PETALING JAYA: Malaysia's sustained high levels of approved investments averaging RM352.1bil per year from 2022-2025, reflect both fundamental and structural improvements.
This was driven by geoeconomic fragmentation as foreign investors embarked on the reconfiguration and diversification of supply chains, explained Socio-Economic Research Centre executive director Lee Heng Guie.
“Hence, Malaysia is one of the investment destinations under the China Plus One strategy for foreign investors seeking to diversify their investment risks,” he told StarBiz.
Domestic pull factors, Lee added, are the implementation of transformative plans such as the Economy Madani Framework, New Industrial Master Plan (NIMP) 2030, National Energy Transition Roadmap, and National Semiconductor Strategy, which align with global megatrends such as high technology, semiconductors, data centres, artificial intelligence (AI), energy transitions, and environmental, social and governance.
The approved investments were broad-based, spreading across sectors and thousands of projects rather than being skewed by a single massive deal.
“Domestic direct investment is primarily organic and driven by long-term national confidence, while foreign direct investment (FDI) is driven by strong positioning in the electrical and electronics (E&E) supply chain, supportive government policies, and a stable macroeconomic environment,” he said.
However, based on the level of net FDI inflows, Malaysia's relative position appears to have weakened compared with Vietnam, while remaining below Indonesia throughout most of the period.
“Nevertheless, Malaysia's strong post-pandemic recovery suggests that the evidence does not support a conclusion of a persistent long-term decline in its ability to attract foreign investment.”
“The approved investment was off to a good start in the first quarter of 2026 (RM92.8bil), and it remains challenging to sustain high approved investment levels in the remaining quarters amid ongoing conflict in West Asia, volatility in global energy markets and increasing cost pressures.”
That said, Malaysia’s supportive investment ecosystem will continue to attract FDI and domestic direct investment inflows, supported by a conducive investment framework, positive economic fundamentals and persistent geoeconomic fragmentation.
The momentum of Malaysia’s 2025 approved-investment record is concentrated and momentum into the second half of 2026 looks resilient, though likely to moderate from the exceptional pace of the past two years.
Centre for Market Education chief economist Alvin Desfiandi pointed out that the figures are heavily supported by a cluster of big digital, AI, and Johor-linked projects rather than a perfectly even nationwide boom.
“Future gains are more likely to come from continued execution and a broader project pipeline than from another burst of headline-sized mega deals
“The strongest driver has been global supply-chain reallocation into Asean, especially in E&E and digital infrastructure. Malaysia also benefited from its own policy mix, the Johor-Singapore Special Economic Zone, approval streamlining and sector incentives, plus its practical strengths in power, land, logistics, and an established semiconductor base.
“So this is not just “luck” from external shifts; Malaysia has been able to convert those shifts into approvals more effectively than before,” Desfiandi opined.
While Vietnam remains the main regional rival in manufacturing-FDI depth, Malaysia is currently outperforming it in approval growth and in the ability to attract high-value digital capital.
“The outlook stays positive, but the growth rate should cool from the 2025 peak. The pipeline is still healthy, and support from E&E exports, AI-related capital expenditure and policy continuity should keep approvals elevated. The main risk is that a softer global backdrop, cost pressures, and fading base effects make it harder to repeat the extraordinary pace of the last two years,” added Desfiandi.
