Malaysia's investment policy is aimed at serving the nation’s industrial promotion and development policy. This is not a surprise considering that the authority engaged in investment regulation and promotion is the Malaysian Industrial Development Authority (MIDA), which is under the purview of Ministry of Industry and Trade (MITI). To talk about investment policy, one must consider the industrial policy.
Earlier, Malaysia's industrial policy was focused on supporting exporting industries. Performance in export was used as the main condition for foreign equity ownership. The greater the percentage of the products exported, the higher the foreign equity share. Foreign companies in Malaysia have been limited to export industries. Such restrictions were lifted only in the late-90s to restore the slow FDI inflows.
In the mid-80s, incentives were based on the investment project. But after that, incentives were given according to the product and activity to guide investment towards the 12-targeted industries that were identified in the First Malaysian Industrial Plan. Since then, investment incentives have become choosier and have changed over a period of time depending on the priority sectors specified in subsequent industrial plans, which focused on high technology industries, research and development, development of human resources, development of industrial linkages and manufacture of machinery and equipment.
Malaysia’s investment policy has achieved the socio-political goals of transferring wealth to Malays, to an extent. The nation offers a range of fiscal incentives like tax credits and duties exemption. In terms of foreign investment, foreign investors are assured verbally against preemption without compensation by virtue of Article 13 of the Federal Constitution. In the absence of a complete investment law that can protect against preemption for all foreign investments, Malaysia has depended on bilateral investment guarantee agreements.
