OECD Investment Policy Reviews: Malaysia 2013

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Malaysia stands out as one of the economic success stories in Asia. Foreign direct investment (FDI) has played a major role in the growth and diversification of the economy, and has been a key part of an outward-oriented development strategy. As an early mover in terms of export-led development, Malaysia has traditionally received significant amounts of foreign investment relative to the small size of its economy. Today, Malaysia is a net outward investor, with its companies increasingly becoming regional and global players.

In spite of this enviable performance, the Malaysian economy is confronting numerous inter-related challenges as it strives to attain developed country status by 2020. Private investment as a share of GDP has declined, and FDI as a share of total FDI in ASEAN has decreased since the early 1990s.

The government has engaged in ambitious reforms across the board which have led to increased liberalisation and more efficient regulations and have contributed to a strong enabling environment for business. Malaysia will also continue to benefit from a dynamic and rapidly integrating region, thereby retaining the attention of investors.

OECD Investment Policy Reviews: Malaysia presents an assessment of the investment climate in Malaysia, including the institutional and legislative framework for investment. It focuses on policy options in the areas of investment, infrastructure, finance, responsible business conduct, corporate governance and green investment and discusses measures to help revive both foreign and domestic investment.


Investment promotion and facilitation

Within an overarching strategy for improving the investment environment, investment promotion and facilitation can help to increase both domestic and foreign investment and to enhance their contribution to national economic development. Success in promoting investment requires a careful calculation of how to employ resources most effectively and how to organise investment promotion activities within the government so that the overriding goal of economic development through improvements in the investment climate remains at the forefront of policymaking. Investment promotion and facilitation measures, including incentives, can be effective instruments to attract investments provided they aim to correct for market failures and are developed in a way that can leverage the strengths of a country’s investment environment. This chapter describes the various steps Malaysia has taken to reduce red tape and integrate the role of business in its development strategies. Particular attention is paid to dedicated measures to improve government efficiency for business, as well as to its investment promotion efforts and how they have become a global reference. The analysis draws out some lessons learned from Malaysia’s experience with industrial clusters and business linkages, which are at the core of the Malaysia’s private sector development strategy. Malaysia’s challenge in achieving Vision 2020 also entails addressing a skills-mismatch to meet the demands of a high-end technology and knowledge based economy, and this chapter highlights some areas for improvement in this regard.


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