Malaysia's IMFC expansion aligns with investor trends

New Straits Times

06-05-2025

KUALA LUMPUR: Malaysia's decision to expand its Invest Malaysia Facilitation Centre (IMFCs) to Penang and Sarawak is timely and apt, with investor interest shifting towards strategic regional markets, economists said.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan described the IMFC expansion as a strategically sound move to promote regional investment inclusivity.
"With existing IMFCs already in Johor and Kuala Lumpur, adding the centres in Penang - the northern economic gateway - and Sarawak - Malaysia's bridge to the Borneo and wider Asean corridor - demonstrates a commitment to regional investment inclusivity," he told Business Times.
Mohd Sedek said Sarawak's untapped potential in renewable energy, resource-based manufacturing and logistics, with its proximity to the Philippines, Vietnam and Indonesia further enhancing its strategic appeal.
Meanwhile, Penang, a mature hub for the electrical and electronics (E&E) sector, stands to benefit from better facilitation services to expedite high-value project approvals.
"The success of the Johor-Singapore Special Economic Zone (JS-SEZ), partly attributed to proactive investment facilitation, shows how targeted institutional support through IMFCs can directly contribute to investor confidence and project realisation," he added.
Mohd Sedek pointed to successful global benchmarks like Ireland, where IDA Ireland operates over 10 regional and international investment offices, helping attract over €24 billion in foreign direct investment in 2023.
This, he said, demonstrates how a decentralised, regionally tuned facilitation structure can yield measurable economic returns.
However, he stressed that to be truly effective, the IMFCs must adopt a data-driven approach, aligning facilitation services with sectoral roadmaps and local strengths to ensure these centres are not just symbolic, but catalytic in unlocking regional competitiveness.
Prime Minister Datuk Seri Anwar Ibrahim, in a special parliamentary session yesterday, said the government will establish new IMFCs in Penang and Sarawak to facilitate investor's needs and monitor approved projects' progress.
This is a part of the government's strategic plan to safeguard economic stability and protect national over the short and medium term, aiming to accelerate the implementation of development projects and government approvals for investment.
Meanwhile, the Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said the IMFC is a comprehensive one-stop centre aimed at expediting investor onboarding and minimising bureaucratic hurdles.
Besides offering incentives, he said the centres need to ensure investors can navigate regulations smoothly, find suitable land to build factory and get the necessary approvals without delays.
"When investors want to invest in one country, it is not just about the incentives. They also look at the regulation and administrative processes.
"In Malaysia, multiple layers of departmental approvals are often required, which can slow things down. What investors are hoping for is that the one-stop centre will help cut through these layers and speed up the entire process," he added.
DRIVING DOMESTIC INVESTMENT MOMENTUM
As of April this year, RM8.5 billion had been allocated, including into venture capital funds as well as in semiconductor projects.
Under the GEAR-uP program, government-linked investment companies (GLICs) have made a commitment to make direct domestic investments (DDIs) worth RM120 billion within five years, with RM25 billion for 2025.
Mohd Sedek said the investments under NIMP 2030 is essential to reduce Malaysia's dependence on foreign capital, especially amid rising global trade tensions and protectionist policies.
"As we've seen this year, trade wars and tariffs can disrupt foreign investment flows. Strengthening DDIs allows Malaysia to gradually build a more self-reliant economy by deepening value-added activities in key sectors like E&E and reinforcing domestic supply chains," he said.
While full self-sufficiency may be ambitious, Mohd Sedek said increasing the investments in stages can serve as an economic buffer, enhancing national resilience - similar to China's drive toward greater economic autonomy.
He noted that Malaysia's medium-term strategy of relying on domestic investment, particularly through GLICs, is broadly sustainable amid global uncertainties and volatile capital flows.
He said it provides a pragmatic buffer by mobilising local capital into infrastructure, digital and green sectors.
However, Mohd Sedek said sustainability depends on disciplined execution - avoiding overdependence on GLICs, ensuring capital efficiency and crowding in private investment.
"Crucially, strong governance is needed to uphold transparency, depoliticise investment decisions and ensure public institutions remain aligned with long-term national and fiduciary objectives.
"Without this, risks of misallocation, market distortion and systemic overexposure may undermine its effectiveness," he added.
Lee highlighted the importance of GLICs not just in driving large-scale projects but also in uplifting local startups and SMEs, enabling them to integrate into regional and global supply chains.
"The real value of foreign investments is when they generate jobs and help raise the capabilities of our domestic industries," he noted.
He also advocated for consistent progress tracking, ensuring that investments translate into tangible economic benefits.