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Successfully investing in Malaysia

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​​​​last updated on 6 October 2025 | reading time approx. 4 minutes

 

 

 

  

How do you assess the current economic situation in Malaysia?

Malaysia has recovered quickly from the economic impact of the pandemic and, as Southeast Asia's fourth-largest economy, is experiencing steady growth due to global demand for electronics and commodities such as oil and gas. In the first quarter of 2025, real GDP grew by 4.4 percent, driven by robust domestic demand and a continued recovery in the key areas of services, manufacturing and construction. A well-educated labour force, comparatively liberal market entry conditions and sufficient infrastructure spending have made Malaysia an attractive and reliable investment location for decades. As part of diversification strategies, Malaysia is currently being used by many companies as a production location in order to stabilise their supply chains.

In addition to the production of crude oil and palm oil, Malaysia has a well-established industrial sector, for example in the fields of electronics, pharmaceuticals and telecommunications, as well as a rapidly growing digital economy. The country benefits not only from its competitiveness on international markets, but also from high domestic demand. Together with Singapore, Thailand and Indonesia, Malaysia is considered the economic leader in the ASEAN region.
   

How would you describe the investment climate in Malaysia? Which sectors offer the largest potential?

Consistently positive forecasts in IMF and World Bank rankings as well as the good general business climate and investor-friendly attitude make Malaysia an attractive destination for long-term investments. Malaysia recorded over 69.5 billion USD in approved investments and USD 39.7 billion in actual foreign investments in 2023. Malaysia's importance to Germany in terms of trade policy was recently emphasised by several visits from top politicians. After Federal President Steinmeier travelled to Malaysia with a delegation in February 2023, the country was visited by former Foreign Minister Baerbock in January 2024. In March 2024, Malaysian Prime Minister Anwar Ibrahim then paid a six-day visit to Germany, which also focused on expanding and strengthening trade relations. In a regional comparison, Malaysia stands out with its well-developed infrastructure, investor-friendly policies, a solid legal system and, last but not least, the fact that English is a lingua franca and communication problems can therefore be avoided.

The electronics, machinery, chemicals and pharmaceuticals, medical devices, aerospace and automotive industries in particular offer interesting business opportunities for German companies. Due to the tensions between the USA and China, Malaysia is also gaining in importance as a location for the semiconductor and aerospace industries, for example.

   

What challenges do German companies face during their business ventures into Malaysia?

The highest volume of foreign investment in the European Union flows from Germany to Malaysia. In 2024, the volume of German direct investment in Malaysia amounted to over 2.5 billion USD. In general, Malaysia offers an investment-friendly environment and there are no recognisable protectionist tendencies in most sectors. Nevertheless, under the Malaysian ‘Bumiputera’ policy, local shareholdings or managing directors are still required for some business areas, such as telecommunications or logistics; in addition, investors must be prepared for sometimes time-consuming administrative procedures to obtain investment and business licences, which can take up to six months. For historical reasons, Malaysia follows English common law. It is therefore essential for German companies to draft contracts carefully, taking into account the special features of this legal system.

Negotiations on a free trade agreement between the EU and Malaysia were resumed in January 2025. The negotiations were originally launched in 2010, but were suspended after seven rounds in 2012 at Malaysia's request. Negotiations were resumed on the basis of the Partnership and Cooperation Agreement signed at the end of 2022 and a review of the current situation. However, there is a certain level of protection for German investors under the bilateral investment protection treaty between Malaysia and Malaysia.

   

Has Malaysia adopted a long-term strategy and concrete measures to promote sustainable business practices?

Yes, Malaysia has adopted a long-term strategy and concrete measures to promote sustainable business practices. Under the Twelfth Malaysia Plan (2021-2025), the government has launched several initi​atives to strengthen ESG (Environmental, Social, and Governance) practices in the country. These initiatives aim to promote sustainability in various sectors and include, among others, the following: 

  1. Support for SMEs: A comprehensive ESG framework called ‘i-ESG’ has been introduced to help small and medium-sized enterprises (SMEs) use sustainable energy and improve their business practices.
  2. The National Energy Transition Roadmap (NETR): This comprehensive strategic plan aims to transition the energy supply from fossil fuels to sustainable alternatives. The NETR sets ambitious targets, including increasing the share of renewable energy to 31 percent by 2025 and 70 percent by 2050.
  3. Net-zero emissions in aviation: The aviation industry has committed to achieving net-zero emissions by 2050 by introducing new technologies, using sustainable aviation fuels and taking measures to offset carbon.
  4. Digital climate protection measures: The Malaysia Digital Economy Corporation (MDEC) has launched the Malaysia Digital Climate Action Pledge (MDCAP), which calls on companies to take measurable steps to reduce their environmental impact.
  5. Sustainable agriculture: The palm oil sector is supported to ensure compliance with the EU Deforestation Regulation and to improve sustainability, labour practices and transparency.

These measures show that Malaysia is not only aiming to comply with ESG standards, but also to create a more sustainable future for businesses and communities. The government has recognized that promoting sustainable business practices is crucial for long-term economic stability and international competition.

   

In your opinion, how will Malaysia develop?

In recent decades, Malaysia has developed into one of the most dynamic economies in Southeast Asia and an attractive investment location. Having previously been heavily dependent on agriculture and extractive industries, the country has diversified its economy and successfully focused on the manufacturing and service sectors with a combination of skilled labour and highly developed infrastructure. In the first quarter of 2025, real GDP grew by 4.4 percent, driven by robust domestic demand and a continued recovery in the key services, manufacturing and construction sectors. In particular, the further opening of the labour market to foreign workers, modernisation of the administration, reduction of the sectoral investment restrictions that still exist in some cases and the conclusion of a free trade agreement with the EU in the medium term are likely to set the course for the country's future success.

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