In 2021, Malaysia experienced a significant economic boost thanks to its thriving foreign affiliate sector. According to the Department of Statistics Malaysia (DOSM), nearly 3,000 foreign affiliates were operating in the country, contributing a staggering value added of RM274.3 billion, equivalent to 17.7% of Malaysia's entire economy.
DOSM's report on foreign affiliates, both inward and outward FATS (foreign-controlled affiliates located in Malaysia and Malaysian affiliates abroad, respectively), sheds light on the pivotal role these enterprises play in shaping Malaysia's economic landscape. Chief Statistician Datuk Seri Mohd Uzir Mahidin emphasized that foreign affiliates are defined as enterprises with over 50% equity owned by a single foreign investor.
Compared to the preceding year, the number of foreign affiliates in Malaysia saw a marginal increase of 0.3%, reaching 2,979 affiliates in 2021. This resulted in an impressive 13.8% surge in value-added, rising from RM241 billion in the previous year to the current RM274.3 billion. This growth was mirrored in the job market, with the number of employees engaged with foreign affiliates increasing by 2.9% to a total of 884,843 individuals in 2021. As a result, the overall compensation of employees rose from RM48.7 billion to RM51.9 billion over the same period.
Breaking down the performance of inward FATS by economic activities, the manufacturing sector emerged as the primary contributor, accounting for an impressive 48.6% of the total value added, amounting to RM133.3 billion in 2021. This sector was a major employer, engaging 664,721 individuals and paying out RM36.1 billion in compensation, particularly in sub-sectors like electrical, transport equipment, and other manufacturing.
The mining and quarrying sector secured the second-highest value added at RM69 billion or 25.2% share, surpassing the services sector which stood at RM68.5 billion. However, in terms of employment, the services sector took the lead, providing jobs to 178,552 workers with a total compensation of RM12 billion in 2021.
Furthermore, the export and import figures of foreign affiliates in Malaysia exhibited significant growth. Exports soared by 27.8% while imports saw a 21.1% increase. The export of inward FATS accounted for 33.9% of trade in goods and services, with imports accounting for 32.3%.
Notably, investors from the Asia region, particularly Singapore, Japan, and China, constituted a substantial 63.5% of total foreign-controlled enterprises in Malaysia. Their contributions played a pivotal role in Malaysia's economic success story.
In tandem with the thriving foreign affiliate sector, Malaysian-controlled affiliates operating abroad also saw an upward trajectory. In 2021, these affiliates achieved a 4.2% increase in turnover, reaching a record RM334.1 billion. Employment figures showed growth as well, with 412,295 individuals hired compared to 393,291 in 2020. Compensation of employees rose by 1.7% to RM24 billion.
The services sector remained the dominant contributor to turnover in 2021, generating an impressive RM205 billion or 61.4%. The manufacturing sector followed closely, contributing RM82.8 billion (24.8%), while the mining and quarrying sector accounted for RM25.7 billion (7.7%).
In terms of performance by country, Malaysian affiliates located in Indonesia led the pack with a turnover of RM50.6 billion. The United Kingdom came in second with a turnover of RM37.3 billion, followed closely by Singapore at RM32.0 billion. Notably, the services sector played a pivotal role in generating the turnover for these top three countries.
In summary, Malaysia's foreign affiliate sector has emerged as a significant driving force behind the nation's economic growth, making substantial contributions to various sectors and showcasing its importance on the global stage.
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