FOREIGN DIRECT INVESTMENT
1. One reason advanced by the advocates of letting the Ringgit to be traded abroad is that it will encourage foreign direct investment.
2. There was a time when Malaysia practically pioneered encouragement for foreign direct investment. It was even before FDI became popular with many developing countries as a shortcut to economic growth. Malaysia wanted FDI for job-creating labour intensive industries because of the need to create employment opportunities for its workforce at that time. It was really not about growing the economy.
6. Most people think that there would be an inflow of capital. But actually only about 10 per cent of the capital needed was brought in. The rest is borrowed from local banks, preferably foreign owned banks. It is therefore Malaysian money that is invested.
7. Apart from tax exemption Malaysia also subsidised the operations of foreign owned companies through subsidised electricity, fuel and domestic transportation. Of course the Malaysian workers contribute through their cheap labour.
8. There is another type of FDI which is even less beneficial. This take the form of investments in the stock market. Usually the objective is not to benefit from profits and dividends but from capital gains.
9. When foreign investors buy Malaysian shares, the prices are likely to appreciate. Foreign institutional investors, especially pension funds can easily push up share prices with their repeated purchases.
10. When the prices are high enough the investors would dump the shares and collect capital gains. The local investors would lose money as prices depreciated.
11. During the financial cirisis of 1997-98, foreign investors dumped their shares so as to quickly change the Ringgit into foreign (US) currency before further falls in the Ringgit would give them less foreign currency in exchange. This invariably caused a steep fall in the share prices and Stock Market Index with consequent losses by local investors.
FOREIGN DIRECT INVESTMENT - Che Det
1. One reason advanced by the advocates of letting the Ringgit to be traded abroad is that it will encourage foreign direct investment.
2. There was a time when Malaysia practically pioneered encouragement for foreign direct investment. It was even before FDI became popular with many developing countries as a shortcut to economic growth. Malaysia wanted FDI for job-creating labour intensive industries because of the need to create employment opportunities for its workforce at that time. It was really not about growing the economy.
6. Most people think that there would be an inflow of capital. But actually only about 10 per cent of the capital needed was brought in. The rest is borrowed from local banks, preferably foreign owned banks. It is therefore Malaysian money that is invested.
7. Apart from tax exemption Malaysia also subsidised the operations of foreign owned companies through subsidised electricity, fuel and domestic transportation. Of course the Malaysian workers contribute through their cheap labour.
8. There is another type of FDI which is even less beneficial. This take the form of investments in the stock market. Usually the objective is not to benefit from profits and dividends but from capital gains.
9. When foreign investors buy Malaysian shares, the prices are likely to appreciate. Foreign institutional investors, especially pension funds can easily push up share prices with their repeated purchases.
10. When the prices are high enough the investors would dump the shares and collect capital gains. The local investors would lose money as prices depreciated.
11. During the financial cirisis of 1997-98, foreign investors dumped their shares so as to quickly change the Ringgit into foreign (US) currency before further falls in the Ringgit would give them less foreign currency in exchange. This invariably caused a steep fall in the share prices and Stock Market Index with consequent losses by local investors.
FOREIGN DIRECT INVESTMENT - Che Det
