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Foreign Direct Investment in Malaysia: An Economic Analysis

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  • Chee-Keong Choong
  • Kian-Ping Lim

Abstract

This paper investigates the significance of market size hypothesis, skilled labor and liberalization process in determining Foreign Direct Investment (FDI) in Malaysia from 1970 to 2001. The newly developed Autoregressive Distributed Lag (ARDL) model, or bounds test proposed by Pesaran, et al. (2001) is applied to model the relationship. While local market size significantly influences the inflows of FDI in the Malaysian economy, the market size of its competitor, China exhibits a negative influence on the inflows. The findings are consistent with a generally hypothesized market size theory. Skilled labor and liberalization process have an independent positive impact on the inflow of FDI in Malaysia.

Suggested Citation

  • Chee-Keong Choong & Kian-Ping Lim, 2007. "Foreign Direct Investment in Malaysia: An Economic Analysis," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 74-85, January.
    • Handle: RePEc:icf:icfjae:v:06:y:2007:i:1:p:74-85
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    Cited by:

    1. Tang, Chor Foon & Yip, Chee Yin & Ozturk, Ilhan, 2014. "The determinants of foreign direct investment in Malaysia: A case for electrical and electronic industry," Economic Modelling, Elsevier, vol. 43(C), pages 287-292.
    2. Tang, Chor Foon, 2008. "A re-examination of the role of foreign direct investment and exports in Malaysia's economic growth," MPRA Paper 38536, University Library of Munich, Germany.

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