Malaysia’s green technology and data center are some of the sectors of interest for foreign investors, UBS said in its recent note.
According to the research house, Malaysia has become increasingly attractive to foreign investors.
The key differentiating factors include political stability, commitment to fiscal reforms, strategic economic plans, existing competitive advantages as well as green energy policies, in conjunction with Malaysia’s New Energy Transition Roadmap.
Besides, Malaysia has a deep talent pool with a high number of STEM graduates, and has numerous free trade agreements and scores well on ease of doing business factors.
UBS also noted localization of foreign direct investment (FDI) has been fairly successful in Malaysia.
For example, the electrical and electronics products (E&E) ecosystem had benefitted from demand from large multinational corporation (MNC) investments; the positive spillovers also extended to construction companies and the labor market.
“The FDI outlook remains very positive. Apart from E&E, green technology, machinery, and metal fabrication are also sectors of interest,
“There remains strong interest in data center investments. If Malaysia becomes a regional data center hub, this will be a major draw for companies at the forefront of technological innovation to deepen investments in Malaysia,” UBS said.
It is noted that on data center investments in Johor, there has been an influx of data center applications with over 50 applications received, 20 of which have been partly in operation and/ or under construction.
A data center task force has been created to streamline and filter the data center investments while taking into consideration power and water usage effectiveness and job creation amongst others.
Notwithstanding, data center investment in Johor is viewed as a sustainable trend in garnering FDI as it serves as a flagpost for more firms to look into Malaysia as a tech destination, according to UBS.
As Malaysia assumes the ASEAN Chairmanship in 2025, UBS said one of the country priorities would be focusing on improving intra-ASEAN trade (currently low at 23 percent of total trade in ASEAN), and encourage the development of the ASEAN grid.
It opined that the setting up of the Invest Malaysia Facilitation Center should manage incoming investments while Johor has also set up a committee to approve new data center investments.
UBS also highlighted the outlook for Malaysia’s FDI inflows in the second half of 2024 is positive, with good traction from China, Europe, the United States, Japan, and South Korea.
“FDI inflow is concentrated in the E&E space, but there is also interest in chemicals, green technology, machinery, and metal fabrication,” it said.
From a business owners’ perspective, UBS said FDI into Malaysia has benefited companies greatly, especially with regard to sub-industries supporting the E&E industry, which
saw large inflow of FDI.
It is noted that in attracting investments, Malaysian Investment Development Authority (MIDA) offers a range of incentives and grants for both foreign and local investors, with a focus on high-tech industries.
MIDA is working to support investors in moving up the value chain and implementing their projects through research and development (R&D), training, and tech acquisition.
Government-linked investment companies (GLICs) participation can also aid in funding companies locally, said UBS.
It is also noted that Malaysia’s New Industrial Master Plan 2030 outlines outlines 21 sectors that the government is eyeing for further development but five are deemed high priority namely: aerospace, chemical, electrical and electronics, pharmaceutical and medical devices.
MIDA is also focused on machinery and equipment, as evident in the countries performance in attracting investments from the semiconductor industry; digital investments; and renewable energy, especially for MNCs that have to meet sustainability targets.
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