KUALA LUMPUR, May 18 — It is an opportune time now for Malaysia to do some "soul searching” with regards to its investment incentives and processes that will make the country stand out from the rest, amidst the reopening of economies across the globe after having lost trillions of dollars due to the Covid-19 pandemic.

But more importantly, there is a need to review and enhance the existing incentives amidst the changing investment landscape to entice both foreign and domestic investors to invest in the country, an economist said.

"Any moves to simplify and to make the investment process more investor-friendly are most welcome. Such endeavours should continue to be intensified, with or without Covid-19,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama.

He said this in response to the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah’s royal address when opening the third term of the 14th Parliament here today.

His Majesty said the country’s investment approval processes, especially for high-impact projects, should be made more efficient and quickly to attract more quality investments into the country.

The King also called on the government to continue to simplify business processes to enhance investment activities, including the need to update existing laws, approval processes and incentives.

Commenting on this, Mohd Afzanizam said the Bank Negara Malaysia (BNM) had conducted studies and found that there were more than 100 incentives administered by 33 agencies.

"So perhaps the government should look into this in order to ensure the investment process is seamless, efficient and cost-effective to the potential and existing investors.”

Malaysia, according to the central bank, presently offers more than 100 different types of incentives to promote investment in the economy. These are disbursed in three main forms: Pioneer Status, Investment Tax Allowance and Reinvestment Allowance.

The central bank said the government needs to rethink on the investment incentives framework in the highly-dynamic global environment and emergence of global trends such as technological disruptions, rapid urbanisation, and climate necessary in preparing the economy for the future.

In particular, prospective investments should exhibit desirable characteristics that would raise overall economic complexity, create high-value jobs, deepen linkages within the domestic supply chain, and create new industrial clusters.

These positive spillovers should be monitored comprehensively and reported on a timely basis.

Meanwhile, Mohd Afzanizam said that the country should also acknowledge the need to elevate itself into high-value added activities that rely more on technology and highly skilled labour especially from the locals.

"We have noticed that the share of machinery and equipment to total investment had gone down from 43 per cent in 2010 to 33 per cent in 2019.

"And, at the same time, foreign labour has been rising. This gives the impression that the level of high-value added activities are still lacking.”

Meanwhile, Asli Centre for Public Policy chairman Tan Sri Ramon Navaratnam said the current economic volatility had provided Malaysia with an opportunity to formulate new policies that make an open economic country much more competitive than other countries.

"In other words, the protectionist policy, where possible, should be removed or phased out in order to attract more foreign investment and discourage investment outflow. The government should also revise all outdated regulations that hamper local and foreign investments,” he added. — Bernama