Country risk in Malaysia is low. Malaysia enjoys an investment grade credit rating and an OECD country credit grade of 2. This indicates a relatively low likelihood that it will be unable or unwilling to meet its external debt obligations in a systemic sense (though, needless to say, individual private and ‘sub-sovereign’ debtors can and do default). But elevated household debt burden will bear watching and is a key country risk.
The World Bank’s ease of doing business gauge—which measures regulation and red tape relevant to a domestic small to mid-sized firm—ranks the Malaysian business climate 15th out of 190 economies. Malaysia significantly outperforms regional peers on almost all measures and ranks within the top 10 countries in the world for getting electricity, protecting investors and dealing with construction permits. But starting a business is significantly harder in Malaysia.
The World Bank ranks Malaysia in the top quartile for the government effectiveness dimension of governance. It ranks in the second percentile for control of corruption, rule of law and regulatory quality. Investors will be using the 1MDB trial as a ‘litmus test’ of Malaysia’s ability to crackdown on corruption. Malaysia doesn’t score as well on ‘political stability and absence of violence’ as well as ‘voice and accountability’ indicators. Political risk is low in Malaysia.
The risk of expropriation in Malaysia is low.