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Outward foreign direct investment from Malaysia

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... Data from Bank Negara Malaysia (BNM) indicates that OFDI flows from Malaysia is primarily concentrated in the services sector from 2005-2013, followed by mining and manufacturing. There is some anecdotal evidence of Malaysian banks moving out of the country in search of new markets (The Edge, 1 March 2010) while outward investments in the mining sector is led by the national oil company, Petroliam Nasional Berhad (Petronas) (Petronas, 2013;Zainal, 2006). As for manufacturing, some case studies have shown that Malaysian manufacturing companies have ventured overseas to overcome labour shortages and increasing labour costs at home, thereby, indicating that some manufacturing investments overseas may be resource-seeking as well (Tham, 2007). ...
... Currently, it has over 100 affiliates and associated companies with economic interests in more than 30 countries. Their overseas operations now cover countries not only in Asia but also in Africa, Latin America and the Middle East and their activities are considered to be more resource and market-seeking (Petronas, 2013;Zainal, 2006). However, Petronas also exports crude petroleum to their subsidiaries as well as third parties in countries such as Singapore, India, Japan and Korea. ...
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In light of a change in the FDI landscape such as a rapid growth of outward FDI from Malaysia since 2007, this paper ascertains the possible impact of inward and outward FDI on Malaysia’s bilateral export trade at the sectoral level, using a dynamic gravity approach. The findings reveal that both inward and outward FDI are complementary to bilateral export trade in the services, mining and manufacturing sectors. Furthermore, the distance elasticity and the real effective exchange rate have different negative impact on the different sectors. Overall, the sectoral bilateral exports could not insulate itself against external events.
... Early firm level studies on Malaysia's electronics subsector indicated few backward linkages in the late 1970s and early 1980s, but these started to evolve in the 1990s (see Tham 2004). ...
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Backward linkages from multinational companies (MNCs) are an economic interaction whereby firms in a host country supply inputs/goods to MNCs. It is possible for a firm to engage in such a relationship while at the same time undergoing production capability accumulation, which is the process by which firms shift from the production of low value-added goods to the production of higher value-added goods. Such a supply of inputs by local firms to their MNC customers has benefits: specifically, local firms increase in innovativeness via learning by interaction. The current research investigates the impact of supplying inputs to MNCs on the ability of local firms to shift up the value chain from low to higher value-added goods. This phenomenon raises a question that fundamentally requires an analysis that goes beyond correlation; namely, a causal analysis. Drawing from the work of Pearl (2009) on causal Bayesian networks, and applying a mixed method case study, this dissertation implements graphical models and the logic of interventions in order to investigate the causal relationship between backward linkages from MNCs and the production capability of local firms. We find evidence that backward linkages from MNCs have a causal effect on the production capabilities of the suppliers in the host country. The target sample of local firms has been drawn from the electronics and electricals (E&E) and plastics and chemicals (P&C) sectors of both Kenya and Malaysia. These selected sectors are among those that have a potential for growth as well as world market advantages, thereby making them good candidates for analysis. Additionally, both countries have a long history of reliance on foreign direct investment (FDI) in their economic development and of engaging in very close bilateral relationships in various spheres. This research is useful in two ways: first, it contributes to the literature surrounding the causal connection between backward linkages from MNCs and the production capability accumulation of local firms. In particular, this research fills in the gap concerning backward linkages research in Kenya and Malaysia. For the current state of research surrounding backward linkages, see Ndemo and Smallbone (2015); Phelps et al. (2009) and Loke and Tham (2017) for Kenya and Malaysia, respectively. Second, this research can potentially aid in national trade policy formulation.
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