Analysis of Foreign Direct Investment Environment in Malaysia

Globalization and exponential growth in technology have made worldwide mobility of money extremely easy and fast. Investors prefer to invest in places that offer attractive returns and are relatively less risky. The inflow of Foreign Direct Investment (FDI) gives developing countries access to capital that would otherwise be not available. FDI also provides much needed foreign exchange and therefore helps to adjust some of the macroeconomic imbalances in developing countries. Every country is trying to attract investors by providing a business-friendly environment. The main objectives of this study are to find out the status of Malaysia as a destination for FDI; the factors that attract FDI into Malaysia and how these can be enhanced, and the factors that hinder the flow of FDI into Malaysia and how these can be reduced. The study covers a period of five years from 2014-2015 to 2018-2019. The study analysis various determinants of FDI like market size, economic growth, infrastructure, political risk, corruption, labor market, technological readiness, innovation, financial system, taxation, cost of capital, ease of doing business, and government policies. The study shows that Malaysia’s performance in attracting FDI relative to both earlier decades and the rest of the Association of Southeast Asian Nations (ASEAN) had slowed. But thebusiness climate in Malaysia is generally conducive to investment.