Abstract
Malaysia has been among the major recipients of world foreign direct investment (FDI). While the benefits of FDI are well documented qualitatively or theoretically, the actual technology-related effect is remained ambiguous. This is particularly important to country like Malaysia as the volume of FDI inflows keeps on decreasing over time recently. It raises a lot of questions regarding the real benefits that Malaysia is able to reap from their presence. If FDI that previous came in merely targeted cheap labor supply and abundant natural resources, Malaysia can expect to lose FDI gradually and at the same time cannot anticipate huge return. Utilizing several manufacturing sub-sectors in Malaysia, this study attempts to investigate the spillover effect of FDI on Malaysian economy, focusing on manufacturing sector. This study employs correlation analysis to gauge the extent of spillover effect of FDI inflows on Malaysian manufacturing sector. Identifying this issue will help whether to be very selective in terms of which FDI to be allowed to enter is the appropriate strategy for Malaysia from now onwards.
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