Regionalism and Cross-Border Investment: The Political Economy of Malaysia’s Outward Foreign Direct Investment in India

Kok Fay Chin, Jun Li

Abstract


This study contributes to the discourse on regional dynamism by exploring key impediments to outward foreign direct investment (OFDI) despite growing regionalism between both countries. Growing Malaysia–India relations in recent years have not only led to new dimensions in bilateral trade but also investment. This study examines a significant, yet underexplored issue related to the dynamics of Malaysia’s economic engagement in investment with India. An important international political economy question that deserves our attention is, did enhanced regionalism—as seen by the increase in preferential trade agreements (PTAs) between Malaysia and India, in particular Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA)—play an important role in stimulating Malaysia’s OFDI in India. Our article is based on two case studies of Malaysian companies that had ventured into India’s two liberalised yet competitive and tough services sector, namely aviation and healthcare. While the macro context shows promising investment opportunities offered by the PTAs for Malaysian firms in various sectors, our case studies provide fresh insights into various problems and challenges facing Malaysian firms’ ventures in India. Despite the liberalisation of India’s services sector, there is a ‘regulatory minefield’ through which foreign investors have to navigate. Only the big corporations with strong financial resources are well positioned to take the right strategic options to steer through the minefield.

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