Advantages And Disadvantages Of Malaysia's Foreign Direct Investment

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According to Eryigit (2012), “Foreign direct investment (FDI) is defined as establishing a new company or branch of a foreign company by foreign investor or share acquisitions of a company established in host country (any percentage of shares acquired outside the stock exchange or 10 percent or more of the shares or voting power of a company acquired through the stock exchange”. According to Fadli, Norazidah, Rhaudhah, Nurul, Salwani and Kamaruzaman (2011), stated that Malaysia one of the developing country that being openness to foreign country in order to attract foreign investor to maintain an accelerate growth to this country. They also stated that foreign direct investment plays an important role in capital formulation and economy growth…show more content…
Irlisuhana, Zulkhairi, Hafizah, and Suhaiza (2011) found the influx of foreign investments into the manufacturing sector was crucial in its transformation from an agricultural based economy to an industrialized based economy. Over many years, Malaysia has adopted two industrialisation policy and two industrialisation strategies which is the two policies are New Economy Policy and National Development Policy while two industrialisation policies were Import Substitution Industrialisation (ISI) strategy and Export-Oriented Industrialisation (EOI) strategy (“Overview of Malaysian Industrialization”,…show more content…
Exchange rate has given both positive and negative impact towards foreign direct investment (FDI). If foreign direct investment (FDI) in that country is export substituting, the increase in exchange rate volatility between headquarters and the country that allow foreign direct investment (FDI) induce a multinational to serve the host country via a local production facility rather than exports, thereby insulating against currency risk. According to Osinubi (2009), direct investment in a country with a high degree of exchange rate volatility will have more risky of profits which indicates negative impact of exchange rate towards foreign direct investment

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