FDI and Growth in East Asia: Lessons for Indonesia

49 Pages Posted: 9 Oct 2010

See all articles by Fredrik Sjöholm

Fredrik Sjöholm

Lund University School of Economics and Management; Research Institute of Industrial Economics (IFN)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Date Written: September 1, 2010

Abstract

Foreign direct investment has been important in the economic growth and global economic integration of developing countries over the last decades. Both Northeast and Southeast Asia, especially the latter, have been part of this development with increasing inflows of FDI and greater foreign participation in their economies. However, Indonesia has been an outlier within the region, with lower inflows of FDI than other countries, especially in manufacturing, and with lower inflows than could be expected from its size and other country characteristics. The inflows of FDI that have taken place have benefited Indonesia and we use the Asian experience to provide some suggestions as to what measures would increase FDI. A relatively poor business environment with inefficient institutions seems to be an important explanation behind the low inflows of FDI.

Keywords: East Asia, Northeast Asia, Southeast Asia, Indonesia, Foreign Direct Investment, Multinational Firms

JEL Classification: F23, F13, O19

Suggested Citation

Sjöholm, Fredrik and Lipsey, Robert E., FDI and Growth in East Asia: Lessons for Indonesia (September 1, 2010). IFN Working Paper No. 852. Available at SSRN: https://ssrn.com/abstract=1689558 or http://dx.doi.org/10.2139/ssrn.1689558

Fredrik Sjöholm (Contact Author)

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

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