The government has lifted all export and equity curbs on foreign participation in manufacturing to woo investment amid stiff regional competition, Trade Minister Rafidah Aziz said today.

Foreign investors can take 100 percent equity in new manufacturing projects with immediate effect, irrespective of their export level, Rafidah told reporters.

"We are now able to challenge the other countries vying for foreign investment having that criteria," she said.

"What we have given them is really the icing on top of the cake and I am very confident that given our track record, we will be able to bring in the investors into our manufacturing sector."

The new ruling is not applicable to existing foreign investment but flexibility will be given based on merit, she said.

Full liberalisation

Malaysia in 1998 allowed full foreign equity in most manufacturing sectors to battle a deep recession, but seven sectors were exempted and the companies must export 80 percent or more of their output.

Rafidah said the full liberalisation of the manufacturing sector, the mainstay of the economy, was a "good indication of the kind of policies to come" as Malaysia sought to remain competitive.

But she said the government would maintain its policy of progressive liberalisation for certain key sectors such as the financial industry.

"We don't want to be setback because of our lack of openness to foreign investors, but in some sectors we will continue to be cautious like the financial sector ... for very good reasons," she said.

"But for manufacturing, especially for the open market place, this is the way we are going for the future."

Under pressure

Rather than worrying about competition, Rafidah urged local industries to boost their productivity and efficiency so they could venture abroad to ensure their long-term survival.

Malaysia is under pressure from other low-cost producers in the region such as China and Thailand, with approved manufacturing investment in 2002 dropping 36 percent from a year earlier to RM16.53 billion.

Local manufacturers have warned weak global growth prospects meant the industry was likely to grow only two percent this year, compared with a five percent official forecast.

The Iraq war and the Sars outbreak in the region compounded its woes, forcing Malaysia to cut its economic forecast to 4.5 percent this year from previous estimates of 6.0-6.5 percent, and the country last month unveiled a RM7.3 billion stimulus package to bolster the economy. - AFP