Journal Press India^®

Author Details ( * ) denotes Corresponding author

Numerous empirical studies on foreign direct investment (FDI) have been conducted because of its rising significance among emerging nations. Studies on South-east Asian countries primarily focus on macroeconomic factors such as GDP, inflation rates, and trade openness, while the role of governance, natural resources, and efficiency indicators in determining FDI inflows and FDI stock remains underexplored. A pair-wise correlation was employed to examine multicollinearity, the Woodbridge autocorrelation test to examine autocorrelation, and the log-likelihood ratio test to examine heteroscedasticity. Cross-sectional independence among the cross-sectional units is checked with the help of the Pesaran test. A fixed-effects panel data model was used to achieve the objectives of the study. This study adds to the existing literature by examining multiple factors together - natural resources, efficiency, governance, and economic conditions — to understand what attracts foreign investment to ASEAN countries. It also goes a step further by examining if the same determinants affect FDI inflows as well as FDI stock.

Keywords

Foreign direct investment; Cross-sectional independence; Natural resources rent; Forest rent; Governance indicators; ASEAN

1. Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: Is Africa different? World Development, 30(1), 107–119.
2. Asiedu, E. (2006). Foreign direct investment in Africa: The role of natural resources, market size, government policy, institutions and political instability. World Economy, 29(1), 63–77.
3. Asiedu, E. (2013). Foreign direct investment, natural resources and institutions (Working Paper No. 3). International Growth Centre.
4. Bokpin, G. A., Mensah, L. & Asamoah, M. E. (2015). Foreign direct investment and natural resources in Africa. Journal of Economic Studies, 42(4), 608–621.
5. Ezeoha, A. E. & Cattaneo, N. (2012). FDI flows to Sub-Saharan Africa: The impact of finance, institutions and natural resource endowment. Comparative Economic Studies, 54(3), 597–632.
6. Ghislain, J. & Makonda, M. (2021). Effects of forest resources on the reception of foreign direct investment in Congo Basin countries. Theoretical Economics Letters, 11(1), 125–144. Retrieved from https://doi.org/10.4236/tel.2021.111010
7. Gopalan, S. (2019). Roads to prosperity? Determinants of FDI in China and ASEAN. The Chinese Economy, 52(4), 318–341. Retrieved from https://doi.org/10.1080/10971475.2018.1559092
8. Goswami, C. & Saikia, K. K. (2012). FDI and its relation with exports in India, status and prospect in North East region. Procedia - Social and Behavioural Sciences, 37, 123–132.
9. Goyal, A. Kumar & Madan, T. (2019). Determinants of foreign direct investment (FDI) in Bimstec economies: A dynamic panel data analysis. International Journal of Advance and Innovative Research, 6(2), 5-12.
10. Grace, G. (2019). Factors affecting inward foreign direct investment: Case of Asean Countries. Info Artha, 3(2), 119–132.
11. Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2014). Multivariate data analysis (7th ed.). Harlow, England: Pearson Education Limited.
12. Ho, C. S. F. & Booth, L. (2017). Fundamentals and country-specific determinants of FDI: Evidence from the United States and Malaysia. Pertanika Journal of Social Sciences and Humanities, 25(2), 203–220.
13. Ho, C. S. F. & Rashid, A. H. (2016). Macroeconomic and country specific determinants of FDI macroeconomic and country specific determinants of FDI. Pertanika Journal of Social Sciences and Humanities, 25(June), 705–722.
14. Hoang, H. H. & Bui, D. H. (2015). Determinants of foreign direct investment in ASEAN: A panel approach. Management Science Letters, 5(2), 213–222.
15. ILO Department of Statistics. (n.d.). Statistics on labour productivity. ILOSTAT. Retrieved from https://ilostat.ilo.org/topics/labour-productivity/
16. Jadhav, P. (2012). Determinants of foreign direct investment in BRICS economies: Analysis of economic, institutional and political factors. Procedia - Social and Behavioural Sciences, 37, 5–14. Retrieved from https://doi.org/10.1016/j.sbspro.2012.03.270
17. Jolliffe, I. T. & Cadima, J. (2016). Principal component analysis: A review and recent developments. Philosophical Transactions A Mathematical, Physical and Engineering Sciences, 374(2065). Retrieved from https://doi.org/10.1098/rsta.2015.0202
18. Kafait, A. (2018). The determinants of foreign direct investment in services: A case of South Asia and Southeast Asia. Journal of International Business Research, 17(1), 1544–0230.
19. Kaliappan, S. R., Khamis, K. M. & Ismail, N. W. (2015). Determinants of services FDI inflows in ASEAN countries. International Journal of Economics and Management, 9(1), 45–69.
20. Kalirajan, K. P., Miankhel, A. K. & Thangavelu, S. M. (2009). Foreign direct investment, exports, and economic growth in selected emerging countries: Multivariate VAR analysis. Retrieved from https://ssrn.com/abstract=1526387
21. Liu, H. H., & Dejphanomporn, P. (2018). Development of inward foreign direct investments in Thailand: Determinants, effects and implications. Asian Economic and Financial Review, 8(6), 717-732.
22. Masron, T. A. & Abdullah, H. (2010). Institutional quality as a determinant for FDI inflows: evidence from ASEAN. World Journal of Management, 2(3), 115–128.
23. Masron, T. A. & Nor, E. (2013). FDI in ASEAN-8: Does institutional quality matter? Applied Economics Letters, 20(2), 186–189.
24. Masron, T. A., Naseem, N. A. & Abdul Wahab, E. A. (2018). Institutional quality in attracting foreign direct investment to small countries. Malaysian Journal of Economic Studies, 55(2), 267–284.
25. Miankhel, A. K., Thangavelu, S. M., & Kalirajan, K. (2009). Foreign direct investment, exports, and economic growth in South Asia and selected emerging countries: A multivariate VAR analysis (MPRA Paper No. 22763). Munich Personal RePEc Archive.
26. Micale, R. P. (2018). The effects of natural resource rents on FDI inflows. Retrieved from https://scholar.colorado.edu/honr_theses
27. OECD (2008) Handbook on constructing composite indicators. Retrieved from https://www.oecd.org/sdd/42495745.pdf
28. Othman, N., Yusop, Z., Andaman, G. & Ismail, M. M. (2018). Impact of government spending on FDI inflows: The case of Asean-5, China and India. International Journal of Business and Society, 19(2), 401–414.
29. Paul, J. & Jadhav, P. (2019). Institutional determinants of foreign direct investment inflows: evidence from emerging markets. International Journal of Emerging Markets, 15(2), 245-261. Retrieved from https://doi.org/10.1108/IJOEM-11-2018-0590
30. Ramasamy, B. & Yeung, M. (2010). The determinants of foreign direct investment in Services. World Economy, 33(4), 573–596.
31. Ramdan, M., Purwanto, A. & Prameswari, M. (2020). Factors affecting foreign direct investment in 10 Asean countries 2015-2018 with fixed effect model approach on panel data regression. Shodhshauryam, International Scientific Refereed Research Journal, 3(1), 30–41.
32. Ray, E. J. (2003). Foreign Direct Investment in Manufacturing. Journal of Political Economy, 85(2), 283–297. Retrieved from https://doi.org/10.1086/260563
33. Ridzuan, A. R., Ismail, N. A. & Hamat, A. F. C. (2018). Modelling macroeconomic determinants for foreign direct investment inflows in ASEAN-5 countries. International Journal of Economics and Management, 12(1), 153–171.
34. Sagarik, D. (2015). The determinants of foreign direct investment flows: Evidence from ASEAN member countries. NIDA Development Journal, 55(2), 1–23.
35. Ullah, I. & Khan, M. A. (2017). Institutional quality and foreign direct investment inflows: evidence from Asian countries. Journal of Economic Studies, 44(6), 1030–1050.
36. UNCTAD (2021) Retrieved from https://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=96740
37. Wong, H. (2005). The determinants of foreign direct investment in the manufacturing industry of Malaysia. Journal of Economic Cooperation and Development, 26(2), 91–110.
38. World Bank (2021). Retrieved from https://databank.worldbank.org/source/world-development-indicators
39. Yakubu, I. N. & Mikhail, A. A. (2019). Determinants of foreign direct investment in Ghana: A sectoral analysis. Retrieved from https://mpra.ub.uni-muenchen.de/95121/1/MPRA_ paper_95121.pdf