In order to encourage FDI, government policy is viewed as necessary. It is detrimental to

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.

Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact.

Foreign Direct Investment refers to the type of investment into a country that is characterized by the inflow of funds from a foreign source that can be in the form of ownership such as stocks, bonds, infrastructural presence, etc. by the element of ‘control’. FDI is defined as the net inflows of investment to acquire a management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.

Modern communications infrastructure makes it possible for anyone with a bank account to make a “foreign portfolio investment” (FPI). Rich and poor alike can gain from this ability to trade stocks and bonds overseas with speed and ease. For those with sufficient resources, however, a “foreign direct investment” (FDI) can also be made. While both types of investment can be lucrative for the investor, I believe that foreign direct investments are usually better for the country receiving the investment, and so FDIs should be the favored form of investment for those with the means to make them.

Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra-company loans".

In today’s increasingly globally integrated business world, foreign direct investment (FDI) “provides a means for creating direct, established and long-lasting links between economies,” according to the 2008 Organization for Economic Co-Operation and Development Benchmark Definition of Foreign Direct Investment (OECD, 2008, p. 14). Foreign direct investment (FDI) is defined as “an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor,” by the United Nations Conference on Trade and Development (UNCTAD).9

Abadie and Gardeazabel (2007) agreed that the stock markets are the main source of FDI, it is well known. But foreign firms that have been purchased through the stock market are in desperate need of financial services. This way, as a prospective investor makes decisions regarding his investments, he will be able to take into account the country’s financial development and banking development, and determine how such factors will ultimately affect their investments

Foreign Direct Investment (FDI) has been considered important for the growth of a country. When the individuals or companies from a country invest in another country, it is regarded as FDI. FDI not only strengthens the manufacturing base of the host country but also contributes to the strengthening of the economic outlook. FDI can be seen as an investment that leads directly to job creation in an economy. The unemployment rate decreases due to FDI, which leads to stability in economic, social and political spheres. This leads to establishing the notion that FDI is necessary for a country because it helps in strengthening the economy of a particular country. Ireland has been benefitted by

FDI has broadened its meaning into the acquisition of a lasting management interest in a firm outside the investing enterprise’s home country. For the reason above, it comes in different forms which include direct acquisition of foreign companies, construction of a factory in a foreign country and investment in joint ventures. Britton and Worthington (2009) described FDI as an important aspect of globalisation as well as the activities of multinational companies.

Foreign Direct Investment (FDI) is a major or key element in international economic integration. Foreign Direct Investment creates a stable, direct and long lasting connections between economies. It therefore encourages the transfer of technology know how between countries and allow the host country to promote its products more widely in international markets. It is also and additional source of funding for investments and it can also be an important form of development. Foreign Direct Investment is an investment in a business firm by an investor from another country in which the foreign investor has control or a significant degree of influence over the company or firm. The Organization of Economic Cooperation and Cooperation

Foreign direct investment is becoming an increasingly important issue in today’s world, with the increasing globalization of capital markets. Foreign direct investment can occur when companies make investments abroad in multiple ways. Companies can invest in properties, plants and equipment abroad, invest in foreign businesses they already own, or acquire existing business assets of foreign companies. Defining the difference between direct investment and portfolio diversifying investments is an important distinction to make, and often depends on the definition of foreign direct investment that is being used, but generally at least 10% ownership of the equity in the foreign business is required in order for it to be

One of the studies is done by the Dar et al (2003). This study summaries the long term relationship between FDI and Economic Growth. It gives

Economists believe that Foreign Direct Investments is an essential part of economic evolution in every country. There are many academic papers that attempt to assess FDI aspects. Despite many researchers have tried to give an accurate explanation to FDI, there is no comprehensively approved theory. FDI motivations have been mainly researched by John Dunning, Stephen Hymer, Raymond Vernon, etc.

Foreign Direct Investment as seen as a main source of non-debt inflows and is increasing being required as a vehicle for technology flows and as a means of attaining competitive efficiency by creating a meaningful network of global interconnections. FDI plays a critical role in the economy since it does not only give opportunities to host countries to enhance their economic development but also opens new vistas to home countries to optimize their earnings by employing their ideal resources.

FDIs, or “Foreign Direct Investments are when a firm invest a certain amount of resources in business activities outside its home country, giving it some control over those activities” (Hill, et.al, p19, 2014)