Malaysia, one of the tiger economies of Asia is one of the best destinations for foreign direct investment (FDI) in Southeast Asia. According to Department of Statistics Malaysia (DOSM), the total FDI stock rose 10.3 percent to USD 159 billion in the second-quarter (Q2) of 2019, from USD 151 billion a year ago.
In Q2, Malaysia experienced growth in services, manufacturing & exports, with the economy growing by 4.9%, beating forecasts and outperforming other ASEAN countries. This growth can be attributed to stronger domestic demand, an increase in private investments, and a rebound of commodity prices. In the long term, Malaysia is expected to benefit from the ongoing US-China trade war through increased investments and trade diversions; additionally, the Government may introduce measures in its budget to insulate from adverse effects of the trade war in the short term. China is Malaysia’s biggest trading partner and Malaysia is focusing on attracting high technology investments from China.
Mega infrastructure projects like East Coast Rail Link (ECRL), a Belt and Road Initiative project, Klang Valley MRT 2 and LRT 3 will create more jobs and strengthen connectivity.
FDI accounts for 40% of overall investments in Malaysia. In the last 3 years, USA, China, Japan, Australia and Germany have accounted for maximum FDI inflows into Malaysia. Major FDI has come into electronic components, hotels & tourism, real estate, renewable energy, metals & rubber.
FDI in Malaysia is primarily driven by the manufacturing sector, which accounts for almost 40 percent share. USA is the biggest source of manufacturing FDI, followed by China, Singapore, and Japan is in fourth place. The new economic model to achieve shared prosperity by 2030 launched recently by Prime Minister Dr. Mahathir replaces the Vision 2020 model. Amongst other areas, the new economic model focuses on Industrial Revolution 4.0, digital economy, creating high-skilled jobs, improved labour market, new growth sectors, reforming human capital, inclusive territorial development. Industry4WRD, the National Policy on Industry 4.0, launched in October 2018 and the new economic model will drive digital transformation in the manufacturing sector making Malaysia a high-tech investment destination for manufacturing.
Select recent foreign investments in Malaysia in the manufacturing sector:
- Airbus has announced a USD 120 million investments in aerospace sector in Malaysia.
- Electronics parts manufacturer AVX, a subsidiary of Kyocera, has expanded its manufacturing facility in Penang, Malaysia.
- USA based 1366 Technologies is investing in the city of Cyberjaya , Malaysia to expands its Electronic Component sector
- China-based Jiangxi Copper, plans to build a plant in Sabah, Malaysia to produce refined copper.
- Hyundai Motors to invests USD 2 billion for a new assembly plant in Malaysia