Approved Investments, FDIs Reflect Different Stages Of Malaysia’s Investment Journey

By Durratul Ain Ahmad Fuad

KUALA LUMPUR, Sept 3 (Bernama) -- Some may argue that the approved investments reported by the Malaysian Investment Development Authority (MIDA) and the foreign direct investment (FDI) figures from the Department of Statistics Malaysia (DOSM) for the first half of 2025 (1H 2025) appear contradictory. 

Truth is, both Malaysia’s RM190.3 billion in approved investments and the RM1.6 billion in FDI recorded in the second quarter of 2025 are complementary, as they represent different stages of the country’s investment journey, said SME Association of Malaysia, Future Sustainable Growth Corporate and National Council Member Dr Anthony Dass.

“MIDA approvals reflect commitments on paper. These are projects that investors have submitted based on their proposals, vetted by authorities, and approved to proceed.

“While gross FDI inflows, captured by DoSM, measure the actual money flowing into the country. This includes equity injections, reinvested earnings, and inter-company loans,” he told Bernama. 

Dass also said net FDI inflows go one step further as they deduct outflows such as profit repatriation and loan repayments.

Approvals: Gross versus Net Inflows

He pointed out that approvals are best compared with gross inflows, because both measure the “front door” of investment — the money committed versus the money actually coming in.

To illustrate his point, he said that, for instance, in 1H 2025, Malaysia recorded RM106.8 billion in approved foreign investments and RM148.9 billion in gross inflows. This indicates that approved investments are indeed translating into actual capital inflows, although there may be differences in timing and scale.

Dass said that comparing approvals with net inflows, however, tells a different story, one that reflects how much of that money Malaysia ultimately retains after accounting for outflows.

“In the same period, net inflows were just RM17.2 billion. This does not mean approvals are ‘wrong’ or ‘empty’, but it does highlight how profit repatriation and debt repayments reduce the amount that stays in the country,” he said. 

Dass explained that approvals and inflows rarely match neatly due to four main reasons, namely timing lag, profit repatriation, quarterly volatility, and different scope.

• Timing lag: A semiconductor plant approved today may only record inflows in stages over several years.
• Profit repatriation: Multinationals reinvest some earnings locally but also send profits back to their headquarters.
• Quarterly volatility: A single large loan repayment or capital withdrawal can swing the numbers in one quarter. Annual data usually gives a steadier picture.
• Different scope: MIDA measures projects approved (new or expansions/diversifications), while DOSM measures all financial flows, including mergers, acquisitions, and profit transfers.

He emphasised that MIDA approvals are not just statistics as they represent projects at different stages, particularly operational (logistic company - where it was first announced as an approved project, the facility is fully operational); while in progress (automation hub - is under development); and just starting (electrical and electronics products (E&E) company - is currently moving from paper approval to physical implementation, with capital beginning to flow).

“This is why DOSM’s quarterly FDI figures may look modest while large projects are still ramping up,” he said.

Retaining More FDI in Malaysia

If inflows are the front door, then outflows are the back door, said Dass, adding that some leakage is natural.

“Malaysia can capture more value by encouraging reinvestment of earnings with tax credits and incentives; deepening local supply chains so multinationals source more from Malaysian small and medium enterprises (SMEs); and strengthening domestic capital markets, allowing firms to raise funds locally rather than rely on overseas borrowing.

“More value can be obtained by building stronger local talent pools to reduce reliance on expatriates and associated remittances; as well as ensuring policy clarity and stability, which encourages companies to keep profits in-country,” he said.

In conclusion, he highlighted that approvals show the pipeline of investor confidence; gross inflows denote the actual capital arriving; and net inflows are what Malaysia ultimately retains. 

“Seen together, these numbers provide a complete picture: intent, actual arrival, and retained value.

“By focusing not only on attracting approvals but also on retaining more value through reinvestment, stronger supply chains, and local talent development, Malaysia can ensure that today’s strong approvals translate into sustainable, high-impact growth tomorrow,” said Dass. 

-- BERNAMA