Markowitz Optimization of Malaysia's Economy: A Proposed Strategy for U.S. Developmental Investment in Malaysia

Abstract

While the ties between foreign investment strategy and U.S. economic strength have been a national priority for centuries, recent changes to global status quo have ushered in a new era of economic power concentration and competition. The rapid growth of the Chinese economy, coupled with recent authority-granting legislation, presents great opportunity for the creation of development-focused investment strategies to further United States foreign policy objectives. The 2018 passage of the Better Utilization of Investment Leading to Development (BUILD) Act, which allows for a strengthening and modernization of American developmental finance capabilities, offers new capacity, specialized focus, and new agencies for the implementation of strategic foreign investment. As a result of these updates, the United States government is at an exciting turning point in history, where developmental finance can be used as a strong tool to further U.S. foreign policy and national security objectives.

Comparing goals stated in U.S. legislation with regional issues surrounding certain aspects of Chinese investment strategy, this paper aims to propose an optimal portfolio for U.S. investment in Malaysia based on sector analysis of investment opportunities, current socioeconomic conditions and economic best practices inherited from past U.S. developmental projects. The investment strategy will be the result of a variation on the traditional Markowitz optimization model which takes industrial sectors as inputs (rather than traditional stocks), and also adds in variables to account for these additional factors. The end result of this project should read as an in-depth analysis of Malaysia’s current climate for American developmental investment, and a proposed strategy by which the United States government could use its new capacity to optimize investment opportunities and positive international influence.