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Foreign companies will continue to invest in Malaysia as the country remains an attractive destination for foreign direct investments (FDIs), Bank of America Malaysia Bhd (BAMB) Country Head Gautam Puntambekar said.
In an exclusive interview with BusinessToday, Gautam said the financial institution doesn’t see any changes to the investment trend by foreign companies in Malaysia for 2025, instead, the investment interest will continue to increase in 2025.
“We don’t expect any less interest from foreign companies to invest in Malaysia as it continues to be a very attractive destination for FDIs as evident from the number of companies investing in this country over the last two to three years.
“Hence, we don’t see any change in this sentiment throughout 2025,” Gautam said to BusinessToday.
It was reported that in the past couple of years, the FDI into Malaysia has gone up by US$12 billion.
He added that another factor that would drive the investment into Malaysia is its proximity to the other neighbouring Southeast Asian countries like Indonesia, Thailand, Philippines and Singapore.
“Furthermore, the recent signing of the Johor-Singapore Special Economic Zone will bolster the investment outlook for the region,” he said.
Increase In Domestic Borrowings
Gautam then highlighted that over the last couple of years, there has been a significant growth in domestic borrowings due to the interest rate differentials between the US and Malaysia.
Gautam says the trend of domestic borrowing might be sustained this year as the Fed might be doing fewer rate cuts than what was anticipated
“The US London Interbank Offered Rate was at 5.5% while Malaysia’s Overnight Policy Rate is at 3%, resulting in a differential of 2.5%, which made it much more palatable for foreign companies to look at domestic borrowing rather than going and borrowing internationally,” he said, noting that another reason driving the growth of domestic borrowing is the risks associated to foreign currencies movement.
“When there is fluctuation in foreign currency and you’re borrowing from overseas, you’re exposed to that risk.
“Additionally, international borrowings might also expose you to possible regulatory risk in the event of sudden regulations change. However, you will have the ability to take away this risk when you have receivables in the same currency that you’re borrowing,” Gautam explained to BusinessToday.
He then mentioned that BAMB is expecting this trend of domestic borrowing to sustain this year given that there might be a lesser rate cut from the US Federal Reserve (Fed) than what was anticipated.
“If that does materialise, the demand for domestic ringgit or the demand for domestic loans is likely to be sustained during this year,” Gautam said while revealing that according to audited financials submitted to the regulator, BAMB’s loan book for 2024 amounted to RM490.324 million.
“Last year, BAMB advised clients on Malaysia investment banking deals worth US$2 billion,” he said, citing Dealogic data.
Hard choice between natural resources and DC investment
Meanwhile, Gautam revealed to BusinessToday that Malaysia will continue to be the No 1 choice for international companies to establish their data centres (DCs).
“Aside from the policies, DCs required two main things — water and electricity, both of which Malaysia continues to have to support the establishment of DCs.
“However, while the Malaysia government continues to intensify its effort in requesting DCs to come in, it is important to note that the resources are limited, and two or three years down the line it could potentially result in a deficit, potentially in either water supply or electricity because these DCs are consuming significant amount of water and electricity for its operation.
“So, it has to be a judicious mix between attracting investments that could generate employment for the locals, as well as helping small and medium enterprises (SMEs) in Malaysia to step up and add to their supply chain. Because inherently, DCs is not a high employing industry,” Gautam said while stressing that it is important to develop a DC ecosystem that could benefit the local population and the SMEs who are operating who then can step up and be a part of that supply chain.
To further safeguard the natural resources, Gautam suggested that Malaysia be selective in allowing which companies to establish their DC operation because there are many companies wanting to set up DCs globally.
“While Malaysia continues to be an attractive destination for international companies to come and establish their DCs, the country needs to be selective in making sure that the DCs are actually adding value and not just depleting the natural resources.
“So, overall, it’s not about the investment quantum these companies can bring, it’s what the country really wants and needs,” Gautam stressed.
AI Chip Restrictions
Moving on, Gautam mentioned that the recent artificial intelligence (AI) chip restriction imposed by the US government would have minimal impact on the advancement of DC in countries like Malaysia.
“Based on the announcements made by former US President Joe Biden, we don’t see the sentiment has changed because we will have to wait for the new administration to come out with their policies to really assess any impact.
“However, based on the current situation, we don’t see an impact or any slowdown by interested companies or those who have invested to stop investment into DCs because setting up a DC costs a lot of money,” Gautam said to BusinessToday.
The new regulations announced by Biden on Jan 13 will cap the number of AI chips that can be exported to most countries and allow unlimited access to US AI technology for America’s closest allies, while also maintaining a block on exports to China, Russia, Iran and North Korea.
The restriction is said to help the US keep its dominant status in AI by controlling it around the world.
Malaysia’s Digital Economy
Meanwhile, to ensure the successful implementation of the digital economy in Malaysia, Gautam revealed that what is needed is a telecommunication network which can support the speed and requirements of the digital economy.
“What we are eagerly waiting for is the rollout of 5G in Malaysia because any digitisation starts with a network.
“Additionally, in today’s fast-paced technology world, it is important for companies to invest in cybersecurity to safeguard any sensitive data from being exposed because as the world continues to change, the technologies will continue to evolve,” Gautam said while emphasising that BAMB continues to invest in technology and automation to ensure all transactions done through BAMB’s platforms are secured and free from any cybersecurity risks.
In closing, Gautam reiterates BAMB’s long-term commitment to Malaysia, highlighting the country’s strengths and investment opportunities.
“We will continue to highlight the country’s areas of strength and remind people that this is a country which you should really consider as an alternate destination for your investments,” Gautam said.
Source: https://www.businesstoday.com.my/2025/02/06/malaysia-remains-regions-top-magnet-for-fdis/