Malaysia is widely considered a developing state that ‘s on the threshold of going a to the full developed state. Malaysia is mostly considered a success narrative when it comes to economic growing over the last century. In the late 19th century it had been a major provider of primary merchandises to the industrialised states, Malaysia ‘s chief export points were gum elastics, lending about 60 per centum to the entire export value, and Sn, lending about 12 per centum. However, Malaysia has long reduced its dependance on agricultural exports and have turned their attendings to foreign net incomes. Manufacturing merchandises have overtaken agricultural merchandises as the chief foreign exchange earner. This is exemplified by the fact that Malaysia is now one of the biggest manufacturers of semi-conductors in the universe. Foreign direct investing ( FDI ) has been an of import beginning of economic growing for a underdeveloped state like ours, conveying with it much needed capital investing, engineering and direction cognition for economic growth.FDI has been seen as a factor underlying the strong growing public presentation experienced by the Malayan economic system. Policy reforms, such asthe debut of the Investment Incentives Act 1968, the constitution of free tradezones in the early 1970s, and the proviso of export, led to a large influx of FDI in the late 1980s.Foreign direct investing, of FDI involves a foreign state pumping money into another state with the intent of geting or constructing touchable assets in that state. Tangible assets include land, mills, machines, edifices and enterprises.FDI in Malaysia is set up following the acquisition of at least 10 % of the entire equity in a local company by a foreign investor.

Harmonizing to the Unctad World Investment Report 2010 released in late July, FDI fell 81 % to US $ 1.4bil from US $ 7.3bil in 2008. In visible radiation of these figures, it is indispensable that Malaysia takes stairss to pull new investors into the state. The most suited foreign investors Malaysia should be looking at are emerging economic systems like China, India, and the Middle East.

Importance of FDI

FDI is an highly of import facet for economic growing in developing states such as Malaysia. FDI brings with it several benefits which can non be overlooked. States that are developing are get downing to see the importance of FDI and are get downing to ease up their policies on FDI to pull more investing. The factors that make FDI such an built-in portion of economic growing in developing states is the fact that it brings with it technological growing and cognition transportation, increased employment and development in human capital, development in substructure, and increase in sum of domestic capital.

Technology and information transportation

This is regarded as arguably the most of import benefit that host states reap from foreign direct investings. MNE ‘s spend a batch of clip and money on research and development, and more frequently than non hold a degree of engineering that is superior to the developing host state, which means there is great possible for a technological and information spillover from the developed state into the developing state. It should be noted though that the extent of this spillover varies depending on contexts.

Human capital sweetening

One more factor which makes FDI really of import for the economic growing of a underdeveloped state is the sweetening of the host state ‘s work force. This works in two ways, straight and indirectly. Foreign direct investing creates some kind of rhythm that consequences in human capital sweetening. First, the Multi National Enterprise ‘s that come into Malaysia will of class provide intensive preparation to the work force of the host state that they employ. This is the direct consequence that FDI has on human capital sweetening. At the same clip, Malaysia ‘s authorities will put up assorted preparation programmes and human resource development Centres to heighten the accomplishments of the local work force which in bend will lure MNE ‘s to put in Malaysia.

Strengths

Malaysia has shaped their substructure in line with the demands of the concern community. There are five international airdromes, digital and fibre ocular engineering are deployed by telecommunication webs, the authorities is invariably doing attempts to construct main roads and railroad paths linking the more rural countries to the metropolis. Malaysia besides has seven international havens that make it an ideal topographic point for foreign investors.

Another strength Malaysia has is a immature, hardworking, educated, and productive work force, arguably one of the best in the part. As mentioned earlier, the authorities takes monolithic attempts in guaranting that the Malaysian work force is good trained and educated to run into the demands of the foreign investors who seek to use them. The authorities has set out assorted programmes workshops to transform the already effectual Malaysian work force into a universe criterion workforce ready to take on anything. Furthermore, the comparatively low-cost cost of life in Malaysia make labour costs really competitory in Malaysia in relation to an educated skilled work force. While India China and the Middle East do hold an copiousness of labor at their disposal at really low costs, skilled and educated labors would be well more at that place than it would in Malaysia. The Malayan authorities places a batch of importance on education.Moreover the Human Resource Development Fund ( HRDF ) was launched by the authorities to promote preparation, retraining and accomplishments upgrading in the private sector. Besides, as Malayan employment Torahs safeguard the rights and involvements of its employees, and really descriptively set out the relationships between employers and employees, there are really minimum trade differences and work stoppages.

Economic strength is another immense merchandising point for Malaysia as a mark for investing by investors from China India and the Middle East. We earlier saw the history of Malaysia ‘s economic growing. The impressive thing about Malaysia is that it has seen uninterrupted economic growing over the old ages. In 2008 the universe ‘s economic system took a hit as a consequence of USA ‘s subprime mortgage crisis. The American economic system faced a dramatic lag and this had an inauspicious spill over consequence on the remainder of the universe, with Asia and Europe in peculiar being affected severely. Malaysia nevertheless, weathered the economic storm and recorded a gross domestic merchandise ( GDP ) growing rate of 4.6 per cent for that twelvemonth. This was chiefly due to strong domestic demand and a continued growing in private and public ingestion.

Another strength Malaysia possesses is back uping authorities policies. A major draw for India China and the Middle East to put in Malaysia is the fact that it has a concern environment that is contributing for enlargement and net incomes that has been cultivated by the Malayan authorities.

Challenges

Rising Costss Of Populating

Equally attractive as Malaya is for foreign investors, there are several challenges confronting Malaysia which may discourage foreign investors. One of the challenges faced by state is raising labour costs. I mentioned earlier that one of Malaysia ‘s strengths in pulling foreign investing is our extremely skilled and educated work force. That can besides slightly have an inauspicious consequence as it means people are anticipating bigger payroll checks every bit good as going more selective about jobs.This is barely a surprise as the cost of life in Malaysia is on the rise and it would n’t do much sense if a extremely educated and skilled person is hardly gaining adequate money to populate comfortably. Furthermore, more and more underdeveloped states around us are going attractive marks for foreign investors as they are get downing to supply skilled work forces for comparatively lower costs. Indonesia, Thailand, Vietnam, Cambodia, Laos and Myanmar are illustrations of states who offer inexpensive labor, and above of that an copiousness of land and immense domestic markets.

Lack of Drive

Another challenge confronting Malaysia is one that it has brought upon itself. It is no hyperbole to state that Malaysia ‘s economic growing has been antic, nevertheless this has been followed by us acquiring a small excessively comfy and content with our success. We are nowhere near as hungry or driven as we used to be in the 70 ‘s and 80 ‘s. Besides our economic system has been hit by the recession twice in the last 15 old ages, one time in 98 and one time in 20008. One may reason that a batch of states were hit during these two periods, but it did however expose the infirmities of our economic system such as the deficiency of regulative steps.

Infrastructure

While Malaysia has good substructure, it can non be denied that our public conveyance system and comfortss pale in comparing to our neighbors Singapore. Foreign investors from China, India and the Middle East may elect to pay higher costs and put in Singapore alternatively.

Recommendations

With mention to the first challenge Malaysia faces in pulling FDI, the authorities should take stairss to increase rewards so more skilled workers are willing to work locally alternatively of looking for greener grazing lands overseas. Improved on the job environments and civilization will besides assist as people will be less selective about the occupation they take.

Malaya should besides take stairss to set into topographic point better regulative systems to avoid sing another economic downswing every bit bad as we did in 1998 and once more in 2008.

On top of that, Malaysia should put money into bettering our substructure. Our public conveyance system and comfortss are in demand of a revamping and this is every bit good a clip as any to make it.

Decision

In decision, it is without uncertainty that Malaya with our impressive work force and strong economic system is already an attractive finish for investors from China India and the Middle East, but we still do hold defects that may set them off. It is in my sentiment that the Malayan authorities with some attempt can rectify this defect and do Malaysia an unchallenged mark for foreign investors.