Foreign Direct Investment in Malaysia: Trends, Patterns and Determinants
Kishor Sharma, James Nayagam & Hui Hon Chung
Working Paper 14/06
September 2006
About the Authors
Kishor Sharma, Charles Sturt University, Wagga Wagga, NSW 2650, Australia
James Nayagam, HELP University College, Kuala Lumpur, Malaysia
Hui Hon Chung, HELP University College, Kuala Lumpur, Malaysia
Charles Sturt University – Faculty of Business Working Paper Series
Managing Editor: Associate Professor Jayne Bisman, School of Accounting, Bathurst
Editors: Dr P. Mathews, School of Commerce, Wagga Wagga
Associate Professor M. O'Mullane, School of Business, Albury
Dr R. Tierney, School of Marketing and Management, Bathurst
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Table of Contents
- Abstract
- Introduction
- Evolution of FDI Policy in Malaysia and Trends and Patterns of FDI
- The Model
- References
Abstract
There is no doubt that foreign direct investment (FDI) has contributed significantly to the transformation of the Malaysian economy, as reflected by the changing composition of its exports and the rising share of FDI in gross fixed capital formation (GFCF). By the late 1990s, Malaysia was third in ranking after Singapore and Hong Kong (among the East Asian countries) in terms of attracting FDI. Despite this, studies on the determinants of FDI in Malaysia are scarce. The purpose of this paper is to investigate the determinants of FDI in Malaysia, during 1971-2005. Our results suggest that global integration of the Malaysian economy through openness has positively contributed to a rise in FDI in the country. However, there is no statistically significant evidence to suggest that the growth in domestic market has any effect in attracting FDI into Malaysia. Surprisingly, our findings tend to suggest a negative association between FDI and the quality of physical infrastructure. This is difficult to explain and needs further investigation.