The state of play of direct foreign investment in Asia

Abstract

A new pattern in which the direction and source of direct foreign investment (DFI) have changed in Asia Pacific is discerned. This study examines some empirical evidence to examine three hypotheses with respect to DFI and the growth process, the "wild flying geese pattern", the impact on export-led growth, and trade. While DFI and the export-led strategy have become the accepted mechanism of economic growth, they have also brought about new problems of competition and sustainable growth for existing NIEs and potential ones. The implications drawn from this study suggests that megatrends in regional strategies, international trade and exchange, and economic cooperation, all need a closer look. Open regionalism in a more interdependent, globalized and competitive environment would serve better as DFI creates a network of interlocking activities among various tiers of developed and developing countries. At the same time there is a need for more coordination of national policies as the transmission process increases in levels and complexity. Increasingly, the degree of freedom in national strategies and policies may also be compromised as the global operations of multinational corporations through DFI necessitate some harmonization and cooperation in activities across borders and sovereign interests may have to serve corporate ones. © 1994.