US investment in Malaysia will not be as large as they used to be as more money flows to lower-cost countries such as China and Thailand, an industry group said in remarks published today.

However, Malaysia is increasingly seen as a services hub with about one-third of some 124,000 workers employed by US firms here engaged in the services sector, the American Malaysian Chamber of Commerce (Amcham) president Tim Garland was quoted by The Star as saying.

"(Foreign direct investment) will not be as large as (it) used to be. There's been a change," he said.

"We do not anticipate investments in greenfield manufacturing operations to grow much bigger. What we expect is growth in existing (US) operations (here), which are retooling or becoming more advanced."

For example, he said giant companies such as Intel Corp and Motorola have moved or consolidated some of their production lines which required a more skilled labour force to Malaysia from more expansive locations such as the US, Japan and Hong Kong.

Although such investments are smaller, they create more value-added for the local economy, he said.

Peg barrier

US companies have invested a total of some RM108.60 billion in Malaysia over the past 25 years, he added.

Malaysia is the US market's seventh largest source of electrical and electronics products but it is losing its competitive edge to other, lower-cost rivals especially neighbouring Thailand and China.

In 2002, investment by US electronics firms in Malaysia plunged 30 percent to RM1.6 billion and Amcham has previously suggested upfront grants, longer tax holidays and reducing the 28 percent corporate income tax to woo foreign investors.

Amcham, which has more than 350 members, urged the government to also consider ending the six-year-old ringgit peg, fixed at RM3.80 to the dollar since 1998, because it posed a barrier to increased FDI. - AFP