ASurveyon Socio-economic Development and FDI-led Strategy

Abstract

This paper examines the causal linkage of foreign direct investment (FDI) strategy on socio-economic development practiced by the Association of Southeast Asian Nations (ASEAN). Based on the literature survey on the FDI and country development, this paper argues that FDI strategy has the important effects on socio-economic development through three channels: economic growth with inward FDI growth as the most essential engine; innovation and technological advance and knowledge spillovers from the FDI-based firms on the economy; and human capital accumulation from the FDI-based firms. The findings based on the secondary data are likely to support the role of inward FDI in socio-economic development. Even though, the ASEAN Economic Community Roadmap helps to encourage the high level of FDI and to optimize the socio-economic development in the ASEAN,but it still lacks the implementation and enforcement of the ASEAN agreements. In the long run, the regional economic monitoring and surveillance process must be evolved to drive the ASEAN to become the ASEAN community in 2015. It is expected that these practical actions will improve the tendencyof the FDI flows, develop the foundation of the market system in the economy, and thus further lift the level of socio-economic development in the Southeast Asian region.