An Empirical Study on the Determinants of FDI in Malaysia and its Link to Trade (1978-2002) - UUM Electronic Theses and Dissertation [eTheses]

Unit Pengajian Siswazat-i Jabatan Hal Ehwal Akadeniik

(Graduate Studies Unit) Academic Affairs Department

Universiti Utara Malaysia

PERAKUAN KERJA KERTAS PROJEK (Cerfification of Project Papclr)

Saya, yang bertandatangan, memperakukan bahawa (/, the undersigned, certify that)

calon unkk ljazah

(candidaft1 for the degree of)

MASTER OF ECONOMICS

telah merlgemukakan kertas projek yang bertajuk {has prestsnfed hisl’her project paper of the following title)

An Empirical Study On The Determinants of FDI in Malaysia and Its Link To Trade (1 978

-

2002).

seperti yang tercatat di niuka surat ,tajuk dan kulit kertas projek (as it appears on the title page and front cover of project paper)

bahawa ke-tas projek tersebut boleh diterirna dari segi bentuk serta kandungan dan meliputi bidang ilmu denga.1 memuaskan.

(fhaf the project paper acceptable in form and confenf and fhaf a satisfactory knowledge of the field is covered by the project paper).

hania Prof. Madya Dr. Nor’Aznin Abu Bakar Tan d at a n g an :

A&A/,

(Name) (P enyeha Utarna/Pnnc/pa/ Supen/;sor) (Sign at ure)

Nama Tanda:angan

(Name 1 (‘periyelia KedualSecond Supervisor) (Signature)

ABSTRAK

Kaj ian ini bertuj uan nicnganalisa hubungan antara keniasukan pelaburan asing langsung dan perdagangan di Malaysia. Kaj ian ini mengguriakan data siri niasa dari tahun 1978 hingga 2002. Metodologi yang digunakan dalani kaj ian ini ialah model graviti khas untuk niengaitkan hubungan kemasukan pelaburan asing langsung dan perdagangan.

Hasil kaj ian nienunjukkan bahltwa import mmiang nierangsangkan keniasukan pelaburan asing langsung yang lebih tinggi. Sebaliknya, kemasukan pelaburan asing langsung tidak niembawa kepada peningkatan perdagangan nielalui import. Secara uniuninya, hasil kaiian ini adalah selari dengan sorotaii karya dan kaj ian-kaj ian enipirikal lepas yang nienyokong teori kaedah keniasukan pelaburan asing langsung. Ini j uga bern-iaksud bahawa syarikat niultinasional akan nieniperkenalkan produk niereka

terlebih dahulu melalui import sebeluni nienjalankan operasi pengeluaran di Malaysia.

.. 11

ABSTRACT

This paper examines the link between inward FDI and trade and how each affects the other in Malaysia. This study is based on annual time series data from the years 1978-2002. The main method of study is via the gravity model which is normally used to determine the extent of trade flows. This study incorporates the gravity model to measure FDI using an augmented gravity model in order to link trade and inward FDI. The results of this study indicate that imports actually induce higher inward FDI which inward FDI itself does not induce higher trade levels through imports. While the findings are generally in line with the literature and empirical studies. it also serves to validate the earlier theories of FDI namely the factors which determines the entrjr mode of inward FIII into Malaysia. This means that MNC’s nroiilcl generally prefer to initially penetrate the Malaysian markets via exports before settin;: LIP production here. Thus, trade through imports can be said to be a precursor of fut tire inward FDI.

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