Abstract:

Malaysia as a developing country needs support from other countries for economic growth. This is done by receiving massive foreign direct investment (FDI) which contribute to a higher employment rate. Higher employment leads to a better living among Malaysian and its economy. During 2009, Malaysia faced a downward trend on the FDI. In many studies, decreasing in FDI effects employment rate significantly. This study focuses on the impact of FDI on employment rate in Malaysia. Other factors such as increasing in the number of foreign workers, gross domestic product (GDP) and exchange rate (EXCR) on employment rate are also included in the study. Data used in the study is annually data from 1980-2012. Autoregressive distributed lag (ARDL) model is used to determine the long run relationship between the variables. Finally, the study may reveal how much is the impact of FDI, foreign workers, GDP and EXCR on employment rate and the time span needed for those variables to be corrected as normal behaviour.