FDI in Crisis and Recovery: Lessons from the 1997-98 Asian Crisis
AbstractIs foreign direct investment (FDI) more resilient at the onset of an economic crisis and the subsequent economic collapse in a given host country compared to other forms of foreign capital inflows? Are affiliates of multinational enterprises in a crisis-hit country better equipped to withstand a crisis and to aid the recovery process by readjusting their investment, production and sales strategies compared to local firms? This paper examines these and related issues in the context of the 1997-98 economic crisis in East Asia. The paper starts with a scene setting surveys of FDI policy and the overall investment climate in the five crisis-hit countries (Thailand, Malaysia, Indonesia, Korea and the Philippines), with emphasis on changes in investment policy introduced as part of the crisis management package. It then looks at the behaviour of FDI compared to other forms of capital flow after the onset of the crisis, followed by an examination of trends in FDI flows in the recovery process and the comparative performance of affiliates of multinational enterprises (MNEs) in economic adjustment. The findings suggest that FDI was indeed a relatively stable source of foreign capital in the crisis context and that MNE affiliates were instrumental in ameliorating the severity of economic collapse and facilitating the recovery process.
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Bibliographic InfoPaper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2003-04.
Length: 24 pages
Date of creation: 2003
Date of revision:
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East Asia; financial crisis; foreign direct investment; capital flows;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-01-08 (All new papers)
- NEP-FIN-2004-01-08 (Finance)
- NEP-HIS-2004-01-08 (Business, Economic & Financial History)
- NEP-IFN-2004-01-08 (International Finance)
- NEP-MAC-2004-01-08 (Macroeconomics)
- NEP-RMG-2004-01-08 (Risk Management)
- NEP-SEA-2004-01-08 (South East Asia)
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