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Human capital, FTAs and foreign direct investment flows into ASEAN

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  • Thangavelu, Shandre M.
  • Narjoko, Dionisius

Abstract

In this paper, we examine the impact of foreign direct investment flows into ASEAN in a gravity model using the bilateral FDI data from 2000 to 2009. In particular, we study the key factors that determine the FDI flows into the region including human capital development and whether membership of a bilateral or regional trade agreement has a differential impact on FDI flows using an extended gravity model. The empirical results indicate that free trade agreements do have positive impact on FDI inflows. However, the returns on FDI inflows depend on the domestic absorptive capacity of the economy and region. It is imperative for ASEAN to align its infrastructure, human capital and technologies to provide MNCs with the necessary linkages to the global network and also to move the domestic industries seamlessly up the global production value-chain. The paper highlights that this is crucial for deeper ASEAN integration and for sustainable growth in the region.

Suggested Citation

  • Thangavelu, Shandre M. & Narjoko, Dionisius, 2014. "Human capital, FTAs and foreign direct investment flows into ASEAN," Journal of Asian Economics, Elsevier, vol. 35(C), pages 65-76.
    • Handle: RePEc:eee:asieco:v:35:y:2014:i:c:p:65-76
    DOI: 10.1016/j.asieco.2014.11.002
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    3. Risti Permani & Xing Xu, 2022. "The nexus between natural disasters, supply chains and trade—Revisiting the role of preferential trade agreements in disaster risk reduction," The World Economy, Wiley Blackwell, vol. 45(10), pages 3002-3030, October.
    4. Hong Hiep Hoang & Michaël Goujon, 2018. "Determinants of Intra-Region and Extra-Region Foreign Direct Investment Inflow in ASEAN: A Spatial Econometric Analysis," Post-Print hal-01918889, HAL.
    5. Metaxas, Theodore & Kechagia, Polyxeni, 2016. "Literature review of 100 empirical studies of Foreign Direct Investment: 1950-2015," MPRA Paper 71414, University Library of Munich, Germany.
    6. Shandre Mugan Thangavelu, 2023. "Structural Changes and the Impact of FDI on Singapore's Manufacturing Activities," Working Papers DP-2023-06, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Shandre Mugan Thangavelu & Fukunari Kimura & Dionisius Narjoko, 2022. "Global Value Chain, Cities and Urban Amenities: Case Study of ASEAN and East Asia," Chapters, in: Fukunari Kimura & Keita Oikawa (ed.), The Comprehensive Asia Development Plan (CADP) 3.0: Towards an Integrated, Innovative, Inclusive, and Sustainable Economy, chapter 10, pages 294-321, Economic Research Institute for ASEAN and East Asia (ERIA).
    8. Subash SASIDHARAN & Shandre THANGAVELU & Ketan REDDY, 2024. "Urban Amenities, Productive Performance, and Global Value Chain Activities of Indian Firms," Working Papers DP-2024-13, Economic Research Institute for ASEAN and East Asia (ERIA).
    9. Wira Ganet Aribowo, 2018. "Analysis of foreign direct investment as a comparison of macroeconomic factors in seven countries Asean 5, China and Japan during period 1996-2015," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 7(4), pages 29-42, December.
    10. Amir Rahman & Rafi Farooq & Khalid Ashraf Chisti, 2023. "Linear and non-linear linkage between human capital and foreign direct investment inflows into APEC countries: an evidence from panel data," SN Business & Economics, Springer, vol. 3(7), pages 1-25, July.
    11. Shandre Mugan Thangavelu & Leng Soklong & Vutha Hing & Ratha Kong, 2023. "Investment Facilitation and Promotion in Cambodia: Impact of Provincial-level Characteristics on Multinational Activities," Working Papers DP-2023-08, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. Adriana Burlea‐Schiopoiu & Simina Brostescu & Liviu Popescu, 2023. "The impact of foreign direct investment on the economic development of emerging countries of the European Union," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2148-2177, April.
    13. Lim, Byeong-ho, 2022. "Re-Evaluation of Free Trade Agreement: Based on Regional Value Contents in Agricultural, Fishery and Livestock products," Conference papers 333476, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. 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.
    15. Hing, Vutha & Thangavelu, Shandre M. & Kong, Ratha, 2023. "Technology, Innovation, and Firm Competitiveness: Firm Level Analysis in Cambodia," ADBI Working Papers 1353, Asian Development Bank Institute.
    16. Fateh Habibi & Mohammad Sharif Karimi, 2017. "Foreign Direct Investment and Economic Growth: Evidence from Iran and GCC," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(3), pages 601-620, Summer.
    17. Syarifuddin, Ferry, 2020. "The Dynamics of Foreign Direct Investment and Exchange Rates: An Interconnection Approach in ASEAN," MPRA Paper 104596, University Library of Munich, Germany.
    18. Victoria Pistikou, 2020. "The Impact of CEFTA on Exports, Economic Growth and Development," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 13(3), pages 15-31, December.
    19. Wei Feng & Yanrui Wu & Yue Fu, 2021. "Dialect Diversity and Foreign Direct Investment in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(2), pages 49-72, March.
    20. Shinta R. I. Soekro & Triono Widodo, 2015. "Mapping And Determinants Of Intra-Asean Foreign Direct Investment (FDI): Indonesia Case Study," Working Papers WP/12/2015, Bank Indonesia.
    21. Olusanya, Oluwakorede, 2020. "Asymmetric Effect of Foreign Direct Investment on Manufacturing Sector Performance in Nigeria," MPRA Paper 113029, University Library of Munich, Germany.
    22. Tafadzwa Matiza & Sandra Perks, 2017. "Human Capital Reputation as an Antecedent of Foreign Direct Investment Market Entry in Zimbabwe," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 185-199.

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    More about this item

    Keywords

    Bilateral FDI; Free trade agreements; Human capital;
    All these keywords.

    JEL classification:

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

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