Abd Karim , Mohd Zaini and Othman, Yusairi
(2005)
Does Afta And China's Entry Into Wto Affect
Fdi In Asean Countries?
Asian Academy of Management Journal (AAMJ), 10 (1).
pp. 1-23.
ISSN 1394-2603
Abstract
Foreign direct investment (FDI) plays an important role in the rapid economic
development of the newly industrializing and developing economies of Southeast Asia. In
terms of the regions attractiveness, ASEAN region is a leading recipient of FDI flows in
the developing world, with five ASEAN countries in the top 20 developing-countries
recipients of long-term global capital flows from 1997 to 1998. While the creation of
AFTA may help FDI inflows to ASEAN countries, China's entry into World Trade
Organization (WTO) will be the opposite and has caused a great deal of worry to ASEAN
countries. The objective of this paper is to empirically determine the effect of ASEAN
Free Trade Area (AFTA) and China's entry into WTO on the inflows of FDI into ASEAN
countries. To achieve the objectives, Seemingly Unrelated Regression (SUR) method was
used to estimate the FDI equation. In general, the results indicate that the establishment
of AFTA had a positive effect on FDI inflows to ASEAN countries while China's entry into
WTO is the opposite.
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