Is Malaysia Inc too comfortable at home?

MALAYSIA’S latest outbound investment data raise a pressing question: are home-grown companies expanding abroad boldly enough, or have they become too comfortable on home turf?

While local business names have continued to invest abroad, Malaysia’s net direct investment outflows have generally been shrinking since peaking in 2022.

In fact, the 2025 data was the second lowest in the past two decades.

Over-reliance on the Malaysian market – or any single country for that matter – can pose an existential threat for businesses in the long run.

The lack of foreign exposure naturally limits the opportunities for growth and revenue base diversification.

China offers a good example why foreign expansion is important.

One reason Chinese companies have grown into global powerhouses is Beijing’s “Go Global” or “Go Out” strategy, introduced in the early 2000s to encourage businesses to invest, acquire assets and expand overseas.

Malaysia too has several success stories, with some of the country’s largest conglomerates heavily invested abroad.

In the case of Genting Bhd, nearly two-thirds of its revenue in financial year 2025 (FY25) came from non-Malaysia markets.

Gamuda Bhd’s overseas operations contributed 64% of revenue in FY25, similar to Sime Darby Bhd.

IHH Healthcare Bhd, which runs private hospitals such as Pantai, Gleneagles and Prince Court, made less than one-fifth of its FY25 revenue from Malaysia.

While there are more companies on the list, experts concur that more Malaysian businesses should expand beyond the country.

“The actual success is when we see more small and medium enterprises (SMEs) scale up and start having foreign presence.

“The question is, are they willing to take the risk?” a consultant tells StarBiz 7.

Last year, Malaysia’s direct investment abroad (DIA) recorded a lower net outflow of RM12.4bil, compared to 2024’s RM35.5bil and 2022’s RM62.8bil.

DIA flows refer to acquisitions and disposals of financial assets and liabilities during a reference period.

It comprises transactions in the form of financial instruments, namely, equity and investment fund shares (include reinvestment of earnings), and debt instruments.

A DIA outflow indicates an increase in investment.

An investment is considered “direct” when the Malaysian entity owns at least 10% of voting power of an enterprise abroad.

Carmelo Ferlito, the chief executive officer at Centre for Market Education, believes that geopolitical uncertainties are likely keeping Malaysian investors at home.

“I tend to interpret the decline as a result of the climate of uncertainty.

“In fact, the dynamics of investments in Malaysia has been sustained over the past few years, showing that businesses prefer to invest domestically to counteract the uncertain scenario out there,” he says.

The record-breaking approved investments last year partly indicate the interest to invest domestically.

In 2025, domestic approved investments represent 51.5% of the total RM426.7bil figure.

Socio-Economic Research Centre executive director Lee Heng Guie notes that Malaysia’s DIA had moderated substantially for three consecutive years.

However, he is “not overly concerned” about the declining trend of DIA by the Malaysian companies, given the dynamic pull and push forces influencing overseas investment.

Rather than a sign of business distress, Lee says it reflects strategic regional diversification and a shift by Malaysian companies to navigate the disruption forces.

“With the economic realignment amid shifting global economic conditions and the diversification and localisation of supply chains, domestic companies are focusing capital closer to home and form strategic partnerships with foreign companies for investing locally.

“Additionally, greater domestic direct investment agenda through the Finance Ministry’s GEAR-uP programme, with channeling capital into high-growth, high-value sectors like energy transition, semiconductors, and data centres,” Lee explains.

An initiative under Ekonomi Madani, GEAR-uP aims to unlock RM120bil over five years to drive socioeconomic reforms and jumpstart Malaysia’s industrial transformation.

The programme is anchored by six major government-linked investment companies (GLICs): Khazanah Nasional Bhd, the Employees Provident Fund, Permodalan Nasional Bhd, Retirement Fund Inc, Armed Forces Fund Board and Lembaga Tabung Haji.

Currently, Lee says that the bulk of Malaysia’s overseas direct investment is in the manufacturing, utilities, distributive trade, leisure, plantation and construction, as well as banking and finance industries.

However, Malaysian companies should also explore other high-potential sectors abroad to acquire new technologies, diversify markets and integrate into the global supply chain, he adds.

“These include the semiconductor sector, oil and gas, halal products and services, Islamic finance, digital economy and green technology.”

Mohd Sedek Jantan, country economist at IPP Financial Advisers, says the lower DIA seen by Malaysia should not be interpreted as domestic companies losing their international competitiveness or becoming less ambitious globally.

Rather, it reflects a shift in how companies are financing overseas expansion amid a more challenging global investment environment, he says.

Although net DIA outflows had moderated sharply to RM12.4bil in 2025, Sedek says the underlying composition tells a different story.

“Equity and investment fund outflows actually increased slightly to RM29bil, supported by higher reinvested earnings from Malaysian companies operating abroad, particularly in Singapore, Mauritius and Canada.

“This suggests that existing overseas operations continue to expand using internally generated profits rather than relying on fresh capital injections from Malaysia.

“The sharp decline in the headline figure was primarily driven by the reversal in debt instruments, which shifted from a net outflow of RM7.3bil in 2024 to a net inflow of RM16.6bil in 2025.

“Debt instruments include inter-company loans, trade credit and other financing arrangements.

“This reversal likely reflects balance sheet optimisation, loan repayments and changes in intra-group financing, rather than companies abandoning overseas expansion.”

According to Mohd Sedek, Malaysian companies continue to generate substantial overseas earnings of RM39.9bil, indicating that their foreign operations remain profitable and resilient.

Mohd Sedek disagrees that Malaysian companies have become overly dependent on the domestic market, or that they are significantly reducing capital expenditure.

Instead, businesses are becoming more disciplined in allocating capital amid a changing global investment landscape.

With more structural opportunities emerging in Malaysia and appearing highly attractive, he says it is economically rational for Malaysian companies to allocate more capital to domestic expansion.

“Firms are sequencing their investments; strengthening technological capabilities, enhancing productivity and building larger domestic platforms before scaling further overseas.

“This trend is also reflected in the manufacturing sector, which recorded a net inflow of RM9.2bil in 2025, suggesting that companies are reinvesting in domestic production capacity and industrial upgrading rather than relocating operations abroad,” Mohd Sedek says.

Realistically speaking, investing domestically on familiar home turf is not only less risky, but also less complicated to execute.

In addition, the lack of financial muscle – a common issue faced by many Malaysian businesses – also hinders foreign expansion.

In the case of China, the country’s sovereign funds have supported efforts to go global, including by helping Chinese enterprises finance mergers and acquisitions abroad

So, a key question is, can the Malaysian government be a more active co-investor in supporting businesses’ foreign expansion?

Mohd Sedek says government agencies and Malaysia’s overseas diplomatic missions should operate as an integrated ecosystem, providing market intelligence, business matching, investment facilitation, export financing and political risk support.

“For many companies, particularly SMEs, the biggest obstacle to overseas expansion is often not financing, but gaining trusted access to local partners, understanding regulatory requirements and building credibility in unfamiliar markets.

“Malaysia’s overseas investment strategy should prioritise quality over quantity.

“Rather than expanding into every market, Malaysian companies should focus on high-growth and under-penetrated markets.”

That said, government assistance alone would not help if business owners are not willing to take the plunge.

Rapid adoption of technology and the willingness to recruit high-skilled, better paid talent would also play a major role in proving their mettle abroad.