According to the Global Opportunity Index 2024 report by the Milken Institute, Malaysia is amongst the leading countries in Asia's emerging and developing countries in terms of overall investment conditions. This is because of its robust institutional framework and relative strengths across economic, financial, and regulatory domains which creates a comparatively lower-risk investment landscape.
The Malaysian government has made significant efforts to relax investment restrictions and to enact conducive policies to facilitate foreign trade and foreign direct investment (FDI). This has attracted international players including Microsoft, Google, ByteDance, Intel, and Amazon Web Services to make significant financial commitment to the country.
What is FDI?
FDI is a type of cross-border investment which involves an overseas investor establishing a presence and influence over a local business in a separate economy, typically to expand operations into a new region. The Organisation for Economic Co-operation and Development (OECD) states that FDI involves ownership of at least 10% or more of the voting power in an organisation by an investor from another economy.
FDI in Malaysia
Information released from the Malaysian government shows that in the first quarter of 2024, Malaysia attracted approximately USD16 billion in FDI, and last year, Malaysia was the successful recipient of USD69 billion in FDI. The main sources of FDI into Malaysia in 2023 were from Singapore, USA, China, Japan, and The Netherlands.
Malaysia offers an attractive proposition for FDI as it has a strategic geographical location in Southeast Asia being an immediate neighbour to Singapore, Indonesia, Thailand, and Brunei. Within the country, there is good transport infrastructure connecting the entire Malaysian peninsular. There are also air and sea cargo facilities located throughout the country providing good accessibility. The workforce is highly skilled, multilingual, and proficient in English, as a result of an established education system and diverse ethnic population.
Case studies: Recent FDI in Malaysia
The Prime Minister of Malaysia, Datuk Seri Anwar Ibrahim, has reiterated numerous times since his election in 2022 that the Malaysian government is motivated to attract more FDI to take advantage of the prospects that the country has to offer. One of the major ways that the Malaysian government aims to encourage FDI is by further improving FDI procedures, reducing red tape and relaxing investment restrictions.
In May 2024, Microsoft announced that it will invest USD2.2 billion over the next four years to build cloud and artificial intelligence (AI) infrastructure. Microsoft will partner with the government of Malaysia to establish a national AI Centre of Excellence and enhance the nation's cybersecurity capabilities with the objective of supporting the growth of the information technology developer community. It is expected that the Microsoft investment will create more than 200,000 new opportunities including AI upskilling opportunities and employment and career paths for Malaysia's citizens. Microsoft established a presence in Malaysia 32 years ago and its latest investment into the country further emphasises Malaysia's relevance as a vibrant tech investment destination and a globally important semiconductor player.
In May 2024, Google announced that it will invest USD2 billion to establish its first data centre and cloud infrastructure in Malaysia to power its Google Search, Google Maps and Google Workspace capabilities. This is expected to contribute approximately USD3.2 billion to the Malaysian GDP and move Malaysia up the global chain leveraging on AI and other advanced technologies.
ByteDance, the parent company of TikTok, plans to invest USD2.1 billion into Malaysia to create an AI hub. ByteDance already has data centre operations in Malaysia, and it plans to further expand and bolster such operations with further capital investment.
In a statement in November 2023, Datuk Seri Anwar Ibrahim stated that Malaysia has secured further investment commitments worth more than USD70 billion from Singapore, USA, Japan, South Korea, China, UAE, and Saudi Arabia.
The continued inflow of FDI will improve the reputation and visibility of Malaysia as an enticing investment ground attracting more money into the economy resulting in a steady cycle of development, innovation, and increased productivity. The signs are encouraging, and the potential for international investors is enormous.
