Determinants of Barries to Quality of Direct Foreign Investments - Evidences From South & East Asian Economies

Abstract

The objective of this paper is to examine whether FDI inflows in South & East Asian economies posses any barriers which are deterring to attract FDI of their actual potential? If so, what are those various set of barriers? These questions are addressed in this study using cross section time series data for 17 South and East Asian economies from 1996 to 2005. We coin the term quality of FDI which is a function of higher percapita FDI inflows, lower volatility in FDI inflows and higher bilateral investment treaties between the host country and rest of the word. We test this against the possible set of barriers, including, Socio-economic, Labour, Policy and Institutional barriers using pooled regression analysis. In the process, we also check as to how fragile our results are to the small but important changes which we bring in the conditioning information set using robustness check. Our empirical evidence suggests that all the possible set of barriers which we have identified has a negative effect in stimulating the quality of FDI. There is an urgent need for South and East Asian economies to address these set of barriers which are acting as stumbling block in not allowing to attract FDI of their actual potential.