandemic, MIDA has continued working with foreign embassies and business chambers during this period to ensure that investors are provided with the necessary assistance, approval, and access to make well-informed investment and business decisions.

3. Political stability and forward-looking policies needed for sustained economic growth

“Greater Kuala Lumpur’s vision as a future city and epicentre of Malaysia’s economic growth is fast becoming a reality as it paves the way for next-generation industries, high-value activities driven by technology and innovation. Malaysia’s strategic roadmap, anchored by forward-looking national policies propel the nation forward in steering sustained economic growth,” said InvestKL Malaysia’s Senior Manager of Investor Relations (Europe) Mr Aidil Azman.

Malaysia is the fourth-largest economy in ASEAN, strategically positioned in the heart of Southeast Asia where it is well serviced by all primary air and shipping lines. The country has established itself as an attractive cost-competitive investment location in the region and is fast becoming a preferred centre for shared services and leading technology industries.

“Despite the many challenges that the country currently faces, Malaysia remains an attractive destination for foreign direct investment. Our human resource capabilities, for instance, remain,” said ASEAN-BAC Malaysia Chairman Tan Sri Munir Majid.