(AFP) - The value of manufacturing investment will improve this year despite shrinking 26.5 percent in 2001, Internationa Trade and Industry minister Rafidah Aziz said today.

Rafidah said 813 projects were approved last year with investments totalling RM24.72 billion, compared to 805 projects worth RM33.6 billion approved in 2000.

Foreign investments were "generally sustained," dipping only 7.6 percent year-on-year, and accounting for 74 percent of total investment with the rest coming from local investors, she said.

The United States, Japan and Singapore remained the top investors, followed by China, the Netherlands, South Korea and Taiwan.

Rafidah said there appeared to be an upswing in foreign interest in the region in the aftermath of Sept 11 terror attacks in the US and the global economic downturn.

"Now the investors are coming back to look at investing offshore. I think the Sept 11 episode has been moved behind. We do get interest coming back into the region now," she told a news conference.

"So far, we have been doing very well. Bear in mind, these are bad times. Times will be better and we expect to do better (in 2002)... because people are seeing this region as stabilising economically."

To convince investors

Rafidah said Malaysia would try to convince new US investors it was not a terrorist nation after the recent arrest of 23 Muslim militants allegedly linked to Osama bin Laden's al-Qaeda and other terror networks.

"We were afraid that Malaysia would be branded as one of those Muslim countries that one should have a hands-off position because we have our small share of militants," she said.

"Fortunately we are able to prove to the world that while we have these militants, we are able to nip it in the bud. We continue to take very aggresive actions, we cannot have militants in this country in any form."

Rafidah said the ringgit peg, fixed at 3.80 to the dollar in 1998, was not a deterrent to foreign investors.

"Most of them said, 'Don't touch the peg, don't touch the ringgit, leave it.' They have already factored it in, I would say all of them said so," she told AFP .

She said Malaysia may not be able achieve the RM25 billion investment target every year under its 10-year Industrial Master Plan until 2005.

But from 1996 to 2001, the annual average had exceeded the target and now stood at RM26.8 billion, she said.

Special incentives

The government would continue to fine-tune its policies and offer special incentives to woo high-tech investments amid intense competition from other Asian countries, particularly China, she added.

Rafidah said the electrical and electronics sector accounted for over 40 percent of approved investments last year, proving Malaysia had kept its competitive edge despite an industry consolidation worldwide and growing competition from China as a manufacturing hub.

Other sectors with significant investments were paper, printing and publishing, non-metallic mineral products, chemical and chemical products and transport equipment.

However, Rafidah said the global economic uncertainties saw proposed investments tumbling 65.8 percent to RM15.8 billion last year, with 712 applications received.

She said 367 projects approved between 1996 and 2001 started production last year, providing over 50,000 jobs and surpassing 18,636 retrenchments in the manufacturing sector.

Manufacturing is the mainstay of Malaysia's economy, contributing over 30 percent to gross domestic product, but a labour cruch in recent years has prompted a switch to high-technology sectors to stay competitive.