KUALA LUMPUR - Malaysia is confident of attracting more foreign investment this year after a big decline in 2020, and is looking at incentives to help support that goal, its finance minister said on Monday.

Tengku Zafrul Abdul Aziz said in an interview that incentives had traditionally been linked to the size of investments, but that they could also focus on "soft skills."

"If the investor is bringing R&D, these are not really tangible, but perhaps we should give the incentive to that as well," he said, adding the drop in foreign direct investment (FDI) last year was largely due to the one-off impact of the coronavirus pandemic and political uncertainties.

In a January report, the United Nations Conference on Trade and Development said FDI into Malaysia plunged 68% last year, the biggest decline in south east Asia.

"I think they've (foreign investors) seen that most of the policies are intact, we have not changed any tax policies, initiatives and incentives are not being pulled. That shows that government is consistent," Zafrul said, referring to the change in government in February last year.

Zafrul also said settlement talks were ongoing with Abu Dhabi sovereign wealth fund IPIC and audit firm KPMG related to the multibillion-dollar scandal at 1Malaysia Development Berhad (1MDB).

Malaysia had filed a legal challenge in 2018 to a settlement agreement between 1MDB and IPIC negotiated during the premiership of former leader Najib Razak, who was found guilty of corruption in a 1MDB-related case.

1MDB said last month it still had 32.3 billion ringgit in outstanding debt.

Malaysia has recovered around 13.7 billion ringgit in assets linked to 1MDB's financial trail, Zafrul said.

Malaysia is also considering reintroducing consumption tax to increase tax revenue. "The discussion now is about timing. It's not the right time now," Zafrul said.

(Reporting by Liz Lee. Editing by Mark Potter) ((liz.lee@thomsonreuters.com; Desk: +60323338039; Twitter: @livinglizly;))