What’s Driving Private Investment in Malaysia? Aggregate Trends and Firm-Level Evidence
IMF Working Papers, August 1, 2006
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Bibliographic details
- Authors: Olaf Unteroberdoerster, Roberto Guimarães-Filho
- Published: August 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451864502.001
Overview
- Authors: Olaf Unteroberdoerster, Roberto Guimarães-Filho
- Date: August 1, 2006
- Purpose: Explain trends in Malaysia’s private sector investment using aggregate and firm-level data and assess implications for Malaysia's investment and growth outlook.
Key aggregate findings
- Private sector investment has been a key source of growth in Malaysia over the last three decades.
- After an unprecedented decline in the wake of the Asian crisis, private investment has remained sluggish in recent years.
- Aggregate data point to sustained overinvestment in the years prior to the Asian crisis.
- Shifts in investor perceptions are identified as important determinants of the recent decline in private investment.
Firm-level evidence
- Firm-level data indicate low profitability has been an important factor behind weak private investment.
- Financing constraints have disproportionately affected smaller firms and firms in the services sector.
- Cash flow and profitability emerge as central micro determinants of investment behavior in the firm-level analysis.
Policy implications and considerations
- Addressing profitability constraints at the firm level could be important to revive private investment.
- Improving access to finance for smaller firms and services-sector firms may help alleviate financing constraints and support investment recovery.
- Restoring investor confidence and perceptions appears important given the role of perception shifts in driving aggregate investment declines.