Malaysia, Saudi Arabia create $2.5bn investment fund

       Malaysia, struggling to reverse investment outflows, said yesterday that it had won a $1.5 billion investment deal from Saudi Arabia and that it expected to strike more deals in coming months.
       The export dependent Southeast Asian country has been hit hard by the global economic downturn and has struggled since the 1998 Asian financial crisis to attract foreign direct investment, losing out to neighbours like Thailand and emerging giant China.
       In 2008, foreign direct investment (FDI) into Malaysia fell by 4% to $8 billion, United Nations data showed,and net flows have been negative since the second quarter of 2008, according to Malaysian central bank figures.
       The Saudi investment is for a planned $2.5 billion fund that will be set up by PetroSaudi International Limited (PSI)and a Malaysian government body called 1Malaysia Development Berhad (1MDB).
       The fund, which will also be financed by a $1 billion Malaysian government bond sale, will invest in petroleum, oil and gas, green energy and real estate.The joint venture will be allowed to invest outside Malaysia but will have to repatriate profits.
       "This will bring a lot of contributions and mega-injections of capital to drive the economic growth of Malaysia, not only in the short term but in the long term," Prime Minister Najib Razak told reporters.
       With global investment flows expected by the UN to slow this year and to recover only slowly next year, Najib said that Malaysia would sign more deals with "capital surplus" countries.
       "We should expect to tap FDI from within Asia, such as China and India,and also the Middle East where they accumulated a lot of surplus with the earlier oil boom," said Lee Heng Guie,head of economic research at Malaysia's CIMB Investment Bank:
       "From a FDI perspective, it's very positive ... It's a time when FDI inflows could be scarce," Lee said.
       News of the deal for which Najib said the Saudis had already transferred their portion of the investment caused the Malaysian ringgit to extend gains to 3.457 per dollar, its highest in nine months, a trader in Kuala Lumpur said.