Assessing the Determinants of Foreign Direct Investment Inflow to Malaysia

Abstract

As Malaysian economy continued to record rapid progress on the back of sustained economic growth, the contribution of Foreign Direct Investment (FDI) to the Malaysian economic expended at a faster pace since the early 1970s. Thus, the major concern of this paper is to discuss and assess the economic factors or influ- ences that led to the expansion of inward capital inflows to Malaysia over the period 1980–2010. This paper also tries to identify the major factors that have influenced FDI inflows to Malaysia. In this paper, a regression analysis has been done to determine the important factors, which was expected to attract foreign firms to locate productions in Malaysia. The significance of these factors was statistically tested by using a multivariate regression model. The result shows factors like labour cost, exchange rate and interest rates were significant in influencing FDI to Malaysia.