DETERMINANTS OF FOREIGN DIRECT INVESTMENT INFLOWS INTO ASEAN COUNTRIES: A GLS ESTIMATION TECHNIQUE APPROACH
Main Article Content
Abstract
In this article, a strongly balanced panel data during 1997-2014 of 10 ASEAN countries and the Generalized Least Squares (GLS) estimation technique have been employed. This is to identify the factors inducing foreign direct investment (FDI) inflows into the area. The estimated results vary across the groups of country members. For the ASEAN 10, the deterministic factors of FDI are the Real GDP Growth, low Inflation, high Trade Openness Ratio, the Improvement of Infrastructure, and the Political Stability. This is consistent with the theoretical model of the determinant of FDI. Unexpectedly, the Exchange Rate Regime and the Labor Productivity have had a negative impact on FDI flows to the region. In addition, the Asian financial crisis 1997 has had a great negative impact on FDI inflows into the area. For the ASEAN 6, the attractive factors of FDI inflows are low Inflation and the Improvement of Infrastructure. The Asian financial crisis 1997 has also had a great negative impact on FDI flows to ASEAN 6 countries. For the ASEAN 4, the Improvement of Infrastructure and the Labor Productivity have strongly induced FDI flows. However, the Exchange Rate Regime has not encouraged FDI flows to the region like the case of ASEAN 6. And, the Asian financial crisis 1997 has not reduced the FDI flows to the four.
Article Details
Keywords
ASEAN, determinants, FDI inflows, GLS estimation technique
References
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41. Mottaleb, K. A., & Kalirajan, K., 2010. ‘Determinants of foreign direct investment in developing countries a comparative analysis.’ Margin: The Journal of Applied Economic Research, 4(4), 369-404.
42. NarayanamurthyVijayakumar, Perumal Sridharan, Kode Chandra Sekhara Rao, 2010. ‘Determinants of FDI in BRICS Countries: A panel analysis.’ Int. Journal of Business Science and Applied Management, Volume 5, Issue 3.
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44. Ohno, Kenichi, 2009. ‘Avoiding the Middle-Income Trap Renovating Industrial Policy Formulation in Vietnam’, ASEAN Economic Bulletin, 2(1): 25-43.
45. Oladipo, Olajide S., 2010. ‘Foreign Direct Investment (FDI): Determinants and Growth Effects in a Small Open Economy’, International Journal of Business and Finance Research, 4(4): 75-88.
46. Ozkan-Gunay, E. Nur and U. Bogazici, 2011. ‘Determinants of FDI Inflows and Policy Implications: A Comparative Study for the Enlarged EU and Candidate Countries’, Emerging Markets Finance and Trade, Supplement 4, Vol. 47: 71-85.
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52. Vijayakumar, Narayanamurthy, Perumal Sridharan and Kode Chandra Sekhara Rao, 2010. ‘Determinants of FDI in BRICS Countries: A panel analysis’, International Journal of Business Science and Applied Management, 5(3): 1-13.
53. Vogiatzoglou, Klimis, 2007. ‘Vertical Specialization and New Determinants of FDI: Evidence from South and East Asia’, Global Economic Review, 36(3): 245-266.
54. Wahid, A. N., Sawkut, R., & Seetanah, B., 2009. ‘Determinants of Foreign Direct Investments (FDI): Lessons from the African Economies.’ Journal of Applied Business and Economics, 9(1), 70.
55. Wahid, A. N., Sawkut, R., & Seetanah, B., 2009. ‘Determinants of Foreign Direct Investments (FDI): Lessons from the African Economies.’ Journal of Applied Business and Economics, 9(1), 70.
56. Wei, S. J., 2000. ‘How taxing is corruption on international investors?’ Review of economics and statistics, 82(1), 1-11.
57. Williams, Kevin, 2015. ‘Foreign Direct Investment in Latin America and the Caribbean: An Empirical Analysis’, Latin American Journal of Economics, 52(1): 57-77.
58. Woodward, D. P., 1992. ‘Locational determinants of Japanese manufacturing startups in the United States.’ Southern Economic Journal, 690-708.
59. Wooldridge, J. M., 2002. ‘Econometric Analysis of Cross Section and Panel Data.’ Cambridge, MA: MIT Press.
60. World Economic Forum (WEC), 2010. The Global Competitiveness Report 20102011.
61. Xose´ A. Rodrı´guez and Julio Pallas, 2008. ‘Determinants of foreign direct investment in Spain’, Applied Economics, 40: 2443-2450.
2. Asiedu, E., 2002. ‘On the determinants of foreign direct investment developing counties: is Africa different?’ World Development, Vol. 30 (1), pp.107-119.
3. Asiedu, E., 2006. ‘Foreign direct investment in Africa: The role of natural resources, market size, government policy, institutions and political instability.’ The World Economy, 29(1), 63-77.
4. Axarloglou, K., 2004. ‘Local labor market conditions and foreign direct investment flows in the US.’ Atlantic Economic Journal, 32(1), 62-66.
5. Basnet, Hem C. and Kamal P. Upadhyaya, 2014. ‘Do Remittances Attract Foreign Direct Investment? An Empirical Investigation’, Global Economy Journal, 14(1): 1-9.
6. Beck, N., & Katz, J. N., 1995. ‘What to do (and not to do) with time-series crosssection data.’ American political science review, 89(03), 634-647.
7. Bellak, Christian, Markus Leibrecht and Joze P. Damijan, 2009. ‘Infrastructure Endowment and Corporate Income Taxes as Determinants of Foreign Direct Investment in Central and Eastern European Countries’, The World Economy, doi: 10.1111/j.1467-9701.2008.01144.x, 267-290.
8. Birsan, Maria and Buiga, Anuta, 2009. ‘FDI Determinants: Case of Romania’, Transition Studies Review, 15(4): 726-736.
9. Blonigen, Bruce A. and Jeremy Piger, 2014. ‘Determinants of foreign direct investment’, Canadian Journal of Economics/Revue canadienne d’economique, 47(3): 776-812.
10. Changwatchai, Piyaphan, 2010. The Determinants of FDI Inflows by Industry to ASEAN (Indonesia, Malaysia, Philippines, Thailand, andv Vietnam). A Ph.D. Dissertation, the University of Utah.
11. Choong, Chee-Keong and Siew-Yong Lam, 2010. ‘The Determinants of Foreign Direct Investment in Malaysia: A Revisit’, Global Economic Review, 39(2): 175-195.
12. Christiansen, H. and Ogutcu, M., 2002. ‘Foreign direct investment: maximizing benefits, minimizing costs’, Paper presented at Global Forum on International Investment, Shanghai, China.
13. Cushman, D. O., 1987. ‘The effects of real wages and labor productivity on foreign direct investment.’ Southern economic journal, 174-185.
14. Dauti, Bardhyl, 2015. ‘Determinants of Foreign Direct Investment in South East European Countries and New Member States of European Union Countries’, Economic and Business Review, 17(1): 93-115.
15. Davoodi, Parviz and Shahmoradi, Akbar, 2004. ‘Reinvestigation of the FDI Determinants Using Panel Data Model’, Quarterly Iranian Economic Research, Vol. 20: 81-113.
16. Dunning, J. H., and Lundan, S. M., 2008. Multinational enterprises and the global economy. Edward Elgar Publishing.
17. Dunning, J.H., 1981. International Production and the Multinational Enterprise. London: George Allen and Unwin.
18. Dunning, J.H., 1988. ‘The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions’, Journal of International Business Studies, 19 (1): 1-32.
19. Faeth, Isabel, 2009. ‘Determinants of Foreign Direct Investment-A Tale of Nine Theoretical Models’, Journal of Economic Surveys, 23(1): 165-196.
20. Froot, K. A., & Stein, J. C., 1992. ‘Exchange rates and foreign direct investment: an imperfect capital markets approach.’ (opt. in Hoang and Bui, 2015).
21. Hattari, R., Rajan, R. S., & Thangavelu, S., 2008. ‘Understanding Intra-ASEAN FDI flows: Trends and determinants and the role of China and India.’ Department of Economics, National University of Singapore, Department of Economics, Unpublished Paper.
22. Hoang, Hong Hiep and Duc Hung Bui, 2015. ‘Determinants of foreign direct investment in ASEAN: A panel approach’, Management Science Letters, 5: 213-222.
23. Hoechle, D., 2007. ‘Robust standard errors for panel regressions with crosssectional dependence.’ Stata Journal, 7(3), 281.
24. Holland, D. and Pain, N., 1998. ‘The diffusion of innovations in central and eastern europe: a study of the determinants and impact of foreign direct investment, NIESR Discussion Paper No.137, National Institute of Social and Economic Research, London.
25. Hossain, M. Sharif and Mitra, Rajarshi, 2013. ‘A Dynamic Panel Analysis of the Determinants of FDI in Africa’, Economic Bulletin, 33(2): 1606-1614.
26. Ismail, N. W., 2009. ‘The determinant of foreign direct investment in ASEAN: a semi-gravity approach’, Transition Studies Review, 16(3): 710-722.
27. Janicki, Hubert P. and Phanindra V. Wunnava, 2004. ‘Determinants of foreign direct investment: empirical evidence from EU accession candidates’, Applied Economics, 36: 505-509.
28. Jiménez, Alfredo, 2011. ‘Political Risk as a Determinant of Southern European FDI in Neighboring Developing Countries’, Emerging Markets Finance & Trade, 47(4): 59-74.
29. Kimino, Satomi, David S. Saal and Nigel Driffield, 2007. ‘Macro Determinants of FDI Inflows to Japan: An Analysis of Source Country Characteristics’, World Economy, 30(3): 446-469.
30. Kinda, T., 2008. ‘Infrastructure and private capital flows in developing countries.’ Munich PersonalRePEc Archive Paper, 19158.
31. Klein, M.W. and Rosengren, E., 1990. ‘Determinants of Foreign Direct Investment in the United States.’ Clark University Working Paper 90 - 3.
32. Kobrin, Stephen J., 2005. ‘The Determinants of Liberalization of FDI Policy in Developing Countries: A Cross-Sectional Analysis, 1992-2001’, Transnational Corporations, 14(1): 67-104.
33. Kok, Recep and Bernur Acikgoz Ersoy, 2009. ‘Analyses of FDI determinants in developing countries’, International Journal of Social Economics, 36(1/2): 105123.
34. Kurihara, Yutaka, 2012. ‘The Deterministic Elements of FDI to ASEAN Countries: The Relationship between FDI and Macroeconomic Variables’, Journal of Management and Sustainability, 2(2): 11-17.
35. Lankes, H.P. and Venables, A.J., 1996. ‘Foreign Direct Investment in Economic Transition: The Changing Pattern of Investments.’ Economics of Transition, Vol.4, pp.331-347.
36. Mamadou, C., 2002. Les Investissements Directs de l’étranger et l’intégration régionale: les exemples de l’ASEAN et du MERCOSUR.’ Revue Tiers Monde, 169, pp 47-69.
37. Masron, A. and H. Abdullah, 2010. ‘Institutional quality as a determinant for FDI inflows: evidence from ASEAN’, World Journal of Management, 2(3): 115-128.
38. Mengistu, A. A., & Adhikary, B. K., 2011. ‘Does good governance matter for FDI inflows? Evidence from Asian economies.’ Asia Pacific business review, 17(3), 281-299.
39. Mina, Wasseem, 2007. ‘The Location Determinants of FDI in the GCC Countries’, Journal of Multinational Financial Management, 17(4): 336-348.
40. Moosa, I. A., & Cardak, B. A., 2006. ‘The determinants of foreign direct investment:
an extreme bounds analysis.’ Journal of Multinational Financial Management, 16(2), 199-211.
41. Mottaleb, K. A., & Kalirajan, K., 2010. ‘Determinants of foreign direct investment in developing countries a comparative analysis.’ Margin: The Journal of Applied Economic Research, 4(4), 369-404.
42. NarayanamurthyVijayakumar, Perumal Sridharan, Kode Chandra Sekhara Rao, 2010. ‘Determinants of FDI in BRICS Countries: A panel analysis.’ Int. Journal of Business Science and Applied Management, Volume 5, Issue 3.
43. Obwona, Marios B., 2001. Determinants of FDI and their Impact on Economic Growth in Uganda, African Development Bank 2001, Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.
44. Ohno, Kenichi, 2009. ‘Avoiding the Middle-Income Trap Renovating Industrial Policy Formulation in Vietnam’, ASEAN Economic Bulletin, 2(1): 25-43.
45. Oladipo, Olajide S., 2010. ‘Foreign Direct Investment (FDI): Determinants and Growth Effects in a Small Open Economy’, International Journal of Business and Finance Research, 4(4): 75-88.
46. Ozkan-Gunay, E. Nur and U. Bogazici, 2011. ‘Determinants of FDI Inflows and Policy Implications: A Comparative Study for the Enlarged EU and Candidate Countries’, Emerging Markets Finance and Trade, Supplement 4, Vol. 47: 71-85.
47. Ramjee Singh, D., McDavid, Hilton, Birch, A. and Wright, Allan, 2008. ‘The Determinants of FDI in Small Developing Nation States: An Exploratory Study’, Social and Economic Studies, 57(3-4): 79-104.
48. Razin, A. and E. Sadka, 2007. Foreign Direct Investment: An analysis of aggregate flows, Princeton: Princeton University Press: p. 8.
49. Sahoo, P., 2006. ‘Foreign Direct Investment in South Asia: Policy, Trends, Impact and Determinants.’ ADB Institute Discussion paper No. 56.
50. Ullah, Muhammad Shariat and Inaba, Kazuo, 2014. ‘Liberalization and FDI Performance: Evidence from ASEAN and SAFTA Member Countries’, Journal of Economic Structures, 3(1).
51. UNCTAD, 2006. World Investment Report 2006, FDI from Developing and Transition Economies: Implications for Development, United Nations, New York, NY and Geneva.
52. Vijayakumar, Narayanamurthy, Perumal Sridharan and Kode Chandra Sekhara Rao, 2010. ‘Determinants of FDI in BRICS Countries: A panel analysis’, International Journal of Business Science and Applied Management, 5(3): 1-13.
53. Vogiatzoglou, Klimis, 2007. ‘Vertical Specialization and New Determinants of FDI: Evidence from South and East Asia’, Global Economic Review, 36(3): 245-266.
54. Wahid, A. N., Sawkut, R., & Seetanah, B., 2009. ‘Determinants of Foreign Direct Investments (FDI): Lessons from the African Economies.’ Journal of Applied Business and Economics, 9(1), 70.
55. Wahid, A. N., Sawkut, R., & Seetanah, B., 2009. ‘Determinants of Foreign Direct Investments (FDI): Lessons from the African Economies.’ Journal of Applied Business and Economics, 9(1), 70.
56. Wei, S. J., 2000. ‘How taxing is corruption on international investors?’ Review of economics and statistics, 82(1), 1-11.
57. Williams, Kevin, 2015. ‘Foreign Direct Investment in Latin America and the Caribbean: An Empirical Analysis’, Latin American Journal of Economics, 52(1): 57-77.
58. Woodward, D. P., 1992. ‘Locational determinants of Japanese manufacturing startups in the United States.’ Southern Economic Journal, 690-708.
59. Wooldridge, J. M., 2002. ‘Econometric Analysis of Cross Section and Panel Data.’ Cambridge, MA: MIT Press.
60. World Economic Forum (WEC), 2010. The Global Competitiveness Report 20102011.
61. Xose´ A. Rodrı´guez and Julio Pallas, 2008. ‘Determinants of foreign direct investment in Spain’, Applied Economics, 40: 2443-2450.