Intra-regional Foreign Direct Investment Research Articles

ВОПРОСЫ ТРАНСНАЦИОНАЛИЗАЦИИ МИРОВОГО ХОЗЯЙСТВА И СДВИГИ В ГЕОГРАФИИ ПРЯМЫХ ИНОСТРАННЫХ ИНВЕСТИЦИЙ В 1970–2020 гг.

The purpose of the article is to identify the most important transformations in the processes of transnationalization of the world economy in 1970–2020. The main tasks are to identify changes in the role of TNCs in the global economy and the driving forces that caused them, to identify shifts in the geography of foreign direct investment (FDI). The relevance of the article is determined by the importance of TNCs in the modern processes of globalization. Research methods: problem approach, cartographic method and multi-scale analysis. Since the early 1970s the share of TNCs in global GDP increased from 16–17% to 32%, in international trade – from 43% to 80%, in industrial production – from 20–25% to 50%. A powerful transnational sector of the world economy has been formed. FDI provides 28–29% of the investments needed for the development of foreign production, while being the main “carriers” of global technological diffusion. With the dominance of services in the production activities of TNCs, the role of the manufacturing industry in it is 2–4 times higher than in the economy as a whole. The “center” of FDI has moved to the Euro-Asian megaregion. The role of East Asia has increased the most, from 1% to 10–13% of global FDI. South-South and South-North investment directions have emerged, which together account for 1/5 of global FDI. “Tax havens” in terms of FDI turnover now surpass large economies (France, Italy, etc.). “Net” interregional outflow of FDI decreased from 31% to 7%. The share of intraregional FDI increased from 36–40% to 48%.

Regional Economic Cooperation in the Western Balkans: The Role of Stabilization and Association Agreements, Bilateral Investment Treaties and Free Trade Agreements in Regional Investment and Trade Flows

ABSTRACT This study explores the role of stabilization and association agreements (SAAs), bilateral investment treaties (BITs) and free trade agreements (FTAs) in the Western Balkans and their impact on the region’s inward foreign direct investment (FDI) and exports, with primary interest in the effects on intra-regional FDI and trade. Results show that BITs were not related to intra-regional FDI, nor to the FDI from other countries. The Central European Free Trade Agreement (CEFTA) contributed to increased intra-regional trade. Finally, the SAAs turn out to be highly significant for FDI from the EU to signee countries, and their exports to the EU.

Do Trade and Investment Agreements Promote Foreign Direct Investment within Latin America? Evidence from a Structural Gravity Model

Latin America has experienced a surge in foreign direct investment (FDI) in the last two decades, in parallel with the ratification of major regional trade agreements (RTAs) and bilateral investment treaties (BITs). This paper uses the latest developments in the structural gravity model theory to study if the co-existence of BITs and two major regional agreements, Mercosur and the Latin American Integration Association (ALADI), exerts enhancing or overlapping effects on FDI for eleven countries in Latin America over the period 1995–2018. The study is novel as it accounts for variations in the degree of investment protection across BITs within Latin America by computing a quality index of BITs. It also explores the nature of interactions (enhancing/overlapping effects) between RTAs and BITs. The findings reveal that belonging to a well-established regional trade agreement, such as Mercosur, is significantly more effective than BITs in fostering intra-regional FDI. Phasing-in effects are large and significant and there is evidence of enhancing effects. Results within the bloc are heterogeneous: BITs exert a positive, but small effect, for middle income countries. However, BITs are not effective in attracting FDI in the case of middle to low income countries, unless these countries ratify BITs with a high degree of investment protection.

Intra-Regional Foreign Direct Investment (FDI) Trends among Developing Asian Regions During 1980-2016

Intra-Regional Foreign Direct Investment (FDI) Trends among Developing Asian Regions During 1980-2016

Does Host Country Institutional Quality Act as a Differentiator in Intra-regional FDI? Evidence from Selected Asian Economies

With primary considerations such as trade and investment openness becoming similar for many economies due to globalization, the role of other factors such as institutional environment in promoting investment has captured increasing attention in recent times. In view of the growing importance of Asia as a prospective foreign direct investment (FDI) destination, we employ panel data regression data for 16 Asian economies over the period 2000–2012 to study if institutional quality affects FDI flows and stocks and whether it can act as a differentiator while selecting a location within Asia. Among the institutional variables employed, ‘political stability and absence of violence/terrorism’ were found to be significant determinants revealing the importance of a stable and safe political environment for FDI. However, ‘corruption’ and ‘regulatory inefficiency’ were found to affect FDI inflows positively, indicating the preference of foreign investors for a system where laws can be circumvented easily through corrupt bureaucracy and where regulations are weak or less stringent. JEL: F21, F23, O43, O53

Back to BITs and Bites: Do Trade and Investment Agreements Promote Foreign Direct Investment within Latin America?

In this paper we investigate the impact of regional trade agreements (RTAs) and bilateral investment treaties (BITs) on intra-regional foreign direct investment (FDI) across Latin American countries from 1995 to 2012. We use an augmented gravity model in which we control for cross-country heterogeneity, multilateral resistances and endogeneity of RTAs/BITs. This study empirically reveals that belonging to a well-established RTAs, such as MERCOSUR, is significantly more effective than the enforcement of BITs in fostering intra-regional FDI. We observe heterogeneous impacts within the bloc: BITs exert a positive but small effect, with an estimated increase in FDI stocks between 4-7.25%, for middle income countries such as Argentina, Brazil, Chile, Costa Rica, Mexico and Uruguay. However, we observe a non-significant effect on middle-low income countries as Bolivia, Colombia, Ecuador, Peru and Paraguay. Our results suggest that political risk and the level of institutional development in the host country act as strong determinants of BITs effectiveness. Furthermore, we find that the main determinants affecting intra-bloc FDI are factor endowments and market potential. These findings shed clarity into the current debate on the effectiveness of BITs versus RTAs as an adequate mechanism to attract foreign investment.

What Determines the Establishment of Chinese Multinational Enterprises’ Asian Regional Headquarters?

ABSTRACTThis study addresses why multinational enterprises (MNEs) in emerging economies establish regional headquarters outside their home countries but within their home regions – an important question that previous studies have largely ignored. We extend Rugman and Verbeke's firm-specific assets (FSAs) framework in contemporary internalization theory and differentiate two firm-specific regional strategies (i.e., foreign direct investment (FDI) and export regionalization) to examine their effects on MNEs’ establishment of regional headquarters in the context of emerging economies. Using survey data from 226 Chinese MNEs, we find that intraregional FDI and interregional exports encourage MNEs to build Asian regional headquarters (ARHQ). Furthermore, we find that home-city regional integration moderates the relationship between interregional exports and ARHQ establishment and that MNEs’ international management capability moderates the relationship between intraregional FDI and ARHQ establishment. This study contributes to the regional strategy literature by clarifying the regional strategies, structures, and management of latecomer Chinese MNEs.

Economic Integration in ASEAN+3 : A Network Analysis

This paper analytically and graphically explores the characteristics of ASEAN+3’s trade and Foreign Direct Investment integration over the 1990~2012 period by applying the tools of network analysis. Our results find evidence that the degree of trade and Foreign Direct Investment integration varies among ASEAN+3 member countries over the observation period. Second, ASEAN+3’s intra-regional trade network seems to be more densely connected than its intra-regional Foreign Direct Investment network. Third, we reveal that large and/or advanced countries seem to be better linked and form a subregional bloc of tightly connected economies only in terms of export absolute value. Therefore, ASEAN+3 has been experiencing a widening gap in the trend and patterns of intra-regional trade and Foreign Direct Investment among its member countries at different levels of economic development.

Trade Patterns and Determinants of International Specialization Structure between ASEAN and China

China and ASEAN are recognized as the most important markets in the world, hence they have emerged as global factories and parts production bases. And trade between China and ASEAN is rapidly expanding and ASEAN has taken position as one of China's three major trading partners. Over the last 20 years, there has been a rapid increase in intra-industry trade where differentiated products are traded within the same industries between China and ASEAN countries. Empirical analysis on determinants of the international specialization structure between China and ASEAN countries shows that the deepening structure of vertical international specialization between the two regions over the past 20 years has been directly influenced by variables representing national characteristics, such as distance (trading cost), common language, the size of the national economy and income gap as well as intra-regional foreign direct investment.

Do International Investment Agreements Attract Foreign Direct Investment into Developing Countries?

The study is concerned with answering a question: what is the role of international investment agreements (IIAs) in attracting foreign direct investment (FDI) into developing countries? It reviews the literature on the impact of IIAs on the size of FDI into developing countries to the extent, to which such literature exists. This is the case for bilateral investment treaties (BITs) and regional integration agreements, but less so for bilateral free trade agreements (FTAs), nowadays including also investment provisions. In the absence of the literature the study relies on the conceptual discussion of possible impacts. Needless to say the literature, especially that on the impact of BITs on FDI, is not only far from reaching definite conclusions but also has come to conflicting findings. The study offers an own assessment of these findings and of the likely impact of IIAs on FDI. As regards the impact of BITs, the study concludes that there is evidence that BITs have played a role in a number of individual FDI projects, thus increasing FDI, but apparently these increases have not been large enough to be captured in aggregated flows of FDI used in most econometric studies. But in their rather narrow responsibilities, BITs constitute one of the most solid, although quite small, components of a coherent, transparent, predictable and stable investment framework of developing countries. Other agreements, and notably regional integration agreements, including investment and trade provisions, lead to new FDI. The impact is more evident in the case of FDI from outside of the economic grouping. EIIAs can also stimulate some intra-regional FDI. The latter impact can be strong when EIIA membership includes both developed and developing or transition countries.

Intra-regional FDI and Economic Integration in South Asia

This article examines trends and patterns of intra-regional foreign direct investment (FDI) in South Asia, with a focus on the potential for integrating production processes among countries in the region through further trade and investment policy reforms. The empirical evidence pieced together from scattered sources suggests that horizontal (market seeking) FDI has continued to dominate South Asian intra-regional FDI, with a significant shift in recent years in favour of services sector activities. Vertical (efficiency seeking) FDI in the region has remained confined to a few product lines, predominately garments, and also a few industries in which the availability of specific natural resources plays an important role in the site selection decisions of firms. In other industries, including electronics and electrical goods in which global production sharing is heavily concentrated, there is no evidence of notable cross-border operations by regional firms.

Trade Patterns and Determinants of International Specialization Structure between ASEAN and China

China and ASEAN are recognized as the most important markets in the world, hence they have emerged as global factories and parts production bases. And trade between China and ASEAN is rapidly expanding and ASEAN has taken position as one of China's three major trading partners. Over the last 20 years, there has been a rapid increase in intra-industry trade where differentiated products are traded within the same industries between China and ASEAN countries. Empirical analysis on determinants of the international specialization structure between China and ASEAN countries shows that the deepening structure of vertical international specialization between the two regions over the past 20 years has been directly influenced by variables representing national characteristics, such as distance (trading cost), common language, the size of the national economy and income gap as well as intra-regional foreign direct investment.

Trade Liberalization, Economic Growth and Convergence: Evidence From East Asian Economies

In recent years most studies analyzing cross-country convergence have ignored the role of international trade, simply framing the analysis in a Solow world. These models then have very limited power in explaining the economic growth of East Asia, given that East Asian integration is largely due to the market-driven forces, trade induced by foreign direct investment (FDI). This paper investigates the interrelationship between regional integration and economic convergence by linking income convergence to intra-regional trade and FDI. A central focus of the model is on how the degree of market integration driven through trade and FDI interacts with income convergence among the East Asian countries during the period 1960-1996. We shed light on the significance of trade openness, liberalization and regional integration in contributing to cross-country income convergence.

Intraregional Foreign Investment in East Asia

The purpose of this article is to give a picture of the development of intraregional foreign direct investment (FDI) in East Asia. The region today (excluding Japan) receives more than half of all FDI in less developed countries. Japan is still the biggest actor for intraregional investment, but the East Asian newly industrialized countries (NICs) have emerged as impor tant investors in the 1980s and 1990s and are, relative to their size, more active foreign investors than Japan. ASEAN and China are also active as outward investors, but on a rather smaller scale compared to the former countries. The distribution of FDI industry-wise is also reported in this article. One interesting development is the high and rising share of services in FDI. A complicated network of transnational business is now rapidly developing in Asia Pacific. Even in the absence of formal market integration, a degree of de facto integration has been developing for some time. In fact, the initiatives recently taken to bring about inte gration in the region seem to be propelled by the actual events instead of being the reason for them. The ASEAN Free Trade Area, now taking form, should provide new incentives for FDI, however.

Intraregional foreign direct investment in the asian pacific region

This article attempts to identify the emerging pattern of Foreign Direct Investment (FDI) and/or international production in the Asian Pacific region. The internationalisation of production has accelerated in the Asian Pacific region as competitive advantage has shifted and as protectionist measures have changed traditional source patterns. The Asian Pacific region has evolved into an interactive international production system comprising three tiers of countries: Japan, the four Asian Newly Industrialized Countries (ANICs), and the four developing countries of the Asian Pacific region (Indonesia, Malaysia, the Philippines and Thailand). The fundamental economic reality which has molded this system is the dynamic complementarity in location advantages of the three tiers.