Foreign direct investment in Southeast Asia: - Regional Office China

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It appears that the advantages and disadvantages of FDI policy instrumentsare not absolute. Rather, successful policy instruments are a matter ofmatching a country’s FDI policies to the specific circumstances of itseconomy, stage of development, location, resources, regional agreementsand international competition, in accordance with the priorities set by thegovernment. For effective FDI promotion, a country should be both cooperativeand competitive with its neighbouring partners. In fact, regionalintegrationagreements constitute a powerful means to attract FDI, especiallywhen the national governments co-operate in order to have coherent and coordinatedpolicies. However, IPAs should also be aware of the policyinstruments adopted by competitor countries in order to successfully attractMNEs to invest in their country.Finally, the role of IPAs has become increasingly more complicated. In fact,IPAs have to adopt a much more active and dynamic attitude towards FDI.Of crucial importance is that IPAs co-operate with other levels of governmentin order to design and implement coherent FDI polices, which should also bereflected in the legal framework. By complementing some FDI liberalisationwith coherent regulation and customised policy instruments, IPAs in thedeveloping countries should be able to capture and promote the kinds of FDIactivity that can assist them to speed up their industrial development.Commentary and discussionHafiz Mirza noted that, although FDI policy craft was nowadays requiredwithin a ‘WTO determined environment’, rapid changes in the world economywere delivering new sources of foreign investment. Therefore, apparentconstraints expressed by representatives of regional IPAs could be overcomeby IPAs “making their own histories” through more rigorous policy analyses,and by moving away from narrowingly focused inducements, towards a moregeneral incentivisation of economic activity as a whole. Southeast Asia haddemonstrated a consistent track-record of generating distinctive solutions tothe problems of: the diverging interests between the State and MNEs;28
socialising public goods and private returns; and the role of theinterventionist state and incentives to the private sector.The discussion exposed the pressing need for the region to build on itssuccesses in attracting FDI by increasing the managerial skills of policymakers.The requirement for greater transparency in legal frameworks, soas to permit consistent interpretation across sovereign territory, wasemphasised as being a key determinant of success in investor aftercareservices provided by IPAs. Trade-policy linkages were underscored withrespect to strategies to attract efficiency-seeking FDI (i.e. export-orientedFDI). A persistent dilemma highlighted was balancing the interests of‘insiders’ wanting ‘protection’ from further competition, and the need forincreasing resource allocation efficiency by allowing greater competition.On the one hand, some countries in the region are reaping the benefits ofrapidly moving towards fourth generation investment policies, by reducingthe legislative differences between domestic and foreign companies andcreating IPAs for domestic industry. On the other hand, some countries aregrappling with the impact of the electoral cycle on the business cycle whichtended, in some cases, to thwart the transition of policy advice into law.Finally, the regional division of labour -- a function of differentiated stages ofdevelopment -- implies an intensification of regional co-operation at the levelof inter-ministerial co-ordination, in setting the stage for negotiating majorFDI projects into the region. This is despite the temptation (and dangers) ofa zero-sum competitive game. Such regional integration initiatives asASEAN+3, AFTA and AIA provide opportunities for such co-ordination.Second presentation summaryAxèle Giroud illustrated that the shift towards spatial distribution ofproduction, across countries and regions, poses new challenges for policymakersand IPAs. What are the characteristics of these spatially distributedproduction networks (SDPNs), and what are the implications for countries29
Page 3: Foreign Direct Investment in Southe
Page 7 and 8: PrefaceThis UNIDO report presents t
Page 9 and 10: PreambleWithin the constantly evolv
Page 11 and 12: IntroductionThe Changing Face of Fo
Page 13 and 14: Theme 1FDI and Multinational Enterp
Page 15 and 16: These include: i) changes in long-t
Page 17 and 18: quality of life in a country can be
Page 19 and 20: consequence, as well as in terms of
Page 21 and 22: high-technology cluster development
Page 23 and 24: Theme 3FDI, Boundaries, Hierarchies
Page 25 and 26: A second dimension is that incentiv
Page 27 and 28: industrial sector and sub-sector le
Page 29: industrial base without relying to
Page 33 and 34: Typically, but not exclusively, Sin
Page 35 and 36: generate tax revenues to fund vario
Page 37 and 38: cumulatively serving to constrain F
Page 39 and 40: Southeast Asia as an integrated mar
Page 41 and 42: Theme 5FDI and Capital in Southeast
Page 43 and 44: Finally, there is also a need for i
Page 45 and 46: components of the integrated global
Page 47 and 48: ConclusionEmerging Policy Direction
Page 49 and 50: In conclusion, Frank Bartels sugges
Page 51 and 52: Taking the above research needs int
Page 53 and 54: Annex 1:Presenters at the EGMName P
Page 55 and 56: TIMOR LESTEMs. Warubon SUKASAMEMr.
Page 57 and 58: 14:00 - 15:30 Theme II: Intra-regio
Page 59 and 60: y Japan ITPOsCommentator: Frank L.
Page 61 and 62: This type of deep information excha
Page 63 and 64: The extent of FDI effects and their
Page 65 and 66: Appendix IV: Opening Statement by U
Page 67 and 68: only of UNIDO but also other UN spe
Page 69 and 70: LIST OF ABBREVIATIONSAFTA - ASEAN F
Page 71 and 72: in mind that host policy for attrac
Page 73 and 74: forces of competition and co-operat
Page 75 and 76: 2. BACKGROUND ISSUESAn accurate per
Page 77 and 78: economies. In contrast, Sub-Saharan
Page 79 and 80: costs, boost quality and accelerate
Page 81 and 82:
Fourthly, in terms of a framework f
Page 83 and 84:
in joint venturing), while retainin
Page 85 and 86:
experiencing the kind of global rel
Page 87 and 88:
other hand, being predominantly nat
Page 89 and 90:
Also, the trade surplus (or deficit
Page 91 and 92:
limited [Freeman and Bartels (2000)
Page 93 and 94:
technology and innovation policy; h
Page 95 and 96:
Credit Information Index NA 0 3 0 6
Page 97 and 98:
Appendix II - Investment climate in
Page 99 and 100:
REFERENCESAlmor T., Hirsch S., 1995
Page 101 and 102:
Freeman N. J., Bartels F. L., Eds.,
Page 103:
Trigeorgis L., 1996, Real Option: M
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Foreign direct investment in Southeast Asia: - Regional Office China

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