FDI in Malaysia disrupted due to torture of foreign workers

INTERNATIONAL DESK: Foreign investment in Malaysia has significantly declined, with experts attributing this to the mistreatment of migrant workers.

The Malaysian government has crossed all limits in violating the rights of immigrant workers, creating fear among investors who are now considering other countries for their investments.

Foreign investment in Malaysia has faced a significant decline due to various factors, with the mistreatment of foreign workers being a primary concern. In Q1 of 2024, foreign direct investment (FDI) dropped to MYR 5.45 billion from MYR 17.55 billion in the previous period, marking the smallest amount since Q2 of 2023​ (CNA)​. The GDP growth for 2023 was 3.7%, which was below the government’s projection of 3.8% and a sharp drop from the 22-year high of 8.7% in 2022​ (The Star)​.

The Malaysian government has been accused of severe human rights violations against migrant workers, including torture, mistreatment, and arbitrary detention. These actions have tarnished Malaysia’s international reputation and deterred foreign investors. The political instability, high inflation rates, and rising crime rates further exacerbate the situation, making Malaysia less attractive for foreign investments.

Detailed Factors Affecting Foreign Investment:

Insufficient Foreign Workers

The number of foreign workers in Malaysia has decreased, causing most companies to suffer from a lack of workforce. These workers play a crucial role in various sectors of the economy, and their shortage is leading to reduced productivity.

Political Instability

Political instability is also affecting foreign investment. The political turmoil and inconsistent government policies create uncertainty among investors, making them unsure about the security of their investments.

Inflation

Inflation in Malaysia has become a significant issue. High inflation rates increase the costs for investors, reducing the potential profitability of their investments. Core inflation rates are expected to rise between 2.8% and 3.5% in 2024, impacted by targeted subsidy rationalization and higher service tax rates​ (Focus Malaysia – Business & Beyond)​.

Rising Crime Rates

The rising crime rates in Malaysia are creating security concerns for foreign investors. Investors are reluctant to invest in a country where their assets and personnel might be at risk.

Other Factors

Inadequate infrastructure, frequent changes in government policies, heavy taxation, and strict financial regulations are also making Malaysia less attractive to foreign investors.

Recent Data

FDI Decline: Foreign direct investment (FDI) in Malaysia dropped to MYR 5.45 billion in Q1 of 2024 from MYR 17.55 billion in the previous period, marking the smallest amount since Q2 of 2023​ (CNA)​.
GDP Growth: The GDP grew by 3.7% in 2023, which was below the government’s projection of 3.8% and significantly lower than the 22-year high of 8.7% in 2022​ (The Star)​.

Currency Depreciation: The Malaysian ringgit has been on a downward trend, weakening against major currencies such as the US dollar and Singapore dollar, further impacting investor confidence​ (CNA)​​ (The Star)​.

Violations by the Malaysian Government

The Malaysian government has faced numerous allegations of human rights abuses against migrant workers.

These violations include

Torture and Mistreatment: Reports indicate severe mistreatment and torture of foreign workers, leading to international condemnation and impacting Malaysia’s image as an investment destination.

Arbitrary Detention: There have been instances of legal migrant workers being arbitrarily detained, violating their basic human rights and creating an environment of fear and insecurity.

Violations of International Standards: The treatment of migrant workers often falls below international standards, leading to calls for intervention by human rights organizations and the United Nations.

Overall, multiple factors are contributing to the decline in foreign investment in Malaysia. If the government does not take swift action to address these issues, the country could face an even more severe economic crisis in the future.