The government has introduced a new automation investment incentive to help companies adopt Industry 4.0 technologies and reduce the impact of US tariffs on foreign investment.
Investment, Trade, and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said the move is aimed at protecting the national economy while encouraging technological upgrades in businesses.
Under the new Automation Capital Allowance, companies can claim up to 200 percent of expenses on automation and Industry 4.0 initiatives, with a cap of RM10 million. These technologies include robotics, smart sensors, and automated systems designed to improve manufacturing and service efficiency.
“The incentive provides firms with the means to modernize their operations and stay competitive, even amid global tariff pressures,” the minister said in a written reply to the Dewan Negara.
The government also provides several other investment incentives to support businesses. These include a carbon tax exemption for sectors with high emissions, such as iron and steel, and the Reinvestment Incentive under the New Industrial Master Plan (NIMP) 2030. Additionally, companies may benefit from the Investment Tax Allowance, offering 60 or 100 percent of qualifying capital expenditure over five years.
Tengku Zafrul warned that US tariffs could raise operating costs and shrink profit margins. If importers pass these costs to businesses or reduce orders, a company’s financial position could be seriously affected.
“Foreign investors may reconsider their plans, deciding whether to expand locally or relocate to countries with lower tariffs,” he said.
To offset these challenges, the ministry is working to broaden export markets and attract foreign investment by enhancing trade relations. Currently, Malaysia has 18 active free trade agreements (FTAs), which it seeks to optimize.
Ongoing negotiations include new agreements with Canada, South Korea, the European Union, and the Gulf Cooperation Council. Potential FTAs are also being explored with countries like Bangladesh and Sri Lanka.
By promoting automation and Industry 4.0 adoption alongside strategic trade expansion, the government aims to maintain the country’s appeal to foreign investors despite global tariff pressures. The combined measures are expected to support economic growth while protecting companies from rising operational costs caused by international trade tensions.
Experts say that incentives like the Automation Capital Allowance could accelerate technological adoption in manufacturing and services, improve productivity, and reduce long-term exposure to global tariffs. The program aligns with Malaysia’s broader economic strategy to foster high-tech industries and attract sustainable foreign investment.
With these incentives, businesses have the opportunity to modernize operations, strengthen competitiveness, and mitigate the financial risks associated with global trade conflicts. By leveraging Industry 4.0 technologies and benefiting from tax and reinvestment programs, companies can better navigate challenges and contribute to the nation’s economic resilience.
