Monday, February 26, 2007

Integrity of Statistics

A reader asked if I am able to accept the official figures given out by the government? Here is a reason why I am being very careful in accepting wholesale what I read.

A report by the United Nations Conference on Trade and Development (Unctad) has cast doubt over the actual amount of foreign direct investment (FDI) into Malaysia in 2006. In a statement published Jan 9, Unctad estimates that Malaysia’s 2006 FDI was around US$3.9 billion (approximately RM13.8 billion), or 1.6 percent less than the US$4 billion recorded the year before.

The report contrasts International Trade and Industry Minister Rafidah Aziz’s announcement that FDI had surged to a record high in 2006. Last Wednesday, Rafidah announced that ‘approved FDI’ for the manufacturing sector was at a record RM20.2 billion, a 1.13 percent improvement over 2005.

Even if the reported figure is correct, an increase of 1.13 percent over 2005 is not really impressive. According to the Unctad report, global foreign direct investment (FDI) inflows grew in 2006 for the third consecutive year to reach US$1.2 trillion, according to it´s first estimate for the year. The total is a 34% increase from 2005, although still short of the record of US$1.4 trillion set in 2000.

The report says one of the most significant developments in FDI over the past two or three years has involved natural resources and related industries. Despite some unfavourable developments for foreign investors in such industries, high demand for natural resources and, as a result, the opening up of new potentially profitable opportunities in the primary sector, such as gas and oil development in Algeria are likely to attract further FDI to the extractive industries. FDI in this sector will be examined in greater detail in UNCTAD´s World Investment Report 2007. This trend is felt in Malaysia too. In 2006, more than RM15 billion has been invested in the oil and gas industry mainly in oil refinery facilities.

The report warns that economic growth in 2007 is projected to slow moderately. Continuing global external imbalances, sharp exchange rate fluctuations, rising interest rates, and increasing inflationary pressures, as well as high and volatile commodity prices, pose risks that may also hinder global FDI flows and could lead to a slowdown in the fast growth in global FDI registered over the past few years.

MITI should consider responding to the Unctad report if the ministry feels that the FDI figures are bias or inaccurate.

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