According to the EY latest investor guide, KL calling: dynamic, digital, diverse, Kuala Lumpur (KL) is gaining global investors’ attention as a preferred principal location to grow their business in the region and globally.
The guide highlights that the challenging global business environment, catalyzed by the COVID-19 pandemic, has accelerated the decisions of leading multinational corporations (MNCs) to optimize their business models and seek “high-value, high-impact” central operating models in strategic locations. As a result, KL has in recent years become a key destination for such investments.
Ranked 12th in the World Bank’s Ease of Doing Business 2020, Malaysia’s total approved Foreign Direct Invesment (FDI) in 2019 amounted to RM82.4b. Malaysia is also ranked the first among Asean countries for lowest cost of living1 and second in market competitiveness2 and digital readiness3.
KL’s balanced growth attributes, including a green ecosystem, rapid growth dynamics, integrated transport facilities, world-class connectivity, future-ready multilingual talent and high-technology capabilities, coupled with its suite of attractive tax incentives for high-tech sector investments, have garnered investors’ attention as Asia’s truly “3-D” city that is dynamic, digital and diverse.
According to Chow Sang Hoe, EY Asean Consulting Leader and Malaysia Consulting Managing Partner, Ernst & Young Advisory Services Sdn Bhd, “The on-going COVID-19 pandemic is fast-tracking the pace of MNCs’ decisions to restructure their supply chains, diversify their supply sources and find local and/or ASEAN near-market manufacturing base to manage uncertainties and disruptions. KL’s highly competitive position has elevated it to be a prime and natural choice.”
In 2019, InvestKL assisted over 90 MNCs who were keen to explore the establishment of operations in Greater KL. With Malaysia‘s digital economy growing double-digit to nearly US$64b (RM268b) in 2020, the number of MNCs looking to KL as part of their expansion plans is expected to grow in tandem.
Muhammad Azmi Zulkifli, Chief Executive Officer, InvestKL, adds, “Kuala Lumpur is an attractive investment destination with many unique opportunities. Despite the COVID-19 pandemic, we remain in active discussions with potential investors and are well on track to achieve our KPI of attracting 100 MNCs by the end of 2020. Although some investors are taking a wait-and-see approach, others remain committed to their investments as they hold a long-term view. Many MNCs are already shifting their decisions towards Kuala Lumpur and we are in talks with MNCs from the high-value services, technology and digital sectors who have expressed interest to expand their capacity or set up their regional headquarters here in Kuala Lumpur.”
The investors guide also showcases viewpoints by MNCs that have established their regional operations centers in KL, sharing how Greater KL’s value propositions have been a strategic fit to their business and operations in the region.
Advancing next-gen digital sectors
In line with its next phase of growth, KL’s evolutionary pivot towards next-generation industries will accelerate Malaysia’s e-commerce growth and digital economy expansion. KL’s Industry 4.0 transformation, well-supported by Malaysia’s national policies, roadmaps and policy frameworks, government initiatives and tax incentives, also augments the city’s readiness to be a dynamic digital hub in the region.
Next-generation sectors that are drawing global investors including Industry 4.0 high-technology manufacturers and service providers include:
- Digital e-platforms: Driven by the strong demand of the young adult segment, Malaysia’s e-commerce sector is projected to grow to nearly US$10b (RM42b) between 2018 and 2022. Supportive government policies and policy frameworks such as the National Fiberisation and Connectivity Plan (NFCP), National eCommerce Strategic Roadmap and Malaysia Smart City Framework have facilitated the growth of e-commerce and the digital economy. Numerous leading regional e-commerce players have already established their regional distribution centers, e-fulfillment hubs and distribution warehouses in KL.
- Robotics and industrial products: The Readiness for the Future of Production 2018 report by the World Economic Forum rated Malaysia as a “leading” Asia-Pacific country in its readiness to adopt Industry 4.0 technology, including robotics. Industry analysts anticipate wider robotics adoption opportunities in Malaysia’s and KL’s small and medium-sized enterprise (SME) sector, which represents 98.5% of all establishments in Malaysia.
- IoT: KL is advancing to become a smart city, leveraging IoT-based solutions including artificial intelligence (AI) and big data analytics to generate real-time traffic tracking using video and image recognition technologies. The implementation of Malaysia’s NFCP provides higher speed and quality connectivity to accelerate KL’s digital economy.
- Advanced medical technologies: Malaysia is increasingly recognized as the region’s medical technology hub, producing a broad range of products from medical-grade gloves, diagnostic imaging equipment to high-tech, digital medical technologies. KL’s conducive technology ecosystem is attracting global MNCs to establish their regional center of excellence (CoE) and core support functions in Greater KL.
- Global Business services (GBS): Leading MNCs, from insurance services to advanced technology innovators, have relocated their Asia-Pacific “high-value, high-impact” central operating models to KL, leveraging Industry 4.0 technologies and the information and communications technology (ICT) talent pool. The AT Kearney Global Services Location Index 2019 ranked Malaysia in the top 3, due to her favorable business environment, competitive labor costs and productivity of skilled professionals.
Robust tax regime for optimum supply chain ecosystem
Malaysia’s flexible tax regime, including her Principal Hub (PH) incentive, and a suite of high-tech sector investments have proven to be significant factors in supporting the next-gen sector ecosystem and driving MNC establishments to relocate their regional headquarters operations to KL.
Apart from optimizing their supply chain operating model and enjoying tax savings, eligible PH establishments can leverage the competitive PH model to streamline their global or regional resources and enhance consistency across their group of companies.
A melting pot of culture, emerging skills and talent
KL’s dynamism is a reflection of Malaysia’s diverse economy and predominantly young demographic that is multicultural, multiethnic, and multilingual. Boasting high literacy rates and with one-third of Malaysia’s labor force having tertiary education, there is a growing and strong pipeline of diverse and skilled young talent pool in Greater KL.
Ranked as one of Asia’s leading countries in embracing Industry 4.0 technologies, Malaysia’s strong public-private-academia collaboration and focus on building competent, diverse technical talent is a key leverage point for MNCs with regional growth and expansion ambitions.
Dato’ Rauf Rashid, EY Asean Assurance Leader and Malaysia Managing Partner, Ernst & Young PLT concludes, “Malaysia’s world-class infrastructure, supportive government policies and agencies, and future-ready digital talent proficient in English and Asian languages continue to attract international businesses to establish their regional headquarters and centers in
Kuala Lumpur. Beyond 2020, I envision that Kuala Lumpur will holistically evolve to become a smart digital city, driven by a balanced community purpose.”
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InvestKL is an investment promotion agency under the Ministry of International Trade and Industry. It is tasked to attract global multinational companies to set-up their regional headquarters or business services hub in Greater Kuala Lumpur, to strategically grow in Asia.
This news release has been issued by InvestKL and Ernst & Young Advisory Services Sdn Bhd, a member of the global EY organization.