A R T I C L E S FOREIGN DIRECT INVESTMENT IN EAST ASIA:TRENDS AND DETERMINANTS * ANTHONY BENDE-NABENDE, JAMES L. FORD, JIM SLATER AND SOMNATH SEN BENDE-NABENDE IS RESEARCH FELLOW, GRADUATE CENTRE FOR BUSINESS ADMINISTRATION, THE UNIVERSITY OF BIRMINGHAM, ENGLAND FORD IS EMERITUS PROFESSOR OF ECONOMICS, THE UNIVERSITY OF BIRMINGHAM SLATER IS DIRECTOR, GRADUATE CENTRE FOR BUSINESS ADMINISTRATION, THE UNIVERSITY OF BIRMINGHAM SEN IS PROFESSOR OF DEVELOPMENT ECONOMICS, THE UNIVERSITY OF BIRMINGHAM This study utilizes two approaches to investigate the determinants of foreign direct investment (FDI) into East Asia. The first approach, descriptive in nature, explores how, why and which locational determinants have significantly influenced the FDI trends in the last two or three decades. The second approach, an empirical one, examines the long-run determinants of FDI during the pre-Asian financial crisis period (1970-97), using co-integration and Granger-causation methodologies. T he globalization of the world economy entails a growing inter-penetration among economies in which the role of foreign direct investment (FDI) has become increasingly important. Not only can FDI add to investible resources and capital formation, but, perhaps more importantly, it is also a means of transferring production technology, skills, innovative capacity, and organizational and managerial practices between locations, as well as of accessing international marketing networks. Therefore, the ongoing competition between countries to host FDI is not surprising. The Asian region has emerged as one of the key participants among the competitors, particularly from the developing countries’ perspective. As Figure 1 (opposite) illustrates, within the developing country regions, recent trends demonstrate the Asian region as the most dynamic and, consequently, the dominant FDI recipient, followed by Latin America. Within Asia, the East has been the dominant FDI recipient. Within the East, the pre-1990s (except 1984–88) period was characterized by the dominance of the Southeast. 1 However, this was mainly attributable to the original five members of the Association of South East Asian Nations (ASEAN), 2 which derived comparative advantages from their surging economies, stable and business-minded governments, cheap labour, falling trade barriers and open investment policies. However, current evidence suggests that the Southeast, after leading the region for years in the aforementioned advantages, is now losing many of them to the developing countries of the Northeast. 3 This study utilizes two different approaches to examine how the locational determinants of FDI
A N T H O N Y B E N D E - N A B E N D E , J A M E S L . F O R D , J I M S L A T E R A N D S O M N A T H S E N
BENDE-NABENDEISRESEARCHFELLOw,GRADUATECENTRE
FORBUSINESSADMINISTRATION,THEUNIVERSITYOF
BIRMINGHAM,ENGLAND
FORDISEMERITUSPROFESSOROFECONOMICS,THE
UNIVERSITYOFBIRMINGHAM
SLATERISDIRECTOR,GRADUATECENTREFORBUSINESS
ADMINISTRATION,THEUNIVERSITYOFBIRMINGHAM
SENISPROFESSOROFDEVELOPMENTECONOMICS,THE
UNIVERSITYOFBIRMINGHAM
This study utilizes two approaches to investigate thedeterminantsof foreigndirect investment (FDI) intoEast Asia. The first approach, descriptive in nature,exploreshow,whyandwhichlocationaldeterminantshavesignificantlyinfluencedtheFDItrendsinthelasttwoorthreedecades.Thesecondapproach,anempiricalone,examinesthelong-rundeterminantsofFDIduringthe pre-Asian financial crisis period (1970-97), usingco-integrationandGranger-causationmethodologies.
Theglobalizationoftheworldeconomyentailsagrowing inter-penetration among economies in
whichtheroleofforeigndirectinvestment(FDI)hasbecomeincreasinglyimportant.NotonlycanFDIaddtoinvestibleresourcesandcapitalformation,but,perhapsmore importantly, it is also a means of transferringproduction technology, skills, innovative capacity,andorganizational andmanagerialpracticesbetweenlocations,aswellasofaccessinginternationalmarketingnetworks.Therefore,theongoingcompetitionbetweencountriestohostFDIisnotsurprising.TheAsianregionhasemergedasoneofthekeyparticipantsamongthecompetitors,particularlyfromthedevelopingcountries’perspective.
As Figure 1 (opposite) illustrates, within thedevelopingcountryregions, recent trendsdemonstrate
This study utilizes two different approachesto examine how the locational determinants of FDI
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have shaped the FDI trends in developing East Asia(i.e. excluding Japan). The first approach, which isdescriptive innature,seekstoexplorehow,whyandwhich locational determinants have significantlyinfluencedtheFDItrendsoverthepasttwodecades,particularly during the post-1991 period. This isachievedbyintegratingtheliteraturewithsomeexistingbasicinformation.Specifically,explanationsaresoughtfortherecent(short-run)growingFDIinflowdisparitybetweentheNortheastandtheSoutheast.Thesecondapproach involves an investigation of the long-rundeterminantsofFDIforthepre-Asianfinancialcrisisperiod, i.e. 1970–97, utilizing the methodologies ofco-integrationandGranger-causation.Thisisachievedbytheformulationofamodel,backedbytheoreticaleconomicliterature.
Therestofthepaperisstructuredasfollows.Thenext section presents an overview of the recent FDItrends,afterwhichthereisadiscussionofthetheoreticalframework.Thisisfollowedbyaqualitativeassessmentofthepost-1991trendsofFDIlocationaladvantages(disadvantages)inEastAsia.Thefocusthenshiftstoa quantitative approach based on co-integration and
Untilthemid-1980s,FDItodevelopingcountrieswasconcentratedinrawmaterialandresource-basedextraction, processing and manufacturing. WithinEast Asia, the Southeast was the main recipientof the inflows because its resource endowments,4combined with its more liberal attitudes towardsFDI, made it a more favourable location than theNortheast.Theexceptiontothisbroadgeneralizationwas FDI in Singapore, which was directed largelyto manufacturing, and to commerce, finance andtransport,5sinceSingaporelackednaturalresourcesandanagriculturalbase(Bende-Nabende2002).Figure2
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(opposite) demonstrates that, with the exception oftheyears1984–88,theSoutheastdominatedtheFDIinflowsharewithindevelopingEastAsiaduringthepre-1992period.
The explanation for the inconsistency duringthe years 1984–88 is as follows: Japanese firms lostinternationalcompetitivenesswhentheappreciationoftheyenin1985escalatedproductioncosts.Thesolutionwastoseekcheaperproduction locationselsewhere.Becauseoftheircomparativelysuperiorinfrastructure,andtheirgeographicandculturalproximity,theAsiannewly industrializing economies (ANIEs)6 were themost favoured locations vis-à-vis other developingcountries, including the ASEAN-4.7 In addition,China’sliberalization,whichstartedinthelate1970s,ledtoagradualsurgeinFDIinflows.ThecombinedeffectimprovedtheNortheast’spositionvis-à-vistheSoutheastduring1984–88.
Between 1989 and 1991, increasing productioncostsintheANIEswarrantedrelocationofproduction,similartotheoneJapaneseinvestmentshadexperiencedearlier, making the ANIEs new outward investors.Countries at a lower level of development than theANIEs,particularly theASEAN-4andChina,weretheprimebeneficiariesofthisrelocation.Inaddition,during the late-1980s, the rising wage costs in the
ANIEs meant that they were often by-passed byJapanesetransnationalcorporations(TNCs)infavourof the ASEAN-4. Furthermore, in expanding theASEANpresence,JapaneseTNCsinparticulartookadvantageofnotonlytherelativelycheaplabour,butalsothequotasandtradearrangementsthatweremorefavourable than those thatwereapplying toexportsfromJapan.
However, since 1992 the trend has changed infavouroftheNortheast,withanincreasingdisparity,particularly since the1997/98Asian financial crisis.Thistimeround,theASEANeconomiesexperiencedamarkeddeclineintheirshareofinflowsfrom61%during1990–91toslightlyover30%during1994–96(UNCTAD1997).AsillustratedinTable1,bytheendof2000,theSoutheast’ssharehadbeenerodedtolessthan10%.ThesetrendsarealsocapturedbytheannualaggregatefigurespresentedinTable2(p.8).
Evidently, these recent trends indicate thatinvestorsaregettingmoreinterestedintheNortheast.In order to understand the underpinning factorsresponsibleforthestructuralchangesofthecompetitiveadvantagesoftherespectiveregionsandcountries,itisessentialtoidentifythetheoreticalframeworkandlinkittoempiricalevidence.Thisisthefocusofthefollowingsections.
The literature has provided several alternativeexplanationsforFDI,athoroughreviewofwhichiswelldocumentedin,forinstance,UNCTC(1992).Themostrecentview,whichinawayembracestheconceptsof the earlier explanations, is that which suggeststhat the propensity for a firm to engage in foreignproductiondependsonthecombinationofownership-specificadvantages,8internalizationopportunities9andlocational advantages10 in the target market. Thesereasons,whichexplainwhyFDItakesplaceatall,havebeengivenbyDunning(1981)undertheeclectictheoryofFDI.EachofthesedeterminantsofFDIrelatestoanadvantageofdirectinvestmentoveralternativemodesofservingthefirm’scustomersabroad.Itmeans,therefore,thatafirmcanonlycaptureaforeignmarketthroughFDIifithasthecapacitytoexploitsimultaneouslyallthethreeadvantages.If,forinstance,itpossessesonly
Traditional trade theory(Helpman&Krugman1985;andKrugman&Obstfeld1994)assertsthatthedirectionandmagnitudesofcapitalflowsaredeterminedbydifferencesinfactorproportionsamongcountries,which cannot be countered by international trade.Developing on Dunning’s eclectic theory, Eiteman,Stonehill and Moffett (1995) emphasize the meritsof internalization. Under the internalization theory,the key ingredient for maintaining a firm-specificcompetitive advantage is the possession of proprietyinformationandcontrolofthehumancapitalthatcangeneratenewinformationthroughexpertiseinresearch,management,marketingandtechnology.
Usually, foreign firms targeting investment inspecific industries or market segments in developingcountries have similar firm-specific capabilities and
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similarinternalizationadvantages.Forinstance,intheprimarysector,firmsthattargettheoilextractionandprocessing industries often have strong firm-specificcapabilities. In the secondary and tertiary sectors,however,foreignfirmsmaysegmentthetargetmarketintoniches,andservethenichesinaccordancewiththeirstrategiccapabilities.Forinstance,ratherthanpursuinghead-oncompetitionwithlargerandstrategicallymore
capablefirms,thesmallandmedium-sizedenterprises(SMEs) may opt to operate in market segments inwhich they compete among themselves.11 This samelevelplaying-fieldsyndromeisalsotrueforthemodeofentry.Forinstance,acquisitionsrequiresubstantialresources and are mostly undertaken by firms withstrongfirm-specificassets.Ontheotherhand,mergersandstrategicalliancesareundertakenbyanytypeof
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firm.Nonetheless,evidenceshowsthat,amongotherthings,thefirms’sizeshavetobecomparativelysimilarfor the alliances to succeed. Similarly, any investingfirm can undertake green-field investment, but thescale of such investment is determined by the firm’sstrategiccapabilities.Theendresultisthatsimilarfirmscompeteinspecificniches.Thus,iffirmswithsimilarfirm-specificassetsandinternalizationadvantagestargetsimilarsegments,thechoiceoftheinvestmentlocationisthenhighlyinfluencedbythelocationaladvantages.Forthatmatter,locationalfactorsmaybesignificantlyresponsible for any FDI disparity between specificdevelopingcountries/regions.FDIfromthelocationaladvantage point of view is influenced by four broadcategories of factors: the cost-related factors, theinvestment environment improving factors, othermacroeconomicfactorsandthedevelopmentstrategyofthehostcountry.
Under the first category, the presence of asignificantcostfactordisparitybetweenahomecountryand a host country may significantly influence thechoiceofaninvestmentlocation.Suchadisparitymightbeparticularlyprevalentinthelabour-intensiveexport-oriented,andsourcingandassemblytypeofindustriesin which major market imperfections arise from thedisproportionate cost of given unit inputs betweenthedevelopedcountriesandthedevelopingcountries.Key cost-related locational factors will be the hostcountry’srealwagerate,foreignexchangerates, landandpropertyrents/rates, fuelcosts, local inputcosts(where applicable), level of taxation, transport costs,andcostofcapital(i.e.lendinginterestrate)inrelationtothoseofthehomecountry.Since,bydefinition,FDIisfundedfromabroad,onewouldassumethatonlythehome country cost of capital is relevant. It is noted,however,thatthehostcountry’scostofcapitalimpactsdirectlyondomesticconsumption.Thus,thelowertheinterest rates, the higher the domestic consumption
The investment environment improving factorsnotonlymake itpossible for the investment to takeplace,butalsosmooththeentireprocessofinvestmentandofeventualproduction.Thecentralfactorshereareseentobetheopennessoftheeconomy,thedegreeofliberalizationoftheinvestmentandthetraderegimes,and the prevailing political risk. The FDI policyliberalizationpackagemayincludeownershippolicies,taxes/subsidies,12 convertibility of currency,13 pricecontrols,andperformancerequirements.14Tradepolicyliberalizationinvolvesthereductionofrestrictionsandtariffsontradedmerchandiseregardingthecountriesinquestion,making themmoreopenandacceptabletotrade.15Thesefactorsmayplaythatcrucialroleofinfluencing the investors’ preference when making achoice between, say, two locations that have similarcost-related advantages. Thus, the expected responseofFDImaydependuponthedegreetowhichthehostdevelopingcountryisopentoforeigntrade,whichcaninfluenceproductivity/competitiveness through scaleeconomies.KravisandLipsey(1982)foundthatahighpropensity to trade was an important factor in the
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decisiontolocateUStransnationalaffiliatesinforeigncountries.Hence,themoreopentheeconomy,themorelikely it is that anygiven investmentwill takeplace.Furthermore,investmentbenefitsthatareconditionedbyliberalizationofthetradeandFDIregimesmayemanatefromtheirfacilitationoffreertradeandinvestmentinconjunction with the repatriation of dividends andprofits to home countries. Bende-Nabende, Fordand Slater (2001) found liberalization to be a majordeterminant of FDI into the ASEAN-5 economies.Furthermore, the political risk rating of the countrycannotbeignored.Anunstablepoliticalenvironmentmakes investments risky and, therefore, erodes theinvestors’confidence.16
Underthemacroeconomicfactors,considerationisgiventofactorsthatcan,intheirownright,influenceforeignfirmstoconsiderdirectinvestmentinthehostcountryasopposedtocontinuingtoservice iteitherthrough exports or through other means such aslicensing.Heretherearetwomarketfamiliarfactors,i.e.currentmarketsizeandthepotentialmarketsize.Whilealargedomesticmarketsizegeneratesscaleeconomies,a growing market improves the prospects of marketpotential.Therefore,thelargerthecurrentmarketsizeandthehigherthemarketgrowthrate,themorelikelythattheinvestmentwilltakeplace.Inaddition,therearecountry-specificcreatedassets intheformof thequalityoftheavailableinfrastructure,technologyandlabour,whichfacilitatetheproductionanddistributionprocessesofgoodsandservices.TNCsareincreasinglyseekingworld-classinfrastructure,skilledandproductivelabour,innovatorycapacitiesandanagglomerationofefficient suppliers, competitors, support institutionsand services. In terms of transnational cost theory,advanced created assets help the investors to reduceinformationcostsandtoachieveothercost-improvingefficiency.Thus,theavailabilityofaskilledwork-force(bothtechnicalandmanagerial),otherwiseknownas
humancapital;ofagoodphysicalinfrastructure;andoftheassociatedtechnology,willinduceFDIinflows.Bhattacharya, Montiel and Sharma (1996) identifiedgrossdomesticproduct(GDP)growthasamajorfactorfor sub-Saharan Africa as a whole, while Mbekeani(1997) foundmarket sizeandgrowthrates tobe themostimportantdeterminantsofFDIinEastAsiaandthePacific,andLatinAmericaandtheCaribbean.
Thepolitical ideologyand,hence,developmentstrategyofthehostcountryalsoplaysacriticalrole,particularlywithrespecttothetypeofinvestmenttobe undertaken. For instance, it may be a restrictiveimport-substitutionstrategy,whichdrawsinvestment(defensive)gearedforthedomesticmarket.Alternatively,itmaybealessrestrictiveexport-orientationstrategy,which promotes investment for exports. Singh andJun’s (1995) study revealed that exports, particularlymanufacturingexports,areasignificantdeterminantofFDIflowsandthatthereisstrongevidencethatexportsprecedeFDIflows.
Thepost-1991FDItrendscanbetracedtospecificpolicychanges in the aforementioned locational advantagecategories.However,itisworthwhilenotingthatthedegreetowhicheachlocationaldeterminantinfluencesthe FDI inflows is, among other things, dependentupon the type of the proposed investment. It willvaryaccordingtowhethertheinvestmentisresourceseeking, market seeking, tariff jumping, efficiencyseekingorstrategicasset/capabilityseeking.Likewise,the degree of influence of locational determinants isdependentuponthelevelofeconomicdevelopmentofthehostcountry.Forthesereasons,inthediscussion,
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thefocusisonlyonthosefactorsthatarebelievedtohavebeenmostinfluentialforthestructuralchanges.Forinstance,theauthorsofthispaperareoftheopinionthat the development strategies in terms of politicalideologyhavenotbeenresponsibleforanysignificantrecentstructuraldifferences.Thisisbecausetheexport-orientationstrategyhas,ingeneral,beenprevalentinthe region in the recent past, particularly during thepost-1991period.Thepapernowfocusesonthemostinfluentialfactorsandsynthesizestheminthesectionsthatfollow.
MacroeconomicFactors
MARKETCHARACTERISTICSThe data contained in Tables 3 and 4 (pp. 12–13)respectivelyrepresentthegrowthratesofrealGDP,which indicate the future market potential, and thelevelofGDP,which is aproxymeasure formarketsize. It isevident that formuchof the1970s,1980sandearly-1990s,theeconomiesofbothNortheastandSoutheastAsiagrewby6%to10%ayear.17Thus,they were more or less on the same level playing-field vis-à-vis future market potential, at least untiltheearly-1990s.Thistrend,however,changedafterthe1997–98Asianfinancialcrisis.Althoughmostcountriesrecordednegativegrowthratesin1998,theSoutheasttendedtobehitmuchmore.Forinstance,whereasintheNortheast,ChinaandTaiwanshowedonlyminorsignsofslowdowningrowth,intheSoutheastonlyMyanmarshowednosignsofslowdowningrowth.Ineffect,bytheendof2000,thegrowthratesoftheASEAN-4(exceptMalaysia)werestilllaggingbehindthose of the Northeast, which had shown signs ofalmostfullrecovery.
Thedataformarketsizehighlightoneobviouscharacteristic.TheGDPlevelsfortheNortheastAsiancountries are far larger than those of the Southeast
Asianeconomies.Forinstance,evenwithitsmodestpopulation of about seven million, Hong Kong’sannuallevelsofGDPexceedthoseofalltheSoutheastAsiancountriesexceptThailandandIndonesia.Evenforthesetwo,theirGDPlevelsfellbelowthatofHongKongafterthe1997/98Asianfinancialcrisis.However,Indonesia caught-up again in 2000. When the 1998shares of aggregate GDP, based on the purchasingpower parity (PPP) value of a country, are used toproxy market size, only those for Indonesia andThailand carry some significant weight. In fact, thePPPestimatesindicatethatevenwhentheDemocraticRepublicofKorea isexcludedfromthesample, thecombinedsizeoftheNortheast(13.4)isalmostthreetimesasbigasthatfortheSoutheast(4.8).
Thus,combiningtheindicatorsoffuturemarketpotentialwiththoseofcurrentmarketsizegivestheNortheast a competitive edge over the Southeast.The wealthy consumer base in Hong Kong, Koreaand Taiwan, and the giant population in China,18far outweigh not only any current benefits of theSoutheast, but also any potential problems of theNortheast. Consequently, investors are betting onAsia’s future and channelling more of their moneyinto the large economies of the Northeast. Forinstance,China’s fast-growingcellphonebusiness isresponsibleforMotorolaInc.’splannedUS$1.9billionchip-makingplant(Frank2001).
CREATEDASSETSWith the exception of Singapore, the Southeasthas lagged behind in developing resource bases tofacilitate their progressive shifts up the levels oftechnologicalcomplexity;and,hence,toparticipatein the state-of-art production activities. Take theexampleoftheon-goinge-comrevolution,whichistransformingtheglobaltransactionofbusinessand,therefore, enhancing the knowledge-driven global
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economy.Forthistosucceed,thework-forceinthehostcountryhastobecomputerliterate.Inaddition,there has to be an infrastructure that enables easyand fast internet communication. The indicativefiguresfor1996,1998,1999and2000arepresentedin Table5 (p. 14). Even in the absence of data forTaiwan, it is evident fromthese indicators that thecountry-specificconcentrationofpersonalcomputersandinternethostsarehighestintheANIEs,threeofwhicharelocatedintheNortheast.
obvious reasons. For this reason, the NIEs arebetter placed than their counterparts in East Asiawhenitcomestocreatedassets.AsTable6(p.15)illustrates,onlySingapore iscompetitivewith theNortheastwhenitcomestoinvestmentintechnicalskills,andintechnicalproficiencyandinnovationcapabilities.
TheInvestmentEnvironment
LIBERALIzATIONANDOPENNESSDuring the mid-1980s, while the countries of theSoutheastfast-trackedtheir liberalizationprocess,thoseoftheNortheastremainedcomparativelyless
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liberalized.TheexceptionwasHongKong,whichrepresented a quintessential case of laissez-faire.The attitude has now reversed. The Southeast,which vigorously opened up from the mid-1980s,is now switching back to regulation. Malaysiaand Indonesia have, for instance, imposed capitalcontrols;Thailandhaslargelyhalteditsprivatizationplans;andthePhilippines’giantbudgetdeficithasdisqualified it from vital International MonetaryFundfinances.
In contrast, the lowering of barriers in theNortheast has partly encouraged cross-bordermergersandacquisitions(M&As),particularlyintheservicessector.Thechangeinthepolicyenvironment
is exemplified by the move by South Korea to selloff major banks and the elimination of foreign-ownershipceilingsinalmostallofitsindustries.ThatiswhyNewbridgeCapital,afterbeingrebuffedinanattempttobuyabankinThailand,decidedtoacquireacontrollingstakeinKoreaFirstBank.Similarly,Taiwanhastorndownmostofitsforeign-ownershiplimits,andisallowingtake-oversofitsbanks(Frank2001).M&AswerealsomadebyLittauerTechnologiesCo.LtdofKorea,whichacquiredHongKong’sAsiaNet(LinkageOn-Line)forUS$1.4billion;andStandardCharteredPLCofUnitedKingdom,whichacquiredHong Kong’s Chase Manhattan-HK Banking forUS$1.3billion(UNCTAD2001).
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One critical issue that is often overlooked isthe fact that M&As can only be undertaken if thehost country possesses local companies that havedeveloped strategic assets and capabilities thatcan interest international firms. Evidently, there ispotentialforM&AsintheNortheastforthesimplereasonthattheregionpossessindigenousfirmswithwhichforeignfirmscanengageinM&As.Bycontrast,however,thepotentialfordomesticfirmstoengageinM&AswithforeignfirmsintheSoutheast(includingthe more developed Singapore) is comparativelysmaller.Unsurprisingly,therearemoreM&Asand,hence, more FDI inflows in the Northeast than in
theSoutheast.UNCTAD(2001)concludesthatthewave of M&As in the Southeast Asian countries,particularlythosehitbythe1997–98financialcrisis,hastaperedoff,reflectingbothaslowdownintherateof assetdisposals and reducedpressure for furthercorporaterestructuring.
In addition, China and Taiwan’s move tojointheWorldTradeOrganisztion(WTO),whichsignalled their further integration into theglobaleconomy, played a significant role in the recentdevelopments.Forexample,initsefforttobecomeamemberoftheWTO,ChinaadoptednewpolicymeasuresrelatingtoFDI,andisdevisingpoliciesto
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encouragecross-borderM&As.Infact,UNCTAD(2001) gives this as a reason for the upsurge ofinflowstoHongKong,particularlyin2000.
POLITICALRISKAsifthefailuretoderegulateisnotbadenough,politicsintheSoutheastisgrowingmorevolatile.Forinstance,inthePhilippines,thepresident(JosephEstrada)wasousted following angry protests, not to mention theincreasingkidnapsundertakenbyguerrillas.Inaddition,riots and ethnic cleansing are not uncommon inIndonesia;Thailandhasheldcontroversialelections;and
The Northeast’s political stability situation,on the other hand, although not perfect by Westernstandards, is in fact improving. For instance, SouthKoreaandNorthKoreahavetakenstepstomakepeace,andthereisdeepeningeconomicintegrationbetweenmainlandChinaandHongKong.Nonetheless,therearestillworryingelementssuchastheconflictbetweenmainlandChinaandTaiwan.
TABLE6Indicatorsoftechnicalproficiency
Country Year %oftertiarystudentsenrolledfornatural
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Cost-relatedFactors
LABOURCOSTSOnlyadecadeago,SoutheastAsiawasleadingtheregioninlow-costlabour.However,havingbenefitedfromtheflying-geese model of development, the ASEAN-4laggedbehind theANIEs inupgrading their createdassets.Consequently,theyhavefoundthemselveslockedbetweentwostrongcompetitors.AttheupperendaretheANIEswithacomparativelysuperiorinfrastructure(including human skills), while at the lower end areseveral countries includingChina, former Indochina,andSouthAsian countrieswhose relativewage ratesaremorecompetitive.Forexample, a factoryworkerintheChinesecityofShenzhencommandsabouthalfthewageofoneinBangkok(Thailand);whilethesalaryfor a middle-manager in Cebu (Philippines) is 47%morethanamiddlemanagerinShanghai(Frank2001).Consequently,whenitcomestolowwagecostsinAsia,thereisnowabetteralternativethantheASEAN-4.
Asia’smodelofdevelopment,i.e.theflying-geese,whichisbasedonthe inter-regionaldivisionof labour,requires at least two relatively developed countries;one to act as the ‘leadgoose’ and theother to act asthe ‘supportgoose’.The leadgoose, in the courseofitsowndevelopmentprocess,constantlydevelopsnewindustriesandpassesontothenext-tiercountriesthoseinwhich ithas lostcompetitiveadvantage.Specifically,thisflying-geesemodel isworkableifthecountriesareatdifferent levelsofdevelopment;have the ability torestructure;possesssufficientdemandandmarkets;havemarketverificationof restructured industries throughinternationally competitive exports; possess enablingframeworkforthetransmissionofTNCassets;andhaveafavourableinvestmentclimate(UNCTAD1997).TheNortheast currently satisfies all these conditions.Forexample,Japanplaysthe‘leadgoose’role,whileKoreaandTaiwanplaytheroleof‘supportgeese’.Therefore,with
China’sabundantcheaplabour,thismodelofdevelopmentcanbesustainedwithintheNortheast. Incontrast, theSoutheastcannotpossiblysurviveunder thismodelofdevelopmentwithoutsupportfromtheNortheast.Forinstance,Singapore,themostdevelopedcountryintheSoutheast, is incapableofplaying the roleof the ‘leadgoose’.Similarly,MalaysiaandThailandare incapableofplayingtheroleof‘supportgeese’.Moreover,becauseoftheslowabilitytorestructure,thereisasimilarityofcomparativeadvantagesamongmostof theSoutheastAsian countries.This ispushing theSoutheastAsiancountries intoamorecompetitive situationwitheachotherforashrinkingpoolofinvestment,luredbyalmostsimilarlocationaladvantages.
DataconstraintsmakeitimpracticabletoinvestigateallthedevelopingEastAsiancountries.Therefore,the empirical analysis is conducted for only eightcountries:HongKong,Indonesia,Korea,Malaysia,the Philippines, Singapore, Taiwan and Thailand.Similarly,dataconstraintsmakeitimpracticabletotestall theaforementionedpotentialdeterminantsofFDI.Consequently,alimitednumberofvariableshasbeenselectedtorepresenteachofthecategoriesin the analysis. The variables and their expecteddirections of response are presented in Table 7(opposite) where the following notation has beenadopted:RWR=realwagerates,IR=interestrates,XR = foreign exchange rates, OPEN = openness,LIB = liberalization, GDP = current market size,Gr = market growth (future market potential),
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HC = human capital and X = export-orientationdevelopmentstrategy.19
It is not realistic, of course, to envisage FDI asresponding to a set of exogenous host countryvariables, given those in the country of origin;and to ignore the feedback effect between thosevariablesandFDI,aswellastheinterdependenciesbetweenthehostcountry’s factors themselves.Todo so is to ignore thepossible spillover effectsofFDI, the potential existence of which is such astrong motivator for host governments’ attemptstoattractFDI.Ineffect,inequation(1)above,theexpectationmustbethatifmacroeconomicfactorsarestrongpull-factorsforFDI,thenthosefactors,suchasnationaloutputor itsgrowthrate,will inturnbeinfluencedbyFDI.
ofhostcountries,butithastendedtodosoonthebasisofone-waycausality,ineitherdirection.Theexplorationoftwo-waycausationisonlyjustbeginning.Therearetwomainavenuesopenifonewishestoexplorethatinterdependencyinasimultaneousfashion(ratherthanjustestablishing‘causality’àlaGranger).Thefirstisto construct some form of a structural simultaneousequation, dynamic, macro-model. The other is toemploy a vector autoregession (VAR) in orthodoxformat, or in the form of a vector error correction(VEC);whichisaJohansen(1995)VARincorporating(potential) error correction terms, consequent uponpotentialco-integratingvectors.Thisstudyemploysthelatteravenuefortheanalysisandassessesco-integrationor,rather,long-runrelationshipsbetweenFDIanditsdeterminants.
The measurement of variables and data sources arereportedinAppendixA(p.22).ThelimitationsoftheWorldPennTableshavebeenpointedoutbySummersandHeston(1991).Theseincludethelowreliabilityofdataobtainedfromthelessdevelopedcountries,whichmeansthatbiasesaswellasmeasurementerrorsmay
Themostnotablelimitationoftheannualtimeseriesdatausedhasbeentheirsmallsamplesize.Theauthorsattemptedtoboostthesamplesizebypoolingthedata.Unfortunately,poolabilitytestsindicatedthatthepooleddatadidnotmeet thehomogeneity conditionwithinthe estimation framework.20 Therefore, the authorsconductedcountry-specificanalysesbutimprovedtheefficiency of the results by making the appropriateadjustmentsforsmallsamplesize.
Tests were run for unit roots and the order ofintegrationandtherootsofthecompanionmatrices.Theresultsindicatedthatthevariables’orderofintegrationis1orcouldbeso;theVARsandtheVECsarestable;thereisNormality;andthereisnoevidenceofAutoregression(AR),orAutoregressiveConditionalHeteroscedasticity(ARCH).Althoughthezero-ordercorrelationsbetweenFDI and its determinants convey a limited range ofinformation,theyrevealthepreliminarystrengthoftherelationships.Forinstance,eachcountryhasatleastsixdeterminantswhosecorrelationwithFDIis≥|0.5|.21
EmpiricalResults
CO-INTEGRATIONItisnotedthatthevariablesintheVARaretreatedasendogenous.However,inarealeconomicenvironment,thereexistsexogenous(attimespolicy)variables,whichimpact on the endogenous variables to complete theeconomic system (as you would have instrumentalvariablesinasystemestimation).Forinstance,marketsize (output) is definitely influenced by capital andlabour, which are in turn influenced by factors suchasthelevelsofinvestment,savingsandtaxation.Theinclusionofsuchexogenousvariablesinthisanalysiswas hampered by the sample size limitation. Thus,the absence of these exogenous variables might be
responsible for the ‘no economic sense’ directionof relationship between FDI and some of the otherendogenous variables. Nonetheless, it is furthernoted that this ‘no economic sense’ relationship isnotpeculiartothis investigationalone.Forexample,when investigating the impact of growth on FDIflowstotheEuropeanEconomicCommunity(EEC),ScaperlanderandMauer’s(1969)resultswereattimeswronglysigned.Inaddition,SchmitzandBieri’s(1972)resultswerenegativelysigned(sometimessignificantly).Furthermore, Lunn (1980) found the growth rate inthe most recent year Y Yt t−( )−1 to be significantlypositivelyrelated,butthatlaggedoneyear Y Yt t−( )−2 tobesignificantlynegativelyrelated.Forthisstudy,itwasdecidedtoeliminatethevariablesfromwhichtheresults did not make ‘economic sense’. This enabledexperimentationwithuptothreelags,buteventuallytwolagswereused.
In testing for co-integration, the study utilizesthe Osterwald-Lenum (1992) critical values for thetracestatisticadjustedforsmallsamplesize.Thetracestatistics reported in Appendix B (p. 23) illustrateco-integration (at the5%level) forall thecountries,i.e.r=1forThailand;r=4forHongKong,MalaysiaandSingapore;r=5forIndonesia,KoreaandTaiwan;andr=6(fullrank)forthePhilippines.
Thestandardizedco-integrationvectorsarereportedinTable8(opposite).Amongthecost-relatedfactors,themost striking results are those for the realwage ratesvariable.Itexhibitsanegativelong-runrelationshipwithFDIforallthecountries,demonstratingitsimportancein influencingthe investmentdecision.Thet-statisticsindicatethatitsco-integrationwithFDIissignificantinallcountriesexceptThailandandKorea.TheresultsforHongKongsuggest that it ismarginally insignificant.Inaddition,theforeignexchangerateandinterestratevariablesdisplay long-runnegative relationshipswithFDI except inHongKong,Malaysia andSingapore.
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Theforeignexchangerateco-integration issignificantforKorea, thePhilippinesandTaiwan;while that forinterestratesissignificantforIndonesia,KoreaandthePhilippines.Thesecost-relatedfactors’resultsreaffirmthegeneral literature that emphasizes the reasons forthe relocationofproduction,particularly fromJapantotheANIEs,andfromtheANIEstothebabyTigers(Indonesia, Malaysia, the Philippines and Thailand),especiallysincethemid-1980s.
The results for the investment environmentimproving factors indicate that FDI is significantlypositively co-integrated with liberalization inHong Kong, Indonesia, Malaysia, the Philippinesand Singapore. However, openness is significant inSingapore,butinsignificantinMalaysia.
Turning to the other macroeconomic factors,humancapitalstockemergesasadominantlong-rundeterminantofFDIflowstoEastAsia.However, its
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long-runrelationshipissignificantonlyinHongKong,KoreaandthePhilippines.Marketsizeissignificantlyco-integratedwithFDIinIndonesia,butinsignificantforSingapore.Marketgrowth is,on theotherhand,significantly co-integrated with FDI in Hong Kong,Korea and Taiwan (the ANIEs), but insignificant inThailand.
With regard to export-orientation policy, theresults demonstrate that the export-oriented policyhas been capable of significantly inducing long-runFDIinflowsonlyinMalaysiaandTaiwan.TheresultsforHongKongareinsignificant.
GRANGERCAUSALITYFDI has been of major concern to economists andpoliticians because of its potential effect on themacroeconomic factors of the host country. Amongthe locational factors investigated in the foregoingsection, there is a possibility of causation betweenFDIandsomeof themacroeconomicvariables.FDImightimpacton,forinstance,output(GDP),growth(Gr),humancapitalandinternationaltrade(X),eachinvestigated above under different contexts. Thepresentstudyisthereforeinapositiontoinvestigatethisaswellbynormalizingeachofthesevariablesas1intherespectiveco-integratingrelationship.However,since some of the variables were eliminated duringthe co-integration analysis, results are not given forthe above four variables for all the countries. TheGranger-causationmethodologyisthereforeemployedtocomplementtheresults.
The results from the co-integration and theGranger-causality methodologies (see Table 9,opposite) suggest a consistent significant impactof FDI on human capital. However, in general, theresultsforoutput,growthandinternationaltradeareinconclusive.
CONCLUSIONANDPOLICYCONSIDERATIONS
Thequantitativeanalysishasdemonstratedthatthereis no solitary long-run determinant of FDI acrossPacificAsia.Ingeneral,FDIflowsintotheindividualcountriesareinfluencedbydifferentfactorsthatmaybeconcomitantwiththehostcountries’levelsofeconomicdevelopment and, hence, their factor endowments.However, it transpires that the dominant long-runFDI determinants are the cost-related factors. Thesearefollowedbytheinvestmentenvironmentimprovingfactors, then the macroeconomic variables and theexportorientationdevelopmentstrategy.Inparticular,realwagerates,liberalizationandhumancapitalstockemerge as key long-run determinants of FDI in therespectivesub-groups.Hence,theconclusionmaybedrawnthatthedrivinglong-rundeterminantofFDIinPacificAsiaistherelativelyunder-pricedskilled(semi-skilled)labourforceandaliberalizingenvironment.Onthe impact of FDI on the macroeconomic factors, itturnedoutthat itsbenefitsweremostlyimpartedonhumanskillsdevelopment.
Thequalitativeassessmenthas,ontheotherhand,exposedtheshortcomingsoflocationaldeterminantsofFDIinEastAsiainrecentyears.Forinstance,twotothreedecadesago,FDIflowstoAsiawerecharacterizedbythedominanceoftheSoutheast,whichderiveditscomparative advantages from its surging economies,stableandbusiness-mindedgovernments,cheaplabour,falling trade barriers and open investment policies.However,theseadvantagesarenowbeinglosttotheNortheast.WhiletheNortheastisopeningtotheworldeconomy,theSoutheast,whichvigorouslyopenedupafterthemid-1980s,isnowswitchingbacktoregulation.Asifthefailuretoderegulateisnotbadenough,politicsintheSoutheastisgrowingmorevolatile,whilethatin
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theNortheastiscomparativelystable.Onlyadecadeago,SoutheastAsiawasleadingtheregioninlow-costlabour.ThiscomparativeadvantageisnowbeinglosttoChina,formerIndochinaandSouthAsiancountries.Ontheotherhand,newcomparativeadvantagesthatstemfromcreatedassetsarenotbeingdevelopedatapaceconcomitantwiththatatwhichtheoldcomparativeadvantagesarebeinglost.Nonetheless,eveniftherightpacewereachievable,itwouldimplycompetingwiththe NIEs. This is a prisoner’s dilemma. Meanwhile,theexistinginnovativeenvironmentintheNortheastimplies that technologicalupgrading continues tobeembraced.Moreover,theSoutheast’ssituationhasbeenmadeworseby thewealthyconsumerbase inHongKong,KoreaandTaiwan,andthegiantpopulationinChina,whichfaroutweighanycurrentbenefitsoftheSoutheast.Consequently,investorsarebettingonAsia’sfutureandchannellingmoreoftheirmoneytothelarge
It is now widely believed that FDI has thepotentialtoengenderbothnegativeandpositiveeffectsin a host country. Nonetheless, a host country canrealizebenefitsfromthepresenceofFDIifitpursuespolicies that can minimize the negative effects butmaximizethepositiveeffects.Butinordertogeneratesuchbenefits,anextraefforthastobemadetolureFDIintothepotentialhostcountry,particularlygiventhatthecompetitionforit isgettingstronger.Moreover,itbecomesevenmoredifficultwhenawholerangeoffactorshas tobeconsidered.However, it is evidentthat,besidespromotingtheotherfactors,developingcountriesparticularlyhavetoattempttoexploittheirrealwageratescomparativeadvantagebeforeitgetseroded.
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The solution for the Southeast, particularly theASEAN-4, lies in more liberalization, deregulation,political stability, and upgrading. In particular, theSoutheastshouldaimatsettingupresourcebasesthatcan facilitate their progressive shifts up the levels oftechnological complexity. This involves institutingplans for deepening the content of export activity,and building the human capital and macroeconomiccapacitytosustainsuchashiftacrossarangeoftradableactivities inresponsetochangingworlddemandandtechnologies.Nonetheless,thesuccessofthisstrategydependsnotonlyonthepresumption,butindeedalsoonthehope,thattheNIEswillthemselvesmoveuptheladderoftechnologicaldevelopment,therebyallowingtheASEAN-4toreplace them.Otherwise,countriesofSoutheastAsiawillremaininaprisoner’sdilemmaand will continue to fight among themselves for thedwindlingFDIflows.
Humancapital=logtotalmeanyearsofeducation—fromNehruandDhareshhwa(1993)for1965–87.Theperiod1988–97estimatedbyauthors.ForHongKongandTaiwan,theannualnumberofstudentsenrolledfor second-level education23—from the UNESCOStatisticalYearbook(variousyears).
2. Indonesia, Malaysia, the Philippines, Singapore andThailandor,rather,theASEAN-5.
3. China, Peoples’ Republic; Hong Kong, China; Taiwan;Korea (Peoples’ Republic); Korea (Democratic Republic)andMongolia.
4.Abundantnaturalresourcesandcheaplabour.
5.Whichsupportedandpromoteditsentrepôtrole.
6.SouthKorea,Taiwan,HongKongandSingapore.
7.ASEAN-5excludingSingapore.
8. Production technology, financial resources, managerialresourcesandmarketingtechniques.
9.Thisincludesthedesiretominimizetheriskand/orcostsoffluctuatingexchangerates;tocushiontheadverseeffectsofgovernmentlegislationorpolicy;tobeabletotakeadvantageofdifferentialinterestratesand‘leads’and‘lags’inintra-grouppayments; and to adjust the distribution of its short-termassetsbetweendifferentcurrencyareas.
10. This may take the form of factors such as a large ora potential domestic market; a low-cost, effective exportproduction base with abundant low-cost, high-qualitylabour; low transportation costs; generous investmentincentives; lax pollution controls; political stability; andsoundmacroeconomicpolicies.
19. It has not been possible to compute the cost-relatedvariablesas‘hostcountryinrelationtohomecountry’becausetheFDIdataused isaggregated innature(i.e. itoriginatesfromseveralcountries).
20. The tests based on Larsson, Lyhagen and Löthgren(1998)methodologygive findingsofnocommonrank forthepanel.
23. In measuring human capital, focus is restricted to thesecond-leveleducation(i.e.secondaryschoolandvocationaltraining)forsimplicity,ignoringthecontributionofprimaryandhighereducation,and investment inhealth.Thestudyassumes that the knowledge and skills so acquired at thesecondlevelofeducationenablesindividualstocarryoutanoccupationthatcanformthefoundationofawell-conductedlife.Ahighersecond-leveleducationenrolmentmeansahigheraccumulationofhumanskills.
REFERENCES
Bende-Nabende, A. 2002, Globalisation, FDI, RegionalIntegration and Sustainable Development, Ashgate,Aldershot.
Bende-Nabende, A., Ford, J.L. & Slater, J.R. 2001, ‘FDI,regionaleconomicintegrationandendogenousgrowth:some evidence from Southeast Asia’, Pacific EconomicReview,6:383–99.
Bhattacharya, A., Montiel, P.J. & Sharma, S. 1996, Privatecapital flows to sub-Saharan Africa: an overview oftrends and determinants, Unpublished paper, WorldBank,Washington,DC.
Dunning, J.H. 1981, International Production and TheMultinationalEnterprise,GeorgeAllen&Unwin,London.
Goldberg,L.&Klein,M.1998,‘Foreigndirectinvestment,trade and real exchange rate linkages in developingcountries’, in Managing Capital Flows and ExchangeRates, ed. R. Glick, Cambridge University Press,Cambridge(USA),pp.365–98.
Helpman, E. & Krugman, P. 1985, Market Structure andForeignTrade,MITPress,Massachusetts.
Kravis,I.B.&Lipsey,R.E.1982, ‘Thelocationofoverseasproduction and production for export by U.S.multinationalfirms’,JournalofInternationalEconomics,2:201–23.
Osterwald-Lenum,M.1992, ‘Anotewithquantilesof theasymptotic distribution of the maximum likelihoodco-integration rank test statistics’, Oxford Bulletin ofEconomicsandStatistics,54:461–72.
Scaperlander,A.E.&Mauer,L.J.1969,‘ThedeterminantsofUSdirect investment in theEEC’,AmericanEconomicReview,59:558–68.
Schmitz, A. & Bieri, J. 1972, ‘EEC tariffs and US directinvestment’,EuropeanEconomicReview,80:259–70.
Schreiber, J.S. 1970, US Corporate Investment in Taiwan,UniversityofCambridge,NewYork.
Singh, H. & Jun, K.W. 1995, Some new evidence ondeterminantsofforeigndirectinvestmentindevelopingcountries, World Bank Policy Research working paperno.1531,WorldBank,Washington,DC.
Summers. R. & Heston. A. 1991, ‘The Penn World Table(Mark5):AnExpandedSetofInternationalComparisons,1955–1988’, The Quarterly Journal of Economics, 56:327–68.
United Nations Educational, Scientific and CulturalOrganization data bank <http://www.unesco.org/education/information/wer/>
World Bank database at <ftp://ftp.worldbank.org/pub/decweb/grthdata/GlobalDevelopmentData/>
World development indicators database at <http:/ / w w w. w o r l d b a n k . o r g / d a t a / c o u n t r y d a t a /countrydata.html>
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ANTHONY BENDE-NABENDE obtained hisPhD in Business Economics from the University ofBirmingham,UK.HecurrentlyholdsaResearchFellowpostattheUniversityofBirmingham’sBusinessSchool.His broad interests are in policy-driven economicand business research, particularly in relation to theinternationaleconomy—primarily,butnotexclusivelyrelating to the growing influence of globalization,international trade, foreign direct investment andregional economic integration on the economicdevelopmentprocess.DrBende-Nabendehaspublishedarticlesinseveralrefereedjournals,includingEconomicsBulletin,PacificEconomicReview,TheGlobalEconomyQuarterlyandWorldDevelopment.Inaddition,hehasauthoredthefollowingtwobooks:Globalisation,FDI,RegionalIntegrationandSustainableDevelopmentandFDI,Regionalism,GovernmentPolicyandEndogenousGrowth. He has also undertaken some consultancywork for the United Nations Centre for Trade andDevelopment(UNCTAD).
JO-HUI CHEN is an Associate Professor in theDepartmentofBusinessAdministrationatChungYuanChristianUniversity,Taiwan,RepublicofChina.HehasalsobeensecondedtothepositionofGeneralSecretaryintheTaipeiBank.HeearnedaPhDinEconomicsfromNorthernIllinoisUniversity(NIU),USA,andreceivedtheawardofOutstandingEconomicsResearchScholaratNIU.AssociateProfessorChenhasreceivedthreeGrants of Outstanding Economics Researcher fromthe National Science Council of Taiwan, ROC. Hisdisciplinarybackgroundisinthefieldsofpublicfinance,international monetary, and regional economics. Hecurrently teaches international monetary, financemanagementandeconomics,atbothundergraduateandgraduatelevels.DrChenhaspublishedrefereedpapersinAppliedEconomics,JournalofForeignExchangeand
International Finance, International Economics andPacificBasinFinancialMarketsandPolicies,aswellasotherChineseeconomicjournals.Currentlyhisareasofresearchinterestareinternationalinvestment,mergerandacquisition,andinternationalpublicfinance.
LICHENG FENG is an Associate Professor atthe School of International Trade and Economics,University of International Business and Economics(UIBE), Beijing. He is also Vice-Director, Centerfor Financial Markets and Investments at UIBE.HeobtainedhisPhDdegree inEconomics fromtheWashington State University in 1999. Dr Feng thenjoined the China Center for Economic Research,Peking University, as a visiting professor and taughtmathematical economics, advanced microeconomicsand investment analysis for one year. After leavingPekingUniversity,hebecameamemberofthefacultyat theSchoolof InternationalTradeandEconomics,UIBE, where he teaches microeconomic analysis,advanced microeconomics, advanced investmentanalysis, financial theory and financial economics.AssociateProfessorFeng’sresearchinterestsareintheareasofinvestmentstrategyandportfoliomanagement,market efficiency, anomaly, corporate finance, andlaboureconomics.HehaspublishedinTheJournalofEconomicResearch.
A S I A P A C I F I C J O U R N A L O F E C O N O M I C S & B U S I N E S S , V O L . 6 N O . 1 ( JUNE 2 0 0 2)
includethefollowingbooks:Expectations,Uncertaintyand the Term-Structure of Interest Rates; Choice,ExpectationandUncertainty;Protectionism,ExchangeRatesandtheMacroeconomy;EconomicChoiceunderUncertainty:APerspectiveTheoryApproach;CurrentIssuesinOpenEconomyMacroeconomics:Paradoxes,Policies and Problems; and G. L. S. Shackle: TheDissentingEconomist’sEconomist.HeistheeditoroftheUncertaintyandExpectationsSeriespublishedbyBasil Blackwell. Recent journal publications includearticlesinEconomicJournal,Economica,AdvancesinAustrianEconomics,EconomicsLetters,andJournalofEconomics. Professor Ford’s research interests are ingeneraleconomicsandappliedeconometrics.Hisspecialfieldsaremonetaryandmacroeconomics,particularlyopen-economy macroeconomics; international tradetheory; economic development; history of economictheory; and uncertainty and expectations, especiallydecision-models and their empirical evaluation bymeansofexperimentalmethods.
JANICEHOWisAssociateProfessor in theSchoolof Economics and Finance at Curtin University ofTechnology, Perth, Australia. She holds a doctoraldegreeinAccountingandFinancefromtheUniversityofWesternAustralia.HercurrentresearchinterestsincludeIPOs,analysts’forecasts,andvoluntarydisclosure.DrHow has received numerous international researchawards, including the Singapore Stock Exchange/PACAP(FMA)CompetitiveResearchAward,Coopers&Lybrand’sAccountingAssociationofAustraliaandNewzealand(AAANz)ConferencePaperResearchAward, Sydney Futures Exchange Limited/PACAPCompetitive Research Award, Stock Exchange ofHong Kong Limited/PACAP Competitive ResearchAward,andArthurAndersenInternationalResearchAward.ShewasalsoawardedaStanford/UWAWomenFellowshipin1996andaPACAP(Pacific-BasinCapital
MarketsResearchCentre)ResearchFellowshiptwice(1994–95and1999–2000).AssociateProfessorHowisanHonoraryMemberoftheGoldenKeyInternationalHonourSociety.Shehaspublicationsinseveralrefereedjournals, including The Journal of Business, Journalof Accounting Auditing and Finance, Pacific-BasinFinance Journal, Australian Journal of Management,andAccounting&Finance.I-CHING KHOO is an Associate, ParticipantSupervision Department, at the Singapore ExchangeLimited, Singapore. Her work involves auditingthe member companies of the exchange, ensuringcompliancewiththeexchangerules.SheobtainedherHonoursdegreeinCommercefromtheUniversityofWesternAustralia.
YUKIOMIYATAisaProfessorintheDepartmentofEconomicsatOsakaPrefectureUniversity,Japan.AfterobtaininghisBAineconomicsfromOsakaUniversity(Japan),hisBSinmaterialsengineeringfromUniversityofWashington,Seattle,andMSinengineeringpolicyfrom Washington University, St. Louis, he obtaineda PhD in Economics from Washington University,St.Louis(USA).BeforemovingtoOsakaPrefectureUniversityin2001,ProfessorMiyatataughtatOsakaUniversityofCommerce(Japan)asaLecturerandanAssistant Professor. He is interested in research ontechnologicalinnovationsandUSindustrialpolicy,inparticular university/industry collaborative researchfor innovations. His publications include papers injournals such as Japan and the World Economy andTechnovation. Professor Miyata has also publishedthree books in Japanese: Cooperative R&D and anIndustrialPolicy(KeisouShobou,1997),AnIndustrialPolicyoftheUnitedStates(YachiyoShuppan,2001),andUniversity–IndustryCollaborationintheUnitedStates(Toyo Keizai Shinpousha, 2002). His latest research
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work regarding university/industry collaboration intheUSAwillbepublishedinEnglishasachapterofInternational Handbook on Innovation (ErlbaumPublishers,forthcoming).
SANGKYUNPARKisaSeniorEconomist,OfficeofManagementandBudget,USGovernment,Washington,DC.Priortothis,hewasaneconomistattheFederalReserveBankofNewYork.HereceivedhisPhDinEconomics from the University of California, LosAngeles(UCLA).DrPark’sresearchinterestsincludefinancial regulation, asset pricing, and consumerbehaviour.Hehaspublishedextensivelyineconomicsand finance journals, including Journal of MonetaryEconomics; Journal of Money, Credit, and Banking;Journal of Financial and Quantitative Analysis andJournalofBankingandFinance.
SOMNATH SEN is Professor of DevelopmentEconomicsattheUniversityofBirmingham.Hewasalso Head of the Department of Economics from1994–2002. He graduated from Presidency College,Calcutta,receivedaMaster’sdegreefromtheUniversityof Birmingham and a PhD from the University ofWarwick.ProfessorSenwastherecipientofagoldmedalforhisundergraduatedegreeresultsandalsoreceivedaCommonwealthScholarshiptoundertakepostgraduatestudyintheUK.HehasactedinanacademicadvisorycapacitytotheWorldBank,OrganisationforEconomic
Co-operationandDevelopment(OECD)DevelopmentCentre and the United Nations. Professor Sen hasbeen a Senior Research Fellow at the StockholmInternationalPeaceResearchInstitute.Hehasrecentlyconcluded (in2000),withcolleaguesatBirmingham,a large Economic and Social Research Council(ESRC) project on Capital Formation, Governanceand Economic Growth in Pacific-Asian Economies,as part of the ESRC programme on Pacific Asia.ProfessorSenhasalsocompleted(in1999)anESRCprojectonthePoliticalEconomyoftheArmsTrade,withPaulLevineandRonSmith.Hiscurrentresearchfocusesonthreeareas:macroeconomicstabilizationinopeneconomies;governmentandgrowth;andAsianeconomies,includingChinaandIndia.
YOJISHIGEMATSUisaPhDcandidateatGraduateProgramofRegionalPolicyStudiesatOsakaUniversityofCommerce,HigashiOsaka,Japan.HeobtainedaBAinGermanliteraturefromChuoUniversity,Japan,andanMAinregionaleconomicsfromOsakaUniversityofCommerce.HeisalsothePresidentofMito-Kato,Ltd in Yao-city, Japan, which manufactures artificialbamboos from plastic materials for gardening. Hisresearch interests include the relationship betweenbanksandbusiness, smallbusinessmanagement,andtheroleofgamblingbusinessesinregionaleconomicdevelopment. He has a journal article published inGambling and Gaming (co-authored with ProfessorIchiroTanioka).
JIMSLATERistheDirectoroftheGraduateCentre,The Birmingham Business School, BirminghamUniversity, and the Convenor of the Europe–EastAsia Research Group. His research interests are incomparative industrial structures of Asia Pacific;the determinants of foreign direct investment; andforeign direct investment and growth in East and
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South East Asia. His publications include articles inrefereed journals such as Economics Bulletin, PacificEconomic Review, International Journal of HumanResource Management, The Journal of the KoreanEconomy, Journal of Business Research and Journalof Productivity. He has also co-edited the followingbooks:TheEuropeanUnionandASEAN:TradeandInvestmentIssues;TradeandInvestmentinChina:TheEuropeanExperience;andBusinessRelationshipswithEastAsia.
PETER VERHOEVEN is a Lecturer in the Schoolof Economics and Finance at Curtin University ofTechnology, Perth, Australia. His first degree is inScience and he is currently completing his doctoraldegree in Financial Econometrics at the Universityof Western Australia. His disciplinary backgroundis in the area of quantitative finance, in particularcomputer modelling. Peter’s research is in the areasofenvironmentalmodelling,riskanalysis,andmarketmicrostructure.Hisresearchpaperonriskmodellingwas selected as one of the top three research papersat the Seventh International Joint Conference ofComputational Finance & Forecasting FinancialMarketsat theLondonBusinessSchool,2000,whileanother of his papers was selected as one of the toptenresearchpapersat thePACAP/FMAConferencein2001.PeterwasawardedtheBestStudentPresenterPrize at the Modelling and Simulation Society ofAustralia and New zealand (MSSANz) in 1999. HehaspublicationsinJournalofCoordinationChemistry,Minerals& Metallurgical Processing, Modelling andForecasting Financial Data and Mathematics andComputers in Simulation. Two of his articles areforthcominginPacific-BasinFinanceJournal.
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