An Analysis of Intra-ASEAN FDI Determinants in the Wake of ASEAN Economic Community

Abstract

This research intends to reveal whether the determinants of intra-ASEAN FDI, with the presence of economic integration, differ from those of extra-ASEAN FDI. Specifically, to verify whether ASEAN policies toward economic integration have made any contribution to the rising intra-ASEAN FDI. The result from the fixed effect model, which was employed by 10 ASEAN countries from 2000-2013, indicates that market size, quality of infrastructure, and labor productivity have had a similar positive effect on intra-ASEAN FDI as in the case of extra-ASEAN FDI. Meanwhile, macroeconomic stability, degree of openness, and the latest ASEAN’s investment scheme have proven to be insignificant. Interestingly, tariff reduction has actually reduced intra-ASEAN FDI. In conclusion, ASEAN’s policies thus far seem to have made no contribution to the rising intra-ASEAN FDI.