Regional distribution of foreign direct investment inflows in the manufacturing sector in Malaysia

This paper analyzes the regional distribution of foreign direct investment (FDI) inflows into the manufacturing sector across 13 states and one federal territory using data for the years 1990, 1995 and 2000. The empirical results indicate that expanding market demand for output, higher labor productivity, more socioeconomic development and increasing the area of industrial estates in the host state are significant determinants of FDI inflows in the sector. Of the four explanatory variables, FDI inflows are most sensitive to labor productivity. They are highly insensitive to the level of social and economic development of a state