"At a certain extend it is desirable to invest abroad, but we should always have to balance between inflow against outflow of funds," he said.
Mahathir was speaking to reporters at 6th Malaysian Construction Summit 2014 on Friday.
He pointed out that too much of fund outflow from the country would not be good for the economy, especially overseas property assets that were acquired.
"Instead of supporting local industry, they (funds) have gone abroad," he said.
Mahathir added that local contractors should be given more opportunities to be involved in mega projects in Malaysia.
Meanwhile, he was also concerned about the 1Malaysia Development Bhd's (1MDB) plans to sell up to RM8.4bil of Islamic Bonds.
"When we want to spend money to build up assets in the country or overseas, it must not be from borrowed money, it must be from surplus," he said.
According to Bloomberg, 1MDB is planning to sell RM8.4bil worth of sukuk to fund construction of a 2,000 MW plant in Negeri Sembilan.
