The 1997 Asian Financial Crisis and Foreign Direct Investment (FDI) Inflows to ASEAN Member Countries, 1995-2005

• Main Author: Palanca-Tan, Rosalina
• Format: text
• Published: Archīum Ateneo 2014
• Subjects: foreign direct investments; ASEAN; 1997 Asian financial crisis; Economics; International Economics
• Online Access: https://archium.ateneo.edu/economics-faculty-pubs/107; https://archium.ateneo.edu/cgi/viewcontent.cgi?article=1106&context=economics-faculty-pubs
• Institution: Ateneo De Manila University

In the late 1990s, ASEAN countries started to find it more and more difficult to lure foreign investors. While ASEAN was capturing about 8% of foreign direct investments (FDI) until the mid-1990s, this share dropped to only about 3% from the late 1990s until mid-2000s. This paper traced the trends and patterns of FDI flows to ASEAN during the years 1995-2005, a period that included the Asian financial crisis that started in July 1997, the years immediately preceding the crisis and the recovery years. The study examined the effects of the crisis on FDI inflows to ASEAN countries and their response to the crisis. A cursory assessment of the strengths and weaknesses of the individual ASEAN countries as well as the opportunities and threats they faced during the period was also done. It was found that the declining interests of global firms in ASEAN was the result not only of the prolonged stagnation in ASEAN countries triggered by the Asian financial crisis, but also of fundamental weaknesses in the ASEAN economies and external factors such as the increasing competition from other developing countries and transitional economies. The study also yielded some insights on how particular circumstances and policies could mitigate or aggravate the impact of similar crises in the future.