Malaysia’s investment story is not a contradiction – it’s about different stages of the same journey.
WHEN headlines announce that Malaysia has secured RM190.3bil in approved investments in the first half of 2025, it sparks confidence.
Yet, in the same breath, the Statistics Department reported that net foreign direct investment (FDI) inflows dropped sharply – from RM15.6bil in the first quarter to just RM1.6bil in the second quarter.
To many, this feels contradictory. Can investment be “so strong” in one report and “so weak” in another? The truth is, both sets of numbers are correct. They measure different stages of Malaysia’s investment journey.
Approvals versus flows: What’s the difference?
The Malaysian Investment Development Authority (Mida) approvals reflect commitments on paper. These are projects that investors have submitted based on their proposals, vetted by authorities, and approved to proceed.
Think of it like buying a ticket for a flight – the intent to travel is there, but the passenger hasn’t boarded yet.
Gross FDI inflows, captured by the Statistics Department, measure the actual money flowing into the country. This includes equity injections, reinvested earnings and inter-company loans.
In the analogy, these are the passengers who actually board the plane.
Net FDI inflows go one step further. They deduct outflows such as profit repatriation and loan repayments. In our analogy, some passengers board, but others may also disembark before the plane takes off again.
Approvals: Gross versus net inflows
Approvals are best compared with gross inflows, because both measure the “front door” of investment – the money committed versus the money actually coming in.
For instance, in the first half of 2025, Malaysia recorded RM106.8bil in approved foreign investments or FI and RM148.9bil in gross inflows. This shows that approvals are indeed translating into actual capital flows, even if the timing and scale differ.
Comparing approvals with net inflows, however, tells a different story: How much of that money Malaysia ultimately retains after outflows.
In the same period, net inflows were just RM17.2bil.
This does not mean approvals are “wrong” or “empty,” but it does highlight how profit repatriation and debt repayments reduce the amount that stays in the country.
In simple terms:
> Approvals versus gross inflows = “Pipeline” versus actual arrivals
> Approvals versus net inflows = “Pipeline” versus what stays behind
Both comparisons matter – one signals future confidence, the other reflects current reality.
Why the gap happens
There are four main reasons why approvals and inflows rarely match neatly:
> Timing lag – A semiconductor plant approved today may only record inflows in stages over several years.
> Profit repatriation – Multinationals reinvest some earnings locally but also send profits back to their headquarters.
> Quarterly volatility – A single large loan repayment or capital withdrawal can swing the numbers in one quarter. Annual data usually gives a steadier picture.
> Different scope – Mida measures projects approved (new or expansions/diversifications), while the Statistics Department measures all financial flows, including mergers, acquisitions and profit transfers.
Breaking it down (analogies)
For the layman, two analogies make this easier to understand:
> Smartphone analogy – Approvals are pre-orders, gross inflows are the deliveries, and net inflows are the phones you actually keep after returns.
> House analogy – Approvals are building permits, gross inflows are the construction spending, and net inflows are the families who eventually move in.
From paper to reality (examples)
Examples to illustrate the journey of different investment projects – from approvals to reality, and how the speed of the whole process can differ;
> A logistics company – first announced as an approved project, the facility is now fully operational.
The approval translated into capital inflows, construction, and today contributes jobs and logistics capacity.
> An automation hub is under development. Funding is flowing in stages – for land, equipment and early works. It shows how approvals often convert into incremental inflows rather than a one-off lump sum.
> An electrical and electronics (E&E) company is currently moving from paper approval to physical implementation, with capital beginning to flow. The facility is not yet operational, underscoring the time lag between approval, inflows and final output.
Together, these examples show that Mida approvals are not just statistics.
They represent projects at different stages – operational (logistics company), in progress (automation hub), and just starting (E&E company).
This is why the Statistics Department’s quarterly FDI figures may look modest while large projects are still ramping up.
Keeping more FDI in Malaysia
If inflows are the front door, then outflows are the back door. Some leakage is natural, but Malaysia can capture more value by:
> Encouraging reinvestment of earnings with tax credits and incentives.
> Deepening local supply chains so multinationals source more from Malaysian SMEs.
> Strengthening domestic capital markets, allowing firms to raise funds locally rather than rely on overseas borrowing.
> Building stronger local talent pools to reduce reliance on expatriates and associated remittances.
> Ensuring policy clarity and stability, which encourages companies to keep profits in-country.
The road forward
Malaysia’s investment story is not a contradiction – it’s about different stages of the same journey.
> Approvals signal intent and confidence.
> Gross inflows show money arriving to fund projects.
> Net inflows reflect how much Malaysia ultimately keeps after outflows.
The challenge is two-fold:
> Convert approvals into realised inflows faster.
> Reduce unnecessary outflows so more value stays within Malaysia.
At the same time, we must reduce confusion:
> Clearer communication and reporting to explain the difference between approved FI and FDI.
> Implementation tracking – Mida reported over 85% of approved manufacturing projects since 2021 are already underway.
> Focus on annual trends to avoid overreacting to quarterly volatility.
The full picture
Mida’s approvals and the Statistics Department’s FDI data are not rivals, but complements – two lenses on the same pipeline.
> Approvals show the pipeline of investor confidence.
> Gross inflows show the actual capital arriving.
> Net inflows show what Malaysia ultimately retains.
Seen together, these numbers provide a complete picture: intent, actual arrival and retained value.
By focusing not only on attracting approvals but also on retaining more value through reinvestment, stronger supply chains, and local talent development, Malaysia can ensure that today’s strong approvals translate into sustainable, high-impact growth tomorrow.
Anthony Dass is FSG Corporate and National Council Member of SME Association. The views expressed here are the writer’s own.
