Brain drain has not led to fall in FDI, says Najib

KUALA LUMPUR, April 29 — The prime minister has refuted a recent World Bank report that Malaysia’s brain drain had led to a drop in foreign investment, pointing out that there was a six-fold rise in capital inflows last year compared to 2009.

Datuk Seri Najib Razak said foreign direct investment (FDI) had increased from RM1.4 billion in 2009 to RM9 billion in 2010 and expressed confidence that Malaysia will be able to secure more such investments in future.

He also said his administration was actively pursuing domestic direct investment (DDI) as nearly three-quarters of all private funding for the Economic Transformation Programme (ETP) will come from local investors by 2020.

“Don’t forget, it is not all about FDI but also about domestic investment. Seventy-three per cent of our plan involves domestic investment,” he told reporters in Putrajaya today.

The World Bank said, in its “Malaysia Economic Monitor: Brain Drain” report released yesterday, that foreign investment could be five times current levels if Malaysia had Singapore’s talent base.

Singapore has absorbed 57 per cent of Malaysia’s one million overseas citizens, with almost 90 per cent of those crossing the Causeway ethnic Chinese, the report said.

Najib acknowledged today that the exodus of skilled Malaysians to Singapore and other advanced countries was a problem that “must be resolved” through initiatives speadheaded by Talent Corp.

Talent Corp was set up by the government earlier this year to lure and retain much-needed professionals in the face of increasing global competition for talent.

Najib announced on April 12 that Malaysian professionals working abroad who return to Malaysia would only have to pay a 15 per cent flat income tax for five years under the Returning Experts Programme (ERP).

“This is one of the main initiatives, and there are other initiatives which have been agreed upon and we will take subsequent measures,” he told reporters

The World Bank has identified governance issues and lack of meritocracy as “fundamental constraints” that block Malaysia’s expansion by fettering competition and innovation.

Malaysia’s growth fell to an average 4.6 per cent a year in the past decade, from 7.2 per cent the previous period.

Singapore, which quit Malaysia in 1965, expanded 5.7 per cent in the past decade and has attracted more than half of its neighbour’s overseas citizens.

Malaysia has in recent years unveiled plans to improve skills and attract higher value-added industries.

Najib has pledged to roll back the New Economic Policy’s (NEP) affirmative action policies but also told the Umno assembly last year that the government’s social contract to provide benefits to Bumiputeras cannot be repealed.

The prime minister has eased some rules to woo funds, including scrapping a requirement that foreign companies investing in Malaysia and locally-listed businesses set aside 30 per cent of their Malaysian equity for Bumiputera investors.

Last year, Najib unveiled the ETP under which the government has identified projects from mass rail transit to nuclear power worth US$444 billion (RM1.3 trillion) that his administration will promote in the next 10 years.