Malaysia needs to move up the value chain if it wants to remain competitive against other Asian countries, says Standard Chartered Bank.

Regional Head of Research for South-East Asia, Mr Tai Hui said “with Asia poised to lead the global economic recovery this year, Malaysia must do all it could to attract foreign direct investments (FDIs)”

Standard Chartered Bank Chief Economist & Group Head of Global Research, Mr Gerard Lyons at the 2010 Standard Chartered Bank Global Research Briefing on Tuesday said –

“We expect huge amounts of capital flows into Asia (this year) both in terms of direct and portfolio investments. The question is whether Malaysia is doing enough to attract FDIs?

“In reality, these investors are smart and they want to pick the best deal,” he told reporters after the 2010 Standard Chartered Bank Global Research Briefing yesterday. Tai also said Standard Chartered had forecast a 4.2% gross domestic product (GDP) growth for Malaysia in 2010.

“Agriculture and commodity-related exports will drive growth for Malaysia. We are more cautious on manufactured exports because competition from Asia is getting intense.

“Inflation rates should remain tame for 2010, depending on fuel and food prices,” he said, adding that Standard Chartered was also expecting a modest improvement in business spending and investments in Malaysia.

“However, if confidence returns sooner than we expect, then we could see a (GDP) growth higher than 5%. Consumption will be the bedrock of growth.”

Standard Chartered Chief Economist & Group Head of Global Research Gerard Lyons said the Malaysian economy was “heading in that direction.”

“If you look at the growth performance in the past five to six years, average (GDP) growth was between 4% and 5%, and that should be the perceived target in the medium term,”

Tai also said Malaysia did not need a third stimulus package and went on to say -

“Looking at the economic data, namely industrial production, export and domestic demand, Malaysia has been making a decent recovery since the ending of the third quarter and early fourth quarter,”

He said a third fiscal stimulus was not necessary.

The Government introduced two stimulus packages totaling RM67bil last year, with the first package at RM7bil in November 2008 and the second worth RM60bil in March 2009.

Standard Chartered FX research head Callum Henderson said the ringgit was expected to surge to 3.15 against the US dollar in the fourth quarter of this year. He said among the factors that would contribute to the appreciation of the ringgit was the growth of the Malaysian economy, a depreciation of the US dollar and moderate growth in the electronics and electrical sector.