More high value-added investments needed from China

“We’ve to move up the value chain and move downstream as well. For example, in the oil and gas industry, we have to create more downstream projects in Malaysia,” Najib said at the CNBC Summit: Malaysia 2013 hosted by CNBC anchor Martin Soong.

KUALA LUMPUR: Malaysia is seeking more Chinese investments in higher value-added sectors of the economy even though China is now Malaysia’s biggest investor.

Prime Minister Datuk Seri Najib Tun Razak said that while the country was enjoying a stream of foreign direct investment (FDI) from China, there was a need for more investments higher up the supply chain.

“We’ve to move up the value chain and move downstream as well. For example, in the oil and gas industry, we have to create more downstream projects in Malaysia,” he said at the CNBC Summit: Malaysia 2013 hosted by CNBC anchor Martin Soong.

China was Malaysia’s biggest trading partner with a 14.4% share of Malaysia’s total trade of RM769.6bil during the January-July 2013 period.
The country is seeing an inflow of Chinese investments in sectors like logistics and steel.

Earlier this month, China-based Guangxi Beibu Gulf International Port Group Co Ltd bought a 40% stake in Kuantan Port Consortium Sdn Bhd from IJM Corp Bhd for RM334.42mil.

Guangxi Beibu is expected to bring more FDI from China into the East Coast Corridor, leading to potential higher volume of cargo handled by Kuantan Port.

Analysts said the East Coast Economic Region (ECER) would benefit the most from Guangxi Beibu’s port operations. The ECER covers Kelantan, Terengganu, Pahang and the Mersing district in Johor.

In late 2011, China’s Shougang Group together with local steel maker Hiap Teck Venture Bhd launched a project to build a RM1.8bil integrated steel mill in the Kemaman Heavy Industrial Park in Terengganu.

The joint venture, Eastern Steel Sdn Bhd, has been given a 60ha iron ore mining concession in Bukit Besi by Terengganu.

On another matter, Najib said he did not rule out imposing capital controls but added that it would only be as a last resort.

Capital controls to curb speculative attacks against the ringgit by hedge funds and to bring stability to the economy was imposed in September 1998 during the Asian financial crisis. The capital controls, which included pegging the ringgit, to RM3.80 to US$1 were lifted in July 2005.

“It has happened before, it’s not impossible but it would be our last resort. I believe that we should use other instruments to correct short-term volatility in capital outflows,” he said.

Fitch Ratings had downgraded Malaysia’s sovereign credit rating outlook in July to “negative” from “stable” to reflect the rating house’s assessment that prospects for budgetary reform and fiscal consolidation to address weaknesses in public finances had worsened since the Government’s weak showing in May general election.

“Chances of default are minimal. Despite our money leaving, our reserves are more than enough compared with what we had during the financial crisis in 1997,” he said.

Malaysia’s international reserves now stood at US$130bil and the country’s fundamentals remained strong, Najib said.

The country’s budget deficit stood at 4.5% of gross domestic product in 2012. The Government is hoping to reduce it to 4% this year.

He added that the nation’s high savings could act as a buffer from the potential outflows. The CNBC conversation with Najib will air on the CNBC channel at 5pm today.

(Source: The Star Online)