We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.

Successfully investing in Malaysia


last updated on 19 May 2021 | reading time approx. 2 minutes

from Michael Wekezer




How do you assess the current economic situation in Malaysia?

Malay­sia has shown an im­press­ive growth since the 1990s. In its most re­cent Janu­ary 2021 up­date of the World Eco­nom­ic Out­look, the IMF has re­vised its GDP growth pro­jec­tions for Malay­sia to 7 per cent in 2021 and 6 per cent in 2022. Be­ing the 4th largest eco­nomy of South East Asia, Malay­sia has con­tin­ued to per­form strongly in re­cent years, due to a glob­al de­mand for elec­tron­ics as well as com­mod­it­ies, such as oil and gas. An im­proved la­bour mar­ket, a pro-cyc­lic­al budget and ample in­fra­struc­ture spend­ing have also con­trib­uted to the sound per­form­ance.

Be­side the pro­duc­tion of crude oil and palm oil, Malay­sia has a well-es­tab­lished in­dustry sec­tor, such as elec­tron­ics, phar­ma­ceut­ic­als and tele­com­mu­nic­a­tion. The coun­try is not only be­ne­fit­ing from be­ing com­pet­it­ive on in­ter­na­tion­al mar­kets, but also from a high do­mest­ic de­mand. To­geth­er with Singa­pore, Thai­l­and and In­done­sia it is one of the lead­ers in the ASEAN re­gion.


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

The over­all in­vest­ment cli­mate in Malay­sia re­mains pos­it­ive, des­pite the dis­rup­tion caused by the Cov­id-19 pan­dem­ic. In the World Bank “Ease of Do­ing Busi­ness” rank­ing of 2020, Malay­sia came in 12th place, which is the second best res­ult with­in ASEAN. The coun­try has also im­proved its rank­ing to 26 from 29 among 88 coun­tries in the “Glob­al Tal­ent Com­pet­it­ive­ness In­dex 2020” (GTCI 2020). In the “DHL Glob­al Con­nec­ted­ness In­dex 2020”, Malay­sia was ranked 16th glob­ally. These rank­ings un­der­line the com­pet­it­ive­ness of Malay­sia as an in­vest­ment loc­a­tion in the South East Asi­an re­gion.

The man­u­fac­tur­ing sec­tor is the main en­gine of Malay­sia’s eco­nom­ic growth with a fo­cus on:

  • Electrical & Electronics;
  • Machinery & Equipment;
  • Chemicals;
  • Medical Devices;
  • Aerospace and
  • Automotive.

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

Ger­many has been Malay­sia’s largest for­eign in­vestor from the European Uni­on. As of June 2020, a total of 461 man­u­fac­tur­ing projects with Ger­man par­ti­cip­a­tion have been im­ple­men­ted with total in­vest­ments of 9.4 bio. US Dol­lar. In gen­er­al, Malay­sia of­fers an in­vest­ment friendly en­vir­on­ment and not an over­reg­u­lated stat­utory frame­work, which also re­flects its high po­s­i­tion­ing in the pre­vi­ous men­tioned “Ease of Do­ing Busi­ness” World Bank rank­ing.

His­tor­ic­ally, Malay­sia is a com­mon law jur­is­dic­tion, which might be un­fa­mil­i­ar for Ger­man com­pan­ies which are used to a civil law sys­tem. Thus, Ger­man com­pan­ies should draft and ne­go­ti­ate com­mer­cial agree­ments care­fully.

Since ne­go­ti­ations of a Free Trade Agree­ment between the EU and Malay­sia are cur­rently sus­pen­ded and have not been re­sumed mainly be­cause of the dis­sents about palm oil, one of the ma­jor com­mod­it­ies farmed and pro­duced in Malay­sia, Ger­man com­pan­ies can­not yet be­ne­fit from pref­er­en­tial treat­ment when it comes to bi­lat­er­al trade.

Most in­dus­tries are open to for­eign in­vest­ments in Malay­sia. In some in­dus­tries, such as the oil and gas or the tele­com­mu­nic­a­tion sec­tor, cer­tain in­vest­ment re­stric­tions are im­ple­men­ted through le­gis­la­tion, guidelines, a con­di­tion to a li­cense or a com­bin­a­tion of these. The in­vest­ment re­stric­tions usu­ally would re­quire a cer­tain level of loc­al share­hold­ing or loc­al man­age­ment, also re­ferred to as “Bu­mi­putera” re­quire­ments.

Ger­man in­vestors can rely on the pro­tec­tion un­der the Bi­lat­er­al In­vest­ment Treaty between Ger­many and Malay­sia from 1962. However, this Bi­lat­er­al In­vest­ment Treaty does not provide the same level of pro­tec­tion as it is com­mon nowadays in in­vest­ment treat­ies and it does not gov­ern a state-in­vestor dis­putes set­tle­ment mech­an­ism.


Malaysia hopes that the Asian free trade agreement “Regional Comprehensive Economic Partnership” (RCEP) will boost growth. What is your assessment?

The RCEP is the latest Free Trade Agree­ment Malay­sia has entered in­to. Once rat­i­fied and in force, RCEP as the world’s largest Free Trade Agree­ment out­side of the World Trade Or­gan­isa­tion will fur­ther lib­er­al­ise trade in the re­gion. Ger­man com­pan­ies when do­ing busi­ness in Asia-Pa­cific should be aware of the com­plex and over­lap­ping Free Trade Agree­ments. Malay­sia is also mem­ber of ASEAN Free Trade Area (AF­TA)of the ASEAN Plus Free Trade Area Agree­ments with China, Ja­pan, Korea, Aus­tralia, New Zea­l­and and In­dia as well as the Com­pre­hens­ive and Pro­gress­ive Agree­ment for Trans-Pa­cific Part­ner­ship (CPTPP). There are fur­ther bi­lat­er­al Free Trade Agree­ments with oth­er coun­tries in place. This “Noodle Bowl” of Free Trade Agree­ments re­quires a fo­cus on trade com­pli­ance and in depth plan­ning and as­sess­ment of ap­plic­able Free Trade Agree­ments.

Bey­ond trade in goods, RCEP also provide rules on trade in ser­vices, in­tel­lec­tu­al prop­erty, elec­tron­ic com­merce, com­pet­i­tion and in­vest­ments. To what ex­tend Ger­man com­pan­ies can be­ne­fit from these rules re­mains to be seen.


In your opinion, how will Malaysia develop?

Malay­sia has be­come one of South East Asia’s most vi­brant eco­nom­ies. Once heav­ily re­li­ant on ag­ri­cul­ture and com­mod­ity-based in­dus­tries, the coun­try has suc­cess­fully di­ver­si­fied to fo­cus on the man­u­fac­tur­ing and ser­vices sec­tors through a com­bin­a­tion of a skilled la­bour force and highly de­veloped in­fra­struc­ture. The World Bank is pre­dict­ing that Malay­sia will trans­form from an eco­nomy in the high­er-me­di­um in­come range to an eco­nomy with high in­come by 2024.

The re­cent geo­pol­it­ic­al ten­sions between China and the West (USA, EU and Aus­tralia) might re­quire com­pan­ies to di­ver­si­fy their in­vest­ments in the Asia-Pa­cific. “China plus one” is now not just a busi­ness strategy to re­duce costs of man­u­fac­tur­ing but an es­sen­tial strategy to ad­dress the geo­pol­it­ic­al risks. Malay­sia could be­ne­fit from re­lo­ca­tion of com­pan­ies from China.


Contact Person Picture

Christian Swoboda

Associate Partner

+60 3 2276 2755

Send inquiry

Deutschland Weltweit Search Menu