In recent years, Malaysia’s investment landscape has been transforming, driven by growing interest in high technology, green industries and advanced manufacturing as well as high value-added service sectors.
Malaysia has experienced an investment renaissance and continues to be a recipient of foreign direct investment (FDI), reinforced by domestic direct investment.
Malaysia has a long-standing track record of generating decent investment returns, benefitting foreign companies.
The emergence of new growth areas in the manufacturing sector such as semiconductors in fast-growing segments such as digitalisation, data centres, artificial intelligence (AI), electric vehicles, medical devices, aerospace industry, telecommunications, and advanced applications in chemicals, healthcare, as well as in renewable energy, has enabled Malaysia to focus on becoming a regional hub for these industries as well as being plugged into global supply chains.
We believe a fundamental shift in Malaysia’s investment landscape is underway. Malaysia is not only strategically located close to the two most populous economies (China and India), but also centrally located in Asia and in Asean.
While the country’s economy may not be as exciting as some of its peers in Asean in terms of economic growth prospects and size of its domestic market, it is still in a “nice sweet spot” within Asean for offering positive economic growth prospects and compelling investment story.
While it is reckoned that US President Donald Trump’s economic and investment policies are inducing uncertainty and could temper global growth by causing trade and FDI flows to be redirected to the United States, Asean, including Malaysia, remains a ‘beacon of growth opportunities’ amid global uncertainties.
Since the trade conflicts under Trump’s first term, the Covid-19 pandemic, and on-going military conflict in Ukraine, the global economic environment has been increasingly uncertain and challenging.
This is shaped by the forces of fragmentation, resulting from geopolitical tensions and strategic competition between great powers, including through trade, technology and industrial policies.
New strategies
Given the significant hotspots in international trade and investment, companies are reconfiguring their supply chains by turning to “onshoring”, “nearshoring” or “friendshoring” to diversify their sourcing and reduce reliance on long-distance manufacturing.
This is in order to mitigate risk and secure back-up sourcing to reduce the impact of disruptions in any single region or supplier, driven by factors like geopolitical uncertainty and the desire for greater resilience.
The government has implemented levers to put Malaysia in a new era of growth by outlining strategic direction and initiatives to make the country a sustainable, green, high-income nation and a top-20 economy by 2030.
The path has been set for restructuring and rebalancing the Malaysian economy through the Madani Economy framework, the Twelfth Malaysia Plan, New Industrial Master Plan 2030, National Energy Transition Roadmap, National Semiconductor Strategy, and Public-Private Partnership Master Plan 2030.
All this has sparked significant interest regarding Malaysia’s future economic direction, particularly drawing high quality FDI into high-growth, high-value industries while also re-energising domestic investment into technology and the digital economy, food security, environmental preservation and climate mitigation projects.
Meanwhile, the government’s GEAR-uP initiative involves six government-linked investment companies investing around RM120bil over five years starting this year to generate economic growth and domestic investment.
Additionally, the establishment of the Johor-Singapore Special Economic Zone offers businesses and investors the opportunity to tap into new emerging growth sectors.
The Thirteenth Malaysia Plan from 2026 to 2030 that will be unveiled in July, will continue to focus on energy transition, technology, high-value electrical and electronics, rare earth metals, modern agriculture and agri-based industries to encourage more new investments.
Spurring investments
Malaysia’s participation in several significant economic agreements, such as the Regional Comprehensive Economic Partnership, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as well as the Asean-China Free Trade Area has deepened economic ties.
Is has also boosted investments, and expanded cooperation across sectors such as manufacturing, green energy, and consumer electronics.
Key factors driving private investment growth in Malaysia were optimism about economic growth and investment prospects, favourable government policies and strategic initiatives that align with trends in semiconductors, AI, data centres, the digital economy and renewable energy.
Since the Covid-19 crisis, Malaysia has attracted foreign and domestic investments, with total approved investments hitting a historic high of RM378.5bil last year, compared with an average of RM302.2bil per year from 2021 to 2023.
The figure was RM167.4bil in 2020 during the pandemic and RM211.9bil in pre-pandemic 2019.
From 2021 to 2024, domestic investments’ share of total approvals was 42.3% while the balance of 57.7% was foreign.
A breakdown of approved manufacturing investment projects in between 2021 and 2024 indicated that new investment projects made up 49.7% of total approvals while the balance of 50.3% was for expansion and diversification.
The realisation of approved investments, which usually takes two to three years, is crucial to ensure real economic benefits in terms of increasing economic growth, higher incomes and deepening industrial links between foreign multinationals and local businesses.
In conclusion, we believe that Malaysia’s investment landscape will continue to grow amid global economic challenges.
The government, ministries and agencies must continue to ensure effective execution of plans and programmes, focus on strong implementation and coordination, clear roles and responsibilities, and continuous tracking and monitoring, and ensuring good governance and accountability.
The government must continue to commit to simplifying regulations, reducing bureaucratic burdens to foster a conducive business ecosystem, particularly for small and medium enterprises in the country to ensure continuing prosperity.
Lee Heng Guie is the executive director of the Socio-Economic Research Centre. The views expressed here are the writer’s own.
