Exploring determinants of foreign direct investment inflows into ASEAN-5

Abstract

This paper analyses the economic motives behind Foreign Direct Investment (FDI) inflows into the ASEAN-5 by encompassing a wide range of determinants. Using these determinants, we uncover unique models for each of the ASEAN-5 countries. In essence, it not only models and contrasts the different intentions behind FDI inflows for individual countries in ASEAN-5, but also uncovers key determinants governing the motives. We do so by utilizing correlation analysis and econometric modeling. Policy implications and possible future economic co-operation within ASEAN-5 based on our findings are also discussed. The results in our study show market-size, trade barriers, cost factors, exchange rate volatility and Information and Communication Technology (ICT) infrastructure to be significant determinants that influence the inflow of FDI for ASEAN-5.