06-05-2025
Malaysia likely to miss 2025 investment targets
PETALING JAYA: Malaysia may not achieve a hat-trick in approved investments this year after two straight years of record-high numbers.
The country is also likely to miss its 5% target for approved investments.
As long as tariff uncertainties persist, coupled with the threat of a recession in the United States, Prof Dr Wong Chin Yoong of Universiti Tunku Abdul Rahman's Faculty of Business and Finance warned that multinational companies may delay their investment decisions.
The United States was Malaysia's top foreign investor last year, with a combined approved investments of RM32.8bil.
Wong also predicts that domestic investments will likely slow down in 2025. Domestic investments accounted for 55% of the total approved investments in 2024.
'The hype in domestic investments was driven by the huge potential of foreign direct investment (FDI).
'For instance, many domestic expansion plans were made to satisfy the huge demand in data centre construction driven by FDI. Hence, the likely slowdown in FDI will also affect domestic investments,' he explained.
Wong added that the data centre boom, one of the key drivers of investment growth last year, will likely pause in 2025.
'I think we can forget about hitting another record high in approved investments this year. This year has a completely different vibe in commercial investment, be it crossing or within borders.
'Intel, for example, had paused its planned expansion in Penang.
'Once the US Trade Representative comes up with a report on the semiconductor industry and proposes semiconductor sector-specific tariffs, we can expect a different picture for the electrical and electronics' FDI too,' he told StarBiz.
Meanwhile, Rakuten Trade head of equity sales Vincent Lau said if total approved investments in 2025 can match, or even reach 90% of last year's RM378.5bil, it would already be considered an achievement.
'The relationship between the United States and China has shown signs of thawing, as both sides have signalled their willingness to negotiate and dial down tariffs.
'Hence, the outlook and sentiment on investments should improve,' he said.
Lau added that the bright spots supporting the country's investment growth will stem from other countries' diversification efforts to seek alternative markets amid the US-China trade war.
'Apple Inc, for instance, is shifting parts of their production out of China to countries like India. Malaysia will continue to benefit from the China +1 or Vietnam +1 strategies,' he said.
Sunway University economics professor Dr Yeah Kim Leng said the more modest approved investments growth target of 5% this year, compared with the near 15% rise seen in 2024, is realistic and achievable if US tariff policies stabilise in the next one to two months.
'Malaysia's large investment pipeline will enable the economy to tide over the current period of uncertainty, provided that it is kept to shorter than a year.
'As long as the global markets, aside from the United States, remain open, the moderating investments that lead to slower output and capacity increases are unlikely to cause an economic downturn,' he said.
For 2025, the United States is unlikely to retain its position as Malaysia's top foreign investor, given President Donald Trump's tariffs and efforts to reshore investments and bring jobs back to the United States.
'As many countries are finding ways to pivot away from the United States due to Trump's 10% base tariffs and excessive reciprocal tariff levels now being negotiated, these countries are now more motivated to expand trade and investment opportunities with one another, including with China,' Yeah said.
He opined that the 5% approved investment target, though challenging, can be attained if investments from China, Japan, South Korea, Singapore, Europe, Middle East and Australia increase, capitalising on Malaysia's favourable growth prospects.
'The country's appeal also lies in its extensive trade linkages created through various regional trade agreements such as the Regional Comprehensive Economic Partnerships and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.'
