“We have to save the country. To my mind… the major problem is poor governance and endemic corruption,” Malaysian Prime Minister Anwar Ibrahim bluntly said about the obstacles his country faces in a CNBC interview.
He is confident that addressing these issues will help attract foreign investment. “Without that trust [and] confidence, nobody will invest in a big way,” he continued. Transparent processes and a commitment to end corruption will feed that trust in Ibrahim’s view.
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One of the most famous corruption cases in the country was the 1Malaysia Development Behard scandal where former PM Najib Razak was found guilty of embezzling millions of dollars. Between 2018 and 2023, Malaysia lost an estimated 277 billion ringgit ($67b) of economic output to corruption. “I would just go after them without mercy,” Ibrahim said about those who steal funds.
The government has launched an anti-corruption initiative to boost Malaysia into the top 25 countries in Transparency International’s Corruption Perception Index (it currently sits at 57).
Foreign investment in Malaysia
Malaysia received $9.7b of FDI inflows in 2023, a slip from the $11.6b it received in 2021.
It has been working on two special economic zones to attract FDI. One of them is in the financial zone of Forest City and the other is the Johor-Singapore Special Economic Zone, which the PM said is likely to be finalized by the end of 2024.
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By GlobalDataIbrahim said some companies have expressed interest in the SEZ with Singapore, although he did not specify which ones. Malaysia’s Economic Minister Rafizi Ramli said that the zone would become a gateway for Western and Eastern investors, including those from China, in the region.
Chips incoming?
Amid the ongoing chip war between the US and China, Malaysia may be well positioned to benefit. Micron and Intel are already expanding operations into Penang, a beachy part of the country that has proven popular with tech investments. European companies such as AMS Osram and Infineon also have shown interest in the area.
In the past, Malaysia has contributed to the semiconductor supply chain through packaging, assembling and testing chips. However, it wants to invest in more value-added production processes such as wafer fabrication and integrated circuit design.
A major factor for Penang’s FDI uptick is the move of Chinese companies to Malaysia. According to Invest Penang chief executive Loo Lee Lian, the heightened interest coincided with Biden’s tightening of trade restrictions on Chinese technology.
Some Chinese companies are partnering with Malaysian firms to produce chips as a precautionary measure against further restrictions.
Gautem Puntambekar, a country executive for Bank of America, said that “when you talk about semiconductors, Malaysia is invariably part of the conversation.”
Malaysia may not have started the chip war, but it could be well-positioned to win it.
