Bano & Tabbada: Foreign Direct Investment Outflows – Asian Developing Countries

Abstract:

Foreign Direct Investment originating from East, Southeast, and South Asian developing countries has increased significantly since 1980. This paper examines the extent and determinants of Foreign Direct Investment outflows from these countries between 1980 and 2011. We use selected home country-specific macroeconomic variables and identifies the key determinants of Foreign Direct Investment outflows using correlation and regression analysis. The results show that Foreign Direct Investment outflows are closely associated with high levels of Gross Domestic Product, high domestic savings, large foreign reserves, export orientation, and relatively large Foreign Direct Investment inflows in the source countries, with the strength and importance of each factor varying with the level of development. Our main conclusion is that, although non-traditional Foreign Direct Investment outflows have so far been confined to a limited number of developing countries, mostly Asian, other developing countries could also become capital exporters with a supportive international environment and appropriate domestic policies.

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