The Determinants of Foreign Direct Investment: A Panel Data Study for the ASEAN Countries

The study explore the determinants of foreign direct investment in ASEAN countries by employing fixed and random effects models for the period 1985–2007. The empirical results reveal that market size, GDP per capita, trade openness, infrastructure facilities and inflation are found to be the most significant factors in determining foreign direct investment in the ASEAN countries. Besides, the results show that level of schooling is found to have positive association with the foreign direct investments, but does not play any significant role in attracting foreign direct investment in ASEAN countries. The findings indicate that the governments of the ASEAN countries should adopt incremental efforts to enhance economic growth, enlarge GDP per capita, implement more successful open-door policies, facilitate better infrastructural facilities and provide effective policy framework on macro economic stability to successfully attract appropriate foreign direct investment in the region.