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Japanese aid as a prerequisite for FDI: the case of Southeast Asian countries

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  • Séverine Blaise

Abstract

This study investigates the nexus between Japan’s official development assistance and foreign direct investments inflows in Southeast Asian countries. An analysis of the geographical and sectoral decomposition of aid flows reveals that assistance programs were mainly allocated in the form of loans for economic infrastructure projects. This orientation attests that the needs of the recipient country are taken into account but also reveals that it is in keeping with a return on investment. Conditional logit analysis shows that Japanese aid flows did have a significant positive impact on private investors’ location choice even though other profit-maximising factors such as agglomeration effects or the quality of infrastructure had a leading spill-over effect. In a context of growing scarcity of aid funding, the study concludes by asserting the importance of a complementary process in which foreign aid is directed towards the development of infrastructure, acting as a pre-requisite for future direct investments. Finally, Japan providing an interesting case study, we will stress the need for a better cooperation between the public and private sectors in development assistance programs.

Suggested Citation

  • Séverine Blaise, 2009. "Japanese aid as a prerequisite for FDI: the case of Southeast Asian countries," Asia Pacific Economic Papers 385, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:csg:ajrcau:385
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    File URL: https://crawford.anu.edu.au/pdf/pep/apep-385.pdf
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    References listed on IDEAS

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    1. Kiichiro Fukasaku & Masahiro Kawai & Michael G. Plummer & Alexandra Trzeciak-Duval, 2005. "Policy Coherence Towards East Asia: Development Challenges for OECD Countries," OECD Development Centre Policy Briefs 26, OECD Publishing.
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    Cited by:

    1. Mr. Olaf Unteroberdoerster & Ms. Runchana Pongsaparn, 2011. "Financial Integration and Rebalancing in Asia," IMF Working Papers 2011/243, International Monetary Fund.
    2. Srabani Roy Choudhury, 2017. "India–Japan Relations," International Studies, , vol. 54(1-4), pages 106-126, January.
    3. Donaubauer, Julian & Herzer, Dierk & Nunnenkamp, Peter, 2012. "Does aid for education attract foreign investors? An empirical analysis for Latin America," Kiel Working Papers 1806, Kiel Institute for the World Economy (IfW Kiel).
    4. Philip Ifeakachukwu Nwosa & Temidayo Oladiran Akinbobola, 2016. "Capital Inflows and Economic Growth in Nigeria: The Role of Macroeconomic Policies," African Development Review, African Development Bank, vol. 28(3), pages 277-290, September.
    5. Kikuo Oishi, 2017. "Japan¡¯s Yen Loan, Prerequisite to Mass FDI from Japan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(3), pages 40-50, July.

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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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