Choosing the Right Industrial Parks in Malaysia for Foreign Manufacturing

Malaysia is attracting record levels of foreign direct investment as companies seek reliable production bases in Southeast Asia. In 2024, approved investments totaled RM378.5 billion (approximately US$80.6 billion), with manufacturing accounting for RM120.5 billion (approximately US$25.6 billion). Foreign commitments made up RM170.4 billion (US$36.3 billion) of the total, reflecting sustained confidence in the country’s role in regional supply chains.

For investors, getting this choice right requires comparing regions with data in hand, understanding the regulatory path from license to operations, and stress-testing costs under different scenarios.

Malaysia’s manufacturing landscape in 2025

Electronics and semiconductors remain the backbone of Malaysia’s industrial exports, contributing more than one-third of national shipments. Intel committed US$7 billion to expand advanced packaging in Penang and Kulim, while Micron pledged an additional US$2 billion for AI-related memory components in December 2024.

The government has set a target of more than RM500 billion (US$106.4 billion) in semiconductor investment over the next decade. Diversification is also taking shape. Proton launched an EV assembly plant in the Automotive High-Tech Valley in Perak in September 2025, and Selangor continues to attract aerospace and medical device investment.

Johor’s integration with Singapore has boosted food processing and advanced manufacturing, while Sarawak’s Samalaju Industrial Park anchors power-intensive industries using bulk hydropower and reinforced 275 kV transmission lines.

The regulatory path foreign investors must follow

Foreign investors must navigate a defined series of regulatory steps that determine when production can begin. These approvals are interlinked, and managing them in the right order avoids costly delays. The process runs from licensing and customs choices through to environmental clearances, sector-specific certifications, and staffing approvals.

Each stage carries its own timeline, but when treated as one integrated chain, the path offers predictability and a smoother ramp-up for businesses entering the market.

Securing the manufacturing license

The first step for any manufacturing operation is obtaining a license once shareholders’ funds exceed RM2.5 million (US$532,000) or the workforce reaches 75 employees. Applications are submitted through the Malaysian Investment Development Authority, and many investors align conditional land agreements with license timelines to avoid financial exposure before approvals are confirmed.

Choosing the right customs regime

After the license application is underway, businesses must decide how their import and export flows will be managed. Export-oriented manufacturers can operate inside a Free Industrial Zone with on-site customs oversight or apply for Licensed Manufacturing Warehouse status, which allows bonded operations at their own premises.

The choice depends on supply chain design: companies prioritizing clustering near suppliers often opt for LMW, while those requiring immediate customs clearance lean toward free zones.

Meeting environmental obligations

Environmental approvals frequently run in parallel. Under the Environmental Quality (Prescribed Activities) Order 2015, certain projects must complete an Environmental Impact Assessment before construction begins. Confirming at the design stage whether an EIA is required helps avoid costly redesigns or delays once facilities are already in progress.

Obtaining sector-specific certifications

Some industries face additional requirements beyond licensing and environmental clearance. Food, pharmaceutical, and medical device manufacturers must secure halal certification through the MYeHALAL system administered by JAKIM. Aligning certification audits with plant validation ensures compliance while preventing disruptions to commissioning schedules.

Securing expatriate staffing

The final stage in the approval process is ensuring that expatriate managers and engineers are cleared to work on-site. Employment Passes are processed through the Expatriate Services Division, which targets a five-day turnaround once complete submissions are made.

In practice, companies should anticipate longer lead times and align staffing approvals with construction and commissioning schedules to avoid leadership gaps during ramp-up.

Costs that determine competitiveness

Malaysia’s cost profile is shifting in ways that remain broadly competitive within ASEAN.

The corporate income tax rate is 24 percent, and from 2025, a domestic top-up tax applies for multinational groups under OECD Pillar Two. This alignment with global standards reduces uncertainty about future reforms, while investment incentives remain available and should be assessed net of the top-up to determine their true benefit.

Labor costs in Malaysia are evolving in a predictable way, with the minimum wage scheduled to rise to RM1,700 (US$362) per month nationwide in August 2025. Even with this adjustment, the country retains a clear cost advantage over Singapore and continues to offer a deeper pool of mid-tier technical talent than many regional peers.

Higher salaries in clusters such as Penang and Selangor reflect strong demand for engineers, yet these increases are typically offset by productivity gains and the efficiencies that come from supplier integration.

In the area of utilities, Malaysia provides both stability and choice. The July 2025 tariff restructuring in Peninsular Malaysia introduced voltage-based classes and expanded Time-of-Use pricing windows, allowing manufacturers to manage load profiles and reduce costs. Tariff details vary by customer class and are issued by TNB.

Sarawak, meanwhile, offers industrial users stable hydropower at rates that remain among the most competitive in ASEAN, which has been decisive for smelters and other energy-intensive operations.

Competitiveness is also reinforced by Malaysia’s logistics network and trade access. Port Klang handled 14.64 million TEUs in 2024, the Port of Tanjung Pelepas 12.25 million, and Penang Port 1.42 million, ensuring redundancy and choice for exporters. Participation in RCEP since March 2022 and CPTPP since November 2022 gives manufacturers flexible rules-of-origin benefits and access to duty-free or reduced-duty markets, helping to offset incremental increases in labor or utility costs.

Where key industries are investing

Electronics and semiconductors

Penang and Kulim remain Southeast Asia’s leading electronics cluster, attracting over US$20 billion in cumulative semiconductor investment since 2021. Intel’s US$7 billion advanced packaging plant in Bayan Lepas includes a 710,000-square-foot clean room, and Micron’s Batu Kawan site is expanding to 1.5 million square feet with an additional US$1 billion commitment.

More than 300 suppliers provide substrates, molding compounds, and cleanroom services, while Penang International Airport handled about 103,000 tonnes of cargo in 2024, a figure that understates its role as a consolidation hub for high-value electronics, with much of the output trucked to KLIA or Singapore for onward shipment.

Opportunities lie in AI-related packaging, automotive-grade chips, and the localization of substrates and lead frames, where Malaysia still imports a large share. Despite higher labor costs compared to Johor or the East Coast, productivity and supply-chain depth continue to draw global leaders.

Automotive and electric vehicles

Selangor and Perak are consolidating Malaysia’s automotive base for both conventional and electric vehicles. Proton’s Automotive High-Tech Valley in Tanjung Malim began operations in 2025 with an initial 20,000-unit capacity and potential to reach 45,000 units. While the site is central to Malaysia’s EV rollout, the country continues to assemble and export internal combustion engine vehicles, ensuring resilience across technologies. National policy targets EVs to comprise 20 percent of new car sales by 2030, but conventional car exports to ASEAN markets remain strong, especially in compact and low-cost segments.

This dual track allows businesses to deploy flexible manufacturing strategies — balancing ICE volumes with EV growth — and to capture supplier opportunities in motors, inverters, battery modules, and lightweight automotive structures.

Medical devices

Penang is a global leader in medical devices, with B. Braun operating one of its largest production bases worldwide. Its Penang site spans 193,000 square meters, employs more than 7,500 people, and houses Asia-Pacific R&D and testing centers.

Although aggregate investment data for the sector is limited, the scale of operations demonstrates long-term foreign confidence. The cluster produces infusion systems, IV catheters, and sterile disposables, with exports reaching hospitals worldwide.

Investors can leverage ISO 13485-certified suppliers, halal certification pathways, and contract sterilization services to accelerate ramp-up. Near-term opportunities exist in scaling sterile packaging, precision plastics, and higher-value disposables for ASEAN and global OEMs.

Aerospace

Subang in Selangor anchors Malaysia’s aerospace sector. The Malaysia International Aerospace Centre and nearby suppliers offer airside access for MRO, component manufacturing, and engineering services. While published investment totals are scarce, demand-side data is strong: Southeast Asian fleets are expected to require more than 3,000 freighter conversions and cabin retrofits over the next decade.

Subang is well-positioned to capture this activity, particularly in precision machining, composites, and avionics repair. Government strategy designates the area as the aerospace hub, ensuring policy support and training pipelines for licensed engineers.

Logistics-intensive and food processing

Johor’s value proposition is throughput and market proximity. The Port of Tanjung Pelepas handled 12.25 million TEUs in 2024, while new industrial zones such as i-Park@Senai and Sedenak Tech Park integrate bonded facilities with modern logistics. Food processors take advantage of cold-chain networks and halal certification to supply Singapore’s market with same-day delivery.

Beyond traditional manufacturing, Johor is also emerging as a data-center hub: Yondr is building a 300 MW campus in Sedenak, and Princeton Digital is developing a 150 MW site, both requiring upgraded utilities that spill over to support adjacent industries. This dual dynamic — consumer logistics and digital infrastructure — positions Johor as Malaysia’s fastest-growing multi-sector hub.

Chemicals and heavy industry

The East Coast corridor, including Gebeng and Kerteh, houses Malaysia’s largest petrochemical concentration. Kuantan Port moved 25 million tonnes of bulk cargo in 2024, and the Malaysia–China Kuantan Industrial Park offers 14.2 km² of industrial land with direct access to pipelines and berths.

Alliance Steel and BASF Petronas Chemicals anchor the cluster, which now looks to specialty chemicals, engineered resins, and renewable-based derivatives to meet new demand from EVs and electronics.

The scale of the estates allows for multi-phase builds, and shared waste-treatment and utilities reduce permitting risk and capex per tonne.

Power-intensive materials

Sarawak’s Samalaju Industrial Park is Malaysia’s hub for energy-intensive industries, with hydropower from Bakun and Murum dams delivered via 275 kV lines. Tariffs remain among the lowest in ASEAN, offering stable, renewable electricity for aluminum, ferroalloys, and glass production. Tenants such as Press Metal Aluminum, and OM Materials show how long-term power agreements support cost certainty and ESG compliance.

The combination of deep-water ports, dedicated transmission, and renewable credentials makes Samalaju uniquely competitive against other ASEAN jurisdictions for smelting and materials projects.

Critical path from site decision to first production

Foreign manufacturers entering Malaysia must plan approvals and construction as one integrated chain rather than isolated tasks.

Many underestimate how long parallel processes can take, which leads to delays at commissioning. The sequence below shows the typical six- to twelve-month path from conditional land agreement to first production, highlighting what happens first, what can run in parallel, and where timing decisions affect certainty.

Month 0–1 – Conditional land and initial filings

Once an investor approves a location shortlist, conditional land terms are signed, usually linked to approvals and utility commitments. At the same time, a manufacturing license application is prepared for submission to the Malaysian Investment Development Authority (MIDA).

Month 1–3 – Manufacturing license and customs regime

During this period, the license is typically processed. In parallel, the company evaluates customs treatment, choosing either Free Industrial Zone status or Licensed Manufacturing Warehouse status. Preparing the customs application while the license is under review allows both approvals to align.

Month 2–5 – Environmental and sector-specific certifications

Where projects fall under the Environmental Quality (Prescribed Activities) Order 2015, an Environmental Impact Assessment must be undertaken. In regulated sectors such as food, pharmaceuticals, or medical devices, halal certification audits are also scheduled during this window. Running these processes in parallel with license and customs applications helps prevent later bottlenecks.

Month 4–6 – Utilities and expatriate staffing

With approvals well advanced, investors move to secure power allocation letters and indicative tariff agreements, place transformer orders, and finalize water and telecoms connections. Expatriate staffing plans are filed with the Expatriate Services Division to align visas with commissioning dates, ensuring technical leadership is available at start-up.

Month 6–12 – Construction, fit-out, and validation

With licenses, customs status, and utilities in place, construction and fit-out commence. Environmental and halal approvals are finalized, followed by system acceptance tests and trial production runs. Qualification lots are validated before volume production is authorized.

Viewing the chain as a whole

When treated as a linked sequence, the path provides a realistic picture of the time required to reach the first good unit. Investors can set expectations more accurately, avoid misaligned approvals, and ensure resources are in place at each stage of the investment ramp.

Making the final investment decision

Industrial Park selection in Malaysia is a strategic decision that defines competitiveness, compliance, and growth potential. Each region offers distinct advantages and trade-offs, and foreign investors who evaluate these based on data and regulatory clarity will be best positioned to capture long-term value.

This article first appeared on ASEAN Briefing, our sister platform.