Macroeconomics variables and business environment influence the foreign direct investment (FDI) inflows in Malaysia

This study examines the relationship between macroeconomics variables, business environment variables and FDI inflow in Malaysia. The data is collected for the period of 21 years from 1991-2012 from World Bank data base for FDI inflow and seven variable, including macroeconomics variables (GPD growth rate, exchange rate, export, imports and inflation), business environment variables (corruption index and political stability). The data has been analysed by using Eviews 6.0 and SPSS 19.0. Descriptive analysis, Pearson’s Correlation analysis and Ordinary Least Square (OLS) were used as for inferential statistics. This study used the Augmented Dickey Fuller (ADF) test to check the stationary of the data using Eviews and Pearson’s correlation using SPSS. The finding of this study revealed that macro-economic variable such as import, export and the exchange rate has a significant
relationship with the FDI inflow but economic growth found insignificant relationship with FDI inflow. It also has been found that business environment variables, corruption control and political stability have significant relationship with FDI inflow, but inflation rate has an insignificant relationship with FDI inflow. The findings
from this study suggested that for macroeconomics and environment variables such as import, export, exchange rate, corruption control and political stability are very important in order to influence FDI inflows.
Political stability and corruption control are the most significant variables for FDI inflow in Malaysia. It is further suggested that these
variables may keep in consideration in the future course of action. This study also suggests the policy recommendations for foster the economic activities in the Malaysian economy by attracting FDI and rising its inflow