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Beyond investment: What should success look like for Malaysia?
Episode host Farah Rosley speaks to Antony Lee and Jacob Lee on Malaysia’s investment competitiveness and creating greater value for businesses and the economy.
In this episode, host Farah Rosley speaks to Antony Lee and Jacob Lee about Malaysia’s investment competitiveness, moving up the value chain and creating greater value for businesses and the economy.
Key takeaways:
Malaysia’s competitiveness depends on more than cost and incentives, with talent, innovation, technology and long-term value becoming increasingly important.
Businesses are placing greater emphasis on supply chain resilience, adaptability and visibility as geopolitical and economic pressures reshape their priorities.
Moving up the value chain requires stronger capabilities, higher-skilled talent and greater adoption of technology and innovation.
The New Incentive Framework can support higher-value investment when its implementation is clear, measurable and transparent, alongside an ecosystem that enables businesses and SMEs to benefit.
Investment success should extend beyond headline figures to create meaningful value for businesses, SMEs and the wider economy.
Podcast chapters
01:22 | Malaysia’s competitiveness in ASEAN
03:42 | How business priorities are changing
08:29 | Moving beyond traditional investment measures
10:17 | What business need from the New Incentive Framework
16:36 | What businesses need to move up the value chain
19:52 | What should investment success look like
But ultimately, Malaysia is not a large labor pool and it is not the cheapest labor pool. So, we need to move away from those businesses that rely on that. Really, the industries that are coming here need higher skills.
Farah Rosley
Malaysia has long competed to attract investment, but the rules are changing. Businesses today are looking beyond costs and incentives, focusing instead on factors such as talent, innovation, sustainability and long-term value creation.
Against this backdrop, Malaysia introduced the New Incentive Framework, or NIF, in March 2026. Why does it matter and what does it tell us about the country’s ambitions as we approach Budget 2027?
Welcome to the EY Executive Exchange.
Joining me today are two very learned gentlemen, Jacob Lee, President of the Federation of Malaysian Manufacturing. As well as Antony Lee, Council Member of the ASEAN Business Advisory Council Malaysia, and also the Vice Chairman of AMCHAM, the American Malaysian Chamber of Commerce.
So, ASEAN has become increasingly integrated, as well as competitive. And we often hear about the need for Malaysia to strengthen its competitiveness, especially amidst all the changes that are happening around this region.
Antony, what are we really trying to achieve and what role should Malaysia play within this ASEAN economy?
Antony
Good question. So if we look at, you know, the geopolitical issues that have happened this year, right. So, it’s even more important that ASEAN is resilient as a grouping. So, three big topics are food security, energy security and of course, the growth of MSMEs in light of all the inflationary pressures that have come.
So ASEAN has worked already a lot closer to supply and help each other out. Malaysia being, I guess per GDP per capita, probably the second strongest after Singapore, still is a very dominant role. So, there’s a lot of leadership that we provide towards ASEAN. At the same time, our neighbors are also catching up and doing a lot to invest and grow their economies. Malaysia still has currently a bit of a head start, but we can’t rest on our laurels. We need to do a lot more.
We benefited a lot from, you know, the data center investments that have come up. A lot of the MNCs building chips, etc., have been here for over 50 years, and they’ve developed a lot of local talent and as a result of those companies doing well, the supply chain also has developed around those economies in Malaysia. So Malaysia has that good strength.
Having said that, it’s a bit of a two-factor economy, right? The low-income group, the agriculture sector, that’s an area that we have to really address. So we can’t leave them behind. We need to encourage them to participate more, more greater participation in the economy, and find ways to help them get on to that.
And we have AI and, you know, technology that is critical. So they all need to be very adverse with it. If you look at it, the urban areas, the centers in Malaysia are very strong. The rural areas are still quite far behind.
Farah
So that’s really good to hear, Antony.
You know, hearing that Malaysia has a good head start. So from a business perspective, Jacob, what are manufacturers and companies prioritizing today that perhaps weren't as prominent a few years ago?
Jacob
I think for the past few years, the whole business environment has changed due to the geopolitical tensions. And competitions among our peers, you know, and the industries are actually managing, from crisis to crisis. We had the COVID-19, and we also had the Ukraine war and the rest recently, the West Asia conflict, where the supply chain is being disrupted. And we’re also suffering from this energy crisis as well, that result into the very high operating costs in energy, in the freight. And our operational conditions have worsened.
Business today now compared to three or four years ago. We used to like, take competitiveness, costs, you know, and efficiency in our top agenda, in our business planning. However, now I think business are more looking into supply chain resilience and adaptability and the visibility. Once the supply chain is being disrupted, where we can get our alternative source?
The second very important challenge that we face is competition. We actually face competition from our regional peers as well. Our regional peers in ASEAN, they are also moving fast forward. So the technology adoption or I would say in particular the smart manufacturing adoption, automation, AI, digitalization and most of all, sustainability, carbon footprint, carbon emissions and inclusivity are also getting more and more important.
In fact, ESG compliance, the sustainability will become a business competitive (factor). The third very important thing is we need to diversify our supply chains and also our diversification of our market. In fact, when we look at ASEAN, I always encourage my members to look at ASEAN as one country. I used to like invest in Shanghai, in China, where China is a very big country. And operating in ASEAN, it’s just like Chinese company operating in China where they can go to different provinces. So to not look at ASEAN as 10 countries, but rather as a bloc, a nation, your domestic market.
Farah
Are these shifts as what was mentioned earlier and discussed earlier, unique to Malaysia alone? Just to Malaysia? Or are businesses across ASEAN also grappling with the same issue?
Antony
They're all grappling the same issue, but actually we are quite well off because, you know, from a fuel and energy perspective, we're better off than them, right? So we have a significant advantage. I mean, countries like the Philippines very significantly impacted by, you know, fuel and they don't have food security. You know, they have a lot of catastrophes that hit them. They all have larger populations. So the market is there.
So it's in our interest to ensure that they all move up the value chain and they all start earning more per capita. Then we become a very significant trading bloc, right? We have 700 million people in ASEAN. It's huge. And we are the fastest growing in the whole world as a grouping. So there's a lot of upside, but there are a lot of hurdles to sort of overcome. But if I look at, you know, the inefficiencies across, there's still a lot of logistic issues between all.
Recently, I was at a conference and they looked at the cost of doing business. For example, shipping, right? So through ports, etc. So in the Philippines, about 20% of your cost is taken up by just dealing with authorities, getting your goods in and out of the place. Vietnam has been working on its side. It's been rationalizing. So it's down to like 12%. Singapore is the leader at 6%.
So even though the cost is higher, the efficiency is that much greater that it still makes sense. And it's of course, incredibly efficient. And, you know, governments need to make sure they stay competitive, especially in terms of trading.
Farah
One of the key shifts we're seeing through the New Incentive Framework is really a move beyond traditional measures of investment success. We are talking about outcome-based rather than focusing solely on investment value or jobs being created or talent being created, for example.
Really, the NIF encourages outcomes as what you have mentioned, innovation, productivity, technology, adoption. In many ways, this reflects a broader shift in how Malaysia is thinking about competitiveness.
Based on all our discussions earlier, Antony, what does that tell us about the type of economy Malaysia is trying to build?
Antony
So it's good if Malaysia chooses certain sectors which they have done, right? So a good example of past success is MDEC bringing the digital thing. I think DHL built its first data center. This is over 20 years ago. The result of that, you know, has created the whole ecosystem and the energy supply, etc. Now there are huge investments in data centers.
But ultimately, Malaysia is not a large labor pool and it is a not a cheapest labor pool. So we need to move away from those businesses that rely on that. So the upskilling of the talent is key, right?
So really the industries that are coming here need higher skills. Those businesses are fortunately investing in them. But we really have to make sure that everybody gets on that bus. There does have to be some sort of incentives to allow that to go faster.
We do need foreign talent to come in to upskill our people. We don't have all of that skills today. So we must be, you know, don't be allergic to strong talent coming in. And it's been proven. So if you look at a lot of MNCs now that have been here over 50 years, a lot of the leadership are all Malaysians.
Farah
What are companies trying to understand about NIF? Is it practical? Is it useful for the business community?
Jacob
I think the New Incentive Framework, the NIF, is probably built to ensure the aspiration in the NIMP 2030, the New Industrial Master Plan 2030, can be achieved.
Because the Prime Minister, he wants to build Malaysia’s economy as a complex economy with high value. That's the reason why we bring in so many of these emerging technologies, semiconductors, you know, companies coming to Malaysia. Many countries like US, Japan, China, Taiwan, you know, they're coming into Malaysia.
Well, the aspiration is for NIF is outcome-based where they can create better quality jobs, high-value investment, for industrial or vendor development for the SMEs so they can help to cascade, you know, those high-value investment into benefits to the to the local small and medium industries. However, the businesses will probably want to know how will it be implemented? Okay. Whether it is measurable? Okay. Whether it is transparent? What should I do in order to qualify for this incentive? You must also know there are many gaps on the ground.
Like what Anthony say, talents in the ground. We are quite resourceful, our tenants are quite resourceful. However, Malaysia lack the depth and the breadth of the talents where you know, where they may probably are unable to probably move up to that value chain. In fact, we talk to many of the foreign investors in Malaysia. Why are they not buying the local components from the local SME?
So, they are saying that our prices are expensive. We may not be able to match the standard and quality. Our scale is small and the delivery time is not desirable. So, when these gaps happen, it is not that the investors are not willing to do the experience of the government, but they just do not have the infrastructure, the availability of the local ecosystem to do that.
So, these are the questions that the industry will probably ask and hope to have more clarity so that the investors could make a good investment decision.
Farah
And when you spoke about clarity, do companies really have enough clarity around what Malaysia ultimately wants them to contribute and achieve?
Jacob
I think in terms of clarity, because NIF is only introduced in March, I think there needs to be some time when the companies make the reporting and we will see how the government agency or MIDA would probably respond to that, to find out what are the gaps between the policy and the regulators and the investors on the ground. However, the aspirations are very clear. That is, they want the industries to probably have a higher value of investment, or more complex products are being made, more research and development and innovations are being done in Malaysia.
And to provide a better quality jobs and higher, higher salaries. I think one of the important thing is also to build the local ecosystem. I think there are some companies like those EV batteries when they first come to Malaysia, they could not find an ecosystem available in Malaysia. Some even suggested these companies come in, the advantage is they can bring the whole ecosystem to Malaysia. So is this a fast fixed for Malaysia or you know is it more of a disadvantage?
So, from the FMM perspective I think we need both, okay. I think we need more collaboration because once the investment is being put in Malaysia, you cannot wait. You have to get things done immediately. So I think a more collaborative mode is very important or some tax holiday or some time should be given to the industry.
Farah
Antony, from an ASEAN perspective, the same question: Is Malaysia really ready?
Antony
So, Malaysia has good examples and a good track record, right. So I may go back to the tech sector. So if you bring in champions like Intel, right? They come here, they actually help build the supply chain. I mean, if you look at, I guess even the EV thing China brought in Tesla on purpose, got them to build it up and then copied and, you know, took it on, right? We all know that story.
So, we need to keep encouraging those key players to come in and what do they like about Malaysia? They like our policymaking, the fact that it stays consistent. And now we've had actually quite a few years of a very stable government. Stable policies are the most important thing for businesses. They want predictability. Cost, yes, is always a factor, but it doesn't have to be everything if the predictable is there.
So fortunately, we are still better off than our neighbors at creating that. But, you know, I mean, there wasn't too long ago in Indonesia was the darling of ASEAN. So there's a warning there for what we need to do and what we need to avoid.
Farah
Ultimately, NIF is only one part of a much broader competitiveness agenda. And with Budget 2027 approaching, many businesses are really looking at signals about what comes next. What are we looking at as a country?
And from your perspective, what additional support or measures will really help Malaysia to achieve the ambitions behind NIF, and of course, also the New Industrial Masterplan 2030?
Antony
Sure. I mean, there's a lot there, but I think government needs to be plugged in to what's happening on the ground. So, you know, there's so much change happening at a very rapid pace. By being closely connected, I think they can react faster. And what's working? Do more of it.
What's struggling? Change what needs to be adjusted because we might plan something now with all the information that we have, it all makes sense. But in six months time, some of it may low longer be relevant. And also don't just focus on certain sectors and don't forget the others, right?
So like I said, the rural, the agricultural sector, that's a large part of the population. Yes. So their well-being is fundamental for all of us. You want to create an ecosystem. We need to have everybody, you know, being lifted up, not left behind.
Farah
What is your take, Jacob?
Jacob
Well, Farah, I remember I had a meeting with the Prime Minister earlier this year. At the end of the meeting, he said that the industries are not moving the value chain, moving up the value chain. You guys are not transforming. You cannot change. You know, you can keep on using the foreign labor and remain labor-intensive and low value. I don't want the conversation to end in that manner. I told the Prime Minister, if you look at the small and medium industries, the bottom line has been squeezed.
Many of these companies, they are actually operating at like survival mode or very tight margin, you know, probably single digit. the industry has no capacity, for example, to pay a better better wages or to adopt technology or move up to the so-called modern manufacturing and also like to engage in research, development and innovation. And that's the reason why the industry remains at the low-value manufacturing. And that has to be changed. The government has to step in to intervene.
So, we do hope for the Budget 2027, the government would allow more capital to remain in the industry where they can, you know, probably pay better wages and do more high value manufacturing and do more research and development.
The other thing that is necessary to talk about the supply chain resilience the government could set up, like a RM100 million for this supply chain resilience fund, that help the industry to look for alternative sources and qualify them so that they can suitable for the local manufacturing sector.
Farah
But at the end of the day, Antony, what does success under NIF actually look like for businesses first, and also for Malaysia?
Antony
So I think we should leverage the fact that we got some sectors of the economy doing really, really well. Right. So how do we make sure that there's an ability to transition some of that skill set learnings, etc.? How do we start with all the data centers here. Yeah. And companies are building supply chains for those data centers. So let's look at those.
We've got so many examples in the past like, you know, we created the Rubber Research Institute, the oil palm research. All the stuff was done back in the day. We've got a lot of talent overseas. We can bring more of them back. And we've already been doing it. Our neighbor across the road has got a lot of our talent. They're investing now. Look at Johor. Johor is getting significant investments out of Singapore. Penang is getting significant investments, right?
Make sure the cost of doing business, the cost of trading has to be the best in ASEAN, right? Let's measure ourselves against all our neighbors on every aspect, right? Immigration, tax, customs, all those areas where it can be a real burden and destroy businesses. Like Jacob said, if margins are thin, we got to iron out all the bureaucracy, right? And governments can be much more digital and go a lot faster.
You know, we have a track record, we believe in it and be consistent in the policies, right? Keep away from the politics. Business doesn't like politics. Businesses like ease of doing business.
Farah
Jacob, anything to add to that point earlier in terms of what does success under NIF actually looked like for businesses?
Jacob
Yes, I hope NIF really, is able to spur businesses to make more investment. And for the country, I do hope that the good GDP number, the good trade number, and investment could cascade down to the level of the rakyat, where the rakyat can benefit, the SMEs can enjoy the benefit of these successes.
I will call that a success for Malaysia, rather than a sectoral success. The so-called these achievement are too concentrated on a few. So we hope that we should like, broaden the scope so that more people can enjoy the success of the nation.
Farah
So really Antony, Jacob, we’ve come to the end of our conversation. And before we close, any final words or closing statement from yourself?
Jacob
I think Malaysia, we have very good road maps. However, I think execution matters. So, I do hope in the coming Budget 2027, our spending will converge into a productivity and create a productive economy so that every dollar that the taxpayers are paying are put into productive investments.
Antony
Yeah, I think we've had a fantastic head start, right? We are the best performing economy in ASEAN. Let's not waste this. And let's stay focused. Like we said, execution. I totally agree with that.
Don't rely on subsidies as much as you can, but, you know, also make sure that you waste as little as possible.
Farah
Ultimately the conversation isn't just about incentives. It's about whether Malaysia can create an environment where businesses are able to generate greater value, build stronger capabilities and remain competitive.
As Malaysia prepares for Budget 2027, discussions around competitiveness, investment and economic value creation are only becoming more important.
Thank you so much, Jacob and Antony, for joining us in this conversation today.
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