German investors hold their ground in Malaysia despite geopolitical headwinds
63% of German companies in Malaysia report rising costs from global trade-policy shifts and 60% cite higher input costs from the Middle East conflict — yet 88% still rate their current business as good or satisfactory, according to AHK Malaysia's Spring 2026 World Business Outlook survey.
Key Highlights
- German businesses in Malaysia remain resilient: 88% of German companies rate their current business situation as good or satisfactory, with 87% expecting conditions to remain stable or improve over the next 12 months.
- Geopolitical headwinds are biting, but not breaking: 63% of companies report rising costs from global trade-policy shifts and 60% cite higher input costs from the Middle East conflict, making external pressures the dominant risk, not domestic conditions.
- Malaysia holds its ground as a strategic base: Despite mounting global uncertainty, 67% of companies have no plans to relocate production elsewhere, with firms choosing to diversify markets and suppliers around Malaysia rather than move out of it.
KUALA LUMPUR, 16 July 2026 — German companies operating in Malaysia continue to demonstrate resilience in the face of an increasingly volatile global environment, according to the latest World Business Outlook Spring 2026 Survey conducted by the Malaysian-German Chamber of Commerce and Industry (MGCC). The survey reveals that 88% of German businesses rate their current business situation in Malaysia as “good” or “satisfactory”, reflecting sustained confidence even as geopolitical pressures mount worldwide.
Looking ahead, the outlook for companies’ own operations remains broadly positive. Some 87% of respondents expect their business situation to remain the same or improve over the next 12 months, with 35% anticipating improvement and 52% expecting it to stay about the same. Employment intentions reinforce this: 34% of companies plan to increase headcount over the coming year, while 46% intend to maintain current staffing levels.
“German companies are telling us a clear story. Malaysia remains a stable, trusted base even as the world around it gets noisier. Our latest survey demonstrates the country’s resilience against a backdrop of global uncertainty and its continued standing as a strategic base for German businesses in Southeast Asia,” said Hannes Farlock, Executive Director of MGCC.
The broader picture is more measured. Some 71% of respondents view Malaysia’s economic outlook for the next 12 months as stable or favourable, though this marks a notable softening from 90% who held that view in the Fall 2025 survey. Investment intentions follow a similar pattern: about half (41%) intend to retain their current investment plans in Malaysia, and a further 21% plan to invest more locally over the next 12 months. That said, 24% plan to invest less and 13% plan no investment at all.
Despite the more cautious economic outlook, German investors show little appetite for leaving Malaysia. Only 18% of companies are actively relocating production to other locations, and 67% have no such plans whatsoever. Instead, firms are adapting around their Malaysian base, with 54% already exploring new sales markets and 40% expanding their supplier networks. This points to a strategy of diversification rather than relocation that speaks to Malaysia’s continued appeal as a regional hub.
When asked to identify their biggest business risks over the next 12 months, respondents overwhelmingly pointed to external and global factors. Supply chain disruption topped the list at 52%, followed by demand uncertainty (47%), energy prices (45%), and raw material prices (40%). By contrast, factors tied to the domestic operating environment ranked lowest: only 8% cited legal certainty and just 3% cited infrastructure as a major concern, a signal that the risks facing German businesses in Malaysia are largely imported rather than home-grown.
Two live international flashpoints are already being felt on the ground. On global trade policy, 63% of companies report rising costs from tariffs, logistics or compliance pressures, while 32% report supply chain delays; only 22% see no effect at all. The Middle East conflict is having a similarly direct impact, with 60% of companies reporting rising input costs and 54% experiencing supply chain disruption. Among companies with US-facing business, 9% already report a decline in that business as a direct consequence of US trade policy.
While the overall outlook remains constructive, the survey underscores the scale of external pressures now facing German businesses in Malaysia. Geopolitical tensions, shifting trade policies, and supply chain fragmentation are translating directly into higher costs and greater uncertainty.
How quickly those headwinds evolve — and whether Malaysia’s domestic operating environment continues to offer stability — will be key factors shaping business sentiment in the months ahead.
In Malaysia, the survey was conducted between 16 March and 10 April 2026, with 99 respondents from MGCC member companies, comprising mostly German companies with branches or subsidiaries in Malaysia, primarily from the services (47%), manufacturing and construction (36%), and trade (16%) sectors.
The survey is part of the broader AHK World Business Outlook, a bi-annual global research initiative conducted by the German Chamber of Commerce and Industry (DIHK). It surveys member companies from the network of German Chambers of Commerce Abroad (AHKs), which represent over 40,000 companies in 93 countries. For more information about the DIHK, please visit www.dihk.de.
