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Analysis of Political Risks Affecting International Construction projects in Malaysia

Lihong Chen, Xiaopeng Deng, Tengyuan Chang

Abstract


With the stable development of economy and a series of policies encouraging foreign investment and infrastructure construction, Malaysia becomes more attractive for international construction contractors. However, there is a lack of analysis of relevant political risks in Malaysia in previous literature. This paper aims to analyze the political risks affecting international construction projects in Malaysia. An assessment system with 11 political risk factors were established to calculate the scores of political risk in Malaysia. The factors were identified through the literature review, questionnaire survey and expert argumentation methods, dividing into four groups: Government Governance, Political and Social Stability, Economic Situation and Relationship between Home-host Countries. Then, analyze political risk trends by collecting data to calculate Malaysia's political risk scores over the decade. The analysis indicates that the level of political risk in Malaysia is declining, which is beneficial to the investment of international contractors. However, with the characteristics of greater uncertainty and greater potential risks in the next period of time, some risk factors, including Control of corruption, Rule of law, Terrorism and Exchange rate fluctuation, the occurrence of which may cause loses to international contractors, require special attention. International contractors should seize opportunities and take appropriate steps to address related risk changes. Since there are few studies on the political risks affecting international construction projects in Malaysia, and there are also few literature on the trends of political risks, this paper can provide a reference for international contractors who want to invest in Malaysia.

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