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This year, Geneva-based United Nations Conference on Trade and Development (UNCTAD) has chosen to launch its World Investment Report 2007 in Cambodia yesterday.

In a cursory look, in 2006, Malaysia managed to attract US$6.1 billion (RM20.6 billion) in foreign direct investments (FDI), improving the 2005 records of US3.97 billion (RM14 billion) by 52.8%.

However, alarmingly, outflow of capital among transnational companies in 2006 has also doubled, totalling US$6.4 billion (RM20.56 billion).

UPDATES: Reuters' bureau chief in Malaysia suggested that the trend could even expose the country's unpopular affirmative-action policy to stronger winds of reform.

Expect the 4th Floor Boys to spin it by saying that, to and fro, the inflow and outflow of foreign capital in Malaysia has reached US$12.14 billion (RM41.16 billion)

theSun is Editor-in-Chief-ed by Ho Kay Tat

But what's our net gain? It seems like a futile effort to fill up the cistern, but at the same time it is leaking wide.

In contrast, global FDI flows for 2006 have reached RM1,306 billion (RM4,440.4 billion), approaching the peak level in 2000 valued at US$1,411 billion.

What amount of FDI will Malaysia attract in the coming years when the peak flows taper off?

Worse, if capital inflows are in the form of short-term 'hot money' while outflows are long-term investments.

When long-term FDI withdraws, it can only mean that investors are not optimistic about the growth prospects and the return of investment in this country.

Hence, It is significant to note that, according to the UNCTAD report, the rise in global FDI flows was partly driven by increasing corporate profits worldwide, and resulting higher stock prices that raised the value of cross-border mergers and acquisitions (M&As).

In fact, M&As continued to account for a high share of FDI flows though greenfield investment also increased in developing and transitional economies like Malaysia.

Transnational corporations at work

On a closer look, the capital outflow seemed to have been triggered by a spade of strategic cross-border M&A activities carried out by Malaysian companies in economies overseas.

Our companies, including those in banking and non-financial services, are expanding into global markets and creating wealth in foreign countries.

For example, Petronas' foreign assets are now valued at US$61.6 billion (RM207.9 billion), ranking it the No. 2 in the non-financial institution category of transnational enterprise.

Secondly, FDI injected into the Malaysian equity market has increased to US53.6 billion (RM182.2 billion) in 2006 from US$47.5 billion (RM161.5 billion) in 2005. This indicates the appetite of the transnational corporations in savouring equity shares of our pan-global companies.

As a context, the major landing points of FDI recorded in the region 2006 -- by ranking of quantum received in East Asia, South Asia and Southeast Asia -- were China, Hong Kong, Singapore and India.

Foreign capital injected in the region was mainly concentrated in services, whereas transnational M&As of extractive industries have increased by five-fold, accentuating at US$1.75 billion (RM5.78 billion).

Read the details, understand the implications

The World Investment Report has been published annually since 1991.

Each year, the Report covers the latest trends in FDI around the World and analyses in depth one selected topic related to foreign direct investment and development.

This year's topic is on transnational corporations, extractive industries and development.

Full report is available here, and the Overview is available here.