Malaysia just like Egypt faced and still faces poverty but Malaysia since the year 1967 after the formation of Malaysia Industrial Development Authority (MIDA) Malaysia started overcoming poverty and reducing the unemployment rates, which in return made slums constantly decrease and this marked the first foray into the formulation of policies to attract Foreign direct investment (FDI). FDI has contributed significantly in the transformation of the Malaysian economy. Malaysia realized that it could be open for worldwide investment in the country because it has cheap labor force and the necessary infrastructure (Roads, airports, railways) in order to support foreign investments and so the government introduced new policies and legislations that eased the process of starting up businesses, it also started improving their infrastructure even more and training the labor force in order to suit the demands and requirements of the investor. The plan of the FDI was to exempt investors from company tax and duty on imported inputs, it also gave the possibility to investment tax credits and accelerated depreciation allowance
on investment. This lead to a ground solid base for investors and it attracted many investors and as a consequence in 1971 New Economic Policy (NEP) was implemented (in 1970) which led to the enactment of the Free Trade Zone Act in 1971 with a view to attract employment-enhancing export-oriented foreign investments. This act led to the establishment of 10 free trade zones with subsidized infrastructure, fast consideration of custom formalities, duty free access to imported inputs and capital goods, and removal of export taxes. This enhanced Malaysia local industry as it had new products being introduced for export outside of Malaysia, which made new factories and small businesses open. This decreased the unemployment rate and it increased the GDP of the Malaysian citizen to 7.4%. Overall the country had a huge peak in its foreign reserves and it had sufficient funds to improve the education and to build new communities that aimed in replacing the slums. Although Malaysia still faces poverty but compared to before the 1960’s it is much better that before and this shows that the plan introduced was successful.
FIGURE 1. FDI INFLOWS TO MALAYSIA, 1970-2005 Source: United Nations, World Investment Report, (Various Issues).