Over-Reliance on Foreign Investment Leads to Negative Results

Developmental states in East Asia and Southeast Asia are accustomed to relying on foreign investment frequently for industrialization. It is crucial to understand whether foreign investment contributes to the economic stability and industrialization process of these developmental states. This study focuses on the consequences of over-reliance on foreign investment in developing countries. Through case studies such as Thailand and the definition of developmental states by Leftwich and Wade, this paper finds that excessive reliance on foreign investment will deepen the financial crisis. At the same time, foreign capital cannot provide effective help to developmental states to overcome the difficulties. From the political economy perspective, the dual role played by the state and institutional flaws makes developmental states increasingly dependent on foreign investment. The main findings of this paper show that excessive reliance on foreign investment will weaken the initial positive role of the developmental states in the economic field, resulting in improper resource allocation and corruption. To sum up, although the developmental state model initially promoted the development of industrialization, over-reliance on foreign investment made it difficult for the developmental state to adapt to post-industrialization and financialization.