Questrion 1

b) Discuss advantages and disadvantages of FDI in Malaysia as host country (10 marks)

Foreign Direct Investment (FDI) in Malaysia registered higher net inflow of RM48.1 billion in 2021 as compared to RM 13.3 billion in the previous year following a gradual recovery in the global economy from the after effects of the COVID-19 pandemic. The increase was mainly driven by higher flows in equity and investment fund shares. In terms of position, FDI climbed to RM788.8 billion as at end of 2021 (2020: RM684.9 billion). Meanwhile, investment income rose to RM101.0 billion from RM43.8 billion in 2020. Manufacturing sectors were the main contributors for FDI flows in 2021, followed by Services and Mining \& quarrying sector. The investment in Manufacturing sector was particularly in Electrical, transport equipment and other manufacturing subsector, while Services was largely in Financial \& insurance/takaful activities. Main country for FDI flows were the United States of America (USA), Singapore and the United Kingdom. The FDI position stood at RM788.8 billion as at end of 2021 , whereby Services was the largest contributor precisely in Financial \& insurance/takaful and Wholesale \& retail trade activities. This was followed Manufacturing sector with Electrical, transport equipment and other manufacturing as the main subsector. Singapore, Hong Kong and Japan remained as the largest investor country for FDI position. Investment income increased to RM101.0 billion from RM43.8 billion in previous year, due to higher income earned by foreign companies in Malaysia. Manufacturing and Services were the main sectors, while investors from the USA, Singapore and the Netherlands gained the highest eamings in 2021