12 June 2023 — Malaysia wants to lure Microsoft Corp and Alphabet Inc’s Google in its drive to be a data hub and as it positions itself as a neutral supply chain base amid rising US-China tensions, according to Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.

“We are attracting as many as we can,” and “slowly establishing ourselves” as a data centre hub, Tengku Zafrul said in an interview with Bloomberg Television’s Haslinda Amin on Friday (June 9).

Malaysia’s investment success this year includes attracting companies such as Tesla Inc and Amazon Web Services. Tesla plans to import its electric vehicles into the Southeast Asian nation and build a network of superchargers, while AWS will invest RM25.5 billion in cloud-computing infrastructure by 2037.

Simmering tensions between Washington and Beijing are increasingly pushing global businesses to seek locations outside of China. Malaysia is vying with other Southeast Asian countries such as Vietnam and Thailand for investments that are aimed at building new supply chains.

“We are seeing a lot of realignment of supply chain, you know, looking at resiliency and security coming to this region,” Tengku Zafrul said.

Malaysia attracted RM71.4 billion in approved investments in the first quarter of this year, up 67% from a year earlier, according to the Malaysian Investment Development Authority. FDI made up more than 52% of the flows. Earlier this month, the country secured RM23 billion of potential investments during a trade mission Tengku Zafrul led to Japan.

Tesla chose Malaysia because of a proven ecosystem built over the past 50 years, Tengku Zafrul said. Malaysia has also sought to capitalise on its attractiveness as a semiconductor hub amid uncertain regional geopolitics, with the minister noting that “we have to be opportunistic sometimes”.

“We are in the position of being neutral and being part of the critical supply chain,” he said. “Malaysia has been a net beneficiary.”

Malaysia caters to about 13% of the world demand for chip testing and packaging, and what Tengku Zafrul estimated as a quarter of US chip-testing and assembly needs. Companies in the sector already provide services of more than RM200 million to Tesla, according to Tengku Zafrul.

Malaysia’s economy is heavily dependent on trade and vulnerable to shocks resulting from disruptions in commerce, especially involving China, its largest partner since 2009. Trade tensions have stemmed from the US’ effort to clamp down on China’s access to critical semiconductor technology and export controls.

The battered trade picture is contributing to what Tengku Zafrul called a “very challenging year” for growth in addition to monetary policy tightening, and the continuing impact of Russia’s war in Ukraine.

Malaysia’s exports fell the most in almost three years in April, and the weakness may persist as China’s economic recovery loses traction.

Malaysia’s gross domestic product expanded a faster-than-expected 5.6% in the first quarter from a year ago, and the government has projected a 2023 growth rate of 4.5%, a moderation from last year.

The benchmark stock index is among the worst-performing Asian stock gauges this year as weakening commodity prices and concerns about a slowdown in the world economy prompted global funds to exit local shares. The ringgit has slid 4.6% year-to-date as rising US interest rates supported the greenback.