Advantages And Disadvantages Of Foreign Direct Investment In Malaysia

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Foreign direct investment FDI is an investment of a company from one country to another whereby assets are acquired, operations are set up and joint ventures with local firms are made (Financial Times , n.d.). FDI is a risky and more expensive method of venturing globally as compared to licensing and exporting, however it does not stop companies from doing so due to its many advantages. FDI is one of the key drivers in speeding up the development and economic growth in Malaysia. Sound macroeconomic management, presence of a well-functioning financial system and sustained economic growth has made Malaysia an attractive country for FDI. Moreover, FDI plays a crucial role in Malaysia economy as it generates economic growth by increasing capital formation through the expansion of production capacity. Based on the statistic conducted by…show more content…
This indicates the market size is not increasing rapidly. Thus, the purchasing power in that particular country is increasing at a sluggish rate. This will further indicate the host country to discourage investors from investing in their country as it does not offer any beneficial opportunities for investors. Foreign investors invest outside their country preferable in growing economies to large economies aiming to make profit (Demirhan and Masca, 2008). This is on account of slow developing economy influences the product sales, and subsequently, the gain of profit. Thusly, given that the rate of return gets a seemingly lesser from one year to the other, Investors won't be satisfying and will never again be encourage to make any further investment anytime soon. Specifically, this will be in dubious with a definitive goal of market seeking firms, which is to grow the business to a bigger market in order to make more profit. To put it plainly, financial development is a critical independent variable to be incorporated into this

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