Malaysia and Saudi Arabia's PetroSaudi International are set to announce a joint venture company to invest $2.5 billion in Malaysia, a report said.

The venture with government-owned 1Malaysia Development would target renewable energy, said th reports on Bernama and the Malaysian Insider website.

The reports did not detail the investment split or when and where the fund would invest.

"The joint venture is set to further increase foreign direct investment from the Middle East, in particular Saudi Arabia," 1Malaysia Development CEO Shahrol Halmi said, according to Malaysian Insider.

Malaysia has struggled in recent years to attract investment and has recorded negative direct investment flows since the second quarter of 2008.

Economists say Malaysia, burdened by what is expected to be its biggest budget deficit this year since 1987, needs to reduce government development spending and boost lacklustre private sector investment.

The government is considering plans for its 2011-15 economic plan to cut government development spending by 10 percent to 180 billion ringgit ($51.65 billion). - Reuters