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Malaysia continues to improve its regulatory framework to attract foreign investment. Foreign investment remains an important part of the Malaysian economy. Gross inflows of foreign direct investment, as released by the Department of Statistics, amounted to RM4.6 billion in the first quarter of 2010, channeled mainly into the manufacturing, services, and oil and gas sectors. Meanwhile, portfolio investments turned around to record a net inflow of RM3.9 billion, mainly into the domestic debt market. The inflows reflected improved investor sentiments on the stronger growth prospects of the Malaysian economy.

Since 17 June 2003, 100 per cent foreign equity holding has been allowed, irrespective of sector and level of export, for all new manufacturing projects and investments for expansion/diversification by existing companies. Following the deregulation of the Foreign Investment Committee investment guidelines in June 2009, equity conditions are imposed only on certain sectors which are deemed strategic (such as information and communication technologies, oil and gas, mining, manufacturing etc.) by the respective sector regulators.

Employment of expatriates in manufacturing or related services sectors has also been relaxed since 17 June 2003. The existing incentive schemes were further improved in 2003.

Malaysia is positively ranked as the 24th most competitive economy in the World Economic Forum’s Global Competitiveness Report 2009–10. Furthermore, in the World Competitiveness Yearbook 2010, published by the Switzerland International Institute for Management Development, Malaysia was ranked as the world’s 10th most competitive economy. The Third Industrial Master Plan (IMP3) 2006–20 recognizes the need for Malaysia to maintain and enhance its competitiveness in order for it to further progress along the value chain from assembly-based and low value-added activities towards higher value-added activities. IMP3 outlines the industrial strategies and policies which form part of the country’s continuing efforts towards realizing Malaysia’s objective of becoming a fully developed nation by 2020, as stated in Vision 2020. The overriding objective of the IMP3 is to achieve global competitiveness through innovation and transformation of the manufacturing and service sector that contributes to the other development thrusts of the National Mission of the Ninth Malaysia Plan (RMK-9), 2006–10.

As the second largest contributor to intra-ASEAN trade, Malaysia promotes itself as a base for foreign investors to access the larger ASEAN market of half a billion people and combined GDP of US$750 billion through the ASEAN Free Trade Area that was realized on 1 January 2003. Based on the World Bank’s report Doing Business 2010, Malaysia has also been ranked 23rd among 183 countries for ease of doing business.