PETALING JAYA: Despite the strong start to 2026, surpassing 2025’s record-high investment approvals of RM431.1bil may prove challenging for the country, according to UOB (Malaysia) Bhd.
Prolonged Middle East tensions, energy price volatility and persistent cost pressures could weigh on investment decisions.
“As such, total investment approvals are expected to moderate towards the three-year average of RM382bil, although ongoing supply chain diversification into Asean, the artificial intelligence upcycle and Malaysia’s underlying economic strengths should continue to provide support,” the bank said in a report.
Malaysia secured RM92.8bil in approved investments in the first quarter of financial year 2026 (1Q26), a marginal 0.2% decline from RM93bil a year earlier.
While the pace eased slightly from the exceptionally strong levels recorded in recent years, UOB said the largely stable outcome suggests investor interest remains resilient despite a more uncertain global environment.
Investment activity continued to be driven by the services sector, which accounted for 65.5% of total approvals, followed by manufacturing and the primary sector.
These investments comprise 1,249 projects across those three sectors and are expected to create 50,226 new jobs, representing a 46.7% increase year-on-year (y-o-y).
Foreign investment (FI) approvals continued to dominate, totalling RM56.2bil and accounting for 60.5% of total approved investments in 1Q26.
The top five sources of FI, comprising Japan, China, the United States, Singapore and Thailand, collectively contributed 90.6% of total FI approvals.
“Notably, 93.6% of Japanese-approved investments in 1Q26 were channelled into digital transformation activities, reflecting Malaysia’s growing role in regional high-tech and digital supply chains,” the bank said.
According to the United Nations Conference on Trade and Development’s January 2026 Global Investment Trends Monitor, investment momentum in digital infrastructure is expected to remain strong globally.
UOB said the report also ranked Malaysia among the world’s top 10 destinations for data centre projects, highlighting growing investor confidence in the country’s digital ecosystem and regional connectivity.
On the other hand, domestic investments rose 13.0% y-o-y to RM36.7bil, increasing their share of total approved Malaysian Investment Development Authority’s or Mida’s investments to 39.5% from 34.9% a year earlier.
Locally, the bank said the New Incentive Framework for the Manufacturing Sector, introduced on March 1, 2026, together with Mida’s invest local initiative, is expected to attract more high-quality, technology-driven investments, deepen local industry participation and support the creation of high-value jobs.
UOB said its projection of total investment approvals in 2026 to moderate following the record-setting level achieved in 2025 takes into account Mida’s existing pipeline.
“As of May 5, 2026, a total of 182 potential projects worth RM38.3bil are under facilitation, led by services (105 projects worth RM14.1bil) and manufacturing (77 projects valued at RM24.2bil) sectors.
“A further RM91bil in potential investments are under active discussion, providing continued pipeline visibility,” UOB said.
