What’s Driving Private Investment in Malaysia? Aggregate Trends and Firm-Level Evidence

Author/Editor:

Olaf Unteroberdoerster ; Roberto Guimarães-Filho

Publication Date:

August 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Private sector investment has been a key source of growth in Malaysia over the last three decades, but after an unprecedented decline in the wake of the Asian crisis it has remained sluggish in recent years. Using aggregate and firm-level data, this paper aims to explain these trends and their implications for Malaysia's investment and growth outlook. Aggregate data point to sustained overinvestment in the years prior to the Asian crisis and the role of shifts in investor perceptions as important determinants of the recent decline in private investment. Meanwhile, firm-level data suggest that low profitability, along with financing constraints affecting smaller firms and those in the services sector, has also been important.

Series:

Working Paper No. 2006/190

Subject:

Capital formation Currencies Gross fixed investment Private investment Public investment and public-private partnerships (PPP)

English

Publication Date:

August 1, 2006

ISBN/ISSN:

9781451864502/1018-5941

Stock No:

WPIEA2006190

Pages:

26

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