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A bright outlook for FDI in Malaysia’s manufacturing sectors

Business Opportunities | March 22, 2023

In December, President Ursula von der Leyen announced the EU’s intention to invest $10 billion into the ASEAN region by 2027 – part of the so-called “Global Gateway” initiative, widely seen as a response to China’s “Belt and Road”.  With a focus on crucial areas such as digitalisation, energy, transport, and sustainable value chains, the announcement was warmly welcomed across the region. 

As an ASEAN member, Malaysia is set to benefit from this, of course.  Following a rather poor 2020 in terms of FDI inflows (when they dropped to the lowest since 2009), FDI into Malaysia surged in 2021 to its highest level on record ($11.6 billion); investment in manufacturing, and in electronics in particular, was key to this.  German electronics multinational Infineon is in the process of constructing a new state-of-the-art wafer fab module in Kulim, due to open in 2024, and Micron Technology and Intel are expanding their semiconductor operations too, both increasing global capacity and fending off issues elsewhere in their supply chains.  Other foreign manufacturers, including Toyota, Porsche, Bosch, Denso, AT&S, Jinko Solar Holding, Risen Energy, Chinadata and Wiwynn, also invested significantly in new or expanding manufacturing capabilities in Malaysia.  Though record FDI levels fell back during the second part of 2022, they have already rebounded to a significant extent, and the general FDI outlook is very favourable.

As south east Asia’s fourth largest economy, consistently ranked by the World Bank as one of the easiest countries in the world in which to operate, and the only nation in the region to feature in the top-thirty of Milken Institutes Global Opportunity Index, it seems surprising that Malaysia has sometimes found it harder to attract manufacturing FDI than its near-neighbour Vietnam, for instance.  However, these recent large-scale investments into Malaysia by global manufacturing names will surely be followed by others, and by foreign SMEs too, in order to meet the needs of a rapidly developing manufacturing sector.

Large-scale manufacture of high-tech products demands effective deployment and ongoing support of leading-edge technologies – measurement technologies, for instance, in order to meet stringent production Quality Control requirements, as well as for research and development.  As such, leading instrumentation and testing companies are among those finding growing opportunities here, in sectors as diverse as semiconductors, vehicle components, and oil and gas.  

During 2022, Malaysia’s manufacturing sector was buoyed up by the strength of its manufacturing exports. Overall, exports performed strongly during 2022, rising by 25% on the previous year. Exports of manufactured goods were up by 22% year on year, with exports of electrical and electronic products rising by 30%, now making up 38% of merchandise exports.  With commodity prices high last year, Malaysia’s revenues from oil and gas exports also rose strongly.  Though GDP is currently not as strong as hoped, and 2023 will likely be a challenging one overall for the economy overall, the growing strength of key parts of Malaysia’s manufacturing sector and exports in particular, driven by confident long-term investments from major overseas players, point to a healthy future – one from which the national as a whole will certainly benefit.

Melchers in Malaysia

Melchers Malaysia has been coordinating the company’s trading activities in Malaysia since 1958 with offices located in Kuala Lumpur, Petaling Jaya, Penang, and Kota Kinabalu. By combining a strong tradition of quality with innovation and reliability, Melchers Malaysia has acquired a steadily expanding customer base.  Today, our activities in Malaysia involve sales and servicing for broad range of machinery, instrumentation, calibration and equipment, on behalf of our partners. Our business operations are coordinated in separate divisions by regional and local sales managers with specific knowledge in their respective fields.   

Established in 1806, and with more than 150 years of experience in East Asia, Melchers is trusted by many international brands and producers to be their “feet on the ground” in this region’s diverse markets, drawing on deep local networks and knowledge, and combining them with dynamic business services and trade infrastructure, to create powerful synergies that deliver results for your business.

#asiarevisited #Malaysia #ASEAN #RCEP #FDI #FDIinMalaysia #InvestinMalaysia #ManufacturingMalaysia #MalaysianGrowth #MalaysiaRising

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