BMI: Malaysia third-best in Asia for industrial investment

A view of Kuala Lumpur City Centre in Malaysia August 15, 2017. — Reuters pic
A view of Kuala Lumpur City Centre in Malaysia August 15, 2017. — Reuters pic

KUALA LUMPUR, Sept 8 — Global market risk and industry analyst Business Monitor International (BMI) assessed Malaysia as the third most attractive emerging market for industry investment in Asia, behind UAE and China.

It also put Malaysia in the top 10th percentile of global markets (including developed markets) for infrastructure, power and food and drink, in its industry outlook report released today.

However, the country’s traditionally dominant oil-and-gas sector was ranked lower due to weaker rewards and more substantial risks.

“Malaysia will be a global growth outperformer in the coming years. Growth will be driven by an expanding workforce, further improvements in business environment and continued Asean economic integration,” said the report.

BMI highlighted Malaysia’s power sector, backed by a “strong coal pipeline” as the second most attractive market in its Global Power Risk/Reward Index (RRI) and first in Asian rankings.

It cited strong macroeconomic and demographic fundamentals driving power demand and capacity growth in the country, with a competitive risk profile supported by strong institutions and friendly business environment.

“We forecast total power generation to grow by an annual average of 5.2 per cent over 2017-2021. Coal will be the driving force as the government looks capitalise on cheap regional coal feedstock, for instance from Indonesia and Australia.

“Domestic firm KKB Engineering, China’s State Nuclear Electric Power Planning Design & Research Institute Co Ltd (SNPDRI) and Japan’s Mitsui and Chugoku Electric are among the firms set to drive overall investment and capacity growth,” said the report.

Renewable energy is also expected to expand from a low base with a forecasted annual average growth of 11.7 per cent from 2017 to 2021.

The RRI report also ranked Malaysia as Asia’s top infrastructure market due to growing inbound investment, largely from China and sustained fiscal expenditures on infrastructure.

This was backed by Malaysia’s expanding rail network and China’s support on port and industrial developments in Kuantan.

“The country’s active and expanding project pipeline is exemplified by the rail sector, where there is ongoing preparatory work for the RM60 bilionn (US$13.8 billion) Singapore-Malaysia High-Speed Railway and the RM55 billion (US$12.7 billion) East Coast Rail Line, as well as expansions to Kuala Lumpur’s rail transit network,” said the report.

However, BMI stated that transparency and corruption issues remain a concern and can affect positions of government-linked investments.

Malaysia’s oil-and-gas sector is still grappling with low oil prices, which is affecting the nation’s approach to boosting oil production through deepwater developments and marginal field developments as well as its Enhanced Oil Recovery programmes.

The report cited limited potential rewards in the mature oil and gas sector is dragging down the industry’s overall RRI score and that the sector’s production is also reaching its peak.

“Developments sanctioned prior to the 2014 oil price decline will boost production until 2018/2019 and we forecast crude oil and condensates production to reach 791,000 barrels a day (b/d) in 2018, up from an estimated 588,000b/d in 2015.

“Nonetheless, oil production declines will resume after 2019 as low oil prices dissuade new financial investment decisions on large greenfield developments. Production will fall to 583,000b/d by 2026,” said the report.

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