Malaysia has proven to be an attractive investments destination coming from a post-pandemic recovery path since it reopened its borders last year. Particularly, the country has proven that it remains an attractive investment destination for global and regional business expansions with both foreign direct and domestic direct investments recording growth for the first half of the year.

In an interview with AEI, Gulam Muszairi, Director, Malaysian Investment Development Authority (MIDA) – Osaka Office, said the country’s economy has been on a strong recovery path and continues to attract investments because of its robust industrial ecosystem and sound economic and incentive policies.

“The Malaysian economy continues to normalize and is on upward trend. Part of it, our GDP (gross domestic product) increased this year…for the past two years, we manage to secure investments growth for Malaysia, that is up to the first half of this year,” said Muszairi.

Investments Post Pandemic

Recently, MIDA announced the country has attracted USD28.0 billion worth of approved investments in the manufacturing, services, and primary sectors from January to June 2022 alone. Accordingly, these investments involved 1,714 projects for the period.

Thus, MIDA said these projects are likely to create 57,771 job opportunities in the country. FDI remained the major contributor, at 70.9 per cent or USD19.9 billion, while investments from domestic sources contributed 29.1 per cent amounting to USD8.2 billion.

Most importantly, the services sector assumed a significant role towards driving growth, accounting for 63.3 per cent of total approved investments with USD17.7 billion. The performance of the services sector exceeded expectations during the January to June 2022 period. Accordingly, this represented increase of 48.9 percent over the same period in 2021.

Meanwhile, investments in the manufacturing sector stood at USD9.8 billion or 34.9 percent and the primary sector USD0.5 billion or 1.8 per cent.

FDI accounted for 70.9 percent of the approved investments, valued at USD19.9 billion. Of the total investments approved, the People’s Republic of China (PRC) dominated foreign investments for the period of January to June 2022 with USD11.0 billion investments. Next, Germany had USD2 billion followed by Singapore with USD1.4 billion.

For projects approved by state, five (5) major states, namely Johor, Selangor, Sabah, Kedah and Pulau Pinang, contributed RM103.5 billion (USD23.5 billion) or 83.9 per cent of the total investments approved from January to June 2022. 

Capitalizes Strengths, Addresses Weaknesses

Muszairi said Malaysia, through MIDA, has been relentless in sustaining the investments momentum in the country. In fact, he said a one-stop agency center has been formed within MIDA to collaborate with relevant government agencies, such as Customs, Immigration, Labor department and the like, to ensure ease of doing business within the country.

“We have to make sure we have complete hands-on support to investors to make sure we have no issues in setting up investments in Malaysia,” said Muszairi.

Muszairi noted the country has inherent strengths that make it a viable investment destination. Particularly, he stressed the country has always taken into accounts the concerns of investors. In addition, he also emphasized the country’s well-entrenched supply chain ecosystem, particularly in the electrical and electronics fields, which he said is “from top to bottom”.

Meanwhile, despite the uptrend investments figures, Muszairi admitted Malaysia’s viability is not without any challenges. Particularly, he said one of the challenge is the sustainability of local talents.

“We have to make sure we have adequate supply of local talents, because if we foresee more investments, we also need to have more talents especially high skilled and qualified workforce. Nevertheless, the government has taken some steps to ensure we have adequate talent pool,” said Muszairi. One of them is through collaboration with universities and technical institutes for talent development programs.

Muszairi said Malaysian government is encouraging high technology investments, which include automation and digitalization in the manufacturing process.

“If you (investor) incorporate smart automation in the manufacturing, they can also enjoy several incentives such as Investment Tax allowance, Automation Capital allowance and Smart Automation grant. Thus, encourage local manufacturing to transform into digitalization and smart manufacturing as well.

Looks to EVs

As part of the National Investment Aspirations (NIA) plan, the Malaysian government is looking to increase investments in high technology fields. Particularly, Muszairi said is to increase manufacturing investments in electrical and electronics, aerospace, pharmaceutical, chemical, and at the same time increase venture to digital economy. 

In addition, Muszairi said that while new energy vehicles (NEVs), such as electric vehicles, are still at its early stage in Malaysia, the government is already taking aggressive steps. The government has already started to build up on the ecosystem it was able to establish in the production and assembly of traditional automotive. Particularly, the government will leverage this to collaborate and link up with the automotive manufacturers to venture to EVs.

“(Venturing to) EVs is also in line with our national energy policy, including our SDG (Sustainable Development Goals) commitments, and our commitment to net zero emissions of GHG by 2050,” said Muszairi.

“This (EV) is one area I can say (MIDA) can convince as many as possible investors, particularly from Japan, to invest in the EV sector,” he added.

To start the ball rolling, Malaysia is offering 100 percent import duty exemptions for EV-related products assembled in Malaysia. In addition, it is also offering excise tax exemption, import duty exemption, and road tax exemption.

This will be on top of the income tax exemption the government is offering to investors for the manufacture/assembly of vehicles and critical parts, which is from 70 percent or 100 percent of five to 10 years for pioneer status incentive. Furthermore, investment tax allowance of 60 percent or 100 percent for a period of 5 to 10 years.

Cites Role of MIDA Japan

Muszairi also underscored the importance of Japan as an investment partner of Malaysia. Through the years, he said Japan has been consistent among the top 5 investors to the country.

In fact, he noted from 1980 to December 2021, Japanese companies have invested to approximately USD27.6 billion spread across 2,709 manufacturing projects. In addition, these investments have resulted to engage about 337,280 employment.

“When you look at these figures, I can say Japan is really an important country for Malaysia. Japan investment has contributed to Malaysia’s strong ecosystem in various sector especially E&E.  That is why we are strengthening our relationship with Japan especially through the ‘Look East Policy’. This is one (aspect) I am looking forward with my role here in Japan,” said Muszairi.