Chapter 1 covers the brief introduction on the topic researchers chose to do in this study, starting from the big picture narrowing down to the field for which researchers focused on. First off, some studies are done on Foreign Direct Investment (FDI), defining and explaining how it works. The effects FDI brought on to a country will also be discussed in this section. Follow on, the topic are narrowed down on to the chosen country - Malaysia. In this section, problem statements regarding the FDI in Malaysia and the involved independent variables will be introduced. Research objectives are then written down with more in depth as researchers go on further into the topic. Research questions and hypothesis on the study will also be inscribed accordingly. Under the sub topic significance of study, the importance and contributions of the research will be discussed. Before the chapter ends, a layout on each chapter will also be briefly outlined. Altogether, there will be 5 chapters including: Chapter 1: Research Overview, Chapter 2: Literature Review, Chapter 3: Methodology, Chapter 4: Data Analysis, and Chapter 5: Discussion, Conclusion and Implications. Last but not least, Chapter 1 is concluded by providing a summary and linkage to the next chapter covering the literature review.
1.1 Research Background
The Economy Watch (2010) defines Foreign Direct Investment (FDI) as a type of investment involving the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. More specifically, FDI refers to the investment of foreign asset into domestic goods and services and this does not include the foreign investments in stock markets. FDI can be carried out through joint ventures, Greenfield investments and cross-border acquisitions. Joint venture is a shared ownership with the local investors in a foreign business. This strategy will turns out good if the MNE finds the right local partner as it can reduce political and country risks, which in turn, increase the understanding on the local market. However, if the wrong partner is chosen instead, political risk and agency costs may occur. Meanwhile, a Greenfield investment is to establish a production or service facility "starting from ground up". It usually requires extended periods of physical construction and organizational development. Cross-border acquisition, on the other hand, is to directly acquire a company in the targeted country. This requires a short period of time to gain presence and it is also a cost-effective way of gaining competitive advantages such as brand names valued in the targeted market (Moffett, Stonehill, & Eitheman, 2009).
According to Awan, Khan, and Zaman (2011), FDI is an essential component to the efficient functioning of International Economic system as it speeds up the development and economic growth of a country. However, the FDI benefits in which host countries can expect to receive depend on the co-operation of their government. The authors also pointed out that FDI mobilizes the capital from rich countries to capital scarce countries. As a result, both countries can gain from this capital movement. Shortage of capital for the development process has always been a key problem in developing countries (Aqeel & Nishat, 2004). This is mainly because domestically generated resources are insufficient to satisfy the growing needs of investments in education, infrastructure and exploitation of natural resources, thus, resulting in their inability to generate internal savings that meet their investment needs (Vadlamannati, Tamazian, & Irala, 2009). FDI inflows act as the lifeblood to developing countries as it brings capital to their countries. Other than that, it made possible the transfer of technology and managerial skills, increase in employment and enhancement in the productivity of home country (Awan, Khan, & Zaman, 2011). Besides, FDI also benefits investors in developed countries by enabling them to take ownership advantage in the host country and gain profits. As a result, there is mutual benefit in the international movement of capital among countries.
Despite the advantages of FDI, it had also led to a few negative effects. First and foremost is the repatriation of investment income. When foreign investors invest in the host country, they are compensated in the form of dividends. It will then be brought back to their country, thus, causing an outflow of fund for the host country. The next problem is the high import content. The large inflow of FDI into the country has brought about an increase in the imports of intermediate goods, consequently, growth in the import bill. "Crowding-out" effects also make up as another problem of FDI. As foreign investors invest in the host country, it increases industry concentration and market power of a few large firms. This in turns, create barriers for other small firms to enter (Wong & Jomo, 2005). In conclusion, FDI brings both advantages and disadvantages to the nation's economy.
Moffett, Stonehill, and Eitheman (2009) also explained that the motives of Multinational Enterprise (MNE) investing abroad can be summarized into 5 categories comprising of market seekers, raw material seekers, production efficiency seekers, knowledge seekers and political seekers. Market seekers produce in foreign countries and can either export to other markets or used to satisfy the local demands. On the other hand, raw material seekers extract raw materials that they can find in other countries. They then either use them for export or further processed and sell it in the country in which the raw materials are found. Production efficiency seekers have similar concept with the raw material seekers. They prefer to produce in countries where one or more factors of production are underpriced in relation to their productivity. Following are the knowledge seekers who operate in foreign countries to gain access to technology or managerial expertise. With better technology or managerial expertise, one can increase productivity and reduce the cost. Hence, achieving the primary objective of MNE investing abroad - reduction of cost. Last but not least, political safety seekers acquire or establish new operations in countries with low economy and political risks.
1.1.1 Foreign Direct Investment in Malaysia
Foreign direct investment is the key driver underlying the strong growth performances experienced by the Malaysian economy. Sound macroeconomic management, presence of a well functioning financial system and sustained economic growth has made Malaysia an attractive country for FDI. Other than that, the government policy reforms like introduction of the Investment Incentives Act in 1968, establishment of free trade zones in the early 1970, and the provision of export incentives alongside the acceleration of open policy in the 1980s has attracted a large amount of FDI inflow in the late 1980s (Ang, 2008). The sharp increase in FDI of Malaysia was due to the coincidence of the foreign investment regime which was further liberalized as part of the structural adjustment reforms implemented in response to the macroeconomic crisis in the mid-1980. In addition, the move by firms from Japan, South Korea, United States and Taiwan in relocating their production bases to low-cost countries due to the rising wages in the domestic countries also plays a part in the increment of FDI in Malaysia (Athukorala & Waglé, 2011).
In the second half of 1980s and 1990s, the total FDI inflow into ASEAN countries increased dramatically from an annual level of US$3 billion to US$30 billion. Singapore remained by far the largest recipient of FDI in the region, whereas Malaysia accounted for 25% of the total inflows into ASEAN countries (Athukorala & Waglé, 2011). According to Karimi, Yusop, and Law (2010), based on the result of TOPSIS method which is used in ranking ASEAN countries in term of attraction and capacity for FDI in 2005, Malaysia was at the second place whereas the first ranking belongs to Singapore. This shows that Malaysia is the most attractive country for FDI among the ASEAN countries right after Singapore.
FDI plays several crucial roles in Malaysia economy; the most crucial one is to generate economic growth by increasing capital formation through the expansion of production capacity. The second role is to promote export growth. Investing firms which have its own product reputation and brand image in the international market reduces the need for domestic firms to spend resources and time to penetrate and acquire foreign markets. The facilitation of the new technology transfer to the host country and reduction in unemployment through the expansion of the economy and job creations resume as the third role of FDI. In addition, FDI also acts as an agent of transformation in the Malaysian economy. This is proven with the dominance of the influx of FDI into the manufacturing sector in its transformation from agricultural economy to industrialized economy (Abdul Rahim, 2006). Wong and Jomo (2005) point out that FDI can bring in foreign exchange to be used in the payment of necessary capital and intermediate goods imports, consequently, solving the foreign exchange problems.
1.2 Problem Statement
As observed from Figure 1, researchers found that Malaysia's FDI net inflows (BoP, current US$) were decreasing from 1992 reaching to a minimum point in 2001 with a total amount of FDI net inflows (BoP, current US$) of US$ 553,947,368.42 only. This is the lowest amount attained since 1980s. The average FDI net inflows (BoP, current US$) that was decreasing since 1992 was able to increase later from 2002 to 2006. However, the FDI net inflows (BoP, current US$) dropped significantly from US$ 8,590,185,403.74 in 2007 to US$ 1,387,393,683.06 in 2009. Surprisingly, things turned the other way round in 2010 as the FDI inflow in Malaysia increased dramatically and reached a net amount of US$ 9,509,265,455.11. It is by far the highest amount achieved among the recent years. According to Athukorala and Waglé (2011), Malaysia's impressive FDI inflow was severely disrupted by the financial crisis from 1997 to 1998 as they see the magnitude of FDI in Malaysia dipped during the period. The high volatility of FDI inflows in Malaysia has drawn attention to the further study of the determinants of FDI inflow in Malaysia.
It is reported that the charm of Malaysia in attracting FDI had declined. As explained by Karimi, Yusop, and Law (2010), even though Malaysia was the second most attractive and highest capacity for foreign direct investment among the ASEAN countries in 2005, the recent inward FDI performance of Malaysia shows that the country was underperforming. The FDI of countries around Malaysia like Thailand and Vietnam have surpassed Malaysia.
Figure 1: Total FDI inflows in Malaysia (BoP, current US$): 1970 - 2010
Source: World Bank (2011): World Development Indictors (Edition: April 2011). ESDS International, University of Manchester.
The decrease of FDI in Malaysia could affect the economic growth of Malaysia conversely. This is because previous studies showed that the strong economic growth of Malaysia depends largely on the FDI. It injects capital and brings in both managerial skills and technology to Malaysia with the aim of satisfying the growing needs of domestic investment (Ang, 2008; Vadlamannati, Tamazian, & Irala, 2009; Abdul Rahim, 2006; Athukorala & Waglé, 2011).
For better understanding of the paper, some necessary knowledge about the independent variables is discussed briefly. First off is the independent variable - economic growth. Slow economic growth is where the increment amount of goods and services produced by the economy is low; this implies that the market size is not growing rapidly and the purchasing power of the residents in the country increase sluggishly. The retarded economic growth in host country discourages investors to invest in the host country itself as it does not offer any beneficial opportunities for investors. Foreign investors aiming at making profits prefer growing economies to large economies (Demirhan & Masca, 2008). There is no reason for the investors to invest in a sluggishly growing economy as the rates of return for the investors is low and the duration to get back their principal is longer in comparison to investing in a rapidly growing economy. This is because slow growing economy affects the product sales, and thus, the growth of profit. Therefore, given that the percentage of return receives year after year comes short, investors will not be satisfied and will no longer be motivated to make any further investment anymore. In particular, this will be in controversial with the ultimate objective of market-seeking firm, which is to expand the business to a larger market in order to earn more profit. In short, economic growth is an important independent variable to be included in this study.
The next independent variable is the market size. Jordaan (as cited in Demirhan and Masca, 2008) mentioned that FDI will move to large expanding markets with greater purchasing power in which firms can potentially get profit from investment. The main objective multinational enterprises expand their business abroad is so that they can produce abroad as locals and serve the local and regional markets without any imposition of import tax. Small market size implies that the purchasing power and the demand of residents are low. There are not many opportunities for foreign investors to expand business into small market as small market size provides less efficient utilization of resources and exploitation of economies scale. Firms always take advantage of economies of scale so that they can produce in a larger quantity at a reduced cost. Small market size prohibits the firm from enjoying such advantage because with the given market size and demand of product, there is no reason for the firm to produce more than what the market demand. As the quantity of products produced is small, the fixed cost per unit increase. This is because fixed cost like rental and salary of employee are invariant to the number of product produced. Thus, the lower the number of production, the higher the average cost of product. This process is better known as the "diseconomies of scale". With the higher product cost, firms are unable to earn more profit or increase their competency by setting a lower selling price. This creates more opportunities for producers who are capable of producing at a lower cost and sell it at a lower price to enter the industry. The level of competition both from and for the foreign investors has increased. Hence, if the foreign firms are unable to compete with the other firms, the possibility of the firms coming down to bankruptcy is high. For this reason, the risk that foreign investors have to bear with the choice of investing in small market size is further increased. Thus, it is an obvious fact that FDI is not in favour to be invested in small market size country. From the explanation above, researchers can see clearly that market size is an important factor that affects the decision of FDI.
The third independent variable is China FDI inflow which is less studied as the factor of FDI in Malaysian case. China could be a threat to other countries nearby like Malaysia, Thailand, Vietnam and Indonesia. According to Chantasasawat, Fung, Iizaka, and Siu (2004), several governments have publicly noted that the emergence of China has diverted direct investment away from their economies. And policymakers throughout the region are convinced that the rise of China has contributed to the foreign and domestic investors leaving their countries and investing in China instead. China is a large country with an outstanding capability to attract more FDI into its country than any others countries. With the high population and market size of billions of people and the availability of large lands for foreign investors to build their business, no wonder there is so many foreign investors interested in the country. In other countries where there is limited land, the price of land might be higher due to the short of supply. High population in China creates high labour force, thus, reducing the cost of labour. Foreign investors are attracted by these benefits and lots of the manufacturers choose to build their factory in China to take advantage of the cheap production costs and increased profits. With China's large market size and high demand, foreign investors will be able to enjoy the benefits of economies of scale as they produce and invest in China. Consequently, as large amount of FDI goes into China, the neighbouring countries will only be able to shares out the remaining amount of FDI. This leaves negative effects on the countries that heavily rely on FDI. As a result, it is crucial to take account of China FDI inflow in the determination of FDI inflow in Malaysia.
Other than China FDI inflows, exchange rate is also an important factor that affects FDI. Exchange rate is of the main concern when foreign firms make decisions on the choice of investment because it has large impact on the capital invested. Foreign investors do not like to invest in country with high currency value. This is because high currency value reduces the capital of the investments. For instance, the exchange rate of Malaysia and United States is RM3.5 / US$ 1 and RM 2.5 / US$ 1 respectively. When US firms choose to invest in Malaysia with the amount of US$ 10, 000,000, the firm can acquire RM 35, 000,000 of capital in Malaysian Ringgit if the exchange rate is RM 3.5 / US$ 1. However, if the Malaysian Ringgit appreciate to RM 2.5 / US$ 1, the capital that can be used in Malaysia to make investment is substantially reduce to RM 25,000,000. From the above situation, researchers can see that the appreciation in the currency value of the host country (Malaysia) reduce the capital that the investors can use to make investment in host country. Smaller amount of fund have to be distributed among the purchase of raw materials, hire of labour and construction of building. As a result, high currency value is not preferable by investors. Foreign investors like depreciated currency value because it would lead to higher relative wealth position of foreign investors, and hence, lower relative cost of capital (Ang, 2007). Due to the effect of the exchange rate, it is vital to include exchange rate in our study of factors affecting FDI in Malaysia.
The fifth factor which is the inflation rate represents the stability of economy. The higher the inflation rate, the lower the economic stability. The low inflation rates have been effective in attracting FDI to developing country (Demirhan & Masca, 2008). The low economic stability increases the risk of the investors in face of losses. During high inflation period, the general prices of goods and services rise. This erodes the purchasing power of public as they need more money to buy a product in comparison to the time period before inflation. Eventually, the quantity of goods and services demanded will decrease. The drop in the quantity demanded will also lead to the decrease in sales. Moreover, the cost of raw materials needed for production increase as well and firms will not be able to exploit the advantage of low production costs. For instance, previously RM 10,000 can purchase 1000 units of woods to produce chairs. However, with the same amount of money during inflation period, the producer will only be able to purchase 800 units of wood. As the average cost of production rise, the selling prices of the product increase, leading the public to the inability to meet up with the expenses. And in the end, it will negatively affect the profit of the business and indirectly affects the return of the investors. As a result, due to the impact inflation rate have on the profitability of business, it is important to be considered by investors before making any investment in that country.
Other than that, infrastructure quality is also another determinant of FDI. Infrastructures such as road, ports, railways and telecommunication system are the basic needs of firms in support of daily business routine. Poor infrastructures that reduce productivity and potential of investments are major constraint for low-income countries. Cost of transport and delivery time will be increased due to the poor infrastructure. OECD points out that although a lot of interest arose among foreign investors on the country of China emerged after 1979, large FDI inflow did not occur in the initial period due to the poor infrastructure (as cited in Ali and Guo, 2005). As market-seeking firms invest and produce in foreign countries, it will have to deliver it to different regions of the countries after production so as to serve the local consumers' needs. Poor road and railway condition would increase the possibility of transport break down, delay in delivery time and damage of products on the way to its destination. Multinational enterprise that set up subsidiary in host country takes telecommunication seriously because of its role as a bridge that connects both the parent and subsidiary company. Poor telecommunication services such as problematic internet connection restraint parent company from doing distance monitoring and supervising the activities of their subsidiary. Nowadays, company use video conferencing to monitor their subsidiary and conduct meeting with other company in order to save time and cost. For all these reasons, researchers are convinced that infrastructure quality is significant in attracting FDI.
Last but not least is the trade openness of the host country. Trade openness indicates the degree host country response to trade, and it involves both import and export activities. Country which dislikes import and export would impose a high tariff on both imported and exported goods. This would discourage foreign investors to make investment in host country, in particular, export-oriented firms. According to Aqeel and Nishat (2005), horizontal FDI is motivated by lower trade cost, hence, high tariff barriers induce firm to engage in horizontal FDI to replace exports with production abroad by foreign affiliates. Export-oriented firms import materials that cannot be found in host country to be further processed and exported to other countries for sale. So if high tariff is imposed on imported goods, the cost of producing the product would increase and the volume of import will decrease. This will harm both the productivity and the profitability of the firm. Vertical FDI can be characterized by individual affiliates specializing in different stages of production output and semi products, which in turns, are exported to other affiliates for further processing (Aqeel & Nishat, 2005). By using this fragmenting production process, it enables company to take on different cost advantages at different countries. For instance, ABC Company faces the problem of high assembling cost and less profitable sales in country A but yet do not want to give up on their business. Fortunately, the cost of labour in country B is very low. Company A can opt to reduce their cost significantly with the assembly of products done in country B and then export back to country A for sale. Therefore, by acquiring the material at a lower cost in country A and assembling the final product in country B, the cost of the product is reduced in comparison to it is finished in either of the country. This fragmentation process gives ABC Company an opportunity to invest abroad and reduce the cost of production. However, given that the trade openness in country B is low with the imposition of high tariff on import and export product, the cost after the taxes will be much higher than before the fragmentation process. The imposed taxes in country B have given up the chance to attract foreign direct investment into country B.
In conclusion, the seven factors which are made up of economic growth, market size, China FDI inflow, exchange rate, inflation rate, infrastructure quality and trade openness are important in the decision making of FDI. Therefore, researchers have included them in this study to verify whether there is relationship between these factors and FDI in Malaysia.
1.3 Research Objectives
1.3.1 General Objective
The general objective is to examine the relationship between FDI inflows and the independent variables in Malaysia from 1982-2010.
1.3.2 Specific Objectives
i. To examine the relationship between economic growth and FDI inflows in Malaysia from 1982-2010.
ii. To examine the relationship between market size and FDI inflows in Malaysia from 1982-2010.
iii. To examine the relationship between China FDI inflows and Malaysia FDI inflows 1982-2010.
iv. To examine the relationship between exchange rate and FDI inflows in Malaysia from 1982-2010.
v. To examine the relationship between inflation rate and FDI inflows in Malaysia from 1982-2010.
vi. To examine the relationship between quality of infrastructure and FDI inflows in Malaysia from 1982-2010.
vii. To examine the relationship between trade openness and FDI inflows in Malaysia from 1982-2010.
1.4 Research Questions
i. Is there any significant relationship between FDI inflows and at least one of the independent variables in Malaysia from year 1982-2010?
ii. Is there any significant relationship between economic growth and FDI inflows in Malaysia from year 1982-2010?
iii. Is there any significant relationship between market size and FDI inflows in Malaysia from year 1982-2010?
iv. Is there any significant relationship between China FDI inflows and Malaysia FDI inflows from year 1982-2010?
v. Is there any significant relationship between exchange rate and FDI inflows in Malaysia from year 1982-2010?
vi. Is there any significant relationship between inflation rate and FDI inflows in Malaysia from year 1982-2010?
vii. Is there any significant relationship between quality of infrastructure and FDI inflows in Malaysia from year 1982-2010?
viii. Is there any significant relationship between trade openness and FDI inflows in Malaysia from year 1982-2010?
1.5 Hypotheses of the Study
H0: There is no relationship between all independent variables and FDI inflow in Malaysia.
H1: At least one independent variable has relationship with FDI inflow in Malaysia
H0: There is no relationship between economic growth and FDI inflow in Malaysia.
H1: There is relationship between economic growth and FDI inflow in Malaysia.
H0: There is no relationship between market size and FDI inflow in Malaysia.
H1: There is relationship between market size and FDI inflow in Malaysia.
H0: There is no relationship between China FDI inflows and FDI inflow in Malaysia.
H1: There is relationship between China FDI and FDI inflow in Malaysia.
H0: There is no relationship between exchange rate and FDI inflow in Malaysia.
H1: There is relationship between exchange rate and FDI inflow in Malaysia.
H0: There is no relationship between inflation rate and FDI inflow in Malaysia.
H1: There is relationship between inflation rate and FDI inflow in Malaysia.
H0: There is no relationship between quality of infrastructures and FDI inflow in Malaysia.
H1: There is relationship between quality of infrastructures and FDI inflow in Malaysia.
H0: There is no relationship between trade openness and FDI inflow in Malaysia.
H1: There is relationship between trade openness and FDI inflow in Malaysia.
1.6 Significance of the Study
Determinant of FDI is a popular topic among the researchers. Even though, there have been many previous studies done on the determinants of FDI in Malaysia, in this case, researchers have added a relatively new variables - FDI inflow of China - into the model in order to find out whether the amount of FDI inflow to China affects the FDI inflow of Malaysia. There have not been many researches that included China FDI inflows as an independent variable in the examination of the determinants of FDI inflow in Malaysia. Other than that, researchers form a new conceptual model which differs from previous studies. Researchers modify the theoretical framework by picking out the factors they are interested in examining and also adding in a new variable, China FDI inflows.
This study will contributes to policymakers like Bank Negara Malaysia and the Federal Government as it gives them a picture of what variables are significantly affecting FDI inflows in Malaysia. Researchers have included some important economic factors like economic growth, market size, exchange rate, inflation rate, quality of infrastructures and trade openness. The most important factors are of course the FDI inflows of China. Bank Negara Malaysia and Federal Government play an important role in affecting Malaysia's economic environment through the monetary policy and fiscal policy. Monetary policy is used by Bank Negara Malaysia to stimulate economic by controlling both the money supply and demand. On the other hand, fiscal policy is where the government uses the expenditure and revenue (taxes) to influence the economy. This study results can serve as a guideline or reference to Bank Negara Malaysia and the Federal Government in formulating monetary and fiscal policy to meet up with the preference of direct investors who consider investing in Malaysia. Besides, these can prevent policymakers from focusing on the unnecessary areas wasting resources in an effort to attract more FDI. With the huge amount of FDI, it will be able to stimulate Malaysia's growth, increase employment rate, living standards and technology transfer and also shorten the period to achieve Vision 2020.
China is a large country with low labour cost, large market size, and high productivity level. For all these reasons, China easily out wins other countries in attracting a much higher FDI into its own country. Most of the manufacturing firms choose to invest in China to exploit the cost advantage. If in this study, researchers found out that FDI inflow of China has significant negative relationship with the amounts of FDI inflows in Malaysia, then the Federal Government of Malaysia should avoid direct competition with China. In contrast, if it is found that there is a significant positive relationship between the both, Malaysia should maintain a good relationship with China. They may consider improving the trading transaction with China or may be even come together with China in constructing policy which benefits both Malaysia's and China's economy.
Other than the contribution to Bank Negara Malaysia and the Federal Government, this study also provides guidelines or serves as a reference to potential direct investors who wish to invest in Malaysia. Before direct investors decide on investing in Malaysia, they will perform a series of examination on Malaysia's situation to determine whether or not it is profitable for them to invest in. This study will guide them through the determinants which have significant effect on the FDI inflows of Malaysia. It will also prevent potential direct investors from investing in countries with high risks and negative return.
In short, by conducting this study, researchers are able to understand more about the determinants of FDI in Malaysia and provide a more robust result to Bank Negara Malaysia and potential direct investors on the impact of economic growth, market size, China FDI inflows, exchange rate, inflation rate, infrastructure quality and trade openness have on Malaysia's FDI in flow.
1.7 Chapter Layout
1.7.1 Chapter 1
Chapter 1 discusses about the topic that researchers are interested to study, introduce the topic and write out the problem statement. Other than that, researchers will also be going through on the objective of conducting this study, what researchers are going to investigate and also the contributions and the importance of the study.
1.7.2 Chapter 2
Chapter 2 is the literature review part. Researchers will be summarizing on what they understand as they read through the past researchers' work. This increases researchers' understanding on the topic that researchers are going to do. Besides, researchers will also review on any relevant theoretical models and come out with the conceptual framework for the research.
1.7.3 Chapter 3
Chapter 3 is the methodology part in which there will be a description on how the research is carried out in term of design, data collection methods, sampling design, operational definitions of constructs, measurement scales, and methods of data analysis. It mainly discusses the preparation work before moving on to the data analysis part which constitutes the next chapter.
1.7.4 Chapter 4
Chapter 4 presents pattern of result using the data and methods previously described in chapter 3. Then, researchers will analyse the results to answer the research questions and hypothesis written down in Chapter 1.
1.7.5 Chapter 5
Chapter 5 is the last chapter of the research in which there will be discussion, conclusion and implications. It summarizes the whole study and converse the major finding, what can be recommended to policy makers and practitioners from the result obtained in the research. Other than that, it also point out the limitations of the study and provide recommendation so that next researcher can further the study if he / she is interested.
1.8 Conclusion
This research paper introduce FDI in details with its definition, types of FDI, motives of FDI, advantages and disadvantages of FDI and also how FDI works. Moreover, this study discuss on the seven determinants of FDI that researchers are interested in, including economic growth, market size, China FDI inflows, exchange rate, inflation rate, infrastructure quality and trade openness. Researchers also explained on this research's objectives - to understand the determinants of FDI inflow in Malaysia in order to improve the future performance of FDI inflow. In terms of the contribution, researchers hope this research will provide policymakers with a better understanding of the factors affecting FDI so that an appropriate policy can be developed. Other than that, researchers also explain on the chapter layout of this study. After clearing up on what need to do in this research, researchers proceed to the next chapter which is the literature review. This research paper will also study on the past researchers' work on the relationship between FDI inflows and the seven determinants and summaries it under the next chapter.
