KUALA LUMPUR, May 20 — Business sentiment and conditions in Malaysia are expected to improve through 2026, according to a survey conducted by the Japanese Chamber of Trade & Industry Malaysia (Jactim) and the Japan External Trade Organisation (Jetro) Kuala Lumpur.
A total of 562 Jactim member companies, comprising local corporations, branches and representative offices, excluding individual members, were contacted for the survey, and 208 valid responses were received.
Data from the survey showed that respondents viewed Malaysia’s growth as firm, although sentiment varies by company and industry due to competition and costs.
“The forecast of the 2026 diffusion index (DI) for business sentiment is expected to increase to 5.3 points, though West Asia tensions remain largely unreflected.
“The second half (2H) 2025 business sentiment DI rose to -4.3 points, a 7.2 points increase from the -11.5 points recorded in 2H 2024 and exceeding pre-pandemic levels,” the survey reported.
The DI for profit level in 2026 is expected to increase to 46.6 points from 38.9 points in 2H 2025, while the DI for profit margin is forecast to rise to 7.2 points from -10.1 points.
The survey found that while a few companies are considering downsizing, the overall commitment to Malaysia remains firm.
“Notably, manufacturers are increasingly viewing Malaysia as a stable functional hub rather than a site for aggressive new investment,” it added.
Non-manufacturing companies, however, had a greater interest in expansion and showed particularly high interest in the Johor-Singapore Special Economic Zone (JS-SEZ).
Regarding Malaysia’s investment environment, the survey found that structural strengths, such as English proficiency and minimal natural disasters, remain the country’s top attractions.
“High ratings for living standards and safety, especially amid global geopolitical risks, reinforce the country’s status as a stable and safe haven for investment and expatriates,” it said.
Regarding foreign labour issues, the survey stated that nearly two-thirds of manufacturers deem foreign labour “necessary”, valuing their flexibility with working hours and shifts.
“Reliance on foreign workers is intensifying due to local recruitment challenges and high turnover rates.
In contrast, only one-third of non-manufacturers require foreign workers, primarily due to local hiring difficulties.
“Regardless of the sector, companies that successfully retain local talent tend to have a lower necessity for foreign labour,” it noted.
The survey pointed out that extending small and medium enterprise (SME) incentives to foreign companies, including Japanese, remains the most significant policy request.
