Investment is putting money into something with the hope of profit. More specifically, investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable returns in the form of interest, income (dividends), or appreciation (capital gains) of the value of the instrument [1]. Many areas of the economy involve in investment which is include business management and finance (household, firms, or government).
In investment, it consist of the individual or an organization which is involve the choices such as pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives or the foreign asset in foreign currency which has certain level of risk and provides the possibility of generating returns over a period of time.
In the case of Private Investor, a company or individual allocate some proportion of their own money in order to help another business or individual which is known as private investor. Private investor normally invests either in small or large start-up businesses, as well as businesses that have been operating, but have run into hard financial times.
2.0 BODY OF REPORT
The example of private investment ''Lets says you are from old company that need to improve your business. By doing so, you will need private investor to invest in your company and will increase your economic growth and at the same time it also will effect in increase the financial, employment, individual income, GDP, GNP and other things that relate to develop economic growth. For example, PETRONAS as strong company because that already have their private investor.
Figure 1
In Malaysia, private investment will account for 92% of the RM1.4 trillion investments required for the NKEAs from 2010 to 2020 and public funding for only 8% [3].
Private investment is a major participant on economic growth. Based on the figure above, the Malaysian investment in foreign investment has increase from year to year. As in 2010, the foreign investment has increase to RM72 million show that the impact of the economic growth.
3.0 SUMMARY OF ISSUE
Private Investment affects economic growth in Malaysia. According to the article from Bernama Tan Sri Zeti said "Most encouraging is that private investment is expected to strengthen and become an important contributor to the growth". The revival of Private Investment in economic activity has been an important factor in sustaining the strong growth prospects in Asia.
The most important things Private investors offer support, money, time, contacts, knowledge and experience, all of which is essential to the success of a business and can be extremely hard to find elsewhere. You should definitely consider them as a source of finance.
Besides, Private investors not only bring money to the table, but they bring their knowledge and experience as well. Because many of them will be successful entrepreneurs with businesses of their own, they'll have a level of expertise that can be vital to the success of a new business. Having someone on board with a proven track record can be invaluable.
4.0 THE IMPLICATION OF ISSUES
4.1 Private versus public investment
Private investment involve any investment activity by private sector that maximum their profit. In the other side public investment is an activity involve by government to encourage the society welfare. Both investments are important to the country for their economic growth. Without this investment, especially private investment it difficult to that country for develop their county. For example country involve in private investment is Malaysia. So, it is important to look the different between private sector and public sector.
4.1.1 Objective
Private investment always focus to maximum their profit .For the example an individual buy a share from a company in case of their share can give profit to him, to the company they can get more capital to stabilize their profit. For the public investment, government makes an investment to maximum the welfare of their society. For the example Bank Negara Malaysia come out with T-bill to maintain the economic and stable the currency in Malaysia.
4.1.2 Expected price
By focusing to the expected price private investment can predict their profit if they invest to certain investment, such as in the future the speculator estimate the price of share RHB Bank will increase so from that private investment can buy that share to get the better profit .in the other hand public investment will use the expected priced to get the information to separate the money to maximum the satisfaction to their society.
4.1.3 Budget decision
Private investment makes their budget decision faster than public investment. Private investment can make a faster decision because they need the faster profit. For the example an individual can buy the share today and if the other day the speculator predicts the price of share increase they can just sell back that share to the market to get the better profit. But for the public investment they make a budget decision by approval from the parliament and they need a long time to take a decision because they have to analyze which one of project that they should invest more money and can fully utilize all the investment.
4.1.4 Implementation
The implementation make by private investment between public investments. For the private investment involve by the firm and the merged firm .they come out with the share that they can sell to the market to get the higher profit. Other than that public investment will be implementing by a government of the country because government need to stable the economic growth. Therefore, private investment is very important to the economic growth.
4.2 Advantages of Private Investment
4.2.1 Increases the level of employment in the country
From the statistic Private Investment can offer to 65 000 new jobs would have been directly created by involving of private investment in our country. The increasing of private investment the percentage of unemployment will be decrease especially to the fresh graduate.
4.2.2 Increases the individual income
The private investment always focus to get a many profit from that the income of individual will increase and the standard of living will also increase. For the example an individual make investment in a firm and at the last the share that they invest get the profit so from that their income will increase so on.
4.2.3 Reduce the poverty in the country
Private investor can help to reduce of the poverty in a country. For the example the increasing of income to the government by investment of the private investor so the country have more money to fulfil the need of society to be a better country. Besides that, It help increase the economy condition in rural and urban area.
4.2.4 Attract foreign investors to invest in the country
The better economic growth can attract the foreign investor. It is because 92% activity are involve by the private investment, so our county economy be more stable and that mean the foreign investor more attractive to invest in our country because they trust to get a higher profit if they invest in the country that have a stable economic.
4.2.5 Times frame
While a bank could take up to 30 or even 60 days to finalize a loan, a private lender can often provide finance very quickly. When you have put together a deal for a property to flip, using private funds allows a much speedier finalization of the deal, so you can move on to the next transaction.
4.3 Disadvantages of Private Investment
The private investment will give the huge impact to the counties itself. Beside the advantages of the private investment, it also has the disadvantages of the private investment.
4.3.1 Competition between private and public investment
It is because people are more interested to invest in private investment. The private investment can give the higher profits to the investor than public investment. So it make the public investment are not be the first choice to the investor how are looking for the higher profit. Therefore it makes the public investment to compete with the private investments.
4.3.2 Lack of stability to economics of the country
The private investment only wills enter the market if the economics of the country are stable, certainty in macroeconomic policies, and flexibility in the financial market. This is a disadvantage because if the economics of the country are not stable the private investment will be reluctant to enter the market. So it will decrease the job opportunities and increase the unemployment.
4.3.3 Suitable investor difficult to locate and have limited funds
In a certain country they have a limitation on the private investment because they need to protect the public investment. For the example in a county need the private investor to invest in their country but at the same time they need the better economic growth, so they will limit the private investor to invest in their country
The important to be a partner with private investor
4.4.1 Start-up Capital
They will give us the funds we need to get our business off the ground to start up the new business.by using this capital the company can fulfil all the demand. Usually the capital that invests by private investor can be up to $1 million.
4.4.2 Skills and Knowledge
The private investor will share their experience to encourage the economic growth .the private investor use their past experiences and knowledge to make better an investment the better skill and knowledge can be more valuable than a business degree. The local firm can study the advance of technology for the better economic growth.
4.4.3 Contacts
They will generously give you access to their rolodex so you can start to build some of your own contacts. Consider these people your future customers and referrals. For the example the private investor gives their name card to get as many as future customers to make the other investor recognisable about their product.
4.4.4 Commitment
The private investors usually have a higher commitment to their investment because their objective to gain a higher profit. They commit wholeheartedly to your business and will do whatever they can to make sure it becomes the vision that you see it as. For the example the private investor get a full consideration of commitment while they observing the price of the market.
4.4.5 Day to Day Operations
The important of private investor, they will have an active role in the running of your business and help you make major decision.
Encouraging private investor to make investment
4.5.1 Inflation rate
The study assumes that Inflation rate have a negative relationship with private investment. That means lower the rate of Inflation in the country then higher would be the interest of investor to make an investment. For the example Malaysia can encourage the private investor to invest in the country by give lower rate to them to make an investment.
4.5.2 Interest rate
To encourage interest of investor in investment, the interest rate should be lower. It is because the interest rate has a negative relationship with private investment. For the example company a have an interest rate 5% and company B offer 7% interest rate so the private investor will be more interested to invest in a company A.
4.5.3 Subsidies
We need to provide subsidies for them on both sides' means to producers and consumers. Its mean when we provide more subsidies it also will increase the interest of investor in investment. For the example Petronas is a company of private investor, so they get the subsidies by the government to sell their product in a lower price. From that the other private investor will be more attractive to invest in this company.
5.0 CONCLUSION
We found out that private investment had larger impact than public investment on economic growth. The more private investor that invests in the country the better economic that country has. By give the subsidies from the government it will attract more private investor to invest in a firm. Other than that we find the private investment give more advantages to a firm such as increases the individual income that means the private investor may be come from an individual, so the private investment always focus to get a many profit from that the income of individual will increase and the standard of living will also increase. Other than that we also identify the important to have a private investment such as about their skills and knowledge .The private investor will share their experience to encourage the economic growth .the private investor use their past experiences and knowledge to make better an investment the better skill and knowledge can be more valuable than a business degree. The local firm can study the advance of technology for the better economic growth. From all this explanation we identify that private investment is very important to a county to gain a better profit to increase an economic and make a country can be compete to each other.
