Tan Sri Mohd Sidek Hassan

Tan Sri Dr. Sulaiman MahbobPRIVATE investment, an important component of aggregate demand,is critical to the welfare of the society because it ensures a steadyflow of future income and output while ensuring replacement ofdepreciated assets within the society. Unlike in closed communitieswhere investments are from domestic savings, funds move now betweencountries in search of better return to investments.Thus there is a lot of competition to attract private investments. Although a varietyof incentives is used to attract these investment flows, in the final analysis, politicalstability and quality of infrastructure reign supreme.Two types of investment flows are oftenidentified. The first is foreign directinvestment (FDI), which is long term innature and is embedded in the social capitalof the country once it is incurred.The other is portfolio flows or short termcapital which comes in and goes out to takeadvantages of the movements in the stockmarket, interest rates (especially overnightrates) and exchange rates.In business terms, purchases of assetsthrough mergers and acquisition are oftenconsidered investments too. Economistsdefine investments as net new expenditurein assets, such as plants and machinery, andinfrastructure.Malaysia has promotedprivate investmentsas sources of output,employment, exportearnings and technology,thus facilitating ourstructural transformation.These changes havemade our economy morediversified.Hyundai Motor workers at a plant of thecompany in Ulsan, 410 km south-east ofSeoul. South Korea relies heavily on domestic savings as a source of investment.Malaysia has promoted private investments as sources of output, employment,export earnings and technology, thus facilitating our structural transformation.These changes have made our economy more diversified.There is no doubt we have to continue to promote private investments fromboth offshore and domestic sources. While FDI are good catalysts in the shortand medium term, they have a tendency for subsequent outflows in the form ofrepatriation of dividends and profit. Malaysia relies a lot on FDI, while in contrast,South Korea relies heavily on domestic savings as a source of investments. Malaysiansare now also involved in crossborder investments. As our economy experiences121