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Why Malaysia is Becoming a Semiconductor Powerhouse
Malaysia has become a winner amidst the ongoing chip war between the U.S. and China, and here's why.
This video is based on publicly available data and analysis. It represents the author’s perspective and should not be taken as professional or financial advice.
Bursa Malaysia chairman Tan Sri Abdul Wahid Omar
KUALA LUMPUR: Malaysia is in a “sweet spot” for economic growth and investment, with the “stars aligning” in its favour, according to industry leaders and market analysts.
This optimism stems from the country’s robust macroeconomic fundamentals, improving investment climate and strategic positioning in the global supply chain.
Maybank Investment Bank head of regional equity research Anand Pathmakanthan highlighted Malaysia’s acceleration in gross fixed capital formation, driven by a blend of domestic direct investment (DDI) and foreign direct investment (FDI).
“The good news is it’s not just FDI, it’s also DDI, which is far more important in terms of job creation and tax generation,” he said during his presentation at the Institute of Chartered Accountants in England and Wales Economy Insight Conference 2024 yesterday.
Anand said for the last 10 years, local companies have not been investing, which has a lot to do with political instability.
“They’ve been investing less and less in Malaysia, which is always a bad sign for any country,” he said.
But in the last two years, he said Malaysia is seeing a recovery in DDI.
“The recovery in DDI reflects the confidence that domestic businesses are feeling better about the environment. That (DDI) is going to be a key support when issues about trade crop up next year with Trump 2.0,” he said.
Meanwhile, Anand said Budget 2025 is “very well-balanced,” emphasising initiatives to crowd-in private sector investments.
He projected continued economic growth, supported by a civil service pay hike, minimum wage increases and enhanced cash handouts, which would sustain domestic consumption in 2025.
“Malaysia is in a very sweet spot, especially when it comes to attracting supply chain relocation and FDI,” he said.
Anand projected Malaysia’s gross domestic product (GDP) to conclude at 5.2% in 2024 and 4.9% in 2025, outpacing the Asean-6 regional average of 4.8% in 2024 and 4.7% in 2025.
Affin Bank Bhd president and chief executive officer Datuk Wan Razly Abdullah echoed the optimism, projecting GDP growth of 5.2% in 2025, up from the bank’s projection of 5% for this year.
He attributed this to stable oil prices, elevated crude palm oil (CPO) prices and active construction and technology sectors.
“The elevated price of oil and CPO will provide good income streams,” he said, adding that Johor and Klang Valley developments would boost the property sector.
“The stars are aligning for Malaysia thanks to our stable political environment and strong FDI flows.”
Wan Razly also expressed bullishness on the ringgit, predicting it to strengthen to RM4.10 against the US dollar by end-2025, supported by the US Federal Reserve interest rate cuts.
Adding to the optimism for Malaysia’s economic prospects, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar highlighted the robust performance of the local bourse, driven by a favourable investment environment and strong macroeconomic fundamentals.
“Malaysia has been a vibrant market for initial public offerings (IPOs) this year. Up to the end of November, we had 47 listings that raised a total of US$1.5bil. By year-end, we expect to close with 54 or 55 listings,” he said.
He noted that the average daily trading value for 2024 has increased by over 50% year-to-date, reaching approximately RM3.1bil.
Abdul Wahid believes this momentum will be sustained into 2025, with 19 IPO approvals in hand for next year.
“Looking at the pipeline, I think 2025 should be another good year,” he said.
He said “the overall good macroeconomics are being translated into the real world and capital markets,” coupled with a shorter processing time for IPO listings of just three months.
Separately, Abdul Wahid said Malaysia should further tap into the Asean market and leverage its strategic advantages, as the regional bloc is well-positioned amidst global uncertainties, particularly ahead of the United States’ tariff threats on China.
Abdul Wahid urged Malaysia to continue to pursue its relationship with Asean in a pragmatic and constructive manner to further capitalise on the bloc’s 670 million consumers.
“The biggest potential that we have is in Asean. Our trade and investments (in the bloc) is relatively low compared to other trade partners and that can be enhanced further,” he said.
Abdul Wahid also emphasised that Malaysia should not be mutually exclusive to any specific trade groupings, trade talks or bilateral agreements and should focus on further strengthening trade relationships.
In the realm of inflation, both Anand and Wan Razly anticipate a rise to 3% in 2025, up from the current 1.9%, mainly due to the targeted petrol subsidy scheduled to take effect mid next year.
Despite the projected uptick, both of them said Malaysia’s inflation rate will stay within a healthy range, underpinned by strong macroeconomic fundamentals and effective policy measures.
China's extensive global trade "circle of friends," driven by cooperation and mutual benefit, is becoming increasingly solid, continuously injecting certainty and growth momentum into the global economy.
Budget 2025: Singles, senior citizens to get RM600
Prime Minister Anwar Ibrahim tabled the 2025 budget, of which RM335 billion, or 79.6%, accounted for operational expenditure. (BernamaPETALING JAYA:
Prime minister and finance minister Anwar Ibrahim has tabled the 2025 federal government budget, with a total allocation of RM421 billion.
This represents a RM27.2 billion increase compared with the RM393.8 billion that was allocated for 2024, and is the first time that the budget has exceeded RM400 billion.
Operational expenditure accounts for RM335 billion, or 79.6%, while RM86 billion is allocated for development expenditure.
Here are the highlights of the 2025 budget:
Economy and investments
GLICs to invest RM120 billion domestically over the next five years. RM25 billion is allocated for next year, while projects worth RM9 billion will be developed through public-private partnerships.
Government to introduce the New Investment Incentive Framework in the third quarter of 2025. RM1 billion in investment funds will be allocated to train local talent and encourage high-value activities.
RM300 million for Khazanah’s National Fund-of-Funds to support investment in startups.
Development and utilities
Allocation for the National Energy Transition Facility raised to RM300 million for 2025 from RM100 million this year.
The Net Energy Metering programme is extended to June 30, 2025, for the installation of photovoltaic solar panels.
RM1 billion for the green technology financing scheme.
UEM Lestra and TNB to invest RM16 billion to improve transmission and distribution networks as well as to decarbonise industrial areas.
All government agencies to sign energy performance contracts to slash electric bills by 10%.
Taxes
Sales tax to be imposed on premium imported food items like salmon and avocado from May 1.
Service tax will be widened to include commercial services, including businesses like fee-based financial services.
Full implementation of the expanded SST starts May 1, 2025.
2% tax on dividend income of more than RM100,000 earned by individual shareholders. This will start from the 2025 assessment year.
Carbon tax to be imposed on steel, iron and energy industries in 2026, to encourage use of low-carbon technology.
Individual income tax relief for education and medical insurance premiums raised to RM4,000.
Tax exemption on foreign-sourced income extended until Dec 31, 2036.
Additional 50% tax deduction for employers who hire women returning to the workforce.
Subsidies
Targeted subsidies for RON95 petrol to be implemented mid-2025.
Education
RM64.1 billion in total allocated to the education ministry.
RM2 billion to upgrade and maintain schools nationwide.
Construction of 44 new schools nationwide to commence next year.
RM870 million for the supplementary food programme in schools.
Nearly RM800 million for early schooling aid.
RM18 billion for the higher education ministry.
RM4 billion for scholarships, loans, and education allowances.
RM500 million provided by PTPTN for students in STEM-related courses in public universities.
Tax relief for savings in the National Education Savings Scheme (SSPN) extended by three more years.
RM20 million for UiTM to produce more engineers in the semiconductor sector.
RM50 million to teach AI-related subjects at all research universities.
RM600 million for research and development under the higher education and science, technology and innovation ministries.
RM7.5 billion allocated for TVET.
RM55 million for GiatMara and community colleges to train 10,000 children from tahfiz and pondok schools over five years.
RM120 million for MCMC to improve internet connectivity at public universities, schools, military camps and Mara institutions.
RM300 million to build two new special needs schools, one focussing exclusively on autism.
Health
RM45.3 billion for the health ministry.
RM1.35 billion for maintaining and repairing health facilities.
Government to raise excise duty on sugary drinks by RM0.40 per litre, starting Jan 1, 2025.
Security
RM19.5 billion for the home ministry.
RM560 million to enhance border security.
RM21.2 billion for the defence ministry.
RM5.8 billion to maintain and repair assets of the armed forces.
Allocation for the Malaysian Anti-Corruption Commission (MACC) increased to RM360 million from RM338 million.
RM20 million to strengthen the National Scam Response Centre.
Additional staffing of 100 people for the National Cyber Security Agency (Nacsa), along with an additional allocation of RM10 million.
Environment
The Ecological Fiscal Transfer fund to be raised to RM250 million to support state efforts in protecting forests and wildlife.
Social welfare
RM13 billion for Rahmah cash aid initiatives, compared with RM10 billion this year. This increase will benefit 60% of the adult population.
4.1 million households will get RM100 in cash aid a month, compared with 700,000 households this year. The cash will be credited into the MyKad of recipients from April 2025, and can only be spent on essential goods.
Singles will get RM600 each.
Social welfare department to get RM2.9 billion, compared with RM2.4 billion in 2024.
Senior citizen aid increased from RM500 to RM600 a month.
Low-income families to get RM250 in aid for each child aged six and under; RM200 for each child aged seven to 18. This is higher compared with RM200 and RM150, respectively, for 2024. This is however capped at RM1,000 per family.
The federal territories general aid is raised from RM100 a month to RM150, with a cap of RM500 per family.
RM300 million for an enhanced Rahmah programme to offer essential goods at reasonable prices.
RM250 million to enroll more low-income individuals in the People’s Income Initiative (IPR).
RM84 million to upgrade facilities at New Villages.
Income eligibility for disabled worker aid relaxed to RM1,700 a month.
Additional tax relief for disabled couples raised to RM6,000.
Additional tax relief for taxpayers with unmarried disabled children raised to RM8,000.
Aid for army veterans raised from RM300 to RM500.
Housing
Nearly RM900 million for 48 People’s Residency Programmes and 14 Rumah Mesra Rakyat projects.
RM12.8 billion in guarantees for over 57,000 first-time home buyers, with ongoing guarantees of RM10 billion for 20,000 buyers.
Jobs and community support
Minimum wage raised from RM1,500 to RM1,700 per month, effective Feb 1, 2025.
Enforcement of the new wage will be postponed for employers with fewer than five employees for six months (starting Aug 1, 2025).
RM200 million allocated to carry out the Progressive Wage Policy.
GiatMara to provide short-term training for 3,000 gig workers.
The EPF i-Saraan incentive is raised to 20% from 15%, subject to a cap of RM500 a year or RM5,000 in a lifetime.
Government to make it mandatory for foreign workers to contribute to EPF. This will be done in stages.
Rural communities
RM100 million for services like mobile clinics to cater to rural communities.
RM2.9 billion to upgrade basic infrastructure in rural areas.
RM380 million for the Orang Asli from RM330 million this year.
Civil Service
On-call duty allowance for medical and dental officers to be increased between RM55 and RM65, depending on the department.
Over RM1.8 billion for the construction, maintenance, and renovation of civil servants’ quarters.
RM500 in special cash aid for civil servants Grade 56 and below.
Transport
Prasarana to provide vans to shuttle students from selected train stations at the cost of 50 sen per ride.
RM2.8 billion to maintain federal roads. RM1 million earmarked for secondary, Felda and industrial roads, as well as roads damaged due to floods.
RM5.5 billion for maintenance of state roads.
Commodities
RM60 million in grants for rubber smallholders.
RM100 million in incentives for smallholders to replant oil palm.
RM2.6 billion for Felda, Felcra and Risda.
Industries and businesses
Multi-tier levy to be implemented in early 2025 to reduce reliance on foreign workers.
RM200 million for Retirement Fund Incorporated (KWAP) to invest in local startups.
RM50 million in matching grants for local entrepreneurs to digitalise.
RM3.2 billion for micro loans from Tekun and BSN for small traders, including the disabled, Chinese and Bumiputera communities.
RM800 million in funds under Mara and PUNB for Bumiputera entrepreneurs, including artisans.
RM1.3 billion to empower G1-G4 contractors to undertake small and medium projects.
Agriculture and food security
RM300 million to collaborate on agricultural projects with state governments to boost local food production.
RM1 billion for initiatives to control prices and supply of goods.
Tourism, arts and culture
Almost RM550 million to enhance tourism promotions and activities for Visit Malaysia 2026.
RM110 million for improving tourist facilities, pursuing Unesco nominations for various cultural sites, and establishing ecotourism cooperation.
RM600 million to restore key cultural sites in Kuala Lumpur.
RM50 million for Dewan Bahasa dan Pustaka to collaborate with language activists in promoting language and literary activities.
Youth and sports
RM50 million for PLKN (National Service Training programme) 3.0.
RM25 million for the Rakan Muda programme.
RM230 million for national sports development.
RM15 million for Harimau Malaya and the Under-18 and Under-13 teams.
Sabah and Sarawak
Sabah and Sarawak will get RM6.7 billion and RM5.9 billion in development funds, respectively.
Special grants for Sabah and Sarawak doubled to RM600 million in 2025.
Over RM200 million for flights to interiors in Sabah and Sarawak.
Disaster management
RM150 million to mitigate flash floods.
RM600 million for the National Disaster Management Agency to prepare for flood disasters.
RM250 million allocated for slope repairs nationwide.
RM20 million for GLIC and GLC foundations to help them provide aid to flood victims.
Islamic affairs
RM2 billion for Islamic affairs.
Halal Development Corporation to merge with Matrade.
RM100 million matching grant to encourage the development of new Islamic finance solutions.
Jakim to hire 100 halal auditors.
RM200 million for the Urban Development Authority to develop affordable homes on waqf land.
RM35 million for Kafa teachers, imams and related personnel.
Laws and legal reforms
Allocation for the legal affairs department raised from RM194 million to RM209 million.
RM200 million for the national audit department, an increase from RM173 million.
Government to form a law reform committee to update commercial laws.
RM60 million for the judiciary to upgrade its infrastructure, including the e-Kehakiman system.
RM25 million for the Special Agency Reform Task Force (STAR).
Others
RM27 million allocated to the Malaysia Competition Commission (MyCC) to bust cartels.
50 acres from the Bandar Malaysia project designated as Malay reserve land.
With billions being spent on Budget 2025, it is important that the money reaches the people, and is not siphoned off by the corrupt and kept in ‘safe houses’. Good must triumph.
Related:
Budget 2025: New dividend tax, higher sugar tax, wage floor up to RM1,700
Bursa Malaysia chairman Tan Sri Abdul Wahid Omar
