The environment for foreign direct investment (FDI)

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Introduction

The environment for foreign direct investment (FDI) has become very competitive and it is important for countries to critically examine their investment policies and ensure their relevance and effectiveness in attracting and benefiting from FDI. Foreign direct investment (FDI) has the potential to generate employment, raise productivity, transfer skills and technology, enhance exports and contribute to the long-term economic development of the world´s developing countries. More than ever, countries at all levels of development seek to leverage FDI for development, including Malaysia.

Malaysia has made the transition from being an essentially primary commodity producing economy over the last three decades to one in which manufacturing contributes more than 30 per cent of annual GDP and the overwhelming majority of exports. This transformation has been facilitated by an export-led investment strategy, in which FDI from more developed nations has played a key role.

To accelerate its economic transition, Malaysia has launched various policies and programmes with varying degrees of success. This paper examines the role and impact of both the FDIs and domestic investments on Malaysia's actual economic growth and development. They will be linked to exports, employment, and domestic equity levels. It should be noted that