Reform Initiatives in the New Investment Policy

The Government unveiled its New Investment Policy (NIP) on 6th October 2022 to continue Malaysia’s move towards becoming the preferred investment destination in Southeast Asia. The NIP will serve as a forward-looking framework to ensure Malaysia remains ever-ready to cater to the changes in the global economic landscape and spur investment in future growth sectors.

Guided by the NIP, the Government will implement reforms to strengthen the fundamentals of Malaysia’s investment ecosystem. Major reforms revolve around improving the ease of doing business, where the Government seeks to enhance the channels of communication with investors. The Project Acceleration and Coordination Unit (PACU) – established under MIDA earlier in 2020 to facilitate manufacturing projects approved by the National Committee on Investment (NCI) will be progressively scaled up to expand its outreach to investors across all regions in Malaysia and provide facilitation for investment projects across all sectors.

Additionally, the Investment Promotion Agencies (IPAs) helmed by MIDA in its role as the principal investment promotion and development agency will also enhance their synergies by establishing clear touchpoints for engagements throughout the investor journey, beginning from the investment promotion and advisory stages until the project implementation stages. With dedicated support from Government agencies, investors will be able to easily navigate regulatory processes and to expedite the implementation of their business projects.

Innovation is key for Malaysia to be able to seize emerging opportunities brought about by global technological developments. The NIP recommends for Malaysia to review its Intellectual Property (IP) policies and to address pertinent issues, such as “evergreening” or artificial extensions of market exclusivity which exist in sectors (such as the Pharmaceutical sector, for example). Thus, the Government seeks to strengthen its patent assessment capabilities to stimulate innovation, while at the same time promote fair competition. The Government will also seek to improve its advisory services to assist innovators – particularly local companies and entrepreneurs – in creating and exploiting IP. It is hoped that these efforts will create a more attractive environment to attract high-technology and knowledge-intensive activities.

Given that incentives act as an added tool to attract investments, the Government will introduce more agile and forward-looking incentives – including fiscal and non-fiscal incentives – to cater to the dynamic needs of investors. The NIP recommends for the Government to grant incentives on a more sector-agnostic basis, and to open incentive opportunities for investment projects that strongly align with the National Investment Aspirations (NIA). This approach will enable Malaysia to be agile in catering to evolving technologies and global priorities. Several examples of investment projects include renewable energy, the digital economy, and research and development (R&D) activities that cut across sectors.

The Environmental, Social, and Governance (ESG) framework plays a central focus on the global economic landscape today. Governments worldwide have integrated fundamental issues such as climate change and carbon emissions, deforestation, labour standards, and supply chain transparency into their trade policies. Global investors are also increasingly applying ESG factors when making investment decisions.

Malaysia is strongly committed to stepping up its ESG efforts, and seeks to accelerate the transition of its industries and local players toward ESG adoption. In line with the recommendations of the NIP, the Government intends to establish minimum ESG reporting requirements to strengthen the accountability of industry players in improving their ESG practices. Given that companies vary in levels of maturity, less mature companies particularly local Micro, Small and Medium Enterprises (MSMEs) will face less stringent reporting requirements in the initial phases of implementation. The Ministry of International Trade and Industry (MITI) has begun consultation and engagement with local and international stakeholders to develop a National ESG Framework for the Manufacturing Sector by 2024. This framework will mainstream ESG elements for the manufacturing sector which will include four main components, namely ESG standards, financial support and incentives, capacity-building, and market mechanisms (including carbon trading and carbon pricing). MIDA is actively engaging with MITI in the effort to develop the National ESG Framework for the Manufacturing Sector and has submitted several proposals for initiatives pertaining to ESG adoption.

The Government will also ensure that policies are positioned to ensure a steady supply of green talent for companies, which will be achieved by coordinating the academic curricula based on the needs of the business ecosystem. The existing workforce will also be trained to develop the values, knowledge, and skills needed to support industries towards becoming more sustainable and resource-efficient.

On top of all this, the Government will enhance its investment focus in green growth areas – such as hydrogen technology, bioenergy, and electric mobility – which will act as both enablers of green adoption across sectors, and as future economic engines. The use of financial and non-financial incentives will be explored to target investment in these green-growth areas.

The NIP has the potential to be a catalytic framework that will help Malaysia to sustain its investment momentum and unlock new growth opportunities. With the concerted efforts and commitment from all stakeholders among the Government, public, and private sectors, the success of the NIP can be assured to realise the aspirations of Malaysia towards becoming a high-income nation.