Trade effects of foreign direct investment: Evidence for Taiwan with four ASEAN countries

Trade Effects of Foreign Direct Investment: Evidence for Taiwan with Four ASEAN Countries. —This paper examines the trade effects of foreign direct investment (FDI) between Taiwan and each of the following four ASEAN countries: Indonesia, Malaysia, the Philippines, and Thailand. Regression results show that Taiwan's outward FDI has a significant positive effect on exports to and imports from the host country, whereas no such effects were consistently found for inward FDI from the same country.     

Foreign direct investment and growth in East Asia: lessons for Indonesia

Foreign direct investment (FDI) has been important in the growth and global integration of developing economies. Both Northeast and Southeast Asia, especially the latter, have been part of this development, with increasing inflows of FDI and greater foreign participation in local economies. However, Indonesia has been an outlier within the region. Inflows of FDI have been lower to Indonesia than to other countries, especially in manufacturing, and they have been lower than could be expected from Indonesia's size, population and other country characteristics. We show that the inflows that have occurred have benefited Indonesia, and use the East Asian experience to identify measures that are likely to increase these flows. A relatively poor business environment, inefficient government institutions, low levels of education and poor infrastructure all seem to be important explanations for the low inflows of FDI to Indonesia.     

Financing of Foreign Direct Investment and Trade Flows: The Case of Indonesia 1

This paper tries to assess the effects of implementing foreign investment in Indonesia on the country's imports from home countries. This effect is found to be sizeable as more than 50% of realised foreign investment in Indonesia is implemented m kind. 1.e. by importing plant equipment. Furthemore, sectoral kind-cash financing ratios have been correlated with sectoral loan-equity ratios of realised investment from Japan as the largest country investing in non-oil sectors. This correlation is found to be negative and is explained by the way that investment legislation provides incennves for foreign investors to pay them equity contribution in kind and convey ownership of the plant equipment to local nationals later on.     

FOREIGN DIRECT INVESTMENT IN INDONESIA: FIFTY YEARS OF DISCOURSE

The topic of foreign direct investment (FDI) has been prominent in assessments of economic development in Indonesia during the past 50 years. In this article I review Indonesia's FDI record in a historical perspective; the current urge to control FDI inflows and the need to augment domestic savings and facilitate technology transfers are not at all new in Indonesia. I draw in particular on the discourse on FDI in this journal, the Bulletin of Indonesian Economic Studies, giving special attention to contributions by this journal to the international literature on FDI and its impact. The article demonstrates that the relation between FDI and economic growth has been less straightforward in Indonesia than elsewhere in Southeast Asia. Although FDI has grown in a restrictive investment climate, on occasion it has failed to do so despite more liberal conditions. This may be attributed to the sustained role of natural resources in determining Indonesia's attractiveness as a host country of FDI.     

Investment facilitation and China's outward foreign direct investment along the belt and road

This study provides a comprehensive and accurate measurement of investment facilitation in 66 countries along the Belt and Road from 2007 to 2018. The expanded gravity model analyzes the impact of host country investment facilitation on China's outward foreign direct investment, and the panel threshold model examines the nonlinear relationship between investment facilitation and outward foreign direct investment. The results indicate significant differences in the level of investment facilitation among countries along the Belt and Road. Overall, spatial distribution characteristics are higher in East Asia, Southeast Asia, and Europe compared to other regions. An increase of 1% in the level of investment facilitation provided by the host country can generally promote a 2.173% increase in China's outward foreign direct investment. Market size (GDP) and technological progress rate (Tec) were used as thresholds for dividing countries along the Belt and Road into four economic regions. Countries in the different economic regions have different levels of sensitivity to investment facilitation and first-level indicators. Currently, Chinese outward foreign direct investment is based on market acquisition but will be based on technological upgrading in the future.     

The impact of affinity on world economic integration: The case of Japanese foreign direct investment

This paper finds that a country's affinity with a foreign country has a positive effect on foreign direct investment flows from it to that country, by analyzing Japanese foreign direct investment outflows during the period of 1995–2009. A rise in a country's affinity with a foreign country is thought to enhance its trust in that country and as a result lower the transaction costs of its economic activities with it, thereby helping to promote its foreign direct investment flows to the country. These findings imply that a rise in affinity among countries is likely to facilitate international economic integration.     

Indonesia's Investment Negative List: an evaluation for selected services sectors

In March 2007, Indonesia's parliament approved a landmark new law on investment. Law 25/2007 replaces separate laws on foreign and domestic investment from 1967 and 1968, and provides a single legislative framework for domestic and foreign investment. The law states that all business sectors are open to investment, including foreign investment, unless specified in a presidential regulation containing Indonesia's Investment Negative List (DNI). This paper summarises the results of four sector studies undertaken to review implementation of the investment law. The purpose of the DNI is to provide certainty to investors by documenting restrictions in a single list, thereby eliminating the power of ministries to set their own rules. This paper finds that, in practice, considerable uncertainty remains, arising particularly from the law's implementing regulations. Furthermore, new ministerial decrees and laws appear to bypass the list and may reflect a trend towards greater restriction of foreign investment in Indonesia.     

Host countries’ growth opportunities and China's outward FDI

In 2014, China proposed the Belt and Road policy, which has pushed China's outward foreign direct investment (OFDI) to over tens of billions of US dollars. However, existing studies have not reached a consensus about the decisive factors in China's OFDI. To verify whether China's OFDI activities are motivated by profits, this paper applies a measure of country‐specific growth opportunities adopted by Bekaert et al. (2007) to measure the growth opportunities of the target countries for China's OFDI. A multinational panel data model, based on data from 51 countries from 2003 to 2012, is used to explore the relationship between host countries’ growth opportunities and China's OFDI. Overall, the analysis finds that China's OFDI does not follow the host countries’ growth opportunities but exhibits different features toward developed countries and developing countries. For developed countries, China's OFDI follows host countries’ growth opportunities to some extent. In the case of developing countries, China's OFDI does not follow host countries’ growth opportunities. When we consider factors such as a host country's financial development and political stability, improvement in these factors improves the attractiveness of the host country to China's OFDI. It is also found that the 2008 global financial crisis did not have a very significant impact on China's OFDI activities.     

投资动机视角下江苏省对东盟10国直接投资的影响因素研究

基于2007—2020年东盟10国的数据,构建拓展的投资引力模型,实证分析投资动机视角下江苏省对东盟直接投资的影响因素,研究发现江苏省对东盟的直接投资动机最为明显的是成本寻求型,其次是技术寻求型和市场寻求型,最后是资源寻求型,而基础设施也对江苏省对东盟的直接投资产生重要影响。为了更好地促进对东盟10国的投资,江苏省应加快边际产业的转移,同时增加对部分国家基础设施的直接投资,并且优化对东盟国家直接投资的结构。     

Decomposing polarisation across developing countries: case study of China,India, and Indonesia

We investigate the contributions of various factors in the differences in polarisation across China, India, and Indonesia using micro‐simulation and decomposition methods. Using household expenditure from harmonised data from these countries, China was found to have the highest polarisation, while India has the lowest. Using India as the base country, the differences in the labour market structures in India and Indonesia have a slightly decreasing effect on polarisation. The effects of the differences in demographic composition and expenditure structures/parameters, however, are uncertain. Further, the differences in polarisation between China and Indonesia can be explained mostly by the differences in the expenditure structures. China's expenditure structure tends to increase polarisation, as evidenced by the resulting reduction in the size of the middle class.     

The East Asian crisis and financing corporate investment: is there a cause for concern?

In view of limited empirical evidence concerning the microeconomic aspects of corporate financial problems in the East Asian countries in the 1990s, this paper analyses the financing pattern of corporate investment in Indonesia, Korea, Malaysia, and Thailand. The analysis is based on an unbalanced panel of listed firms during the period 1989–1997. By using firm size, retention practices, and leverage as three different indicators of financial constraint on firm investment, we have examined the role of various internal and external financing variables on corporate investment in the sample countries. Results indicate that a large number of sample firms depend on free cash flow, especially in Indonesia; there was also a steady increase in debt-equity ratio in all countries. There were signs of agency costs in the use of cash flow in Korea and Malaysia and also in the use of debt financing in Malaysia and Thailand. There was also sign of over-investment among the Thai firms during 1994–1997 though it appears very little if at all was done to redress it in time.     

Hypergrowth in an East Asian NIC: Public policy and capital accumulation in Singapore

Singapore has produced the world's highest investment ratios, known to account for growth more rapid than in any other less-developed country over the past three decades, but such high investment needs explanation. We trace Singapore's public policy of increasing tax concessions and infrastructural spending—in effect subsidies to private firms—and use an open-economy, neoclassical model to show how, by attracting “footloose” foreign capital and raising investment levels, these policy measures can drive growth. The consequent transformation of living standards in Singapore suggests, in accordance with theory but contrary to most practice, that for some less-developed countries effectively zero tax on foreign direct investment may be a beneficial strategy. Yet for both Singapore and other would-be late industrializers, major issues of development strategy arise from the kind of input-driven growth analyzed in this article.     

Towards improved monetary policy in Indonesia

Indonesia's depreciation vastly exceeded that of all other countries hit by the Asian crisis. Indonesia also experienced far higher inflation. This paper argues that there is a close medium to long-term relationship between money growth and inflation in Indonesia, and that this has not been greatly disturbed by the crisis. It argues that the country's disappointing performance in relation to maintaining the value of the rupiah can be explained by the central bank's failure to sterilise the monetary impact on base money of its last-resort lending to the banks. The fundamental lesson is that Bank Indonesia would be well advised to adopt slow and steady growth of base money as the nominal anchor for monetary policy, now that the pre-crisis policy of slow and steady depreciation of the rupiah has been abandoned.     

论东亚各国资本移动自由化的影响——资本移动自由化的文献综述

亚洲各国的资本移动自由化开始于20世纪80年代后期至90年代之间。历经90年代后期的金融危机,亚洲各国的资本移动情况各不相同。以韩国为例,亚洲危机之后,外资流入股市的比例激增;另一方面,流入印尼和菲律宾的外资则多为外债的借入,投入股市及直接投资的比例几无成长。在中国,以其独特的外资管制政策抑制投入股市的总额之外,90年代后期起,更快速的开放国外直接投资的资本进入。文章拟就有关国际资本移动自由化既存的研究作简单回顾,同时考察亚洲各国对外资管制多样化的各种重要论述。     

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

During the past decade, China's outward direct investment (ODI) and exports have experienced rapid growth, drawing increasing attention to the relationship between them. Using the gravity model based on panel data on China's ODI and trade to 174 countries and regions during 2003–2012, the present paper investigates the impacts of China's ODI on exports. We find that China's ODI to a host country significantly promotes China's trade with that economy: a 10‐percent increase in ODI stock can lead to a 2.14‐percent increase in exports, a 2.07‐percent increase in imports and a 2.87‐percent increase in net exports. The scale of the host country's economy, its infrastructure and its distance to China also have significant impacts on China's exports. Therefore, growth in ODI will facilitate China's trade and integration into the global economy, and enhance industrial upgrading in China by transferring the low‐end industries abroad.     

The Role of Markets,Technology, and Policy in Generating Palm-Oil Demand in Indonesia

Indonesia produces more palm oil and consumes more palm oil per capita than any country in the world. This article examines the processes through which Indonesia has promoted palm-oil consumption and some of the consequences of that promotion. Partial equilibrium modelling shows that Indonesia's remarkable increase in palm-oil consumption since 1985 is not largely attributable to population and income growth. Instead, much of this consumption growth has resulted from substitution away from coconut oil, facilitated by government policies on technology, pricing, distribution, and trade. The switch from coconut oil to palm oil in Indonesia was associated with increased land conversions to agriculture and diminished smallholder competitiveness. Despite lower rates of cooking-oil substitution in the future, simulations suggest that Indonesia's total palm-oil consumption in 2035 will be at least double that of 2010.     

Anti-dumping Policies and International Portfolio Allocation: The View from the Global Funds

Anti-dumping policies, as one of the most important nontariff measures to protect a country's economic interests, can have an impact not only on a country's trade and social welfare, but also on capital flows. Anti-dumping measures can result in increased trade costs and alterations to exchange rate risk. This study investigates the impact of anti-dumping sanctions on the international portfolio allocations of global funds. Antidumping policies can decrease the proportion of a fund's investment portfolio allocated to recently-sanctioned countries. Closer trade ties between the sanctioned country and the country where a fund is domiciled exacerbate the divestiture, but stronger foreign direct investment links weaken the negative association. Some country and fund heterogeneities are also discussed. We find that more developed countries are less affected by the impact of anti-dumping measures on equity fund allocations; liberalization of the economy and stable government could also mitigate the negative impact of anti-dumping sanctions. High-risk funds, such as growth funds or funds that invest in leveraged buyouts, showed the greatest response to changes in anti-dumping regulations.     

What can Indonesia learn from China's industrial energy saving programs?

Even though Indonesia's CO₂ emissions are dominated by deforestation while China's are dominated by industry, Indonesia has much to learn from China's industrial energy saving programs. To begin with, it is only a matter of time before Indonesia's emissions from fossil fuels overtake those from deforestation. Given the long technological lock-in effects of energy systems and industries, Indonesia needs to think now about how it will tackle this problem. There are other reasons for believing that Indonesia might learn something from China – the CO₂ intensities of GDP, of industry and of cement production have been rising in Indonesia, while they are falling in China. China's better intensity performance is due to policies that Indonesia would do well to follow – adopting a technological catch-up industrial development strategy; raising energy prices to scarcity values; liberalising domestic markets and opening the economy to trade and investment; and mounting a massive energy saving program.     

Some neglected issues in factor proportions and ownership: An Indonesian case study

Conclusion The purpose of this article has been to examine a number of issues frequently overlooked in the large literature on factor proportions and ownership in LDC manufacturing, with reference to a rich data set from Indonesia. Substantial differences in factor proportions among ownership groups confirm the conclusions of most other studies. This paper departs from a significant portion of the general literature in four respects: it introduces a systematic decomposition technique for distinguishing between differences within industries and those arising from compositional differences; it has emphasised the importance of finely disaggregated industrial classifications, without which interfirm comparisons may generate quite misleading results; it has highlighted the need to develop more elaborate ownership definitions than the simple foreign-domestic dichotomy commonly employed; and it has cast doubt on the validity of the frequent assertion that differences in factor proportions are attributable principally to variations in relative factor prices among ownership groups. Our conclusions are inevitably restricted by the focus on just one country. However, they have some general applicability given the quality of the Indonesian data base, and the nature of its industrial policy environment - especially high manufacturing protection and a relatively liberal foreign investment code - which is replicated in other developing countries.     

Measuring Barriers to International Division of Labor in East Asia*

International fragmentation has developed dramatically in East Asia since the 1990s. The purpose of the present paper is to measure border barriers in transactions of intermediate goods in East Asian countries. We find that the barriers in each country have steadily declined since 1985. The barriers in China and Taiwan have declined remarkably since the 1980s, whereas those in Indonesia experienced a slight increase in the 1980s. These results are qualitatively unchanged even if we control the effect of agglomeration on intra‐national inputs.