Domestic investments can help boost innovation

LETTERS: The recent announcement by Prime Minister Datuk Seri Anwar Ibrahim to set domestic direct investment (DDI) as one of the main performance indicators to generate investments in the country is a good initiative that should be lauded.

The move will indirectly reduce the country's dependence on foreign direct investments (FDIs), which has sparked fierce competition among developing countries, especially in Southeast Asia.

The total investment approved in the manufacturing sector for Malaysia in 2021 was RM195.1 billion, of which 92 per cent were FDIs, while for 2022, the total investment approved was RM84.3 billion, of which 78 per cent were FDIs.

Of course, as a developing country, Malaysia still needs FDIs, especially to offer quality jobs and encourage technology transfer, but it is time for the country to encourage local companies to improve their technologies and capabilities and be on a par with foreign multinational companies.

It is because local companies are rooted here and will continue to operate in this country, while foreign companies tend to move their operations to other countries after the period of tax exemption incentives they enjoy is over.

This noble effort, if implemented, will encourage local companies, especially small and medium enterprises (SMEs), to thrive and will indirectly help them contribute more to the country.

In Malaysia, SMEs contribute 38.9 per cent to the national economy and 48.4 per cent to total employment. In China, SMEs contribute 60 per cent to the national economy and 75 per cent to total employment.

In Germany and Japan, SMEs contribute 55 per cent to both economies and 60 and 70 per cent to total employment, respectively.

To make this effort a success, proactive steps need to be taken by the government. Among them is the reactivation of the Domestic Investment Strategic Fund (DISF) by the Malaysian Investment Development Authority (Mida), which focuses on accelerating the shift of Malaysian-owned companies in targeted industries into high value-added, high-technology, knowledge-intensive and innovation-based industries.

The DISF aimed to harness and leverage outsourcing opportunities created by multinational corporations operating in Malaysia, intensify technology acquisition by domestic companies and allow them to obtain international standards in strategic industries.

This incentive was similar to incentives offered in Singapore, such as the Research and Innovation Scheme for Companies and the Centres of Innovation offered by the Singapore Economic Development Board to support technology development and innovation activities.

As a result, many local companies in Singapore succeeded in boosting business through the acquisition of foreign companies and technology. Among them was the acquisition of MRA Systems LLC by ST Engineering, which made ST Engineering a globally prominent manufacturer of aircraft components and equipment.

In view of this, the proposed incentives and initiatives aforementioned need to be given serious attention by the government as they will encourage local companies, whether SMEs or large local companies, to continue to grow and innovate, which will not only leapfrog the country to the top 30 largest economies, a target of the Madani Economy but, more importantly, it will put the country among the top 20 nations in the global innovation index, where Malaysia is currently ranked 36th.


Senior Manager, InvestPerak, Ipoh

* The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times

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