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The Effect of ASEAN Economic Integration on Foreign Direct Investment

Author

Listed:
  • Wana Ismail, Normaz

    (University Putra Malaysia)

  • Smith, Peter

    (University of Southampton)

Abstract

The primary concern of this study is to highlight AFTA’s roles in increasing ASEAN countries’ attractiveness for FDI from members and non-members, noting that the agreement has been followed by many packages to enhance FDI flows into the region. The time period cover in this study is after the AFTA has been implemented (1995 to 2003). The gravity model is employed in this study in the analysis based on cross section and panel data analysis. There are two main effects are considered in this study, namely the effects of REI on intra-regional FDI flows and on extra-regional FDI flows. The major finding of this study is the ASEAN5 invest in each other less than they invested in the new ASEAN members. The empirical results from extra-regional-FDI revealed that the European countries increase investment in ASEAN than any other region in the sample. Moreover, further investigation also found that the USA and Japan invested more in ASEAN5 than in the new ASEAN members.

Suggested Citation

  • Wana Ismail, Normaz & Smith, Peter, 2009. "The Effect of ASEAN Economic Integration on Foreign Direct Investment," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 385-407.
    • Handle: RePEc:ris:integr:0479
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    Citations

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    Cited by:

    1. W.M.Muli & J.O. Aduda & J.L. Lishenga & D.O. Abala, 2017. "The Moderating Effect of Economic Growth on the Relationship between Economic Integration and Foreign Direct Investment in the East African Community," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 6(3), pages 1-4.
    2. Ei Ei Phyoe, 2015. "The Relationship between Foreign Direct Investment and Economic Growth of Selected ASEAN Countries," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 1(4), pages 132-146.
    3. Li, Qiaomin & Scollay, Robert & Maani, Sholeh, 2016. "Effects on China and ASEAN of the ASEAN-China FTA: The FDI perspective," Journal of Asian Economics, Elsevier, vol. 44(C), pages 1-19.
    4. World Bank, "undated". "World Bank East Asia and Pacific Economic Update, April 2014 : Preserving Stability and Promoting Growth," World Bank Publications - Reports 18378, The World Bank Group.
    5. Anh T. N. Nguyen & Andrzej Cieślik, 2021. "Determinants of foreign direct investment from Europe to Asia," The World Economy, Wiley Blackwell, vol. 44(6), pages 1842-1858, June.
    6. Abidin ÖNCEL & Raisal Fahrozi LUBİS, 2017. "What impact has free trade area on economies of ASEAN-5 countries?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(612), A), pages 51-62, Autumn.
    7. Oscar Alberto Gómez & José Roberto Concha, 2016. "Análisis de atracción de inversión extranjera a países de la Alianza del Pacífico," Estudios Gerenciales, Universidad Icesi, vol. 32(141), pages 369-380, December.

    More about this item

    Keywords

    ASEAN; AFTA; foreign direct investment; gravity model;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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