KUALA LUMPUR: Malaysia’s foreign direct investment (FDI) outlook for 2026 remains promising, after exceeding an RM8 billion level in the third quarter (Q3) of 2025.
This will be driven by clear policies, regulatory efficiency, strong infrastructure, competitive energy pricing and strategic incentives targeting high-value sectors, according to economists.
FDI into Malaysia surged to a net inflow of RM8.5 billion in Q3, up from RM1.6 billion in Q2, driven by larger equity injections, according to the Department of Statistics Malaysia.
Chief statistician Datuk Seri Dr Mohd Uzir Mahidin noted that most FDI inflows were directed to the services sector, particularly the information and communication and financial activities subsectors, largely linked to data centre operations.
The major investors of FDI were from Singapore, China and Japan.
Direct investment abroad (DIA) registered a net outflow of RM1.7 billion from a net inflow of RM600 million in the preceding quarter.
“The inflows were driven by equity liquidations and reinvestment of earnings, mainly in the services sector, with the majority concentrated in wholesale and retail trade subsector.
“Singapore, Thailand and Angola were the main contributors to DIA inflows during the quarter,” he said.
Malaysia’s international investment position (IIP) rose to a net asset of RM77.3 billion at the end of Q3 2025.
Total financial assets stood at RM2.59 trillion, surpassing total liabilities of RM2.51 trillion.
Cumulative investments for FDI and DIA reached RM1.02 trillion and RM615.8 billion, respectively.
Asia remained the top region for both FDI and DIA, with FDI largely from Singapore and Hong Kong, while DIA flowed mainly to Singapore and Indonesia.
Malaysia’s international reserves stood at RM520.8 billion as of end-September 2025.
Universiti Teknologi Mara Business Management Faculty senior lecturer Dr Mohamad Idham Md Razak said the key catalysts to a bullish 2026 include continued policy clarity and regulatory efficiency in high-value sectors such as advanced manufacturing, semiconductor supply chains, data centres and renewable energy.
“Strong infrastructure readiness, competitive energy pricing and the government’s commitment to fiscal reform and digital-economy expansion are expected to bolster investor confidence.
“Strategic incentives under the New Industrial Master Plan and streamlined approval processes further position Malaysia as an attractive alternative hub for firms seeking diversification within Asean,” he told Business Times.
On the downside, Idham noted that factors such as rising geopolitical uncertainty, potential electricity supply constraints and competition from neighbouring countries offering more aggressive incentives for data centre and technology investments could slow or even reverse FDI inflows.
He said investors may also reassess plans if operating costs rise or if delays occur in grid upgrades, renewable-energy integration, or land-use approvals.
“Weakening global demand for tech-related services or tighter financial conditions could also dampen appetite for large-scale, capital-intensive projects such as data centres,” he added.
© New Straits Times Press (M) Bhd
