Due to the large decline in global trade and investment flows, the COVID-19 pandemic has hit open economies such as Malaysia particularly hard. To cushion the initial shock, the Malaysian government had implemented multiple economic stimulus packages (ESPs) totalling RM 295 billion (USD 68.7 billion), while focusing on measures to mitigate the public health crisis (see Figure 1). Although these packages helped prevent a far more severe economic collapse, they were ultimately stop-gap measures—insufficient to support long run growth. Yet having successfully flattened the COVID-19 curve ahead of many other countries, Malaysia is ready to consider its long run economic recovery strategy.

This briefing paper aims to initiate a conversation on revisiting Malaysia’s macroeconomic policy for post-COVID growth and development. Given the recent relocations, Malaysia should pursue policies to attract multinational corporations (MNCs) in regionally competitive industries through developing a strong domestic industrial ecosystem in these sub-sectors, rather than through direct investment incentives. Adopting a ‘race to the top’ approach will better ensure that this outward-oriented strategy benefits a broad segment of the population—promoting a more inclusive recovery.