Determinants of foreign direct investment in the manufacturing sector of Sarawak

Ow, Kah Yen (2015) Determinants of foreign direct investment in the manufacturing sector of Sarawak. [Final Year Project Report] (Unpublished)

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Abstract

This study aims to investigate the detenninants of Foreign Direct Investment (FDI) on manufacturing sector in Sarawak. This study adopted the annually data of FDI, domestic investment, Gross Domestic Product (GOP) and trade openness which ranging from 2001 to 2012. The annually data were transfonned into quarterly data and investigate by using Unit Root test, Johansen and Juselius cointergration test and Vector Error Correction Model (VECM). The results of unit root tests show that all the variables were stationary at first difference which is /(1). Besides that, the cointegration results imply a strong and stable long run equilibrium exist between variables. Based on VECM results, the FDI on manufacturing sector is positively affected by all the explanatory variables in both short m:n and long run. Hence, the government of Sarawak should provide more incentives for higher domestic investment, greater market size on manufacturing sector and expand the degree of openness to restore the confidence of foreign investor in Sarawak.

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