1 AJBM PUBLIC SEMINAR “A NEW PATTERN OF FOREIGN INVESTMENT IN EMERGING EAST ASIA ECONOMY” SESSION II FACTORS ENABLING FOREIGN INVESTMENT IN ASEAN & EAST ASIA 23 NOVEMBER 2005 PLAZA ATHENEE, BANGKOK, THAILAND PANEL DISCUSSION COMMENTS BY PANELIST DATO’ MOHAMED IQBAL SECRETARY GENERAL OF MAJECA MALAYSIA-JAPAN ECONOMIC ASSOCIATION AND GROUP EXECUTIVE DIRECTOR OF FARLIM GROUP (MALAYSIA) BERHAD

2 UNCTAD : WORLD INVESTMENT REPORT 2005  ASIA & OCEANIA RECEIVED IN FDI 2002 – US$94 BILLION 2003 – US$107 BILLION 2004 – US$148 BILLION TOP RECEIPIENT AMONG DEVELOPING REGIONS. GEOGRAPHICALLY CONCENTRATED : CHINA, HONG KONG, SINGAPORE, INDIA & REPUBLIC OF KOREA  EAST ASIA – INCLUDING ASEAN PREFERRED TARGET IN % INCREASE IN FDI FLOWS 2002 – US$15 BILLION 2003 – US$19 BILLION – 27% INCREASE CHINA – LARGEST RECEPIENT – US$60.6 BILLION HONG KONG, CHINA : US$34 BILLION – 150% INCREASE  CHINA & HONG KONG – 2/3 OF THE FDIs IN THIS PART OF THE WORLD

3  FACTORS ENABLING LARGE CAPITAL FLOWS RAPID AND STRONG ECONOMIC GROWTH IMPROVED POLICY ENVIRONMENT INCREASING STRATEGIC COMMITMENTS TO ASIAN MARKETS BY TNCS ELECTION OF NEW GOVERNMENTS IN MOST COUNTRIES REGIONAL INTEGRATION INTRA-REGIONAL INVESTMENT INCENTIVES

4 INVESTMENTS TECHNOLOGY ECONOMIC GROWTH CAPITAL FLOWS - SOURCE OF INADEQUATE TO MEET DEVELOPMENTAL TARGETS DEMAND FOR CAPITAL (INVESTMENT) CAPITAL FLOWS FOREIGN DOMESTIC DEVELOPING COUNTRIES EMERGING MARKETS

5 COMMERCIAL FLOWS NON-COMMERCIAL FLOWS – MIGRANT WORKER’S REMITTANCE PORTFOLIO INVESTMENT BANK LENDING FDI PRIVATE CAPITAL FLOWS EXTERNAL DEVELOPMENT FINANCING BILATERAL MULTILATERAL ODA (OFFICIAL DEVELOPMENT ASSISTANCE

6 FDI  ACCESS TO NEW INVESTMENT CAPITAL NEW TECHNOLOGIES MANAGEMENT EXPERTISE EXPORT MARKETS  DERIVE THRU MNCS NEW TECHNOLOGIES QUALITY IMPROVEMENT PRODUCTIVITY TO MEET INVESTMENT STANDARDS “GREEN FIELD” INVESTMENTS (BUILDING NEW PRODUCTIVE CAPACITY, JOBS GENERATION IN HOST COUNTRY)  ENHANCE BUDGET CONSTRAINTS, AND LOW LEVEL OF DOMESTIC SAVINGS FACED BY MOST DEVELOPING COUNTRIES  WILL REMAIN AS A STRATEGIC SOURCE OF FINANCING

7 CRISES AND RESILIENCE 1980sDEBT CRISES-DROP IN BANK LENDING 1990sASIAN FINANCIAL CRISIS LED TO REFORMS IN INVESTMENT POLICIES OBJECTIVE: TO ATTRACT STABLE FORMS OF FOREIGN CAPITAL FDI AS AN ALTERNATIVE TO DOMESTIC SOURCES INCLUDING BANK LOANS

8 GLOBALISING WORLD  COMPETITION FOR FDIs FOCUS ON 1.ENABLING BUSINESS FRIENDLY ENVIRONMENT 2.NEW APPROACHES TO ATTRACT FDI 3.MANAGING FDI TO MAXIMISE CONTRIBUTION

9  PAST TARGETTED PROMOTION POLICIES INCENTIVES PERFORMANCE REQUIREMENTS STRUCTURES/MECHANISMS TO SUPPORT ENTERPRISES  PRESENT TREND LIBERALISATION OF FDI REGIMES SINCE 2003 – 244 CHANGES IN LAWS AND REGULATIONS AFFECTING FDI – 220 – IN THE DIRECTION OF MORE LIBERALISATION. INTERNATIONAL RULES IN THE FRAMEWORK OF MULTILATERAL AGREEMENTS 86 BILATERAL INVESTMENT TREATIES (BITs), and 60 DOUBLE TAXATION TREATIES (DITTs) [TOTAL 2316] CONCLUDED IN 2003 TRIMS - TRADE RELATED INVESTMENT MEASURES - SUBSIDIES AND COUNTERVAILING MEASURES (SCMS) DROPED – LOCAL CONTENT REQUIREMENTS PHASED OUT ABOLISHED INVESTMENT PERFORMANCE REQUIREMENTS EXPANDED SCOPE OF INCENTIVES

10 MALAYSIA 2006 BUDGET PRO – BUSINESS PRO – GROWTH STRENGTHENING RESILIENCE & MEETING CHALLENGES a)PROACTIVE GOVERNMENT MEASURES TO ACCELERATE ECONOMIC ACTIVITIES b)PROVIDING BUSINESS FRIENDLY ENVIRONMENT APPROACH