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[2013-5] Analysis of FDI Flows to Major Asian Emerging Market Countries

Research Department(+82-2-759-4172) 2013.06.03 3188

    Asian emerging market countries, as it has led the recovery of world FDI flows with its share of total global FDI expanding markedly since the global financial crisis. This paper sets out to analyze the current status of FDI and its characteristics and determinants in eight major Asian countries that make up the major part of Asian emerging market countries.
    FDI in these eight Asian countries is seen to be led by the manufacturing and services industries in terms of industry, and by greenfield FDI in terms of investment type. Investments by advanced Asian and European countries account for a large share of  total FDI in these eight countries.
    Looking at FDI determinants, FDI is seen to depend heavily upon economic location conditions such as these countries’ growth potential, relative wage level and access to resources. In addition, access to resources is seen to have had a greater effect on FDI since the global financial crisis. In terms of FDI type, it is analyzed that M&A-type FDI tends to be motivated by the desire to secure market shares, while greenfield FDI in a bid to reduce labor costs.
    Meanwhile, an empirical analysis of the investment environment by country and comparison and assessment of the countries based on the UNCTAD rankings show that Malaysia’s overall investment
environment is most favorable of the eight, followed by those of Korea, Thailand and China. Korea is seen to be relatively favorable in economic and policy terms but to rank lower from the erspective of social acceptance of FDI.
    FDI flows to these major Asian emerging market countries arehighly likely to remain on the rise to establish production bases and secure market share, thereby contributing to economic development. In this regard, we in Korea need to improve the efficiency of the labor market, which is less competitive than those of other
emerging market countries and to reorder the related systems and legal frameworks including the investor protection system, in order to actively attract FDI while maximizing the economic effects of these investment inflows.