This study aims to explore the determinants of foreign direct investment (FDI) for the ASEAN region economies to assist the policymakers and governments in attracting sustainable investment to the region.
This study has used the data set from 1970 to 2022 for 10 ASEAN economies. The analysis has used the generalized method of moment panel regression modeling.
The findings reveal that market size, human capital and trade openness, as key location (L) advantages, boost FDI inflows by highlighting the role of economic scale and liberalized trade in ASEAN nations. Institutional quality [internalization (I) advantage] positively influences investment by reducing regulatory risks for the investors. Furthermore, in ownership (O) advantages, innovation-driven economies reflect a shift toward efficiency-seeking FDI over traditional resource-seeking strategies. Conversely, environmental degradation has a negative impact, supporting the pollution haven hypothesis, where stringent environmental regulations discourage investment. Nonetheless, the macroeconomic stability and official development assistance did not yield any significant impact.
This study may serve as a foundational resource for policymakers and ASEAN governments in devising strategies to attract foreign investment to the region. The findings assert that ASEAN region policymakers should focus on opening the ASEAN region by removing the tariff and non-tariff barriers and fostering regional economic integration with neighboring countries, expanding market size, investing in human capital and creating regulations favorable to international trade.
To the best of the authors’ knowledge, there is hardly any study that has explored the FDI determinants through extending the OLI framework.
