Malaysia’s investment growth in 2025 faces challenges

In the context of global trade uncertainty, 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.

Prof Dr Wong Chin Yoong of Tunku Abdul Rahman University’s Faculty of Business and Finance predicted that domestic investments will likely slow down in 2025.

Meanwhile, multinational companies may delay their investment decisions due to tariff issue and risks of the U.S.’s economic recession.

The U.S. was Malaysia’s top foreign investor last year, with a combined approved investment of MR32.8 billion MR ($7.74 billion).

Foreign direct investment (FDI) plays an important role in driving domestic investment in Malaysia.

For instance, many domestic expansion plans were made to satisfy the huge demand in data center construction driven by FDI. Hence, the likely slowdown in FDI will also affect domestic investments.

In addition, the data center boom, one of the key drivers of investment growth last year, will likely pause in 2025. This is due to the uncertain global trade environment, as exemplified by Intel Corporation suspending its plans to expand its manufacturing facility in Penang.

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 RM378.5 billion, it would already be considered an achievement.

The relationship between the U.S. 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 U.S.-China trade war. For instance, Apple Inc, is shifting parts of its production out of China to other countries.

Sunway University economics Prof 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 U.S. tariff policies stabilise in the next one to two months.

For 2025, the U.S. 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 U.S.

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, capitalizing on Malaysia’s favorable growth prospects.

Yeah said Malaysia’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.