Since an unexpected political transition in March, Malaysia’s new government under Prime Minister Muhyiddin Yassin has focused its attention on the unprecedented set of challenges facing Malaysia in 2020, including the COVID-19 pandemic and a sharp drop in global oil prices. In response to the economic damage wrought by COVID-19 restrictions, the Malaysian government has approved over USD 60 billion in stimulus measures designed to protect Malaysian citizens and businesses, and has laid out plans to prioritize the country’s economic recovery following the lockdown period for the remainder of 2020 and into 2021.
The Malaysian government has traditionally encouraged foreign direct investment (FDI), and the Prime Minister and many cabinet ministers have signaled their openness to foreign investment since taking office. Government officials have 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 other “catalytic sub-sectors,” such as aerospace. The government also seeks to further develop traditional sectors such as oil and gas; palm oil and rubber; wholesale and retail operations, including e-commerce; financial services; tourism; electrical and electronics (E&E); business services; communications content and infrastructure; education; agriculture; and health care.
Under the previous administration, inbound FDI had been steady in nominal terms, though Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of the Association of Southeast Asian Nations (ASEAN) had slowed. According to the 2013 Organization for Economic Cooperation and Development (OECD) Investment Policy Review of Malaysia, FDI to Malaysia began to decline in 1992, and private investment overall started to slide in 1997 following the Asian financial crises. In the intervening years, domestic demand has increasingly been the source of Malaysia’s economic performance, with foreign investment receding as a driver of GDP growth. The OECD concluded in its Review that Malaysia’s FDI levels in recent years had reached record high levels in absolute terms but were at low levels as a percentage of GDP. The current government estimates that GDP will shrink 0.5 percent in 2020.
The business climate in Malaysia is generally conducive to U.S. investment. Increased transparency and structural reforms that will prevent future corrupt practices could make Malaysia a more attractive destination for FDI in the long run. The largest U.S. investments are in the oil and gas sector, manufacturing, and financial services. Firms with significant investment in Malaysia’s oil and gas and petrochemical sectors include ExxonMobil, Caltex, ConocoPhillips, Hess Oil, Halliburton, Dow Chemical and Eastman Chemicals. Major semiconductor manufacturers, including ON Semiconductor, Texas Instruments, Intel, and others have substantial operations in Malaysia, as do electronics manufacturers Western Digital, Honeywell, St. Jude Medical Operations (medical devices), and Motorola. In recent years Malaysia has attracted significant investment in the production of solar panels, including from U.S. firms. Many of the major Japanese consumer electronics firms (Sony, Fuji, Panasonic, Matsushita, etc.) have facilities in Malaysia.
|TI Corruption Perceptions Index||2019||51 of 183||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||12 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||35 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||$13,581||https://www.bea.gov/system/
|World Bank GNI per capita||2018||$10,591||http://data.worldbank.org/