Outward Foreign Direct Investment from Malaysia

Abstract

The overall pattern of outward foreign direct investment from Malaysia indicates increasing participation in global outflows of foreign direct investment, especially to Southeast Asia. In 1980, Malaysia was ranked eleventh in the top fifteen developing and transition economies in terms of stocks of outward foreign direct investment, but it moved up to the tenth position by 2013. Outward flows surpassed inward flows after 2007 and Malaysia became a net capital exporter. This paper seeks to examine the pattern of outward foreign direct investment from the country, key motivations, and some of its impact. Government-linked companies are key players in these outward flows, especially in the oil and gas and services sector. The main findings in this paper show that outward investment from Malaysia is driven mainly by a horizontal, market-seeking type of investment while the literature indicates that its impact on trade is insignificant. Given the key role played by government-linked companies in outward foreign direct investment, an important return from these investments will be the repatriation of profits back to the home country. To promote greater transparency, these companies need to report to the public the returns and repatriation of profits on their investments abroad for Malaysia’s current and future development.