impact of government policies and investment agreements on fdi ...

specifies the model to be estimated. Section 4 discusses the variables, data sources <strong>and</strong>
expected relationships with the variables. Section 5 <strong>and</strong> 6 presents the results on
determinants <strong>of</strong> aggregate FDI <strong>and</strong> determinants <strong>of</strong> FDI from developed <strong>and</strong> developing
countries respectively. Section 7 summarizes <strong>and</strong> concludes.
II
Trends in FDI Flows to Developing Countries <strong>of</strong> Asia
The last two decades have witnessed a tremendous increase in global FDI flows.
This has been accompanied by a slow shift in the pattern <strong>of</strong> FDI, which has gradually
become more favourable to the developing countries. Table 1 presents the percentage <strong>of</strong>
global FDI flows into developed <strong>and</strong> developing countries <strong>and</strong> from developed <strong>and</strong>
developing countries in this period. We find that the share <strong>of</strong> developing countries in total
inward FDI has increased steadily. The average annual percentage flow <strong>of</strong> FDI into
developing countries rose from 25 percent in the 1980s to 30 percent in 1990s. This
average would have been much higher in the 1990s but for the slow-down <strong>of</strong> the Asian
economies after 1997. The average annual outflow <strong>of</strong> FDI from developing countries has
almost doubled in the 1990s as compared to 1980s though an increasing proportion <strong>of</strong>
FDI flows, i.e., around 88 percent still comes from the developed countries.
Amongst the developing regions, we find that the share <strong>of</strong> Asian developing
countries in the global FDI flows has increased steadily in the last two decades.1 The
average annual inflow <strong>of</strong> FDI into Asia <strong>and</strong> Pacific increased to around 54 per cent in the
1980s to around 61% in the 1990s. But the distribution <strong>of</strong> FDI flows between Asia <strong>and</strong>
Pacific is biased heavily towards the Asian countries. The average annual inflow into
Asian countries in the 1980s was around 97 per cent, this further increased to around 99
percent in the 1990s. Within Asia, we find that on an average 72%<strong>of</strong> total FDI went to
South, East <strong>and</strong> South East Asia in the 1980s <strong>and</strong> around 97% in the 1990s. We therefore
analyse FDI flows into this region. Our sample includes the following countries namely,
Bangladesh, China, China- Hong Kong, India, Korea, Malaysia, Nepal, Pakistan,
Philippines, Singapore, Sri Lanka, China-Taiwan, Indonesia, Thail<strong>and</strong> <strong>and</strong> Viet Nam.
1
UNCTAD 2003
4