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The Determinants of Inward FDI in Selected ServiceS Industries in MalaysiA

Author

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  • Tham Siew Yean
  • Andrew Jia-Yi Kam
  • Nirwan bin Noh

Abstract

In its drive to achieve a high-income country status, Malaysia aspires to attract more private investment into the services sector. However, empirical studies on the determinants of foreign direct investment (FDI), especially in the services sector, are sparse, even more so at the industry level. The location theory asserts that FDI inflows into a host country are determined by variables related to resources, infrastructure, market conditions, cost and business environment. This paper investigates the validity of the location theory on Malaysia using a set of panel data for eight services industries from 2003 to 2010. We find that at the industry level, market size, ICT infrastructure and human capital have significantly influenced FDI inflows into the services sector. However, the impact of FDI liberalisation is not significant compared to the dynamic changes of the other variables as progress in FDI liberalization is slow and limited.

Suggested Citation

  • Tham Siew Yean & Andrew Jia-Yi Kam & Nirwan bin Noh, 2018. "The Determinants of Inward FDI in Selected ServiceS Industries in MalaysiA," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(2), pages 215-231.
    • Handle: RePEc:prg:jnlpep:v:2018:y:2018:i:2:id:652:p:215-231
    DOI: 10.18267/j.pep.652
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    More about this item

    Keywords

    services sector; services liberalisation; foreign direct investment; panel data; Malaysia;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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