Malaysia’s tech sector, particularly semiconductors, digital economy and start-up ecosystems, is increasingly attracting foreign investment. Despite pandemic-related challenges and supply chain disruptions, Malaysia’s digital sector received approved investments worth US$4.1 billion in 2020, according to Malaysia Digital Economy Corporation (MDEC).
In March 2023, Amazon Web Services (AWS) announced plans to invest US$5.7 billion by 2037 to establish an AWS Region. This reflects its confidence in Malaysia’s digital economy and growth potential, according to the Malaysian Investment Development Authority (MIDA).
Several factors contribute to Malaysia’s tech appeal, making it a strategic location for tech investment in the Southeast Asian region.
One of the primary reasons is Malaysia’s strategic location and connectivity within the region. Malaysia is situated in the heart of ASEAN, a market of over 650 million people with a combined GDP of US$3 trillion. Malaysia also has strong trade and diplomatic ties with major economies such as China, Japan, India and the US. This connectivity provides Malaysia with access to a diverse customer base and opportunities for collaboration and innovation.
Another factor that contributes to Malaysia’s tech appeal is its supportive government policies and initiatives. Over two decades, Malaysia has invested in its digital infrastructure and human capital development through programs such as the Multimedia Super Corridor (MSC), the National Digital Economy Blueprint (MyDIGITAL), and the National Investment Aspirations (NIA). These programs create a conducive environment for tech companies to thrive, by providing incentives, funding, infrastructure, talent and regulatory frameworks.
The establishment of the MDEC, a government agency that leads the digital transformation of the economy, is one of the key outcomes of these programs. MDEC has been instrumental in attracting and facilitating foreign tech investment in Malaysia and nurturing and promoting local tech startups.
MDEC has also launched initiatives that help tech startups establish a regional presence, such as Global Acceleration and Innovation Network (GAIN), Malaysia Tech Entrepreneur Program (MTEP) and Digital Hub.
Growing presence of tech companies in Malaysia
Several foreign tech companies have invested in or expanded their operations in Malaysia, including Intel, Google, Microsoft, IBM, Huawei, Alibaba, Tencent, Grab and Carsome. These companies chose Malaysia for its cost competitiveness, skilled workforce, quality infrastructure, market access and innovation potential.
Malaysia is also home to some of Southeast Asia’s most successful and promising tech startups. Malaysian-born unicorns, such as Grab and Carsome, have expanded regionally and globally. Other startups on their way to achieving unicorn status include Aerodyne (drone tech), Inmagine (creative industries), iPrice (e-commerce), StoreHub (retail tech) and Fave (fintech). According to Startup Genome, Kuala Lumpur ranks ninth globally in Ecosystem Value (US$16.1 billion) and 34th in Ecosystem Performance.
Malaysia’s strategic location, connectivity, supportive government policies, and thriving tech startup ecosystem make it an attractive destination for foreign investment in the Southeast Asian region. With its continuous efforts to transform its digital economy, Malaysia is poised to become a leading tech hub in the region.
Established talent pool and tech ecosystem
According to the International Trade and Industry Minister, Tengku Zafrul Aziz, Malaysia is banking on its established talent pool and ecosystem in the electrical and electronics sector to attract more investments.
Rather than solely relying on financial incentives to lure businesses, Zafrul believes that building on Malaysia’s strengths is key to standing out to investors. His remarks were made during an investor conference in Kuala Lumpur in March and come on the back of recent successes in attracting high-profile brands such as Tesla and AWS. Tesla plans to import its electric vehicles into Malaysia and build a network of superchargers.
Zafrul attributes Tesla’s decision to choose Malaysia to the country’s well-established tech ecosystem, which has been built up over the past 50 years. Companies in this space already provide services worth more than US$45 million to Tesla.
Tesla also plans to work closely with small and medium-sized enterprises as it builds its supercharger network in the country.
- Malaysia is a country that has been steadily attracting foreign investment in its tech sector, especially in the fields of semiconductors, digital economy and start-up ecosystem.
- Strategic location and connectivity within Southeast Asia and beyond, giving it access to a large and diverse customer base and opportunities for collaboration and innovation.
- Supportive government policies and initiatives that create a conducive environment for tech companies to thrive, by providing incentives, funding, infrastructure, talent and regulatory frameworks.
- Presence of the world’s leading tech companies such as Intel, Google, Microsoft, IBM, Huawei, Alibaba, Tencent and Grab.
- Home to some of Southeast Asia’s most successful and promising tech startups, such as Aerodyne, Inmagine, iPrice, StoreHub, Fave and Carsome.
- Potential to become a tech startup hub in Southeast Asia by leveraging its strengths and opportunities in the digital economy.
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