Determinants of foreign direct investment inflows in Asia and the Pacific Region: Ways forward.

• Main Authors: Patiu, Liberty S., Nayve, Ruben, Jr., Baylon, Dioscoro P., Jr.
• Format: text
• Published: Animo Repository 2019
• Subjects: Investments, Foreign—Asia; Investments, Foreign—Pacific Area; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/5757
• Institution: De La Salle University

The study examined the nexus between FDI net inflows, GDP growth rate, degree of financial openness, gross fixed capital formation, inflation, industry value added, and corporate tax rates in Asia and the Pacific Region for the period 2002-2015. It also explored the determinants' effect on FDI inflows before and after the financial crisis. For the three (3) panel regression models (pooled OLS, fixed effects and random effects) using aggregate data, random effects model was preferred in explaining the relationship between FDI inflows and its determinants. There is strong evidence of positive impact of degree of openness and GFC while a strong negative impact of corporate tax rate on FDI inflows. As majority are low and middle income countries, conducive business environment for FDI to flourish through better tax and lower inflation rates were provided. On the other hand, mixed results were generated for the impact of global crisis where a fixed effect was preferred over random effects model. Trade openness and corporate tax rates were found to be significant predictors of FDI net inflows before the crisis. After the crisis, consumer price index and inflation showed positive and significant effects, which are deemed to provide negative implications to most countries due to high cost of investments. The results provides certain policy implications for the countries in the region where FDI inflows can be influenced by the type of incentives provided by host country and the attractiveness of the domestic businesses which have not been too vibrant for international business to consider capital investments.