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Journal of Management & Muamalah
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Journal of Management & Muamalah
Jurnal Pengurusan & Muamalah
eISSN 2180-1681
EDITORIAL BOARD/ SIDANG EDITOR
Chief Editor / Ketua Editor
NORAZIRAWATI AHMAD
Managing Editor / Editor Pengurusan
DR. NORFAIZAH OTHMAN
NOR SUHAILY BAKAR
Executive Editor / Editor Kerja
MOHD FADHLI AB RAHMAN
NORAZNIDA HUSIN
ZAMILA ABD RANI
Editor / Editor
DR FARADILLAH IQMAR OMAR
GHAZALI MOHD ALI
FADILAH MAT NOR
ZAINAB AMAN
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SAFURA AHMAD SABRI
Editorial Advisory Board / Sidang Penasihat Editorial
DR. NORZALINA ZAINUDIN
DR. AINURLIZA MAT RAHIM
DR. MOHD AZUL MOHAMAD SALLEH
DR. SHEIKH MUHAMAD HIZAM SHEIKH KHAIRUDDIN
Special thanks to all involved in the publication of this journal.
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INDEXING

Journal of Management & Muamalah, Vol. 9, No. 1, 2019
eISSN 2180-1681
Jurnal Pengurusan & Muamalah
Volume / Jilid 9 June / Jun 2019
Number / Nombor 1 eISSN 2180-1681
No. Articles / Artikel Page / Halaman
1 ICT Usage and Digital Inclusion among Entrepreneurs of Small
and Medium Enterprises in the Klang Valley.
Faradillah Iqmar Omar, Norazirawati Ahmad, Sheikh
Muhamad Hizam Sheikh Khairuddin, Husna Ahmad
Dimyati
3 - 11
2 Gangguan Seksual: Tragedi yang Tidak Didedahkan dan Kesan
kepada Mangsa
(Sexual Harrassment: The Unreported Tragedy and It’s Impact
on The Victim )
Siti Marziah Zakaria, Nor Ba’yah Abdul Kadir, Nor Hazila Mat
Lazim
12 – 19
3 Foreign Direct Investment, Economic Growth and Labour Market
Regulation: Empirical Evidence from Malaysia
(Pelaburan Langsung Asing, Pertumbuhan Ekonomi dan
Peraturan Pasaran Buruh: Bukti Empirikal dari Malaysia)
Nurza Mohamed Yusoff, Nur Naddia Norzin, Nur Haiza
Nordin
20 – 36

eISSN 2180-1681
3
ICT Usage and Digital Inclusion among Entrepreneurs of Small and
Medium Enterprises in the Klang Valley
FARADILLAH IQMAR OMAR
International Islamic University College Selangor
MALAYSIA
faradillah@kuis.edu.my
NORAZIRAWATI AHMAD
MALAYSIA
norazirawati@kuis.edu.my
SHEIKH MUHAMAD HIZAM SHEIKH KHAIRUDDIN
Universiti Kuala Lumpur
MALAYSIA
sheikhmhizam@unikl.edu.my
HUSNA AHMAD DIMYATI
MALAYSIA
husna.dimyati@gmail.com
ABSTRACT
The phenomenon of rapid growth in today's digital age has a major impact on many aspects of
life and industry, as well as the model and principles of business today. The use of ICT does not
only serve as a channel of communication and source of information but also as a tool for
online business. ICT is believed to be the best platform to replace conventional business
systems because it is able to give impact towards the digital economy if the technology is fully
utilized. This study is conducted to review the level of ICT usage through a range of online
applications and digital inclusion among entrepreneurs in Small and Medium Enterprises
(SMEs) in the Klang Valley (Bangi, Shah Alam and Kuala Lumpur). The study examines the
pattern of ICT usage and their application in practice and explains the relationship between the
uses of ICT and digital inclusion among SMEs. A quantitative approach is used and data are
collected through a survey of 500 respondents comprising entrepreneurs (SMEs) aged 18 to 55
years who perform in a variety of business categories. The majority of respondents have been
doing business for 2 to 4 years and they find their business performance improving after use of
ICT. The findings also show that the majority of entrepreneurs have used ICT in less than 3
years and most of them use ICT for the purpose of contacting friends. By using a Pearson
Correlation analysis, the result reveals that the level of ICT usage and digital inclusion have a
positive and significant correlation (r = .599, p <0.05). This indicates that the use of ICT gives
an impact to entrepreneurs to have the benefit of digital inclusion in their business management
especially to increase the digital economy and to be prepared for the industrial revolution 4.0
that is emerging rapidly.

eISSN 2180-1681
4
Key Words: ICT usage, Digital Inclusion, Entreprenuers (SMEs)
INTRODUCTION
ICT advancement has brought new opportunities for knowledge sharing and knowledge-
gathering among men and women (Huyer, 2006). ICT can provide unlimited opportunities for
economic development and social engagement through new innovative tools and ideas. The use
of ICT does not only serve as a channel of communication and information resources but also as
an online business tool. This online business phenomenon is not something new, but over the
past few years it has grown so rapidly with the emergence of virtual entrepreneurs. This can be
seen with the success of big entrepreneurs in Malaysia such as Bella Ammara, Zawara and
QairaHijab who started with online business and then stepped up with the opening of physical
boutiques to make it easier for more customers to have access to the products physically. In
Malaysia, the government has also introduced ICT applications in helping to strengthen the
people's economy. This is in line with the efforts of the SME Corporation which holds various
programmes to provide exposure to the usability of ICT. Nur Yuhanis and Shuhymee Ahmad
(2017) point out that a country's economic, social, political and technological process can be
mobilised more potentially through three major components of ICT i.e computing, computing
technology, communication technology and media technology. Thus, the use of ICT should be
fully utilised by entrepreneurs in business development in order to be more efficient and
productive. This study focuses on Small and Medium Enterprises (SMEs) entrepreneurs who
are the catalysts for the country's economy. SMEs are small and medium micro businesses.
They are categorised in different levels according to their sales revenue and sectors.
The use of ICT in business benefits the entrepreneurs. The benefits that have been
identified in the study are related to innovation, productivity and internationalisation
(Giotopoulos, Kontolaimou, Korra & Tsakanikas 2017), where entrepreneurs can organise
business processes, address business markets and their partners (Migiro 2006). There are
various types and classifications of businesses undertaken by SMEs, which can be placed at
global rankings by using more relevant and innovative channels. However, reports from SME
Corporation (2012) finds that the adoption of technologies is at the low level of ICT utilisation
and that is the reason why most SMEs do not achieve high performance. Therefore, this study
will identify the pattern of ICT utilisation among SME entrepreneurs in the Klang Valley,
especially in Shah Alam and Kuala Lumpur as a preliminary description.
This article discusses the ICT usage practices that include the purpose, skills and
motivation of using them among SME entrepreneurs and their relationship to digital inclusion.
This is important to see the extent of the usage and its effect on the digital inclusion of ICT
which is regarded as a platform that benefits in managing the business better.
DIGITAL INCLUSION AND BUSINESS
Business fields are not foreign to any world community. In fact, a country's economy can grow

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rapidly through business. Small and medium enterprise (SME) -based businesses are
contributors to the economy in Malaysia. Starting with small businesses, small and medium-
sized enterprises in Malaysia are already in the process of expanding their market
internationally. According to Malaysia's External Trade Development Corporation
(MATRADE) chief executive officer, Datuk Dzulkifli Mahmud, the company is working to
assist SME entrepreneurs especially bumiputeras, women and youths to actively participate in
export activities to overseas markets (RTM News, 2016).
The revolution of internet use has brought a huge impact in everyday life especially in
entrepreneurship around the world (Gusniar et al., 2014). The introduction of information and
communication technology (ICT) in today's business fields also brings entrepreneurs to a higher
level in business. Compared to traditional trading practices, ICT engagement in business is seen
to attract more consumers to get services or products marketed virtually. This is because online
purchases are easier and save time, where all business transactions are done online (Zaleha et
al., 2016). In line with the ever-changing lifestyles, online purchase methods are increasingly
gaining momentum among consumers (Farhan et al., 2015). This is because consumers no
longer have to rush to a location solely to buy the necessary goods or services. Besides that,
online business is also more practical as consumers can get the goods at any time without being
limited to time and geographical boundaries. With the help of the internet, the majority of users
can search the information prior to making a decision on a purchase (Mazlina & Nek Kamal,
2014). In fact, consumers can compare prices and choose different types of goods at any one
time without having to move anywhere.
Additionally, the introduction of e-commerce services has provided another facility to
consumers of online buying and selling services. This is because e-commerce services are
capable of conducting business transactions involving goods and services between two parties
or more, using electronic and internet equipment (Anandia & Farah, 2016). In addition, e-
commerce-based businesses have the potential to help entrepreneurs generate high income if
they are able to tap on market opportunities and more recent marketing techniques (Ahmad
Firdause & Mohd Rafi, 2017). Even with such services, it can also indirectly help entrepreneurs
explore international markets. Based on the study conducted by Trend Micro, the online buying
phenomenon is seen as warm and predictable that Malaysia collects more than 8 of its 10
internet users to use internet speeds for shopping activities (Shahar, 2013). This situation is not
something that is impossible, except that with the latest technology sophistication coupled with
the increasingly good internet service every day allows all online trading activities to run
smoothly. This business revolution has indeed been anticipated by the emergence and creation
of new media applications that facilitate the businesses to run.
Apart from sparking a revolution in online business, the internet has brought a new
transformation into marketing. Marketing plays an important role in promoting or introducing a
product to consumers. With the latest internet and application facilities, merchants can use the
platform to introduce their products in terms of branding, promotion and revenue generation
(Suzanna Azmieyda & Mohd Zainudin, 2016). With a creative, meticulous and effective
marketing technique, a product that is offered will definitely get the attention of users. In fact,
to stay relevant in the field of business, entrepreneurs should be familiar with the latest trends

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according to current changes. The use of social media applicationss as a medium of e-marketing
is currently seen as attracting more users to know about a newly launched product. This is
because the features of an interactive, user-friendly and easy-to-use social media application
make it easier to accept. In Asia, as well as being a user-accessible platform, the use of social
media as a digital marketing medium also saves advertising costs by 50 percent compared to
traditional advertising methods (Utusan Online, 2016). This method is able to expand its reach
abroad as the internet is not only a media network but also a transaction medium in the global
market (Norazila et al., 2016). The selection of the right marketing medium is crucial and needs
to be emphasized in promoting a product. This is because advertising is one of those weapons
that can help increase sales or profit (Mubarroh, 2013). Furthermore, advertising has a huge
impact on a product so it can leave an impact on consumers. Through e-marketing medium
using social media applications, users can not only see how a product is displayed, but the
testimonials of users who have used the product are also being shared. This may influence other
social media users to get the same product as marketed. As such, the availability of various
applications accessible through the internet, makes the businesses grow more globally and
efficiently (Azlizan, 2017). Looking at these developments, entrepreneurs should take
advantage of the advantages offered by applications to help increase their business potential to
equally compete with other products internationally. This is because with increasingly
competitive business competitions, the medium of e-marketing through social media is
important for entrepreneurs to introduce their products regardless of whether the business is
already known by the public or not (Suriatie & Nor Aishah, 2017).
However, there are factors that influence the use of ICT among entrepreneurs. For
example, cultural factors and perceptions and productive processes using ICT tools influence
the success of using ICT in business. This success can be seen from different angles based on
the culture and perceptions of entrepreneurs. For Moroccan entrepreneurs, for instance, the
impact of using ICT in business can be seen in terms of managing skills, financial knowledge
and communication skills while for Turkish entrepreneurs, it is to maintain customer
relationships, business administration and the management of part-time employees (Nijkamp &
Sahin 2009). The use of ICT in business is a form of business planning as well as a strategy that
maximizes the potential use of technology to benefit business.
METHODOLOGY
In this study, quantitative approach is used and data are collected through a survey of 500
respondents comprising entrepreneurs (SMEs) aged 18 to 55 years who perform in a variety of
business categories. This was the respondent criteria. A set of questionnaires is developed and
used as a research instrument for obtaining data. The selection of the study area for face-to-face
interviews is based on several criteria such as time factors and seminar events. Data collected
using a convenience sampling method. Some areas identified are in the Klang Valley namely
Kuala Lumpur, Putrajaya, Bangi and Shah Alam. In order to get a good population, samples
were selected based on typical urban areas with more modern metropolitan and socio-economic
features. The selection of the area is also based on the characteristics of the Federal Territory and
the Klang Valley which correspond to the location of the ICT users and the location of the areas

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which are also located near the Multimedia Super Corridor which implements the rapid use of
ICT. The sample for this study is comprised of entrepreneurs who do business and meet the
criteria set by SME Corps.
ICT Usage
In this study, ICT usage is measured according to four dimensions: (a) skills of computer
software usage; (b) skill of Internet applications usage; (c) skills of social media usage; and (d)
motivation of ICT usage. The researchers measure the dimension according to the frequency of
application usage via closed questions using a Likert scale ranging from (1) “very infrequently”
to (5) “very often.” To measure the Internet skills dimension, the researchers use a Likert scale
ranging from (1) “very unskilled” to (5) “highly skilled.” Finally, to measure the motivation to
use the Internet dimension, the researchers use a Likert scale ranging from (1) “strongly
disagree” to (5) “strongly agree.”
Digital Inlcusion
In this study, the researchers measure digital inclusion using four dimensions: (a) social network;
(b) business information seeking; (c) e-commerce and (d) adverstising/marketing. All 3 of these
dimensions comprise 15 items that the researchers measure using a Likert scale ranging from (1)
“very infrequently” to (5) “very often.” The reliability test yields a Cronbach’s alpha for the
variable digital inclusion of .90.
RESULT
Descriptive
The demographic profile of the respondents indicates that the dominant characteristics of the
entrepreneurs in the study are: male (288, 57%), aged between 28 to 37 (195, 39%), race of
Malay (439, 87.8%), increased business performance based on ICT usage (414, 82.8%), and
duration of ICT usage of less than 3 years (276, 55.2%).
TABLE 1: Demographic Profile
Demographic Frequency Percentage (%)
Gender
Male
Female
288
212
57.6
42.4
Age
18-27
28-37
38-47
48-57
58 above
115
195
111
38
9
23
39
22.2
7.6
1.9

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8
Race
Malay
Chinese
Indian
Bumiputera Sabah
439
38
16
7
87.8
7.6
3.2
1.4
Business Performance Based on
ICT Usage
Increase
Decrease
No Change
414
2
82
82.8
.4
16.4
Duration of ICT usage
Less than 3 years
4-5 years
6-7 years
8-9 years
More than 9 years
276
127
45
10
42
55.2
25.4
9
2
8.4
For the analysis on the purpose of using ICT, most of the SME entrepreneurs score from
3 (Once in a while) to 4 (Often) for purposes such as “Get economic related information”, “Get
information related to politics”, “Get information on education”, “Get religious related
information”, “Get health information”, “Access E-Government applications”, and “Visit the
website / blog for entertainment”. Meanwhile, most of them score 4 – Often and 5 – Very often
of using ICT for the purpose of to “Get entrepreneurship information”, “Contact friends”, and
“Call the family”. Out of the 5 point scale, the highest mean is at 4.04 recorded for “Contact
friends”. This means that ICT is used by SME entrepreneurs most of the time to contact friends.
In contrast, the least usage of ICT for them is getting information pertaining to politics. Finally,
all standard deviations are low (from 0.90 to 1.22) indicating that the data do not deviate much
from the normal distribution.
TABLE 2: Purpose of ICT Usage
Item 1 2 3 4 5 Mean Standard
Deviation
Percentage
The purpose of using ICT
Get economic related information. 5.4 10 30.8 38.8 15 3.48 1.04
Get information related to politics. 11.8 17 28.6 30 12.6 3.15 1.19
Get information on education. 3.6 9.8 31.2 37.8 17.6 3.56 1.01
Get religious related information. 3.8 6.2 25.6 43 21.4 3.72 .99
Get health information. 3.4 7.4 28 43.6 17.6 3.65 .97
Get entrepreneurship information. 2.2 7.2 21 41.6 28 3.86 .98
Access E-Government applications. 11.6 17.6 24.4 32.8 13.6 3.19 1.22
Contact friends. 2 2.2 20.4 41 34.4 4.04 .90
Call the family. 2 4.2 18 41.2 34.6 4.02 .94
Visit the website / blog for
entertainment.
6.2 8.2 27.4 35.8 22.4 3.60 1.11
1= Very infrequently, 2= infrequently, 3= Once in a while, 4= Often, 5= Very often (N=500)

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9
Reliability
Constructs formed is measured in terms of reliability and validity index to assess suitability. Pre-
tests are performed on all variables to assess the reliability and validity of research equipment. In
general, an instrument of research studies requires reliability test using the Cronbach Alpha
procedure. The closer the Alpha value is to 1, the higher level of reliability is indicated. The level
of reliability is good and acceptable when the Alpha is more than 0.70. In this study, the index of
ICT usage and digital inclusion implications show the validity and reliability for each dimension.
Table 3 shows the index of validity and reliability of the measurement instruments.
TABLE 3: The Index of Validity and Reliability of ICT Usage
Variables Cronbach’s
Alpha (α)
No. of Items
ICT Usage
Skills of computer software usage .836 6
Skill of Internet applications usage .772 7
Skills of social media usage .796 7
Motivation of ICT usage .756 7
Digital Inclusion
Social network .888 5
Business information seeking .894 5
E-commerce .902 5
Advertisement / e-marketing .927 7
Correlation
The correlation analysis shows that the relationship between ICT usage and digital inclusion has
a significant positive relationship (r = .599, p <0.5). This decision explains that entrepreneurs
who use ICT at a high rate report having high digital inclusions. Other studies such as Faradillah
and Samsudin (2-15) also indicated similar results.
TABLE 4: The Correlation between ICT Usage and Digital Inclusion
ICT USAGE DIGITAL
INCLUSION
ICT USAGE Pearson Correlation
Sig. (2-tailed)
N
1
500
.599**
.000
500
DIGITAL
INCLUSION
Pearson Correlation
Sig. (2-tailed)
N
.599**
.000
500
1
500
**Correlation is significant at the level 0.01 (2-tailed)

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CONCLUSION
This study clearly shows that ICT usage is important in influencing the digital entrepreneurship
of entrepreneurs. Hence, an entrepreneur needs to master the skills and have a high motivation in
using ICT. The results show that the level of ICT usage practices has a positive relationship with
digital inclusiveness. Entrepreneurs benefit from using ICT in managing their business,
especially in addressing the modernisation of the global and digital economy. The future research
proposal is to explore the aspects of innovation and business performance among SME
entrepreneurs who engage in online business using the full ICT platform.
Acknowledgement
The research is funded through the project FRGS/1/2016/SS09/KUIS/03/1 of the Fundamental
Research Grant Scheme (FRGS) from the Ministry of Higher Education.
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Gangguan Seksual: Tragedi yang Tidak Didedahkan dan Kesan
kepada Mangsa
Sexual Harrassment: The Unreported Tragedy and It’s Impact on The
Victim
SITI MARZIAH ZAKARIA*, NOR BA’YAH ABDUL KADIR & NOR HAZILA MAT
LAZIM
*marziah@ukm.edu.my
ABSTRAK
Gangguan seksual merupakan suatu tragedi bagi seorang wanita. Gangguan seksual memberi
kesan yang buruk kepada emosi mangsa, kerjaya, rumah tangga serta kehidupan mereka secara
keseluruhan. Mangsa gangguan seksual perlu dibela serta dibantu untuk mendapat pengadilan
dan perlindungan. Justeru, artikel ini akan mengupas kemelut gangguan seksual yang berlaku
dalam masyarakat. Teori-teori gangguan seksual juga akan dibincangkan, di samping
mengetengahkan kesan gangguan seksual kepada wanita. Gangguan seksual boleh berlaku di
mana-mana sahaja, sama ada di pejabat swasta, pejabat kerajaan, premis perniagaan, kilang,
sekolah, malah di tempat-tempat awam. Akta gangguan seksual yang akan diusulkan oleh
kerajaan nanti dijangkakan akan melindungi semua wanita di Malaysia. Ia merupakan langkah
serius kementerian berkenaan untuk mempertahankan maruah wanita di tempat kerja, di tempat
awam, dan di mana-mana sahaja. Langkah-langkah pencegahan juga perlu dirangka dan
dilaksanakan bagi mengurangkan kes gangguan seksual. Mekanisma pencegahan yang
komprehensif perlu dibangunkan di tempat kerja bagi melindungi wanita daripada terus menjadi
mangsa. Unit atau bahagian berkaitan seperti bahagian sumber manusia perlu mengambil
langkah aktif bagi membanteras gangguan seksual di tempat kerja. Polisi gangguan seksual perlu
disampaikan dengan jelas kepada semua kakitangan supaya mereka tahu apa yang patut
dilakukan jika mereka menjadi mangsa.
Kata kunci: Gangguan Seksual, Akta Gangguan Seksual, Polisi Gangguan Seksual, Wanita di
Tempat Kerja
PENGENALAN
Gangguan seksual merupakan fenomena global yang boleh berlaku dalam persekitaran tempat
kerja (Azura &Ahmad Izzudin Fahmi, 2010; Hejase, 2015; Zakaria, Abdul Malik & Malani,
2001; Ishak & Lai, 2001; Siti Rapidah & Nur Shafini, 2014; Siti Rapidah et al, 2015; Mohd
Nazari, Lee & Chan, 2007), institusi pendidikan (Mohammed et al., 2015; Matchen & DeSouza,
2000; Sabitha, 2003), institusi ketenteraan (Stander & Thomsen, 2016; Street et al., 2008) dan di
tempat awam (MacMillan et.al, 2000). Biasanya, golongan wanita merupakan golongan yang
sering menjadi mangsa gangguan seksual (Mohd Nazari, Lee & Chan, 2007) dan golongan lelaki
pula merupakan pengganggu seksual.

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Antara kod etika dan garis panduan kepada gangguan seksual yang diperkenalkan oleh
kerajaan ialah Kanun Keseksaan, Akta Kerja 1955, Kod Amalan Untuk Mencegah Dan
Membasmi Gangguan Seksual Di Tempat Kerja pada tahun 1999, dan Garis Panduan
Mengendalikan Gangguan Seksual di Tempat Kerja Dalam Perkhidmatan Awam. Kod Amalan
Untuk Mencegah Dan Membasmi Gangguan Seksual Di Tempat Kerja (1999) digunakan sebagai
garis panduan kepada majikan bagi penubuhan mekanisme dalaman di peringkat perusahaan
untuk mencegah dan membasmi gangguan seksual di tempat kerja.
Walau bagaimanapun, kajian Khairunesa dan Sazali (2013) mendapati majoriti pekerja di
sebuah syarikat mempunyai tahap kefahaman dan kesedaran yang rendah terhadap kod amalan
yang diperkenalkan Kementerian Sumber Manusia. Sebaliknya pula, Fonny dan Ida Hartina
(2016) melaporkan majoriti pekerja tanpa mengira umur dan status perkahwinan yang bekerja di
tiga buah institusi pendidikan mempunyai tahap kesedaran yang tinggi terhadap gangguan
seksual seperti verbal, bukan verbal, fizikal dan visual. Perkara ini menunjukkan sesetengah
organisasi atau institusi pendidikan seperti Universiti Malaya dan Universiti Islam Antarabangsa
telah mengkhususkan polisi dan prosedur gangguan seksual (Mohamed et al, 2015) bagi
memastikan keselamatan dan persekitaran yang sihat kepada para pelajar dan kakitangan.
Manakala segelintir organisasi masih lagi tidak memberi penjelasan mengenai takrif dan polisi
gangguan seksual yang telah diperkenalkan oleh kerajaan.
Justeru, artikel ini akan mengupas kemelut gangguan seksual yang berlaku dalam
masyarakat. Teori-teori gangguan seksual juga akan dibincangkan, di samping mengetengahkan
implikasi gangguan seksual kepada wanita. Cadangan-cadangan akan dikemukakan untuk
membantu pihak kerajaan dan majikan dalam menangani isu ini serta memberi panduan kepada
kajian pada masa hadapan.
METODOLOGI
Artikel ini akan mengemukakan kajian-kajian terdahulu yang telah dijalankan bagi merungkai
tragedi atau kes gangguan seksual yang berlaku di pelbagai negara. Artikel jurnal, prosiding dan
laporan telah dirujuk bagi mendapatkan input mengenai kajian gangguan seksual. Penyelidik
memilih artikel-artikel terkini, terutamanya yang diterbitkan selepas tahun 2000. Penekanan
diberikan kepada kajian yang dilakukan di Malaysia untuk melihat senario kes ini di Malaysia.
Kajian-kajian lepas memberi penekanan lebih dalam mengenal pasti tahap kesedaran wanita
tentang gejala gangguan seksual, bentuk-bentuk gangguan seksual yang dialami oleh mereka,
tindakan mereka setelah mengalami gangguan seksual serta kesan pengalaman tersebut kepada
kehidupan mereka.
TEORI BERKAITAN GANGGUAN SEKSUAL
Menurut teori organisasi, gangguan seksual boleh dijelaskan oleh isu-isu organisasi termasuklah
kuasa dan ketidaksaksamaan status dalam organisasi yang boleh meningkatkan peluang
berlakunya gangguan seksual. Konsep utama yang menerangkan gangguan seksual ialah kuasa

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(Gruber, 1992). Norma masyarakat mencadangkan bahawa orang yang berkuasa dan tidak
berkuasa wujud dalam hierarki masyarakat. Lelaki biasanya memegang lebih banyak kuasa
daripada wanita dan bersifat agresif, manakala wanita selalunya bersifat pasif dan lemah. Selain
itu, iklim organisasi yang bersifat permisif, pekerjaan yang dimonopoli oleh gender tertentu,
etika organisasi, norma dan polisi turut meningkatkan peluang berlakunya gangguan seksual.
Sebagai contoh, terdapat sesetengah organisasi mempunyai toleransi yang tinggi terhadap
gangguan seksual. Sesetengah organisasi tidak mempunyai polisi anti-gangguan seksual yang
jelas dan tidak menggariskan prosedur aduan apabila terdapat kes gangguan seksual. Iklim
organisasi begini hanya akan menggalakkan lagi pelaku untuk terus memanipulasi mangsa.
Mangsa pula berdepan risiko seperti dimalukan jika melaporkan, manakala pelaku hanya akan
terlepas walaupun aduan telah dibuat. Justeru, iklim organisasi dianggap sebagai peramal utama
kepada gangguan seksual.
Teori sosial-kognitif gangguan seksual (Hollon & Kriss, 1984) pula mencadangkan
bahawa komponen utama sosio-kognitif adalah: i) kandungan dan struktur memori jangka
panjang, ii) pemprosesan sosio-kognitif (contohnya perhatian), iii) produk kognitif (kepercayaan,
pemikiran, atribusi). Kajian lepas mendapati bahawa wujudnya skema seks dalam memori yang
mengaitkan kuasa dengan seks. Fitzgerald (1993) mendapati bahawa majoriti daripada lelaki
yang terlibat dalam tingkah laku gangguan seksual mungkin tidak menyedari bahawa mereka
sedang melakukan gangguan seksual. Ini boleh dijelaskan oleh konsep automaticity. Kajian juga
menunjukkan bahawa pelaku gangguan seksual akan menyalahkan mangsa atas perlakuan
mereka. Mereka akan menjustifikasi tindakan mereka untuk mempertahankan diri dalam situasi
terbabit.
GANGGUAN SEKSUAL: TRAGEDI YANG TIDAK DIDEDAHKAN
Gangguan Seksual adalah merupakan suatu tragedi atau pengalaman hitam bagi seorang wanita.
Kesan gangguan seksual boleh menyebabkan wanita berada dalam keresahan, tekanan dan
kemurungan, malah boleh membawa kepada cubaan membunuh diri apabila bebanan emosi yang
mereka hadapi tidak lagi terkawal. Kajian menunjukkan bahawa telah ramai wanita menjadi
mangsa gangguan seksual, namun tidak ramai yang berani melaporkannya kerana malu berdepan
dengan persepsi negatif, takut dengan ugutan dan bimbang dibuang kerja. Dalam sesetengah kes,
mereka tidak melaporkan kerana kurangnya kesedaran mangsa akan hak mereka dan peruntukan
undang-undang. Ramai yang tidak menyedari wujudnya garis panduan bagi melaporkan kes
gangguan seksual seperti yang digariskan dalam Kod Amalan Untuk Mencegah Dan Membasmi
Gangguan Seksual Di Tempat Kerja pada (1999).
Timbalan Menteri Pembangunan Wanita, Keluarga dan Masyarakat, Hannah Yeoh
berkata dalam tempoh antara 2015 hingga 2017, sebanyak 47 kes gangguan seksual dilaporkan
yang melibatkan penjawat awam. Bagi sektor swasta pula, jumlah kes yang telah dilaporkan ke
Kementerian Sumber Manusia dan agensinya sehingga Jun 2018 adalah 15 kes di mana 13
daripadanya telah selesai dan bakinya masih dalam tindakan (Berita Harian, 2018). Laporan kes-
kes ini rendah kerana kod amalan ini sebenarnya tidak diwajibkan di syarikat-syarikat swasta. Di

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samping itu, ramai juga dalam kalangan pekerja swasta yang tidak sedar akan kewujudan kod
amalan tersebut (Nur Lela Zulkipli, 2018).
Oleh itu, terdapat banyak kes gangguan seksual yang tidak dilaporkan kepada pihak yang
berkuasa walaupun jumlahnya yang sebenar adalah lebih daripada yang dilaporkan (Azura &
Ahmad Izzudin Fahmi, 2010; Kod Amalan Untuk Mencegah Dan Membasmi Gangguan Seksual
Di Tempat Kerja, 1999). Hejase (2015) mendapati sebanyak 28% daripada jumlah responden di
organisasi seperti universiti, hotel, bank, dan industri kerja malam (kelab malam, restoran, dan
bar) di Lebanon telah mengalami gangguan seksual. Sungguhpun demikian, hanya 7% daripada
mangsa mengambil tindakan dan hanya 5% daripada kes gangguan seksual telah dilaporkan.
Antara sebab gangguan seksual tidak dilaporkan adalah kerana mangsa khuatir tindakan
tidak diambil secara serius, khuatir tidak akan dinaikkan pangkat, khuatir akan menerima amaran
atau kes direkodkan, khuatir diberhentikan kerja, dan disebakan malu menjadi bahan sindiran
(Hejase, 2015; Kod Amalan Untuk Mencegah Dan Membasmi Gangguan Seksual Di Tempat
Kerja, 1999). Menurut Hannah Yeoh selaku Timbalan Menteri Pembangunan Wanita, Keluarga,
dan Masyarakat, kebanyakan mangsa tidak melaporkan kes gangguan seksual kerana jenayah
tersebut bersifat subjektif dan sukar untuk membuktikan mereka adalah mangsa (Berita Harian
Online, 2018). Oleh sebab itu, mangsa tidak berani tampil ke hadapan untuk mendapatkan
pembelaan yang sewajarnya dan mengambil keputusan mengabaikan atau melupakan kes
tesebut.
Namun, tidak dinafikan juga terdapat kes gangguan seksual yang berjaya dibuktikan
secara kukuh di muka pengadilan dan kemenangan kes berpihak kepada mangsa. Misalnya, kes
Mohd Ridzwan bin Abdul Razak vs Asmah Bt. Hj Mohd Nor di mana Mahkamah Tinggi
menolak rayuan perayu kerana terdapat keterangan kukuh yang membuktikan perayu telah
menyebut perkataan kesat dan kata-kata kasar eksplisit yang berunsur seksual kepada responden.
Disebabkan tindakan perayu, responden iaitu sebagai mangsa telah mengalami tanda-tanda
tekanan emosi, kemurungan akibat daripada ketakutan dan kebimbangan, mengalami migrain
dan sakit di kakinya. Oleh itu, Mahkamah Tinggi telah memberikan ganti rugi am dan tambahan
bagi kesalahan gangguan seksual yang telah dibuktikan.
Kajian yang dijalankan oleh Azura dan Ahmad Izzudin Fahmi (2010) menunjukkan
bentuk gangguan seksual yang paling banyak berlaku ialah bentuk lisan (47.1%) iaitu seperti
gurauan lucah dan juga pujian berbaur seksual, dan diikuti bentuk gangguan fizikal (33.3%)
seperti meraba serta melakukan sentuhan berunsurkan seksual (Zakaria, Abdul Malik & Malani,
2001). Kajian yang dijalankan oleh Ishak dan Lai (2001) pula menunjukkan bentuk sentuhan
yang tidak bermaksud seksual adalah paling kerap berlaku di tempat kerja (26%), sementara
bentuk tingkah laku paksaan mengadakan hubungan seks adalah paling jarang berlaku (4%).
Bentuk gangguan seksual lain yang berlaku ialah kata-kata berunsur seksual yang bermaksud
memuji (20%), kata-kata berunsur seksual yang bermaksud mencaci (16%), pandangan atau
isyarat berunsur seksual yang bermaksud mencaci (12%), pandangan atau isyarat yang
bermaksud memuji (10%), paksaan untuk mengadakan temu janji (7%), dan sentuhan yang
bermaksud seksual (5%).

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Antara hukuman yang boleh dikenakan kepada pesalah gangguan seksual ialah denda,
tangguh pergerakan gaji, turun gaji, turun pangkat malah boleh dibuang kerja. Namun begitu,
pada masa ini negara masih belum mempunyai undang-undang khusus bagi gangguan seksual.
Hanya kod etika dan peraturan atau garis panduan yang boleh menjadi rujukan dan sandaran bagi
kes gangguan seksual. Ini menyebabkan proses pertuduhan menjadi sukar. Akta gangguan
seksual perlu diwujudkan bagi menangani kelemahan dalam perundangan dan peraturan sedia
ada berhubung gejala gangguan seksual. Kod etika dan garis panduan sedia ada ialah Kanun
Keseksaan, Akta Kerja 1955, Kod Amalan Untuk Mencegah dan Membasmi Gangguan Seksual
di Tempat Kerja 1999 dan Garis Panduan Mengendalikan Gangguan Seksual di Tempat Kerja
Dalam Perkhidmatan Awam.
GANGGUAN SEKSUAL: KESAN KEPADA EMOSI, KERJAYA,
KESIHATAN, DAN KEHIDUPAN
Gangguan seksual memberi banyak implikasi kepada individu mahupun organisasi. Kesan
gangguan seksual kepada individu adalah dari segi fizikal, kesejahteraan emosi dan kerjaya.
Kesan-kesannya termasuklah kesihatan mangsa terjejas seperti mengalami sakit kepala,
ketegangan bahu, tengkuk, dan sendi (Takaki, Taniguchi, & Hirokawa, 2013; Street et al, 2008;
Taniguchi et al., 2016), mengalami trauma atau masalah psikologi seperti kemurungan pada
tahap kritikal, dan tekanan (Hejase, 2015; Nor Shafrin, 2007). Justeru, peraturan sedia ada perlu
diperbaiki bagi memudahkan mangsa melaporkan gangguan seksual. Peraturan yang ditetapkan
perlu memastikan mangsa terbela dan hukuman setimpal dijatuhkan kepada pesalah jika
disabitkan dengan tuduhan.
Selain itu, gangguan seksual juga memberi kesan kepada perkembangan kerjaya mangsa.
Antaranya adalah terpaksa bertukar tempat kerja, hilangnya peluang peningkatan kerjaya,
mengalami ketidakpuasan kerja, berasa terhina dan kurang keyakinan diri, bermasalah dalam
hubungan interpersonal, dan juga kadang kala dipulaukan di tempat kerja (Zakaria, Abdul Malik
& Malani, 2001; Azura & Ahmad Izzudin Fahmi, 2010; Boland, 2002; Hejase, 2015; Ishak &
Lai, 2001). Kajian Ishak dan Lai (2001) turut mendapati bahawa semakin banyak pengalaman
seseorang individu terhadap gangguan seksual, semakin bertambah tekanan fizikal, psikologi dan
emosi yang dihadapi oleh mereka. Kesannya, kepuasan kerja mereka juga akan semakin
menurun. Oleh itu, mangsa gangguan seksual memerlukan perlindungan segera supaya tidak lagi
terus diancam oleh pelaku. Selain itu, identiti mereka juga perlu dilindungi dan dirahsiakan
untuk mengelak stigma daripada organisasi dan komuniti.
Gangguan seksual juga boleh memberi kesan yang buruk kepada organisasi antaranya
mengurangkan produktiviti syarikat, meningkatkan konflik kumpulan, menyukarkan pencapaian
syarikat, memburukkan imej syarikat, kehilangan pekerja yang mahir, meningkatkan
ketidakhadiran kakitangan, seterusnya meningkatkan beban kewangan kepada organisasi
(Boland, 2002; Poulston, 2008; Siti Rapidah et al. 2015). Gangguan seksual mengakibatkan
syarikat perlu menanggung kos seperti kos guaman dan juga kos pampasan kepada mangsa, di
samping kadar penggantian pekerja yang meningkat yang secara tidak langsung meningkatkan
kos untuk merekrut kakitangan yang baharu (Poulston, 2008).

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CADANGAN DAN IMPLIKASI
Isu ini harus dipandang serius oleh semua pihak. Masalah gangguan seksual berpotensi untuk
berlaku di mana sahaja sama ada di sektor awam mahu pun swasta, malah di tempat awam sekali
pun. Ia juga boleh berlaku kepada sesiapa sahaja tanpa mengira usia, pangkat, bangsa dan agama.
Jika organisasi memandang serius kes gangguan seksual yang dilaporkan dan tidak dilaporkan, ia
boleh mengurangkan kejadian ini di tempat kerja. Di samping itu, mekanisme-mekanisme
pencegahan perlu dirancang dan dilaksanakan oleh semua. Sebagai contoh, melakukan
pengasingan antara pekerja wanita dan lelaki di premis seperti kilang dan kedai. Sekolah dan
universiti juga boleh mengambil langkah waspada dengan mengasingkan tempat duduk pelajar
lelaki dan perempuan di dalam kelas. Begitu juga dengan pengangkutan-pengangkutan awam
yang terdapat di Malaysia seperti bas, keretapi, LRT, MRT dan monorail.
Kejadian gangguan seksual boleh diterangkan oleh teori organisasi. Teori ini
mencadangkan bahawa gangguan seksual berlaku kerana wujudnya hierarki dalam organisasi.
Gangguan seksual biasanya dilakukan oleh pekerja yang memegang jawatan yang lebih tinggi
daripada mangsa. Mangsa pula selalunya wanita yang tidak mempunyai kuasa, berpersonaliti
sopan, lemah lembut dan tidak melawan. Selain itu, iklim organisasi yang bersifat permisif,
pekerjaan yang dimonopoli oleh gender tertentu, etika organisasi, norma dan polisi turut
meningkatkan peluang berlakunya gangguan seksual.
RUMUSAN
Oleh itu, dasar mengenai gangguan seksual perlu jelas di setiap organisasi. Peraturan juga perlu
diperketatkan untuk menutup peluang bagi pekerja yang mempunyai niat untuk meneruskan niat
mereka. Peraturan yang boleh dilaksanakan sebagai contoh adalah larangan bagi pekerja lelaki
memasuki ruangan pekerja wanita, larangan berdua-duaan antara pekerja lelaki dan wanita,
larangan bagi pekerja wanita pulang lambat dan sebagainya. Peraturan sebegini akan memberi
mesej yang jelas kepada pekerja bahawa organisasi mereka serius dalam menangani isu
gangguan seksual.
Kajian akan datang perlu memberi lebih penekanan kepada faktor-faktor yang
menyumbang kepada berlakunya gangguan seksual di premis yang pelbagai termasuklah tempat
awam. Faktor yang pelbagai dan relatif boleh meningkatkan atau menurunkan kes gangguan
seksual. Faktor penyumbang mungkin sosio-demografi pelaku, mangsa, komuniti, dan
sebagainya. Faktor-faktor ini boleh dijadikan asas bagi pembangunan model pencegahan
gangguan seksual di pelbagai premis.
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Foreign Direct Investment, Economic Growth and Labour Market
Regulation: Empirical Evidence from Malaysia
NURZA MOHAMED YUSOFF
Faculty of Management and Muamalah
MALAYSIA
nurza@kuis.edu.my
NUR NADDIA NORDIN
Faculty of Entrepreneurship and Business
Universiti Malaysia Kelantan
MALAYSIA
naddia.n@umk.edu.my
NUR HAIZA NORDIN
Faculty of Entrepreneurship and Business
MALAYSIA
haiza@umk.edu.my
ABSTRACT
This study aims to analyze the role of labor market regulation in moderating the impact of
foreign direct investment (FDI) on economic growth. It tests whether countries with high level of
labor market regulation can benefit from FDI inflows more efficiently. It uses observation from
Malaysia and data spanning over 2000-2015 period. Threshold regression was employed to
examine the influence of labor market regulation on the impact of FDI on output growth. The
result suggest that there is a threshold effect in the FDI-growth relationship such that the positive
impact of FDI after Malaysia achieve a certain level of quality in term of labor market
regulation. This finding is consistent with the view that host countries must have absorptive
capacity in order to benefit from FDI inflows. Therefore, policymakers should weigh the cost of
policies aimed at attracting FDI versus those that seek to improve the regulation of labor market.
Key Words: Foreign Direct Investment, Economic growth, Labor market, Threshold estimation
and Malaysia

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Pelaburan Langsung Asing, Pertumbuhan Ekonomi dan Peraturan
Pasaran Buruh: Bukti Empirikal dari Malaysia
NURZA MOHAMED YUSOFF
Fakulti Pengurusan dan Muamalah
Kolej Universiti Islam Antarabangsa Selaangor
MALAYSIA
nurza@kuis.edu.my
NUR NADDIA NORDIN
Fakulti Keusahawanan dan Perniagaan
MALAYSIA
naddia.n@umk.edu.my
NUR HAIZA NORDIN
Fakulti Keusahawanan dan Perniagaan
MALAYSIA
haiza@umk.edu.my
ABSTRAK
Kajian ini bertujuan untuk menganalisis peranan peraturan pasaran buruh dalam
menyederhanakan impak Pelaburan Langsung Asing (FDI) terhadap pertumbuhan ekonomi.
Analisis ini adalah untuk menguji sama ada negara yang mempunyai peraturan pasaran buruh
yang ketat boleh meningkatkan manfaat daripada aliran masuk FDI dengan lebih efisyen. Kajian
ini menjadikan Malaysia sebagai sampel dengan membuat pemerhatian terhadap data yang
merangkumi tempoh antara tahun 2000-2015. Bagi mendapatkan jawapan berkenaan pengaruh
peraturan pasaran buruh yang berkaitan kesan FDI terhadap hasil (output) pertumbuhan
ekonomi, regresi ambang telah digunakan. Hasil kajian mendapati bahawa terdapat kesan
ambang dalam hubungan pertumbuhan ekonomi dengan FDI iaitu kesan positif FDI selepas
Malaysia mencapai beberapa tahap kualiti terutamanya berkaitan peraturan pasaran buruh. Ini
menunjukkan bahawa hubungan ini konsisten dengan pandangan pakar bahawa negara-negara
tuan rumah mesti mempunyai kapasiti penyerapan untuk mendapat manfaat daripada aliran
masuk FDI. Oleh itu, pihak pembuat dasar perlu menggubal polisi yang melibatkan kos yang
bertujuan untuk menarik FDI berbanding dengan usaha mereka untuk memperbaiki peraturan
pasaran buruh.
Kata Kunci: Pelaburan Langsung Asing, Pertumbuhan Ekonomi, Pasaran Buruh, Anggaran
Ambang dan Malaysia

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INTRODUCTION
Economic growth and productivity improvement are among the most important issues in the
field of economics. In the past decades, economists have attempted to find out the reason why
some countries are able to grow faster than the others. Studies by Durlauf et al., (2005) and Sala-
i-Martin (1997) revealed that over than sixty different variables that contributes to the growth
performance. One of them is foreign direct investment (FDI) which is believed will bring
potential positive externalities on economic growth in the host country. The International
Monetary Fund (IMF) defined FDI as an international investment made to acquire lasting interest
in enterprises operating outside of the economy or a flow of capital across international
boundaries. The lasting interest here is a long term relationship between the direct investors with
direct investment enterprise, where direct investment here implies the acquisition of at least 10
percent of the ordinary shares of an enterprise abroad. An alternative definition of FDI refers as a
set of economic activities or operations that carried out in a host country by firms controlled or
partly controlled by firms in some other country. IMF (1993) stated that FDI bears three broad
characteristics; first it refers to a source of external financing rather than necessarily net physical
investment or real activity per se; second a matter of convention FDI involves a 10 percent
threshold value of ownership; thirdly FDI consists of both the initial transaction that creates
investments and the direct investment enterprises aimed at maintaining, expanding or reducing
investments. More specifically, FDI is defined as consisting of three broad aspects (IMF, 1993)
as new foreign equity flows; intra-company debt transactions and reinvested earnings.
The inflows of FDI will be depends on the purpose of home country investment and the
economic factors at the host country that can be classified in three types of FDI, which is
resource seeking FDI, market seeking F1
DI and efficiency seeking FDI. Resource seeking FDI is
motivated by the availability of natural resources in host countries like raw materials,
complementary factors of production that is labor and physical infrastructure. Nunnenkamp
(2002), this type of FDI inflows is important and remains a relevant source of FDI for
developing countries. The second type of FDI is market seeking FDI, where the inflows will be
depends on the market size, market growth and regional integration. Productivity and adjusted
labor cost, sufficiently skills labor, business related services and trade policy are the factors to
attract the efficiency seeking FDI in the host country. Besides the types of FDI, the inflow of
FDI is seems to have a connection with host countries advantage or known as location
advantage. Whereas the location advantage embodies the characteristic (economic, institutional
and political) such as large domestic markets, the degree of openness of the host economy, level
of development, availability of natural resources, an educated labor force, low labor cost, good
institutions (the clarity of country’s law, efficiency of bureaucracy and the absence of
corruption), political stability, nature of exchange rate regime return on investment, corporate
and other tax rates among others. Countries that have these advantages will attract the inflows of
FDI.
The purpose of this study is to estimate the role of labor market in moderating the impact
of FDI on economic growth in Malaysia. Whereas this purpose is relate to the third type FDI of

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“efficiency seeking FDI”. In line with the previous discussion, labor market is one of the factors
that attract inflow of FDI. Theoretically labor market had been discussed as one of the important
factor on economic growth (Solow 1956; Mankiw, Romer and Weil 1992). The labor markets at
host countries play an important role to adapt the inflows from FDI. These markets should able
to absorb the differences in the nature of technology employed by home countries. Basically
home countries have a bundle of intangible assets such as sophisticated product differentiation,
organizational and management skill, and superior technology which provides some advantages
to host countries and to acquire this advantage host countries need to provide and prepare a good
condition of labor market. Because of that, there is growing acknowledgment among government
in developing countries that labor market reforms are necessary for attracting the inflows of FDI.
The best alternative is by providing the universal flexibility of labor market. Host countries with
low levels of employment protection and a flexible labor market are commonly perceived to
provide an environment conducive to investment, employment and structural change.
The globalization of production processes by MNC has further encouraged policymakers
around the world to redesign their labor market regulations to provide greater flexibility in this
market in order to adapt with the operations of MNCs. The rationale is that increased flexibility
in labor market regulations will make a host country more attractive to MNCs looking at
alternative locations and will result in greater FDI. Location decision of MNCs points to the high
priority attaching to labor market flexibility issues in determining the investment location. Labor
market flexibility is fast becoming a key requirement for MNCs seeking to consolidate
approaches to managing human capital in a global context. Firms those seeking the maximization
of profit are most interested to locate in countries with more flexible labor markets, which afford
firms more freedom to adjust to prevailing economic conditions. Thus the labor market
flexibility will have a substantial impact on the nature of FDI and will affect the practices and
behavior of inward investing organizations. Therefore, it seems reasonable to assert that, there
will influx inflows of FDI to countries with flexible labor market. Labor market flexibility can be
determined if the operation of market force are freely from the rigidities and or restriction of
powerful actors such as a monopsony employers, trade unions and government on the labor
market. Thus this would imply the elimination of all barriers to the free operation of market force
and the labor market is perfectly flexible. Labor market flexibility is a central element in
determining the overall performance of the nation economy and describes how labor markets
function. A flexible and efficient labor market, combined with a stable macroeconomic
environment, implies an economy that is fairer, more competitive and more productive. It also
implies an economy that is better able to adapt to the changing economic environment. Her
Majesty's Treasury2
(commonly known as HM Treasury) identify three basic 'overall' definitions
of the labor market flexibility; (1) Flexibility as the speed with which the labor market can adjust
in response to an economic shock; (2) A flexible labor market as one that exhibits a good
equilibrium, i.e. a low structural unemployment rate; and (3) A flexible labor market as one that
has institutional features that allow wages and employment to adjust smoothly and freely to
equate supply with demand.
2
Her Majesty's Treasury (HM Treasury) is the United Kingdom's economics and finance ministry.

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With the flexible labor market, the host country labor market will benefit more from the
inflows of FDI and location of MNC’s. The entry of MNC’s, with the technological advantage
yields the productivity differences between home country and domestic country in influencing
wages. Basically, foreign firms will pay the wages 7 percent higher than industry average and as
the advantage owing the productivity differences (Driffield 1996). On the other side, domestic
firms will get the technology which may increase the productivity of skilled workers. In the
mean time, we can say that the inflows of FDI will influence economic growth to host country
and provides the important link between technology and economic growth. By providing flexible
labor market, the inflows of investment may bring with it exposure to new technologies and the
possibility of technological spillovers to domestic industry (Haskel et al 2002). MNC operations
in the host country can result in technology spillovers from FDI whereby domestic firms adopt
superior MNC technology which enables them to improve their productivity. Technology
spillovers thereby generate a positive externality that should allow the host country to enhance its
long-run growth rate. The primary interests and motive to attract FDI especially policy makers in
developing and transition economies is to obtain new and advanced technology from developed
countries or MNC’s with the purpose to establish domestic innovation capacity, besides
expecting FDI inflows to bring much-needed capital marketing techniques and management
skills.
LITERATURES REVIEW
The relationship between Foreign Direct Investment (FDI) and economic growth has been an
interested issue for a period of ten years. There are numerous studies in FDI promoting economy
growth (i.e De Mello (1999), Chadee et al., (1997) ,Nair-Reichert and Weinhold (2001),
Freckleton, Wright and Craigwell, (2012) and Iqbal, Ahmad, Haider and Anwar (2014). Overall
study the significant of FDI and growth on particular countries. Study on South Asian
Association for regional cooperation (SAARC) is an organization of south Asian nation by
Qaiser Abbas, Salman Akbar, Ali Shan Nasir and Ullah (2011) for a sample of SAARC countries
for year 2001 to 2010 shows that is a positive and significant relationship between GDP and FDI
while an insignificant relationship between GDP and inflation. Furthermore Agrawal & Khan
(2011) found China’s growth is more affected by FDI, than India’s growth in a panel of 2
countries over the period 1993 – 2009. As well as Khder Aga (2014) finds that the effects of
FDI- human capital and FDI-export indicate that the transfer of high technology and knowledge
has an adverse impact on South Korean economic growth. Study by Borensztein et al., (1998)
developed a research of 69 developing countries over two time periods 1970-1979 and 1980-
1989 confirms that FDI contributes towards the economies of the less developed countries, if
they have the capabilities to absorb advanced technologies. However Ying and Riming (2008)
found new evidences that export led growth (ELG) and FDI-led growth with data of 28 regions
in China for 1994-2005 shows simulation reveals that with foreign trade and FDI scale varying,
marginal GDP in different Chinese regions is positive. Alfaro et al. (2004) examine the links
among FDI, financial markets and economic growth using cross-country sample of 71
developing and developed countries for the period 1975-1995 suggests that FDI plays an
important role in contributing to economic growth but the level of development of local financial
markets is crucial for these positive effects to be realised.

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By analysed on the data of 6 emerging countries of China, India, Mexico, Malaysia,
Pakistan and Thailand for the period of 1970-2005, Miankhel et al., (2009) claimed that FDI
drives the economic growth of India while exports drive the economic growth of Pakistan and
bidirectional causality between GDP and FDI in Thailand while no causal relationship in
Malaysia among East Asian countries. The significant contribution of FDI to economic growth in
the developing countries has been highlighted by Nair-Reichert and Weinhold (2001) and study
by Alzaidy, Naseem, Niaz, and Lacheheb,(2017) shows that financial development plays an
essential role in moderating the impact of FDI on economic growth in Malaysia. This implies
that well-developed financial sectors lead to further and facilitate FDI spill over and hence yield
economic growth, particularly for the case of Malaysia. Labor market regulation generally refers
to the range of economic, social, and judicial measures and channel that affect labor market
outcomes and behavior. The importance of labor market issues has been increasingly reflected in
economic policy discussions where, according to Freeman (2007, p. 3).Results from a study of
the operations of the labor market in the Caribbean Group for Cooperation in Economic
Development (CGCED) suggest that these regulatory measures do have some effect on the
operation of businesses in the region (see Abt Associates 1998).
Study by Parcon (2008) analyses FDI inflows to a sample of 195 countries over the
period 1990-2005 and finds evidence that FDI to developed and developing countries is affected
differently (negatively in some cases and positively in other cases) by different aspects of labor
market standards and regulation. Labor market institutions and their impact on economic
outcomes have been widely studied in many OECD countries, but much less so in others.
Javorcik and Spatareanu (2005) analyse the effect of labour market regulation on FDI on a
sample of 19 western and eastern European countries and found that extensive flexibility in the
host country’s labour market is associated with a higher probability and volume of investment.
Meanwhile Loayza and Palacios’s (1997) study of labor market liberalization in Latin America
and the Caribbean also comes to the conclusion that low level of labor market distortion exists in
the Caribbean compared with Latin America. Diego (2013) found that the relationship between
MNEs location decision and host country’s labor market institutional factors is sensitive to host
country’s development stage and market integration with the EU countries by using a sample of
41 European countries over the period 2004-2008. These results are consistent with previous
findings (Javorcik and Spatareanu (2005), Delbecque et al. (2007), Olney (2011), Parcon (2008).
The effect of MNEs on wages and working conditions varies in complex ways across different
types of investments, workforce groups and national environments also suggests that
governments and other stakeholders may be able to take measures to enhance the contribution of
FDI to economic and social development (OECD, 2008).
Study by (Busse and Groizard, 2006) found the evidence that excessive regulations
restrict growth through FDI only in the most regulated economies and the more regulated
economies are less able to take advantage of the presence of multinational companies. This result
is further evidence of the fact that important host country characteristics can lead to a positive
impact of foreign investment inflows on growth rates. Based on the survey by Vijaya and Kaltani
(2007) shows that FDI-Flows have a negative impact on overall wages in the manufacturing
sector and this impact is stronger for female wages as compared to Ndikumana and Verick
(2007) no convincing evidence on the linkages between FDI and labour market characteristics

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and outcomes in sample of African countries. Bazen (2000) states, the realisation of the benefits
on minimum wages (reducing wage and income inequality, pay discrimination, poverty in
working families, and providing work incentives and protection for low paid workers) depends
on the policy not having adverse effects on the economy. Hence research done by Sambharya
and Rasheed (2015) indicate that better economic management (monetary policy, fiscal burden
and banking and finance), less government participation in the economy, less state intervention
(strong property rights, less regulation, low prevalence of informal markets and less corruption),
absence of wage and price controls and higher levels of political freedom lead to higher FDI
inflows after controlling for FDI stock. Moreover Azémar and Desbordes (2010) research are
using separate data on sales by US multinational enterprises (MNEs) foreign affiliates on a
sample of 43 developed and developing countries for 1982-1994 period shows that the provision
of fiscal incentives or the deregulation of the labour market would exert a positive impact on
total FDI. Mayom (2015) investigates the impact of FDI on the labor market measures in a
sample of 48 Sub-Saharan African countries over the period 1991-2009 show that the variable of
interest, FDI, shows the expected signs and significance in the employment estimation.
In a study of FDI from seven developed countries entering seven Central and Eastern
European countries using country-level data, Leibrecht and Scharler (2009) find that differences
in employment protection legislation have no effect on FDI flows entering the host countries
when labor costs are included in the model. Based on data for the years 2000 to 2003, the
findings suggest that if, for example, Italy (a typical country with strict regulation) had enjoyed
the same flexibility in labour market regulation as the United States (a typical country with
flexible regulation), its unemployment rate might have been 2.3 percentage points lower among
the total labor force, 3.4 percentage points lower among women and 5.6 percentage points lower
among young people (University of Bath, 2009). Furthermore using a sample of 121 countries
over the period 1970-2000 there is an unconditional negative correlation between income
inequality and regulations in the labor market (Calderón, Chong, and Valdés, 2004).Good labor
market regulations promote new business and can help shift workers to the formal sector, where
higher productivity boosts economic growth. Restrictive labor market regulations, by contrast,
can discourage the development of formal businesses or prevent the growth of existing ones (La
Porta and Shleifer, 2008). Study by Nordin (2014) shows the countries that group above
threshold value of more flexibility of labor market has a positive impact and indicate that labor
market flexibility play an important role in moderating FDI on economic growth in developing
countries.
METHODOLOGY
The performance of the labor market is also vital to the well being of the economy and society.
Flexibility and efficiently labor market support with a stable macroeconomic environment,
implies an economy that is fairer, more competitive and more productive and economy is better
able to respond to economic change. In particular, the labor market is a key to the economy’s
sustainable rate of growth and contributes to overall competitiveness and productivity. This
section comprises the discussion regarding the estimation model, data and econometric
methodology that will be built and used to test the role of labor market flexibility in moderating

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FDI effects on economic growth. This study employed model specification that is broadly similar
to Mankiw et al. (1992) and extension the model based on Aiginger (2004) and Bernal-Verdugo
et al., (2012) and using the threshold regression estimation technique to capture the role of labor
market flexibility in moderating the impact of FDI on economic growth.
Theory of economic growth had been establish by Solow (1956), that known as Solow
growth model. This is a model of capital accumulation in a pure production economy, where
there are no prices because this model are strictly interested in output equal to real income.
Assumption of the model are everyone works all the time, so there is no labor or leisure choice,
and assume all income receive will be save, hence invest a fixed portion of their income. There is
no government intervention in the economy and hence no taxation nor subsidies, where this is a
closed economy. The Solow growth model is described as follow:
𝑌 = 𝐴𝐾𝛼
𝐿1−𝛼
(1)
where 𝐴 is a productivity parameter and where 𝛼 < 1 that production involves decreasing returns
to capital, and based on the law of motion that shows capital accumulation depends on
investment (equal to aggregate savings). Our interest is on role of labor market on economic
growth where Solow model only focus on capital accumulation. Human capital is expected to
affect growth on long run; to capture the role of human capital new growth theory had been
introduced known as New or Endogenous Growth Theory. There are two pioneer works that
explain role of human capital in growth model. First is Lucas (1988), model (2) shows the
growth rate of human capital affect the growth rate of aggregate income:
𝑌𝑡 = 𝐾𝑡
𝛼
𝐻𝑡
1−𝛼
ℎ𝑡 = 𝐾𝑡
𝛼
(𝐿𝑡ℎ𝑡)1−𝛼
(2)
where Y, K, H, h and L denote aggregate income, physical capital stock, aggregate and per capita
human capital stock and labor respectively. The coefficient of 𝛾 in introduced to capture the
possible effect of human capital that may lead to increasing returns to scale. The second is
Romer (1990) that explain role of human capital in facilitate technological development, where a
higher level of human capital leads to more innovations and higher efficiency which finally
cause a higher growth rate of aggregate income. In short, the level of the human capital stocks
affects the growth of the economy. According to Romer (1990), he assumes that human capital is
used to improved technology which translates in a physical capital accumulation.
From the above discussion, we can conclude that Lucas approach consider human capital
as a qualitative aspect of labor that is required to operate existing and new technologies. When
there is closed economy, Romerian aspect of human capital is dominant because we cannot
import the technology. This section develops a growth model to estimate the role of labor market
in moderating the impact of FDI on economic growth. The estimation of econometric
specification in this study is done by using R software (The R Foundation for Statistical
Computing). The specification of growth model is motivated by influential paper Mankiw et al.
(1992) (MRW) and support by Aiginger (2004), indicate that beside the basic economic growth
determinants, the characterizes a set of institutions, such as product or labor market regulation, or
legal and institutional variables, the rule of law, corruption etc. should be accounting in the
growth model, so that this model estimation include the labor market flexibility.

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GROWTHt = β0 + β1 GDPt + β2FDIt + β3𝐿𝑀𝑡 + εt (3)
where GROWTH is growth rate of GDP per capita for Malaysia in period t, GDP is logged level
of per capita GDP, FDI is foreign direct investment, LM is a labor market that examines based
on index of labour market regulation.
In this paper, we apply threshold test by Hansen (2000) to assess the null hypothesis of a
linear regression. This method allows the sample data to determine the number and location of
the thresholds. From this threshold regression, the developed model will fall into regimes that
depend on an unknown value of an observed value (two regimes or three regimes). Our model
will estimate role of labor market flexibility in moderating FDI on economic growth, as such we
want the parameter associated of labor market as a threshold variable. We can achieve this by
estimating the following threshold specification;
GROWTHit = {
β0
1
+ β1
1
GDPt + β2
1
FDIt + εt ; LM ≤ γ
β0
2
+ β1
2
GDPt + β2
2
FDIt + εt ; LM ≥ γ
(4)
where γ is unknown threshold. Here the observation can divided into two or three regimes or
groups depending on whether threshold variable that is labor market flexibility (LMF) is smaller
or larger than the value γ. The impact of labor market flexibility in moderating the impact of FDI
on growth will be given by β2
1
for countries in the low LMF regimes (i.e. with an LMF level less
than γ) and by β2
2
for countries in the high LMF regimes (i.e. with an LMF level greater than γ).
EMPIRICAL RESULTS
In this section, we estimate the role of labor market in moderating the impact of FDI on
economic growth by using threshold regression based on Hansen (2000). The empirical results
are present and discuss in the next sections. The analysis and discussions for Malaysia over the
period 2000-2015 and there are two indicators represent labor market that we use in this study
that is the index of labour market regulation. Before we examine the existence of threshold
effects in the models, the first step of our analysis is to estimate the best model to use in the
whole analysis. The tested models are stated in Equation (5) to (6), where the equation (5) is
without interaction variable and equation (6) we examine the interaction variable of FDI and
labor market.
GROWTHt = β0 + β1 GDPt + β2FDIt + β3LMREGt + εt (5)
GROWTHt = β0 + β1GDPt + β2FDIt + β3LMREGt + β4LMREG t x FDIt + εt (6)
The results are presented in Table 1 and Table 2. Table 1 present the result without
interaction variable and Table 2 present the result with the interaction variable. As shown in the
Table 1 and Table 2, all the models that we tested are highly significant at 1 percent significant
level. We decide to use model without interaction variable because based on reported result, with

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interaction variable for both indicators of labor market, FDI has not directly effect on growth rate
as the estimated coefficient is insignificant at the usual level that can be seen in Table 2. Result
for model without interaction is reported in Table 2, and we find that FDI are highly significant
in influencing growth rate. This finding are consistence with the past the literature of De Mello
(1997), Lipsey (2000), Olivia and Rivera-Batiz (2002), Choe (2003) and Ma (2009) who also
find that the role of FDI in promoting country growth rate.
TABLE 1: Ordinary least square estimation
Labor Market Regulation
GDP 0.81 0.16 4.98 7.58e-07
***
FDI 11.71 2.57 4.56 5.85e-06
***
LMF 0.04 0.09 0.44 0.66
Constant 0.41 0.93 0.45 0.65
F-test 15.33
p-value 9.865e-10***
Multiple 𝑅2 0.049
Note: Data covers periods from 2000-2015 and estimation using R statistical Software.
TABLE 2: Ordinary least square
Coefficient Standard
error
t-value p-value
Labor Market Regulation
GDP 0.85 0.16 5.16 3.09e-07
***
FDI 27.51 10.83 2.54 0.11
LMF 0.13 0.11 1.22 0.22
FDI x LMF -2.29 1.53 -1.50 0.13
Constant -0.34 1.06 -0.31 0.74
F-test 12.08
p-value 1.453e-09***
Multiple 𝑅2 0.05
The next empirical analysis need to be done is to ensure the existence of the threshold
effects. According to Hansen (1996, 1999 and 2000), the existence of threshold effect can be
examine by using bootstrap approach in estimating the p-value based on 1000 replication for all
bootstrap test. To determine number of the threshold, model (9) was estimated by using least
square estimation by allowing for zero, one and two thresholds. The test statistics𝐹1, 𝐹2 are
presented in Table 3.
𝑇𝐹𝑃𝑡 = 𝜇𝑡 + 𝜃1 + 𝜃2𝐺𝐷𝑃𝑡−1
2
+ 𝜃3𝐺𝐷𝑃𝑡−1
3
+ 𝜃4 𝐿𝑀𝑅𝐸𝐺𝑡−1 + 𝜃5 𝐺𝐷𝑃𝑡−1 𝐿𝑀𝑅𝐸𝐺𝑡−1 +
𝛽1
,
𝐹𝐷𝐼𝑡−1 𝐼 (𝐿𝑀𝑅𝐸𝐺𝑡 ≤ 𝛾1) + 𝛽2
,
𝐹𝐷𝐼𝑡−1 𝐼 (𝛾1 > 𝐿𝑀𝑅𝐸𝐺𝑡 ≤ 𝛾2) + 𝛽3
,
𝐹𝐷𝐼𝑡−1 𝐼 ( 𝛾2 >
𝐿𝑀𝑅𝐸𝐺𝑡 ) + 𝑒𝑡 (7)

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This model is developed based on equation (4) setting. Where TFP as dependent variable,
INTGDP as an independent variable, FDI is of interest variable and LM is threshold variables
and will be measure by index of labour market regulation. There are also additional regressors
that included in this model 𝐺𝐷𝑃𝑡−1
2
, 𝐺𝐷𝑃𝑡−1
3
and 𝐺𝐷𝑃𝑡−1 𝐿𝑀𝑅𝐸𝐺𝑡−1 represent the non-linear
term to reduce the possibility of spurious correlations due to omitted variables bias.
TABLE 3: Test for threshold effects.
Labour Market Regulation
Test for single threshold
𝐹1 20.42
p-value 0.05**
(10%, 5% , 1% critical value) [15.62, 20.21, 37.62]
Test for double threshold
𝐹2 15.96
p-value 0.06*
(10%, 5% , 1% critical value) [17.67, 21.47, 43.22]
Table 3 shows the estimation result of the F-test, p-value and critical value based bootstrap
estimation. Table 3 reported that, based on 𝐹1 value of 20.42 and 𝐹2 value of 15.96 and both are
statistically significant at 5 percent significant level and we can easily rejected the null
hypothesis, that there are existence of threshold effect. Therefore, the threshold estimation
indicated that there are double threshold effects and we classify the data and model into three
regimes that represent in equation (8).
𝑇𝐹𝑃𝑡 =
𝜇𝑡 + 𝜃1 𝐺𝐷𝑃𝑡−1 + 𝜃2𝐺𝐷𝑃𝑡−1
2
+𝜃3𝐺𝐷𝑃𝑡−1
3
+ 𝜃4 𝐿𝑀𝑅𝐸𝐺𝑡−1 + 𝜃5 𝐺𝐷𝑃𝑡−1 𝐿𝑀𝑅𝐸𝐺𝑡−1 +
𝛽1
,
𝐹𝐷𝐼𝑡−1 𝐼 (𝐿𝑀𝑅𝐸𝐺𝑡 ≤ 𝛾1) + 𝛽2
,
𝐹𝐷𝐼𝑡−1 𝐼 (𝛾1 > 𝐿𝑀𝑅𝐸𝐺𝑡 ≤ 𝛾2) + 𝛽3
,
𝐹𝐷𝐼𝑡−1 𝐼 ( 𝛾2 >
𝐿𝑀𝐹𝑅𝐸𝐺𝑡 ) + 𝑒𝑡 (8)
The result represent strong evidence of a nonlinear relationship between labor market and
country growth rate as in each instance the null hypothesis of no threshold is rejected. The point
estimate of double threshold for regulation is reported in Table 4. The result can be represent in
three classes of countries that can be indicated by the point estimates with the very low level of
labor market flexibility’, ‘very high level of labor market flexibility’ and ‘other’. The ranges of
confidence intervals are not too tight which indicate high uncertainty about the nature of this
division. More details and information can be learn and seen about the thresholds estimate of
labour market regulation from plots of concentrated ratio function 𝐿𝑅1
𝑟
(𝛾) and 𝐿𝑅2
𝑟
(𝛾) in
figures 1- 2.

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TABLE 4: Threshold estimates
Estimate 95% confidence intervals
Labor Market Flexibility: Regulation
𝛾
̂1
𝑟 4.5 [3.6, 5.1]
𝛾
̂2
𝑟 5.9 [5.9, 6.2]
FIGURE 1: Confidence interval construction in single threshold model of regulation.
FIGURE 2: Confidence interval construction in double threshold model of regulation.
The regression coefficient estimates, conventional OLS standard errors and white-
corrected standard errors are reported in Table 6. The reported results of regulation as indicator
labor market and estimate for double threshold effects. We can see, the first independent variable
of GDP, show mixed result of positive and negative. The first coefficient of 𝐺𝐷𝑃 𝑡−1 is 41.17,
where there are positively relationship between GDP and economic growth. By following the
model developed by Hansen (1999), 𝐺𝐷𝑃𝑡−1
2
show negative value of -10.10, where when GDP is
3 4 5 6 7 8 9
0
5
10
15
20
Figure 1
Confidence Interval Construction in Single Threshold Model
Threshold Parameter
Likelihood
Ratio
3 4 5 6 7 8 9
0
5
10
15
Figure 2
Confidence Interval Construction in Double Threshold Model
Second Threshold Parameter
Likelihood
Ratio

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squared, there is negatively relationship with the growth rate and this negative sign are
consistence with reported result by Hansen (1999), we take power of three for GDP 𝐺𝐷𝑃𝑡−1
3
of
0.67 and positively related with the growth rate, also consistence with result reported with
Hansen (1999). The coefficient values of labor market flexibility indicate negative sign of -1.20
that labor market flexibility are negative relationship with economic growth, this result is
consistence with Barro (1998) with the level of flexibility of labor market are negatively
relationship with growth rate (i.e: less flexibility of labor market (high regulation) will lowers the
growth rate).
Turning now to the interaction variable of GDP and labor market flexibility indicate the
positive value of 0.56 with growth rate, where this coefficient value indicates that when we
interact labor market flexibility with the GDP, labor market flexibility will play a positive role to
country growth rate. This result indicates that with more flexible labor market supported by good
condition of GDP will influence growth rate and this result is consistence with Forteza and Rama
(2000). Our interest variable is the threshold effects. Since previously we estimate regulation has
double threshold effect, so model of regulation that we examine based on three regimes. The first
regime indicate ‘very low level of labor market flexibility” second regime indicates “very high
level of labor market flexibility’ and third regime indicate ‘other’. This estimation of threshold
variable indicates the role of labor market flexibility in moderating the impact of FDI on
economic growth.
Results for threshold estimation of labour market regulation of ‘very low level of labor
market flexibility’ show negative coefficient of -22.77 that we can conclude with low level of
labor market flexibility, there is negatively impact in moderating FDI on country growth rate.
Result for second regime show 41.10 of ‘very high level of labor market flexibility’ and third
regime of ‘other’ indicate the coefficient value of 13.48. We can conclude that, country with very
high level of labor market flexibility will encourage the inflows of FDI and at the same time will
boost country growth rate. These results explain with high level of labor market flexibility,
country will attract more inflows of FDI and at the same time will enhance countries growth rate,
however with low level of labor market flexibility did not attract inflows of FDI and will lowers
the countries growth rate. Past studies by Cooke and Noble (1998), Cooke (2001), Ferner and
Quintanilla (1997), Bentolila and Bertola (1990), Haaland et al., (2003) and Dewit et al., (2003)
also indicate that flexible labor market are significant attractor of FDI.
TABLE 5: Threshold regression
Regressor Coefficient estimate OLS SE White SE
Labor Market Regulation (Double Threshold)
Dependent variable is Growth rate
𝐺𝐷𝑃 𝑡−1 41.17 24.3992 24.6597
𝐺𝐷𝑃𝑡−1
2 -10.10 5.4689 5.4162
𝐺𝐷𝑃𝑡−1
3 0.67 0.3961 0.3793
𝐿𝑀𝐹 𝑡−1 -1.20 1.5834 1.5511
𝐺𝐷𝑃 𝑡−1𝐿𝑀𝐹 𝑡−1 0.56 0.3549 0.3582
𝐹𝐷𝐼 𝑡−1𝐼(𝐿𝑀𝐹 𝑡−1 ≤ 4.5 ) -22.77 9.8106 12.3442
𝐹𝐷𝐼 𝑡−1𝐼(4.5 < 𝐿𝑀𝐹 𝑡−1 ≤ 5.9 ) 41.10 7.1527 17.4865

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𝐹𝐷𝐼 𝑡−1𝐼( 𝐿𝑀𝐹 𝑡−1 > 5.9) 13.48 3.7201 6.3268
Threshold estimate 5.9
Fixed threshold 4.5
Confidence region [5.9, 6.2]
Sum of Squared Errors 7347.184
LR Test for threshold effect 15.96085
Trimming Percentage 0.05
CONCLUSION AND RECOMMENDATION
This study has developed an empirical discussion about the role of labor market in moderating
the impact of FDI on growth by using threshold estimation. The method is applied to Malaysia
with estimation of 16 years for the period 2000-2015. Based on index of labour market
regulation, we find the different regimes of these two indicators. Labour market regulation show
an existence of double thresholds with three regimes applied in the estimation model. This study
present the new evidence on the role of labor market in moderating the impact of FDI on growth,
where the major contribution of this study is FDI have a positive effect on economic growth only
when the index of labor market exceed a threshold level at second regimes of ‘very high level of
labor market flexibility’. Thus, we can conclude that, countries with very high level of labor
market flexibility will play an important role in moderating the impact of FDI on economic
growth and this result consistence with Haaland et al., (2003), Javorcik and Spatareanu (2004),
Gunnigle and McGuire (2001) and Storey et al., (2002), that they find country with greater
flexibility in the host country’s labor market is associated with higher probability of investment
taking place as well as with a larger volume of investment flows. The other contribution of his
study is labor market flexibility should be one of the determinant of growth rate, not only labor
discussed by Solow (1956) and human capital by Barro and Lee (1993).
This finding emphasize the importance role of government and labor market union in
forming any labor market regulation because any new rules or modification of this market will
affect the level or inflows of FDI also the number of MNC’s location and finally will reduce
country growth rate. Accordingly, policy marker should originate policies to promote labor
market flexibility, because more flexible of labor market will give more benefit to the host
countries. Although more flexible give more benefit compare to the rigid labor market, any
changes of labor market policy should not neglected the employment protection.
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