Turning Waste into Wealth: Malaysia’s Circular Economy in Action

Malaysia generates an estimated 39,000 tonnes of solid waste every day—the equivalent of filling almost 3,000 garbage trucks daily. With a growing population, rapid urbanisation, and expanding economic activities, this figure is set to rise, with the waste management sector as the second biggest contributor to national greenhouse gas (GHG) emissions.

For decades, the nation has relied on the conventional “take, make, manage, dispose” model. While this linear system drove economic growth in the past, it has also left a legacy of overflowing landfills, wasted resources, and widespread pollution. Today, landfills remain the dominant disposal method, and many are already reaching capacity.

But a shift is underway. The Circular Economy (CE) presents Malaysia with a compelling opportunity to reimagine waste as a valuable resource. This model extends the lifecycle of materials, reduces environmental harm, and supports innovation across industries. By adopting CE principles, Malaysia can align economic progress with sustainability, reduce greenhouse gas emissions, and position itself as a regional leader in green growth.

The Circular Economy Blueprint for Solid Waste (2025–2035) defines CE as the reuse, recycling, upcycling, and repurposing of materials to minimise environmental pollution, conserve natural resources, and generate economic value. Unlike the linear economy, CE focuses on “closing the loop” by ensuring that materials remain in circulation for as long as possible.

Initially centred on the 3Rs (Reduce, Reuse, Recycle), the framework has evolved into a more comprehensive 9Rs:

• Refuse – Avoid unnecessary consumption.
• Rethink – Design smarter, more sustainable products.
• Reduce – Minimise material and energy use.
• Reuse – Extend product use beyond first ownership.
• Repair – Fix items rather than discard them.
• Refurbish – Restore products to working condition.
• Remanufacture – Rebuild products to original specifications.
• Repurpose – Adapt materials for new uses.
• Recycle & Recover – Extract value from waste at end-of-life.

This holistic approach embeds sustainability into production, consumption, and waste management, ensuring long-term efficiency and resilience.

Adopting CE is timely as Malaysia navigates key waste management challenges:

• Landfill Dependence: The country operates 135 landfills (114 dumpsites and 22 sanitary landfills), most of which are nearing full capacity and contribute to methane emissions.
• Recycling Gaps: The national recycling rate reached 37.9% in 2024, just shy of the 40% target set under the Twelfth Malaysia Plan (12MP). While progress is commendable, it still lags behind developed nations such as Germany (65%) and South Korea (59%).
• Resource Loss: Valuable materials such as metals, plastics, and organics are discarded, resulting in missed opportunities for resource recovery and economic gains.
• Open Dumping & Segregation Issues: Improper waste separation, especially at household and municipal levels, exacerbates pollution and undermines recycling efficiency.

These realities make a strong case for CE, not only as an environmental solution, but also as an economic and social imperative.

The adoption of circular principles carries wide-ranging implications:

• Environmental Benefits – Less reliance on landfills means lower methane emissions, reduced water contamination, and preservation of biodiversity.
• Economic Efficiency – By capturing the value of discarded materials, Malaysia can reduce raw material imports, strengthen resource security, and encourage innovation in recycling and remanufacturing.
• Social Impact – New industries in waste management, repair, and refurbishment can create thousands of green jobs, boosting local economies and improving community well-being.
• Global Positioning – As international supply chains increasingly prioritise sustainability, Malaysia’s embrace of CE enhances its competitiveness and attractiveness to investors.

Malaysia has taken meaningful steps to institutionalise CE principles across multiple sectors:

Solid Waste Management Policies

• National Solid Waste Management Policy – A framework for integrated waste solutions.
• National Cleanliness Policy – Encourages behavioural change in waste generation and segregation.
• Malaysia Plastics Sustainability Roadmap (2021–2030) – A phased plan for sustainable plastics use and recycling.
• Circular Economy Blueprint for Solid Waste (2025–2035) – A long-term roadmap for waste reduction and sustainable resource use.

Manufacturing Sector Initiatives

• MITI’s Circular Economy Policy Framework – Transitioning manufacturing away from linear, fossil fuel-based systems to CE-driven models emphasising efficiency and green technologies.

National Development Plans

• Twelfth Malaysia Plan (12MP):
  • Plastics – Extended Producer Responsibility (EPR) programs to hold producers accountable for post-consumer waste.
  • Electronics – Expansion of e-waste collection centres to recover precious metals and reusable components.
  • Agriculture – Promotion of composting and bioenergy from organic waste.
• Thirteenth Malaysia Plan (13MP): Will deepen CE focus under “Improving the Well-Being of the People and Environmental Sustainability.”

These frameworks signal Malaysia’s strong commitment to embedding circularity in both industry and society.

Malaysia can also draw lessons from global leaders in CE:

• European Union (EU): The EU Circular Economy Action Plan has driven high recycling rates and the creation of secondary materials markets.
• Japan: Pioneered a “Sound Material-Cycle Society” through strong recycling laws and public-private partnerships.
• South Korea: Introduced a volume-based waste fee system that significantly boosted recycling participation at the household level.

By adopting and adapting such best practices, Malaysia can accelerate its own transition.

Malaysia’s waste management policy framework is designed to foster a competitive investment environment, aligning with global decarbonisation and sustainability trends.

Green Investment Tax Allowance (GITA) – Tier 2

Introduced in Budget 2023, this incentive provides fiscal support for waste management projects:

• • Integrated Waste Management Projects (involving recycling/treatment plus at least two additional activities such as collection, composting, storage or recovery):
    • 100% Investment Tax Allowance (ITA) on qualifying capital expenditure (QCE) for 5 years, offset against 100% of statutory income.

• High-Technology Recycling Activities:

• • Pioneer Status (PS): 70% income tax exemption for 5 years, OR
  • ITA: 60% of QCE for 5 years.

As at June 2025, the integrated waste management and recycling sector attracted RM22.7 billion in investments, including RM3.2 billion from 17 approved Integrated Waste Management (IWM) projects. This reflects Malaysia’s proven ability to create a business environment where sustainability and profitability go hand in hand.

The road toward circularity requires innovation, collaboration, and public participation. For Malaysia, the priorities ahead include:

1. 1. Strengthening Waste Segregation – Expanding infrastructure and education to improve separation at source.
   2. Scaling Extended Producer Responsibility (EPR) Schemes – Extending producer accountability across industries beyond plastics.
   3. Investing in Technology – Harnessing advanced recycling technologies, digital tracking of waste streams, and green manufacturing practices.
   4. Community Engagement – Empowering households, local councils, and civil society to play an active role in waste reduction.
   5. Regional Leadership – Positioning Malaysia as a CE hub in ASEAN by sharing expertise, technologies, and solutions.

As the Government’s principal investment promotion agency, MIDA remains committed to facilitating high-value, technology-driven investments that support Malaysia’s transition to a circular economy. 

Embracing CE is not only about solving waste challenges—it is about building resilience, creating jobs, and ensuring Malaysia’s economic competitiveness in a low-carbon future. Together, with strong policy support and private sector innovation, Malaysia can transform today’s waste into tomorrow’s opportunity, ensuring a cleaner, greener, and more prosperous future for all.

For more information, please contact the Green Technology Division, MIDA at
https://www.mida.gov.my/staffdirectory/green-technology-division/