Fdi In Malaysia Case Study

The decrease of FDI in Malaysia could affect the economic growth of Malaysia conversely as previous studies showed that the strong economic growth of Malaysia depends largely on the FDI. It injects capital and brings in both managerial skills and technology to Malaysia with the aim of satisfying the growing needs of domestic investment (Ang, 2008; Vadlamannati, Tamazian, & Irala, 2009; Abdul Rahim, 2006; Athukorala & Waglé, 2011).

For better understanding of this study, some necessary knowledge about the independent variables is discussed briefly. The first independent variable is economic growth. Slow economic growth is where the increment amount of goods and services produced by the economy is low which implies that the market size is not

The higher the inflation rate, the lower the economic stability. The low inflation rates have been effective in attracting FDI to developing country (Demirhan & Masca, 2008). The low economic stability increases the risk of the investors in face of losses. During high inflation period, the general prices of goods and services rise. This erodes the purchasing power of public as they need more money to buy a product in comparison to the time period before inflation. Eventually, the quantity of goods and services demanded will decrease. The drop in the quantity demanded will also lead to the decrease in sales. Moreover, the cost of raw materials needed for production increase as well and firms will not be able to exploit the advantage of low production costs. As the average cost of production rise, the selling prices of the product increase, leading the public to the inability to meet up with the expenses. Finally, it will negatively affect the profit of the business and indirectly affects the return of the investors. As a result, due to the impact inflation rate have on the profitability of business, it is important to be considered by investors before making any investment in that