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In this page: FDI in Figures | What to consider if you invest in Malaysia | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information


FDI in Figures

Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty could put significant downward pressure on global FDI in 2022. The 2021 growth momentum is unlikely to be sustained. Indeed, world flows in the second quarter of 2022, the latest data available, were down 31% from the first quarter and 7% less than the quarterly average of 2021 (UNCTAD Global Investment Trends Monitor, October 2022). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession. Expectations for the full year are for a marked slowdown. In developing Asia, despite successive waves of COVID-19, FDI rose to an all-time high for the third consecutive year, reaching $619 billion. Asia is the largest recipient region, accounting for 40 per cent of global FDI. However, inflows remain highly concentrated; six economies account for more than 80 per cent of FDI to the region (UNCTAD, October 2022).

According to UNCTAD's World Investment Report 2022, FDI inflows declined 55% to USD 3.16 billion in 2020 before reaching 11.62 billion in 2021. The FDI stock was about USD 174 billion in 2020 and USD 187.37 billion in 2021. Multinationals in the M&A sector, such as those in the health and mining sectors (e.g. the acquisition of a stake in IHH Healthcare by Mitsui & Co, Japan and in Seb Upstream by OMV, Austria) have sustained the level of investment. The decrease in FDI inflows was driven by lower equity and investment fund shares and higher loans extended to overseas affiliates. Services and manufacturing sectors were the main contributors to FDI flows in 2020, followed by Mining & quarrying. Investment in the Services sector was particularly in financial and utilities, while Manufacturing was largely in the electricity, transport equipment and other manufacturing subsectors. The main investors in terms of FDI flows are Singapore, Thailand and China.

Malaysia’s net FDI inflows reached 10.9 billion USD in 2021, increasing 2.6 times from the 2020 figure. This is a new record compared to the previous record of 10.7 billion USD in 2016. Investment from countries in Asia are the biggest contributor to this growth, with a total of 5.1 billion USD invested, making up 46.7% of total investments. Among the Asian countries, Singapore, Japan, Korea, Hong Kong, and Mainland are the top five investors. It was followed by the U.S, which invested 4.2 billion USD. Europe ranked third with 1.3 billion USD, with the UK, Netherlands and Austria as the largest investing countries.The sector receiving the most investments and that contributed to the growth in 2021 was manufacturing, with a total increasing from which had been severely impacted by the COVID-19 outbreak. Transport equipment, and other equipment, followed by mineral and metal products, saw particular popularity, with 60% of the manufacturing investment going into these sectors. Manufacturing is gaining increasing interest from FDI investors, as its contribution to total FDI has become dominant since 2020, making up 53% and 61% of total net FDI inflows in 2020 and 2021 respectively (Asia Perspectives, 2022).

Despite a difficult situation in 2020, Malaysia continues to be an attractive investment destination amid rising trade tensions across the world. The authorities seek to position Malaysia as a gateway to the ASEAN market by offering various incentives to foreign companies, notably the status of pioneer company and tax reductions associated with investments. The country benefits from a high-skilled and English-speaking workforce. However, the government maintains a large discretionary power for authorising investment projects and uses it to obtain the maximum benefits from foreign participation and by demanding agreements that are advantageous in matters of transferring technologies or creating joint ventures.

The latest United NationAsia-Pacific Trade and Investment Trends Report provides additional information on FDI in Malaysia and Asia-Pacific in 2022 and 2023.

Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 3,16012,17316,940
FDI Stock (million USD) 170,682187,257199,206
Number of Greenfield Investments* 100123153
Value of Greenfield Investments (million USD) 7,28425,08616,805

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.



Main Investing Countries 2020, in %
Singapore 21.7
Hong Kong 12.1
Japan 10.9
Netherlands 8.4
USA 5.7
Main Invested Sectors 2020, in %
Manufacturing 39.2
Financial and insurance activities 24.5
Mining and quarrying 6.0
Construction 1.6

Source: Department of Statistics Malaysia, Latest data available.

Form of Company Preferred By Foreign Investors
Partnership with a local company.
Form of Establishment Preferred By Foreign Investors
A company.
Main Foreign Companies
Some examples include: Exxon/Mobil, Caltex, Texas Instruments, Intel, Sony, Fuji, Panasonic, Microsoft, Motorola, Mattel, Dell.
For further information, consult the "Success Stories" section of the InvestKL portal.
Sources of Statistics
Department of Statistics Malaysia

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What to consider if you invest in Malaysia

Strong Points

Malaysia's economy is already relatively well internationalised and relies on diversifying and growing exports. The country has also managed to create a healthy business environment, ranked at the 12th position in terms of ease of doing business out of 190 countries in the World Bank's 2020 Doing Business Report. The country continues to strive to make its economy attractive to FDI by implementing a broadly liberal and transparent investment policy by proposing in addition: 

  • High cost-competitiveness
  • Attractive investment incentives
  • Developed infrastructure
  • A strategic position linked to the country's proximity to the main Asian markets
  • Important natural resources 
  • Strong dynamism of the services sector
  • High domestic consumption fuelled by high per capita income and low unemployment.
Weak Points

The main weaknesses of Malaysia in terms of FDI are:

  • Bureaucratic and regulatory burdens
  • A shortage of skilled labour
  • Overall rise in labour costs, creating a risk of erosion of the country's price competitiveness
  • The country's economy also remains vulnerable to a slowdown in demand from China, its main trading partner and to the prices of natural resources (gas and oil)
  • The country's unity is rather fragile given regional, ethnic and religious disparities.
Government Measures to Motivate or Restrict FDI
Malaysian governments have traditionally been open to foreign direct investments, which have been an integral component of the country's economic development. Within the framework of its economic development plan, Malaysia has provided tax incentives to attract foreign investment in strategic sectors of activity, such as "pioneering status" for industry sectors, agriculture, and tourism, the "Bionexus label" for the biotechnology sector and the "MSC status" for companies in the ICT and multimedia sectors.
The government established the National Committee on Investment, an investment approval body jointly chaired by the Minister of Finance and the Minister of International Trade and Industry, to expedite the regulatory process with respect to approving new investments. The 2022 budget includes a special fund of up to RMY 2 billion to attract strategic FDI.
Malaysia has various national, regional, and municipal investment promotion agencies, including the Malaysian Investment Development Authority (MIDA) and InvestKL. Further information can be sourced on i-Incentives, the portal that provides the information on investment incentives offered by the Federal Government of Malaysia.

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Protection of Foreign Investment

Bilateral Investment Conventions Signed By Malaysia
To see the list of investment treaties signed by malaysia, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD
Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement
ICSID , International Centre for settlement of Investment Disputes
ICCWBO , International Court of Arbitration, International Chamber of Commerce
Member of the Multilateral Investment Guarantee Agency
Malaysia is a signatory of the MIGA convention.
Country Comparison For the Protection of Investors Malaysia East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 9.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 8.0 6.7 9.0 5.0

Source: The World Bank - Doing Business, Latest data available.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Foreign and domestic private entities can establish and own business enterprises and engage in all forms of remunerative activity, although exceptions may apply to specific sectors.
Acquisition of Holdings
Restrictions still apply in various sectors: logistics, industrial training, wholesale and distributive trade (in relation to hypermarkets and food and restaurant businesses), which are required to limit foreign equity participation when applying for operating licenses, permits and approvals (max 70% for foreigners); insurance companies (max 70%, with exceptions); the national telecommunications firm Telekom Malaysia (aggregate foreign share cap set at 30%, or 5% for individual investors); oil & gas; financial services; capital markets activities carried out by investment banks; insurance and Islamic insurance (takaful); communications and multimedia; education; transportation services, freight forwarding and shipping; water; energy supply; professional services; and security and employment agencies.
Obligation to Declare
Under the Industrial Coordination Act of 1975, investors seeking to engage in manufacturing activities need a license if the business claims capital of MYR 2.5 million or employs at least 75 full-time staff.
Competent Organisation For the Declaration
National Committee on Investment
Requests For Specific Authorisations
Foreign holdings are limited in radio/television broadcasting, distribution of water and electricity, logistics, industrial training, and distributive trade, insurance sector, oil & gas, telecommunications, etc.
Foreign investment in services, whether in sectors with no foreign equity caps or controlled sub-sectors, remain subject to review and approval by ministries and agencies with jurisdiction over the relevant sectors. 

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Office Real Estate and Land Ownership

Possible Temporary Solutions
You can refer to platforms such as Instant Offices, CoWorker, Property Guru, etc.
The Possibility of Buying Land and Industrial and Commercial Buildings
Land administration is shared among federal, state, and local government.  State governments have their own rules about land ownership, including foreign ownership.
Risk of Expropriation
The risk of expropriation is low. Both foreign and domestic investors are entitled to fair compensation in case their private property is required for public purposes.

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Investment Aid

Forms of Aid
Direct fiscal incentives consisting of a reduction in the tax on profits for a determined length of time and indirect incentives in the form of exemption from Customs duties, goods and services tax and excise duties. For further information, consult the i-Incentives portal.
Privileged Domains
Incentives in the form of tax holidays, financing, and special deductions are provided for investments in qualifying projects sectors such as ICT; biotechnology; halal products (e.g., food, cosmetics, pharmaceuticals); oil and gas storage and trading. For further information, consult the i-Incentives portal.
Privileged Geographical Zones
The government is trying to encourage FDI in sectors such as the exporting manufacturing industries; information and communications technologies; biotechnology; halal products (e.g., food, cosmetics, pharmaceuticals); oil and gas storage and trading; Islamic finance. For further information, consult the i-Incentives portal.
Free-trade zones
There are thirteen free industrial zones (FIZ) and twelve free commercial zones (FIC); the port of Klang is both FIZ and FIC.
Incentives are available in several areas: Kuala Lumpur; Labuan Island (off Eastern Malaysia); East Coast of Peninsular Malaysia; Sabah and Sarawak (Eastern Malaysia); Northern Corridor.
Public aid and funding organisations
The State (finances industrial training, provides funds for the development of human resources), the Malaysia International Financial Centre (MIFC) initiative, the Malaysian banking sector (Export Credit Refinancing), the Islamic Development Bank (IDB).

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Investment Opportunities

The Key Sectors of the National Economy
Malaysia exploits its abundant natural resources (palm oil, rubber, tin, wood, oil, natural gas), and has developed the electronics and chemicals sectors. It also has a high value-added products industry, such as semiconductors and other electronic products. Financial services; tourism; communications content and infrastructure; education; agriculture; and health care are among the important economical sectors for the country..
High Potential Sectors
The national government has recently called for investments in high technology and research and development, focusing on artificial intelligence, "Internet of Things" device design and manufacturing, smart cities, electric vehicles, automation of the manufacturing industry, telecommunications infrastructure, and aerospace.
Privatization Programmes
Although the government restated its commitment to privatize companies in several key sectors (i.e. transportation, agriculture, utilities, financial services, manufacturing, and construction), no timeline for the process has been set.
The Malaysian Government established the Public-Private Partnership Unit (UKAS) to provide guidance and administrative support to businesses interested in privatization projects and large-scale government procurement projects, as well as to oversee transactions ranging from contracts and concessions to sales and transfers of ownership from the public to the private sector.
Foreign investors may participate in privatization programs, but foreign ownership is limited to 25% of the privatized entity’s equity.
Tenders, Projects and Public Procurement
Tenders Info, Tenders in Malaysia
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide

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Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
The Government restricts investment in those branches of production deemed to be essential for national development, such as the automobile industry, as well as in low value-added branches of production, which are labour-intensive. Foreigners have limited access to services, such as financial services, professional services (legal, for example), accounting and architecture.
Government Linked Corporations (GLCs) continue to dominate the market in several sectors, including transportation, agriculture, utilities, financial services, manufacturing, and construction.

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Finding Assistance For Further Information

Investment Aid Agency
Malaysian Investment Development Authority (MIDA)
i-Incentives platform
Other Useful Resources
National Chamber of Commerce and Industry of Malaysia
SME Info
Doing Business Guides
Investment Climate in Malaysia - US Department of State
World Bank's Doing Business Report - Malaysia

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Latest Update: September 2023