Malaysian Companies Are Investing Less Abroad

Malaysia's outbound investment numbers just dropped to their second-lowest level in two decades. On the surface, that sounds like a red flag: Malaysian companies pulling back from the world, getting comfortable at home, losing their global ambition. Dig into the actual numbers, though, and a more complicated story emerges.

The headline number

Malaysia's net direct investment abroad has been shrinking steadily since peaking in 2022. Last year's figure, RM12.4 billion, was down sharply from RM35.5 billion in 2024 and RM62.8 billion in 2022. That's the second-lowest level in the past twenty years.

For context on the mechanics here: direct investment abroad (DIA) outflows track acquisitions and disposals of financial assets, equity, investment fund shares, reinvested earnings, and debt instruments like inter-company loans. An investment counts as "direct" when a Malaysian entity owns at least 10% of the voting power in a foreign enterprise. A DIA outflow generally signals increasing investment abroad, so a shrinking outflow number suggests Malaysian companies are sending less capital overseas than they used to.

There's a real economic argument for why this trend deserves attention. Over-reliance on any single market, including your own home market creates genuine long-term risk for businesses. Foreign exposure isn't just about prestige; it's about growth opportunities and revenue diversification that a purely domestic business simply can't access.

China's often cited as the model here. Part of why Chinese companies grew into genuine global powerhouses traces back to Beijing's "Go Global" strategy, introduced in the early 2000s specifically to push businesses toward investing, acquiring assets, and expanding overseas.

Malaysia does have its own success stories worth noting. Genting Bhd pulled nearly two-thirds of its FY25 revenue from non-Malaysian markets. Gamuda's overseas operations contributed 64% of revenue that same year, matching Sime Darby's proportion. IHH Healthcare which runs private hospitals like Pantai, Gleneagles, and Prince Court generated less than one-fifth of its FY25 revenue from Malaysia itself. These are genuinely global Malaysian companies, and experts broadly agree more businesses, especially SMEs, should be following that path. As one consultant put it directly: "The question is, are they willing to take the risk?"

Carmelo Ferlito, CEO of the Centre for Market Education, reads the declining outbound investment trend as a direct response to global uncertainty. His interpretation: Malaysian businesses are choosing to invest domestically, specifically as a way of counteracting an unpredictable external environment. He points to 2025's record-breaking approved investment figures as supporting evidence domestic approved investments made up 51.5% of the total RM426.7 billion in approved investments last year, suggesting genuine, sustained appetite for investing at home rather than simple risk aversion abroad.

The "not overly concerned" camp

Socio-Economic Research Centre executive director Lee Heng Guie acknowledges Malaysia's DIA has moderated substantially for three straight years, but he's explicitly "not overly concerned" about the trend. His read is that this reflects strategic regional diversification and companies actively navigating global disruption, rather than any sign of business distress.

Lee ties this directly to broader economic realignment shifting global conditions, supply chain diversification and localization that's pushing Malaysian companies to focus capital closer to home while building strategic partnerships with foreign companies investing locally instead. He also points to the government's GEAR-uP programme, an initiative under Ekonomi Madani aiming to unlock RM120 billion over five years to drive socioeconomic reform and industrial transformation. That programme is anchored by six major government-linked investment companies, Khazanah Nasional, EPF, PNB, KWAP, the Armed Forces Fund Board, and Lembaga Tabung Haj, channeling capital into high-growth sectors like energy transition, semiconductors, and data centres.

Currently, most of Malaysia's overseas direct investment concentrates in manufacturing, utilities, distributive trade, leisure, plantation, construction, and banking/finance. Lee argues Malaysian companies should be pushing into additional high-potential sectors abroad too semiconductors, oil and gas, halal products and services, Islamic finance, digital economy, and green technology specifically to acquire new technologies, diversify markets, and integrate more deeply into global supply chains.

The most detailed pushback: it's not what it looks like

The most granular counterargument comes from Mohd Sedek Jantan, country economist at IPP Financial Advisers, who directly disputes the idea that Malaysia's falling DIA reflects declining international competitiveness or ambition. His argument: this is a shift in how companies finance overseas expansion, not a retreat from expansion itself.

Here's where it gets genuinely interesting. While the headline net DIA outflow dropped sharply to RM12.4 billion in 2025, the underlying composition tells a different story. Equity and investment fund outflows actually increased slightly, to RM29 billion, supported by higher reinvested earnings from Malaysian companies already operating abroad, particularly in Singapore, Mauritius, and Canada. In other words, existing overseas operations are continuing to expand, just using profits they're already generating abroad rather than fresh capital injected from Malaysia.

The sharp drop in the headline number, Sedek explains, was primarily driven by a reversal in debt instruments inter-company loans, trade credit, and similar financing arrangements which flipped from a net outflow of RM7.3 billion in 2024 to a net inflow of RM16.6 billion in 2025. He frames this as balance sheet optimization, loan repayments, and changes in intra-group financing structures, rather than companies abandoning their overseas ambitions.

Backing this up further: Malaysian companies generated RM39.9 billion in overseas earnings, which Sedek points to as clear evidence that foreign operations remain genuinely profitable and resilient, not struggling or being wound down.

The domestic reinvestment case

Sedek pushes back directly on the idea that Malaysian companies have become overly dependent on the domestic market or are cutting capital expenditure broadly. Instead, he frames this as businesses becoming more disciplined about capital allocation amid a genuinely changing global investment landscape.

His argument: with more structural opportunities emerging domestically and looking genuinely attractive, it's economically rational for Malaysian companies to direct more capital toward domestic expansion right now. He describes this as sequencing firms strengthening technological capabilities, improving productivity, and building larger domestic platforms before scaling further overseas. He points to manufacturing specifically, which recorded a net inflow of RM9.2 billion in 2025, as evidence companies are reinvesting in domestic production capacity and industrial upgrading rather than relocating operations abroad.

There's also a simpler, more practical explanation sitting underneath all of this: investing domestically, on familiar ground, is inherently less risky and less complicated to execute than expanding into unfamiliar foreign markets. And a lack of financial muscle a genuinely common constraint for many Malaysian businesses, especially SMEs remains a real hindrance to foreign expansion regardless of ambition.

Where China's model actually offers a lesson

Here's an interesting structural comparison worth drawing out: China's sovereign wealth funds have actively supported the country's "Go Global" push by helping Chinese enterprises finance mergers and acquisitions abroad. That raises a genuinely useful question for Malaysia: can the government become a more active co-investor in supporting Malaysian businesses' foreign expansion, rather than leaving companies to navigate it largely alone?

Sedek argues government agencies and Malaysia's overseas diplomatic missions should function as an integrated ecosystem providing market intelligence, business matching, investment facilitation, export financing, and political risk support all together, rather than as disconnected resources. His key insight here is important: for many companies, especially SMEs, the biggest barrier to overseas expansion often isn't financing at all. It's gaining trusted access to local partners, understanding unfamiliar regulatory requirements, and building credibility in markets they don't know well.

His recommendation for Malaysia's overseas investment strategy going forward: prioritize quality over quantity. Rather than spreading into every possible market, Malaysian companies should concentrate on high-growth, under-penetrated markets where the effort of building that access and credibility is actually worth it.

What still needs to happen regardless

Even with better government support structures, Sedek is clear that assistance alone won't move the needle if business owners themselves aren't willing to take the plunge into unfamiliar markets. Beyond institutional support, he points to two other genuine differentiators: how quickly companies adopt new technology, and their willingness to recruit high-skilled, better-paid talent, both of which will play a real role in determining whether Malaysian businesses can actually prove themselves competitive once they do expand abroad.

This is a genuinely useful example of how a single, alarming-looking headline statistic, Malaysia's DIA hitting a two-decade low, can tell two very different stories depending on how deep you're willing to dig. Read at face value, it looks like a retreat. Read through the actual composition of the numbers, it looks more like Malaysian companies financing overseas growth differently (through reinvested profits rather than fresh capital), optimizing debt structures, and deliberately sequencing investment building stronger domestic platforms first before pushing further abroad.

Whether that's the right long-term strategy for Malaysia Inc. is still genuinely open to debate. But it's clearly more nuanced than simply "Malaysian companies have gotten too comfortable at home."