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PETALING JAYA: The verdict and punishment meted out on former prime minister Datuk Seri Najib Razak shows international investors that Malaysia has an independent judicial system that follows the nation’s laws and constitution, and not on shifting political power or the pressures of a temporary majority, experts say, adding that this plays a crucial role in attracting foreign direct investments (FDI).

Center for Market Education CEO Dr Carmelo Ferlito said there may be a tendency to see a positive impact on the economy from Najib’s jailing as it boosts investor confidence in Malaysia’s commitment to the rule of law.

“There might be a higher degree of power struggle in Umno. The impact on the economy will be determined by which faction in Umno comes out as the winning one, who will win the general election and with what economic platform.

“Surely we have seen in the last two years the emergence of a leadership that is less open to economic freedom and more oriented towards a higher degree of government control over the economy; and this is not good. If such a leadership remains after the next election, it won’t be a good signal for the economy,” Ferlito told SunBiz.

Najib began serving his 12-year sentence at Kajang Prision on Aug 23, 2022 after the Federal Court upheld his conviction and sentence in the SRC International case.

However, Ferlito said the decision will have no direct impact on the Malaysian economy and may even add to political uncertainty.

Japan National Graduate Institute for Policy Studies Assistant Professor (Southeast Asian Studies) Dr Lim Guanie concurred.

“We are showing global investors that we have an independent judicial system. It is not a bad thing, but that is not the only thing.

“If you look at certain economies, especially in Asia, some of them scored quite low on the governance index and civil liberties but we still want to go to them,” he said.

Lim said Malaysia needs to be more pro-business and pursue more active process, performance and strategic benchmarking.

“Indonesia is actively pushing this,” he stated, but added that there is no need for Malaysia to be too concerned.

In the first half of 2022, Malaysia attracted RM123.3 billion (US$28 billion) of approved investments, according to the Malaysian Investment Development Authority.

The manufacturing sector attracted RM43.1 billion, services RM78.0 billion and primary sectors RM2.2 billion.

FDI remained the major contributor to total approved investments at 70.9% or RM87.4 billion.

Of the total approved, China dominated foreign investments for the period of January to June 2022, with RM48.6 billion. This is followed by Germany (RM9.0 billion), Singapore (RM6.0 billion), Brunei (RM5.1 billion), and the Netherlands (RM4.1 billion).

Malaysia’s services sector secured projects worth RM78.0 billion in the first half of 2022, compared with RM52.4 billion for the same period in 2021, an increase of 48.8%. This is followed by the manufacturing sector at RM43.1 billion or 34.9% and the primary sector at RM2.2 billion or 1.8%.

The country’s economy has been on a strong recovery path since its borders were reopened last year, supported by a robust industrial ecosystem, increase in domestic demand and easing of Covid-19-related containment measures.

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