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International Business Management
Year: 2015  |  Volume: 9  |  Issue: 4  |  Page No.: 349 - 357

Attracting Foreign Direct Investment: The Case of Malaysia

Charis Solomon, Md. Aminul Islam and Rosni Bakar    

Abstract: Foreign Direct Investment (FDI) has contributed significantly to the transformation of the Malaysian economy as reflected by the changing composition of its exports and the rising share of FDI inflows. From previous studies, it has been identified that financial market development, market size of the economy, government infrastructure expenditure, economy openness, real exchange rate, corporate tax and inflation rate do contribute to the FDI inflows into a country. However, the significant contribution of each of the factors vary by countries. Thus, this study attempted to find out determinants of FDI inflows in Malaysia. The study used data concerning the FDI inflows into Malaysia from the year 1991-2010. Analysis was then carried out to identify the relevance of these determinants towards FDI inflows into Malaysia. Based on the results obtained, it shows that FDI inflows have significant positive relationship with financial market development and market size of the economy. However, FDI inflows are negatively related to corporate tax. Therefore the Malaysian government has to take certain measures to increase financial market developments and the market size of the economy but reduce or stabilize their corporate tax to encourage more FDI inflows into Malaysia.

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