Asia/Pacific September 24, 2021 / 09:21 am UTC

Malaysia: Robust Foreign Investment Approvals to Limit Pandemic Scars

By Charu Chanana

Malaysia’s investment approvals saw a strong rebound in the first half of 2021, especially driven by the foreign interest in the manufacturing sector. With a broader vaccination coverage and a stable political outlook for now, we expect a further recovery in investment sentiment into end-2021, and broader gains from trade and investment will also help limit the scarring effects of the pandemic. 

Figure 1: Malaysia’s Investment Approvals (MYR mn)

Source: CEIC, Continuum Economics

Malaysia’s investment approvals recovered strongly in H1 2021, reaffirming its position as an attractive investment destination and a key supply chain hub in the region especially in the manufacturing sector. Malaysia attracted a total committed investment of MYR 107.6bn in H1, 69.8% higher than the MYR 63.3bn a year ago that was weighed by the first COVID-19 outbreak across the world. 

Manufacturing sector remained the most favourable industry with approved investments totaling MYR 66.9bn (or 62.2% of total committed investments), followed by services (MYR 34.1bn or 31.7%) and primary sectors (MYR 6.5bn or 6.1%). Most of the investments were underpinned by foreign interest, with foreign direct investment (FDI in manufacturing seeing growth of over 200% y/y. Domestic investments comprised 42% of the total, and only 13% in manufacturing. The investments involved 2,110 projects and are expected to generate 44,994 job opportunities in the country.

It is noteworthy that this investment interest has been recorded when most of the region, including Malaysia, was still scrambling to find effective ways to deal with the Delta COVID waves, and the unstable domestic political situation also clouded the outlook. However, with a broader vaccination coverage and a stable political outlook for now, we expect a further recovery in investment sentiment into end-2021. 

We expect Malaysia to continue attracting high-value and high-tech investments, bolstered by its capacity and capability in providing high-skilled talents and firm readiness in adopting advanced technology for value-added industries. We believe trade and investment recovery will help Malaysia to rebound further in 2022, and limit the scarring effects of the pandemic.

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Analyst Certification
I, Charu Chanana, the lead analyst certify that the views expressed herein are mine and are clear, fair and not misleading at the time of publication. They have not been influenced by any relationship, either a personal relationship of mine or a relationship of the firm, to any entity described or referred to herein nor to any client of Continuum Economics nor has any inducement been received in relation to those views. I further certify that in the preparation and publication of this report I have at all times followed all relevant Continuum Economics compliance protocols including those reasonably seeking to prevent the receipt or misuse of material non-public information.