Infrastructure market in Malaysia

Investing in large-scale infrastructure projects is one of the Malaysian government’s key strategies to fuel economic growth.

Experts have forecasted the Malaysian construction industry to expand by 16.5% in 2022, supported by post-pandemic economic recovery, the government’s focus on completing large infrastructure projects, and increased investments in industrial and energy projects.

This year has seen large-scale transportation infrastructure projects, which were previously put on hold for government review, now moving forward again.

As part of the Twelfth Malaysia Plan, which is the country’s development roadmap for 2021 to 2025, the government aims to reduce bureaucracy, and build reliable infrastructure and an ecosystem to attract quality foreign investments.

Key opportunities for Canadian infrastructure companies in Malaysia

• Renewable energy projects
• Urban transportation
• Rural infrastructure
• Communication connectivity

Notable challenges for Canadian infrastructure companies in Malaysia

• Strong bilateral ties in the infrastructure sector with other Asian economies
• Public sentiment toward foreign investment or participation in key national projects
• Political uncertainty

Business landscape in Malaysia

The Malaysian government has made reducing the country’s national debt a priority and will be more cautious about spending. As such, public-private partnership (P3) projects may be better received in the future if the country’s potential financial risks are minimized.

P3 projects must demonstrate that they are a form of “smart spending” for the government and that they will facilitate local job creation, rather than simply being low-cost and allowing technology transfers.

For a P3 project to be considered, it must meet 4 key criteria:

• Output specification can be clearly identified and quantified
• The economic life of the asset or service should be at least 20 years
• Projects with technological obsolescence risk will not be considered
• Project sponsors must be financially strong, with the paid-up capital of its special purpose vehicle (SPV) for the project being at least 10% of the project value

The P3 models typically adopted in Canada have advantages that are not usually present in the systems used by our Malaysian counterparts. Canadian experience with P3 models includes high levels of private sector risk-sharing and value for money, which could be of interest to Malaysia.

Additionally, private-sector capacity building is a way for Canada to participate in Malaysia’s infrastructure sector. Canadian companies could see opportunities to forge ties with Malaysian companies that are eager to move up the value chain through international joint-venture partnerships.

Summary

Malaysia is a dynamic and open economy that is also a gateway to the increasingly important Southeast Asian region. The Malaysian government continues to signal that it is open to business and foreign investments that elevate the country’s position in the region.

Canadian companies have participated successfully in Malaysian infrastructure projects, including in several iconic public transportation projects.

The Canada brand is greatly respected in Malaysia and this is an advantage for Canadian companies wanting to pursue opportunities in Malaysia.

For more information on infrastructure in the Malaysia market, please contact mohan.gurusamy@international.gc.ca.