The Effect of Foreign Direct Investment on Renewable Energy Consumption in Malaysia

Abstract

The flow of foreign direct investment (FDI) of multinational enterprises from the home countries to their host countries is normally accompanying with transferring of knowledge, and technology, beside to the management practices. In this concern, the better management practices that related to environmental performance, these multinational enterprises try to transfer cleaner technology, which leads to drive down the usage of energy consumption to a larger extent. Therefore, many developing countries (including Malaysia) are seeking to attract more FDI in renewable energy. This paper investigates the relationship between the macroeconomic factors (including FDI), CO2, energy intensity and renewable energy in Malaysia, covering the period of 1999-2016. The Partial Least Square (PLS) analysis results show that the relationship between macroeconomic factors and renewable energy consumption is negative, this could be related to the high cost of renewable energy in Malaysia.