Until to 2015, 100% of university of funding for Malaysian public universities has come from the government. However, the Malaysian Ministry for Higher Education wants to boost the country's ranking and improve institutional efficiency, and in November 2015, the government announced that starting in the new year 5% of total funding will be reserved and redistributed based on performance ratings.

The new formula aims to address issues of productivity and competency, and will provide Malaysia's twenty public universities the incentive to innovate. The government hopes that the new funding scheme will lead to growth in student numbers, especially at the graduate level and that universities will work to improve test scores. The funding will be divided into three and five percent, and redistributed based on whether the universities meet benchmarks for input and output, respectively.

The change in funding is part of the Malaysian government's long-term plan to make the country's universities more autonomous. Under the current system, Malaysian universities are very dependent on government funding to support academia, with most universities relying on the government for 75-95%   of their total budgets. However, in recent years, Malaysia's universities have demonstrated the ability to generate funding independently, and the government aims to reduce dependency to 40% by 2025. This figure would match that of most universities around the world. The ultimate goal of the new plan is to make Malaysian universities more competitive on a global scale.