Kuala lumpur: 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.
According to BERNAMA News Agency, Dass explained that MIDA approvals reflect commitments on paper, representing projects that investors have submitted based on their proposals, vetted by authorities, and approved to proceed. In contrast, gross FDI inflows, captured by DOSM, measure the actual money flowing into the country, including equity injections, reinvested earnings, and inter-company loans.
Dass also noted that net FDI inflows go one step further as they deduct outflows such as profit repatriation and loan repayments. He emphasized 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, Dass highlighted that 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. Comparing approvals with net inflows tells a different story, reflecting how much of that money Malaysia retains after accounting for outflows. In the same period, net inflows were just RM17.2 billion, highlighting how profit repatriation and debt repayments reduce the amount that stays in the country.
Dass explained that approvals and inflows rarely match neatly due to four main reasons: timing lag, profit repatriation, quarterly volatility, and different scope. Timing lag refers to projects like semiconductor plants, which may only record inflows in stages over several years. Profit repatriation occurs when multinationals reinvest some earnings locally but also send profits back to their headquarters. Quarterly volatility is influenced by factors like large loan repayments or capital withdrawals that can swing numbers in one quarter, with annual data usually providing a steadier picture. Different scope means MIDA measures projects approved, while DOSM measures all financial flows, including mergers, acquisitions, and profit transfers.
He emphasized that MIDA approvals represent projects at different stages, particularly operational, in progress, and just starting. This explains why DOSM’s quarterly FDI figures may look modest while large projects are still ramping up.
Dass further explained that while some leakage is natural, Malaysia can capture more value by encouraging reinvestment of earnings with tax credits and incentives, deepening local supply chains, and strengthening domestic capital markets. Additionally, building stronger local talent pools and ensuring policy clarity and stability can help retain more value in the country.
In conclusion, Dass highlighted that approvals indicate the pipeline of investor confidence, gross inflows denote the actual capital arriving, and net inflows are what Malaysia ultimately retains. By focusing 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.