Factors affecting Foreign Direct Investment (FDI) in Malaysia

Foreign Direct Investment (FDI) are needed for the country to achieve a sustainable high trajectory of economic growth. The irrefutable reason for this is it can transform a country to become a developed country. The significance of Foreign Direct Investment (FDI) are bring with it the advantages of advance technology, good management practices, improve quality products, upgrade skills and reduce debts. In Malaysia, Foreign Direct Investment (FDI) is an important part of massive investment which drives the growth of Malaysia economic. In other words, Foreign Direct Investment (FDI) has contributed to the creation of an ‘economic miracle’ in Malaysia. Hence, this study attempts to investigate the factors that affecting Foreign Direct Investment (FDI) in Malaysia. Using time series analysis, the annual data consisting of Foreign Direct Investment (FDI), economic growth (EG), inflation rate (IR), trade openness (TO) and exchange rate (ER) for 35 years from 1981-2015 were carefully analysed. Multiple Linear Regression is applied in the study to investigate the relationship between independent variables (economic growth (EG), inflation rate (IR), trade openness (TO) and exchange rate (ER)) and dependent variable (Foreign direct Investment (FDI)). Analysis was then carried out to examine the relevance of these factors towards Foreign Direct Investment (FDI) in Malaysia. Based on the results obtained, it shows that inflation rate (IR) has a significant relationship Foreign Direct Investment (FDI) in Malaysia.