> FDI and Malaysian Economic Performance

BY SEE HENG NAM, KHOR CHERN YANG, LING SIEW YING, WANG LI SHUANG 

          Foreign direct investment can be concluded as it is an investment that made by a company from one country to another country in the form of establish a business operation. It commonly happens in an open economy that always offer skilled workforce and involve provision of management and technology to the investors. Foreign direct investment happens through international trade, through licensing and joint venture with a foreign company. Foreign direct investment can be categorized into three main categories which are equity capital, reinvested earnings and other capital.

          Malaysia has involved foreign direct investment since 1975. Malaysia has been considered as one of the earliest country that involved in the Foreign Direct Investment at 1975 as Japan, Jamaica, Republic of Korea, Hong Kong, Iceland, China, Belgium and Greenland still did not involve in the Foreign Direct Investment at that time. Theoretically, FDI and growth rate has been support and implements by recent developments countries in growth theory, which highlight the importance of improvements in technology, efficiency, and productivity in stimulating growth. There have some data that shows how the foreign direct investment influences Gross Domestic Product (GDP) from year 1975 to 2015.

          The table shows the Malaysia FDI net inflow and GDP in 1975, 1995 and 2015. In 1975, less than half country involved in FDI only. At that time, Malaysia could be said as potential country for FDI to earn higher profit. In 1995, more than half country involved in FDI. Few country start realize the importance of openness on a country. FDI net inflow in Malaysia quite high compare few years before. After 20 years, night over ten country involved in FDI business abroad. In 2015, due to high competition between the countries such as China, Malaysia FDI net inflow decrease to 3.7% only.

          In the conclusion, although the increasing of the Foreign Direct Investment brings significant impact to the economic Malaysia in early 1900s yet the impact of the Foreign Direct Investment to Malaysia has decreased after certain time. This can be seen when in 2015, FDI net inflow decrease to the lowest 3.7% while GDP still increase to 296.283 billion USD. Thus, from here we can say that Foreign direct investment bring significant impact to the economic performance of a country however the role of the Foreign Direct Investment to economic performance has decreased after 2015.