An analysis of the impact of foreign investment on regional disparities

A case of Malaysia

Hasnah Ali, Ah Choy Er, A. R. Ahmad, Novel Lyndon, Sanep Ahmad

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Foreign Direct Investment (FDI) is said to boost the economic growth of the host country and FDI also is one of the factors that contribute to regional disparities because FDI typically tend to focus on the areas that offer economic advantages compared to those areas of backward regions. This study aimed to investigate the effect of FDI on economic development and regional disparities in a globalizing economy of Malaysia. It explores the proposition that regional disparities are linked to the FDI that come into the country. This study involved six areas of the Northern, Central, Eastern, Southern, Sabah and Sarawak Regions. The variables used involved data acquired from Bank Negara Malaysia Report, Ninth Malaysia Plan, Tenth Malaysia Plan, Labor Investigation Report, Department Of Statistics Malaysia, Malaysian Investment Development Authority (MIDA) and Economic Planning Unit (EPU) and the period covered was 28 years ranging from the year of 1980 to 2008. The analysis was conducted using classical production function which explained output as function to capital and labor and involved time series and cross section data which will be regressed with Least Square Dummy Variables (LSDV) Regression Model and Random Effects Model. It was found that FDI is positive and significantly related to GDP implying that FDI is enhancing economic growth and regions with higher level of FDI tend to have higher GDP. Since FDI focuses on the developed areas especially the central, northern and southern regions, thus this concentration will widen the regional disparities in Malaysia. These disparities has brought about the imbalances between the society with regards to poverty, manufacturing activities and many more.

Original languageEnglish
Pages (from-to)7-17
Number of pages11
JournalAsian Social Science
Volume9
Issue number14 SPL
DOIs
Publication statusPublished - 11 Oct 2013

Fingerprint

direct investment
foreign investment
Malaysia
economic growth
planning unit
labor
Regional disparities
Foreign direct investment
Foreign investment
Foreign Direct Investment
Foreign Investment
economic planning
production function
time series
economics
bank
manufacturing
statistics
poverty
regression

Keywords

  • Economic development
  • Foreign direct investment
  • Regional disparities

ASJC Scopus subject areas

  • Social Sciences(all)
  • Arts and Humanities(all)
  • Economics, Econometrics and Finance(all)

Cite this

An analysis of the impact of foreign investment on regional disparities : A case of Malaysia. / Ali, Hasnah; Er, Ah Choy; Ahmad, A. R.; Lyndon, Novel; Ahmad, Sanep.

In: Asian Social Science, Vol. 9, No. 14 SPL, 11.10.2013, p. 7-17.

Research output: Contribution to journalArticle

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