Malaysia ranks third after Singapore and Thailand in foreign direct investment (FDI) among Asean countries, the Dewan Rakyat was told today.

Parliamentary secretary to International Trade and Industry Ministry Dr Tan Yee Kew said it is inappropriate to compare Malaysia with big countries like Indonesia and China.

"We are more developed compared to these two countries. However, they are bigger in size compared to us and it is unfair to compare Malaysia with them," she said.

Tan was responding to a supplementary question from Mahadzir Mohd Khir who asked her why the foreign investment rate in Indonesia and China is much higher compared to Malaysia.

"Is it due to the federalism in Malaysia where state government need the federal government's approval before accepting investments?" he asked.

Tan, explaining that the concept of federation is not a problem in attracting foreign investments, said: "The decision to accept an investment is up to the federal government. The state government only plays its part in issues like land which needs the approval of a local government."

Facing competition

Earlier, Tan explained that the government has taken several steps to face the competition posed by China, Vietnam, Thailand and Indonesia in attracting foreign investment.

Among them, she said, is the liberalisation of foreign equity where all foreign investments including expansion and diversification projects are allowed 100 percent equity ownership.

"However, we need to take into consideration our country's visions when it comes to other sectors," she added.

Tan said the government, while improving existing incentives, has also introduced new incentives and offered pre-packaged incentives for strategic investment projects.