• Malaysia's strategic location, strong infrastructure and export-oriented economy make it an attractive prospect for ASEAN expansion, while services and manufacturing sectors represent prime investment opportunities.
• A number of opportunities have also emerged in the medical devices sector, across the healthcare industry in general and with regard to the halal economy, areas where Malaysia is internationally competitive and boasts a well-developed ecosystem.
• In addition to participating in such sectors, Hong Kong can also play a pivotal role by providing business services and market-entry support, reinforcing its position as the super-connector between the Chinese Mainland, Malaysia and ASEAN.

Strategically located at the centre of the ASEAN bloc, with access to a market of 680 million people, Malaysia offers a business‑friendly environment supported by well‑developed physical and digital infrastructure. Such advantages have made it an attractive destination for investment and a strategic platform for regional expansion. Its world‑class ports include Port Klang, the world’s 10th busiest container port. Malaysia, therefore, offers an attractive platform for Hong Kong and Chinese Mainland enterprises’ ASEAN expansion, production diversification, and participation in such high‑growth sectors as semiconductors, electronics, data centres, medical devices, and halal products.

These industries are attracting significant investment, while underlining Malaysia's key role within many regional and global value chains. For Chinese Mainland enterprises, Malaysia offers opportunities with regard to production diversification, regional expansion and participation in higher‑value industries. For Hong Kong firms, opportunities extend beyond direct investment and trade to providing financing, logistics, supply chain management, professional services and market‑entry support. By facilitating business linkages between Chinese Mainland companies, Malaysia and the wider ASEAN market, Hong Kong can further strengthen its role as the region’s super‑connector and super‑value‑adder.

Malaysia’s economic engine

In terms of GDP, Selangor, Kuala Lumpur, Johor, Sarawak, Pulau Pinang and Perak are Malaysia’s six largest contributing states/regions. Together, these six territories accounted for nearly three‑quarters (73.4%) of Malaysia's GDP in 2024. Moreover, with GDP growth rates of more than 6%, the top three largest states/regions – Selangor (6.3%), Kuala Lumpur (6.2%) and Johor (6.4%) – were the main growth drivers of the Malaysian economy, which expanded by 5.1% in 2024.

A strong manufacturing ecosystem underpins Malaysia’s export‑oriented economy. Notably, the country’s trade‑to‑GDP ratio stood at 137% in 2024, while 80% of Malaysia’s exports are domestic exports.

The largest states/regions by GDP contribution are also Malaysia’s largest exporters, contributing 85% of the country’s total exports in 2025. Electric and electronic (E&E) products are among the country’s major export categories, along with palm oil and refined petroleum products.

There are several major E&E clusters across Malaysia. Contributing to 60% of the nation’s total E&E exports and renowned as the Silicon Valley of the East, Penang, for instance, is an advanced manufacturing hub, with a focus on semiconductors, integrated circuits and such high‑value activities as assembly, testing and packaging (ATP). 

Selangor, meanwhile, has a more diversified electronics base. In addition to IC packaging, design and semiconductor manufacturing, a wide range of consumer electronics, industrial equipment and automotive electronics are also among its major outputs.

Similar to Selangor, Johor also produces a wide range of consumer and industrial electronics, as well as providing backend semiconductor manufacturing. Supported by its proximity to Singapore, Johor is also an important location for data centres.

Sectoral overview and emerging opportunities

Malaysia’s economy is driven by two complementary pillars – a large services sector and a highly export‑oriented manufacturing base. In 2025, services (59%) and manufacturing (23%) together accounted for about 82.5% of GDP, underscoring their central role in driving overall economic growth.

The services sector is the dominant pillar of the Malaysian economy and serves as both the main driver of domestic demand and as an increasingly important platform for regional business activities. Within this broad sector, the largest subsector is the wholesale and retail trade, which underpins household consumption and the distribution of goods across the domestic market. Alongside this, transportation and storage (logistics) have emerged as the fastest‑growing components, expanding by over 10.9% in 2024 and 9% in 2025, reflecting Malaysia’s growing role as a regional distribution and supply chain hub. Its services sector also includes a wide range of finance, insurance, and business activities, as well as real estate and professional services, which are closely tied to corporate activity and investment flows, and have recorded robust growth in recent years.

• Data centres

A key area of structural upgrading within the overall services sector is the digital and ICT segment, which includes data centres, cloud computing, software development, and digital platforms. The Malaysian authorities, particularly the Malaysian Investment Development Authority (MIDA), have prioritised ICT as a strategic growth engine, seeing it as set to enhance productivity across multiple industries and support the country’s transition towards a knowledge‑based economy. 

Malaysia’s latest investment figures clearly illustrate where businesses see growth opportunities and where confidence is strongest within the economy. In 2025, total approved investment* reached RM426.7 billion (+13% year‑on‑year), with the services sector dominating (66% of total approvals), a reflection of sustained investor interest in Malaysia’s role as a regional digital and business hub. Within the services sector, the largest inflows were concentrated on information and communications (RM152.9 billion) and real estate (RM78.2 billion), signalling particularly strong demand in data centres, digital infrastructure, and corporate services ecosystems, areas that are increasingly critical for regional supply chains and business operations.

In view of the robust development of data centres across Malaysia, Hong Kong and the Chinese Mainland, cloud service providers, AI developers, telecommunications firms and digital platform operators may well find opportunities in related investment, cloud computing services, smart manufacturing, and digital infrastructure development. Hong Kong companies could also participate in infrastructure investment and provide financing and professional services to facilitate the relevant investment flows. The fact that Hong Kong is Malaysia’s second‑largest FDI source, while the Chinese Mainland is the second‑largest foreign investor by ultimate source (2025), shows that Hong Kong’s role is already clearly established. Ranked fifth by ultimate source, Hong Kong businesses are also demonstrating strong interest in investing in Malaysia.

It has been reported that some Hong Kong‑based companies in the ICT sector have signed MoUs with their Malaysian counterparts in order to facilitate Malaysia’s digital infrastructure advancement.¹

At the same time, the manufacturing sector continues to attract substantial, high‑quality investment (RM131.3 billion in 2025, for a 31% share), underscoring its enduring importance as Malaysia’s export‑oriented industrial backbone. Investment flows within the manufacturing sector are highly concentrated in a few key subsectors, notably E&E (RM28.5 billion), chemicals (RM24.9 billion) and transport equipment (RM14.9 billion). This indicates that businesses remain strongly optimistic about Malaysia’s role in the global electronics and advanced manufacturing supply chains.

The manufacturing sector, while smaller in GDP share, is the principal engine of Malaysia’s external sector and its industrial development. Strongly export‑oriented, recent official data has indicated that about 70% of manufacturing output is linked to export‑oriented industries, highlighting its deep integration into the global supply chains. 

• Semiconductors and electronics

At the core of this sector is the electrical and electronics industry, which forms the backbone of Malaysia’s industrial base. This includes semiconductor components, integrated circuits, and a wide range of electronic products. The country has also come to play a critical role in global value chains, largely with regard to such midstream activities as assembly, testing, and packaging. The E&E cluster is also the largest contributor to exports and has benefited from rising demand linked to digitalisation, artificial intelligence, and data centre expansion.

Malaysia is the world’s sixth‑largest semiconductor exporter and 10th‑largest exporter of E&E products.² According to the Department of Statistics Malaysia (DOSM), Malaysia’s E&E exports totalled approximately RM711.6 billion (44.3% of total exports) in 2025, maintaining its position as the country’s largest export category.

The semiconductor industry continues to play a central role in Malaysia’s manufacturing sector, characterised by the strong presence of multinational corporations alongside a growing base of domestic firms. Local capabilities are largely concentrated in downstream segments, particularly in such areas as assembly (including advanced packaging), testing, and system integration. At the global level, demand for advanced chips remains robust, driven by a variety of emerging technologies, including electric vehicles, autonomous systems, 5G networks, the Internet of Things, artificial intelligence, cloud computing, and blockchain, all of which have contributed to ongoing supply constraints in the case of semiconductor components and equipment.

Foreign investors have contributed significantly to Malaysia’s development by providing technology and employment opportunities, as well as deeper integration into global supply chains. At the same time, the strengthening of local supply networks has enhanced the country’s overall competitiveness and market positioning. Malaysia has also nurtured a number of notable home‑grown companies across the electronics value chain. These include such firms as Carsem, Unisem and Inari Amertron in the semiconductor assembly and testing sector, as well as SyMMiD (integrated circuit (IC) design) and SilTerra (wafer fabrication and semiconductor development).³

Hong Kong companies can provide logistics and supply chain management services to Malaysian industry practitioners. In particular, with over 70% of its trade related to electronics products, notably the high‑value ones, Hong Kong is well positioned to support Malaysia’s E&E and semiconductor ecosystem. As an international financial centre, Hong Kong can also provide project financing services and help Malaysian companies raise funds for further expansion and upgrading. It is significant that 88 of the 219 Southeast Asian companies listing overseas between 2014 and 2025 chose HKEX. US$4.3 billion was raised by Southeast Asian companies via HKEX over this period, compared with US$3.9 billion raised via other major global exchanges. 

Beyond E&E, Malaysia’s manufacturing structure is relatively diversified. The petroleum, chemical, rubber and plastics industries form another major cluster, supplying both export markets and downstream industries, while the metal products, machinery and fabricated goods supporting industrial production and infrastructure development have demonstrated strong growth in recent years. The food processing and consumer manufacturing industries serve a dual role, catering to both domestic consumption and export markets, particularly within the regional markets. At the same time, the transport equipment sector (including automotive production and components manufacturing) is also a significant segment, largely supported by domestic brands and a well‑developed supplier network.

• Medical devices and healthcare

Malaysia has also developed competitive strengths in medical devices and healthcare‑related industries, which complement its broader manufacturing ecosystem. The medical devices sector is highly export‑oriented, with more than 90% of production destined for overseas markets and continues to benefit from rising global demand for healthcare products. The country is a major global supplier of medical consumables and is home to more than 200 manufacturers, including multinational firms.

Hong Kong companies can leverage Malaysia’s sophisticated supply chain ecosystem and extensive trade networks to manufacture medical devices and distribute to global markets.

In addition to serving as a production base, Malaysia is emerging as an attractive market for Hong Kong’s medical devices, pharmaceuticals and health supplements, a development driven by an ageing population and growing health awareness. Furthermore, Malaysia enjoys relatively strong consumer spending power compared with many other countries in the region, supporting demand for higher‑value healthcare products. Notably, there are more than 300 biotechnology‑related companies in Hong Kong, most of them healthcare companies working in bio‑pharmaceuticals, diagnostics, medical devices and traditional Chinese medicinal or healthcare products.

Chinese Mainland companies offering medical and healthcare products, including traditional Chinese medicine, may also find significant opportunities in the Malaysian market. Hong Kong, widely recognised as a highly regulated and advanced market, can play an important facilitative role. Product registration and market presence in Hong Kong can help enhance consumer confidence abroad, particularly in Southeast Asia, thereby supporting the international expansion of Chinese Mainland healthcare and medical product companies. 

• The halal economy

Another of the country’s key economic pillars is the halal industry, a sector where Malaysia retains a leading global role. The sector contributes around 10% of GDP and continues to expand alongside rising global demand for halal‑certified products and services. Malaysia’s halal exports exceeded RM68 billion in 2025, an outcome supported by its internationally‑recognised certification system, which is accepted across multiple markets. Positioned within a rapidly growing global halal ecosystem spanning food, pharmaceuticals and cosmetics, Malaysia benefits from strong institutional support and a well‑developed value chain, reinforcing its status as a trusted global halal hub.

Hong Kong companies can use Malaysia as a gateway to the wider halal market, particularly Indonesia and the Middle East. In particular, in the case of consumer goods, JAKIM’s halal certification is widely recognised internationally.

As Asia’s leading international financial centre, Hong Kong could also collaborate with Malaysia, the leading global hub for Islamic finance, on the development of related products in order to enable broader exposure of sharia‑compliant financial products for international investors. Notably, Asia’s first sovereign sukuk ETF was launched on the HKEX. The HKEX has also signed an MoU with Bursa Malaysia to strengthen collaboration and enhance capital market connectivity between Hong Kong and Malaysia, including cooperation on dual listings, ETFs, joint development of indices and investment products, Shariah‑compliant securities, and carbon markets. This shows the strong potential and market readiness for further collaboration between the two.

Note *Approved investments include both domestic and foreign investments. The ratio of domestic-to-foreign investment in 2025 is 51:49. Note that there is a difference between approved foreign investments and foreign direct investments. Approved Foreign Investments represent proposed investment projects with foreign equity participation that have been granted licenses, incentives, permits, grants, soft loans, etc., by relevant ministries and agencies. It reflects potential investment into the country, which will be realised as actual inflows over a specified period, usually across multiple years. Foreign Direct Investments, on the other hand, refer to investments by non-residents via transactions of financial instruments, including equity, reinvestment of earnings and debt instruments (such as inter-company loans and advances, trade credits, etc.).

Source:

¹ Johor Capital Group Partners Hong Kong-Based Companies to Advance Digital Infrastructure

² MATRADE: The Sky is not The Limit for Malaysia’s E&E Trade

³ MIDA: Electrical & Electronics