Malaysia - Country Commercial Guide
Investment Climate Statement
Last published date:

The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses.  The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption.  The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.

Executive Summary

The Malaysian government has traditionally encouraged foreign direct investment (FDI), which has contributed significantly to its economic development. Malaysia recorded over $36.9 billion in FDI in 2022, comprising 55.1 percent and 78.3 percent of total investment in its services and manufacturing sectors, respectively. Malaysia’s investment climate is enhanced by its strategic location and access to Southeast Asian markets; abundant land and natural resources; highly developed information and communications technology (ICT) infrastructure; skilled, English-speaking workforce; and robust ecosystem of manufacturers and suppliers across key sectors, including medical devices, semiconductors, and solar panels.

Malaysia’s economy grew 8.7 percent in 2022, its fastest growth rate in over 20 years, spurred by the easing of COVID-19 restrictions; rising commodity prices, favoring exports of palm oil, crude oil, and natural gas; and growth in manufacturing exports, particularly electrical and electronic (E&E) products. Following a period of political transition that has weighed on business sentiment for the past several years, Malaysia’s 2022 general election resulted in the formation of a unity government led by long-time opposition leader Anwar Ibrahim, who was sworn in as Malaysia’s tenth prime minister on November 24, 2022. Under Anwar, Malaysia has embarked on a series of incremental reforms to address competitiveness issues related to subsidies, transparency in public procurement, and an overreliance on foreign workers.

Malaysia’s unity government passed a revised budget in 2023 with $88.1 billion in allocations that boost public spending and revenue collection and prioritize debt management. Among the investment incentives included in the budget are an extension of tax incentives for manufacturing companies that relocate to Malaysia and extensions of income tax incentives and investment tax allowances for the aerospace sector. The New Industrial Master Plan (NIMP) 2030, which the government plans to introduce in the second half of the year, will propose changes to investment incentives for foreign companies that prioritize the creation of high-value jobs and opportunities for domestic companies to feed into global supply chains.

The business climate in Malaysia is generally conducive to U.S. investment. Major U.S. semiconductor and consumer and industrial electronics manufacturers are leaders within Malaysia’s successful E&E industry. There are also multiple U.S. companies with investments in Malaysia’s oil and gas and petrochemical sectors.

Malaysia’s new government continues to develop policies to address the climate crisis. Malaysia’s central bank plans to establish a $450 million financing facility to support sustainable technology startups and assist small- and medium-sized businesses implement low-carbon practices. Malaysia’s finance ministry, guided by the Twelfth Malaysia Plan, is engaged in discussions over the feasibility of a carbon tax, while Bursa Malaysia, the national stock exchange, introduced a voluntary carbon-market exchange in December 2022. The 2023 budget included import duty exemptions on electric vehicle (EV) components for local assembly and income tax exemptions for EV charger manufacturers.

As an export-driven economy, Malaysia is sensitive to global economic conditions. Russia’s war of aggression in Ukraine has contributed to an increase in inflation due to higher global commodity prices and supply shortages. Headline inflation in Malaysia rose from 2.5 in 2021 to 3.3 percent in 2022, while core inflation rose from 0.7 percent to 3.0 percent over the same period. Malaysia’s unity government has also prioritized food security for this reason, with tax incentives for food production projects expanded and extended through the end of 2025.

In March 2022, Malaysia ratified the Protocol of 2014 to the 1930 Forced Labor Convention, strengthening its commitment to combat forced labor.

For information on Malaysia Investment Climate Statement, please visit Investment Climate Statement website.